Picturesque Santa Monica, located in California and known for its palm tree-lined boulevards, has of late been dug up by ungainly drilling rigs. At one level, the intensive boring operations are seeking to trace potential carcinogen methyl tertiary butyl ether (mtbe) that has seeped from underground petrol storage tanks into the us state's aquifers. At another, they are gnawing at the very foundation of nafta (the North American Free Trade Agreement).

The mtbe controversy has snowballed into a full-blown legal battle between the us and Canadian company Methanex Corporation. The latter has sued the state of California contending that the ban on the pollutant has hurt its business. Several countries have been keeping close watch on the case since its outcome is likely to determine how the emerging global investment regime will affect the autonomy of regional and local governments to legislate against polluting businesses.

In this regard, the recent preliminary judgement of the three-member nafta trade tribunal has done little to allay fears. Critics allege that even as the decision may have thwarted Methanex