Environmental health at stake in first corporate attack under Peru NAFTA deal
It's February 1, which makes it two years since the Bush administration rushed to implement the NAFTA-style deal with Peru right before it left office, and over the objections of the congressional Democrats that had partnered with the administration to get it through Congress.
On the second anniversary of the Peru FTA implementation, we see a lead company attacking Peru's policies related to environmental health. Details about the Renco v. Peru case are scarce, but we know that the company involves a U.S. multinational that got upset after getting smacked with a U.S. lawsuit filed on behalf of 137 Peruvian children who have suffered from lead poisoning. Renco is now claiming $800 million from irritants related to its commitment to clean up the environmental mess on its site.
According to the case materials from the Missouri court case, Renco is a New York corporation that in turn owns DR Acquisition Corp., a Missouri corporation, which in turn owns Doe Run Resources Corporation - the second largest lead producer in the world with over $125 million in profits in 2006. Doe Run operates a Peruvian subsidiary through a Cayman Islands corporation.
In 1997, Doe Run and Renco bought a metallurgical complex in La Oroya, Peru in October 1997. The Missouri case was filed on behalf of 137 children that live in and around the Peruvian village of La Oroya. It is claimed that these children suffered lead poisoning as a result of the company's actions, amounting to negligence, civil conspiracy and liability. Among other specific claims, the plaintiffs argue that Doe Run sought to "avoid the cost of instituting procedures at and purchasing equipment for Defendants' metallurgical complex... that would protect public health and the health of the minor plaintiffs." The petition for damages states that:
Defendants' metallurgical complex emits pollution from both the chimneys (known as “stacks”) as well as in fugitive emissions that escape simply as a result of the metallurgical processes and the handling of materials because the complex does not use appropriate ventilation or capture systems that could avoid such emissions. These emis-sions include pollutants in both gaseous form and as particular matter. The particulate matter has a high content of heavy metals including lead, cadmium, arsenic, and other toxic metals, while the gas of greatest concern is sulfur dioxide, a by-product generated by burning minerals that contain sulfur. Defendants' metallurgical complex also deposits toxic and harmful substances, both purposefully and accidentally, into the Mantaro River, which locals call the “dead river” as pollution has killed all plant and animal life in it. Additionally, harmful and toxic substances maintained by Defendants' metallurgical complex both at the plant and those accidentally released near the plant enter the ground, water, and air and further expose the minor plaintiffs to these substances.
24. The levels of pollution in La Oroya caused by the Defendants' metallurgical complex are so severe that the city has been recognized as one of the 10 most polluted places on the planet and the health threats in La Oroya have been described as more severe than those that exist in Bhopal, India and similar to those in Chernobyl, Russia.
25. According to many sources, including the Saint Louis University researchers, the CDC, and the Blacksmith In-stitute, the air quality level is critical not only because the minor plaintiffs must breathe this polluted air but also because the particulate matter within the air is dispersed in a dust form that enters and settles inside the minor plain-tiffs' houses and is deposited on the ground and on all surfaces, including furniture, clothing, water, and crops.
26. Specifically, these studies, including the study performed by Saint Louis University, show that over 99 percent of children in La Oroya have blood lead levels of greater than 10 ug/dL, which is the level considered by many or-ganizations including the Missouri Department of Health, the CDC, and the WHO, to be a cause of concern requir-ing action. The Saint Louis University study, as well as other studies, found that many of the children had blood lead levels of greater than 45 ug/dL, which are no longer merely levels of concern, but levels that constitute a medical emergency.
27. The health effects of lead poisoning are well known. Lead impacts nearly every organ and system of the human body and is not safe at any level. Lead causes multitude and serious injuries to the nervous system, which can lead to convulsions, coma and brain death. It causes learning and behavioral disorders, memory loss, nausea, anemia, hear-ing loss, fatigue, colic, hypertension, mylagia. It causes spontaneous abortions.
28. Infants and children are especially susceptible to lead poisoning due to their tendency to make hand-to-mouth contact. Additionally, infants and children absorb lead more readily than adults, due to structural similarities be-tween calcium and lead, and are thus at an even higher risk of suffering lead poisoning. Lead is incorporated into developing bone structures in place of calcium and then leaches into the bloodstream, causing damage to various organs and systems. This process occurs more rapidly in those who do not have adequate access to calcium in their diets, as do the minor plaintiffs. The young therefore experience the serious negative effects of lead at much lower levels of exposure than adults.
29. Sulfur dioxide, another pollutant emitted continuously and at an excessive level from Defendants' metallurgi-cal complex, damages circulatory and respiratory system, increases mortality, and is linked to lung cancer, espe-cially when present along with elevated levels of particulate matter, as is the case in La Oroya. Additionally, sulfur dioxide is the main ingredient in acid rain, which has burned the surrounding mountains bare of vegetation and makes it impossible to sustain successful farming operations. Due to the wrongful actions of the Defendants de-scribed herein, the level of sulfur dioxide in the air of La Oroya is approximately ten times greater than the level allowed in Missouri and in the U.S.
30. Various studies, particularly the Saint Louis University study, show that urine levels of cadmium in residents of La Oroya are up to six times greater than those generally found in the U.S. population. The air cadmium content in La Oroya is as much as 20 times greater than internationally accepted standards. Cadmium is a recognized carcino-gen. The Saint Louis University study also shows that La Oroya residents have elevated levels of arsenic, another known carcinogen. The arsenic content in the air of La Oroya is at least six to eight times greater than levels that are considered highly dangerous internationally.
31. Suitable technologies and processes exist to prevent the pollution caused by the activities at the Defendants' metallurgical complex, such technology has not been implemented at the La Oroya.
Thus far, Renco and Doe Run have not prevailed in their domestic U.S. court case.
But Renco is hitting back on a parallel track with a case under the U.S.-Peru FTA. The company is saying that it bought the metallurgical complex from the Peruvian government, which privatized the formerly state-run site in the 1990s. Renco claims that it signed its stock transfer agreement with the Peruvian government obligated the company to cover some of the costs of the site clean-up, but that the government agreed to assume any liablity in health or other lawsuits brought against the company related to the La Oroya site for a period of ten years (through 2007, later extended through 2012, apparently), subject to certain exceptions (detailed in the Notice of Intent, paragraph 4, linked above).
Renco claims that Peru lowballed the environmental clean-up costs, and then refused to be lenient with the deadlines for meeting the clean-up goals. The company also cites the financial crises of 2002 and 2007-09 for the need for additional extensions.
The bottomline for Renco: all of the hassles related to the environmental clean-up and Missouri lawsuits amount to a violation of their expectations, and unfair and inequitable treatment - both challengeable under the FTA. They also claim a national treatment violation (Simon Lester has more on this here), violation of the stock transfer as a protected "investment agreement" under the FTA - and say that Peru's actions may amount to an indirect expropriation! Renco is claiming $800 million in damages, quite a bit more than the company apparently invested in the complex.
The context for all of this is Peru's failure to comply with the May 10 environmental provisions that were cited by many members of Congress as the basis for their support of the agreement. As Inside U.S. Trade reported in December,
In an e-mail this week, USTR spokeswoman Nkenge Harmon declined to say whether the U.S. would initiate formal consultations under the FTA for Peru's non-compliance, but stressed that the U.S. is taking seriously the need for Peru to fully implement its FTA commitments.
Peru already missed an Aug. 1 deadline imposed by the FTA itself to come into full compliance with the terms of the FTA's forestry annex, which is intended to improve forest sector governance and reduce illegal logging. The U.S. and Peruvian governments have both taken the position that the forestry law is necessary, but not sufficient, to achieve full compliance with the annex.
However, the law has faced opposition from some indigenous groups in Peru that say it would open up more of their lands for development and that have demanded that the Peruvian Congress pursue more extensive consultations with indigenous communities prior to voting on the law.
Following the Aug. 1 deadline to implement the forestry annex, U.S. and Peruvian environmental groups said in a letter to both governments that they would press the U.S. to initiate formal dispute settlement proceedings against Peru under the FTA unless it makes "significant progress" on its unmet obligations within six months.
As we documented last year at this time, after signing the FTA, Peru's Garcia administration made a set of wholesale changes to the country's Amazon policy that would make it easier for multinational companies to drill and exploit jungle natural resources.
This has had predictably negative consequences for the country. Indigenous groups vigorously protested the weakining of their controls over their ancestral lands, leading to bloody civil-military conflict. And, as a collection of labor, human rights and environmental groups wrote to President Obama last year, Amazonian land under concession to U.S. and other oil, gas and mining companies has risen from around 10% before trade negotiations started in 2003, to an estimated 70% in 2010.
Oil, gas and mining companies that want in on the Amazon resource rush love NAFTA-style deals, especially the provisions giving special handouts to big corporations. A few years back, the U.S. Industry Trade Advisory Committee on Energy and Energy Services (known as ITAC 6) put out its official report on the Peru FTA. This report was written by U.S. corporations and lobby groups, including Duke Energy and Halliburton, and was presented to U.S. negotiators. While ITAC reports often go through all or many of the provisions of an agreement chapter-by-chapter, the ITAC 6 report was unusually terse. Under “objectives and priorities” of the group, the report read only: “Investment provisions.” The only other analysis in the six page document (with five pages of letterhead and contact information) was:
“ITAC 6 has reviewed the U.S. -Peru Free Trade Agreement and our members agree that it will lead to improvements in the trade relationship between Peru and the United States. On investment provisions and, more specifically, investor-state dispute resolution and the ability to use international arbitration, we are pleased [with] the U.S. – Peru Free Trade Agreement text…”
Corporations ask, and corporations receive. We'll stay tuned to the Renco v. Peru case, and share any more that we are able to find out.