Metalclad to Receive $16 Million

The Mexican government Friday paid Newport Beach waste management company Metalclad Corp. $16 million to end a five-year dispute that has cast doubt on the efficacy of NAFTA’s arbitration panels.

The first North American Free Trade Agreement panel ruled in 1996 that Mexico violated a law protecting foreign investors by blocking Metalclad from constructing a waste dump in northern Mexico. However, the dispute continued in Canadian courts until both parties agreed to a settlement.

“I guess NAFTA worked in the end,” said Anthony Dabbene, Metalclad’s chief financial officer. “But the original intention of the panel was to make these disputes go quickly, and we’ve been at it for five years.”

The resolution will spare the Mexican government and the company more court fees and the additional public scrutiny of another battle in the Supreme Court of British Columbia. Mexico’s willingness to settle also may help boost investor confidence in the country.

The Mexican government said in a news release that it paid the $16 million to honor its international obligations “in spite of its disagreement with the ruling by the international court.”

The dispute began when the government of San Luis Potosi state scuttled Metalclad’s plan to build a landfill, arguing the project was environmentally unsafe even though the company had a federal permit.

Dabbene said the settlement would more than cover the company’s “considerable” legal fees. He said Metalclad would use the money for domestic operations.