Investment Treaty Arbitration: Mexico

Argentina (22 July 1998)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Austria (26 March 2001)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Bahrain (30 July 2014)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Belarus (27 August 2009)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

BLEU (Belgium–Luxemburg Economic Union) (18 March 2003)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

China (6 June 2009)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Cuba (5 April 2002)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Czech Republic (13 March 2004)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Denmark (24 September 2000)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Finland (20 August 2000)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

France (11 October 2000)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Germany (23 February 2001)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Greece (3 October 2002)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Iceland (28 April 2006)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

India (23 February 2008)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Italy (5 December 2002)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Korea (28 June 2002)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Kuwait (28 April 2016)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Netherlands (1 October 1999)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Portugal (4 September 2000)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Singapore (3 April 2011)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Slovakia (8 April 2009)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Spain (3 April 2008)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Sweden (1 July 2001)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Switzerland (14 March 1996)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Trinidad and Tobago (16 September 2007)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Turkey (17 December 2017)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

United Arab Emirates (25 January 2018)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

United Kingdom (25 July 2007)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Uruguay (7 July 2002)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Central America (22 November 2011)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Chile (17 April 1998)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Colombia (11 June 2010)

No

Yes

No

Yes

No

6 months

Yes

Yes

CPTPP (8 March 2018)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

EFTA (27 November 2000)

Yes

No

Yes

Yes

No

No

No

Yes

Israel (10 April 2000)

No

No

No

Yes

No

No

Yes

Yes

Japan (17 September 2004)

Yes

Yes

Yes

Yes

No

180 days

Yes

Yes

Pacific Alliance (6 June 2012)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Panama (3 April 2014)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Peru (6 April 2011)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Uruguay (15 November 2003)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

USMCA (1 July 2020)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Most of the investment treaties concluded by Mexico state that an investor is a national of a contracting party or an enterprise constituted under the laws of one of the contracting parties making or having made an investment in the other contracting party’s territory. For example, the BIT with Austria defines investor as ‘a natural person having the nationality of a Contracting Party in accordance with its applicable law; or an enterprise constituted or organised under the applicable law of a Contracting Party making or having made an investment in the other Contracting Party’s territory’. A similar definition is found in the investment treaties with Argentina, Korea and Sweden, among others.

For enterprises, some investment treaties concluded by Mexico require the seat of the company is in the territory where it is constituted to be considered an investor under the treaty. This is the case for the BITs with Argentina, Finland and Spain, among others. For example, the BIT with Argentina in its article 1 states that an investor can be ‘a legal person, constituted in accordance with the laws and regulations of one of the contracting parties and having its seat in the territory of that contracting party’.

Likewise, recent treaties concluded by Mexico are now requiring company investors to have ‘substantial business activities’ in the territory where they are constituted. For example, the BITs with China, Kuwait, Singapore, United Arab Emirates and Turkey. The BIT with Trinidad and Tobago states that an investor is ‘a company that is constituted or otherwise organized according to the laws of a Contracting Party, and having substantial business activities in the territory of that Contracting Party’.

Generally, most of the BITs, MITs or FTAs signed by Mexico exclude non-nationals from seeking BIT protection. The general rule for seeking BIT protection is for the investor(s) to be a national of any of the contracting parties.

Generally, the investment treaties concluded by Mexico only require natural persons to be ‘nationals’ of a contracting party to be considered an investor of that contracting party. Treaties tend to refer to the local laws of each contracting party to determine the nationality of the individual.

There is no permanent residence requirement in most of the investment treaties concluded by Mexico. The BIT with Cuba has this requirement providing as follows: ‘National means: a) with respect to the Republic of Cuba: the natural persons that are citizens of that State in accordance with their national legislation and have their permanent residence in the national territory.’

However, it should be considered that in some cases the local law of a contracting party may require residency in order to be considered a national of that contracting party. Therefore, a residency requirement could indirectly exist through the domestic laws of the contracting parties. In Mexico, the nationality of an individual does not depend on residency requirements.

Most Mexican investment treaties define ‘investment’ broadly. They tend to include every kind of asset, owned or controlled, directly or indirectly, by investors of one contracting party admitted in accordance with the laws, regulations and policies of the other.

Nevertheless, other treaties include a definition of what does not constitute investment. For instance, the BIT signed with United Kingdom at article 1 provides that ‘investment’ does not mean a loan to an enterprise nor a claim for money that arise solely from commercial contracts for the sale of goods or services or the extension of credit with a commercial transaction. Another example of agreements that provide what is not considered as investment is the FTA signed with Chile and the FTA signed with Uruguay.

There is no general rule, it depends on the treaty. For instance, the BIT signed with Trinidad and Tobago provides in its article 1(5), that profit and interest, capital gains, dividends, royalties and fees are included within the investment definition.

There is no general rule, it depends on the treaty. The BIT signed with Denmark contains a specific provision about duration, by stating in its article 1(1) that the BIT covers only those investments that have the purpose of establishing lasting economic relations with an enterprise.

In general, the investment treaties concluded by Mexico have an unqualified FET formulation. Meaning that the treaty simply accords fair and equitable treatment to investments. The typical formulation found is ‘each contracting party shall ensure fair and equitable treatment of the investments of nationals of the other contracting party.’ The BITs with Argentina, Austria, Belarus, Czech Republic, Denmark, Finland, France, Germany, Greece, Iceland, Italy, Korea, the Netherlands, among others have almost the same wording. This unqualified formulation is mainly found in the first generation of investment treaties concluded by Mexico.

However, some investment treaties, particularly the new ones, link the FET standard to the minimum standard of treatment under customary international law of treatment of aliens. For instance, the BIT with Bahrain states that: ‘the concepts of “fair and equitable treatment’ and ‘full protection and security’ do not require treatment in addition to or beyond that which is required by the customary international law minimum standard of treatment of aliens.’ Such FET formulation is similarly found in the BITs with China, India, Kuwait, Singapore, Trinidad and Tobago, Turkey and United Arab Emirates.

Other investment treaties add other substantive contents to the FET standard. For example, the BIT with China stipulates the irrelevance of a breach of a different treaty norm: ‘a determination that there has been a breach of another provision of this Agreement, or of a separate international agreement, does not establish that there has been a breach of this Article [FET].’ The treaties with Singapore and Trinidad and Tobago also provide this restriction.

Interestingly, the Central America investment treaty specifies that the FET protection includes, but it is not limited to, the obligation not to deny justice in criminal, civil and administrative procedures, in accordance with the principle of due process incorporated into the main legal systems of the world. The USMCA in article 14.6 limits the scope of FET to this definition.

Most of the investment treaties where Mexico is part state the typical expropriation clause: ‘a contracting party shall not expropriate or nationalise, directly or indirectly, an investment of an investor of the other Contracting Party or to take any measures having equivalent effect.’ Such definition is found in the BIT with Argentina, Austria, United Kingdom, Uruguay, among others. Similarly, other investment treaties have the following wording ‘neither contracting party may expropriate or nationalize an investment either directly or indirectly thought measures tantamount to expropriation or nationalization’ such as the CPTPP, FTA with Japan or the BITs with Bahrain, China, the Czech Republic, Denmark, Spain, among others.

Most of the investment treaties signed by Mexico do not consider interest paid and resulting from an expropriation as part of the compensation. However, some investment treaties, such as the BITs signed with Korea, Singapore, Greece and France, do.

Most of the treaties refer to similar grounds for expropriation, including:

• it must serve a public purpose;
• it must be non-discriminatory;
• it must be carried out in accordance with due process of law; and
• it must be accompanied by payment as means of compensation.

Some of the last concluded treaties define the concept of ‘indirect expropriation’. For example, the CPTPP provides that indirect expropriation is ‘an action or series of actions by a Party’ that ‘has an effect equivalent to direct expropriation without formal transfer of title or outright seizure’. Such analysis requires a ‘case-by-case, fact-based inquiry’ and considering several factors, such as the economic impact of the government action, the extent to which the government action interferes with distinct, reasonable investment-backed expectations, the character of the government action, among others.

Among the investment treaties concluded by Mexico, national treatment clauses generally provide that each contracting party shall accord to investors of the other contracting party and their investments, treatment no less favourable than that it accords to its own investors and to investments of its own investors. By contrast, most-favoured-nation clauses provide that no less favourable treatment shall be accorded to investors and to investments of investors of any third state.

Some investment treaties specify that the treatment no less favourable, for both standards, must be with respect to the management, maintenance, use, enjoyment or disposition of investments. This is the case for the BITs with Bahrein, Belarus, China, France, Greece, Iceland, India, among others. Some even add the requirement ‘in like circumstances’ to be considered in the analysis, such as the BITs with Belarus, Iceland and India.

USMCA addresses these two concepts in different articles. This formulation is followed by the investment treaties and BITs executed with Belarus, Central America, Chile, China, Costa Rica, CPTPP, India, Japan, Pacific Alliance, Peru, Slovakia, Trinidad and Tobago, among others. In contrast, some investment treaties such as the ones executed with Colombia, Argentina, Cuba, France, Korea and Spain address the protections in the same article.

Most of the investment treaties of Mexico expressly provide that the provision of the most-favoured national and/or national treatment does not extend to the benefits of membership of an association, an economic union, a common market or a free trade area or taxation.

The USMCA narrows the scope of application of both most-favoured nation treatment and national treatment standards. USMCA arbitral tribunals must consider whether the treatment is accorded in ‘like circumstances’, which depends on the ‘totality of the circumstances, including whether the relevant treatment distinguishes between investors or investments on the basis of legitimate public welfare objectives’.

Mexico’s investment treaties commonly include a reservation providing that, by virtue of a treaty to avoid double taxation, there is no obligation to extend to the investors or investments of one contracting party advantages granted to investors or investments of the other contracting party or of a country that is not a party.

For instance, such a provision can be found in article 5.3 of the BIT between Mexico and Turkey.

Similarly, article 11–10 of the investment treaty executed with Peru establishes that MFN treatment and national treatment do not apply to purchases made by a party or a state company, nor to subsidies or contributions – including governmental loans – guarantees and insurance granted by a party or a state company.

The general rule provided by the investment treaties signed by Mexico is the general obligation of the host state to provide full protection and security. Most treaties do not define the scope of such obligation.

Nevertheless, some investment treaties clarify the scope of such standard by stating the following: ‘for greater certainty the concepts of fair and equitable treatment’ and ‘full protection and security’ do not require additional treatment to what is required by the minimum level of treatment of foreigners under customary international law. This is the case for the BITs with China, India, Kuwait, Singapore, Trinidad and Tobago, Turkey, the free trade agreement with Peru, among others. Notably, the USMCA modifies the wording by establishing that ‘full protection and security’ requires each party to ‘provide the level of police protection that is required under customary international law’.

The investment treaties concluded by Mexico that have an umbrella clause generally have the following formulation: ‘Each contracting party shall observe any other obligation it has assumed in writing, with regard to investments in its territory by investors of the other contracting party. Disputes arising from such obligations shall be settled under the terms of the contracts underlying the obligations.’

The following BITs contain an umbrella clause (Austria, BLEU, Denmark, France, Germany, Greece, Iceland, Netherlands, Portugal, Spain and Switzerland BITs).

Most of the treaties that contain this clause have a specific chapter that regulates it. However, Denmark and Netherlands BITs do not have a specific chapter regulating the umbrella clause.

Several investment treaties guarantee protection and security for investments of the other contracting party referring to special situations. For instance, the typical clause says that if the investment of a contracting party suffers losses because of war or other armed conflict, resulting from a state of national emergency, civil disturbance or other similar events, investments should be treated with the same national investments privileges as those of nationals. For instance, the BITs signed with Austria, Bahrain, Belarus, BLEU, China, Czech Republic, France, Germany, Greece, India, Italy, Korea, Kuwait, Netherlands, Portugal, Singapore, Slovakia, Spain, Sweden, Trinidad and Tobago, Turkey and United Arab Emirates provide such protection.

Some of the investment treaties signed by Mexico contain fork-in-the-road provisions (Spain, Argentina, Korea, Greece, India, Iceland, Panama, Portugal, UK, Czech Republic, Sweden, Switzerland, Trinidad and Tobago, and Uruguay).

Under most of these treaties, investors must opt to pursue their claim through the local courts or by means of international arbitration. They cannot do both. This means that if the investor chooses to submit a claim before local courts, the choice is final and loses the right to access the investor-state arbitration. For example, the Central America treaty states in its article 11.20.4: ‘If a disputing investor chooses to submit a claim of the type described in this article to the judicial or administrative courts or tribunals of a disputing party or any other solution procedures for disputes, national or international, that choice will be final, and the disputing investor may not subsequently submit the dispute to conciliation or arbitration under this article.’

Interestingly, the USMCA Annex 14-D, Appendix 3 provides that US investors may not submit to arbitration a claim arguing Mexico had breached an obligation ‘if the investor or the enterprise, respectively has alleged that breach of an obligation under [the investment] Chapter, as distinguished from breach of other obligations under Mexican law, in proceedings before a court or administrative tribunal of Mexico.’

There is the possibility of a contracting party submitting a claim to arbitration that has already been brought before a national court, provided that the competent national tribunal has not rendered judgment in the first instance or on the merits of the case (Germany and Netherlands BITs).

Some investment treaties signed by Mexico give more importance to arbitration than to local court proceedings, such as the Germany, Netherlands and Argentina BITs.

In an arbitration claim against Mexico, notice of arbitration must be submitted before the Dirección General de Consultoría Jurídica de Comercio Internacional, which is subordinate to the Ministry of Economy.

In Mexico, the Ministry of Economy manages investment treaty arbitrations.

In recent cases, the legal counsel serving with the Dirección General de Consultoría Jurídica de Comercio Internacional in the Ministry of Economy has represented Mexico. However, according to the public version of procedural order 1 of the ongoing cases of Oro Negro v Mexico and Odyssey Marine Exploration Inc v Mexico, external counsel is also representing Mexico. Therefore, Mexico has used external counsel in investor-state arbitrations.

Yes, in April 2018, the Mexican Congress approved the Washington Convention. The Convention entered into force on 26 August 2018. In Mexico, there is no need to have a legislation implementing the treaties to which Mexico is a party. When a treaty is ratified and published in the Official Gazette, it is automatically considered part of the Mexican legal system.

Mexico signed the New York Convention on 14 April 1971.

In addition, by incorporation of the UNCITRAL Model Law on Arbitration into Mexico’s Commerce Code (applicable to local and international arbitration), UNCITRAL provisions are now found in domestic legislation.

There is no specific legislation governing non-ICSID investment arbitrations. However, claims have been brought against the Mexico outside ICSID, under the UNCITRAL Arbitration Rules in cases such as:

• GAMI Investments Inc v Mexico (concluded);
• International Thunderbird Gaming Corp v Mexico (concluded);
• Shanara and Marfield v Mexico (pending);
• Carlos Sastre v Mexico (pending);
• Billy Joe Adams et al v Mexico (discontinued); and
• Robert J Frank v Mexico (discontinued).2

Mexico has a good record when it comes to complying with awards. Currently, all awards have been ultimately satisfied.

It is favourable; the execution of over 20 BITs granting access to investment arbitration to foreign investors confirms it.

We are not aware of any award that has not been voluntarily recognised by Mexico.

No

No

This law regulates and provides legal certainty to foreign investment in several economic sectors, and abolishes restrictions in most areas. It does not provide specific types of protections or rights.

No

No

No

Yes

This provides a specific procedure and guarantees in favour of the person subject to expropriation.

Yes

No

Case No.

Claimant

Under

ARB/97/1

Metalclad Corp

NAFTA

ARB/97/2

Robert Azinian and Others

NAFTA

ARB/98/2

Waste Management, Inc

NAFTA

ARB/99/1

Marvin Roy Feldman Karpa

NAFTA

ARB/00/2

Técnicas Medioambientales Tecmed SA

Bilateral investment treaty (BIT) between Mexico and Spain

ARB/00/3

Waste Management, Inc

NAFTA

UNCITRAL

GAMI Investment, Inc

NAFTA

UNCITRAL

International Thunderbird Gaming Corp

NAFTA

ARB/02/1

Fireman’s Fund Insurance Co

NAFTA

ARB/04/1

Corn Products International, Inc

NAFTA

ARB/04/5

Archer Daniels Midland Co and Tate & Lyle Ingredients Americas, Inc

NAFTA

ARB/04/3; ARB/04/4

Gemplus SA, SLP SA, and Gemplus Industrial SA de CV, Talsud SA

BITs between France and Mexico;

BIT between Argentina and Mexico

ARB/05/1

Bayview Irrigation District and Others

NAFTA

ARB/05/2

Cargill, Inc

NAFTA

UNCT/14/1

KBR, Inc y Corporación Mexicana de Mantenimiento Integral

NAFTA

ARB(AF)/09/0

Abengoa, SA y COFIDES

BIT between Mexico and Spain

ARB(AF)/12/4

Telefónica SA

BIT between Mexico and Spain

Cases initiated and pending resolution

Lion Mexico Consolidated v Mexico, ARB(AF)/15/2, NAFTA

Shanara Maritime International, SA and Marfield Ltd Inc, v Mexico, Mexico–Panama BIT

B-Mex, LLC & others, v Mexico, ARB(AF)/16/3, NAFTA

Blanco, Nelson & Tele Fácil v Mexico, UNCT/171, NAFTA

Anthone & others v Mexico, ARB(AF)16/3, NAFTA

Carlos Esteban Sastre v Mexico, Argentina–Mexico BIT, Mexico–Spain BIT and Mexico–Switzerland BIT

Eutelsat v Mexico, ARB(AF)/17/2, France–Mexico BIT

Legacy Vulcan & Calica v Mexico, ARB/19/1, NAFTA

Odyssey Marine Exploration, Inc & Exploraciones Océanicas, S de RL de CV v Mexico, UNCT/20/1, NAFTA

Oro Negro v Mexico, UNCT/18/4, NAFTA

PACC Offshore Services Holding Ltd v Mexico, UNCT/18/5, Mexico–Singapore BIT

Terence Highlands v Mexico, ARB/19/26, Mexico–United Kingdom BIT

Vento Motorcycles, Inc v Mexico, ARB(AF)/17/3, NAFTA

Active notices of intent

Espíritu Santo Holdings, LP v Mexico

L1brero et al v Mexico

Primero Mining Corp v Mexico

Dal Tile Corporation (DTC) & Dal Tile International (DTI) v Mexico

Jinlong Dongli Minera Internacional, SA de CV v Mexico

Renaud Jacquet et al v Mexico