NAFTA ( NOW CUSMA) Investment Dispute

One Companys Toxic Waste is Another Companys Gold Mine

Decom Mat Inc. is a relatively new American toxic decontamination business based in the state of

Michigan. Decom Mat provides toxic waste treatment for a wide array of hazardous products and

by products, including chemical solvents, medical waste, asbestos, and cyanide. The material is

treated before it is sent to landfills or incineration sites.

Incorporated in 2005, Decom Mat quickly established itself as an industry leader in the U.S. The key

to its success was its invention of a ground breaking technological decontamination process that

renders waste into a form that is almost 100 percent environmentally friendly. Although the track

record for the process has not been established, initial research and tests confirm Decom Mats

innovative new process surpasses all existing regulatory requirements by rendering all forms of

waste more environmentally neutral than any other commercial treatment process for hazardous

decontamination currently in practice.

The company is estimated to be worth USD 200 million, but with the international attention and

interest in the minimal environmental impact of its decontamination process, its worth is projected

to quadruple in the next five years.

Cross-Border Expansion

With the success of its new green technology gaining momentum internationally, in 2012, Decom

Mat looked to Canada to invest in its next facility. After careful consideration, it chose the

province of Ontario. As with the decision to open the first plant in Michigan, logistics played a

crucial role in the selection of the next facility location.Like Michigan, Ontario was well positioned for short haul transport distances for trucks and trains

from hospitals, chemical plants, tire manufacturing companies and other industrial plants

responsible for producing tonnes of hazardous waste materials daily. In addition, the new facility

was located near the Canada-U.S. border. The current logistics company contracted for

transportation of the waste had a subsidiary in Canada and was well versed in hazardous material

import and export regulations and procedures.

As opposed to building an entirely new plant, Decom Mat purchased an existing decontamination

plant in Ontario for USD 25 million and invested an additional USD 22 million upgrading the

existing facility to perform the new process.

Legislative Hurdle

A month before the plant was set to officially begin processing, its operation was blocked by the

province of Ontario. The reason given by the provincial government was, ironically, lack of

compliance with provincial environmental regulations.

Recent environmental legislation passed required all hazardous waste processing or treatment

methods to have a minimum of five years of documented regulatory compliance to be legally

entitled to operate in Ontario. The legislation applied to any facility not currently in operation on

the day the legislation was passed.

With only three years of documented

regulatory compliance, while exceptional, Decom Mat was

not authorized to begin operation.

Having invested close to USD 50 million with the purchase and upgrade of the Canadian facility,

Decom Mat Inc. turned to NAFTA (Now CUSMA) to sue the Canadian government.

4. If this scenario were brought to a NAFTA tribunal, Decom Mat would most likely win. Explain

why.