By Stephanie Nebehay

GENEVA, Aug 16 (Reuters) - A United Nations-sponsored forum on disarmament is failing to do anything to rid the world of weapons of mass destruction or prevent an arms race in outer space, the Canadian envoy to the body said on Thursday.

Outgoing Ambassador Paul Meyer said the international community had invested considerably in the Geneva-based Conference on Disarmament (CD), but said a "dysfunctional" voting system allowed a few states to hold the forum hostage.

"Alas, we have to acknowledge that the return on that investment has been virtually nil. If the CD were a business, it would have been declared insolvent long ago and shut down," Meyer said in a blunt speech after four years in his post.

The 65-member state forum -- whose last success was the 1996 Comprehensive Test Ban Treaty prohibiting underground nuclear explosions -- has been unable to launch negotiations on a treaty to ban production of nuclear bomb-making fissile material.

All decisions must be taken by consensus at the Geneva talks, the world's main multilateral disarmament negotiating forum.

A Fissile Material Cutoff Treaty is strongly backed by the United States and others, but delegations differ on whether it should include a verification mechanism, opposed by Washington.

China and Russia are among countries that have long argued that parallel progress was needed on other issues, including negotiations to prevent weapons being deployed in outer space.

"It would appear only logical that in a situation where there is an insurmountable conflict between a given forum and the substance to be addressed by it -- that the latter should not be sacrificed to the former," Meyer said.

"In other words, if despite the best efforts of many in this hall, we are unable to agree on a way to resume work, we should look to other fora or processes for carrying this work forward."

Meyer noted Canada and others had taken their campaign to ban antipersonnel landmines outside of the scope of the 1980 Convention on Conventional Weapons. The negotiations resulted in the 1997 Ottawa treaty banning the pernicious weapons.

He said the conventional arms pact may be side-stepped again later this year to take action on cluster munitions, blamed for thousands of civilian casualties worldwide.

"The chief point is that if states are serious about accomplishing something in the field of multilateral arms control, they will find the appropriate diplomatic vehicle for so doing," Meyer declared.

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