MONTPELIER, Vt. --A Canadian company wants to open a new plant in Claremont, N.H., to bottle fresh water from a source in Stockbridge, Vt.

But if Vermont wants to limit how much water the company takes, it may run afoul of the North American Free Trade Agreement.

States around the country are growing increasingly worried about the threats posed to their laws and regulations by the secret tribunals that resolve disputes in international trade. Experts say everything from environmental rules to the licensing of nurses and other professionals could be affected.

"Free trade agreements are to state sovereignty and economic development what global climate change is to the environment and natural resources," said state Sen. Virginia Lyons, D-Chittenden. "I think it's a really significant issue for our state, and for every state in the country."

WASHINGTON, D.C. – The looming congressional fight over the Central America Free Trade Agreement (CAFTA) will be greatly affected by the growing list of NAFTA “investor-state” cases, now totaling billions in compensation demands, in which foreign investors are attacking regulatory and other government actions before closed, extra-judicial tribunals, Public Citizen said today. Passage of the proposed controversial CAFTA-NAFTA expansion would extend the investor-state tribunal system, which allows private enforcement of extraordinary investor privileges granted in international “trade” pacts, to corporations and investors operating in six additional nations.

In a new report, NAFTA Chapter 11 Investor-State Cases: Lessons for the Central America Free Trade Agreement, Public Citizen describes how Canadian cattle producers are using NAFTA to demand $300 million in compensation from U.S. taxpayer funds, claiming that the Canadian cattle import ban instituted after mad cow disease was found in Canada violates their NAFTA rights. In addition, a Canadian tobacco company is using the private NAFTA tribunals to attack the U.S.tobacco settlements. The report is available here and is being released today at events in Washington, D.C., Sacramento and Olympia, Wash.

These claims are among the 42 cases filed thus far by corporate interests and investors under NAFTA’s “Chapter 11” investor provisions, which grant foreign interests more expansive legal rights and privileges than those enjoyed by U.S. citizens or corporations. With only 11 of the 42 cases finalized, some $35 million in taxpayer funds have been granted to five corporations that have succeeded with their claims. An additional $28 billion has been claimed from investors in all three NAFTA nations. The U.S. government’s legal costs for the defense of just one recent case topped $3 million. Seven cases against the United States are currently in active arbitration.

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“That foreign producers can attack vital public health measures like the mad cow import ban or the U.S. tobacco settlements demonstrates yet again how the NAFTA investor protection model included in CAFTA constitutes an extraordinary threat to policies vital to protecting public health,” Wallach said. “We wonder what role this secretive $300 million NAFTA challenge is playing in the Bush administration’s irresponsible proposal to reopen the border to Canadian beef and cattle imports in March. It is hard to imagine why else the administration would expose U.S. consumers to risk of such a deadly disease except that this NAFTA-created $300 million in liability prompts the administration to once again allow trade concerns to trump public health.”

Corporate investors also have used NAFTA’s investor-state enforcement system to challenge domestic court rulings, local and state environmental policies, municipal contracts, tax policy, federal controlled substances regulations, federal and state anti-gambling policies, a federal government’s alleged failure to provide water rights, and even the provision of public postal services. In most instances, challengers have sought millions of dollars in damages, claiming that regulatory measures and government actions negatively affected their profitability. If an investor prevails in its NAFTA claim, the losing nation is obliged to compensate the firm from the national treasury. Among the 42 cases detailed in the report:

* Aspects of the U.S. state tobacco settlements of the late 1990s, which have resulted in a dramatic drop in the rate of teen smoking in the United States, have been challenged as arbitrary and unfair by Canadian tobacco traders.

* A California regulation requiring the backfilling of open-pit mines has been challenged by a Canadian mining enterprise, which plans to develop a giant open-pit cyanide gold mine in Imperial Valley, Calif., and which owns and operates similar mines around the world.

* UPS is seeking $160 million in compensation from Canada, claiming that its government-run parcel delivery system undermines UPS’ market share.

* Bans or phase-outs of toxic substances have been challenged three times. A challenge to Canada’s phase-out of certain uses of the pesticide lindane has been initiated by a U.S. company. Canada’s proposed ban on the gasoline additive MMT was challenged, but before the case was finalized Canada reversed the policy and paid $13 million to an American firm; California’s ban on the gasoline additive MTBE has been challenged by a Canadian firm, and that multimillion-dollar case is still pending.

"These cases show that there is a growing threat to democratic governance and state sovereignty as more and more state and local government policies, even court decisions, are targeted by NAFTA investors,” said Mary Bottari, a policy analyst at Public Citizen and author of the report...While President Bush speaks of a new doctrine of aggressively promoting democracy, in fact the international trade pacts he is pushing export the worst of anti-democratic values around the world.”