In its Award dated September 20, 2021, the Tribunal in Lion Mexico Consolidated L.P. v. United Mexican States adjudicated claims brought under Chapter Eleven of the North American Free Trade Agreement (NAFTA) concerning an egregious denial of justice within the Mexican judicial system. The dispute originated from the fraudulent cancellation of three mortgages held by the Claimant, a Canadian entity, which served as security for loans totaling approximately US$ 32 million for real estate developments in Jalisco and Nayarit.

The Tribunal held that Mexico breached the Fair and Equitable Treatment (FET) standard under Article 1105 of NAFTA, specifically the prohibition against denial of justice under customary international law. The factual nexus of the breach involved a "Sinaloa Proceeding" where a state judge in Nayarit, acting on forged documents purportedly showing debt satisfaction, cancelled the Claimant's mortgages in a summary proceeding conducted without the Claimant's knowledge. Service of process was deliberately directed to an incorrect address, preventing the Claimant from mounting a defense. Subsequent efforts by the Claimant to vacate these fraudulent orders via amparo actions were dismissed by Mexican courts on hyper-technical and formalistic grounds. The Tribunal concluded that the systemic failure of the Mexican judiciary to provide an effective remedy against a manifest fraud, coupled with procedural conduct that shocked the sense of judicial propriety, constituted a clear denial of justice.

Crucially, the Tribunal rejected the Respondent's argument regarding the exhaustion of local remedies, finding that the Claimant had pursued all reasonable avenues for relief and that further domestic litigation would have been futile. Regarding jurisdiction, the Tribunal affirmed that the mortgages constituted protected "investments" as interests in property under Article 1139, while clarifying that the underlying promissory notes did not qualify as separate investments. As a remedy, the Tribunal awarded US$ 47 million in damages, representing the full value of the lost security, plus compound interest and a significant portion of legal costs.

The legal battle extended into national courts as the United Mexican States sought to vacate the award. In a significant Judgment dated April 7, 2026, the United States Court of Appeals for the District of Columbia Circuit affirmed the lower court's refusal to vacate the arbitral award. Mexico had petitioned for vacatur on the grounds that the arbitrators exceeded their powers under the New York Convention. The Court of Appeals, however, maintained the high degree of deference afforded to arbitral tribunals, ruling that the Tribunal acted within its mandate when determining that the denial of justice occurred. The Court also affirmed the denial of a motion to intervene by Hector Cardenas, the individual associated with the underlying fraudulent conduct in Mexico, citing the untimeliness of the motion and its lack of relevance to the narrow legal question of vacatur. This judgment reinforces the finality of the NAFTA award and underscores the limitations of using national courts to re-litigate the merits of international investment disputes.