Metalclad vs Mexico

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Transcript of Metalclad vs Mexico

1CASE No. ARB(AF)/97/1INTERNATIONAL CENTRE FORSETTLEMENT OF INVESTMENT DISPUTES(ADDITIONAL FACILITY)B E T W E E N:METALCLAD CORPORATIONClaimantandTHE UNITED MEXICAN STATESRespondentA W A R DBefore the Arbitral Tribunal constitutedunder Chapter Eleven of the NorthAmerican Free Trade Agreement, andcomprised of:Professor Sir Elihu Lauterpacht, QC, CBEPresidentMr Benjamin R. CivilettiMr Jos Luis SiqueirosDate of dispatch to the parties: August 30, 20002TABLE OF CONTENTSParagraphI. INTRODUCTION 1II. THE PARTIES 25A. The Claimant 24B. The Respondent 5III. OTHER ENTITIES 6IV. PROCEDURAL HISTORY 727V. FACTS AND ALLEGATIONS 2869A. The Facilities at Issue 2829B. Metalclads Purchase of the Site and ItsLandfill Permits 3036C. Construction of the Hazardous Waste Landfill 3744D. Metalclad is Prevented from Operatingthe Landfill 4569VI. APPLICABLE LAW 7071VII. THE TRIBUNALS DECISION 72112A. Responsibility for the conduct of stateand local governments 73B. NAFTA, Article 1105: fair and equitabletreatment 74101C. NAFTA, Article 1110: Expropriation 102112CASES 3VIII. QUANTIFICATION OF DAMAGESOR COMPENSATION 113129A. Basic elements of Valuation 113125B. Bundling 126C. Remediation 127D. Interest 128E. Recipient 129IX. COSTS 130X. AWARD 1314I. INTRODUCTION1. This dispute arises out of the activities of the Claimant, MetalcladCorporation (hereinafter Metalclad), in the Mexican Municipalityof Guadalcazar (hereinafter Guadalcazar), located in the Mexican Stateof San Luis Potosi (hereinafter SLP). Metalclad alleges that Respondent,the United Mexican States (hereinafter Mexico), through its localgovernments of SLP and Guadalcazar, interfered with its development andoperation of a hazardous waste landfill. Metalclad claims that this interferenceis a violation of the Chapter Eleven investment provisions of theNorth American Free Trade Agreement (hereinafter NAFTA). In particular,Metalclad alleges violations of (i) NAFTA, Article 1105, whichComment by Jewel: Alleged violations of Mexico:requires each Party to NAFTA to accord to investments of investors ofanother Party treatment in accordance with international law, includingfair and equitable treatment and full protection and security; and (ii)NAFTA, Article 1110, which provides that no Party to NAFTA maydirectly or indirectly nationalize or expropriate an investment of aninvestor of another Party in its territory or take a measure tantamount tonationalization or expropriation of such an investment (expropriation),except: (a) for a public purpose; (b) on a non-discriminatory basis; (c) inaccordance with due process of law and Article 1105(1); and (d) onpayment of compensation in accordance with paragraphs 2 through 6.Mexico denies these allegations.

II. THE PARTIESA. The Claimant2. Metalclad is an enterprise of the United States of America, incorporatedunder the laws of Delaware. Eco-Metalclad Corporation (hereinafterECO) is an enterprise of the United States of America,incorporated under the laws of Utah. ECO is wholly-owned by Metalclad,and owns 100% of the shares in Ecosistemas Nacionales, S.A. de C.V.(hereinafter ECONSA), a Mexican corporation. In 1993, ECONSACASES 5purchased the Mexican company Confinamiento Tecnico de ResiduosIndustriales, S.A. de C.V. (hereinafter COTERIN) with a view to theacquisition, development and operation of the latters hazardous wastetransfer station and landfill in the valley of La Pedrera, located in Guadalcazar.COTERIN is the owner of record of the landfill property as well asthe permits and licenses which are at the base of this dispute.

3. COTERIN is the enterprise on behalf of which Metalclad has,as an investor of a Party, submitted a claim to arbitration under NAFTA,Article 1117.4. In these proceedings, Metalclad has been represented by:Clyde C. Pearce, Esq.Law Offices of Clyde C. Pearce1418 South Main StreetSuite 201Salinas, California 93908USA.B. The Respondent5. The Respondent is the Government of the United MexicanStates. It has been represented by:Lic. Hugo Perezcano DiazConsultor JuridicoSubsecretaria de Negociaciones Comerciales InternacionalesDireccion General de Consultoria Juridica de NegociacionesSecretaria de Comercio y Fomento IndustrialAlfonso Reyes No.30, Piso 17Colonia CondesaMexico, Distrito Federal, C.P. 06149Mexico.III. OTHER ENTITIES6. The Town Council of Guadalcazar, SLP, is the municipal governmentof Guadalcazar, the site of the landfill project. While neither Guadal6ICSID REVIEWFOREIGN INVESTMENT LAW JOURNALcazar nor SLP are named as Respondents, Metalclad alleges thatGuadalcazar and SLP took some of the actions claimed to constitute unfairtreatment and expropriation violative of NAFTA.

IV. PROCEDURAL HISTORY7. On October 2, 1996, Metalclad delivered to Mexico a Notice ofComment by Jewel: Procedure for Arbitration taken by Mexico:Delivery of Intent to Submit Claim to Arbitration to Mexico Delivered to Mexico consent and waiver Metalclad filed Notice of claim with ICSID to permit access to ICSID Additional FacilityIntent to Submit a Claim to Arbitration in accordance with NAFTA, Article1119, thereby instituting proceedings on behalf of its wholly owned enterprise,COTERIN, for purposes of standing under NAFTA, Article 1117.On December 30, 1996, Metalclad delivered to Mexico a written consentand waiver in compliance with NAFTA, Article 1121(2)(a) and (b).8. On January 2, 1997, and pursuant to the NAFTA, Article 1120,Metalclad filed its Notice of Claim with the International Centre for Settlementof Investment Disputes (hereinafter ICSID),1 and requested theSecretary-General of ICSID to approve and register its application and topermit access to the ICSID Additional Facility.9. On January 13, 1997, the Secretary-General of ICSID informedthe parties that the requirements of Article 4(2) of the ICSID AdditionalFacility Rules had been fulfilled and that Metalclads application for accessto the Additional Facility was approved. The Secretary-General of ICSIDissued a Certificate of Registration of the Notice of Claim on that same day.10. On May 19, 1997, the Tribunal was constituted. The Secretary-General of ICSID informed the parties that the Tribunal was deemed tohave been constituted and the proceedings to have begun on May 19,1997, and that Mr. Alejandro A. Escobar, ICSID, would serve as Secretaryto the Tribunal. All subsequent written communications between theTribunal and the parties were made through the ICSID Secretariat.1 Under NAFTA, Article 1120(1)(b), a disputing investor may submit its claim to arbitrationunder the Additional Facility Rules of ICSID provided that either the disputing Partywhose measure is alleged to be a breach referred to in Article 1117 (in this case, Mexico) or theParty of the investor (in this case, the United States of America), but not both, is a party to theICSID Convention. The United States of America is a party to the ICSID Convention; Mexicois not. Hence the Additional Facility Rules of ICSID appropriately govern the administrationof these proceedings.CASES 711. The first session of the Tribunal was held, with the parties agreement,in Washington, D.C. on July 15, 1997. In accordance with Article21 of the ICSID Arbitration (Additional Facility) Rules (hereinafter theRules), the Tribunal then determined that the place of arbitration wouldbe Vancouver, British Columbia, Canada. The parties accepted that determinationby the Tribunal.12. Numerous requests for production of documents were exchangedby the parties, some of which were allowed, and some of which were disallowed,particularly those that came later in the proceedings. Throughinstructions given by its President,2 the Tribunal issued a ruling on April27, 1999, relating to Mexicos April 14, 1999 Request for Production ofDocuments. The President of the Tribunal indicated that he could not, atthat stage of the case, decide the extent to which the requested documentsand materials might be relevant to the case, but ordered Metalclad toproduce the documents at issue and noted that Metalclad might seek anaward of costs related to the production should the requests be adjudgedunreasonable or improper. No such finding has been made.13. On September 10, 1997, pursuant to NAFTA, Article 1134providing for interim measures of protection and Article 28 of the Rulesproviding for Procedural Orders, Mexico filed a Request for a ConfidentialityOrder seeking a formal order that the proceedings be confidential.Metalclad filed its response on October 9, 1997. On October 27, 1997,the Tribunal issued a determination, which in its material part reads asfollows:There remains nonetheless a question as to whetherthere exists any general principle of confidentiality thatwould operate to prohibit public discussion of the arbitrationproceedings by either party. Neither the NAFTA northe ICSID (Additional Facility) Rules contain any expressrestriction on the freedom of the parties in this respect.Though it is frequently said that one of the reasons forrecourse to arbitration is to avoid publicity, unless the agreementbetween the parties incorporates such a limitation,2 At the first session of the Tribunal, of July 15, 1997, the parties agreed that the Presidentof the Tribunal should have the power to determine procedural matters.8 ICSID REVIEWFOREIGN INVESTMENT LAW JOURNALeach of them is still free to speak publicly of the arbitration.It may be observed that no such limitation is written intosuch major arbitral texts as the UNCITRAL Rules or thedraft Articles on Arbitration adopted by the InternationalLaw Commission. Indeed, as has been pointed out by theClaimant in its comments, under United States securitylaws, the Claimant, as a public company traded on a publicstock exchange in the United States, is under a positive dutyto provide certain information about its activities to itsshareholders, especially regarding its involvement in aprocess the outcome of which could perhaps significantlyaffect its share value.The above having been said, it still a