In 1999, Methanex initiated a lawsuit against the United States when California legislatures ordered a ban on MTBE by 2002 because of concerns over groundwater contamination. Methanex alleged the California law violated Chapter 11 of the North American Fair Trade Agreement (NAFTA), which gives foreign investors the power to challenge national and state laws protecting the environment and public health, and to sue for governments for compensation when environmental protection measures affect the value of their investment. Methanex sued the United States for $970 million in financial losses.
Meanwhile, California maintained that banning MTBE(methyl tertiary butyl ether), a compound used to increase oxygen content and act as an octane enhancer in unleaded gasoline, was crucial to protect human health and the environment. MTBE was making its way into drinking water sources, contaminating groundwater supplies of hundreds of communities across the state and making the water undrinkable.
CIEL in partnership with Earthjustice and the International Institute for Sustainable Development requested permission from the Tribunal to submit an amicus curiae brief. The Tribunal issued a press release announcing its decision to allow NGOs and other interested organizations to submit proposals for amici to be considered, in so doing marking an enormous achievement in international investment history. CIEL and Earthjustice submitted an amicus curiae brief, which reminded the Tribunal that California, like all States, is obligated under international law to protect human rights and the environment and stated that the Tribunal “must give substantial deference to measures implemented to achieve these goals.” The Tribunal welcomed the NGO briefs.
On August 9, 2005, the Tribunal released its Final Award, dismissing all of the claims and ordering Methanex to pay the United States’ approximately $4 million in legal fees and arbitral expenses. Methanex v United States set precedents for amicus submissions and public hearings that would continue with later disputes under NAFTA. Additionally, ICSID continued to pursue new transparency rules for its proceedings.