NAFTA Panel Sides With Metalclad on Claim

Dow Jones Newswires

A trade tribunal has ruled that Metalclad Corp., which sold its Mexican operations after one of its businesses was seized, is entitled to $16.7 million from the Mexican government, the Newport Beach company said Wednesday.

The ruling should have a “significant impact,” said the company, which has posted losses throughout the last decade. Last year, Metalclad logged sales of $13.4 million.

Metalclad took legal action in 1997, two years after its $22-million hazardous waste disposal site was seized by the state of San Luis Potosi.

The hazardous-waste management company sought $90 million in damages from the Mexican government, alleging that the former governor of San Luis Potosi effectively expropriated Metalclad’s facility by declaring the site part of an ecological zone.

The claim was filed under the North American Free Trade Agreement, which allows foreign investors who believe that their assets have been unfairly seized to demand compensation from the country where they were doing business.

The cases are heard by an international trade tribunal, and its ruling can’t be appealed, Metalclad said.

The company had entered Mexico early in the decade with high hopes, recognizing Mexico’s growing need to clean up its environment.

But frustrated with its dealings there, the company decided last year to sell its Mexican operations, including an industrial waste collection and recycling business. At the time, Metalclad Chief Executive Grant Kesler said the company’s Mexican operations had lost $45 million over the years.

Metalclad spent about $22 million on the hazardous-waste landfill site. It demanded $90 million in compensation to reflect the assessed value of the site as an ongoing concern.

The ruling was issued by a three-judge panel consisting of professor Elihu Lauterpacht of Cambridge, England; former U.S. Atty. Gen. Benjamin R. Civiletti; and Jose Luis Siqueiros, an international jurist of Mexico City.

The company announced the tribunal’s ruling after the close of U.S. markets. The shares closed at $4.31, up 6 cents in Nasdaq trading.