SAN FRANCISCO—A first-of-its-kind federal appellate court ruling not only puts foreign companies at risk of being held liable under the Superfund law for waste disposals outside of U.S. borders but also could lead to foreign liability problems for U.S. companies, according to legal and business interests.

In the closely watched case, a 9th U.S. Circuit Court of Appeals panel on July 3 unanimously ruled that a Canadian company that disposed of hazardous wastes in British Columbia is subject to the U.S. pollution law, because the pollutants migrated south and contaminated the Upper Columbia River in northeastern Washington.

Upholding a lower court's decision in a lawsuit filed by two private U.S. litigants, the appellate court-often highly critical of what it described as the Superfund law's ambiguous and ungrammatical language-dissected several provisions of the law in explaining why the court's ruling is not an extraterritorial application of the statute.

The case marks the first time that a non-U.S. operation has faced pollution liability under U.S. law for operations conducted outside of the United States, attorneys agree.

With both business and environmental issues at stake, the case has drawn wide attention on both sides of the border. Nine amicus briefs were filed by business associations in both countries, Canada's national government and the attorneys general of five states, American and Canadian Indian groups and an environmentalist organization.

The U.S. and Canadian business interests as well as the Canadian government oppose applying the Superfund law-which is formally known as the Comprehensive Environmental Response, Compensation and Liability Act-to the Vancouver, British Columbia-based company, Teck Cominco Metals Ltd. The other interests support the plaintiffs' efforts.

Teck has not decided whether to seek a rehearing by the full appellate court, but attorneys representing the U.S. Chamber of Commerce and the Canadian business trade associations said the groups likely would support an appeal.

An attorney for the Canadian government said she could not comment on the 9th Circuit panel's ruling.

But the government said in its amicus brief that it has "a strong interest" in preserving its "sovereign right to regulate Canadian persons and companies operating in Canada."

An affirmation of the lower court's decision would make other Canadian businesses operating near the U.S. border subject to CERCLA, "regardless of Canadian law," the government argued in its brief. In addition, Canadian businesses would become susceptible to other U.S. laws when their "conduct in Canada may have effects in the United States," the government argued.

Instead of allowing the lawsuit to proceed, the issue should be resolved through diplomatic measures, the Canadian government argued.

The Canadian Chamber of Commerce and the Mining Assn. of Canada argued similarly in their joint amicus brief.

The U.S. Chamber of Commerce opposes the litigation on several grounds.

Two frameworks

As Teck unsuccessfully argued, said Amar Sarwao, general litigation counsel for the Chamber in Washington, CERCLA does not state that it applies to conduct outside of the United States. "We'd want a clear statement from Congress," he said.

Otherwise, applying the law so widely would create confusion for companies that have operations in both the United States and Canada, Mr. Sarwao said. Those companies would "have to deal with two legal frameworks," and many times they are conflicting, he said.

The decision raises other potential problems for U.S. businesses, said attorney Rex S. Heinke, who represents the Canadian business associations.

"If the U.S. can make Canadian companies liable in its courts for alleged environmental pollution, then there's no reason Canada can't do that and Mexico can't do that" to U.S. companies that, for example, emit air pollutants that drift into those countries, said Mr. Heinke, a partner at Akin Gump Strauss Hauer & Feld L.L.P. in Los Angeles. "Is that the way to solve this problem?" he asked.

And, "there's no reason" that non-U.S. litigants could not apply the same liability concept to charge U.S. companies with violations of other statutes in the litigants' countries, Mr. Heinke said.

But those who support the litigation say the 9th Circuit panel's ruling is an important victory for U.S. and Canadian interests.

Without the ruling, U.S. operations have no disincentive to relocate just outside of the country's borders in an effort to avoid future U.S. pollution liabilities, said attorney Rob Roy Smith, who filed an amicus brief for the Okanagan National Alliance, a Canadian Indian group.

While any Superfund-controlled cleanup of the Columbia River would involve polluted areas only in the United States, the group filed its brief in protest of the Canadian government's failure to control Teck's hazardous waste disposal activities, said Mr. Smith, a senior associate at Morisset Schlosser Jozwiak & McGaw in Seattle.

The attorneys general for Arizona, California, Idaho, Montana and Oregon filed their joint amicus brief in favor of holding Teck liable under U.S. law, because those states have waterways that flow out of Canada, said a spokeswoman for the California attorney general's office, the lead state in the brief. "The same situation could easily happen here" in California as well as in the other states, she said.

The Columbia River in Washington has been polluted with heavy metals contained in the tens of thousands of tons of slag from Teck's lead and zinc smelter operations in British Columbia, according to court papers. Teck disposed of the slag in the Columbia River for most of the 20th Century until 1995.

The private litigants in Washington sued Teck after the company failed to reach an agreement with the U.S. Environmental Protection Agency over studying the health and environmental impact of the pollution and then ignored the EPA's subsequent December 2003 order to conduct the study.

Moot ruling

While the ruling is significant for U.S. and Canadian business, it is moot in some respects for Teck. The EPA rescinded its order against Teck last month when the company agreed to fund an EPA-designed study. The litigation proceeded because the plaintiffs want fines imposed against Teck for the period it did not comply with the EPA order. The plaintiffs also are attempting to recover attorneys' fees.

A spokesman for Teck subsidiary Teck Cominco American Inc. of Spokane, Wash., said the parent company has "made a commitment, and will stand by it," to remove any "unacceptable risk" in the afflicted area.

Joseph A. Pakootas et al. vs. Teck Cominco Metals Ltd., 9th U.S. Circuit Court of Appeals, July 3; No. 05-35153.