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BEFORE THE HONORABLE TRIBUNAL ESTABLISHED PURSUANT
TO CHAPTER XI OF THE NORTH AMERICAN FREE TRADE
AGREEMENT (NAFTA)

ODYSSEY MARINE EXPLORATION, INC.
(CLAIMANT)

V.

UNITED MEXICAN STATES,
(RESPONDENT)

(Caso CIADI No. UNCT/21/1)

REJOINDER

COUNSEL FOR THE UNITED MEXICAN STATES:
Orlando Pérez Gárate

ASSISTED BY:

Secretaría de Economía
Laura Mejía Hernández
Virginia Isabel Pérez del Castillo Pérez
Francisco Diego Pacheco Román
Alan Bonfiglio Ríos
Antonio Nava Gómez
Rafael Rodríguez Maldonado
Rafael Alejandro Augusto Arteaga Farfán

Pillsbury Winthrop Shaw Pittman LLP
Stephan E. Becker

Tereposky & DeRose
Alejandro Barragán
Ximena Iturriaga

19 October 2021

[Courtesy Translation]

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GLOSSARY

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I. INTRODUCTION

1. This Rejoinder contains responses to the factual, legal and quantum aspects of the Claimant's claims filed against the Mexican State regarding the Don Diego Project. Contrary to the Claimant's arguments, Mexico has provided the necessary evidence to demonstrate that the case presented by Odyssey, its partial description of the facts, and unsubstantiated accusations lack merit and represent an abuse of the use of the investment arbitration mechanism provided for in Chapter XI of the NAFTA.

2. Based on the evidence presented by the Respondent, the Tribunal may corroborate that there was no politically motivated campaign by Mr. Pacchiano against the Don Diego Project and, likewise, it can verify that the Don Diego Project did not receive a less favorable treatment than that received by other projects. On the contrary, the Respondent has shown that the decisions issued by the DGIRA were reasonable taking into account the importance of the Gulf of Ulloa and the marine species inhabiting that area.

3. In order to be able to start the Don Diego Project, the Claimant had to obtain an environmental impact authorization from the DGIRA, which is the only technical and regulatory entity in the entire Mexican government empowered to issue such an authorization. The Claimant submitted an “environmental impact statement” (MIA) that started the environmental impact assessment procedure (EIA Procedure), which culminated in the issuance of the 2016 Resolution, which was the basis for the DGIRA to deny Don Diego Project's environmental authorization.

4. Subsequently, the Claimant challenged the 2016 Resolution before the Mexican courts (TFJA). In this regard, the national courts ordered the DGIRA to reissue a new resolution exercising its full freedom of decision based on its regulatory powers. Therefrom derived, and based on the relevant technical and scientific aspects and complying with what was ordered by the TFJA, the DGIRA issued the 2018 Resolution which was the basis for it again to reject Don Diego Project's application for environmental impact authorization. Dissatisfied with this decision, ExO once again challenged the 2018 Resolution. Consequently, there are currently legal matters pending resolution by Mexican courts.

5. The administrative EIA Procedure, as well as the litigation before national courts, were transparent and carried out in accordance with due process. Proof of this is that ExO and a plurality

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of parties (authorities, international organizations, non-governmental organizations, inhabitants of communities, among others) actively participated in the EIA Procedure in full adherence to the legal framework. The situation to be considered is that, based on contemporary and irrefutable evidence, the EIA Procedure concluded that the Don Diego Project was not a sustainable or viable project, which is why it did not obtain the “environmental impact authorization" from the DGIRA.

6. Now, practically three years after the 2018 Resolution, the Claimant and its witnesses continue to argue that there were political reasons that led to the denial of the Don Diego Project's environmental impact authorization. This is false and there is no evidence to support this claim. In fact, the Claimant's' allegations depend largely on two [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] It is clear that these allegations have little credibility.

7. Part of the Claimant's strategy in this arbitration has been to ignore or minimize the relevance of the Gulf of Ulloa. Despite these efforts, Odyssey is unable to disprove the fact that this is a unique place in the world. On the one hand, the Gulf of Ulloa is part of the migratory routes of different species of whales from Russian and North American coasts, which shelter in neighboring areas considered whaling sanctuaries, which are protected natural areas and are part of the natural heritage of humanity. On the other hand, the Gulf of Ulloa is a natural center of biological activity that concentrates a large population of sea turtles, and a primordial feeding habitat for the Caretta caretta turtle, which represents a unique natural phenomenon. This species —in danger of extinction— is born off the coast of Japan and migrates to Mexico to grow and feed precisely in the Gulf of Ulloa. Dozens of years later, it returns to the Japanese coast to continue its reproductive cycle. Similarly, the Gulf of Ulloa is a feeding area for several threatened species, including the Guadalupe fur seal. These are just a few aspects that show that the Gulf of Ulloa is a natural treasure for Mexico and for humanity.

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8. The Claimant has made it clear that its claim in this arbitration is comparable to its other line of business: the “treasure hunt":

That potential $2 billion judgment (of which Odyssey would be entitled to 65%, or some $1.3 billion, due to partnerships) for a publicly traded company with a market cap of about $90 million has been enticing to investors. Since the litigation started, Gordon says he's seen a new group of investors emerge who are wagering on the outcome of the litigation. To date, Odyssey Marine has raised more than $30 million for the court battle with Mexico, with $20 million coming in the form of non-recourse debt that will not have to be repaid if they lose. The company posted $2.03 million in revenue in 2020, down from $3.07 million in 2019.¹

9. This kind of statement undermines the credibility of Odyssey's business projections and claims raised in this arbitration. In fact, it is seriously questionable that the Claimant seeks for the Tribunal to resolve technical and legal issues that are subject to review before Mexican courts. Given this situation, the Respondent has found it necessary to reiterate in this Rejoinder that the Tribunal is not the competent authority to: i) conduct a de novo review of the 2015 MIA of the Don Diego Project; nor ii) act as a court of appeal. Investment arbitration simply does not have that function.

10. The Claimant has not been able to refute the fact that the extraction of minerals from the seabed is a highly regulated and controversial activity at the international level due to the high degree of uncertainty about the impacts on both the environment and the species inhabiting the place where such activities are carried out. Despite this, the Claimant's position before the Mexican courts and before this Tribunal is that the dredging in the Project —to be carried out 24 hours a day, seven days a week and over 50 years— would not have caused environmental impacts. This position is simply absurd. Based on the facts, as well as the testimony and expert reports provided by the Respondent, the Tribunal will be able to corroborate the high degree of speculation around the Don Diego Project, which is a project that only reached a merely initial stage.

11. The high degree of speculation about the possible environmental impacts that the Don Diego Project could generate and the lack of specific information that would effectively address the authority's questions, led the DGIRA to reject the Project's environmental authorization. The foregoing was based on a detailed technical and scientific analysis of the available evidence that involved, inter alia, the determination of the clear deficiencies in the MIA prepared by ExO and

¹ Business Observer, “Marine and mineral extraction company dive into legal squabble with Mexico" (May 5, 2021). R-0172. ↩

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Odyssey, as well as the application of the precautionary principle, applicable under Mexican law and public international law.

12. Notwithstanding the fact that the 2018 Resolution is reasonable from a technical, scientific and legal point of view, the Respondent has shown that [Redacted] [Redacted] [Redacted] the DGIRA's decision to deny the environmental authorization was not based on any order or instruction for political reasons.

13. In this sense, the Respondent has been able to corroborate that all of Odyssey's allegations and its witnesses regarding alleged: i) meetings with Mr. Pacchiano; ii) commercial relations with Pemex; iii) working meetings with environmental authorities; and iv) meetings with leading scientists —such as Dr. Seminoff— are false.

14. For the benefit of the Tribunal, the Respondent summarizes the most important legal aspects of this Rejoinder Memorial:

• The Claimant is unable to demonstrate that Mexico failed to provide Fair and Equitable Treatment to Odyssey's investment pursuant to NAFTA Article 1105. The evidence provided by the Claimant is ineffective to demonstrate, inter alia, that Mr. Rafael Pacchiano ordered the Don Diego Project's environmental authorization denial for political reasons.
• The fact that the Claimant does not agree with the content of the Resolutions that denied environmental authorization to the Don Diego Project does not mean that such Resolutions are illegal or arbitrary.
• The Claimant had access to due process at all times before the DGIRA and before the national courts. In particular, the Claimant actively participated in the Don Diego Project's environmental assessments, but it was unable to demonstrate that Don Diego was a viable project. It is worthwhile to highlight the fact that the Claimant does not allege any claims against the actions of the Mexican courts and also that it continues to litigate the same DGIRA's actions that are subject of this arbitration, before national courts.

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• The alleged "legitimate expectations” of Odyssey were not violated by Mexico. The environmental regulation and, in particular, the decisions around it, may not be perfect, but that does not mean that the decision to deny Don Diego Project's authorization was not reasonable from the technical, scientific and legal fields.
• The Claimant is unable to legally and factually demonstrate that Mexico violated the obligation to provide Full Protection and Security (PSP) to Odyssey's investment. It even appears that the Claimant declined to present this claim in arbitration considering that the Reply does not even refer to the principle of PSP under the NAFTA.
• The Respondent acted with full and due exercise of its environmental regulatory powers when evaluating and resolving the request for an environmental impact statement. DGIRA's decision is not comparable to a direct or indirect expropriation measure and, therefore, does not violate NAFTA Article 1110.
• Claimant's claim related to National Treatment under NAFTA Article 1102 is a desperate attempt by Odyssey to try to substantiate its case. However, it is without merit. First, none of the Six Projects is in “similar circumstances" to the Don Diego one and, second, it is false that Mexico has accorded less favorable treatment to the Don Diego Project compared to the treatment accorded to other projects.
• The competent regulatory authority determined that the project was not environmentally viable and that there was no certainty that the environment, as well as threatened and endangered species, would not be affected. Therefore, it is appropriate for the Tribunal to offer deference to the decision issued by the regulatory authority, i.e., the DGIRA.
• The Tribunal cannot conduct a de novo review of the 2015 MIA, much less serve as an appellate court to analyze the 2018 Resolution technical-scientific aspects. Again, the Tribunal's function is to determine whether the DGIRA's decision is reasonable and if it was issued in accordance with the principles established in Chapter XI of NAFTA, taking into account the facts duly demonstrated in this arbitration.

15. Regarding the quantum analysis, the Respondent's position can be summarized as follows:

• The Claimant's claim for damages is grossly overstated. Contemporary evidence shows that the Project was still in its early stages and the necessary elements did not exist to

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estimate the various components of future cash flows with a reasonable degree of certainty. As of the Valuation Date, the Claimant had not demonstrated the technical or economic viability of its project through a feasibility study (FS or PFS), nor did it have Proved or Probable Mineral Reserves.

• The fact that the MIA's approval was a necessary condition for the Project to advance to its next stage does not imply that, if obtained, the Project would become the profitable business on which the Claimant bases its estimate of damages. The Project still had to overcome important obstacles such as: developing the basic engineering of the operation; demonstrate the existence of Reserves; perform tests to confirm that it could consistently produce a product conforming to market specifications; establish a customer base or at least demonstrate that there was a potential market for its products; get the funding; build the necessary equipment and infrastructure; and a long etcetera.
• The above-mentioned is indicative that the success that the Claimant anticipated was a simple possibility and not a probable outcome, as the Claimant pretends the Tribunal to believe through the numerous expert reports it has submitted in this proceeding and that were prepared specifically for the purposes of this litigation. The fact that the Claimant values the Project as if it were an ongoing business with a proven track record of profitable operations or as a project whose technical and economic viability has been demonstrated with contemporary specialized studies, explains the enormous divergence between the results obtained by the parties' damage experts.
• The Respondent has demonstrated and confirmed in this writing that, in accordance with the generally accepted guidelines and standards for the valuation of mining projects, the best practices of the industry and the practice of international tribunals that have resolved controversies related to projects in the pre-operational stage, a project like Don Diego's cannot be valued through the revenue approach (DCF or ROV), as the Claimant's experts do. Projects that are in an early development stage, equivalent to that of the Project, are valued through cost or market methodologies such as those used by Quadrant, the Respondent's expert.

16. In conclusion, the Respondent does not consider it appropriate —nor pertinent— that in an investor-State arbitration, technical-scientific aspects that have already been submitted to the

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national regulator and expert authority in environmental matters are re-evaluated. Similarly, the evidence provided by the Respondent has shown that: i) the Claimant's claims lack merit; ii) Odyssey's witness statements should not be admitted or, where appropriate, have no credibility; and iii) the Claimant's claim for damages is unsupported.

17. The Respondent requests the Tribunal to consider as a starting point for its analysis the following observation of the UNESCO World Heritage Center on the Don Diego Project: “the Project, located in the Gulf of Ulloa, would seriously threaten the marine species and ecosystems of the area [...] an important attribute of the Outstanding Universal Value of the property [...]”.

II. FACTS

A. The Claimant seeks for the Tribunal to resolve, in accordance with Mexican law, scientific and legal issues that are subject to review by national courts

18. In its Reply, the Claimant argues that "Odyssey is not seeking to appeal an adverse environmental decision, nor is it asking the Tribunal to determine the MIA afresh”,² however, it also acknowledges that “[t]he dispute is whether the scientific and other factual evidence demonstrates that the Project was illegitimately denied".³ These statements are contradictory since they show that the Claimant seeks, in fact, for the Tribunal to analyze and rule on technical-scientific aspects, masking its claim with the alleged existence of “secret marching orders”⁴ under which they implied that the 2014 MIA was withdrawn and the 2015 MIA was denied.

19. But not only that, the Claimant also seeks for the Tribunal to rule on the correct interpretation and application of Mexican environmental law, that is, to act as a national court to determine the scope of the LGEEPA article 35. This is confirmed by the Claimant's following assertion:

There is a dispute as to whether the DGIRA is entitled to deny a MIA under Article 35(III)(b) only when proposed activities would adversely affect an endangered species

² Reply, ¶ 17.

³ Reply, ¶ 19.

⁴ The Claimant expressly used the concept of “secret marching orders” to formulate its claim regarding the two denials of the MIA, however, Mexico noted the similarities between the concept and the claim that was made in the case Vento Motorcycles v. Mexico. Consequently, the Claimant now attempts —unsuccessfully— to depart from the analogies existing in that case and within its Reply has dispensed with the use of that term. See Claimant's Reply, ¶ 221.

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as a whole (as Odyssey asserts), or when those proposed activities would affect a few individuals of an endangered species (as Mexico asserts).⁵

20. In this sense, the Tribunal must bear in mind that the factual aspects of a technical-scientific nature, as well as the interpretation and application of the LGEEPA, are being reviewed by the TFJA.⁶ Therefore, the Tribunal' should focus on determining whether prima facie evidence has been submitted proving that the DGIRA acted on a whim and resolved the matter in the way it did so by a political instruction outside the legal framework. In any case, the Tribunal must determine whether the alleged "secret marching orders" constitute per se a violation of the minimum standard of treatment or expropriation under NAFTA. Based on the evidence provided by the Claimant, it is evident that the Tribunal will conclude that the claim does not stand and the DGIRA's decision —in its capacity as a specialized and regulatory body in technical-scientific matters— was reasonable and does not generate any violation of Mexico's obligations under NAFTA.

21. In any event, it is evident that the judgment handed down in the trial before the TFJA will invariably affect the Claimant's claim.⁷ This situation is well known by Odyssey who omits to address this aspect and, instead, limits itself to stating that “Mexico breached NAFTA's investment protections",⁸ notwithstanding that the facts underlying its claim are practically the same as in Mexican courts, as discussed below.

1. The Claimant omits to indicate that the nullity trial before the TFJA affects the factual aspects of its claim in this arbitration

22. As already indicated in the Counter-Memorial, on August 19, 2019, ExO challenged the DGIRA's 2018 Resolution through a contentious administrative lawsuit before the TFJA.⁹ ExO requested the TFJA to “analyze the legality of the defendant authority's Refusal to authorize the ExO MIA, [...] and sentence the authority to issue a new resolution [...]”.¹⁰ Particularly, ExO expressly asked the TFJA “resolve the merits of the ExO claim by establishing the terms and guidelines that the authority must observe”, that is, “that is resolved on the authorization of the

⁵ Reply, ¶ 22.

⁶ See Second Solcargo-Rábago Report, ¶¶ 94-98.

⁷ See Second Solcargo-Rábago Report, ¶¶ 102-106.

⁸ Reply, ¶ 17.

⁹ Counter-Memorial, ¶¶ 379-384. See Second Solcargo-Rábago Report, ¶¶ 102-106.

¹⁰ C-0186, pp. 13-14.

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MIA”.¹¹ There is no doubt that if the TFJA resolves ExO's challenge in its favor, the Claimant would be in a position to obtain double compensation before this Tribunal.

23. From that point of view, the Claimant's claim is premature. Proof of this is that it resorts to this Tribunal to analyze exactly the same facts that it raises before national courts.¹² The Claimant even goes so far as to request this Tribunal —as well as the TFJA— to rule on the interpretation of Mexican environmental regulations.

24. Indeed, in its Reply, the Claimant develops various arguments regarding the interpretation of LGEEPA article 35, particularly, it indicates that “[r]espondent's interpretation of Article 35(III)(b) is manifestly wrong and directly contradicts SEMARNAT's practice and application".¹³ To do this, the Claimant relies on the report of a legal expert who distinguishes between the terms "species" and "individual” to —erroneously— interpret¹⁴ LGEEPA article 35 and even cites the alleged existence of an interpretive standard adopted by the DGIRA in the Puerto de Manzanillo project.¹⁵ Precisely those three aspects of LGEEPA article 35 that the expert addresses and the Claimant cites, namely: (i) erroneous interpretation; (ii) distinction between individual and species; and (iii) alleged administrative precedent of the “Puerto de Manzanillo" project, are actually a mere copy of what ExO argued to the TFJA:

[...] we argue that the defendant authority assumed an improper interpretation of article 35, section III, subparagraph b) of the LGEEPA, whose application -under criteria of reasonableness and proportionality- requires determining (i) if the identified impacts represent damage, for which dimensioning variables along with mitigation and compensation measures should be considered, and (ii) if the eventual damage transcends to a specific species, and not only certain individuals or populations
[...]

It is worth highlighting that the environmental authority has expressly assumed that criterion, as can be seen in page 101 of the official letter SGPA / DGIRA.DDT.-1383.05 dated November 22nd, 2005, in which the project “Port of Manzanillo, Master Development Program, 2000-2010” was authorized, [...].¹⁶

¹¹ C-0186, pp. 14-15.

¹² See Second Solcargo-Rábago Report, ¶¶ 102-106.

¹³ Reply, ¶¶ 19-30.

¹⁴ See Second Solcargo-Rábago Report, ¶¶ 12-18.

¹⁵ Second Héctor Herrera Report, ¶¶ 49-67.

¹⁶ C-0186, pp. 51 and 53 (emphasis added).

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25. This similarity is not accidental and is repeated throughout the Claimant's Reply. For example, in the “legal grounds” section regarding the claim on alleged discrimination based on NAFTA Article 1102, the Claimant relies on the report of a biology expert to assert that: (i) there are other projects comparable to the Don Diego Project; and (ii) the Don Diego Project was discriminated against by the Respondent for not having been authorized. Again, the arguments and facts referred to by the Claimant are practically a copy of what ExO presented before the TFJA:¹⁷

[...] Ex O sets forth the arguments that prove the illegality of the Contested Resolution to the extent that, in denying the authorization of the Project, the defendant authority failed to consider assumed criteria previously used to authorize projects of a similar nature.

[...] These violations are independent from each other; however, they are exposed in the same concept of challenge, insofar as their joint understanding allows us to arrive at the conclusion that the DGIRA should have applied different criteria when deliberating on ExO's MIA, and since it did not, a factual situation arose that implies an undue appreciation of the Project and its MIA, as well as an unequal treatment in front of project owners who are placed in similar situations of law.¹⁸

26. For the benefit of the Arbitration Tribunal, Table 1 presents a comparative analysis that shows the similarities of the facts and claims raised by the Claimant before this Tribunal vis-à-vis those that are presented before the TFJA and whose decision remains sub judice.

¹⁷ Although within the lawsuit filed by ExO before the TFJA only 3 projects coincide with the 5 that the Claimant presented in its Reply, ExO presented a list with more than 70 dredging projects that it considers comparable to the Don Diego Project. See C-0186, pp. 149-153.

¹⁸ C-0186, p. 149.

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Table 1. ExO's claims and arguments before the TFJA vis-à-vis Odyssey's claims and arguments before the Arbitral Tribunal

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27. Table 1 makes it possible to verify that whatever the result of the nullity trial before the TFJA, it will invariably have an effect on the Claimant's claim.¹⁹ Additionally, it is evident that the only substantial difference between ExO's facts, arguments and claims before the TFJA and those raised by the Claimant before this Tribunal, is that in this arbitration the Claimant alleges the alleged existence of “secret marching orders" that [Redacted] [Redacted].²⁰ In Mexico's view, this aspect, together with the testimonial statements of Mr. Pacchiano himself, the evidence in the record and, significantly, [Redacted] [Redacted]; constitutes an element that demonstrates that the Claimant has had to appeal to create a theory of “secret marching orders” to be able to present its claim in this arbitration.

2. The Claimant tries to unduly circumscribe the Tribunal's jurisdiction to the aspects that are subject to review by the TFJA, which demonstrates that it resorts to this arbitration as an appeal instance

28. In the Reply, the Claimant has indicated that "[...] the debate about environmental issues that do not affect sea turtles is irrelevant, as they were not the grounds upon which SEMARNAT denied ExO's MIA under Article 35(III)(b) of LGEEPA”.²¹ This affirmation confirms that the Claimant seeks that the Tribunal limit its analysis to the technical-scientific aspects that are precisely the object of review by the TFJA. Additionally, the Claimant intends for the Tribunal itself to work as a national court and review the scientific evidence, contrasting it with the DGIRA's determinations, which is demonstrated by the following statement:

Mexico has not engaged with, and therefore does not challenge, the expert reports and evidence submitted by Odyssey from experienced biologists and other scientists which comprehensively address the potential environmental impacts described by SEMARNAT in the 2018 Denial.²²

29. In fact, the Claimant claims that “Mexico now attacks the Project's environmental soundness by relying on Technical Opinions and submissions that were not part of the reasoning

¹⁹ See Second Solcargo-Rábago Report, ¶¶ 102-106.

²⁰ Memorial, ¶ 221.

²¹ Reply, ¶ 21.

²² Reply, ¶ 44.

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of the Denial [...]”.²³ However, this assertion is contradictory since, on the one hand, the Claimant intends to restrict the Tribunal's review topics, as well as Mexico's arguments, to those aspects expressed by the DGIRA in the 2018 Resolution²⁴ and, on the other hand, it itself presents new evidence that was not the subject of the analysis carried out by the DGIRA that led to the 2018 Resolution. For example, the Claimant indicates that “Mexico does not challenge the Expert Reports prepared by Deltares [...]”,²⁵ however, it was not part of the PEIA and it is only now that it has presented it in this arbitration proceeding, which confirms that, basically, the Claimant wants the Tribunal to rule on the Don Diego project's viability.²⁶

30. Based on the foregoing, it is clear that the Claimant intends that the Tribunal limit itself to analyzing the technical and scientific aspects that are subject to review by the TFJA and that the Tribunal rules on whether the denial of the authorization by the DGIRA is supported by the additional scientific evidence presented in this arbitration. Mexico considers that, ultimately, the Claimant asks the Tribunal to perform a function that does not correspond to it. Due to this insistence of the Claimant, and in order to provide an objective context to the Tribunal on the alleged environmental sustainability of the Don Diego Project, Mexico has been forced to submit, together with this Rejoinder Memorial, three expert reports that will allow for the Tribunal to weigh the evidence presented in this arbitration and confirm that the decision of the environmental authority was technically, scientifically and legally reasonable. Additionally, as discussed below, these reports also show that the DGIRA correctly resolved that the Don Diego Project represents a serious threat to the ecosystem of the Gulf of Ulloa region and to the sustainability of marine species such as whales and other turtles, including the Caretta caretta ones.

a. It is false that the 2018 Resolution did not address the impact of the Don Diego Project on whales

31. It is questionable that the Claimant asserts that “Odyssey did not serve an expert report on the Project's effect on whales with its Memorial because impact on whales did not form any part

²³ Reply, ¶¶ 64-76.

²⁴ Reply, ¶¶ 64-76.

²⁵ Reply, ¶ 45.

²⁶ "Deltares concludes that the Project would have used proven technology with well-established techniques to minimize potential environmental impacts (which are known and can be addressed), [...]". Reply, ¶ 45.

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of the 2016 and 2018 Denials".²⁷ This statement is false. The 2018 Resolution does reflect the DGIRA's concerns regarding whales and, in fact, constitutes one of the reasons that led DGIRA to deny the authorization of the 2015 MIA.²⁸ Indeed, the 2018 Resolution makes express reference to large marine mammals in the following terms:

[...] under the technical analysis performed to MIA-R, IF, IA, and IC, the scientific information this DGIRA follows, and which is contained in Legal Reasonings No. XVI and XVII, as well as the adverse effects derived from the project, [...], that AP is located in the Gulf of Ulloa, which tridimensional space constitutes the habitat of the loggerhead sea turtle, which species is classified as endangered [...], also reporting the existence of other three species of sea turtles also classified as endangered, such as “Lepidochelys olivacea" or the Pacific ridley sea turtle, the “Dermochelys coriacea" or leatherback sea turtle, the "Chelonia mydas" or green turtle and the “Eretmochelys imbricate" or hawksbill sea turtle, with respect to which there are no specific analysis, [...], considering that the chelonians species mentioned above, as well as the sea big mammals species mentioned in the Legal Reasoning No. XVII of this Resolution, what proceeds is the DENIAL OF THE AUTHORIZATION so requested, [...] also the mitigation measures proposed by petitioner,, [...], fail to guarantee that all the effects of the project will not adversely affect the sea species [...], and that have been referred to, in Legal Reasoning No. XVII of this instrument..²⁹

32. Additionally, within the Considerando XVII of the 2018 Resolution itself the “Gulf of Ulloa" is examined as “habitat of other species” and, in fact, the DGIRA pointed out the following:

Regarding sea mammals, this environmental authority replicates and owns the information transcribed in previous paragraphs regarding the fact that out of the 47 species known in Mexico, 35 have been reported in the Eastern coast of the Baja California peninsula. Among them, the blue whale (Balaenoptera musculus) can be mentioned as well as the fin whale (B. physalus), Bryde's whale (B. edeni), sperm whales (Physeter macrocephalus),spinner dolphin (Stenella longirostris), Risso's dolphin (Grampus griseus), striped dolphin (Stenella coeruleoalba), killer whales (Orcinus orca), and California sea wolf (Zalophus californianus), short-beaked common dolphin (Delphinus delphis), pacific white-sided dolphin (Lagenorhynchus obliquidens), the humpback whale (Megaptera novaeangliae) and the grey whale (Eschrichtius robustus).All these species of mammals are subject to special protection in the Mexican standard.³⁰

33. Even ExO has acknowledged before the TFJA that the DGIRA did address the project's impact on whales, and specifically, indicated that: “[i]n Rebuttal XVII. GULF OF ULLOA, HABITAT OF OTHER SPECIES, included in 295 to 316 of the Contested Resolution, the DGIRA

²⁷ Reply, ¶ 85.

²⁸ Urbán-Viloria Report, ¶ 44.

²⁹ C-0009, pp. 515-516 (emphasis added).

³⁰ C-0009, p. 316 (emphasis added).

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includes multiple references to species that inhabit the Gulf of Ulloa and are included in NOM 059. Specifically, the DGIRA refers to various species of whales, birds and turtles other than Caretta caretta. These observations are resumed between pages 472-473".³¹ Therefore, it is inexplicable that the Claimant considers that the impact on the whales constitutes a “[a]dditional example [...] of how Respondent seeks to rely on new reasons to justify".³²

b. The Claimant's position regarding the impact of the Don Diego Project on whales shows that its claim is premature since it is based on the same allegations presented before national courts

34. The Claimant's position on the whale issue before the Tribunal seems to replicate the same argument that ExO adopted before the TFJA, i.e., the alleged “defective statement of reasons to the [...] affecting of species other than the Caretta caretta turtle”.³³ Particularly, ExO argued the following:

[t]he DGIRA referred to various species of whales, [...]. However, the generic data that it includes, notably within Rebuttal XVII and other sections of the Contested Resolution, is presented isolated and decontextualized.³⁴

35. This line of argument coincides precisely with that stated by the Claimant in the Reply, namely, "[t]he 2018 Denial refers to impact on sea turtles and other protected species of sea turtles [...] but does not give any reasons for denying the Project based on an impact on whales, [...]”.³⁵ Once again, it can be verified that the Claimant's claim is based on the same facts and allegations that it raises at the domestic level before national courts, therefore the Tribunal must be careful to avoid ruling on technical-scientific aspects related to the Project's viability, since it is a matter that corresponds primarily to the specialized Mexican authorities (i.e., to the DGIRA) and, where appropriate, the TFJA.

³¹ C-0186, p. 79.

³² Reply, ¶¶ 77-87.

³³ C-0186, p. 78.

³⁴ C-0186, pp. 80-81.

³⁵ Reply, footnote 204.

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c. There is a possibility that the TFJA will issue another decision that allows addressing and correcting any additional aspect that SEMARNAT considers pertinent

36. Although ExO asked the TFJA to definitively resolve on the MIA's authorization, that is, to order the DGIRA to authorize the MIA on a conditional basis,³⁶ the TFJA itself has the power to be deferential to the DGIRA and determine that it is the latter who decides "with full freedom in the use of their powers and attributions”,³⁷ as it did with respect to the 2016 Resolution. Indeed, the TFJA recognized that it should not be substituted in the powers of the DGIRA, a specialized authority with the technical capacity to analyze the scientific aspects that are the subject of the dispute, in particular, the TFJA explained the following:

[...] this Court has the power to analyze the legality of the resolution of Refusal of authorization of the MIA (appealed resolution), and is able to sentence the authority to grant the authorization of the MIA to the plaintiff or not, however, the law requires that this Jurisdictional Body have the sufficient elements to do this, which does appear to happen in the specific case.

The foregoing, because this Tribunal does not have sufficient means of proof to analyze the MIA,nor does it have the necessary technical resources to analyze whether or not the mitigation proposals of the project would be effective in preventing damage to the habitat of the loggerhead turtles and the 4 species in danger of extinction, which is the subject of judgment, nor could it technically determine which measures might be sufficient for that purpose.

[...], -as already mentioned- the Tribunal does not have the technical capacity to analyze these proposals, and if they are analyzed by this Court, it would be replaced in the powers that are proper and exclusive to the Secretariat of Environment and Natural Resources (SEMARNAT).³⁸

37. It follows from the preceding paragraphs that, in the procedure that is sub judice, the TFJA could again determine that it does not have the technical capacity or the sufficient elements to order the MIA authorization. If this is the case, the TFJA may again grant due deference to the DGIRA to resolve what it deems appropriate.³⁹ Under this assumption, the DGIRA could even address other effects that the Project could have on other species and correct, with the proper

³⁶ C-0186, p. 197.

³⁷ C-0170, p. 212. See Second Solcargo-Rábago Report, ¶¶ 102-106.

³⁸ C-0170, pp. 186-187 (emphasis added).

³⁹ See Second Solcargo-Rábago Report, ¶¶ 102-106.

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justification and motivation, any additional aspect that had been identified by the TFJA,⁴⁰ as it happened and was recognized in the judgment regarding the 2016 Resolution:

In addition to the above, a further impediment for this Tribunal to determine whether or not the actor's MIA should be authorized is that the litis raised in the trial at hand, deals exclusively with the possible damage that could be caused to the species of turtles in question, however, in the content of the administrative file in which the refusal was issued to the MIA, it is warned that there are several additional species that could be affected by the project, such as: the gray whale, dolphins, sharks, fish, mollusks, migratory ales, among others, and this Judge does not have the technical resources to carry out an analysis in that sense.

Likewise, this Tribunal could not analyze other possible environmental impacts that the project in question represents, such as: water, air, sound pollution, among others.⁴¹

38. Therefore, and despite the fact that the Claimant has omitted to address it, it is evident that there is a possibility that the TFJA may decide that it is the DGIRA itself that once again must determine the viability of the MIA authorization.⁴²

d. ExO has not fully participated in the TFJA procedure despite having the opportunity to do so

39. In the procedure that resolved ExO's challenge against the 2016 Resolution, the TFJA recognized that it required various expert evidence in environmental matters to be able to verify the viability of the mitigation measures proposed by ExO for the purpose that the 2015 MIA was authorized.⁴³ In fact, the TFJA was clear in stating that in order to decide on the authorization of the 2015 MIA it would have needed various technical opinions regarding all the topics analyzed during the PEIA. In particular, the TFJA noted the following:

[...] este Cuerpo Colegiado considera que, para valorar la causa petendi que expresa la parte actora, es necesaria la opinión técnica y especializada de expertos en la ciencia ambiental, en todas y cada una de las disciplinas implicadas en el asunto que nos ocupa.⁴⁴

40. Although the nullity trial is still pending resolution,⁴⁵ ExO submitted only one expert evidence in marine biology, for which Mexico considers that this offer does not adhere to what

⁴⁰ See Second Solcargo-Rábago Report, ¶¶ 94-98.

⁴¹ C-0170, p. 187 (emphasis added).

⁴² See Second Solcargo-Rábago Report, ¶¶ 102 and 104.

⁴³ C-0170, p. 187.

⁴⁴ C-0170, p. 188.

⁴⁵ See Second Solcargo-Rábago Report, ¶¶ 98, 102 and 106.

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was indicated and reiterated by the TFJA, i.e., that “a efecto de estar en condiciones de entrar al estudio de dicha propuesta, se requiere de la opinión de expertos en las diversas ciencias implicadas en el asunto de mérito”.⁴⁶ It is strange that Odyssey and ExO chose not to take the opportunity to present expert reports to the TFJA, but instead submitted them to the Tribunal in this proceeding. This suggests that the Claimant itself does not believe that its evidence is convincing enough to satisfy Mexican domestic legal requirements. Instead, it hopes that the Tribunal will be the one to decide on its claim, ruling on technical issues beyond its competence.

e. The expert opinion presented by SEMARNAT before the TFJA is consistent with the 2018 Resolution and is part of the pending trial before the TFJA

41. The Claimant tries to make the Tribunal believe in the existence of an alleged contradiction of SEMARNAT in relation to the turtles' density in the Project area, however, this accusation is based on a wrong reading of the Resolutions.⁴⁷ Indeed, the Claimant argues that “[i]n both Denials, SEMARNAT erroneously justified its conclusion that Caretta caretta would be impacted as a species on the basis that academic literature demonstrates that there are one to 28 Caretta caretta turtles [...] and 54 to 85 Caretta caretta turtles per km²".⁴⁸ In this regard, it should be noted that, although the 2016 Resolution referred to these figures, such reference was made to support the conclusion that the Gulf of Ulloa is the habitat of the Caretta caretta species.⁴⁹ In this sense, even if these figures were incorrect, this would not alter the indisputable fact that the Gulf of Ulloa is the Caretta caretta turtle's habitat.⁵⁰ Furthermore, this situation was clarified in the 2018 Resolution in the following terms:

Based on information contained in figure 2, created by this DGIRA and based on the overlap of the polygon of the project area, it is determined that the surface of the AP is located within the Gulf of Ulloa, which is considered a Caretta caretta critical habitat and in which, specifically concerning the first three polygons, it was identified the

⁴⁶ C-0170, p. 192.

⁴⁷ Memorial, ¶¶ 272-273 and 275. See Reply, ¶¶ 58-62.

⁴⁸ Reply, ¶ 59.

⁴⁹ Within the AP surface and specifically in the first three polygons, it was identified that there is an abundance of 1-28 turtles per km², and in polygons 4 and 5, the abundance is 54 to 85 turtles per km², therefore this authority concludes that, according to article 3, section XXIII, of the General Wildlife Law, the Gulf of Ulloa: is habitat for the Caretta caretta species. See C-0008, p. 220.

⁵⁰ Group of Experts on Sea Turtles Report, ¶ 27. Verónica Morales Report, ¶¶ 76 and 89.

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existence of an abundance from 1 to 28 Turtles per km2, and with respect to polygons 4 and 5, abundance corresponds to 54 to 85 turtles per km².

In order to comply with the guidelines indicated by the jurisdictional authority, this DGIRA proceeded to analyze the best available scientific evidence to precise that the existence of a habitat does not onlydepend on the presence of certain species, but also on the use such species make of the same.⁵¹

42. As can be seen from the previous quote, although in the first paragraph the DGIRA again quotes the figures with respect to which the Claimant argues an alleged contradiction, it is clear that it did so solely to clarify their scope. This is confirmed precisely in the second paragraph, in which the authority indicates that it “proceeded to analyze the information [...] to specify that the existence of a habitat does not depend only on the presence of certain species [...]”.⁵² In fact, in subsequent paragraphs the DGIRA explains the study by Peckham et. al., 2007, specifying that Figure 1 addresses the positions (not the density), as well as “the distribution and use of space of juvenile loggerhead turtles within the Península de Baja California”:⁵³

⁵¹ C-0009, pp. 290-291.

⁵² C-0009, p. 291.

⁵³ C-0009, p. 291.

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Figure 1. Positions and percentage of habitat use determined for 43 loggerhead turtles monitored by satellite telemetry between 1996 and 2006. (Peckham et al., 2007)

Source: C-0009, p. 291.

43. Based on Figure 1, it is clear that, unlike the 2016 Resolution, in which the term “position" was erroneously mixed with that of “abundance", the 2018 Resolution clarified this aspect,⁵⁴ which coincides with what was declared by [Redacted] in her expert statement.⁵⁵ For the Tribunal's benefit, Table 2 presents a comparative analysis of the 2018 Resolution and the

⁵⁴ In the 2016 Resolution, Figure 1 was erroneously named “Abundancia de Tortugas amarilla Caretta caretta" (C-0008, p. 221), while in the 2018 Resolution the title of Figure 1 was corrected to "Densidad de Kernel del Uso de hábitat de la Tortuga Caretta caretta en el Pacífico Norte”. See C-0009, p. 289. Although on pp. 295 and 467 it is mentioned that it exists “a specimen abundance between 28 and 85 Caretta caretta per km2", this reference seems to be an involuntary error by the DGIRA since these figures and their scope are previously and exhaustively clarified from pages 291 to 294 of the 2018 Resolution. In accordance with the aforementioned, Mexico considers it deplorable that the Claimant intends to take advantage of this situation to make the Tribunal believe that there is an inconsistent act of the DGIRA.

⁵⁵ C-0453, pp. 38-40.

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Biologist Lenka's expert report regarding the supposed density of the Caretta caretta turtle in the Project area.

Table 2. Comparative analysis that shows the congruence between the 2018 Resolution and the [Redacted]s expert report regarding the supposed density of the Caretta caretta turtle

44. Pursuant to Table 2, the Tribunal will be able to verify that, contrary to what was indicated by the Claimant, there is no inconsistency between what was indicated by SEMARNAT in the 2018 Resolution and what was declared by [Redacted]. On the contrary, the DGIRA was exhaustive in addressing the main point that it sought to support with the figures referred by the Claimant regarding the index of positions (erroneously referred to as density) of turtles per km², ie, that the Gulf of Ulloa is the habitat of the Caretta caretta turtle.

[Page 23]

45. In any event, the Claimant appears to overlook an indisputable scientific fact, namely that the abundance estimate of the Caretta caretta turtle in the Baja California peninsula is up to ~30,000 turtles not including other species of turtles.⁵⁶ This number contrasts with the 3 scarce sightings reported by the Claimant derived from a field campaign carried out for 13 days, and which differs significantly in timing and data collection time from the studies conducted by Dr. Seminoff.⁵⁷ This divergence of information can be explained by the lack of rigor and scientific methodology on the part of ExO and the Claimant,⁵⁸ as well as the few days dedicated to the study despite the magnitude of the project.

46. It should be noted that the Claimant itself has acknowledged that the number on the abundance of the Caretta caretta turtle in the Baja California Peninsula has been updated by Dr. Seminoff, who in an article subsequent to the one cited by the DGIRA in the 2018 Resolution, states that “[t]he mean annual abundance of 43,226 loggerhead turtles [...] represents the first abundance estimate for foraging North Pacific loggerheads based on robust analytical approaches".⁵⁹ With this number, it is not very serious for the Claimant to question that “the Gulf of Ulloa is an area that has been long considered as a critical habitat for Caretta caretta juveniles turtle" and that, “it is an area of great importance for an important proportion of the entire population of the North Pacific Caretta caretta turtle”.⁶⁰

3. The TFJA expressly recognized that SEMARNAT could issue another resolution denying the 2015 MIA, subject only to proper motivation and justification

47. In the Reply, the Claimant argues that it “never argued [...] that the TFJA ordered SEMARNAT to approve the MIA”.⁶¹ This statement is false. Both in the Notice of Intent, as in the Notice of Arbitration, and even in the Memorial, the Claimant indicated that “[i]n plain

⁵⁶ C-0009, p. 251. Seminoff, Jeffrey A. et. al, Loggerhead turtle density and abundance along the Pacific Coast of the Baja California Peninsula, Mexico determined through Aerial surveys: A preliminary assessment en 26ᵗʰ Annual Symposium on Sea Turtle Biology and Conservation, 2006, p. 321. R-0208. See WS Jeffrey Seminoff, ¶ 17.

⁵⁷ C-0009, p. 287 and R-0208, p. 321.

⁵⁸ Group of Experts on Sea Turtles Report, ¶¶ 20, 115, 144. Verónica Morales Report, ¶ 80.

⁵⁹ See C-0072. See WS Jeffrey Seminoff, ¶ 17.

⁶⁰ C-0009, p. 287. See WS Jeffrey Seminoff, ¶ 17.

⁶¹ Reply, ¶ 120.

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contempt of the March 2018 order of the Tribunal, the second refusal issued by SEMARNAT again failed to evaluate ExO's technical proposal, [...]".⁶² For the Claimant, the only acceptable result for the DGIRA to comply with the TFJA's order was to issue a resolution authorizing the Don Diego Project. This is confirmed by the statements made by his legal expert, Mr. Herrera, who affirms the following:

Indeed, if the case to deny the AIA provided for in Article 35, section III, b) of the LGEEPA had been reconsidered, the environmental authority should have authorized the MIA plain and simple; or should have granted the conditional authorization, establishing the corresponding conditions (referred to in Article 28 of the LGEEPA) in the resolution, if the environmental authority wanted to require mitigation measures, instead of denying the authorization based on the grounds of Article 35 of the LGEEPA, which was not updated, as evidenced in paragraph III.C. of this opinion.⁶³

48. As the Respondent pointed out in its communication to the Tribunal of August 30, 2021, the Claimant —and its expert— erroneously assume that the TFJA ordered SEMARNAT that it should grant the Authorization of the 2015 MIA. On the contrary, TFJA's decision shows that granting the conditional authorization was a mere hypothetical possibility that depended solely on the DGIRA's determination,⁶⁴ as established by the judgment itself:

[...] the appropriate thing is to declare the contested decision null and void [...], to the effect that the authority, [...] issue a new resolution, which resolves the application for authorization of the MIA [...], in which it analyzes each and every aspects that were exposed in the application and its scope by the claimant, [...], as well as analyzes, where appropriate, other additional measures of prevention and mitigation, so that they are avoided, mitigate or compensate the environmental impacts likely to occur with the project submitted to authorization, so that in the event that the authority determines to authorize the project conditionally – a determination that must be reasoned and reasoned – in terms of section II, of the aforementioned legal precept, the authority conditions said authorization on compliance with said prevention and mitigation measures; and done the above, the defendant authority properly founds and motivates its determination, based on the most reliable scientific data available, with full freedom in the use of its powers and attributions, the aspects already commented and specified in this ruling, [...], leaving safe the powers of the Ministry of Environment and Natural Resources (SEMARNAT) to resolve what corresponds in law.⁶⁵

⁶² Notice of Intent, January 4, 2019, ¶ 104, see also, ¶¶ 7, 103-104 and 120; Notice of arbitration, April 5, 2019, ¶¶ 7, 115-118 and 133; and Memorial, ¶ 220.

⁶³ Second Héctor Herrera Report, ¶ 80.

⁶⁴ See Second Solcargo-Rábago Report, ¶¶ 99-101.

⁶⁵ C-0170, pp. 211-212 (emphasis added).

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49. From the previous paragraph it can be deduced that: i) the TFJA preserved SEMARNAT's powers, that is, ordered it to decide with full freedom in the use of its powers; and ii) the justification and motivation of the DGIRA should deal with the aspects commented on and specified in the judgment, that is, those points in which it was determined that “la autoridad fue omisa en analizar en su integridad y dar contestación”.⁶⁶ Therefore, this reinforces the fact that it was not only possible but foreseeable that the authorization would again be denied since it was recognized that its determination was only subject to correcting the omissions that led to the invalidity of the 2016 Resolution, as it happened. This scenario was even the most likely considering that the TFJA itself, when using the phrases “en su caso” and “para que en el caso de que",⁶⁷ recognized as a mere hypothetical possibility to decide on the authorization of the project in a conditional manner.⁶⁸

50. In accordance with the aforementioned, it is understandable, nothing surprising, much less arbitrary, the fact that “[d]e la lectura de la nueva resolución, se desprend[a] que la agencia ambiental buscó robustecer la decisión negativa que ya había tomado de antemano”.⁶⁹ In fact, despite the fact that ExO challenged the 2018 Resolution before the TFJA arguing “[t]hat the aforementioned resolution by again denying the granting of the authorization of the Environmental Impact Statement [was] "grosslyillegal","⁷⁰ the TFJA itself rejected that argument and acknowledged that “by issuing the new resolution [...] the authority did indeed attend to all the points indicated in the judgment that resolved the present trial".⁷¹ In particular, the TFJA acknowledged that its decision implied that the DGIRA had the power to decide in whatever sense it wanted with the sole condition that its decision was duly founded and motivated:

[...] the judgment of March 21, 2018, was clear in the sense of specifying that "the powers of the Ministry of Environment and Natural Resources (SEMARNAT) to resolve what corresponds in law were left safe”, that is, that the nullity decreed by this Judge in no way constrained the environmental authority to grant the authorization of the MIA, but that the nullity decreed was only for the purpose of issuing a new resolution, duly founded and reasoned, in which the authority analyzed the aspects that

⁶⁶ C-0170, p. 183. See Second Solcargo-Rábago Report, ¶¶ 99-101.

⁶⁷ C-0170, p. 212.

⁶⁸ See Second Solcargo-Rábago Report, ¶¶ 99-101.

⁶⁹ Second Héctor Herrera Report, ¶ 80.

⁷⁰ R-0140, p. 32.

⁷¹ R-0140, p. 81 (emphasis added). See Second Solcargo-Rábago Report, ¶¶ 99-101.

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it unduly omitted to do in its first resolution - specified in the respective ruling and resolved what corresponded in law.⁷²

51. Therefore, it is evident that the TFJA expressly determined that SEMARNAT could issue another resolution that would correct the aspects that were omitted to analyze in the 2016 Resolution and that were identified by TFJA itself, namely, that it was recognized that the 2015 MIA could again be denied, subjecting that decision to a proper motivation and justification to do so.⁷³

4. Odyssey seeks for the Tribunal to conduct a de novo review of the 2015 MIA

52. The Claimant insistently argues in its Reply that “Mexico ignores [...] Odyssey's Scientific Evidence”; “Mexico has not engaged with, [...], the expert reports and evidence submitted by Odyssey from experienced biologists and other scientists”;⁷⁴ and “Mexico does not challenge the he expert evidence".⁷⁵ This type of assertion contradicts the Claimant's position according to which "Odyssey is not seeking to appeal an adverse environmental decision, nor is it asking the Tribunal to determine the MIA afresh”.⁷⁶ For Mexico, the Claimant's claim is clear because it seeks for the Tribunal to evaluate de novo the DGIRA's decision. This is reflected throughout the Reply as evidenced in the following paragraphs.

53. First, the Claimant claims that “Mexico does not challenge the Expert Reports prepared by Deltares"⁷⁷ and argues that “Deltares explains why the mining activities described in papers on deep seabed mining referenced by SEMARNAT in the 2018 Denial are not relevant to ExO's Project".⁷⁸ In this regard, Deltares points out that the activities covered by said articles focus on "deep/abyssal sea mining using different techniques in different habitats [...]”.⁷⁹ The previous citation constitutes a clear example that the Claimant intends for the Tribunal to examine the

⁷² R-0140, p. 113.

⁷³ See Second Solcargo-Rábago Report, ¶¶ 99-101.

⁷⁴ Reply, ¶ 44.

⁷⁵ Reply, ¶ 53.

⁷⁶ Reply, ¶ 17.

⁷⁷ Reply, ¶ 45.

⁷⁸ Reply, ¶ 46.

⁷⁹ Reply, ¶¶ 45-46.

[Page 27]

findings made by DGIRA and contrast them with the expert reports submitted in the arbitration by Odyssey, that is, for the Tribunal to analyze the 2015 MIA again. The aforementioned despite the fact that the 2018 Resolution is the result of what was ordered by the TFJA, namely, a new resolution that "fund[a] y motiv[a] adecuadamente su determinación, con base en los datos científicos más fidedignos disponibles" ⁸⁰

54. In this regard, and to address the issue of seabed mining, the DGIRA indicated:

[...] this DGIRA, proceeded to consider the information contained in all the studies performed by Kathryn A. Miller, Kirsten F. Thompson, Paul Johnston1 and David Santillo, "An Overview of Seabed Mining Including the Current State of Development, Environmental Impacts, and Knowledge Gaps, 2018", which due to its specificity, knowledge, marketing and recent data, is considered the most reliable scientific information; thus, it is owned and adopted by the agency as technical support for the assessment of the project.⁸¹

55. Based on the foregoing, the Tribunal will be able to verify that the Claimant questions in this arbitration the scientific articles used by the DGIRA to carry out its analysis and determination and, consequently, intends for the Tribunal to rule on their relevance and applicability, which is unsustainable. For the benefit of the Tribunal, Table 3 presents a comparative analysis of the findings made by the DGIRA in the 2018 Resolution and the questions raised by the Claimant in this arbitration regarding said findings. It is striking that, at the 2015 MIA, ExO presented the expert reports of Messrs. Newell and Clarke, which were analyzed in the 2018 Resolution. However, now within the framework of this arbitration, the Claimant presents the testimonial statements of these two people to refute the analysis contained in the 2018 Resolution.

Table 3. Comparative analysis of the 2018 Resolution and the Claimant's arguments in this arbitration, which shows that the Claimant intends for the Tribunal to formulate a de novo analysis of the MIA

⁸⁰ C-0170, p. 212.

⁸¹ C-0009, p. 318.

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56. As described in this section and the content of Table 3, it is evident that the Claimant wants the Tribunal to conduct a de novo analysis of the MIA, which is unsustainable and should be rejected by the Tribunal.

[Page 29]

5. Mr. Pacchiano's twitter statements regarding the sense of the 2018 Resolution are not inappropriate since it was foreseeable that it would be issued again in the negative sense

57. Contrary to what the Claimant asserts, Mr. Pacchiano’s statement on the sense of the 2018 Resolution is not surprising, inappropriate, nor does it demonstrate that the denial of the 2015 MIA responded to Mr. Pacchiano’s determination “to burnish his environmental credentials with the public that [,] was willing to violate Mexican law by publicly announcing that the Don Diego Project would be again denied in advance of the actual decision”.⁸²

58. The 2018 Resolution was issued in response to what was ordered in the TFJA’s ruling of March 21, 2018,⁸³ i.e., to issue a new resolution that was duly founded and motivated, which did not imply that SEMARNAT should re-evaluate the 2015 MIA.

59. In this sense, Mr. Pacchiano’s twitter statement was consistent and attended to the technical-scientific analysis previously carried out by the DGIRA, which should only strengthen the justification and motivation of some aspects ordered by the TFJA (e.g., analyze the prevention and mitigation measures proposed by ExO), leaving the DGIRA’s decision-making powers safe. Therefore, the sense of the TFJA’s ruling contemplated the possibility that, in exercise of its powers as a technical authority, the DGIRA would once again deny the 2015 MIA.⁸⁴

60. In this regard, Mr. Pacchiano himself has clarified the following:

Although the Claimant argues again that I allegedly ordered that the press be informed that Don Diego would be denied for the second time and that I allegedly “promoted” the second denial through my Twitter account, I would like to point out that the management of my Twitter account was controlled both by myself and the Social Communication Unit of SEMARNAT, and the latter took advantage of the reach of my account to share communications from SEMARNAT and other government agencies and public officials. Therefore, it was totally normal that from my account retweets were given to different communications of the general actions of SEMARNAT and the federal government of which I was part.⁸⁵

61. Therefore, the fact that Mr. Pacchiano's official Twitter account was used to comment on the 2015 MIA’s sense is a common practice, since as the head of SEMARNAT, he must pronounce

⁸² Reply, ¶ 113. ↩

⁸³ Second Solcargo-Rábago Report, ¶¶ 4, subsection o, 101 and 103. ↩

⁸⁴ Second Solcargo-Rábago Report, ¶¶ 107 and 108. ↩

⁸⁵ Second WS Rafael Pacchiano, ¶ 36 (emphasis added). ↩

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on sensitive environmental issues or of public interest, without implying inappropriate or arbitrary conduct.⁸⁶

6. The Claimant's references to the TFJA's ruling regarding an alleged lack of due process are irrelevant because this aspect has already been corrected by the 2018 Resolution

62. The Claimant argues that “Mexico’s TFJA itself confirmed SEMARNAT’s rejection of due process",⁸⁷ however, Odyssey omits to clarify that this determination was made with respect to the 2016 Resolution, which was corrected as ordered by the TFJA with the issuance of the 2018 Resolution.⁸⁸ In fact, the extracts on the alleged lack of due process cited in the Reply correspond to the TFJA’s decision regarding the first ExO’s contest against the 2016 Resolution. However, in a second challenge —now against the 2018 Resolution—, the Claimant only claimed two aspects that had nothing to do with a lack of due process, namely: i) alleged failure of the DGIRA to comply with what was ordered by the TFJA in the 2018 ruling on the 2016 Resolution;⁸⁹ and ii) an alleged repetition of the act by the DGIRA when again denying the authorization of the 2015 MIA through the 2018 Resolution.⁹⁰ The TFJA rejected both claims in the following terms:

Therefore, it is clear that at the date of filing the complaint for omission, that is, on October 4, 2018, the term of four months had not elapsed, [...], to comply with the judgment of March 21, 2018, issued by this Superior Chamber, hence the COMPLAINT FOR OMISSION is inadmissible. [...] although it is true, both the annulled resolution and the one issued in compliance with the judgment of this Jurisdictional Plenary, resolved to deny the authorization of the MIA requested by the claimant, on the grounds that the works and activities of the project subject to study, would affect species declared in danger of extinction, specifically the loggerhead turtle, loggerhead, or Caretta caretta; the truth is that the new

⁸⁶ As the Respondent pointed out in its communication of August 30, 2021, “es común que la postura de la SEMARNAT se exprese a través de comunicados de prensa cuando se trata de temas ambientales sensibles o que son de interés para el público general. Por ejemplo, recientemente, la SEMARNAT se ha pronunciado en contra del uso del glifosato y continúa manifestándose en ese sentido, a pesar de que existen impugnaciones judiciales en curso”. See R-0165, R-0166, R-0167, R-0168 and R-0169. ↩

⁸⁷ Reply, Section II.D., p. 55. ↩

⁸⁸ See C-0009. It should be noted that the TFJA rejected the challenge filed by ExO for an alleged repetition of the act by the DGIRA, when issuing the 2018 Resolution. In this regard, the TFJA indicated that "[...] to the extent that, in complying with the final judgment, the defendant environmental authority did not issue a decision in the same terms as the one annulled, due to the considerations set out above; hence the UNFOUNDED complaint of repetition that concerns us”. See R-0140, p. 113. ↩

⁸⁹ R-0140, pp. 3, 11-20. ↩

⁹⁰ R-0140, pp. 27-117. ↩

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resolution of October 12, 2018 incorporated new grounds and reasons for the effect of supporting such a refusal, which were not expressed by the authority in the annulled resolution dated April 7, 2016. [...] therefore, it cannot be said that there is a repetition of the annulled act,in so far as, in complying with the final judgment, the defendant environmental authority did not issue a decision in the same terms as the annulled one, due to the considerations set out above; hence the UNFOUNDED complaint of repetition that concerns us.⁹¹

63. Thus, given that ExO’s claims were rejected by the TFJA, the company filed a third challenge —again against the 2018 Resolution— which remains sub judice.⁹² In this regard, in its third challenge, as in the second, ExO did not raise any claim regarding any alleged lack of due process. Therefore, it is evident that the facts cited by the Claimant in relation to an alleged lack of due process⁹³ are irrelevant because they have already been corrected by the DGIRA with the issuance of the 2018 Resolution.

B. The Claimant's claim is based on the alleged existence of “secret marching orders" [Redacted]

64. As already demonstrated in the previous section, the Claimant presents in this arbitration the same claims as ExO did before national courts, which makes it evident its intention that this Tribunal act as an appeal body and even carry out an evaluation de novo of the MIA. Since the NAFTA does not allow this course of action, the Claimant has also based its claim on the [Redacted] [Redacted], alleging the existence of alleged “secret marching orders” [Redacted] [Redacted]”.⁹⁴ Without prejudice of noting that the Claimant has dropped any reference to the phrase "secret marching orders", because it evoked the same claim in Vento Motorcycles v. Mexico that was rejected by that tribunal —and whose similarity with the facts of the present case is significant—, [Redacted]

65. In the following subsections are elaborated in detail some aspects that are enable further clarity to the Tribunal on the lack of credibility of [Redacted] and [Redacted]. In particular: i) that [Redacted] and [Redacted]

⁹¹ R-0140, pp. 20, 112-113 (emphasis added). ↩

⁹² Second Solcargo-Rábago Report, ¶¶ 102-106. ↩

⁹³ Cfr. C-0170, pp. 108, 192-211 and Reply, 120-121. ↩

⁹⁴ Memorial, ¶ 221. ↩

[Page 32]

[Redacted]⁹⁵ [Redacted] [Redacted] iii) that [Redacted] and [Redacted] [Redacted] v) that neither Odyssey, nor [Redacted] and [Redacted] [Redacted]; and vi) there is no contemporary documentary evidence that shows that [Redacted].

1. [Redacted] and [Redacted]

66. It is unquestionable the fact of [Redacted] and [Redacted] [Redacted]⁹⁸ [Redacted] [Redacted] [Redacted] [Redacted]⁹⁹.

⁹⁵ See Second Solcargo-Rábago Report, ¶¶ 203-204. ↩

⁹⁶ For greater clarity, the arguments made by Mexico regarding the allegations of [Redacted] and [Redacted] contained in their testimonies do not imply an acceptance of their content. On the contrary, and solely for the purposes of argumentation, the Respondent starts from the general premise that “assuming without granting" that what [Redacted] and [Redacted] affirm in their testimony were true — which is denied — [Redacted] [Redacted]. ↩

⁹⁷ Aticle 4, seccion I LGRA, R-0057 and Article 2 LFRASP, R-0058. ↩

⁹⁸ First WS [Redacted], ¶ 2. First WS [Redacted], ¶ 3. ↩

⁹⁹ Article 7 of LGRA, R-0057 y Article 7 of LFRASP, R-0058. ↩

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[Redacted]¹⁰⁰

67. [Redacted] and [Redacted]

[Redacted] In this regard, the Internal Regulation of SEMARNAT set out that DGIRA has the obligation of assessing environmental impact manifestations.¹⁰¹ The Internal Regulation set out that is the General Director who is in charge of DGIRA, who assumes its technical and administrative direction and is responsible before superior authorities of its correct operation.¹⁰²

68. In his second testimonial statement, [Redacted] indicates that “[Redacted] [Redacted]” while [Redacted] declares that “[Redacted] [Redacted]”.¹⁰³ Assuming without granting that their statements were true --which Mexico denies and the evidence presented by the Respondent confirms it--, both assertions imply [Redacted] [Redacted]“.¹⁰⁴ Even [Redacted] affirms that [Redacted] [Redacted]¹⁰⁵ In fact, he acknowledges “[Redacted] [Redacted]”¹⁰⁶, and even so, [Redacted].

69. It is also surprising that in the event [Redacted] [Redacted] and [Redacted] [Redacted]

¹⁰⁰ Article 7 of LGRA, R-0057 y Article 7 of LFRASP, R-0058. ↩

¹⁰¹ Article 28 section II of RISEMARNAT, R-0053. ↩

¹⁰² Article 18 of RISEMARNAT, R-0053. ↩

¹⁰³ Second WS [Redacted], ¶ 34 (emphases added). ↩

¹⁰⁴ See Reply, ¶ 166. ↩

¹⁰⁵ Second WS [Redacted], ¶ 32. ↩

¹⁰⁶ First WS [Redacted], ¶ 32 and Second WS [Redacted], ¶ 32. ↩

¹⁰⁷ See Second Solcargo-Rábago Report, ¶ 212. ↩

[Page 34]

[Redacted] The Claimant cannot blame the Respondent for evidence that was or should have been [Redacted] and [Redacted] and that [Redacted] [Redacted].

70. Although the Claimant intends to victimize [Redacted] and [Redacted] arguing that [Redacted].¹⁰⁸ The Respondent respectfully takes issue with this, since what is surprising is that the Claimant seeks to justify [Redacted] and [Redacted] [Redacted].

71. Furthermore, it is clear for the Respondent that there is also an issue of ethical principles, considering that [Redacted] and [Redacted] [Redacted] [Redacted].¹⁰⁹ The performance of a person before an apparent dilemma of that nature says a lot about its probity and honor.

72. Based on the Claimant’s allegations, assuming without granting that what [Redacted] and [Redacted] say was true — which is denied — [Redacted] [Redacted],¹¹² For Mexico, it is clear that if the statements of [Redacted] and [Redacted] were true — which is rejected — it would mean that [Redacted]

¹⁰⁸ Reply, ¶ 166. ↩

¹⁰⁹ Second WS Salvador Hernández, ¶ 16. ↩

¹¹⁰ Second WS [Redacted], ¶¶ 11 and 22 and Second WS [Redacted], ¶¶ 32-34. ↩

¹¹¹ Reply, ¶ 166. ↩

¹¹² Second WS [Redacted], ¶ 28. ↩

[Page 35]

[Redacted] [Redacted]¹¹³

a. [Redacted]

73. In the Counter Memorial, the Respondent pointed out that “in the working meetings the clear possibility was even raised that [Redacted] [Redacted]”¹¹⁴ In spite of this, [Redacted] claims that “[Redacted] [Redacted]”.¹¹⁵ This is false. Mr. Romero has submitted a witness statement in which he confirms that as a former representative of the Government of Mexico, he expressed the possibility that [Redacted] [Redacted]:

While explaining the generalities of the arbitration, I pointed out [Redacted] [Redacted] [Redacted]. Although it is possible to affirm that this does not constitute a formal request, the truth is that this possibility was mentioned. [Redacted]¹¹⁶

74. This statement coincides with what was indicated by Mr. Hernández, who also participated in said meeting [Redacted] [Redacted].

In particular, Mr. Hernández has stated the following: The clear example of this is the meeting on February 7, 2019, in which the officials of the Ministry of Economy raised the possibility that, if the case progressed, [Redacted] [Redacted].

¹¹³ See Second Solcargo-Rábago Report, ¶ 212. ↩

¹¹⁴ Counter-Memorial, ¶ 209. First WS Salvador Hernández, ¶ 7. ↩

¹¹⁵ Second WS [Redacted], ¶ 32. ↩

¹¹⁶ WS Hugo Romero, ¶ 17. ↩

[Page 36]

[Redacted]¹¹⁷ 75. Although it is true that in those first meetings with SEMARNAT, the defense team of Mexico (DGCJCI) could hardly clearly identify who its witnesses would be¹¹⁸ --except for Mr. Pacchiano considering the Claimant’s direct accusations--[Redacted] [Redacted].

76. In any case, [Redacted] [Redacted] [Redacted] [Redacted].

b. [Redacted]

77. Although the Respondent has indicated [Redacted] [Redacted] [Redacted]”¹²⁰, however, that assertion is false.¹²¹ [Redacted] [Redacted].¹²² This allegation is incorrect.

78. Mr. Romero has clarified the scope [Redacted] [Redacted]

¹¹⁷ Second WS Salvador Hernández, ¶ 11 (emphasis added). ↩

¹¹⁸ WS Hugo Romero, ¶ 18 (emphasis added). ↩

¹¹⁹ Counter-Memorial, ¶ 388. ↩

¹²⁰ Second WS [Redacted], ¶ 25. ↩

¹²¹ Second WS Salvador Hernández, ¶¶ 7-8. ↩

¹²² Second WS [Redacted], ¶ 26. ↩

[Page 37]

[Redacted] In particular, Mr. Romero has explained the following:

I am also struck by the fact that [Redacted] [Redacted]. Although the legal area of SEMARNAT was the point of contact, it was for the purpose of having a single communication channel such as coordinating meetings, delivering information, but it was not, in my understanding, only to allow an official of the legal area to take a position. If this had been the case, we would only have met with the SEMARNAT legal division. For this reason, I consider that the statement in the sense that “[Redacted] [Redacted]” is incorrect.¹²³

79. [Redacted]¹²⁴ Notwithstanding, Mr. Hernández has testified that at the meeting on February 7, 2019 —which [Redacted] [Redacted]— to the Ministry of Economy lawyers that, from a technical and environmental point of view, and in accordance with the applicable legal framework, Don Diego project could not obtain environmental authorization for the reasons that were already stated in the resolutions issued by DGIRA”.¹²⁵ Although Mr. Hernández has indicated that ““[Redacted]””, he has also clarified that ““[Redacted] [Redacted]””.¹²⁶ This recounting of the events matches with what was expressed by Mr. Romero, who also participated in the meeting on February 7, 2019. In fact, at that meeting SEMARNAT explained that the conclusion of the DGIRA Resolutions was due to purely [Redacted], as explained by Mr. Romero:

At the meeting, SEMARNAT officials explained that the rejection was due to technical issues, such as the impact on the fauna in the Gulf of Ulloa --Caretta caretta turtle and whales, or the food for them--, the unknown impact on the ecosystem, the novelty of the project. These officials also informed us that similar projects had been denied in other

¹²³ WS Hugo Romero, ¶ 13 (emphasis added). ↩

¹²⁴ Second WS [Redacted], ¶ 27. ↩

¹²⁵ Second WS Salvador Hernández, ¶ 12. ↩

¹²⁶ Second WS Salvador Hernández, ¶ 12. ↩

[Page 38]

countries. As defense lawyers, my interest was always to know in detail and give deference to the authorities, on that occasion SEMARNAT was no exception. [Redacted] there was no doubt that the reason for the rejection was a technical issue.¹²⁷

80. Pursuant to the foregoing, it is false that [Redacted] [Redacted]¹²⁸ [Redacted] [Redacted].

c. [Redacted] on the Mexico's legal strategy for this arbitration

81. Regardless of [Redacted] [Redacted] there is also evidence that [Redacted] [Redacted].¹²⁹ In that paper, SEMARNAT’s position regarding the content of the notice of intent submitted by Odyssey was expressed.¹³⁰ The aforementioned paper was physically delivered to the Ministry of Economy lawyers in a meeting on April 1st, 2019¹³¹, [Redacted] [Redacted].¹³² These facts coincide with what was referred by Mr. Romero in his witness statement:

[...] At the end of the meeting, I was informed by my colleagues from the Ministry of Economy at that time, of a paper prepared by the Coordinating Unit for Legal Affairs (UCAJ) and the DGIRA in which they expressed the SEMARNAT's position regarding the content of the Notice of Intent submitted by Odyssey. [Redacted] [Redacted].

¹²⁷ WS Hugo Romero, ¶¶ 20-21 (emphasis added). ↩

¹²⁸ Second WS [Redacted], ¶ 27. ↩

¹²⁹ Second WS Salvador Hernández, ¶ 13. See WS Hugo Romero, ¶ 22 and HGRM-001. ↩

¹³⁰ Second WS Salvador Hernández, ¶ 13. See WS Hugo Romero, ¶ 22 and HGRM-001. ↩

¹³¹ Second WS Salvador Hernández, ¶ 13. See WS Hugo Romero, ¶ 22 and HGRM-001. ↩

¹³² Second WS [Redacted], ¶ 29. ↩

[Page 39]

82. Although Mr. Romero did not engage in the meeting on April 1, 2019, the lawyers who did engage witnessed the delivery of the aforementioned paper mentioned by Mr. Hernández, which is confirmed by the mail by which one of the lawyers who were at the meeting shared this paper with the rest of the DGCJCI team that also attended that meeting:

Dear. I enclose the scanned memo that the Ministry of Environment and Natural Resources shared with us today about the Odyssey case. Greetings. Antonio.¹³³

83. The Tribunal may verify that the content of the Memorandum prepared by the UCAJ and [Redacted]¹³⁴ coincides with the position expressed by the SEMARNAT officials in the meetings held with the lawyers of the DGCJCI,¹³⁵ as well as with the content of the Resolutions issued by DGIRA.¹³⁶ Therefore, it is evident [Redacted] [Redacted] [Redacted].¹³⁹

2. [Redacted] [Redacted]

84. [Redacted] [Redacted]

¹³³ HGRM-001. ↩

¹³⁴ HGRM-001. ↩

¹³⁵ Second WS Salvador Hernández, ¶¶ 9, 10, 11 and 12. See WS Hugo Romero, ¶ 12, 20, 21 and 25. ↩

¹³⁶ C-0008 and C-0009. ↩

¹³⁷ "Accordingly, in April 2019, Mr. Orlando Pérez, General Director of the DGCJCI, informed to SEMARNAT group about Odyssey's proposal to hold a meeting at the technical level in order to seek possible solutions". Second WS Salvador Hernández, ¶ 15. Email from April, 2019, R-0069. Email from May 31, 2019, R-0071. ↩

¹³⁸ "On the occasion of the arbitration notification, on April 5, 2019, the General Director forwarded that notification [Redacted]". WS Hugo Romero, ¶ 24 and HGRM-003. ↩

¹³⁹ Second WS [Redacted], ¶ 26. ↩

¹⁴⁰ Article 4.5 (a) of IBA Rules on Trial Practice in International Arbitration. RL-0004. ↩

[Page 40]

[Redacted] [Redacted]

85. [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted].

a. [Redacted] [Redacted]

86. [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted]

¹⁴¹ PO1, ¶ 19.2.3. ↩

¹⁴² PO3, Annex B, Request, justification and objection to Request No. 17, pp. 92-93. ↩

¹⁴³ Reply, ¶ 147. ↩

¹⁴⁴ The only expenses that Mexico covers the witnesses are the cost of the plane tickets, the lodging and the necessary to appear at the face-to-face hearings. See Second Solcargo-Rábago Report, ¶¶ 193- 197. ↩

¹⁴⁵ Accordingly, pay is reasonable per hour of work dedicated to providing or preparing your Witness Statement. See Sergio Huacuja Report, ¶ 96. ↩

¹⁴⁶ See Second Solcargo-Rábago Report, ¶¶ 217-220. ↩

[Page 41]

[Redacted] [Redacted] [Redacted]

87. [Redacted] [Redacted] [Redacted] [Redacted] [Redacted]

88. [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted]

89. [Redacted] [Redacted] [Redacted] [Redacted] [Redacted]

¹⁴⁷ C-0364, ¶¶ 2.c and 2.d and C-0365, ¶¶ 2.c. and 2.d (emphasis added). ↩

¹⁴⁸ See Second Solcargo-Rábago Report, ¶¶ 194- 197. ↩

¹⁴⁹ C-0364, ¶ 5 and C-0365, ¶ 5 (emphasis added). ↩

¹⁵⁰ Second WS [Redacted], ¶ 5. ↩

¹⁵¹ Second WS [Redacted], ¶ 3. ↩

¹⁵² C-0364, ¶ 2.b and C-0365, ¶ 2.b. ↩

¹⁵³ C-0364, ¶ 2.a and C-0365, ¶ 2.a. ↩

[Page 42]

[Redacted] [Redacted] [Redacted]

b. [Redacted] [Redacted] [Redacted]

90. [Redacted] [Redacted] [Redacted]

91. [Redacted] [Redacted] [Redacted]

92. [Redacted] [Redacted] [Redacted] [Redacted]

93. [Redacted] [Redacted] [Redacted] [Redacted]

¹⁵⁴ C-0364, ¶ 2.d and C-0365, ¶ 2.d. ↩

¹⁵⁵ C-0364, ¶ 2.c and C-0365, ¶ 2.c. ↩

¹⁵⁶ Counter-Memorial, ¶ 430. ↩

¹⁵⁷ Second WS [Redacted], ¶ 5. ↩

¹⁵⁸ Second WS [Redacted], ¶ 3. ↩

¹⁵⁹ C-0364, ¶ 5 and C-0365, ¶ 5. ↩

¹⁶⁰ C-0364, ¶ 2.a and C-0365, ¶ 2.a. ↩

[Page 43]

[Redacted] [Redacted] [Redacted]¹⁶² [Redacted]

c. [Redacted]

94. [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted]¹⁶⁵

95. [Redacted] [Redacted] [Redacted] [Redacted]

¹⁶¹ C-0364, ¶ 4 and C-0365, ¶ 4. ↩

¹⁶² C-0364, ¶ 8 and C-0365, ¶ 8. ↩

¹⁶³ First WS [Redacted], ¶ 37. ↩

¹⁶⁴ Second WS [Redacted], ¶ 3. ↩

¹⁶⁵ Second WS [Redacted], ¶ 28. ↩

[Page 44]

3. [Redacted] and [Redacted]

96. As mentioned in the Counter Memorial,¹⁶⁶ both the LFRSP (current and applicable for the 2016 Resolution), and the LGRA (applicable for the 2018 Resolution), establish that public officials have the obligation to "[r]eport the acts or omissions that in the exercise of their functions they will warn, that may constitute administrative misconduct “.¹⁶⁷ Also, although public officals also have the obligation to "[f]ollow instructions from their superiors”, this obligation is subject to such orders "being in accordance with the provisions related to public service".¹⁶⁸ It is incontrovertible that [Redacted] [Redacted]”.¹⁶⁹

97. [Redacted] and [Redacted] Mexico understands that this is because the Claimant did not consider it necessary [Redacted].¹⁷⁰ Instead, the Claimant presented Mr. Huacuja's report, who instead of acknowledging the existence of an obligation to report alleged administrative misconduct, [Redacted] [Redacted] [Redacted] [Redacted].

¹⁶⁶ Counter-Memorial, ¶¶ 187-196. ↩

¹⁶⁷ Article 49 section II of LGRA. R-0057. See also article 8 section XVIII of LFRSP. R-0058. See Second Solcargo-Rábago Report, Apart XIII.A, ¶¶ 189-190. ↩

¹⁶⁸ Article 49 section III of LGRA. R-0057. See also article 8 section VII of LFRSP. R-0058. Second Solcargo-Rábago Report, ¶ 190. ↩

¹⁶⁹ Article 49 section III of LGRA. R-0057. See Second Solcargo-Rábago Report, ¶¶ 190-191. ↩

¹⁷⁰ C-0364, ¶ 2.a y C-0365, ¶ 2.a. ↩

¹⁷¹ Sergio Huacuja Report, ¶ 30. ↩

¹⁷² Sergio Huacuja Report, ¶ 31. ↩

¹⁷³ Sergio Huacuja Report, ¶ 31. ↩

[Page 45]

[Redacted]¹⁷⁴ which has been rejected by Mr. Pacchiano.¹⁷⁵

98. For its part, the Claimant justifies [Redacted] and [Redacted] failure [Redacted] [Redacted].¹⁷⁶ Without prejudice to the fact that Mr. Pacchiano has specified that “[Redacted] [Redacted]”¹⁷⁷ what is unrealistic is that the Claimant intends to base its claim on the words [Redacted] [Redacted]. It is also surprising that the Claimant defends the [Redacted] [Redacted] [Redacted].¹⁸⁰

99. Regardless of the justifications that the Claimant and its expert indicate regarding the [Redacted]¹⁸¹, and [Redacted] both the Claimant and its expert seem to agree that there is an obligation to report in accordance with Mexican legislation,¹⁸² as explained in the following section.

a. The Claimant and his expert do not dispute the fact that [Redacted] and [Redacted]

100. Based on Mr. Huacuja’’s opinion, the Claimant indicates that “[t] he regime in force at the time of the First Denial in 2016, the [...] (“LFRASP”), is not structured to encourage public

¹⁷⁴ Sergio Huacuja Report, ¶ 32. ↩

¹⁷⁵ Second WS Rafael Pacchiano, ¶ 7. ↩

¹⁷⁶ Reply, ¶ 166. ↩

¹⁷⁷ Second WS Rafael Pacchiano, ¶ 7. ↩

¹⁷⁸ Second WS [Redacted], ¶ 31. ↩

¹⁷⁹ Reply, ¶ 166. ↩

¹⁸⁰ See Second Solcargo-Rábago Report, ¶¶ 203-204. ↩

¹⁸¹ Sergio Huacuja Report, ¶ 10. ↩

¹⁸² Sergio Huacuja Report, ¶ 19. ↩

[Page 46]

officials to report irregularities “because supposedly" it was impossible for the whistleblower official to remain anonymous".¹⁸³ Likewise, it alleges that despite the fact that “[t]he LRGA governed [...] at the time that SEMARNAT issued its Second Denial in October 2018 [...], it was not until 2019, [...] that the possibility of submitting anonymous complaints became a reality “.¹⁸⁴

101. As indicated in the paragraph above, it is evident that the Claimant and Mr. Huacuja do not dispute the fact that [Redacted] [Redacted] [Redacted].¹⁸⁵

102. It is questionable for Mexico that the Claimant asserts that “[Redacted] [Redacted]”¹⁸⁶ since it is based on a mere assumption. In fact, this statement is contradicted by the facts that show that [Redacted] [Redacted].¹⁸⁷

103. [Redacted] [Redacted] [Redacted] [Redacted] [Redacted]¹⁸⁸

¹⁸³ Reply, ¶ 167. ↩

¹⁸⁴ Reply, ¶ 168. ↩

¹⁸⁵ Reply, ¶ 169 and 171. See Second Solcargo-Rábago Report, ¶¶ 191-195 and 199-200. ↩

¹⁸⁶ Reply, ¶ 171. ↩

¹⁸⁷ See R-0177- R-0187. See also Second Solcargo-Rábago Report, ¶¶ 207- 208. ↩

¹⁸⁸ Reply, ¶ 171. See Second Solcargo-Rábago Report, ¶¶ 201-206. ↩

[Page 47]

b. [Redacted] [Redacted] [Redacted]

104. [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted]

105. [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted]

¹⁸⁹ Article 55 of LGRA. R-0057. ↩

¹⁹⁰ Reply, ¶ 152. ↩

¹⁹¹ Reply, ¶ 1521 ↩

¹⁹² First WS [Redacted], p. 5. ↩

¹⁹³ C-0365, p. 1. ↩

[Page 48]

[Redacted]¹⁹⁵ [Redacted]

106. [Redacted] [Redacted] [Redacted] [Redacted] [Redacted]¹⁹⁸

108. [Redacted]

4. La Claimant has not provided contemporary evidence that shows that [Redacted] and [Redacted]

109. [Redacted] [Redacted].¹⁹⁹ For his part, [Redacted] [Redacted].²⁰⁰ Although the Claimant argues that “[Redacted] [Redacted]

¹⁹⁴ Article 55. The public officer who acquires for himself or for the persons referred to in article 52 of this Law, real estate, movable property and securities that may increase their value or, in general, improve their conditions, will incur in misuse of information, as well as obtaining any private advantage or benefit, as a result of inside information of which he has had knowledge. Article 56. For the purposes of the article above, privileged information is considered to be that obtained by the public officer as a result of its duties and that is not in the public domain. The restriction provided for in the article above will be applicable even when the public officer has retired from its job, position or commission, up to a period of one year. (emphasis added). See R-0057. See also Counter-Memorial, ¶¶ 410-412. ↩

¹⁹⁵ Sergio Huacuja Report, ¶ 79. ↩

¹⁹⁶ Sergio Huacuja Repor, ¶ 79. ↩

¹⁹⁷ Sergio Huacuja Report, ¶ 79. See Second Solcargo-Rábago Report, ¶¶ 221-224. ↩

¹⁹⁸ C-0364, p. 1. ↩

¹⁹⁹ See Second WS [Redacted], ¶¶ 11 and 21. ↩

²⁰⁰ See Second WS [Redacted], ¶¶ 13 and 14. ↩

[Page 49]

[Redacted] [Redacted]²⁰¹

110. In any event, [Redacted] [Redacted]. The Respondent does not have to satisfy the Claimant’’s burden of proof, and cannot be required to produce documents that are non-existent.

[Redacted].

111. Without prejudice of the foregoing, the Tribunal must take into account that the production of documents in international arbitration in “comparison with Anglo-American practice has been variously described as “conservative”, or as a procedure destined to “filling in the gaps” “as opposed to building up the factual record"²⁰² Indeed, ““in arbitration is that a party will establish its case based largely (if not entirely) on the documents within its own possession".²⁰³ [Redacted] [Redacted] [Redacted].

112. The Tribunal must take into account that it is common [Redacted] [Redacted] [Redacted]²⁰⁴

113. [Redacted] and [Redacted] [Redacted]

²⁰¹ Letter from Mexico to Claimant’s representatives, May 18, 2021. R-0160. ↩

²⁰² O’Malley, Nathan D. Rules of Evidence in International Arbitration: An Annotated Guide: Lloyd's Arbitration Law Library. Taylor and Francis, p. 39. RL-0078. ↩

²⁰³ O’Malley, Nathan D. Rules of Evidence in International Arbitration: An Annotated Guide: Lloyd's Arbitration Law Library. Taylor and Francis, p. 40. RL-0078. ↩

²⁰⁴ Article 23 Federal Archives Law. R-0175. ↩

[Page 50]

[Redacted] and [Redacted]

114. [Redacted]. The emails from Mr. Narvaez do not show that [Redacted] and [Redacted]. In fact, the March 22, 2016 email only reports hearsay information about what Mr. Limón –ExO and Odyssey’’s legal advisor— “said was commented" in an alleged meeting with SEMARNAT, i.e., “the outbursts of the Mr. Ancira they will cost you dearly". It should be noted that in an email dated August 10, 2016 -- after the 2016 Resolution -- Mr. Narvaez refers to this situation as ““whatever that means““,²⁰⁵ that is, he did not know what this meant.

115. On the other hand, Mr. Lozano's witness statement only gives an account of his impressions [Redacted] [Redacted].²⁰⁶ The same situation occurred with the November 2015 meeting that Mr. Lozano says he had with CONANP officials, whose impressions he describes as follows: “[W]e withdraw from the meeting with a feeling of extreme confidence that we had correctly addressed all CONANP's environmental concerns and that the Project would be authorized soon”.²⁰⁷ The impressions of Mr. Lozano do not coincide with the official opinion of CONANP that manifested against the Project, as stated in the Resolutions.²⁰⁸

116. In accordance with the above, [Redacted] [Redacted] [Redacted].

²⁰⁵ C-0416 ↩

²⁰⁶ First WS Claudio Lozano, ¶ 39. ↩

²⁰⁷ First WS Claudio Lozano, ¶ 64. ↩

²⁰⁸ See Second WS Rafael Pacchiano, ¶ 16. ↩

[Page 51]

5. The Claimant and ExO allege that they were aware of Mr. Pacchiano's alleged instructions but chose not to do anything about it

117. The Claimant seeks to support the credibility of [Redacted] and [Redacted]²⁰⁹ [Redacted]. Mexico does not know the reasons why the Claimant decided not to report Mr. Pacchiano for any alleged irregularity and [Redacted] [Redacted].

118. For the Respondent, the course of action adopted by the Claimant is problemtic, [Redacted] [Redacted] which is unsustainable and even questionable. In this sense, [Redacted] [Redacted] [Redacted] reject the MIA for having felt personally insulted by Mr. Ancira —who, by the way, has breached a reparation agreement with the Government of Mexico derived from the crime of operations with resources of illicit origin in the sale of Agro Nitrogenados;—²¹⁰ and ii) that the alleged order of Mr. Pacchiano was motivated by the concern of affecting his political position.²¹¹

119. To this end, some of the "elements” provided by the Claimant consist of the following:

• Email from Mr. De Narváez to Mr. Longley dated March 22, 2016, in which he mentioned that the alleged “outbursts of Mr. Ancira are going to cost him dearly”.²¹² This email only reflects information heard by Mr. Narvaéz. Apparently he reports what a third party (Mauricio Limón), who was acting as representative of ExO, said at a meeting, based on a

²⁰⁹ Reply, ¶ 88. ↩

²¹⁰ "If Alonso Ancira breaches with agreement signed with PEMEX, he will lose his company and hornos," Forbes, September 2, 2021. R-0176. ↩

²¹¹ Reply, ¶ 88. ↩

²¹² Reply, ¶ 88 a. See C-0416. ↩

[Page 52]

mere assumption of something that could happen. It also highlights the fact that, supposedly one day before the issuance of the 2016 Resolution, [Redacted] [Redacted]²¹⁴

• Email from Mr. De Narváez to Mark Gordon and other Odyssey's representatives dated on August 10, 2016. Notwithstanding that it is an email that the Claimant submitted incompletely choosing to reveal certain sentences and hiding others, based on an alleged attorney-client privilege despite the fact that Mr. Narvaez is not Odyssey's lawyer, the note seems to account for the mere opinion of Mr. Narvaez who points out “the negative resolution of our MIA was political and not technical in nature [...] ", blaming that on “Alonso's outbursts with Pacchiano",²¹⁵ but without really knowing what it meant, by referring to this situation as “whatever that means".²¹⁶ In any case, in that email, Mr. Narvaez maintains that “[i]t is very clear to us that [Redacted] [sic]) are not the force holding back our project, it is Secretary Pacchiano".²¹⁷ Notwithstanding the fact that Mr. Pacchiano has rejected to have been confronted by Mr. Ancira,²¹⁸ it is evident that Odyssey's representatives failed to submit any complaint due to the supposed clarity of an apparent irregularity.²¹⁹ It is also clear that the alleged existence of "command orders" has never been part of ExO's allegations in the annulment trial before the TFJA. In other words, only in this arbitration does the Claimant seek to base its claim on the allegation of an alleged existence of "command orders".
• Statement by Mr. Claudio Lozano, stating CONANP and DGIRA "had previously endorsed the project".²²⁰ The meetings referred to by Mr. Lozano were prior to the issuance

²¹³ First WS [Redacted], ¶26 and Second WS [Redacted], ¶ 30. ↩

²¹⁴ Second WS Rafael Pacchiano, ¶ 13. ↩

²¹⁵ C-0416. ↩

²¹⁶ C-0416. ↩

²¹⁷ Reply, ¶ 88 b. See C-0416. ↩

²¹⁸ Second WS Rafael Pacchiano, ¶ 30. ↩

²¹⁹ Second WS Rafael Pacchiano, ¶ 13. Second Solcargo-Rábago Report, ¶¶ 4 y 209. ↩

²²⁰ Reply, ¶ 88 c. ↩

[Page 53]

of the first resolution, that is, in April 2015 [Redacted]²²¹ and on February 18, 2016 with CONANP.²²² What [Redacted] [Redacted] irrelevant because the facts outweighed their words, [Redacted]. The same thing happens with CONANP that submitted a technical opinion, which considered that Don Diego was an environmentally unviable project.²²³

• Statement from Dr. Lozano in which he affirms that [Redacted] [Redacted].²²⁴ This supposed meeting was held one day before the issuance of the 2016 Resolution, which reveals Mr. Lozano's own perception of the scope of the Project as regards the protection of turtles. In fact, to support his saying he refers to a meeting with NOAA. However, as will be seen infra, Dr. Seminoff has submitted a statement confirming that what was stated by Odyssey's representatives regarding the meetings he held with them was actually exaggerated.²²⁵ Mexico considers that Mr. Lozano's enthusiasm for the project was such that his judgment is probably clouded and his opinions do not necessarily reflect reality. On the other hand, it is revealing that Odyssey's representatives were satisfied that [Redacted] [Redacted].²²⁶
• The video of Mr. Pacchiano from September 12, 2018 in which he apparently indicates that the Project would be rejected.²²⁷ Mr. Pacchiano has already stated that [Redacted] [Redacted],²²⁸ so it was clear to Mr. Pacchiano that the second resolution would be issued in the same sense as the first. Furthermore, the fact that Mr. Pacchiano had pronounced on the meaning of the Resolution, [Redacted]

²²¹ First WS Claudio Lozano, ¶ 39. ↩

²²² First WS Claudio Lozano, ¶¶ 62-64. Second WS Claudio Lozano, ¶ 19. ↩

²²³ Second WS Benito Bermúdez, ¶¶ 33 and 35. ↩

²²⁴ Reply, ¶ 88 d. See First WS Claudio Lozano, ¶ 70. ↩

²²⁵ WS Jeffrey Seminoff, ¶¶ 9-17. ↩

²²⁶ See Second WS Rafael Pacchiano, ¶ 13. ↩

²²⁷ Reply, ¶ 88 e. C-0176. ↩

²²⁸ See First WS Rafael Pacchiano, ¶ 42 and Second WS Rafael Pacchiano, ¶¶ 10 and 12. ↩

[Page 54]

[Redacted]²²⁹ [Redacted]²³⁰

• Newspaper articles that refer to an "information sheet" that they received from SEMARNAT stating that the Project would be denied.²³¹ As already mentioned in the communication of August 30, 2021, the Claimant intends to give the information sheet a scope that it does not have.²³² Indeed, the Claimant's argument regarding the informative sheet is based on a wrong assumption of the TFJA's decision. The fact that DGIRA has declared days after the TFJA's decision that it would again deny the MIA's authorization has nothing illegal, much less surprising.²³³ In fact, the TFJA's own decision recognized that DGIRA was the technical authority empowered to resolve the concerns it raised and allowed it to be the one to resolve with the proper rationale and motivation.²³⁴ This decision contrasts with the erroneous perception that the Respondent and ExO had, who assumed that with their legal strategy adopted through the nullity trial, the TFJA would authorize

²²⁹ "[...], it would be very debatable that a State Secretary would be responsible for carrying out the technical functions of an of an environmental impact assessment. Furthermore, [Redacted] [Redacted]". Second WS Rafael Pacchiano, ¶ 7. ↩

²³⁰ Second WS Rafael Pacchiano, ¶¶ 33-35. ↩

²³¹ "The representatives of Mexico have shown me an 'information card' that was allegedly provided in April 2018 to media related to the Don Diego Project. This is the first time I have seen such a document and I state that I was not aware of its existence, although I do not highlight any information that could be considered 'sensitive' or 'inappropriate'. Second WS Rafael Pacchiano, ¶ 37. ↩

²³² Respondant's communication from August 30, 2021. R-0209. ↩

²³³ “[T]he SEMARNAT will comply with the judgment with the conviction that said project represents a threat to the integrity of the ecosystem, for which it will reinforce the technical and scientific justification to confirm the original resolution, meaning, to deny the authorization". C-0470. ↩

²³⁴ C-0170, p. 212. ↩

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the Project.²³⁵ This did not happen and this confirms that it was not “an excuse”,²³⁶ but a real environmental concern that still persists today.

120. Mexico finds it strange and absurd that, if the Claimant knew about an alleged irregularity in the Project's PEIA, it would not have done anything about it. This omission to report a potential illegality is not minor as it assumes that there were no elements [Redacted] [Redacted]. This situation is addressed by Mr. Pacchiano who denies [Redacted] [Redacted] and notes the absence of complaints against them:

Finally, if [Redacted] [Redacted]. Furthermore, [Redacted] [Redacted]. I also find it unusual that, knowing this information, ExO's representatives have not proceeded to file a complaint against me. [Redacted] [Redacted].²³⁷

121. Regardless of how questionable the constant meetings of [Redacted] [Redacted], the failure to report a possible unlawfulness by ExO seems to have an explanation related to these meetings. Indeed, said omission of ExO is explained because it possibly followed a strategy recommended [Redacted] [Redacted]²³⁸ i.e., obtaining a resolution from the TFJA that confirmed and authorized Don Diego Project, however, the TFJA's decision shows that DGIRA's environmental concerns were legitimate. Further, it is strange that the Claimant has consented to

²³⁵ "The beauty of the annulment case in the courts, in our view, is that it would make life very easy for Pacchiano since consent would be given not by a SEMARNAT decision but by a court ordered decision, it would have no political toll for him which was apparently his motivation in the refusal decision of consent". See C-0416. ↩

²³⁶ Reply, ¶ 8, 43, 212, 225, and First WS [Redacted], ¶ 25. ↩

²³⁷ Second WS Rafael Pacchiano, ¶ 13. ↩

²³⁸ [Redacted] [Redacted]”. C-0363. ↩

[Page 56]

[Redacted] and [Redacted] twice [Redacted] [Redacted].

C. The law is clear in establishing that the responsibility for resolutions on environmental impact rests with the signing official

122. In his second witness statement, [Redacted] has indicated that he does not agree with the “[Redacted]”,²³⁹ in particular, with the fact that “only DGIRA determines whether the MIAs without any intervention of the Secretary or the Undersecretary”.²⁴⁰ However, [Redacted] himself acknowledges, in paragraphs subsequent to said statement, that “the responsibilities of approving the Projects, assessing the MIA information and supporting documents, and responding to requests for additional information and opinions of third parties rests with DGIRA”.²⁴¹

123. [Redacted] himself also agrees [Redacted] [Redacted].²⁴² This is an unquestionable fact, although Messrs. Flores and Villa intend to qualify it by pointing out that the DGIRA is not an independent director and that it depends hierarchically on the Undersecretary of Management for Environmental Protection and the Secretary of SEMARNAT. The hierarchical structure in the chain of command is irrelevant for the purposes of determining the responsibility of an act in accordance with the attributions and powers that the law grants to public officials.

124. [Redacted] [Redacted]. As shown in Table 4, [Redacted] [Redacted] [Redacted]

²³⁹ Second WS [Redacted], ¶ 12. ↩

²⁴⁰ Second WS [Redacted], ¶ 12. ↩

²⁴¹ Second WS [Redacted], ¶ 15. ↩

²⁴² Second WS [Redacted], ¶ 10. ↩

[Page 57]

Table 4. [Redacted]

Fuente: R-0177, R-0178, R-0179, R-0180, R-0181, R-0182, R-0183, R-0184 and R-0185.

125. For example, [Redacted] e [Redacted] at [Redacted] n [Redacted] [Redacted].

[Page 58]

[...] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted]²⁴³

126. The aforementioned reasoning applies mutatis mutandis to the case of the attributions that RISEMARNAT [Redacted] [Redacted] [Redacted] [Redacted].

1. The Secretary Pacchiano did not have any interference in the technical-scientific evaluation or in the meaning of the Resolutions made by [Redacted] and [Redacted]

127. Mr. Pacchiano has already stated that he had no involvement in the PEIA, much less in the meaning of Don Diego Project Resolutions. In fact, he has stated that he was always respectful of the technical-scientific determinations issued by the DGIRA:

As I mentioned in my first witness statement, I was always respectful of the law with regard to the attributions, competences and powers of each administrative area of SEMARNAT and I never interfered in the technical-scientific work carried out by DGIRA.²⁴⁵

128. The foregoing matches with the applicable legal framework that governed the functions of Mr. Pacchiano in his capacity as Undersecretary and Secretary of SEMARNAT. As mentioned above, [Redacted] the fact that the DGIRA was responsible for

²⁴³ [Redacted] p. 21. R-0186. ↩

²⁴⁴ Article 28 section II of RISEMARNAT. R-0053. ↩

²⁴⁵ Second WS Rafael Pacchiano, ¶ 8. ↩

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evaluating and approving or rejecting the MIA,²⁴⁶ however, they suggest that the hierarchical relationship of the Secretary implies that he is also responsible for the behavior of his subordinates. This is false and, although the Claimant attempts to dispute this situation, it relies on the expert report of Mr. Herrera, who performs a general analysis of RISEMARNAT without going into detail about the specific provisions that regulate the actions of the various officials involved. It is no accident that the Claimant makes the following erroneous assertions based on Mr. Herrera's analysis:

• The Secretary of SEMARNAT is responsible for the approval of environmental impact statements.²⁴⁷ This is false, although the Secretary is the highest authority of the Secretariat, this does not mean that he is responsible for all the acts carried out by the officials in his charge. In fact, the expert omits to analyze the extraordinary power that RISEMARNAT confers on the Secretary to resolve MIA requests when he expressly requests it due to the interest of the subject. Accepting the position of the Claimant and its expert that the Secretary is generally responsible for the resolution of the MIA would imply that this provision in question would be meaningless, which is untenable.
• The Secretary has the right to directly exercise the powers he enjoys, although he may also delegate them, including the approval of the MIA.²⁴⁸ The Claimant herself acknowledges that the Secretary is assisted by his subordinates to carry out the tasks that are the responsibility of SEMARNAT. In this sense, the RISEMARNAT is clear in pointing out that the determination of a technical-scientific nature that the evaluation of an MIA implies corresponds to the Director General of DGIRA. As mentioned above, the Secretary may exercise that power, but it is an extraordinary assumption that must adhere to what is expressly provided by law and that did not occur in that case.
• The Secretary is responsible for all actions carried out by SEMARNAT.²⁴⁹ This proposition is absurd because it would imply that any act carried out by a SEMARNAT official would

²⁴⁶ Second WS [Redacted], ¶ 10 and Second WS [Redacted], ¶ 15. ↩

²⁴⁷ Reply, ¶ 90 a. ↩

²⁴⁸ Reply, ¶ 90 b. ↩

²⁴⁹ Reply, ¶ 90 c. ↩

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be the responsibility of the Secretary, meaning, there would be no legal distinction between the Secretary's conduct and those of any other subordinate.²⁵⁰ This would mean that the laws on administrative responsibility would be irrelevant, which is inconsistent with the very application of these laws. [Redacted] [Redacted] [Redacted].

• The DGIRA is not an independent authority, but an administrative unit of SEMARNAT in charge of the Secretary and Undersecretary whose subordinates must follow its instructions.²⁵¹ Mexico does not dispute that the DGIRA is not an independent administrative unit, the issue to consider is that legally there is a distribution of powers and attributions for the proper exercise of the tasks that are the responsibility of SEMARNAT. The Claimant's proposal [Redacted] [Redacted]. Precisely the distribution of powers and the existence of laws on administrative responsibility entail the recognition that it is legally impossible to hold a single person responsible for the conduct of their subordinates.
• The Director General of DGIRA must agree with his immediate superior on the resolution of the issues, such as the evaluation and determination of the MIA, in addition, the Director General and Undersecretary must follow their instructions.²⁵² This statement is misleading since the fact that the Director General must report on the issues to his superior is not synonymous with having to “agree” on the meaning of the resolution of an MIA. This determination corresponds solely to the Director General in his capacity as an expert covering the technical-scientific profile to adopt such determination. Therefore, it is false that the Director General of DGIRA must follow instructions regarding the meaning to be resolved by an MIA. Such a statement contradicts the applicable legal framework.

²⁵⁰ See Second WS Salvador Hernández, ¶ 6. ↩

²⁵¹ Reply, ¶ 90 d. ↩

²⁵² Reply, ¶ 90 e. ↩

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Furthermore, [Redacted] [Redacted].

• The DGIRA must keep informed to the Secretary and Undersecretary about the evaluation of any important MIA.²⁵³ Mexico does not dispute this aspect either, in fact, Mr. Pacchiano has indicated that [Redacted] [Redacted]. In addition, the fact that the General Director must keep informed his hierarchical superiors, in no way exempts him from the legal responsibility that falls under his charge on the meaning that he will give to the resolutions on environmental impact based on the information that there is on the file of each case in particular.
• The Secretary and Undersecretary of SEMARNAT have the power to confirm, modify or revoke the authorizations of the MIA by virtue of an appeal for review, and they have the duty to resolve them.²⁵⁴ As the Claimant points out, the review is an extraordinary resource that implies that the hierarchical superior resolves any decision of his subordinate with which the governed does not agree. This fact justly confirms that the responsibility to resolve an MIA falls on the Director General. Furthermore, the Claimant omits to point out that in the nullity proceedings it filed, [Redacted] [Redacted].

129. Accordingly, Mexico's legal experts also disagree with the interpretation that Mr. Herrera makes of the scope and powers of the Director General under the law. In particular, Mexico's legal experts have noted:

As indicated in the First Report, contrary to what was maintained by the Claimant, the Director General of DGIRA is the highest authority in the PEIA, in accordance with the Organic Law of the Federal Public Administration (the “LOAPF”). The powers of DGIRA are set out in article 28 of the SEMARNAT Internal Regulations and those related to an environmental impact assessment procedure of the characteristics of Don Diego are found in sections I, II, IV, V, VI, VII, VIII, XIII, XV, XIX, XX of Article 28 of RISEMARNAT. The Claimant's Expert erroneously cites article 18 of the RISEMARNAT to point out that said regulation “establishes a relationship of responsibility of the superiors (such as the Secretary and Undersecretary) with respect to the correct functioning of the inferiors (such as the DGIRA)” [... ]

²⁵³ Reply, ¶ 90 f. ↩

²⁵⁴ Reply, ¶ 90 g. ↩

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[Article 18 of RISEMARNAT] does not mention either the Secretary or the Undersecretary. In reality, the wrong justification by the Claimant's Expert can only be explained by his claim to hold the Secretary and the Undersecretary legally responsible for the results of the PEIA, which does not find support in the applicable regulations, nor is it clear from the exhibited documentaries. In other words, the assertions of the Claimant's Expert in the sense that the Undersecretary and the Secretary were responsible for the Negative Resolutions, in addition to lacking a legal basis under Mexican law, are contrary to the conduct observed by the Claimant herself, by means of ExO, in the appeals of said Negative Resolutions.²⁵⁵

130. Therefore, it is clear that, contrary to what was argued by the Claimant, Mr. Pacchiano did not have the legal authority to interfere in the MIA's resolution of Don Diego Project — and in fact, he did not do so—.

2. [Redacted] and [Redacted]

131. [Redacted] and [Redacted] [Redacted] [Redacted] [Redacted] [Redacted]²⁵⁷ Clearly, the Claimant did not consider it necessary [Redacted] and, therefore, preferred to submit an expert report to support its position that “Secretary Pacchiano had the power to cause the MIA to be denied".²⁵⁸

132. Without prejudice of addressing the inaccuracies of the Claimant and its expert in the following section, it suffices to point out that its premises are based on erronously considering that

²⁵⁵ Second Solcargo-Rábago Report, ¶¶ 19, 20, 21 and 35. ↩

²⁵⁶ See Second WS of [Redacted], ¶¶10 ↩

²⁵⁷ C-0364, ¶ 2.a y C-0365, ¶ 2.a. ↩

²⁵⁸ Reply, ¶¶ 88-119 ↩

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the mere fact that the Secretary of SEMARNAT is the highest ranking official in the chain of command within of SEMARNAT, is sufficient to make him accountable for all the decisions adopted by its subordinates in the performance of their duties and functions.²⁵⁹

133. This assertion is absurd since it would be as much as asserting that the President of Mexico is responsible for each and every one of the conducts carried out by the officials of the APF regardless of the powers and attributions that the law itself confers on them. Accepting this assumption would render null and void the laws that govern the distribution of powers, the actions of officials, as well as the laws on the responsibility of public officials. This situation is unsustainable.

134. Therefore, Claimant cannot [Redacted] [Redacted]. This is simply implausible.

3. [Redacted] responsible for the decisions on environmental impact assessment

135. Contrary to what was asserted by the Claimant [Redacted] [Redacted]²⁶¹

136. [Redacted] [Redacted] [Redacted]

Thus, and by virtue of the above, it is noteworthy that in accordance with the provisions of article 27 in section II of the Internal Regulations of the Ministry of Environment and Natural Resources in force during the time when the facts denounced arose, the General

²⁵⁹ See Second WS of Salvador Hernández, ¶¶ 4-6. ↩

²⁶⁰ See First WS of [Redacted], ¶ 2. First WS of [Redacted], ¶ 2. Second Expert Solcargo- Rábago, ¶¶ 40-43. ↩

²⁶¹ Counter- Memorial, ¶¶ 179 and 180. ↩

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Directorate of Environmental Impact and Risk is the authority empowered to evaluate and resolve the Environmental Impact Statements [...].²⁶²

137. [Redacted] [Redacted]²⁶⁴ [Redacted] [Redacted]²⁶⁵

138. [Redacted] [Redacted] [Redacted] [Redacted]

139. [Redacted] [Redacted] [Redacted] [Redacted] [Redacted]²⁶⁶

²⁶² [Redacted] (emphasis added). R-0181. ↩

²⁶³ [Redacted] [Redacted] ↩

²⁶⁴ [Redacted] ↩

²⁶⁵ [Redacted]. R-0185. ↩

²⁶⁶ [Redacted] (emphasis added). R-0187. ↩

[Page 65]

140. In this regard, it is clear that [Redacted] [Redacted]²⁶⁷

141. The Respondent's attention is drawn to the fact that [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted]²⁶⁹

142. The foregoing [Redacted] [Redacted]

²⁶⁷ Article 28, fraction II of the RISEMARNAT. R-0053. ↩

²⁶⁸ [Redacted] R- 0185. ↩

²⁶⁹ [Redacted] (emphasis added). R-0186. ↩

[Page 66]

4. The accusations of the Claimant and her witnesses against Mr. Pacchiano are unsustainable and disproportionate

143. The Claimant allocates more than 15 pages to indicate that Mr. Pachiano had an interest in issuing a negative resolution in order not to "harm to his political standing”²⁷⁰, and attempts to strengthen its claims by arguing that Mr. Pachiano's political aspirations were not limited to seeking an elected office, but “also includes survival as a political appointee in a presidential administration".²⁷¹ His statements are mere assumptions that seek to support his theory about the alleged existence of orders of command.

144. As has been recognized by Mr. Pacchiano himself —and by the Claimant—, in 2014 the project called Los Cardones was authorized [Redacted] [Redacted]. Despite the public reaction that was generated against the authorization of the Los Cardones project and Mr. Pacchiano, he was always respectful of the work of DGIRA and the sense of that resolution, regardless of the possible impact on his image. Mr. Pacchiano has given an account of this:

[Redacted] [...] Firstly, all projects evaluated during the time in which I was SEMARNAT's Secretary were given the same importance, since the law does not allow any distinction to be made between applicants and type or relevance of the projects that are submitted for approval of environmental impact authorizations. Secondly, I never put my "public image" or my "political career” above my responsibility as Secretary of State. As I mentioned in my first witness statement, I was always respectful of the law regarding the attributions, competences and powers of each administrative area of SEMARNAT [...]. The case of "Los Cardones" is the best example that my position was always based on the primacy of technical and scientific issues determined by the DGIRA and that I never intervened in its decisions, nor did I seek to influence it for political or public image reasons. As in all projects during my tenure, the DGIRA made decisions in accordance with the law and, although the Don Diego project was also a project that generated concerns, I did not relinquish in any way to pressure and/or public opinion. [...] I consider that Claimant's argument lacks logic since, if the exhortations, media opinions or points of agreement had any legal effect on the technical-scientific determination of the DGIRA (which they clearly do not), Los Cardones project would also have been denied considering its media relevance. However, this did not occur precisely because the DGIRA's determinations are based on technical-scientific aspects

²⁷⁰ Reply, ¶ 88. ↩

²⁷¹ Reply, ¶ 95. ↩

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and conform with an evaluation of that nature in which neither the Secretary, nor the Undersecretary of SEMARNAT, much less the deputies or senators have any interference whatsoever in accordance with the legal framework that governs the actions of the DGIRA (SEMARNAT's Internal Regulations).²⁷²

145. The Claimant goes to the extreme of resorting to any device to try to convince the Tribunal that the meaning of the resolutions is attributable to Mr. Pacchiano. He even involves his wife, unduly and without support, to try to support his allegations, which is disproportionate and unsustainable, and in the same way inappropriate.²⁷³ Indeed, as mentioned by Mr. Pacchiano, his wife was elected as a plurinominal Senator, which meant that her election was not subject to the citizen vote:

The Claimant now points out that another alleged reason why I ordered the denial of the authorization of the MIA of the Don Diego Project was due to the risks it posed to my wife's nomination as Senator of the Republic. Without prejudice to the fact that this statement is also false and meaningless, I find it disrespectful that the Claimant is now using the reputation of my wife and my family to support its claims against me and against the Mexican State. Furthermore, my wife, Alejandra Lagunes, was elected as a plurinominal Senator, that is to say, her nomination and her designation as Senator did not require campaigns to promote the citizen vote, nor to appear on the election ballots, much less to compete against candidates of other political parties. For this reason, it is untenable to affirm that the approval of the Don Diego Project would affect her nomination and designation as Senator of the Republic.²⁷⁴

146. The foregoing shows the Claimant's desperation to support its case and make the Tribunal believe that Mr. Pacchiano was responsible for denying the MIA 2015 of the Don Diego Project, however, [Redacted] [Redacted]. This decision was the product of the DGIRA's technical-scientific reasoning. Therefore, it is false that the DGIRA Resolutions have addressed an alleged aspiration or protection of the political image of Mr. Pacchiano.

D. The EIA Procedure and the 2018 Resolution were carried out in accordance with environmental legislation

147. As already noted above, Odyssey's allegations are confusing and contradictory since, on the one hand, it states that its claims do not seek to “appeal an adverse environmental decision, nor

²⁷² Second WS of Rafael Pacchiano, ¶¶ 8, 9 y 22. See First WS of Rafael Pachianno, ¶¶ 46 y 47. ↩

²⁷³ Reply, ¶ 111. ↩

²⁷⁴ Second WS Rafael Pacchiano, ¶ 20. ↩

²⁷⁵ See Second Solcargo- Rábago Report, ¶¶ 4 d) y 19. First Solcargo- Rábago Report, ¶¶80-81. ↩

[Page 68]

is it asking the Tribunal to determine the MIA afresh”.²⁷⁶ However, on the other hand, the Claimant affirms that the controversy of this arbitration centers on “whether the scientific and other factual evidence demonstrates that the Project was illegitimately denied".²⁷⁷ Regardless of Odyssey's claim, the function of the Tribunal does not consist on acting as an appellate court, or conducting a de novo analysis of the 2015 ExO's MIA application and the 2018 DGIRA Resolution.²⁷⁸

148. Although Odyssey seeks to challenge various aspects of the 2018 Resolution - which is an administrative decision of a technical, legal and scientific nature of more than 500 pages - it is established in investment arbitration under the NAFTA that an investor's dissatisfaction with the result of a decision issued by a public authority does not mean that it violates the Treaty.²⁷⁹

149. In this sense, the Respondent will refute the criticisms made by Odyssey, its experts and its witnesses against the 2018 Resolution, but it is emphatic that the fact that any of them are not addressed does not mean that Mexico admits to them. On the contrary, when dealing with issues that have already been analyzed by DGIRA —the specialized technical-scientific entity empowered to decide on requests for an environmental impact statement—,²⁸⁰ the Tribunal should grant it the appropriate margin of deference because it is the administrative and regulatory entity empowered to pronounce on technical and scientific matters.²⁸¹

1. The application of article 35 III (b) of the LGEEPA was carried
out in a reasonable manner and in accordance with the law

150. Odyssey alleges that the 2018 Resolution violates NAFTA because, in its opinion, DGIRA incorrectly applied Article 35 III (b) of the LGEEPA. As has already been mentioned above, this provision establishes the grounds on which the DGIRA can deny a MIA request. In this regard, the relevant part of said provision establishes:

²⁷⁶ Reply, ¶ 17. ↩

²⁷⁷ Reply, ¶ 19. ↩

²⁷⁸ See Counter- Memorial, ¶¶ 2, 5, 469. ↩

²⁷⁹ Robert Azinian, Kenneth Davitian, & Ellen Baca v. Estados Unidos Mexicanos, Caso CIADI No. ARB (AF)/97/2, Laudo, 1º de noviembre de 1999, ¶ 83. RL-0009. ↩

²⁸⁰ See Counter- Memorial, ¶¶ 2, 5, 469. ↩

²⁸¹ Joshua Dean Nelson and Jorge Blanco v. Estados Unidos Mexicanos, Caso CIADI No. UNCT/17/1, Laudo, 5 de junio de 2020, ¶257, CL-0127. S.D. Myers, Inc. v. Government of Canada, UNCITRAL, Laudo Parcial, 13 de noviembre de 2001, ¶ 263, CL-0103. ↩

[Page 69]

ARTÍCULO 35. After the environmental impact study is presented the Secretary will initiate the evaluation procedure, for which it will review that the application is made in accordance with the formalities stipulated in this Law, its Regulations and the applicable Official Mexican Standards, and will integrate it into the respective file within a period not greater than ten days.

[...]

Once the environmental impact study is evaluated, the Secretary will issue the corresponding resolution, duly based and motivated by the law, in which it will:

[...]

III. Deny the requested authorization, when:

[...]

b) The project or activity in question may lead to one or more species being declared threatened or endangered or when one of those species is affected [...]²⁸²

151. In accordance with Article 35 III (b) of the LGEEPA, DGIRA has the power to reject the AIA of a project when its works or activities i) may lead to one or more species being declared threatened or endangered; or ii) affect a threatened or endangered species. The wording and purpose of the environmental law in Mexico is clear since it regulates two assumptions, namely, i) the mere declaration and ii) the affectation of species in two perfectly identifiable risk categories, i.e., threatened or endangered species.²⁸³ In fact, DGIRA has already interpreted this provision in this way,²⁸⁴ as discussed below.

152. Thus, in accordance with the first assumption, if the work or activity of a project can cause the declaration of threat or danger of extinction of one or more species, then the project must be denied. A fortiori, and in accordance with the second assumption, the mere affectation of one or more threatened or endangered species is enough for the project to be susceptible of denial. It is evident that the affecting of a species - which is already threatened or in danger of extinction - can occur when the work or activity affects even an individual of the species.

153. Despite the foregoing, Claimant seeks to generate controversy in the application and interpretation of this legal provision. On the one hand, Odyssey alleges that DGIRA may reject a MIA when the project in question affects an entire endangered species.²⁸⁵ On the other hand, the

²⁸² LGEEPA, C-0014. ↩

²⁸³ Second Solcargo-Rábago Report, ¶ 84. ↩

²⁸⁴ Second Solcargo-Rábago Report, ¶¶ 99 y 100. ↩

²⁸⁵ Reply, ¶¶ 22-25. Second Héctor Herrera Report, ¶¶ 56, 57 y 62. ↩

[Page 70]

position adopted by DGIRA in the 2018 Resolution - and shared by Solcargo- Rábago - consists of the DGIRA being able to reject the MIA of a project when it affects an entire species or individuals that make up populations of an endangered species.²⁸⁶

154. Notwithstanding that the text of the law does not qualify in any way the impact (significant, minimal, etc.),²⁸⁷ nor is the term “all” found, which the Claimant and its expert use to formulate the superfluous distinction between species and individual, the Respondent considers this discussion futile. The fact that a species is considered in danger of extinction is precisely due to the critical mortality of individuals and populations of a species. The 2018 Resolution itself explains this situation:

This DGIRA notes that, in spite of other sections of IF and even in the IA, the petitioner states that the project does not affect in any way whatsoever marine turtles, particularly loggerhead turtles which, in their juvenile phase, inhabit the Gulf of Ulloa, and which is also located in the AP, since, as indicated, they are found at twenty meters of depth, whilst the dredging activities are performed at greater depths. Proposing mitigation measures with respect to impact over loggerhead turtles shows that the petitioner does foresee direct impact over turtle individuals, derived from the dredging activities, which is why, regardless of whether the adverse effect rely over one single or many individuals, it is clear that in the case of a species classified as endangered any adverse effect deserves special attention, hence the statement made by the petitioner is unacceptable, in the sense that potential deaths of sea turtles derived from the project are not relevant [...]²⁸⁸

155. To assert that the application of Article 35 III (b) of the LGEEPA is limited to the affectation of an entire species would render nugatory the inclusion of species in special protections according to national and international classifications.²⁸⁹

156. The Claimant and its experts have avoided mentioning NOM-59-SEMARNAT, which lists several endangered species, including the Caretta caretta turtle and the gray whale. NOM-059-SEMARNAT also establishes methodologies and standards to determine the different risk categories of endangered species.²⁹⁰ Some of these criteria include real and potential factors that produce a decrease in the size of species populations, e.g., genetic deterioration; modifications in

²⁸⁶ See Resolution of 2018 of the DGIRA, pp. 515-516, C-0008. Second Solcargo-Rábago Report, ¶ 89. ↩

²⁸⁷ Article 35 III (b) of the LGEEPA, C-0014. ↩

²⁸⁸ DGIRA 2018 Resolution, pp. 503-504, C-0008. ↩

²⁸⁹ First Solcargo-Rábago Report, ¶ 190. ↩

²⁹⁰ See NOM-059-SEMARNAT, p. 19, R-0038. ↩

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habitat; rarity (i.e., those whose populations are naturally sparse), uniqueness or taxonomic relevance, ecological, or intrinsic attributes of a species.²⁹¹

157. Part of the problems of the MIA of the Don Diego Project is due to the fact that it included deficient information regarding the number of individuals of Caretta caretta turtle, without leaving aside the fact that the Gulf of Ulloa is a critical habitat for this species in danger of extinction.²⁹² The following excerpt from the 2018 Resolution is relevant:

In conclusion, in accordance with the best available scientificevidence based on the results obtained by Seminoff et al. (2006), the Gulf of Ulloa is an area that has been long considered as a critical habitat for Caretta carettaturtle juveniles. Pursuant to the studies conducted by Peckham et al. (2007, 2008) and by Koch et al (2013), which were quoted by Seminoff 2014, it is an area of great importance for an important proportion of the entire population of the North Pacific Caretta carettaturtle.²⁹³

158. Although the example of the vaquita marina referred to by Odyssey and Dr. Sergio Flores is illustrative, it is used incorrectly. The vaquita marina is indeed an animal species in danger of extinction, and the affecting of an individual of this species clearly reduces its population and the survival of the entire species.²⁹⁴ The population of the Caretta caretta tortoise is not in the same critical situation that the vaquita marina, but that does not mean that the authority can authorize in a permissive way the increase in the mortality of individuals of this type of sea turtle. The North Pacific Marine and Regional Ecological Planning Program (OEMR-PN Program), published in 2018 by SEMARNAT, provides greater context:

The trend and contextual scenarios revealed profound changes in the gray whale population in the UGA. These changes are that in both scenarios a point is reached from which the number of individuals decreases suddenly.

[...]

Trend and contextual scenarios suggest that the loggerhead turtle population may remain viable, as long as it is not captured beyond a certain number of individuals..²⁹⁵

159. It is disquieting that Odyssey, Dr. Herrera and Dr. Sergio Flores minimize the characteristics of the Caretta caretta turtle and its classification as an endangered species. This

²⁹¹ NOM-059-SEMARNAT, p. 8, R-0038. ↩

²⁹² Group of Experts on Sea Turtles Report, ¶¶ 29, 67, 132 and 133. Verónica Morales Report, ¶¶ 6 and 19. Urbán-Viloria Report, ¶ 13. ↩

²⁹³ Resolution of 2018, p. 287, C-0009 (emphasis added). ↩

²⁹⁴ Reply, ¶ 29. Second Sergio Flores Report, ¶¶ 32-33. ↩

²⁹⁵ OEMR-PN Program, p. 20, C-0438. ↩

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animal species carries out a natural phenomenon, consisting of a migratory cycle that comprises the waters of the Gulf of Ulloa, where it remains for several years in the juvenile and sub-adult stage, to later return to the beaches of Japan to reproduce and nest.²⁹⁶ As explained by the Biologist Bermúdez, the Mexican State has made significant efforts to achieve the conservation of this species given its high degree of vulnerability.²⁹⁷

160. In desperation, the Claimant and Dr. Herrera perform numerical and comparative exercises based on nine AIAs in which, in their consideration, DGIRA interpreted Article 35 III (b) of the LGEEPA according to their position in this arbitration.²⁹⁸ Odyssey and Dr. Herrera's claim is incorrect.

161. First, none of the AIAs identified by Odyssey and Dr. Herrera are related to dredging projects in the Gulf of Ulloa and its impact on, inter alia, Caretta caretta turtles and gray whales.²⁹⁹

162. Second, the Claimant's and Dr. Herrera's interpretation of these nine AIAs is carried out in isolation and without providing any additional element to support their position pursuant to Article 35 (III) (b) of the LGEEPA. Furthermore, as indicated above, the protection of endangered species would be futile if the prohibition of environmental impact authorizations depended on whether the project in question affects or may affect an entire species.³⁰⁰

163. Third, [Redacted] and [Redacted].³⁰¹

[Redacted].³⁰²

[Redacted]

²⁹⁶ Firstt WS of Benito Bermúdez, ¶ 15. Report of the Group of Experts on Sea Turtles, ¶¶ 31, 32, 33 y 131. Verónica Morales Report, ¶ 47. ↩

²⁹⁷ First WS Benito Bermúdez, ¶ 24. ↩

²⁹⁸ Reply, ¶¶ 25-26. ↩

²⁹⁹ Second Solcargo-Rábago Report, ¶¶ 118. 122, 123 y 151. ↩

³⁰⁰ Second Solcargo-Rábago Report, ¶¶ 84, 150 y 151. ↩

³⁰¹ See, AIA of the MIA “recinto minero El Concheño", p. 74, C-0345; ΑΙA of the MIA “recinto minero Tayaha”, p. 66, C-0346; AIA of the MIA “Recinto Minero Ana Paula", p. 98, C-0348; AIA of the MIA “Proyecto de Explotación Minera Los Gatos", p. 114, C-0348; AIA of the MIA “Central La Jacaranda", p. 55, C-0350; ΑΙA of the MIA “Plantas Metalúrgicas", pp. 85-86, C-0351, and AIA of the MIA "Planta CIL Los Filos", p. 61, C-0352. ↩

³⁰² First WS [Redacted], ¶¶ 1, 2. First WS [Redacted], ¶ 2. ↩

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[Redacted].³⁰³ With this, [Redacted] intends [Redacted] which is false. Previously, DGIRA has used article 35(III)(b) of the LGEEPA as a legal basis to deny a MIA authorization, i.e., in the "Central Termoeléctrica Rosarito" case.³⁰⁴ In fact, the application and interpretation of said provision in that case coincides with the interpretation of the Respondent and Solcargo-Rábago, as reflected in the two denials of the Don Diego Project.

164. The Claimant and Dr. Herrera have not identified a legal basis - either in a national law or in an international treaty signed by Mexico - in which it is expressly established that the authorizations of environmental projects must be rejected when they put an entire endangered species at risk, which they clearly will not find because it simply does not exist.³⁰⁵

165. Again, Article 35(III)(b) of the LGEEPA does not contain the term "all" by which the Claimant intends to make the superfluous distinction between “individual” and “species” in order to support its ad hoc interpretation of said provision. The logic behind this article is the same i.e., the protection of threatened and endangered species, avoiding that a species whose risk category is already threatened is eventually declared endangered or, that a species that is already in danger of extinction is affected, which obviously can occur when an individual of the species is affected, without it being necessary to affect all the individuals of the entire species,³⁰⁶ as the Claimant erroneously suggests.

166. In any case, it should be noted that in 2019 ExO challenged the legality of the 2018 Resolution before the TFJA arguing, inter alia, the way in which DGIRA applied article 35(III)(b) of the LGEEPA.³⁰⁷ Indeed, ExO mentioned the AIA of the Manzanillo Project, just as Dr. Herrera

³⁰³ First WS [Redacted], ¶ 34 and Second WS [Redacted], ¶ 27. ↩

³⁰⁴ Second Solcargo-Rábago Report, ¶¶ 99 y 100. ↩

³⁰⁵ First Solcargo-Rábago Report, ¶ 189. ↩

³⁰⁶ Second Solcargo-Rábago Report, ¶¶ 89 y 90. ↩

³⁰⁷ Application for annulment filed on August 19, 2019 by ExO before the TFJA, pp. 51, 74 y 78, C-0186 ("This situation implies that the DGIRA denied the authorization even when the elements of the normative hypothesis of article 35, section III, subparagraph b), of the LGEEPA are not met; and that the DGIRA incorrectly applied said precept, based on the incorrect perception that individuals, populations and species are interchangeable concepts [...] it is clear that the DGIRA based its decision to deny the authorization of the MIA on an undue understanding of article 35, section III, subparagraph b), of the ↩

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did in his second expert report.³⁰⁸ This confirms that the Claimant seeks the Tribunal to rule on interpretive questions of Mexican environmental law that are specific to domestic courts.

167. The Claimant and [Redacted] try to make the Tribunal believe that the 2018 Resolution denied the AIA of the Don Diego Project because the death of a single individual of Caretta caretta turtle endangered the biological viability of the species, pursuant to Article 35(III)(b) of the LGEEPA.³⁰⁹ This position is incorrect. The problem is not the death of a single Caretta caretta turtle individual, but rather that ExO did not provide sufficient scientific evidence in the 2015 ΜΙΑ to determine how many specimens could be affected by the activities of the Don Diego Project.³¹⁰ The following transcript shows this:

It is important to say that petitioner collected field data under a turtle sighting campaign from August 1 to 13, 2013, pursuant to IF provided by petitioner, whose campaign only lasted 13 days and differs, in terms of period and time of data collection, from the sighting studies carried out by Seminoff et al. (2006), the results of the prospection and exploration studies of petitioner not showing a statistical rigorous analysis conducted under a scientific methodology, since petitioner only observed three sea turtle specimens. The foregoing raises uncertainty for this DGIRA, namely the lack of information and data collection in the AP. [...]

On that regard, this DGIRA, based on information analyzed in the preceding paragraphs, concludes that the habitat of turtles scientifically corresponds to the entire water column, from the surface to the bottom of the sea, without the possibility of making any technical or legal distinctions, in the sense that habitats are limited only to certain parts within a surface. An assertion in that sense would favor constructions that would result in the fragmentation of the habitat.³¹¹

168. It should be noted that Dr. Seminoff in his Witness Statement submitted along with the Rejoinder Memorial, confirms that, based on his research work as an expert in the study of the behavior of the Caretta caretta turtle species, the presence of this species is found in the entire Gulf of Ulloa. Consequently, and since they are curious creatures, even with the implementation of the most demanding mitigation mechanisms, it cannot be said that the Don Diego Project will

LGEEPA, which states that the impacts should affect an entire species -defined as a group of individuals- and, in any case, that they could result in an affectation in itself.").

³⁰⁸ Application for annulment filed on August 19, 2019 by ExO before the TFJA, p. 51y 53, C-0186. Reply, ¶¶ 25 y 26. First Héctor Herrera Report, ¶ 56. Second Héctor Herrera Report, ¶¶ 63-64. ↩

³⁰⁹ Second Sergio Flores Report, ¶ 25. ↩

³¹⁰ Group of Experts on Sea Turtles Report, ¶¶ 24, 26, 113, 116 and 145. ↩

³¹¹ DGIRA 2018 Resolution, pp. 287, 291-295. C-0009 (emphasis added). ↩

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not impact the population of this species, particularly if it is considered that there are more than 40,000 turtles in that area.³¹²

169. In any event, the Respondent considers it inappropriate and inadmissible to claim the interpretation of a provision of the LGEEPA as a violation of NAFTA, especially when it also presents that same claim before a national court whose procedure remains sub judice.

2. The allegations of the Claimant and its experts regarding the
instruments issued by the Mexican State to protect the Caretta
caretta turtle in the Gulf of Ulloa are confusing and incorrect.

170. It is disconcerting that the Claimant, [Redacted] and [Redacted] and Dr. Sergio Flores confuse the content of the 2018 Resolution and the content of legal orders issued by SAGARPA and SEMARNAT to protect the Caretta caretta turtle populations that inhabit the Gulf of Ulloa, with the sole purpose of alleging that “the impact of the Project on the Caretta caretta turtles was adequately addressed in the MIA” and that [Redacted].³¹³

171. As a starting point, there is no doubt that the Don Diego Project would have affected the Caretta caretta turtle.³¹⁴ Although Odyssey qualifies it as "extremely conservative", in the 2015 MIA itself, ExO, on its own initiative, recognized that the dredging activities of the Don Diego Project could kill specimens of this species.³¹⁵ This means that there was a risk that the dredging of the Don Diego Project could cause the death of Caretta caretta turtle specimens, thus being an anthropogenic cause (i.e., due to human means) that would increase the mortality of this species.³¹⁶

172. Given the relevance of the Gulf of Ulloa, the Mexican State has effectively decreed various instruments to protect the Gulf of Ulloa and the endangered species that inhabit it, including: i) the Fishing Refuge Agreement published in 2015 by SAGARPA; ii) the Fishing Refuge Agreement published in 2016 by SAGARPA; iii) the Fishing Refuge Agreement published in 2018 by

³¹² WS Jeffrey Seminoff, ¶ 17. ↩

³¹³ First WS [Redacted], ¶¶ 35-36. First WS [Redacted], ¶ 13. Reply, ¶¶ 43, 225. ↩

³¹⁴ Group of Experts on Sea Turtles Report, ¶¶ 16, 42, 87, 127, 140, 142, and 149. Verónica Morales Report, ¶¶ 51-68. ↩

³¹⁵ Reply, ¶ 32. ↩

³¹⁶ Second Solcargo-Rábago Report, ¶ 86. ↩

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SAGARPA; iv) the Agreement establishing the Gulf of Ulloa as a refuge for the Caretta caretta turtle published in 2018 by SEMARNAT, and iv) the OEMR-PN Program published in 2018 by SEMARNAT.³¹⁷

173. Fishing is an activity that can affect endangered species.³¹⁸ It appears that the Claimant seeks to criticize the fact that Mexican authorities have established a mortality limit for Caretta caretta turtles as a consequence of fishing activities. This is because fishing is an important source of resources in the Baja California Sur area, just as it was explained in the Counter-Memorial.³¹⁹ The concerns of the inhabitants and fishermen of Comondú expressed regarding the Don Diego Project during the PEIA of the 2015 MIA provide proof of this.³²⁰ It is not unusual for a government to authorize the “bycatch” of turtles and marine mammals in fishing operations, along with animal population assessments. In fact, the US NOAA Department of Fisheries issues such permits.³²¹

174. Fisheries Refuge Agreements issued by SAGARPA (a Secretary of State other than SEMARNAT) are intended to resolve the effects that fishing activities cause to species that are subject to protection regimes (e.g., the Caretta caretta turtle) and reduce the possible interaction of fishing with these species.³²² Through the Fisheries Refuge Agreements, the Mexican State established a mortality limit of 90 specimens of Caretta caretta turtles per year as a result of fishing activities and, if this limit is exceeded, commercial fishing operations should be suspended in order not to affect more specimens.³²³

³¹⁷ Fisheries Refuge Agreement issued by SAGARPA on April 10, 2015. R-0035. Fisheries Refuge Agreement issued by SAGARPA on June 23, 2016, pp. 1-9. C-0010. extending the validity of the fishing refuge area and new SAGARPA measures of June 25, 2018. C-0011. Agreement establishing the SEMARNAT loggerhead turtle refuge area of June 5, 2018. R-0040. North Pacific Marine and Regional Ecological Management Program published on August 9, 2018 by SEMARNAT. C-0438. ↩

³¹⁸ See First Solcargo-Rábago Report, ¶ 188. ↩

³¹⁹ Counter-Memorial, ¶ 299. ↩

³²⁰ Counter-Memorial, ¶¶ 299-301. ↩

³²¹ See Permit No. 16230 that authorizes the incidental capture of five threatened and endangered species of sea turtles in the gillnet fishery. R-0210. Certificate of December 29, 2020 authorizing fishermen in the South Pacific tuna fishery with purse seines to kill and injure marine mammals. R-0211. ↩

³²² Fisheries Refuge Agreement of June 23, 2016, p. 2. C-0010. ↩

³²³ Fisheries Refuge Agreement of June 23, 2016, p. 2 and 5. C-0010. ↩

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175. The Fisheries Refuge Agreements and the mortality limits established in them are part of a public policy of conservation aimed at weighing fishing activities (an essential economic activity for thousands of people who live on the coasts of Baja California Sur) and the protection of an endangered species.³²⁴ The Fisheries Refuge Agreements themselves establish that only specimens of Caretta caretta turtle that have died due to fishing activities will be quantified and not due to natural causes or other anthropogenic causes such as, for example, marine mining.³²⁵

176. During the production of documents, the Respondent presented two technical opinions prepared in 2015 and 2016 by INAPESCA, referred to in the 2016 SAGARPA Fishing Refuge Agreement.³²⁶

177. These technical opinions are not related to marine mining activities and much less to the Don Diego Project.³²⁷ The purpose of INAPESCA's analysis was to confirm that INAPESCA had no objection to decreeing the western coast of Baja California Sur as a fishing refuge, and explained the methodologies by which the mortality limit of 90 specimens of Caretta caretta turtle was determined with the help of research centers and in accordance with scientific methodologies.

Under the coordination of the National Commission of Natural Areas, under SEMARNAT, the Interdisciplinary Center for Marine Sciences [CICIMAR] Research

³²⁴ During the Don Diego EIA Procedure, INAPESCA presented a technical opinion to the DGIRA, [Redacted] in which he emphasized the commercial importance of fishing in the Gulf of Ulloa Area, identified deficiencies in the 2015 MIA and highlighted their concerns about a long-term project and the effect of climate change (“MIA has been reviewed in detail, as well as the additional information provided by the promoter. In the revised documentation there is no quantitative analysis of the effect of dredging operations on fisheries, only qualitative assertions [...] Additionally, and given that the promoter expresses his interest in continuing with direct extraction activities for a period of 50 years (until at least 2065); it is of particular attention to formally consider the following: The potential effects of climate change. By 2050 most of the effects of climate change will be palpable in most of the planet. In the region of the western coast of Baja California, these effects are already measurable at this time and have begun to alter the patterns of distribution and abundance of important populations of fishing interest [...] Potential long-term conflicts between the presented project [Don Diego] and the large-scale mariculture industry should be minimized."), pp. 6 y 10. R-0133. ↩

³²⁵ Fisheries Refuge Agreement of April 10, 2015, p. 5. C-0035. Fisheries Refuge Agreement of June 23, 2016, p. 5. C-0010. ↩

³²⁶ INAPESCA technical opinion of June 3, 2016. C-0347. See Procedural Order 3, p. 37. Fisheries Refuge Agreement published on June 23, 2016 by SAGARPA, p. 2. C-0010. (“That the National Fisheries Institute has recommended through its technical opinion established with official number RJL/INAPESCA/DGAIPP/0790/2016, ratify the fishing mortality limit for the species of loggerhead turtle (Caretta caretta) of 90 specimens per year throughout the Fishing Refuge Zone, considering the precautionary approach."). ↩

³²⁷ See Second WS Rafael Pacchiano, ¶¶ 23-24. ↩

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Centers and the Autonomous University of Baja California Sur initiated in 2013 an inter-institutional and interdisciplinary study with the objective of knowing the causes of the deaths of the loggerhead turtle in the Gulf of Ulloa. The results of the final report of the "Study on the causes of death of the loggerhead turtle (Caretta caretta) on the west coast of Baja California Sur (Gulf of Ulloa)" presented by the three Research Centers were inconclusive, given the multiplicity of factors identified as causes of death of loggerhead turtles found on the beaches. The argument for this conclusion is based on the fact that in addition to the stranding of sea turtles, hundreds of tons of shrimp and some marine mammals were also recorded, so it can be deduced that the small-scale fishing activities could hardly be considered as a direct cause of the morality of this fauna, considering the equipment and fishing gear used.

[...]

In order to provide a possible solution to the conflict between the conservation sector and fishing in this area, the report "Sustainable fishing exploitation and protection of the loggerhead sea turtle in the Golf de Ulloa” of SEMARNAT's “North Pacific Marine Ecological and Regional Management Program" presents an analysis using a combination of a geospatial model and a dynamic simulation model as tools. The vulnerability of the juvenile loggerhead sea turtle population was estimated in terms of risk or probability of population size reduction in 100 years.

[...]

As a recommendation it is stated that "[...]the bycatch in the Gulf of Ulloa should not exceed a total of 200 individuals per season"; therefore, it is recommended that "... the total bycatch of loggerhead turtles in the Gulf of Ulloa may not exceed 200 individuals per year. If this number is exceeded, all fishing activities in UGA GU-03, UGA GU-04 and UGA GU-05 must be suspended until the following year” because "...if this maximum limit of total bycatch per year is exceeded, the risk of losing 25% of the loggerhead sea turtle population in the Gulf of Ulloa is unacceptable".

This recommendation is analogous to that established by the United States [...], where the fishing is closed with 34 interactions with loggerhead turtles.

However, considering that [...] the species is in danger of extinction, under a precautionary approach oriented toward the recovery of the loggerhead sea turtle population, the value of co should be less than 1.

Therefore, a maximum of 90 turtles per season, equivalent to 0.45 turtles per boat per season, instead of the 200 proposed in the analyzed study, is proposed as an acceptable value to favor the recovery of this species and at the same time allow fishing as an economic activity.³²⁸

178. As can be seen, at no time did SEMARNAT or INAPESCA propose that the bycatch of the Caretta caretta turtle be limited to 200 individuals, as stated by the Claimant.³²⁹ INAPESCA's technical opinions only made reference to a study that recommended not to exceed the mortality

³²⁸ INAPESCA technical opinions of March 23, 2015 and June 3, 2016, pp. 8-9. C-0347. ↩

³²⁹ Reply, ¶ 38. ↩

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of 200 individuals per year. However, due to the character of the loggerhead turtle as an endangered species, INAPESCA determined a lower mortality limit, i.e., 90 specimens.

179. Apparently the Claimant intends to compare fishing activities with the dredging operations of the Don Diego Project, in order to argue that the impact of the Don Diego Project on the Caretta caretta turtle was adequately addressed in the 2015 MIA, a situation that is not comparable, since the project would be an additional source of mortality to that previously analyzed and considered by SEMARNAT and INAPESCA.³³⁰

180. Once again, the decision to declare the Gulf of Ulloa a refuge for the Caretta caretta turtle and limit the mortality of this species under an exceptional allowance limited to 90 specimens a year is part of a public policy of conservation.³³¹ The above is an example of the sovereign exercise of a State to regulate and implement measures and policies of an environmental nature, in accordance with Article 1106.6 of NAFTA, Article IV of the Inter-American Convention for the Protection and Conservation of Sea Turtles (CIT)³³², and Article 3 and 6 of the Convention on Biological Diversity (CBD).³³³

³³⁰ Second Solcargo-Rábago Report, ¶ 86. ↩

³³¹ See Second WS Rafael Pacchiano, ¶¶ 23-24. ↩

³³² Article IV of the CIT (“IV. 1. Each Party shall take appropriate and necessary measures, in accordance with international law and on the basis of the best available scientific evidence information useful for the adoption of the measures referred to in this Article, [...] 2. c. To the extent practicable, the restriction of human activities that could seriously affect sea turtles, especially during the periods of reproduction, nesting and migration [...] h. The reduction, to the greatest extent practicable, of the incidental capture, retention, harm or mortality of sea turtles in the course of fishing activities, through the appropriate regulation of such activities, as well as the development, improvement and use of appropriate gear, devices or techniques, including the use of turtle excluder devices (TEDs) pursuant to the provisions of Annex III, and the corresponding training, in keeping with the principle of the sustainable use of fisheries resources;[...] 3.a. Each Party may allow exceptions to Paragraph 2(a) to satisfy economic subsistence needs of traditional communities,”). RL-0080. ↩

³³³ Convention on Biological Diversity, (“Article 3. in accordance with the Charter of the United Nations and the principles of international law, the sovereign right to exploit their own resources pursuant to their own environmental policies, and the responsibility to ensure that activities within their jurisdiction or control do not cause damage to the environment of other States or of areas beyond the limits of national jurisdiction. RL-0081. ↩
Article 6. Each Contracting Party shall, in accordance with its particular conditions and capabilities:
a) Develop national strategies, plans or programmes for the conservation and sustainable use of biological diversity [...] b) Integrate, as far as possible and as appropriate, the conservation and sustainable use of biological diversity into relevant sectoral or cross-sectoral plans.")

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181. On the other hand, the Claimant criticizes that neither the 2016 Resolution nor the 2018 Resolution made reference to the OEMR-PN Program, which has been referred to as "the undisclosed study of SEMARNAT”.³³⁴ This instrument was published on 9 August 2018, i.e., two years after the 2016 Resolution and two months before the issuance of the 2018 Resolution. For evident reasons, DGIRA was unable to translate the textual content of the OEMR-PN Program into the 2016 and 2018 Resolutions.

182. However, the Claimant ignores that within the EIA Procedure of the 2015 ΜΙΑ, [Redacted] the technical opinion of the General Directorate of Environmental Policy and Regional and Sector Integration of SEMARNAT (Environmental Policy Directorate) to determine whether the Don Diego Project was consistent with the OEMR-PN Program, at that time still pending completion and publication.³³⁵ On October 19, 2015, the Environmental Policy Directorate issued the technical opinion [Redacted], and concluded that Don Diego was not consistent with what was established in the OEMR-PN Program.³³⁶

183. The Claimant also criticizes that the Counter-Memorial and the First Report of Solcargo-Rábago did not analyze the OEMR-PN Program because, in its consideration, “the study [OEMR-PN Program] [...]demonstrates unequivocally that SEMARNAT's Denial of the Project on the basis of its purported impact on Caretta caretta was baseless and ignored the contemporaneous evidence that demonstrated the Project would have no impact".³³⁷

184. Claimant apparently forgets that Biologist Bermúdez emphasized the importance of this instrument for the protection of the Gulf of Ulloa and the Caretta caretta turtle.

Due to the relevance of Gulf of Ulloa in the life cycle of yellow turtle species and in order to ensure its protection, the site was declared a "wildlife refuge area for the yellow turtle" in 2018

In 2018, the North Pacific Marine and Regional Ecological Planning Program was completed, also including the area that comprises the Gulf of Ulloa. This document is

³³⁴ Reply, ¶¶ 39-40. ↩

³³⁵ Resolution of 2019 of the DGIRA, p. 5. C-0009. [Redacted] R-0078. (“[...] since there is a draft project of “Decree for the conservation and protection of the Pacific loggerhead sea turtle (Caretta caretta) within its critical habitat for feeding and development in the Gulf of Ulloa, Baja California Sur", which is about to be published and entered into force, therefore said decree is not legally applicable to the project "). ↩

³³⁶ Technical opinion of the Environmental Policy Directorate of October 19, 2015, p. 4. R-0131. ↩

³³⁷ Reply, ¶ 40. ↩

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the product of many years of work and is intended to preserve the environmental conditions that support a viable minimum population of yellow turtles; to prevent sub-lethal effects on priority species caused by harvesting activities; to prevent ecological imbalances generated by direct, indirect, cumulative and synergistic environmental impacts of fishing and mining activities on the seabed; to preserve the functional integrity of the areas of high biological productivity of the neritic (lower) ecosystems and of the Center of Biological Activity of the Gulf of Ulloa, which support the habitat of priority species and the use of target species for fishing.³³⁸

185. The OEMR-PN Program and the Loggerhead Turtle Refuge Agreement are two SEMARNAT instruments published in 2018 and aimed at protecting the Caretta caretta turtle, which is subject to “strong anthropogenic pressures, which has led to the design and application of conservation policies whose fundamental objective is the recovery of the populations of the aforementioned chelonians".³³⁹ An example of this are the following excerpts from the OEMR-PN Program:

• Favor the protection of the habitat of the Caretta caretta turtle over the mining activities of the seabed.³⁴⁰
• Reduce the mortality rate of loggerhead turtle populations - evidently made up of individuals of this species - through sustainable fishing use.³⁴¹
• Like the Fisheries Refuge Agreements, it establishes a mortality limit of 90 individuals of Caretta caretta turtle due to bycatch of fishing.³⁴²
• It recognizes that a mortality greater than 200 individuals per year due to anthropogenic actions in the Gulf of Ulloa constitutes an unacceptable level of risk for the long-term viability of the species.³⁴³
• It identifies marine mining and its infrastructure, and specifically phosphorite extraction, as an environmental problem and conflict with conservation and fishing.³⁴⁴

186. The reality is that the Claimant's allegations regarding the Fishing Refuge Agreements, the 2015 and 2016 technical opinions of INAPESCA and the OEMR-PN Program do not support its

³³⁸ First WS Benito Bermúdez, ¶¶ 16-17 (emphasis added). ↩

³³⁹ SEMARNAT Loggerhead Turtle Refuge Agreement, p. 1. R-0040. ↩

³⁴⁰ OEMR-PN program, p. 70. C-0438. ↩

³⁴¹ OEMR-PN program, p. 70. C-0438. ↩

³⁴² OEMR-PN program, p. 140. C-0438. ↩

³⁴³ OEMR-PN program, p. 140. C-0438. ↩

³⁴⁴ OEMR-PN program, p. 149. C-0438. ↩

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claims, nor do they demonstrate the alleged “low probability” of mortality impacts in Caretta caretta turtles during the activities of the Don Diego Project.

3. The 2018 Resolution analyzed the possible impact of various
species, including sea turtles and cetaceans

187. The Claimant asserts that the 2018 Resolution did not take into account the impact of the Project on whales because the concerns of NGOs, national and international authorities and research centers were addressed by ExO through the additional information it presented during the EIA Procedure.³⁴⁵ Furthermore, Dr. Sergio Flores alleges that the 2018 Resolution does not scientifically support any negative impact of the Project on whales that inhabit the Gulf of Ulloa.³⁴⁶ Both allegations are incorrect.

188. The 2018 Resolution describes in detail the possible negative effects of the Don Diego Project on endangered and vulnerable species, and emphasized the Caretta caretta turtle and the gray whale.

189. As explained above, the 2018 Resolution considered that 35 of 47 marine mammals existing in Mexico, including the blue whale, killer whale, California sea lion, humpback whale and clearly the gray whale (see Image 1) and subject to special protections, inhabit the Gulf of Ulloa.³⁴⁷

Image 1. Gray whale and humpback whale

[Image of a gray whale underwater on the left, and a humpback whale breaching on the right]

CARLOS RAMÓN GODÍNEZ REYES

³⁴⁵ Reply, ¶¶72(d), 85. ↩

³⁴⁶ Second Sergio Flores Report, ¶ 12(a). ↩

³⁴⁷ DGIRA 2018 Resolution, p. 473. C-0009. ↩

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Source: Conanp, “100 years of conservation in Mexico, 1917-2017”. R-0194.

190. The 2018 Resolution also considered that four additional endangered sea turtles to the Caretta caretta turtle inhabit the Gulf of Ulloa.³⁴⁸

191. Regarding whales, the 2018 Resolution has a specific section called “Gulf of Ulloa, Habitat of Other Species”, in which scientific information and academic sources were analyzed, which determined that the environmental characteristics of the Gulf of Ulloa and its high productivity and biodiversity make it a unique habitat for feeding, refuge and reproduction of several vulnerable marine species, both resident and seasonal, which was considered by DGIRA at the time of denying the AIA of the Don Diego Project.³⁴⁹

192. One aspect not refuted by the Claimant is that the Gulf of Ulloa is an internationally recognized whaling sanctuary.³⁵⁰ In this situation, some species of cetaceans that inhabit the Gulf of Ulloa are protected by NOM-059-SEMARNAT and NOM-131 -SEMARNAT, which establish guidelines and specifications on the protection and conservation of their habitat.³⁵¹

193. Furthermore, contrary to what the Claimant may point out - including the ex post facto allegations of Dr. Sergio Flores - CONANP considered that the 2015 MIA did not contain scientific information on the noise pollution produced by dredging activities and its impact on the gray whale and other marine mammals, and on direct, cumulative and residual impacts on gray whale behavior.³⁵²

194. In addition, the Claimant has failed to explain that the OEMR-PN Program emphasizes that dredging activities constitute an environmental conflict that affects the gray whale breeding and rearing habitat:

Whales (mysticetes) have complex acoustic behaviors to carry out vital activities such as foraging, breeding calves, migration, and mate selection. Therefore, increasing background noise levels within the frequency bands used by whales can decrease their

³⁴⁸ DGIRA 2018 Resolution, p. 473. C-0009. ↩

³⁴⁹ DGIRA 2018 Resolution, pp. 295-317, 474-475, 507-508. C-0009. ↩

³⁵⁰ Urbán-Viloria Report, ¶¶ 11, 13 y 14. ↩

³⁵¹ See Counter- Memorial, ¶¶ 87-88. NOM-0031-SEMARNAT. R-0031. NOM-059-SEMARNAT. R-0038. ↩

³⁵² First WS Benito Bermúdez, ¶ 22. Technical opinión of CONANP, pp.15-17, 15 y 32. C-0006. ↩

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ability to send and receive information, negatively affecting their vital activities (Hatch, et al., 2012). Noise has been documented to increase the risk of whale habitat abandonment.³⁵³

195. The 2018 Resolution contains more than 25 pages dedicated to analyzing the situation of whales in the Gulf of Ulloa and the possible impacts caused by the Don Diego Project.³⁵⁴ The reason for this is because the relevance of the Gulf of Ulloa “relevance lies in it being a local and regional sea ecosystem of great importance for food, shelter, and reproduction purposes with respect to vulnerable sea species”.³⁵⁵

4. The Claimant seeks to minimize the concerns of Mexican
authorities, NGOs and international organizations regarding
Don Diego

196. The Claimant argues that the technical opinions received by DGIRA during the EIA Procedures of the 2014 MIA and the 2015 MIA seek to "mask" the lack of contemporary documentation and evidence on the evaluation of the EIA Procedure, and seek to "distract" the Tribunal.³⁵⁶ This is also wrong.

197. The Claimant and [Redacted]³⁵⁷ [Redacted] frequently requests these types of opinions as part of the evaluation of an MIA.³⁵⁸ The Claimant also does not refute the fact that the DGIRA received opinions in addition [Redacted] and that were part of the EIA Procedure of the 2015 MIA, mainly from NGOs.³⁵⁹

³⁵³ OEMR-PN Program, pp. 48, 53, 143. C-0438. ↩

³⁵⁴ DGIRA 2018 Resolution, pp. 295-317, 474-475, 507-508. C-0009. ↩

³⁵⁵ DGIRA 2018 Resolution, p. 507. C-0009. ↩

³⁵⁶ Reply, ¶ 67. ↩

³⁵⁷ Counter-Memorial, ¶¶ 215 y 305. ↩

³⁵⁸ Second WS [Redacted], ¶ 15. ↩

³⁵⁹ Counter-Memorial, ¶ 279-284. ↩

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198. Claimant and its witnesses claim that the Don Diego Project AIA was denied for political reasons. If that were true - which is rejected - [Redacted]. This shows that there is inconsistency in Odyssey's claims and facts.

199. Contrary to what Odyssey and its witnesses and experts infer, the Respondent has not indicated that the opinions [Redacted] were binding on the DGIRA.³⁶⁰ As Solcargo-Rábago explained in its first expert report, all the opinions that the DGIRA received during the EIA Procedure constitute a useful element to “provide the DGIRA with additional elements to guide its resolution”, which in fact happened.³⁶¹

200. Based on the technical opinions received, DGIRA informed ExO that there were insufficiencies and inconsistencies in the 2015 MIA, and requested ExO to expand, rectify or clarify the information related to the Don Diego Project.³⁶² In other words, due to concerns reflected in the technical opinions required by the DGIRA, ExO presented “additional information”, missing information “and” information in scope or complementary “, which was analyzed by the DGIRA at the time of issuing the 2018 Resolution.³⁶³ However, this additional information or missing information did not answer the questions and concerns of the authority.

201. It is highly questionable that the Claimant and its witnesses affirm, on the one hand, that the concerns of third parties (e.g., CONANP) were successfully addressed by ExO through the additional information it presented in the PEIA and, on the other hand, they intend to point out that DGIRA did not take into consideration the technical opinions [Redacted], mainly if it is taken into account that some of them were issued by recognized research centers, authorities and international organizations.³⁶⁴

³⁶⁰ Reply, ¶ 69. ↩

³⁶¹ First Solcargo-Rábago Report, ¶ 103. ↩

³⁶² Counter-Memorial, ¶¶ 306-307. Official letter of October 30, 2015 from the DGIRA, p. 1. C-0004. ↩

³⁶³ DGIRA 2018 Resolution, pp. 1,515, C-0009. ↩

³⁶⁴ Reply, ¶¶ 70-71. ↩

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202. The Respondent does not consider it necessary to re-explain in this Rejoinder all the concerns that authorities, NGOs, international organizations and research centers communicated to DGIRA during the EIA Procedure of the 2015 MIA, but the following examples are illustrative:

• The UNESCO World Heritage Center stated that “[t]he submitted EIA does not evaluate potential impacts of the Project on the Outstanding Universal Value (OUV) of the Whale Sanctuary El Vizcaino property [...] particular attention should be paid to the assessment of potential direct impacts on the marine species, such as the gray and the blue whale, as well as four species of marine turtles”.³⁶⁵
• Scientists from The Society for Marine Mammalogy concluded that "[t]he study incorrectly interpreted available information and in other cases there was a lack of sufficient information to fully evaluate the impact of the dredging operations on blue and gray whale populations.”³⁶⁶
• Contrary to what Odyssey and its witnesses may affirm, the institutional opinion of CONANP is reflected in the technical opinion of November 26, 2015 prepared by the team of Biologist Benito Bermúdez, in which it considered that the Don Diego Project was contrary to environmental regulations for not taking into consideration and analyzing a series of environmental effects that could cause affections, inter alia, to the gray whale and the loggerhead turtle.³⁶⁷

203. It appears that the Claimant seeks to minimize the right of the interested public to participate in the PEIA of a project, just as happened in the PEIA of the Don Diego Project. In this regard, the IACHR has indicated the following:

La Corte considera que la participación del público interesado, en general, permite realizar un examen más completo del posible impacto que tendrá el proyecto o actividad, así como si afectará o no derechos humanos. En este sentido, es recomendable que los Estados permitan que las personas que pudieran verse afectadas o, en general, cualquier persona interesada tengan oportunidad de presentar sus opiniones o comentarios sobre el proyecto o actividad antes que se apruebe, durante su realización y después que se emita el estudio de impacto ambiental.³⁶⁸

204. The Claimant criticizes the fact that Mexico has referred to the opinions received by DGIRA in the Counter-Memorial and considers them to be "ex post facto justifications.”³⁶⁹ Again, the opinions provide adequate context for the authority, are of a guiding nature and the DGIRA

³⁶⁵ Communication from the World Heritage Center of April 18, 2016. R-0139. ↩

³⁶⁶ Society for Marine Mammalogy technical opinion dated March 28, 2016. R-0128. ↩

³⁶⁷ CONANP's technical opinion of November 20, 2015, pp. 33-34. C-0006. ↩

³⁶⁸ Advisory Opinion OC-23/17 issued on November 15, 2017 by the Inter-American Court of Human Rights, ¶ 168. RL-0082. ↩

³⁶⁹ Reply, ¶¶ 74 and 77. ↩

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has the discretion to take those aspects contained in the opinions received during a PEIA that in its consideration are relevant at the time of solving with regard to a MIA.

205. What the Claimant has not been able to refute is that no institution, authority, international body, research center or NGO supported the Don Diego Project.

5. Letters Sent to ExO and suspensions during PEIAs demonstrate
DGIRA's concerns

206. Claimant's argument that SEMARNAT was satisfied with the information provided by Odyssey and, on the other hand, DGIRA's actions within the EIA Procedures of 2014 MIA and 2015 MIA, are inconsistent. As indicated in the Counter-Memorial, on November 21, 2014 (within the EIA Procedure of the 2014 MIA), DGIRA notified ExO of an official letter informing ExO of its concerns about the Don Diego Project.³⁷⁰ The October 30, 2015 (during the 2015 ΜΙΑ ΕΙΑ Procedure), [Redacted].³⁷¹ The following transcript accounts for this:

In this regard and derived from the analysis carried out to the MIA-R of the project, this DGIRA identified insufficiencies and inconsistencies in the environmental and technical information presented that do not allow an objective evaluation of the studies presented [...] this administrative unit requests for the only time to the promoter, to continue with the evaluation in terms of Environmental Impact of the project, the extension, rectification or clarification of the information contained in the following chapters ...

[...]

[...] the evaluation period for the project is suspended as long as the requested information is not available, in order to have all the necessary elements to conclude the procedure established in this DGIRA.³⁷²

207. The insufficiencies and inconsistencies of the MIA 2015 [Redacted] are contained in the official letter of October 30, 2015 and have been summarized in the Counter-Memorial.³⁷³ There is no evidence to demonstrate that [Redacted]

³⁷⁰ Counter-Memorial, ¶ 240. Letter of November 21, 2014 from the DGIRA. C-0100. ("Sobre el particular y derivado del análisis realizado a la MIA-R del proyecto, esta DGIRA identificó insuficiencias e incongruencias en la información ambiental y técnica presentada que no permiten realizar una evaluación objetiva de los estudios presentados”). ↩

³⁷¹ Counter-Memorial, ¶¶ 306- 309. ↩

³⁷² Official letter of October 30, 2015, pp. 2 and 11. C-0004. ↩

³⁷³ Counter-Memorial, ¶¶ 308-309. ↩

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[Redacted] the 2014 and 2015 official letters, and to suspend the EIA Procedures until ExO submitted additional information.

208. The Claimant and [Redacted] and [Redacted]³⁷⁴

209. The Claimant goes to the extreme by pointing out that Mexico has not produced any contemporary evidence (documentary or testimonial) that demonstrates that the EIA Procedure of the 2015 MIA was carried out in its entirety.³⁷⁵ However, DGIRA's own 2014 and 2015 documents, [Redacted], diminish the credibility of Odyssey's allegations and the statements of his witnesses. Likewise, the 2018 Resolution is the clearest evidence that the 2015 MIA did not comply with environmental legislation for Don Diego to obtain the environmental impact authorization.

E. There is contemporary evidence that confirms that the refusal of
authorization from SEMARNAT is based on a valid justification for
protecting the ecosystem in the Gulf of Ulloa and the sustainability of
marine species

1. Possible impacts that the Don Diego Project would have had on
the ecosystem of the Gulf of Ulloa

210. The Claimant seems to try to minimize the possible negative impacts that sea turtles would suffer if the Don Diego Project had been authorized, characterizing these concerns as “mere pretexts".³⁷⁶ However, the scientific literature has been emphatic in pointing out that activities such as those related with Don Diego are harmful, in various areas, for various species that inhabit the Gulf of Ulloa, including marine mammals and sea turtles. In this regard, the Respondent presents, together with this Rejoinder, expert opinions on the matter, which will provide the Tribunal with greater context and will assist it in having an objective understanding regarding the

³⁷⁴ Second WS [Redacted], ¶¶ 15, 18. Second WS [Redacted], ¶ 17. ↩

³⁷⁵ Reply, ¶ 231. ↩

³⁷⁶ Counter- Memorial, ¶ 149 y 153. Reply ¶ 225 ↩

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Claimant's arguments related to the fact that its project was friendly to the laws. turtles and other marine species. However, it should be clarified that the Respondent does not intend that this arbitral tribunal carry out a de novo analysis and assume the responsibility of an environmental authority. The Respondent reiterates that this analysis of the Don Diego Project adhered to the provisions of national legislation and was carried out by the expert authority on the matter based on technical-scientific information that led it to conclude that the Project was not environmentally sustainable.

211. In this sense, Dr. Morales develops three major effects that the Don Diego Project could have generated in sea turtles, including Caretta caretta,³⁷⁷ (see Image 2).

212. The first affectation is the obstruction for free swimming and a potential collision. As Dr. Morales describes it, taking into consideration the magnitude of the vessels, the fact that there would be at least two vessels operating simultaneously and given that they would operate close to each other "they have the potential to obstruct the free passage of turtles and increase the risks of collision of turtles both on the surface with the vessels and other mobile infrastructure present, and in mid-water with the vessels' live work, pipelines, piping and hoses".³⁷⁸

Image 2. Caretta caretta turtle

³⁷⁷ Verónica Morales Report, Section III.B.2. ↩

³⁷⁸ Verónica Morales Report, ¶ 41. ↩

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213. In the same sense, Mr. Flores-Ramírez assures that “las embarcaciones de apoyo tienen el potencial de golpear a las tortugas marinas” and even receive “impactos directos que produzcan lesiones graves o mortalidad".³⁷⁹ However, Mr. Flores-Ramírez, in contradiction to this same statement, argues that the tickling chains have been mitigation measures for the protection of sea turtles whose effectiveness has been proven in dredging operations carried out in the United States,³⁸⁰ without even citing a source about it. On this point, Dr. Morales emphasizes that these measures have not been tested in national waters and there is no scientific evidence to demonstrate their effectiveness in Mexico or in any other part of the world.³⁸¹

214. The second problem implied by the Don Diego Project is the suction entrapment of the dredge. Being that the Gulf of Ulloa is the habitat of diverse marine turtles, among them, the loggerhead turtle, ridley, leatherback, and prieta; and considering that the leatherback turtle and the olive ridley turtle (just to mention a few) can be submerged to depths greater than those of the project, it is not remote that some of them would be caught by the suction of the dredge.³⁸² Even Mr. Flores-Ramírez acknowledges that turtles could be affected by dredging with TSHD dredgers.³⁸³

215. Dr. Morales delves into this issue with respect to Caretta caretta turtles, and points out that, contrary to what Mr. Flores-Ramírez suggests regarding the remote probability of finding individuals of Caretta caretta in deep waters due to low temperatures,³⁸⁴ Caretta caretta turtles could actually go down to the depths that the project would operate because the turtles are used to the temperatures in the Gulf of Ulloa.³⁸⁵ Therefore, it would be possible that the turtles could be affected by the dredging.

³⁷⁹ First Sergio Flores-Ramírez Report, ¶ 122. ↩

³⁸⁰ First Sergio Flores-Ramírez Report, ¶ 26. ↩

³⁸¹ Verónica Morales Report, ¶ 41. ↩

³⁸² Verónica Morales Report, ¶ 42. ↩

³⁸³ First Sergio Flores-Ramírez Report, ¶ 124. ↩

³⁸⁴ First Sergio Flores-Ramírez Report, ¶ 23 iii). ↩

³⁸⁵ Verónica Morales Report, ¶ 60. ↩

[Page 91]

216. Finally, the third potential negative impact on sea turtles would be the emission of noise. On this point, both Dr. Morales³⁸⁶ and the Claimant's expert³⁸⁷ agree that the turtles could be affected by the noise of the dredging activity.

217. The Group of Experts on Sea Turtles explains that, if the Don Diego Project were authorized, it would have direct and indirect repercussions on turtle mortality, as well as on their habitat:

The Don Diego project, which is intended to be carried out within one of the most important C. caretta turtle aggregation areas in the North Pacific, would create additional sources of mortality, both direct, due to its operations, and indirect, due to habitat destruction, adding its negative impacts to those that already exist for this species.³⁸⁸

218. The direct effects are reflected in the mortality of an endangered species, a situation that must be considered in the projection of biological viability of a species (i.e., its projection of growth or extinction). Therefore, in the specific case the Caretta caretta turtle, Respondent's experts confirm that SEMARNAT's resolución is adequate, in accordance with a scientific analysis and support.³⁸⁹ Specifically, the experts indicated:

Given that the critical values of annual mortality levels estimated for C. caretta in the GU that compromise the viability of the species were being exceeded, the negative decision of the DGIRA for the mining project is justified in the understanding of a high probability that it would cause additional mortalities, either by direct bycatch or indirect impacts by reducing the quantity or quality of its feed.³⁹⁰

219. Despite Claimant's and its experts' combined attempts to assert that the AP does not coincide with the endangered species here cited, experts Jorge Urbán and Lorena Viloria, based on the most accurate and reliable contemporary scientific information, conclude otherwise:

The gray whales, blue whales and humpback whales, among several other species of marine mammals, use the GU, including the Project Area during various times of the year for activities such as breeding, feeding and transit.³⁹¹

³⁸⁶ Verónica Morales Report, ¶ 45. ↩

³⁸⁷ First Sergio Flores-Ramírez Report, ¶ 124. ↩

³⁸⁸ Group of Experts on Sea Turtles Report, ¶ 47. ↩

³⁸⁹ Group of Experts on Sea Turtles Report ¶¶ 148 and 149. Urbán-Viloria Report ¶¶ 11.h, 44, and 50. Verónica Morales Report, ¶¶ 85 y 107. ↩

³⁹⁰ Group of Experts on Sea Turtles Report, ¶ 109 (emphasis added). ↩

³⁹¹ Urbán-Viloria Report, ¶ 46. ↩

[Page 92]

The MIA and the Additional and Complementary Information do not consider the presence of these species in the Project Area.³⁹²

The project area (“AP”) coincides with 100% of the migratory routes of gray whales (2-35 km from the coast), humpback whales (4-80 km from the coast) and with the migratory route and feeding zone of blue whales.³⁹³

The PA overlaps or coincide with the area used by species such as the blue whale, gray whale and humpback whale.³⁹⁴

220. The above is shared with the analysis and conclusion made by the Marine Turtle Expert Group in relation to Caretta caretta:

As has been widely mentioned and demonstrated in this document and in the resolutions of 2016 and 2018, the coincidence of the AP with the habitat of the C. caretta turtle is not marginal: the most complete maps of the distribution of the turtle, those based on aerial sightings, clearly show that C. caretta use the entire GU, including the AP. In addition, the movements and densities of the turtles change over time based on several factors (Figures 3 and 5 of this report).³⁹⁵

221. Therefore, as can be seen, contrary to what the Claimant might think, it is evident that the dredging activities that the Claimant intended to carry out could significantly affect marine mammals and sea turtles, and the implementation of the Project would have been no exception.

2. The information presented by the Claimant in the 2015 MIA, as
well as the aditional information submitted, contained
deficiencies and inaccuracies, meaning that SEMARNAT's 2018
Resolution is correctly supported

222. On September 3, 2014, ExO submitted the 2014 MIA.³⁹⁶ In order to provide a response to the 2014 MIA, SEMARNAT requested the Claimant on November 21, 2014, to submit additional information,³⁹⁷ which was delivered by ExO in March 2015.³⁹⁸

³⁹² Urbán-Viloria Report, ¶ 47. ↩

³⁹³ Urbán-Viloria Report, ¶ 6. ↩

³⁹⁴ Urbán-Viloria Report, ¶ 11. c. ↩

³⁹⁵ Group of Experts on Sea Turtles Report, ¶ 128. ↩

³⁹⁶ Counter-Memorial, ¶ 211. Memorial ¶ 107. ↩

³⁹⁷ Counter-Memorial, ¶¶ 240-241. Memorial ¶ 121. ↩

³⁹⁸ Counter-Memorial, ¶ 245. Memorial ¶ 127. ↩

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223. ExO submitted a new MIA on June 26, 2015,³⁹⁹ to which SEMARNAT requested to rectify errors on June 30, 2015.⁴⁰⁰ ExO subsequently submitted, in substitution to the MIA of June 26, a new MIA on August 21, 2015,⁴⁰¹ and on December 3, 2015 submitted the additional information for that MIA.⁴⁰²

224. The Claimant appeared to respond to the observations made to the MIA, however, this did not mean that the observations were properly addressed and, [Redacted]⁴⁰³ the reality is that the additional information submitted by ExO, far from being “detailed”, presented clear deficiencies and inaccuracies.⁴⁰⁴ Moreover, assuming without conceding that the information had been “detailed”, this does not mean that it resolved the concerns expressed by SEMARNAT, much less that it was ascertaining information or that it effectively responded to the questions raised by the authority.

225. Among the many deficiencies in the additional information of the MIA, there were statements lacking scientific support, errors, and out-of-context statements that Dr. Morales identifies in a very precise manner in her report.⁴⁰⁵

226. Some of the many failures of ExO, were:⁴⁰⁶

• Assertions about the infauna found in the area, indicating that they are opportunistic type r species, with no real support or backing.
• No precise information on the dimensions of the vessels or the process barge, the suction force of the dredge, the technical specifications of the pipes connected to the dredge drag head, or how the dimensions of the dredge drag head were calculated.

³⁹⁹ Counter-Memorial, ¶ 260. Memorial, footnote 300. ↩

⁴⁰⁰ Counter-Memorial, ¶ 260. ↩

⁴⁰¹ Counter-Memorial, ¶ 263, Memorial ¶ 133, and footnote 300. ↩

⁴⁰² Additional Information. C-0005. Memorial ¶ 140. ↩

⁴⁰³ Second WS of [Redacted], ¶ 17. ↩

⁴⁰⁴ Group of Experts on Sea Turtles Report, ¶¶ 24, 26, 113, 116 and 145. ↩

⁴⁰⁵ Verónica Morales Report, Section V. ↩

⁴⁰⁶ Verónica Morales Report, ¶ 69. ↩

[Page 94]

• In various sections of the document, illustrations were without scale and in a generic manner, rather than presenting specific technical diagrams of all parts of the process.
• There is no indication of where the brine from this reverse osmosis process will be disposed, nor is there any mention of the amount of water that will be required for this sediment washing process, nor of the temperature or any other characteristic at which it will be returned, nor whether the excess humidity will go along with the rest of the water back to the seabed; or how the deposit of shells and materials is minimized just because the process on the barge is “mechanical and continuous”.
• Regarding the return of inert material without phosphate content / rehabilitation, there is no indication of what type of ecological process this rehabilitation is related to, nor the more precise positioning of the coarse sands.
• No information is provided on the final destination of the transport of the phosphate material, navigation routes, route of the vessel, how the barge is transferred, etc.
• The parameters do not specify what happens to the depth of the seafloor in all scenarios, nor do they explain how the frequency of the transporting vessels is determined.
• It does not explain how they will avoid re-dredging material that was returned.

227. Another relevant aspect confirmed by SEMARNAT's 2018 Resolution is that the MIA does not consider all the impacts on biodiversity in the Gulf of Ulloa. Particularly, the effects on the Caretta caretta turtle, where not only would it have direct and immediate effects, but also the growth of the future population of this species would be compromised by indirect actions, which imply the imminent risk of a species in danger of extinction. The report of the Group of Experts on Sea Turtles presented by the Respondent states:

Only direct impacts are mentioned in the MIA-R (e.g., turtles that could be trapped in dredging operations). However, there are no estimates of indirect impacts due to modifications of the seabed habitat, due to the intervention derived from the project. These habitat modifications and changes are considered significant threats in U.S. Endangered Species Act evaluations and can cause reductions in the growth rate of individuals by affecting the quantity and quality of food available.⁴⁰⁷

⁴⁰⁷ Group of Experts on Sea Turtles Report, ¶ 88 (emphasis added). ↩

[Page 95]

228. It is important to note that, despite Claimant's insistence on the lack of use of scientific evidence by the Mexican authorities, especially the DGIRA in the 2018 Resolution, it has been evidenced throughout this Memorial that this was not the case. SEMARNAT denied the MIA in a reasoned and substantiated manner. This is confirmed by Respondent's experts, Dr. Urbán Ramírez, Dr. Morales Zárate and the Group of Experts on Sea Turtles, who upon conducting a comparative analysis of the available information and the conclusions contained in the 2018 Resolution,⁴⁰⁸ argue that:

After having analyzed the Resolution issued in 2018 by the DGIRA, in particular the section on marine mammals, we consider that it does present the necessary scientific evidence on distribution, temporality, estimates and density of marine mammals in the GU, as well as its coincidence with the AP. Therefore, the DGIRA's decision to reject the MIA is consistent.⁴⁰⁹

DGIRA shows sufficient scientific evidence on distribution in space and time, estimates of abundance and density of the main species of marine mammals in the GU.⁴¹⁰

229. In this regard, the Group of Experts on Sea Turtles agrees with the above, concluding as follows:

For the above mentioned, we consider that both SEMARNAT resolutions were scientifically sound and have sufficient arguments that amply justify the denial of the Project due to its potential impacts on the C. caretta population and its habitat.⁴¹¹

For all of the above, this group of experts considers that SEMARNAT's resolutions of 2016 and 2018, have an adequate analysis regarding the possible affectations to C. caretta turtles, in accordance with scientifically sound information and arguments that justify their resolutions due to the negative impacts to the GU ecosystem and the affectations of an endangered species, mainly by applying the precautionary principle.⁴¹²

230. Also, Dr. Morales, shares this criterion, stating:

In my opinion, the DGIRA made the correct decision and it was well-supported based on the best technical and scientific information available, which includes the review and detailed technical opinion of prestigious academic institutions with experts in different disciplines, as well as civil organizations and considering the feelings of the society from Baja California Sur. The DGIRA is clear in stating that the Gulf of Ulloa is a critical habitat for the Caretta caretta turtle and, in turn, in evidencing that the Project area coincides with the habitat of Caretta caretta turtles. The 2018 Resolution provides

⁴⁰⁸ Urbán-Viloria Report, ¶ 1. ↩

⁴⁰⁹ Urbán-Viloria Report, ¶ 44. ↩

⁴¹⁰ Urbán-Viloria Report, ¶ 50 (emphasis added). ↩

⁴¹¹ Group of Experts on Sea Turtles Report, ¶ 28 (emphasis added). ↩

⁴¹² Group of Experts on Sea Turtles Report, ¶ 149 (emphasis added). ↩

[Page 96]

ample and adequate rationale and justification for this. Likewise, the DGRIA rightly states that this would generate a negative impact to the GU ecosystem.⁴¹³

231. Although Claimant argues that it submitted complete information that should have led to the approval of the MIA,⁴¹⁴ it was denied because, according to Dr. Morales, the Claimant "submitt[ed] incomplete information, which does not reach the technical sufficiency, which is inconsistent, is not detailed and in many cases presents unsubstantiated arguments".⁴¹⁵

232. It is worth mentioning that, regardless of the fact that the Mexican authorities did use the necessary scientific information, those who actually have the obligation to prepare and present specific and sufficient evidence is, on the contrary, the Claimant,⁴¹⁶ in order to demonstrate the viability of its Don Diego Project and its non-impact on the ecosystem. This is clearly stated by Dr. Urbán and Dr. Viloria:

The MIA and the supplementary information do not present evidence of the NO affectation of the Project to marine mammals.⁴¹⁷

Specific studies are required on the activities and the area of action to determine that a project like Don Diego does not affect a species, and, for this Project, they were not carried out.⁴¹⁸

Neither the MIA nor the Claimant in this arbitration has demonstrated that the Project does not affect marine mammals found in the area of action, which was their obligation. The Claimant is the one who must submit sufficient studies, analysis and information to support its conclusions on the non-impact of the Project on the Gulf of Ulloa and its marine species, including the gray, humpback and blue whale.⁴¹⁹

To this day, there are no specific studies on the distribution and abundance of cetaceans in the Gulf of Ulloa. In the absence of such studies, there is no way to detect changes arising from the Project and it cannot be said that the Project would not affect the cetaceans that inhabit the GU, as the Claimant maintains. However, there is information derived from different studies that fully or marginally include the study area for certain periods of time.⁴²⁰

233. In this regard, Dr. Morales likewise shares the aforementioned conclusion, stating that:

⁴¹³ Verónica Morales Report, ¶ 85 (emphasis added). ↩

⁴¹⁴ Reply,¶¶ 43, 44, 45, 58, 59 and 60. ↩

⁴¹⁵ Verónica Morales Report, ¶ 86. ↩

⁴¹⁶ Second Solcargo-Rábago Report, ¶ 96. ↩

⁴¹⁷ Urbán-Viloria Report, ¶ 9. ↩

⁴¹⁸ Urbán-Viloria Report, ¶ 11 subparagraph d. ↩

⁴¹⁹ Urbán-Viloria Report, ¶ 11 subparagraph c. ↩

⁴²⁰ Urbán-Viloria Report, ¶ 11 subparagraph e. ↩

[Page 97]

The Claimant does not submit any information of its own regarding the abundance and distribution of Caretta caretta turtles in the GU [...]⁴²¹

The Claimant continues to maintain a confusing wording that does not allow to clearly differentiate when the information is its own or comes from previous independent work. Likewise, the technical details of its processes, as well as its equipment, continue to be omitted. Neither are the methods used in their simulation models detailed nor do they explore them in depth, from which it does not provide any evidence of the input information used, nor the assumptions on which they are based, nor the degree of uncertainty that their results have, removing by default any validity from their results and therefore it cannot be argued that none of these processes or risks to sea turtles of any species are affected by the equipment.⁴²²

234. From the foregoing, a simple question arises, if the Claimant did not use correct and sufficient information to carry out its study, consequently, the results it obtained are simply erroneous. An example of the foregoing is the mitigation measures proposed by the Claimant both in the MIA and in the additional and complementary information, on which experts Urbán and Viloria have concluded that “[t]he mitigation measures are based on misinformation, therefore, they are not adequate."⁴²³ For further context, said experts argue the following:

The mitigation measures proposed in the MIA with respect to marine mammals are based on wrong premises about the presence, temporality and migration routes of gray, blue and humpback whales. For example, pointing out that gray whales migrate 2 km from the coast, and that it is scarce, or that there is no presence of other species in the AP consist of incorrect statements. Therefore, the proposed mitigation measures on the temporary suspension of Project activities are inappropriate.⁴²⁴

235. The Group of Experts on Sea Turtles agrees:

The mitigation measures proposed by the Claimant are insufficient and present deficiencies because they have not been demonstrated under conditions such as those that would be presented in the GU and in a series of time sufficient to guarantee adequate protection for C. caretta and the ecosystem.⁴²⁵

236. Likewise, the aforementioned concurs with the conclusions of Dr. Morales to this respect:

The information submitted by the Claimant lacks detailed information and methodological and scientific support [...] [it does not] specify timelines, logs or other details in this regard, [...] [it does not] provide technical information nor does it refer to any scientific document that supports its operation and effectiveness, to repeat in several

⁴²¹ Verónica Morales Report, ¶ 78 (own emphasis). ↩

⁴²² Verónica Morales Report, ¶ 87 (own emphasis). ↩

⁴²³ Urbán-Viloria Report, ¶ 10. ↩

⁴²⁴ Urbán-Viloria Report, ¶ 43. ↩

⁴²⁵ Group of Experts on Sea Turtles Report, ¶ 146. ↩

[Page 98]

ocasions that they are widely used around the world and efficient is not a valid argument to assume it as a fact.⁴²⁶

237. Despite the Claimant's and its experts' combined attempts to assert that the AP does not coincide the endangered species here cited, experts Jorge Urbán and Lorena Viloria, based on the most accurate and reliable contemporary scientific information, conclude otherwise:

The gray whale, blue whale, and humpback whale, among several other marine mammal species, use the GU, including the Project Area during various periods of the year for activities such as breeding, feeding, and transit.⁴²⁷

The MIA and the Additional and Supplementary Information do not consider the presence of these species in the Proyect Area.⁴²⁸

The project area (“AP” by its acronym in Spanish) coincides with 100% of the migratory routes of gray whales (2-35 km from the coast), humpbacks (4-80 km from the coast) and with the migratory route and feeding zone of blue whales.⁴²⁹

The AP overlaps or coincides with the area used by species such as the blue whale, gray whale and humpback whale.⁴³⁰

238. The above is shared with the analysis and conclusion made by the Marine Turtle Expert Group in relation to Caretta caretta:

As it has been amply mentioned and demonstrated in this document and in the 2016 and 2018 resolutions, the concurrence of the PA with C. caretta turtle habitat is not marginal: the most complete turtle distribution maps, those based on aerial sightings, clearly show that C. caretta use the entire GU, including the PA. In addition, turtle movements and densities change over time based on several factors [...].⁴³¹

239. According to the foregoing, it is notorious that the Claimant submitted incorrect, incomplete and insufficient information both in the 2015 MIA and in the additional information submitted, and that SEMARNAT's 2018 Resolution is clear and correctly supported.

F. Claimant has not been able to prove its allegations of having held
meetings with Mexican authorities [Redacted]

240. Once again, Claimant and its witnesses refer to a series of alleged meetings between representatives of AHMSA and Odyssey with SEMARNAT officials, particularly with Mr. Rafael

⁴²⁶ Verónica Morales Report, ¶ 80. ↩

⁴²⁷ Urbán-Viloria Report ¶ 46. ↩

⁴²⁸ Urbán-Viloria Report ¶ 47. ↩

⁴²⁹ Urbán-Viloria Report ¶ 6. ↩

⁴³⁰ Urbán-Viloria Report ¶ 11. c. ↩

⁴³¹ Group of Experts on Sea Turtles Report, ¶ 127. ↩

[Page 99]

Pacchiano, in order to support that the 2014 MIA was withdrawn by ExO at Mr. Pacchiano's request, and to support that the 2015 MIA was denied for political reasons and as a result of an alleged confrontation between Mr. Ancira and Mr. Pacchiano.⁴³²

241. In addition, Odyssey notes that, [Redacted]

[Redacted]

[Redacted]⁴³³

242. The foregoing is sought to be demonstrated with “hearsay” and some internal emails. As will be explained infra, these elements are insufficient to support Odyssey's allegations.

1. There is no evidence on the alleged meetings and issues
discussed between AHMSA and ExO executives with Secretary
Pacchiano referred by Odyssey

243. The Reply contains serious accusations against Mr. Pacchiano. The Claimant goes to the extreme in asserting that factors beyond Don Diego, such as, for example, the high levels of pollution in Mexico City, the impact on the vaquita and the teporingo – endangered species –, an alleged conflict between fishermen and environmentalists over the creation of the turtle protection refuge in the Gulf of California,⁴³⁴ among other factors, [Redacted].⁴³⁵ All of these allegations lack veracity and simply consist of a “smokescreen” that seeks to distract the Tribunal from what really happened during the PEIA of the 2014 MIA and the 2015 MIA, in order to build a false appreciation of Mr. Rafael Pacchiano.

244. What is paradoxical is that Odyssey alleges that the Mexican State has the burden of proof to demonstrate that SEMARNAT's denial of the 2015 MIA was “driven by anything else but Mr. Pacchiano's personal, political motivations.”⁴³⁶ This is incorrect. It is the Claimant that has the

⁴³² See Memorial, ¶150. Reply, ¶ 88. ↩

⁴³³ Reply, ¶¶ 484-487. ↩

⁴³⁴ See Second WS of Rafael Pacchiano, ¶¶ 23-24. ↩

⁴³⁵ Reply, ¶¶ 103-110. ↩

⁴³⁶ Reply, ¶ 118. ↩

[Page 100]

burden of proof to demonstrate allegations of such gravity, being necessary to provide evidence that meets a high evidentiary standard as will be explained below.

245. Since the Memorial Odyssey has made reference to a series of meetings betweem representatives of AHMSA and Odyssey-ExO with SEMARNAT officials and Mr. Rafael Pacchiano.⁴³⁷ This situation is repeated in the Reply. Because of this, it is important to recount the facts and confront them with the alleged evidence provided by Odyssey.

a. 2015 Meetings

246. In 2015, two meetings were held between representatives of ExO and AHMSA with SEMARNAT officials, including Mr. Pacchiano, then Undersecretary of SEMARNAT. The first meeting was held on June 10, 2015.⁴³⁸ The Respondent has been able to confirm that Messrs. Ancira, Gonzalez Merla and De Narvaez, on behalf of AHMSA and ExO, and Messrs. Pacchiano, Schiaffino, Kuri [Redacted] were present at the meeting. As stated by Mr. Pacchiano in his first witness statement, as of 2015 Mr. Ancira started to be the main interlocutor of the Don Diego Project and, during the meeting, Mr. Pacchiano informed AHMSA and ExO that the Project would be authorized only if it complied with the law and if it demonstrated that it would not affect the environment.⁴³⁹ As can be seen from the contemporaneous evidence, the 2014 MIA resolution was due to be issued on June 22, 2015, that is, within days of the meeting.

247. Days later, on June 18, 2015, Mr. Pacchiano received Mr. Ancira again at the latter's insistence. The Claimant and its witnesses assert that at this meeting Mr. Pacchiano requested Mr. Ancira that ExO withdraw the 2014 MIA, which they seek to demonstrate with:

• The statements of Mr. Claudio Lozano, a person who did not participate in the June 18, 2015 meeting, but states that subsequent to it, Mr. Ancira commented to him that Undersecretary Pacchiano suggested that ExO should withdraw the MIA and resubmit it along with certain letters of support, which was the only thing necessary to approve the Project, since "there were no environmental reasons to reject the MIA”.⁴⁴⁰

⁴³⁷ Memorial, ¶¶ 130-132, 143-151. ↩

⁴³⁸ First WS Rafael Pacchiano, ¶¶ 58-60. ↩

⁴³⁹ First WS Rafael Pacchiano, ¶ 60. ↩

⁴⁴⁰ First WS Claudio Lozano, ¶¶ 40-42. ↩

[Page 101]

• [Redacted], a person who was also not present at the June 18, 2015 meeting and who has only provided confusing testimony. In the first statement, [Redacted].⁴⁴² Now, in his second statement, [Redacted].⁴⁴³ Apparently, [Redacted].⁴⁴⁴
• The statements of Mr. Mark Gordon, a person who was also not present at the June 18, 2015 meeting, but who apparently received a phone call that day from Mr. Ancira to comment him that Mr. Pacchiano requested that the 2014 MIA be withdrawn, to be subsequently evaluated in an “expedited" manner and thus be approved.⁴⁴⁵
• An email dated October 19, 2015 (i.e., 4 months after the meeting) exchanged between Mr. Greg Stemm (founder of Odyssey) and Ms. Barrera (assistant to Mr. Ancira), persons who are not involved in this arbitration and who were also not present at the June 18, 2015 meeting.⁴⁴⁶ Being clear, this e-mail does not contribute anything in this regard.

248. The Tribunal will be able to observe that these elements are not sufficient to demonstrate that a Secretary of State required an applicant to withdraw its environmental impact assessment request that in the next few days was going to be resolved by the competent area (i.e., the DGIRA).⁴⁴⁷ In fact, Mr. Pacchiano himself has categorically denied that he has made such a request:

I understand that Odyssey again alleges that on June 18, 2015, I met with Mr. Ancira and that at that meeting I recommended to Mr. Ancira that ExO withdraw the MIA and

⁴⁴¹ See Second WS Rafael Pacchiano, ¶ 14. ↩

⁴⁴² First WS [Redacted], ¶ 13. ↩

⁴⁴³ Second WS [Redacted], ¶¶ 17-18. ↩

⁴⁴⁴ See Second WS Rafael Pacchiano, ¶ 14. ↩

⁴⁴⁵ First WS Mark Gordon, ¶¶ 69-71. ↩

⁴⁴⁶ Email dated October 19, 2015. C-0389. ↩

⁴⁴⁷ See Reply, ¶ 205. ↩

[Page 102]

resubmit it to DGIRA along with letters of support from the Governor of Baja California Sur, the Municipal President of Comondú and INAPESCA. As I stated in my first witness statement, it is false that I made the alleged requests referred to by the Claimant.⁴⁴⁸

[...]

It is also false that [Redacted]. Although I do not know the reasons why ExO's representatives withdrew the MIA in 2015, probably it was because [Redacted] that the Don Diego Project was not feasible under the terms that were submitted.⁴⁴⁹

249. Contrary to the Claimant's allegations regarding the alleged requests for withdrawal of the MIA and submission of letters of support: i) Mr. Pacchiano has provided a factual account of what actually happened in the meetings with representatives of AHMSA, Odyssey and ExO; ii) there are Odyssey's press releases addressed to the investing public on Nasdaq and to the company's own shareholders that contradict those allegations; and iii) there are annual reports filed by Odyssey before the SEC in which the Claimant itself confirmed that it voluntarily withdrew the 2014 MIA in order to evaluate it and gather further information.⁴⁵⁰

b. 2016 Meetings

250. The Claimant, through Mr. Claudio Lozano, asserts that on March 12, 2016, he attended a meeting in which Mr. Pacchiano, by then Secretary of SEMARNAT, as well as Messrs. Ancira and Koltheniuk, representing AHMSA and ExO, were present. Based on this meeting, the Claimant asserts that Mr. Ancira “became impatient with the lack of response" from Mr. Pacchiano, argued that ExO would challenge the DGIRA's decision – by then not yet issued – before the Mexican courts, which ended in confrontations between Mr. Ancira and Mr. Pacchiano.⁴⁵¹ In other words, Claimant seeks to claim that Mr. Pacchiano felt insulted by Mr.

⁴⁴⁸ Second WS Rafael Pacchiano, ¶ 29. ↩

⁴⁴⁹ Second WS Rafael Pacchiano, ¶ 14. ↩

⁴⁵⁰ See Memorial, ¶ 336, Odyssey's press release dated June 22, 2015. R-0107. 2019 Annual Report (Form 10-K) of Odyssey, p. 7. C-0190. ↩

⁴⁵¹ Memorial, ¶ 145. First WS Claudio Lozano, ¶ 65-67. ↩

[Page 103]

Ancira and thus, “in an apparent fit of rage," ordered the denial of the AIA for the Don Diego Project.⁴⁵²

251. Claimand seeks to demonstrate these serious accusations with:

• The witness statements of Mr. Claudio Lozano, a person who initially stated that the meeting took place on March 12, 2016, i.e., on a weekend, but in his second witness statement he states that he is “certain” that the meeting occurred during the first half of March 2016.⁴⁵³
• [Redacted] were not present at the alleged March 2016 meeting. In addition, [Redacted]⁴⁵⁵
• Emails dated March 22, 2016 and August 10, 2016, exchanged by Odyssey executives, persons who were also not present at the alleged March 2016 meeting and who only refer to conjectures by Mr. Mauricio Limón about Mr. Ancira's alleged “outbursts" against Mr. Pacchiano.⁴⁵⁶

252. With these limited elements, Claimant seeks to prove a very serious accusation, i.e., that the 2015 MIA was denied due to apparent “personal caprices” and “political caprices” of the then Secretary of SEMARNAT. In this regard, Mr. Pacchiano has again rejected these accusations as follows:

I understand that Mr. Claudio Lozano again asserts in his second witness statement that in March 2016 a meeting was held in which Messrs. Ancira, Koltheniuk and Lozano were allegedly present, and in which Mr. Ancira confronted me by pointing out that "ExO would be forced to appeal to the Mexican courts to force a decision." 36 Likewise, Mr. Lozano states that he recalls another meeting “in May 2016 in my office, in which

⁴⁵² Memorial, ¶ 150. Reply, ¶¶ 88, 93, 198, 204. ↩

⁴⁵³ First WS Rafael Pacchiano, ¶ 66. Second WS Claudio Lozano, ¶ 25. ↩

⁴⁵⁴ First WS Claudio Lozano, ¶ 20. ↩

⁴⁵⁵ First WS [Redacted], ¶¶ 8-9. ↩

⁴⁵⁶ See emails dated March 22, 2016 and August 10, 2016. C-0405 and C-0416. ↩

[Page 104]

Messrs. Ancira, Fernández de Cevallos and Lozano were present."37 Notwithstanding what I already pointed out in my first witness statement on such allegations, no meeting in the months of March or May 2016 appears in my agenda. The reality is that I do not recall the alleged meetings in 2016, much less that Mr. Ancira confronted me.⁴⁵⁷

253. As is evident from the above referenced quote, Mr. Pacchiano has testified that he has no recollection of the March 2016 meeting, nor of an apparent May 2016 meeting, which to this day still remains unspecified by Claimant and its witnesses.⁴⁵⁸

c. 2017 Meetings

254. By 2017, the 2015 MIA had already been rejected by the DGIRA and the Appeal for Review 74/2016 filed by ExO against the 2016 Resolution was ongoing, which in turn was resolved in February 2017.⁴⁵⁹

255. Claimant and Mr. Claudio Lozano assert that prior to that, on January 31, 2017, Mr. Pacchiano met with Messrs. Ancira and Elvira, the latter a former Secretary of SEMARNAT and by then an executive of AHMSA.⁴⁶⁰ It is remarkable that the Claimant included among its interlocutors a former Secretary, apparently its objective was to influence the technical-scientific nature of the DGIRA's resolution and to generate pressure on the officials. In this regard, Mr. Pacchiano reports this fact:

I do recall participating in a meeting at the end of January 2017 in which Messrs. Elvira and Ancira were present. I also recall that at that meeting Mr. Ancira, by way of an informal comment, sarcastically pointed out that he had had to hire Mr. Elvira, former Secretary of SEMARNAT, to “convince” SEMARNAT that the Don Diego Project was viable. I did not give great importance to that comment, a bit out of place, since any DGIRA decision is independent of the personal or professional opinion that any former SEMARNAT Secretary may have on a given project. Therefore, I insisted again to Mr. Ancira that he should present technical and scientific information to the DGIRA and that it was not a matter of personal conviction.⁴⁶¹

256. The Claimant and Mr. Lozano state – without having been present at the meeting – that at the January 2017 meeting, Mr. Pacchiano commented that he wanted to avoid a nullity judgement

⁴⁵⁷ Second WS Rafael Pacchiano, ¶ 30 (emphasis added). ↩

⁴⁵⁸ First WS Rafael Pacchiano, ¶¶ 66-67. ↩

⁴⁵⁹ See Counter-Memorial, ¶¶ 349-353. Resolution of Appeal for Review 74/2016 dated February 27, 2017. C-0160. ↩

⁴⁶⁰ Second WS Claudio Lozano, ¶¶ 26-27. 2017 AHMSA's Annual Report, p. 96. R-0008. ↩

⁴⁶¹ Second WS Rafael Pacchiano, ¶ 31 (emphasis added). ↩

[Page 105]

"and that he preferred to resolve the ExO MIA through an appeal for review [Recurso de Revisión 74/2016], but that he needed time to approve the Project after the COP13 conference and therefore, after the media coverage on SEMARNAT and the environment had already passed."⁴⁶² In this regard, two clarifications should be made:

• First, Mr. Pacchiano has denied Mr. Lozano's accusation stating that "[t]his is false. My position was always that the DGIRA would resolve in accordance with the applicable legal framework and based on the information that was integrated during the PEIA. I never suggested legal alternatives to contravene a technical decision of the DGIRA. Furthermore, I am not a lawyer to make suggestions of that nature".⁴⁶³
• Second, it seems that the Claimant and Mr. Claudio Lozano forgot that COP13 took place in December 2016, i.e. practically two months before the January 31, 2017 meeting.

257. This same argument was made in Mr. Claudio Lozano's first statement, but based on the alleged meeting of May 2016, for which there is no evidence whatsoever:⁴⁶⁴

Secretary Pacchiano agreed to meet with us in May 2016 at the SEMARNAT office. Messrs. Ancira, Fernández de Cevallos and I also attended the meeting. When we arrived at Secretary Pacchiano Alamán's office, his assistant greeted us and told us that Secretary Pacchiano only wished to meet with Messrs. Ancira and Fernández de Cevallos and that I should wait in the hallway.

[...]

[...] Secretary Pacchiano had said that there was a timing problem. COP 13 (The United Nations Conference of the Parties to the Convention on Biological Diversity) was scheduled to occur in Cancun, Mexico, in December 2016. Mr. Ancira said that, from an image perspective, Secretary Pacchiano did not believe it would be convenient to grant the MIA before this occurred, because Mexico wanted to avoid any environmental controversy related to a “mining project” in an environmentally sensitive area such as the Gulf of Ulloa. Secretary Pacchiano assured them that after COP13 he would support the Project and approve the MIA.⁴⁶⁵

258. Claimant's allegations are inconsistent and are based solely on “hearsay”. The Tribunal should not give any probative value to such alleged evidence.

⁴⁶² Reply, ¶ 118 and footnote. 318. Second WS Claudio Lozano, ¶¶ 26-27. ↩

⁴⁶³ Second WS Rafael Pacchiano, ¶ 32. ↩

⁴⁶⁴ Second WS Claudio Lozano, ¶¶ 26-27. Email dated February 15, 2017. C-0363. ↩

⁴⁶⁵ First WS Claudio Lozano, ¶¶ 74-75 (emphasis added). ↩

[Page 106]

2. There is no evidence on the alleged meetings and issues
discussed between AHMSA and ExO executives with CONANP,
CONAPESCA and INAPESCA officials

259. Again, Claimant alludes to a February 2016 meeting between AHMSA and ExO executives with CONANP officials, including Commissioner del Mazo, in which CONANP's concerns about the Don Diego Project and its impact on the environment were apparently resolved.⁴⁶⁶ This allegation is incorrect.⁴⁶⁷ As noted by Biologist Bermudez, CONANP's institutional position is reflected in the technical opinion that CONANP presented in the PEIA of the 2015 MIA in November 2015, [Redacted].⁴⁶⁸

260. Previously, the Claimant made the same allegations in relation to meetings held in January and February 2015 with officials from INAPESCA and CONAPESCA, in which ExO apparently addressed the concerns of both entities about the 2014 MIA, and thanks to the "feedback" received from both authorities implemented new aspects to be carried out in the Don Diego Project.⁴⁶⁹ Regardless of the veracity of these alleged meetings, the reality is that INAPESCA's technical opinion (i.e., its institutional position) is highly critical of Don Diego.⁴⁷⁰

261. For the aforementioned, the assertions of Claimant and its witnesses regarding meetings with Mexican authorities lack credibility, and the contemporaneous evidence (e.g., technical opinions presented in the PEIA of the Don Diego Project) support to this fact.⁴⁷¹

3. There is no evidence of the alleged meetings and issues discussed
between AHSMA and ExO executives [Redacted]

262. Claimant alleges that between 2014 and 2018, representatives of AHMSA and Odyssey [Redacted]

⁴⁶⁶ Reply, ¶ 71. Second WS [Redacted], ¶¶ 122. See Memorial, ¶ 142. ↩

⁴⁶⁷ See Second WS Rafael Pacchiano, ¶ 16. ↩

⁴⁶⁸ First WS Benito Bermúdez, ¶¶ 26-27. Technical opinion dated November 20, 2015. C-0006. ↩

⁴⁶⁹ Memorial, ¶ 124. First WS Claudio Lozano, ¶¶ 36-37. WS Richard Newell, ¶¶ 25.4-25.5. ↩

⁴⁷⁰ See Counter-Memorial, ¶¶ 294-298. Technical opinion from INAPESCA dated March 29, 2016. R-0133. ↩

⁴⁷¹ See Second WS Rafael Pacchiano, ¶ 15. ↩

[Page 107]

[Redacted]⁴⁷²

263. Respondent finds no explanation for these assertions, furthermore, the elements provided by Claimant are confusing and unconvincing. Claimant seeks to prove the assertions [Redacted] with:

• Mr. Mark Gordon's second witness statement.⁴⁷³
• Five internal emails, including a map of the Don Diego Project site,⁴⁷⁴ and
• The business cards [Redacted].⁴⁷⁵

264. In this regard, the Tribunal must take into account four aspects.

265. First, there is no evidence about the meetings allegedly held between 2014 and 2016 [Redacted], and much less evidence about the alleged advice provided [Redacted].

266. Second, [Redacted]⁴⁷⁷ At the

⁴⁷² Reply, ¶¶484 ↩

⁴⁷³ Second WS Mark Gordon, ¶¶ 4-39. ↩

⁴⁷⁴ [Redacted] ↩

⁴⁷⁵ [Redacted] ↩

⁴⁷⁶ Reply, ¶ 484. Second WS Mark Gordon, ¶ 13. ↩

⁴⁷⁷ Second WS Mark Gordon, ¶ 14. ↩

[Page 108]

document request stage, Mexico requested, inter alia, copy of any memorandum of understanding, letter of intent, purchase and sale agreement or similar documents⁴⁷⁸ The Claimant did not produce any documents in this regard clearly because they do not exist. This is confirmed [Redacted]:

[Redacted]⁴⁷⁹

267. Third, [Redacted]

[Redacted]⁴⁸⁰

268. Fourth, Claimant and Mr. Gordon assert [Redacted]⁴⁸¹ has testified that the meeting in which he participated in connection with the Don Diego Project was conducted as a courtesy. The following explanation of [Redacted] is relevant:

[Redacted]

⁴⁷⁸ Procedural Order No. 3, Annex B, p. 88. ↩

⁴⁷⁹ WS [Redacted], ¶ 10. ↩

⁴⁸⁰ See WS [Redacted], ¶ 12. ↩

⁴⁸¹ Reply, ¶¶ 484-487. Second WS Mark Gordon, ¶¶ 13, 26-34. ↩

[Page 109]

[Redacted]⁴⁸²

269. As can be seen, the Claimant’s and Mr. Mark Gordon’s allegations are questionable and there is no contemporaneous evidence to support them, much less demonstrate the possibility that Don Diego [Redacted]. Moreover, the alleged expectations created about the possible growth of ExO in Mexico were fostered by Odyssey’s own intermediaries, including Mr. Ancira, [Redacted].⁴⁸³

4. Dr. Seminoff’s testimony reveals a lack of credibility in the allegations of Odyssey and its witnesses.

270. Claudio Lozano and Mark Gordon referred in their declarations to a meeting with Drs. Seminoff and Squires of NOAA Fisheries. Based on that meeting, Claimant asserts that both scientists allegedly opined that Don Diego and the turtles could coexist in the Gulf of Ulloa and that the Project was environmentally sound and socially responsible.⁴⁸⁴

271. In the Reply, the Claimant insists on relying on this premise to argue that: i) the Don Diego Project does not put the Caretta caretta species at risk;⁴⁸⁵ ii) the impact of the Project “was adequately addressed in the MIA and with the mitigation measures implemented it was very unlikely that there would be any mortality”;⁴⁸⁶ iii) the Project “was environmentally sustainable and should be approved with the implementation of the mitigation measures proposed by ExO”;⁴⁸⁷ iv) that the scientific evidence established that there was no environmental impact;⁴⁸⁸ and v) that

⁴⁸² WS [Redacted] Tovar, ¶¶ 5-7. ↩

⁴⁸³ WS Mark Gordon ¶¶ 18 and 33 (“[Redacted]”). ↩

⁴⁸⁴ First WS Claudio Lozano, ¶¶ 58-59. WS Richard Newell, ¶¶ 26.4-26.8. First WS Mark Gordon, ¶¶ 76-77. Email from D. De Narvaez to various, November 18, 2015. C-0137. Memorial, ¶ 139. ↩

⁴⁸⁵ Reply, Section II.B.2. ↩

⁴⁸⁶ Reply, ¶ 43. ↩

⁴⁸⁷ Reply, ¶ 6. ↩

⁴⁸⁸ Reply, Section II.B.3 ↩

[Page 110]

the Claimant recruited world-class dredging and environmental experts to assist in the development of the dredging operations and to protect the environment.⁴⁸⁹

272. All of the aforementioned aspects are false, and the DGIRA’s Resolutions are evidence of this, supported by various technical-scientific elements on the basis of which it formulated its determination. In fact, the Claimant has acknowledged that the DGIRA relied heavily on Dr. Seminoff’s studies to deny the MIA.⁴⁹⁰

273. Although at the document production stage Mexico requested from Claimant the communications exchanged between Odyssey and ExO managers and executives with Dr. Seminoff and Dr. Squires, as well as the documents regarding the November 2015 meeting,⁴⁹¹ the documents exhibited by the Claimant are inconclusive and do not prove its assertions.⁴⁹²

274. Despite this, Mr. Claudio Lozano insists that he disagrees with Mexico that the Project was environmentally unsustainable and that the 2015 MIA was significantly flawed.⁴⁹³ Similarly, in the Reply, Claimant reiterated —and criticized— that Mexico, inter alia, did not challenge environmental aspects of the Project.⁴⁹⁴ As a result, Respondent found it necessary to turn to Dr. Seminoff to clarify Claimant’s allegations regarding his opinion on the alleged environmental soundness of the Don Diego Project.

275. In this regard, Dr. Seminoff has confirmed the following about the “impressions” of the Claimant’s representatives about the November 2015 meeting:

In reading the excerpts from [Memorial and Reply; excerpts of the first witness statements of Messrs. Richard Newell, Mark Gordon and Claudio Lozano; and certain documents produced by the Claimant in the arbitration relating to a meeting that took

⁴⁸⁹ Reply, Section II.E. ↩

⁴⁹⁰ Memorial, ¶ 139. ↩

⁴⁹¹ Procedural Order No. 3 dated April 23, 2021, Annex B, Request No. 31 of the Respondant, pp. 66-67. ↩

⁴⁹² In essence, the documents produced by the Claimant consisted of internal emails; emails exchanged with NOAA officials to schedule the meeting; an academic article by Dr. Squires; and a photograph outside the NOAA Fisheries facility. See emails from Messrs. Narvaez and others. dated April 14, 2016. R-0188. Photograph produced on April 9, 2021 by the Claimant. R-0189. and Dale Squires, Fisheries buybacks: a review and guidelines, Fish and Fisheries, 2010. R-0190. ↩

⁴⁹³ Second WS Claudio Lozano, ¶ 6. ↩

⁴⁹⁴ Reply, ¶ 56. First WS Richard Newell, ¶¶ 3, 23-28. ↩

[Page 111]

place in November 2015], it is readily apparent that Odyssey has mischaracterized the sentiments I shared about the project during the November 18, 2015 meeting.

First, [...] Mr. Lozano’s and Mr. Gordon’s statements suggests that I somehow had the authority to render Agency decisions regarding the efficacy of the Project; this is fundamentally inaccurate. Specifically, I did not and would never put myself in a position to speak on behalf of NOAA, nor did I indicate in any way to Odyssey or to any NGO that I had the authority to make statements about NOAA’s approval or endorsement of any project.

Second, [...] At this meeting, I did not express any view regarding whether the Project and turtles could co-exist. Instead, I listened politely to the presentation, [...] I did not state or express that the Project seemed to be environmentally sound or socially responsible. In fact, I do not recall any discussions about social or economic development programs on which to conclude that the Project was socially responsible. Further, I do not recall Dr. Squires expressing the sentiments or views attributed to him about the project.⁴⁹⁵

276. Dr. Seminoff’s statement is compelling and makes it clear that the statements of Claimant’s witnesses are seriously questionable. Indeed, Mr. Claudio Lozano’s erroneous impressions of his meeting with Drs. Seminoff and Squires show that these appear to be the result of his enthusiasm for the Project, as well as the natural bias that he himself probably generated due to his interest in the authorization of the Project. For example, Mr. Claudio Lozano assumed —wrongly— that Dr. Seminoff would have refuted his assessment that the Don Diego Project would not affect turtles if he had not agreed with that assessment. In this regard, Dr. Seminoff has specified that:

This is an unfounded assumption, as Mr. Lozano and I had never previously met and he did not know me. In general, while I welcome informational meetings of this nature when discussing projects that might interact with sea turtles, I would need far more information than that emerging from a single in-person meeting, with no follow-up, prior to reaching any conclusions about the efficacy or impacts of such a project on sea turtles. Simply put, the information shared by Odyssey at the November 2015 meeting did not permit me to express any conclusions regarding whether and how the Project would impact sea turtles.

I recall that during the meeting I was encouraged that officials for a large mining project such as Don Diego were considering ways to reduce impacts to sea turtles. However, I believe that Mr. Lozano’s statement conflates my being “pleased” or encouraged with endorsement or approval.⁴⁹⁶

277. Contrary to what Claimant may assert, in reality Dr. Seminoff: (1) never stated his —or NOAA’s— support for the Project; (2) never asserted that the Don Diego Project’s mitigation efforts were sufficient to prevent loggerhead turtle interactions; or (3) much less communicated

⁴⁹⁵ WS Jeffrey Seminoff, ¶¶ 9-11. ↩

⁴⁹⁶ WS Jeffrey Seminoff, ¶¶ 12-13. ↩

[Page 112]

that there would likely be no potential impact on loggerhead turtles in the area of operation.⁴⁹⁷ For the benefit of the Tribunal, each of these aspects that were explained by Dr. Seminoff is transcribed in detail below:

With respect to (1), I have been a scientist at NOAA for 19 years and I am well aware of our organizational norms and protocols for approval processes. I did not and would never put myself in a position to speak on behalf of NOAA, nor did I suggest in any way to the meeting participants that I had the authority to make statements about NOAA’s approval or endorsement.

With respect to (2), as a professional sea turtle scientist, I focus my research on sea turtle ecology and habitat use. I am not involved in the field of sea turtle interaction mitigation for dredge operations such as the proposed substrate extraction activities of the Don Diego Project, and I do not have expertise on this topic. Due to this lack of expertise and my cautious personal nature, I did not and would not make broad statements about the efficacy of sea turtle interaction mitigation protocols such as those proposed by the Don Diego team.

With respect to (3), based on my own research, I know that loggerheads occur throughout the Gulf of Ulloa and are present in areas outside of the “hotspots.” (See maps from Seminoff et al. 2014). Therefore, even with the most stringent interaction mitigation procedures, there is always a possibility that loggerheads will be interacted with; sea turtles are curious creatures and even at low population density there is some probability of interaction with fisheries or dredging gear. Also, considering the large number of loggerheads that can be present in the Gulf of Ulloa— approximately 40,000—I did not and would not suggest that the Don Diego Project could move forward with no impact to the local loggerhead population.⁴⁹⁸

278. It is important to note that Dr. Seminoff himself has confirmed that even with the most stringent mitigation procedures, it cannot be argued that the Don Diego Project will not have an impact on the Caretta caretta turtle species, as established by DGIRA in its Resolutions.

5. People related to AHMSA were the main interlocutors of the Project

279. As mentioned in the Counter-Memorial and by Claimant itself, as of 2015, AHMSA began to be the interlocutor of ExO and Don Diego before SEMARNAT.⁴⁹⁹ What stands out in this situation is the insistence of several people related to AHMSA to seek “empathies” from SEMARNAT in order to obtain the AIA for the Project. This course of action evidences ExO’s need to politically influence a decision whose analysis involved a technical-scientific nature by the

⁴⁹⁷ WS Jeffrey Seminoff, ¶ 14. ↩

⁴⁹⁸ WS Jeffrey Seminoff, ¶¶ 15-17. ↩

⁴⁹⁹ Counter-Memorial, ¶¶ 37, 43. ↩

[Page 113]

DGIRA.⁵⁰⁰ If Don Diego had been technically feasible, as the Claimant asserts, there would have been no need to devote so many resources to try to push its project through controversial and wealthy members of the private sector or from the national political life to try to get the Project off the ground.

280. Respondent requests the Tribunal to take the following into account:

• Mr. Alonso Ancira, an influential businessman and the main executive of AHMSA, served as the main interlocutor for the Don Diego Project.⁵⁰¹
• Mr. Diego Fernández de Cevallos, an influential businessman and politician, served as ExO’s business advisor and was also an interlocutor of the Don Diego Project before SEMARNAT, and Claimant has even confirmed that Mr. Fernández de Cevallos had an economic interest in Don Diego.⁵⁰² Mr. Fernández de Cevallos has been repeatedly accused of abuse of power and influence peddling, due to the fact that he previously served as a congressman and senator, as well as of owing millions of dollars to the Respondent.⁵⁰³ ExO apparently hoped that, given the lack of technical support, Mr. Fernández de Cevallos’ influence would be sufficiently relevant for the approval of the Don Diego Project through political channels, which did not occur.
• Mr. Mauricio Limón, former Undersecretary of Environment,⁵⁰⁴ was an advisor to ExO [Redacted] to discuss the 2015 MIA.⁵⁰⁵

⁵⁰⁰ Second WS Rafael Pacchiano, ¶ 31. ↩

⁵⁰¹ Memorial, ¶ 130. Counter-Memorial, ¶¶ 258-59. ↩

⁵⁰² First WS Claudio Lozano, ¶ 69. First WS Mark Gordon ¶ 83. First WS Rafael Pacchiano, ¶ 50. ↩

⁵⁰³ Proceso, Diego and his millionaire litigations with the power of power, May 26, 2010. R-0195. El Universal, “El Jefe Diego”, winner in controversial and millionaire trials, October 2, 2019. R-0196. SDP Newsias, Diego Fernández de Cevallos, from influence peddling to the contrast campaign, October 15, 2021. R-0197. ↩

⁵⁰⁴ Memorial, ¶ 92. Counter-Memorial, ¶ 202. ↩

⁵⁰⁵ See Reply, ¶ 88. Email dated March 22, 2016. C-0405. ↩

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• Mr. Juan Elvira, a former Secretary of SEMARNAT and now an executive of AHMSA, also [Redacted] to discuss the 2015 MIA, including during periods when the Project was not even subject to evaluation by the DGIRA.⁵⁰⁶

281. While it is true that SEMARNAT officials may have courtesy meetings with representatives of MIA applicants, the situation of the Don Diego Project was atypical. It is highly questionable that the Claimant fostered an intense lobbying exercise around Don Diego with the support of certain businessmen and politicians.⁵⁰⁷ It is noteworthy that none of ExO’s main interlocutors before SEMARNAT were presented as witnesses in this arbitration.

G. [Redacted] and [Redacted] are unfounded.

282. Claimant’s Reply has “recycled” some allegations directed against the Mexican State, previously set forth in the Request for Provisional Measures, [Redacted] and [Redacted].⁵⁰⁸

283. The Respondent does not consider it necessary to transcribe again what was stated in the Response to the Request for Provisional Measures, considering that this situation was resolved by the Tribunal in the PO 4.⁵⁰⁹ [Redacted].⁵¹⁰ There is no evidence to show this, just as the Tribunal found in PO 4.⁵¹¹

[Redacted]

[Redacted]”).

⁵⁰⁶ See email dated August 10, 2016. C-0416. See email dated January 14, 2017, C-0363. ↩

⁵⁰⁷ See Second WS Rafael Pacchiano, ¶¶ 33-35. ↩

⁵⁰⁸ Reply, ¶¶ 6, 145-171, 198. Second WS of [Redacted], ¶¶ 5-9. Second WS of [Redacted], ¶¶ 6-11. ↩

⁵⁰⁹ See Response to the Request for Provisional Measures of April 23, 2021. PO 4 of May 25, 2021, ¶¶ 60-68. ↩

⁵¹⁰ Reply, ¶¶ 6, 145-148. ↩

⁵¹¹ PO 4, ¶¶ 62-67 [Redacted] ↩

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284. Respondent is merely exercising a legitimate right to present its defense in this arbitration, to provide factual and legal counter-arguments, to adduce evidence, and to challenge Claimant’s allegations and evidence, [Redacted] and [Redacted].

285. As explained in the Response to the Request for Provisional Measures, [Redacted]

[Redacted]⁵¹²

286. Notwithstanding this, the dispute settlement mechanism provided for in Chapter 11 of NAFTA does not grant immunity to individuals or legal entities from any facts that may give rise to administrative sanctions or crimes, and that must be investigated under the national legislation of each of the Parties, such as, for example, those investigations against former public officials in charge of the OIC of SEMARNAT. In Mexico —as in any country where the rule of law exists— administrative sanction procedures and criminal proceedings are based on the principle of presumption of innocence, access to justice, due process and legality.⁵¹³

287. As set forth in this Rejoinder Memorial, the Tribunal will be able to corroborate that there is no proportion between the serious allegations made by Claimant against Mr. Pacchiano and the Mexican State —lacking any evidence— [Redacted]⁵¹⁴

288. Therefore, [Redacted] are unfounded, [Redacted].

⁵¹² Response to the Request for Provisional Measures of April 23, 2021, ¶¶ 3, 39-42. [Redacted]mal letter dated April 21, 2021 from SEMARNAT’s OIC, p. 4. R-0158. ↩

⁵¹³ Response to the Request for Provisional Measures of April 23, 2021, ¶¶ 41-44. ↩

⁵¹⁴ See Second WS [Redacted], ¶¶ 27-31. ↩

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H. Other countries have been skeptical and cautious about authorizing marine dredging projects similar to the Don Diego Project

289. There are a number of pending controversias regarding proposed seabed mining projects. For example, the company Namibian Marine Phosphate (NMP) has been seeking to conduct seabed mining for phosphates in Namibian waters for a number of years. In June 2021, in a lawsuit initiated by fishermen’s organizations, a Namibian court ruled that the company had violated a mining license when it carried out what it had called “trial mining” and “bulk sampling” without a valid environmental clearance certificate. Previously, an environmental clearance certificate issued to NMP in 2016 had been set aside, a court ruled that the environmental agency had not followed correct procedural requirements, and the application process restarted.⁵¹⁵

290. Similarly, the company Chatham Rock Phosphate (CRP) was granted a permit to mine for phosphate from the seabed, but its application for an environmenal permit was denied in 2015. A paper recently published by the Society of Environmental Toxicology and Chemistry in its journal Integrated Environmental Assessment and Management stated that:

Interested parties objected to the project on the grounds that it would adversely affect fishing, seabirds, marine mammals, and primary productivity. Experts representing all of the interested parties analyzed these issues and decided that it was unlikely that there would be any significant impacts on them. The phosphate on the Chatham Rise has a number of environmental benefits (e.g., extremely low cadmium, low runoff into waterways, reduced CO2 emissions from transport) but there was almost no vocal support for the project from the agricultural or environmental sectors.

Ultimately the decision-making committee declined the application because they did not consider the environmental risks were sufficiently well understood, did not believe the proposed conditions or adaptive management could address possible adverse environmental effects, and thought the benefits of the project were not sufficient to outweigh these uncertainties.

CRP has since identified the work required to fill the data gaps to support another environmental consent application. It is awaiting the outcome of court appeals arising from a marine mining project closer to shore that will clarify the interpretation of the governing legislation before starting its reapplication process.⁵¹⁶

⁵¹⁵ Confederation of Namibian Fishing Associations, et al. v. Environmental Commissioner Teofilus Nghitila, et al., Case No. HC-MD-CIV-MOT-REV-2016/00335 (High Court of Namibia Main Division, Windhoek) (30 June 2021). R-0202. ↩

⁵¹⁶ Amanda Reichelt-Brushett, Judi Hewitt, Stefanie Kaiser, Rakhyun Kim, and Ray Wood, Deep seabed mining and communities: A transdisciplinary approach to ecological risk assessment in the South Pacific, in Integrated Environmental Assessment and Management (2021), p. 7 (Available online). R-0203. ↩

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291. The court case to which the foregoing article refers is a dispute involving an environmental approval for another seabed mining project in the territorial waters of New Zealand by the company Trans-Tasman Resources (TTR), which involves the mining of iron sands. In 2017, in a split decision, the “Decision-Making Committee” (DMC) appointed by the New Zealand environmental authority voted, in a split decisión, to grant an environmental approval for the project. The decision was appealed by a group of environmental and fisheries organizations. The High Court set aside the approval, holding that the DMC had applied an “adaptive management approach” not authorized by the law. TTR appealed the decisión to the Court of Appeal, but the claimants also cross-appealed, arguing that there were additional grounds on which the approval should have been overturned. The Court of Appeals rejected TTR’s appeal and agreed with certain arguments of the environmental and fisheries groups, as follows:

[258] The conditions imposed by the DMC reflect a high level of uncertainty about the baseline in relation to the presence and distribution of seabirds and marine mammals, and about the likely effects of TTR’s mining activities on seabirds and marine mammals. That uncertainty was the product of incomplete information about those matters.

[259] We consider that the DMC’s response to this level of uncertainty was inconsistent with the EEZ Act for a number of overlapping reasons:

(a) The level of uncertainty identified in the DMC decision, and reflected in the conditions imposed, engaged the requirement to favour caution and environmental protection in ss 61(2) and 87E (2). Granting consent on the basis of this level of information, and conditions of the kind imposed by the DMC, was not in our view consistent with that requirement.

(b) To the extent that the relevant effects were caused by the sediment plume, and thus relevant to the marine discharge consent sought by TTR, the high level of uncertainty meant that the DMC could not be satisfied that the s 10(1)(b) objective of protecting the environment from pollution caused by such discharges would be achieved.

(c) Imposing very general conditions about avoiding adverse effects on these fauna, and leaving the specific controls required in order to avoid such effects to management plans prepared by TTR and submitted to the EPA for certification, was inconsistent with the scheme of the EEZ Act and the public participation rights for which it provides. Submitters should have an opportunity to be heard on these topics. The result of deferring these issues to management plans was to remove submitters’ rights to be heard by the decision-maker with responsibility for determining these important issues.⁵¹⁷

⁵¹⁷ Between Trans-Tasman Resources Limited AND Taranaki-Whanganui Conservation Board, Cloudy Bay Clams Limited, Fisheries Inshore New Zealand Limited, Greenpeace of New Zealand Incorporated, Kiwis Against Seabed Mining Incorporated, New Zealand Federation of Commercial Fishermen Incorporated, Southern Inshore Fisheries Management Company Limited, Talley’s Group Limited, Te Ohu Kai Moana Trustee Limited, Te Rūnanga O Ngāti Ruanui Trust, The Royal Forest and ↩

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292. TTR appealed the decision of the Court of Appeals to the New Zealand Supreme Court, and the case remains pending.⁵¹⁸

293. Meanwhile, a prospective seabed mining company naned DeepGreen Metals recently was merged into an existing publicly held corporation named Sustainable Opportunities Acquisition Corp, becoming The Metals Company. DeepGreen/The Metals Company has been seeking to mine polymetallic nodules in an ocean región known as the Clarion-Clipperton Zone (CCZ). A “proxy statement” filed with the U.S. Securities and Exchange Commission by Sustainable Opportunities Acquisition Corp in support of the merger includes the following statements:

Potential future commercial-scale nodule collection operations in the CCZ are certain to disturb wildlife in the operating area. The nature and severity of these impacts on CCZ wildlife are expected to vary by species and are currently subject to significant uncertainty. DeepGreen’s studies cataloguing wildlife and ecosystem function, piloting the nodule collection system and assessing impacts arising from the use of this system are all currently in progress. Given the significant volume of deep water and the difficulty of sampling or retrieving biological specimens in the Area, a complete biological inventory might never be established. Accordingly, impacts on CCZ biodiversity may never be, completely and definitively known. For the same reasons, it may also not be possible to definitively say whether the impact of nodule collection on global biodiversity will be less significant than those estimated for land-based mining for a similar amount of produced metal.

It is also currently not definitively known how the risk of biodiversity loss in the CCZ could be eliminated or reduced through mitigation strategies or how long it will take for disturbed seabed areas to recover naturally. Prior research indicates that the density, diversity and function of fauna representing most of resident biomass (including mobile, pelagic and microbial life) are expected to recover naturally over years to decades. However, a high level of uncertainty exists around recovery of fauna that requires the hard substrate of nodules for critical life function. The extent to which planned measures, such as leaving behind 15% of nodule cover (by mass) and setting aside no-take zones, would aid recruitment and recovery of nodule-dependent species in impacted areas will depend on factors like habitat connectivity, which is an area that is still under study.⁵¹⁹

Bird Protection Society of New Zealand Incorporated and The Trustees of Te Kahui O Rauru Trust AND Environmental Protection Authority, CA573/2018 [2020] NZCA 86 (3 April 2020), ¶¶ 258-259. R-0204.

⁵¹⁸ Trans-Tasman Resources’ seabed mining appeal under way in Supreme Court, New Zealand Herald Whanganui Chronicle (17 Nov. 2020). R-0205. ↩

⁵¹⁹ Amendment No. 4 to Form S-4 Registration Statement of Sustainable Opportunities Acquisition Corp., Proxy Statement for Extraordinary General Meeting of Sustainable Opportunities Acquisition Corp. Prospectus for 62,000,000 Common Shares and 24,500,000 Warrants of Sustainable Opportunities Acquisition Corp. which will be Renamed “TMC The Metals Company Inc.” as a Result, and Upon the Consummation, of the Continuance as a Company Existing Under the Laws of British Columbia as Described Herein, Form 424B3 (Aug. 13, 2021), p. 50. R-0206. See also p. 126 (“... although DeepGreen ↩

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294. It is interesting to note that this disclosure was added after inquiries from the Securities Exchange Commission about why the company had not discussed in the document, as it had in other publications, impacts on disturbed seabed.⁵²⁰

295. The Respondent has described the above examples to demonstrate two key points:

• First, that as a factual matter it is not credible to claim that there can be perfect knowledge that a large scale deep sea mining project such as Don Diego will have no negative effects on sea life, as the Claimant argued both to SEMARNAT and to this Tribunal.
• Second, that it is not unusual, and certainly not a violation of the customary international law’s minimum standard of treatment, to apply the precautionary principle to a proposed project of this nature, as will be seen infra.

III. LEGAL ARGUMENT

A. Claimant has failed to meet the burden and evidentiary standard necessary to prove the serious allegations made against Mr. Pacchiano and the Mexican State

296. The burden of proof and the standard of proof are two fundamental elements of evidence in international dispute settlement proceedings. The burden of proof is governed by the “onus probandi incumbit actori” principle and its objective is to ensure that the party making a certain allegation bears the burden of proving it.⁵²¹ On this basis, in investment arbitration, the burden of

believes that the lifecycle ESG impacts of metal production from polymetallic nodules are significantly lower than land-based mining, given that no seafloor polymetallic nodule deposit has been collected on a commercial scale to date, there is some uncertainty regarding the ultimate potential impact of commercial-scale operations on wildlife and ecosystem function on the CCZ abyssal seafloor and overlying water column. There can be no assurance that the ESG impacts of metal production from nodules are not greater than anticipated.”).

⁵²⁰ See letter dated July 28, 2021 from Sustainable Opportunities Acquisition Corp to Securities and Exchange Commission. R-0207. ↩

⁵²¹ Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America), ICJ, Judgement, 26 de noviembre de 1984, ¶101. RL-0083. (“Ultimately, however, it is the litigant seeking to establish a fact who bears the burden of proving it”). Case Concerning Avena and Other Mexican Nationals (Mexico v. United States of America), ICJ, Judgement, 31 de marzo de 2004, ¶ 55. RL-0084 (“Both Parties recognize the well-sellled principle in international law that a litigant seeking to establish the existence of a fact bears the burden of proving it.”). Marvin Feldman v. United Mexican States ↩

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proving the impact of a measure taken by a respondent State is indisputably on the claimant investor.⁵²²

297. The Claimant appears not to understand that it has the burden of proof to demonstrate the allegations made in this arbitration against the Mexican State and, particularly, against Mr. Pacchiano.⁵²³ The burden of proof cannot be avoided by Odyssey and the risk of not meeting it implies that the Tribunal cannot be persuaded of the facts alleged and, as a consequence, has to dismiss the claim.⁵²⁴

B. The Claimant has not met the burden and standard of proof necessary to demonstrate the serious allegations made against Mr. Pacchiano and the Mexican State.

298. Regarding the burden of proof, it consists of the burden of proof necessary to prove a fact or allegation, i.e., it responds to the question of how much evidence is necessary to demonstrate an aspect in question or the entire case presented by one party. The Rompetrol court v. Romania explained it as follows:

“the burden of proof is an absolute principle that defines which party has to prove what in order for its case to prevail. The standard of proof defines how much evidence is needed to establish either an individual issue or the party’s case as a whole⁵²⁵.”

299. Generally, it has been accepted that the disputing party who alleges facts or claims of considerable gravity against a State - such as illegal acts, acts of corruption, crimes, fraud, among

(ICSID Case No. ARB(AF)/99/1), Award, December 16, 2002, ¶ 177. CL-0068. Rompetrol Group N.V. v. Romania, ICSID Case No.ARB/06/3, Award, May 6, 2013, ¶ 178. RL-0085.

⁵²² Tokios Tokelés v. Ukraine, ICSID Case No. ARB/02/18, July 26, 2007, ¶ 121. RL-0086 (“[...] the burden of demonstrating the impact of the state action indisputably rests on the Claimant. The principle of onus probandi actori incumbit – that a claimant bears the burden of proving its claims – is widely recognized in practice before international tribunals.”). See also International Thunderbird Gaming Corporation v. United Mexican States, Award, January 26, 2006, ¶ 95, CL-0168 (“[...]t he party alleging a violation of international law giving rise to international responsibility has the burden of proving its assertion”). ↩

⁵²³ Reply¶ 118 (“Respondent has produced no documentary evidence to support its contention that SEMARNAT’s Denial of the MIA was driven by anything else but Mr. Pacchiano’s personal, political motivations.”). ↩

⁵²⁴ Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Award, August 27, 2008, ¶¶ 248-249. RL-0087. See Windstream Energy LLC v. Canada, PCA Case No. 2013-22, Award, September 27, 2016, ¶351. CL-0124. Generation Ukraine Inc. v. Ukraine, ICSID Case No. ARB/00/9, Award, September 16, 2003, ¶¶ 19.2, 19.15 and 19.26. RL-0057. ↩

⁵²⁵ Rompetrol Group N.V. v. Romania, ICSID Case No.ARB/06/3, Award, May 6, 2013, ¶ 178. RL-0085. ↩

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other conducts - must meet a high burden of proof⁵²⁶. This situation is due to the recognized conclusion reached by Judge Higgins in Case Concerning Oil Platforms, consisting in that “[t] he graver the charge, the more confidence there must be in the evidence relied on”.⁵²⁷ This means that the party that alleges facts of considerable gravity, not only has the burden of proof to prove the said allegation but also, the evidence presented must meet a clear and convincing standard burden of proof, ie, a high burden of proof threshold (“high threshold”).

300. With a different wording (“conclusive evidence”, “clear and convincing evidence”, “more persuasive evidence”, “irrefutable proof”, “sufficient to exclude any reasonable doubt”, among others), but with the same objective, several courts have reiterated that it is necessary to meet a high standard of proof when claims are related to wrongdoings. Given this, claimant investors who allege these types of claims must fully comply with the burden of proof and irrefutably demonstrate their allegations⁵²⁸.

301. In this case, the Claimant has not demonstrated (i.e., met the burden of proof) with any clear and convincing evidence that it meets the required high threshold (i.e., standard of evidence) in accordance with the seriousness and gravity of its allegations. By way of example, the Claimant has failed to demonstrate:

⁵²⁶ Corfu Channel (United Kingdom of Great Britain and Northern Ireland v. Albania), Judgment on Merits, April 9, 1949, p. 17. RL-0088 (“A charge of such exceptional gravity against a State would require a degree of certainty that has not been reached here”). Application of the Convention on the Prevention and Punishment of the Crime of Genocide (Croatia v Serbia), ICJ, Judgment, February 3, 2015, ¶ 177-178. RL-0089 (“The Court, after recalling that “claims against a State involving charges of exceptional gravity must be proved by evidence that is fully conclusive”). ↩

⁵²⁷ The Case Concerning Oil Platforms (Iran v. U.S.), Opinion Judge Rosalyn Higgins, 2003, ¶ 33. RL-0090. ↩

⁵²⁸ Waguih Elie George Siag v. Arab Republic of Egypt, ICSID Case No ARB / 05/15, Award, June 1, 2009, ¶ 326, RL-0091 (“It is common in most legal systems for serious allegations such as fraud to be held to a high standard of proof”). EDF (Services) Limited v. Romania, ICSID Case No. ARB / 05/13, Award, Oct. 8, 2009, ¶ 221. CL-0043 (“The evidence before the Tribunal in the instant case concerning the alleged solicitation of a bribe is far from being clear and convincing.”). Chemtura Corporation v. Government of Canada (UNCITRAL) Award, 2 August 2010, ¶ 137. CL-0033 (“in accordance with well established principles on the allocation of the burden of proof, and the standard of proof for allegations of bad faith or disingenuous behavior is a demanding one”). Liman Caspian Oil BV and NCL Dutch Investment BV v Republic of Kazakhstan, ICSID Case No ARB / 07/14, Excerpts from the Award, June 22, 2010, ¶¶ 422-424. RL-0092. The foregoing has also been confirmed in communications from non-disputing parties in investor-State arbitrations. See Omega Engineering LLC and Oscar Rivera v. Republic of Panama, ICSID Case No.ARB / 16/42, Submission of the United States of America, Feb. 3, 2020, ¶ 45. RL-0093. ↩

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• The alleged request - by way of demand - from Mr. Pacchiano, made on June 18, 2015, to Mr. Ancira for ExO to withdraw the MIA 2014, in order for it to be presented again to the DGIRA accompanied by letters of support⁵²⁹.
• The alleged meetings held in March and / or May 2016 in which Mr. Ancira apparently got upset with Mr. Pacchiano (already Secretary of State at that time), as a result of which Mr. Pacchiano felt “insulted”, [Redacted]⁵³⁰.
• The allegation that the Don Diego Project AIA was rejected due to Mr. Pacchiano’s political and personal motivations, in order not to be dismissed as Secretary of State and not to affect his political career and that of his wife.⁵³¹
• The allegation that once the TFJA’s March 2018 judgment was issued, Mr. Pacchiano as Secretary of State, [Redacted]⁵³²
• [Redacted]⁵³³

302. Considering that these allegations are the factual basis for the violations of NAFTA Articles 1105⁵³⁴ and 1110⁵³⁵ alleged by Odyssey in this investment arbitration, it is questionable when the Claimant has failed to prove any of these allegations.

⁵²⁹ Memorial, ¶¶ 130, 254. Reply, ¶ 88. ↩

⁵³⁰ Memorial, ¶¶ 144-146. Reply, ¶ 88. ↩

⁵³¹ Memorial, ¶¶ 130, 254. Reply, ¶¶ 2, 111-113, 194. ↩

⁵³² Memorial, ¶¶ 262. Reply, ¶ 198. ↩

⁵³³ Reply, ¶¶ 6, 148. ↩

⁵³⁴ Reply, ¶¶ 190, 194, 198, 204-210 (“A decision taken for political reasons and cloaked in the exercise of a state’s regulatory powers is the epitome of arbitrary treatment and thus constitutes a breach of the MST standard [...] the MIA was denied for purely political reasons.”). ↩

⁵³⁵ Reply, ¶¶ 237, 238, 250-256 (“the MIA Denial was executed based on Mr. Pacchiano’s political decision rather than on legitimate environmental concerns [...] the decision of the scientific team was annulled by the Secretary for reasons not allowed under Mexican law [...] scientific and environmental processes were completely subverted by the political will of Secretary Pacchiano”). ↩

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303. The Tribunal may corroborate that the Claimant’s accusations are extremely serious and even inappropriate in an investor-State arbitration.⁵³⁶ Regardless, these types of accusations cannot be taken lightly⁵³⁷.

304. The seriousness of Odyssey’s accusations imply that a Secretary of State ordered that the 2015 MIA of the Don Diego Project be rejected for mere “personal whims” and in order not to affect his image and political career⁵³⁸. These accusations are false.⁵³⁹

305. The Claimant intends to prove these accusations with: i) the testimonial statements of Mr. Gordon and Mr. Claudio Lozano, persons who cannot be considered “first-hand” witnesses because they did not witness many of the facts that they allege (ie, “hearsays”);⁵⁴⁰ ii) the testimonial statements of [Redacted] and [Redacted], which, in the Respondent’s opinion, lack credibility and veracity, are erroneous and inconsistent with the information contained in this arbitration and are not sufficient to support the allegations of Odyssey;⁵⁴¹ iii) four emails

⁵³⁶ See Response to the Request for Provisional Measures of April 23, 2021 and Second WS Rafael Pacchiano, ¶¶ 5, 7 and 20. ↩

⁵³⁷ See Counter-Memorial, ¶¶ 194-195. ↩

⁵³⁸ Reply, ¶ 113 (“[...] Mr. Pacchiano was apparently so determined to burnish his environmental credentials with the public that he was willing to violate Mexican law [...]”). ↩

⁵³⁹ First WS Rafael Pacchiano, ¶¶ 11, 30, 33, 36, 39, 43 and 51. Second WS Rafael Pacchiano, ¶¶ 5 and 7. ↩

⁵⁴⁰ See supra, Section III.A. In Moin v Iran, the Iran-United States Claims Tribunal did not consider the evidence for not being “firsthand” but simply “hearsay”, which could not be substantiated. Jalal Moin v The Islamic Republic of Iran, Case No. 950, Award No. 557-950-2, May 24, 1994, ¶ 19. RL-0094 (“The Tribunal considers this to be hearsay evidence, on which it cannot rely, unless the evidence is substantiated. Such substantiation is missing”). ↩

⁵⁴¹ See supra, Section III.A. In Generation v Ukraine, PSEG v Turkey, and Fraport v Philippines, the courts dismissed witness statements as highly questionable and conflicts of interest. Generation Ukraine Inc. v. Ukraine, ICSID Case No. ARB / 00/9, Award, September 16, 2003, ¶ 19.7. RL-0057. PSEG v Turkey, ICSID, Award, January 19, 2007, ¶¶ 177–178. CL-0092. Fraport AG v Republic of the Philippines, ICSID Case No.ARB / 03/25, Award, August 16, 2007, ¶¶ 328–329. RL-0095. ↩
Unlike what happened in this case, in Vivendi v. Argentina, there was evidence, including official minutes from public notaries, on alleged meetings held between representatives of the parties. Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, ICSID Case No. ARB / 97/3, Award, August 20, 2007. ¶¶ 4.13.6–4.13.10 (Aug. 20, 2007). RL-0096.
In Azinian, the court dismissed a claimant’s witness statement for lack of credibility, this being the only “evidence” provided to support the investors’ claims. Robert Azinian, Kenneth Davitian, & Ellen Baca v. United Mexican States, ICSID Case No. ARB (AF) / 97/2, Award, November 1, 1999, ¶¶ 119, 122-123. RL-0009. Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB / 03/24, Decision on Jurisdiction, February 8, 2005, ¶¶ 177–178. RL-0097 (case in which the court considered a claimant’s

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exchanged between representatives of Odyssey, ExO and AHMSA;⁵⁴² iv) fragments of no more than 1 minute of a press conference by Mr. Pacchiano that has been decontextualized by the Claimant;⁵⁴³ v) two press articles and a 2018 information note from SEMARNAT; ⁵⁴⁴, and vi) a “retweet” from Mr. Pacchiano to a “post” published in October 2018 on the SEMARNAT Twitter account.⁵⁴⁵

306. The Respondent explained in the Counter-Memorial that this “evidence” is neither clear nor convincing and does not meet the evidentiary threshold to demonstrate the serious allegations made by Odyssey against the Mexican State, particularly against Mr. Pacchiano and now against his family.⁵⁴⁶

307. Contrary to the action of the Claimant, the Respondent has provided the direct testimony of Mr. Pacchiano by means of which it refutes the accusations made against him.⁵⁴⁷ Given that it is evident that Odyssey has failed to meet the burden of proof, nor with the standard of evidence required to support the serious allegations it makes against the Mexican State, the Respondent requests the Tribunal to dismiss the Claimant’s claims.

C. Jurisdiction

308. In the Reply, the Claimant completely mischaracterized the Respondent’s position regarding the distinction between Articles 1116 and 1117 of the NAFTA, either intentionally or more likely because it failed to understand the provisions of the Treaty. The Respondent did not argue that a claimant investor cannot file a claim for its own account under Section 1116 and also

testimony “[n] ot only largely unsupported by contemporary documentation but that it is materially inconsistent with parts of that documentation and also contradicted by other statements”).
Noble Ventures, Inc. v. Romania, ICSID Case No. ARB / 01/11, October 12, 2005, ¶¶ 96–98. RL-0098 (the court refused to consider an “uncorroborated and disputed evidence”, consisting of a testimonial around a telephone call).

⁵⁴² Emails dated October 19, 2015. C-0389, March 22, 2016. C-0405 and August 10, 2016, C-0416. Email dated February 15, 2017. C-0363. ↩

⁵⁴³ Counter-Memorial, ¶ 494. First TS Rafael Pacchiano, ¶¶ 74-75. See C-0174 and C-0176 (video provided by Claimant on March 1, 2021). ↩

⁵⁴⁴ Excelsior, “Negarán dragado de arena en Ulloa”, April 19, 2018, C-0171. La Crónica Jalisco, “Insistirá Semarnat en frenar proyecto minero submarino en BCS”, CL-0173. Nota informativa SEMARNAT. C-0470 ↩

⁵⁴⁵ See C-0177. ↩

⁵⁴⁶ Counter-Memorial, ¶¶ 494-506. ↩

⁵⁴⁷ See Second WS Rafael Pacchiano, ¶¶ 13-24. ↩

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on behalf of an investment under Section 1117; rather, the Respondent explained that there is a distinction between the types of damages that are available under NAFTA Article 1116 and 1117 and also a difference as to who should be paid the possible financial compensation that is ordered in an award. As explained in more detail below in the Damages Section, Claimant cannot separately assert damages for itself as a shareholder and damages for the value of ExO, as this would result in a double counting. The Claimant also cannot claim damages for itself based on the portion of ExO that is also owned by Mexican investors.

309. There is another important distinction between Articles 1116 and 1117 of NAFTA. Article 1105 (1) clearly establishes that “[each of the Parties shall grant to the investments of the investors of another Party, treatment in accordance with international law, [...]”. Thus, unlike NAFTA Article 1102, for example, Article 1105 does not impose obligations with respect to investors, but only applies to the treatment of investments.⁵⁴⁸ Consequently, the Claimant cannot file a claim for violation of the Article 1105 as an investor under Article 1116 of NAFTA. Similarly, the Claimant may seek expropriation compensation pursuant to Article 1110 only as an investor and only in connection with its ownership interest.

310. In the Counter-Memorial, the Respondent raised questions as to whether the Claimant actually owns and controls ExO, especially in light of Claimant’s filings with the SEC indicating that it has pledged most of its assets to MINOSA and Monaco, and that AMHSA and Mexican citizen Alonso Ancira appeared to have control of ExO’s activities in Mexico. In the Reply, the Claimant did not address the role of the Mexican investor in ExO, but has presented additional evidence to establish his (indirect) role in the ownership and control of ExO. Given the circumstances, the Respondent does not believe that it is necessary for the Tribunal to rule on this issue, because there are other broad grounds for dismissing the Claimant’s claims.

⁵⁴⁸ Various academics have confirmed this point in the following terms: “The first paragraph of Article 1105 is limited to treatment of investments, unlike the second paragraph of Article 1105, and indeed other provisions such as Article 1102 and 1103, which refer to treatment accorded to both investments and investors. This limitation was present even in the earliest drafts of what became Article 1105 (1). “Meg N. Kinnear et al., Article 1105 - Minimum Standard of Treatment, in Investment Disputes Under NAFTA, An Annotated Guide, p. 1105-17 (Kluwer 2008). RL-0144. ↩

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D. The Testimony of [Redacted] and [Redacted] Is Neither Credible Nor Admissible

311. The Claimant alleges that the fact that [Redacted] “were willing to provide sworn evidence that could be (and, indeed, has been) construed as anti-Mexican—particularly in the current political climate—makes their testimony more, not less, credible”.⁵⁴⁹

[Redacted].⁵⁵⁰ These assertions are meaningless for the following reasons:

• Mexico does not know what the Claimant refers to by “the current political climate.”
• It is paradoxical that the Claimant [Redacted]
• The lack of credibility of [Redacted] is magnified considering that the [Redacted] does not alter the fact that their credibility is now seriously questionable.

312. Although the Claimant weakly attempts to defend the admissibility and credibility of [Redacted] testimonial statements, the following points clearly demonstrate that the Tribunal should consider both statements as inadmissible or, where appropriate, lacking credibility.

313. In the first place, it is incontrovertible that according to Mexican regulations, [Redacted]⁵⁵¹ [Redacted]T— could not seriously

⁵⁴⁹ Reply, ¶ 146. ↩

⁵⁵⁰ Reply, ¶ 146. ↩

⁵⁵¹ See supra, Sections II.C. and II.C.1. Counter-Memorial, ¶¶ 174, 175, First Solcargo-Rábago Report, ¶¶ 79, 80, 114, 201 and Second Solcargo-Rábago Report, Section IV.B, ¶¶ 19-42. ↩

⁵⁵² Second WS [Redacted], ¶ 10. ↩

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question this fact.⁵⁵³ Although the Claimant intends to question this point with a generic and ad hoc interpretation of the Mexican regulations,⁵⁵⁴ accepting it would imply attributing to a single person —the Secretary— absolutely all the acts carried out by each and every one of the public officials within a Secretary of State. Obviously, this interpretation is erroneous because it would imply that the administrative responsibility of public servants would become null and void by eliminating any type of responsibility for public officials other than the Secretary.

314. Mr. Salvador Hernández, a person who has been in charge of the DGIRA, [Redacted] gives an account of this:

The fact that the Secretary of SEMARNAT and the Undersecretary of Management for Environmental Protection are hierarchically above the General Director of the DGIRA, does not mean that the Secretary and the Undersecretary are the officials responsible for evaluating requests for environmental impact assessment.⁵⁵⁵.

315. The aforementioned points have also been addressed by Mr. Pacchiano, who has rejected in the following terms the accusations made against him⁵⁵⁶:

For example, [Redacted]

[Redacted]⁵⁵⁷.

316. Secondly, it is questionable [Redacted]⁵⁵⁸. [Redacted]. This fact is implausible considering [Redacted].

⁵⁵³ First WS [Redacted], ¶ 2. ↩

⁵⁵⁴ Reply, ¶ 90. Second Héctor Herrera Report, ¶¶ 24-29. ↩

⁵⁵⁵ Second WS Salvador Hernández, ¶ 6. ↩

⁵⁵⁶ See supra, Section II.C.1. ↩

⁵⁵⁷ Second WS Rafael Pacchiano, ¶ 6 (emphasis added). ↩

⁵⁵⁸ First WS [Redacted], ¶¶ 2 and First WS [Redacted], ¶ 2. ↩

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[Redacted]⁵⁵⁹ Strangely, it is up to this moment that, due to the arbitration, [Redacted].

[Redacted].⁵⁶⁰ It is also implausible [Redacted]

The Claimant’s allegations are based on the mere statement of its witnesses whose credibility is seriously questionable.

317. Third, it is indisputable that Mexican regulations provide for checks and balances for the hierarchical structure that is organized vertically through lines of authority or command of the executive branch.⁵⁶¹

[Redacted].⁵⁶² The only challenge in which mention is made of this theory of “secret command orders” is the present arbitration.⁵⁶³ However, there are no complaints in this regard [Redacted] or by ExO before SEMARNAT supervisory bodies or those in charge of investigating any wrongdoing that confirm their statements. This is not only a legal issue, but also an ethical one,⁵⁶⁴ as stated by Mr. Salvador Hernández:

[Redacted]

[Redacted]⁵⁶⁵

⁵⁵⁹ See supra, Sections II.C.1 and II.C.3. ↩

⁵⁶⁰ First WS [Redacted], ¶¶ 26, 27, 30 and 31 and First WS [Redacted], ¶ 11. ↩

⁵⁶¹ Counter-Memorial, ¶¶ 460-462. ↩

⁵⁶² See supra, Sections II.C. and II.C.1. ↩

⁵⁶³ See Second Solcargo-Rábago Report, ¶ 212 ↩

⁵⁶⁴ See supra, Sections II.B.4, II.C.2 and II.C.3. ↩

⁵⁶⁵ Second WS Salvador Hernández, ¶ 16. ↩

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318. [Redacted].⁵⁶⁶ However, this omission is not accidental [Redacted].

Instead, the Claimant intends to cover [Redacted]

[Redacted]⁵⁶⁸

319. Fourth, [Redacted]⁵⁶⁹ Notwithstanding that this statement [Redacted],⁵⁷⁰ it is revealing that ExO has also failed to proceed to file the corresponding complaint with the pertinent authorities.⁵⁷¹ Said omission is questionable, especially considering that one of the interlocutors who allegedly heard [Redacted] was Mr. Diego Fernández de Cevallos, legal and corporate advisor to ExO,⁵⁷² and who has a long career as a political actor and as a litigator in lucrative matters against the interests of the State.⁵⁷³

320. Although the Claimant alleges that the references [Redacted]⁵⁷⁴ [Redacted] in Sections II.C and IIC.3.

[Redacted]⁵⁷⁵

⁵⁶⁶ See supra, Section II.C.2. ↩

⁵⁶⁷ C-0364, ¶ 2.a and C-0365, ¶ 2.a. ↩

⁵⁶⁸ Sergio Huacuja Report, Section V.A.3, ¶¶ 30-32. See supra, Sections II.B.5 and II.C.1. ↩

⁵⁶⁹ Second WS [Redacted], ¶ 31. See Second Solcargo-Rábago Report, ¶¶ 186-189. ↩

⁵⁷⁰ See Second Solcargo-Rábago Report, ¶¶ 201-202. ↩

⁵⁷¹ See supra, Sección II.B.5. ↩

⁵⁷² Counter-Memorial, ¶¶ 33-34. Oceánica Resources public deed dated May 15, 2020. R-0007. C-0134, p. 50. First WS. Claudio Lozano, ¶ 69. C-0057, p. 8. ↩

⁵⁷³ Drafting, Proceso, Diego, the devils’ advocate, May 25, 2010. R-0173. ↩

⁵⁷⁴ Reply, ¶ 148. ↩

⁵⁷⁵ See supra, Section II.C.3. ↩

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[Redacted] legally viable mechanisms existed to report any irregularity by public servants, ie, both could and should report through those mechanisms provided for in the law.⁵⁷⁶ Therefore, it is scandalous that the Claimant and ExO have also failed to simultaneously denounce the alleged “command orders” [Redacted].⁵⁷⁷

321. Fifth, [Redacted] once Mr. Pacchiano left office at the end of November 2018. However, [Redacted]. Indeed, during the meetings held by the lawyers of the Ministry of Economy (representatives of the Respondent) with the DGIRA, [Redacted].⁵⁷⁸ This [Redacted]:

[...] [Redacted]

[Redacted]⁵⁷⁹

322. Sixth, and related to the previous point, [Redacted]⁵⁸⁰ In fact, [Redacted].⁵⁸¹ For Mexico, this meant that [Redacted] that the DGIRA’s determinations were made in accordance with the law and, consequently, it implicitly disputed Odyssey’s claims.⁵⁸²

323. [Redacted]⁵⁸³ however, that was precisely the most plausible conclusion that could be drawn

⁵⁷⁶ See supra, Sections II.C and II.C.3. ↩

⁵⁷⁷ See supra, Section II.B.5 ↩

⁵⁷⁸ See Second WS Salvador Hernández, ¶¶ 7-17. ↩

⁵⁷⁹ Second WS [Redacted], ¶ 28. ↩

⁵⁸⁰ Second WS Salvador Hernández, ¶¶ 16-17. ↩

⁵⁸¹ Second WS [Redacted], ¶ 28. ↩

⁵⁸² See supra, Sections II.B.1.b and II.B.1c. ↩

⁵⁸³ Second WS [Redacted], ¶ 28. ↩

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from his actions, particularly when he failed to clarify the contrary knowing the meaning of Odyssey’s claims derived from the public notice of intention⁵⁸⁴ [Redacted].⁵⁸⁵ Therefore, and unless [Redacted]

[Redacted]⁵⁸⁶

324. In seventh place, [Redacted]⁵⁸⁷“to review SEMARNAT’s concerns directly with its scientists and the specific mitigation measures Odyssey and ExO have proposed”.⁵⁸⁸ At that time, [Redacted]

[Redacted]⁵⁸⁹ In fact, derived from the position expressed by the DGIRA, [Redacted]⁵⁹⁰ the Ministry of Economy indicated to the SEMARNAT officials that if considered feasible to accept the meeting proposal at the technical level, “it would be worthwhile for the investor to bring a proposal that they are looking for. It must be solved with true mitigation measures”⁵⁹¹ and not those that he presented in the MIA [Redacted], as reflected in the Resolution of 2018 itself.⁵⁹²

325. It should be noted that the representatives of Mexico expressly requested the DGIRA —[Redacted]— to behave with the truth and reveal any

⁵⁸⁴ Odyssey’s Notice of Intent was made public on the website of the Ministry of Economy as of March 22, 2019. See. Mail of Mr. Sergio Sánchez Berumen of March 25, 2019. R-0174. ↩

⁵⁸⁵ SHS-001. ↩

⁵⁸⁶ See supra, Sections II.B.1.b and II.B.1c. ↩

⁵⁸⁷ See SHS-002 and SHS-003. ↩

⁵⁸⁸ SHS-003. ↩

⁵⁸⁹ See supra, Section II.B.1.a. ↩

⁵⁹⁰ Second TS [Redacted], ¶ 28. ↩

⁵⁹¹ SHS-002, p. 1. ↩

⁵⁹² C-0009. ↩

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information that could be relevant to the case. Indeed, Mr. Romero, a former representative of the Respondent, confirms this fact by detailing what happened at that meeting:

On February 7, 2019 and due to this arbitration, three lawyers of the DGCJCI held the first working meeting with SEMARNAT officials. This first meeting was held at the SEMARNAT offices and we attended: on behalf of the DGCJC [...] [Redacted].

[...]

It was common to explain during the first meetings with the involved authorities (i) the attributions of the DGCJCI according to the Internal Regulations of the Ministry of Economy regarding the defense of the Mexican Government, which was fundamental to let them know that the objective of the lawyers was to know the facts but not to judge them, and it was essential to know the truth, in order to prepare the best possible defense, [...] In particular, I recall that I explained to SEMARNAT officials that it would be necessary to have their full cooperation and willingness to be able to prepare Mexico’s defense should the arbitration move forward. The above, as part of the protocol that normally followed the lawyers of the DGCJCI in this type of meetings with the authorities whose acts are claimed. In fact, I said that we needed to know all the details, details and information that they considered relevant in order to understand Odyssey’s claim and know its merits..

I even expressly requested them to share with us the information that, even if not in our favor, would be necessary to know in order to be able to formulate a reasonable explanation of those points to the Tribunal, favoring transparency.⁵⁹³

326. This request to behave truthfully was also made by e-mail, insisting to the SEMARNAT officials that the information they could provide us [...] on the technical aspects of the case was vital.⁵⁹⁴ “For this reason, they were required, “to send a document with a detailed explanation of the matter in response to the Notice of Intent [...], the relevant aspects of the request for the environmental impact authorization and the other facts that it considers pertinent.”⁵⁹⁵ The foregoing, as part of the information that was required “to better understand the matter” and in preparation for the consultations [Redacted]⁵⁹⁶ In response, SEMARNAT provided a Memorandum prepared by the UCAJ [Redacted].⁵⁹⁷

327. Eighth, and precisely related to the previous point, it is strange [Redacted]

⁵⁹³ WS Hugo Romero, ¶¶ 9-10. ↩

⁵⁹⁴ R-0068, p. 3. and HGRM-002, p. 3. ↩

⁵⁹⁵ R-0068, p. 3. and HGRM-002, p. 3. ↩

⁵⁹⁶ Second WS [Redacted], ¶ 30. See WS Hugo Romero, ¶ 23 and HGRM-002. ↩

⁵⁹⁷ HGRM-001. See WS Hugo Romero, ¶ 22. Second WS Salvador Hernández, ¶ 13. ↩

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[Redacted]”.⁵⁹⁸ In this regard, Mr. Romero has stated that he is entirely surprised that [Redacted]: “[i]n the first meeting, the explanation, questions and openness to receive comments from DGCJCI officials was made to all SEMARNAT officials present at the meeting; [Redacted]”.⁵⁹⁹ Furthermore, “[t]he statements in the meetings were addressed to all the officials and we always emphasized the importance of knowing the truth in order to be able to make an evaluation of the matter and prepare an adequate defense”⁶⁰⁰. Even at the meeting of February 7, 2019, [Redacted]

[Redacted]⁶⁰²

328. In the ninth place [Redacted]

[Redacted]⁶⁰³

[Redacted]⁶⁰⁴

[Redacted]⁶⁰⁵ This action is clearly contradictory.

329. In tenth place, although the Claimant affirms that [Redacted]

⁵⁹⁸ Second WS [Redacted], ¶ 28. ↩

⁵⁹⁹ WS Hugo Romero, ¶ 12. ↩

⁶⁰⁰ WS Hugo Romero, ¶ 13. ↩

⁶⁰¹ See supra, Section II.B.1.a. ↩

⁶⁰² See supra, Section II.C.3. ↩

⁶⁰³ Second WS [Redacted], ¶ 34. ↩

⁶⁰⁴ See supra, Section II.B.1. ↩

⁶⁰⁵ See supra, Section II.B.4. ↩

[Page 134]

[Redacted]⁶⁰⁶

[Redacted]⁶⁰⁷

[Redacted]⁶⁰⁸

[Redacted]⁶¹⁰

330. Although the Claimant claims that [Redacted]⁶¹¹ [Redacted]. It should be noted that Mexico did not compensate [Redacted] or any other witness in any of the arbitrations in which it has been sued.

331. Thus, the testimonial statement of Mr. Pacchiano, as well as all the points explained in this Section and Sections II.B and II.C., show that the testimonial statements of [Redacted] and [Redacted] must be considered with reservations by the Tribunal. Therefore, the evidence cited above strongly supports the Respondent’s position that [Redacted] and that both [Redacted] have conducted themselves, at least, in an unethical manner.

332. Finally, it should be noted that the Claimant is wrong when it states that the evidence can only be excluded if it is proven that it was obtained illegally.⁶¹² In the case EDF (Services) v. Romania cited by the Respondent in the Counter-Memorial,⁶¹³ the tribunal excluded the evidence

⁶⁰⁶ Reply, ¶ 147. ↩

⁶⁰⁷ See supra, Section II.B.2.a. ↩

⁶⁰⁸ See Second Solcargo-Rábago Report, ¶¶ 203-204. ↩

⁶⁰⁹ [Redacted] ↩

⁶¹⁰ See supra, Section II.B.2. ↩

⁶¹¹ Reply, ¶ 147. ↩

⁶¹² Reply, ¶ 156. ↩

⁶¹³ Counter-Memorial, ¶ 418. ↩

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in question because it was obtained “contrary to the principle of good faith and fair treatment required in international arbitration.”⁶¹⁴ In Libananco Holdings Co. v. Republic of Turkey, the Turkish State had intercepted approximately 1,000 privileged or confidential emails through state surveillance methods, a situation in which the court decided to dismiss these communications as evidence.⁶¹⁵ As the court explained, the surveillance was not illegal, but rather, a legitimate exercise of the sovereign right of the State to counter crime.⁶¹⁶

333. Even if the Tribunal decides not to exclude the evidence of [Redacted], it has been established that their testimony is completely implausible. The actions of [Redacted] the lack of any contemporary evidence to corroborate his statements, the denial by [Redacted] the testimony of Mr. Pacchiano who denies these accusations, among other things, makes it clear that his motivation is based on expectations of an economic gain⁶¹⁷ or otherwise by a general grievance against the Government of Mexico. The Court should not give any credence to their testimonies.

Ε. The Claimant’s Failure to Disclose Contingent Economic Incentives

334. Seeking to disavow its own SEC 10-K filing,⁶¹⁸ the Claimant vehemently asserts that “it is plainly false on the fase of the document that . . . contingency fees are dependent on the outcome

⁶¹⁴ EDF (Services) v. Romania, ICSID Case No. ARB/05/13, Procedural Order No. 3 (August 29, 2008), ¶ 38. RL-0007. ↩

⁶¹⁵ Libananco Holdings Co. Limited v. Republic of Turkey, ICSID Case No. ARB / 06/8, Pre-Trial Decision (June 23, 2008) ¶ 19. RL-0079. ↩

⁶¹⁶ Libananco Holdings Co. Limited v. Republic of Turkey, ICSID Case No. ARB / 06/8, Pre-Trial Decision (June 23, 2008) ¶ 78. RL-0079. ↩

⁶¹⁷ Second WS Rafael Pacchiano, ¶ 7. ↩

⁶¹⁸ Odyssey Marine Exploration, Inc. Form 10-K for the period ending Dec. 31, 2019, filed Mar. 20, 2020, p. 69 (“During January 2020, our Board of Directors approved two four-month contracts with two advisory consultants in connection with the litigation of our NAFTA arbitration which would allow them to receive 1.5 million new equity shares each if they proved to be successful in the facilitation of the process. This equity is only issuable upon the Mexican’s government approval and issuance of the Environmental Impact Assessment (“EIA”) for our Mexican subsidiary. All possible grants of new equity shares were also approved by the Administrators of Oceanica. We also owe consultants contingent success fees of up to ↩

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of the arbitration.”⁶¹⁹ While the Claimant asserts that neither of its unnamed “consultants” are to serve as “experts or consultants” in this arbitration and that none of its experts or consultatnts “is testifying on a contingency basis,”⁶²⁰ the Claimant fails to disclose the identity of the unnamed consultants or to put into the record copies of the underlying contingency agreements.⁶²¹ Thus, the Tribunal has no record basis for concluding that the written and oral testimony in this arbitratoin is not motivated by economic incentives that could affect the reliability of such testimony. All the Tribunal knows is that two unnamed “consultants” are to receive 1.5 million equity shares in Odyssey as well as $700,000 “in connection with the litigation of our NAFTA arbitration.”⁶²²

335. Earlier this year, a Canadian court in its decision addressed a similar incentive structure for a consultant. The court emphasized that the consultant conducted its investigation “because they were being paid a very large amount of money to do so by someone”⁶²³. The following transcript is relevant:

I am also somewhat concerned about what inferences the specifics of Black Cube’s retainer give rise to. Their base fee was $1.5 million U.S. A bonus structure — the particulars of which I will not elaborate on — provided for maximum fees up to $11 million U.S. Catalyst was the party ultimately paying Black Cube’s fees. Even for Catalyst, $11 million is a big number. A natural inference is that the payor of such a significant sum will want to know what it is they are paying for. How else will they know if the fees are reasonable? The alternative is that they do not want to know. Actual knowledge and willful blindness are close cousins.⁶²⁴

336. As set out in more detail in the Counter-Memorial⁶²⁵, the IBA Guidelines on Party Representation in International Arbitration do not permit “success” or “contingency”

$700,000 upon the approval and issuance of the EIA. The EIA has not been approved as of the date of this report.”). C-0190.

⁶¹⁹ Reply, ¶ 173. ↩

⁶²⁰ Reply, ¶ 174. ↩

⁶²¹ See Reply, ¶ 174. ↩

⁶²² Odyssey Marine Exploration, Inc. Form 10-K for the period ending Dec. 31, 2019, filed Mar. 20, 2020, p. 69. C-0190. ↩

⁶²³ The Catalyst Capital Group Inc. v. West Face Capital Inc., 2021 ONSC 125, No. CV-17-587463-00CL, Ruling on Privilege Motions, Jan. 11, 2021, ¶ 367. RL-0099. ↩

⁶²⁴ The Catalyst Capital Group Inc. v. West Face Capital Inc., 2021 ONSC 125, No. CV-17-587463-00CL, Ruling on Privilege Motions, Jan. 11, 2021, ¶ 379. RL-0099. ↩

⁶²⁵ Counter-Memorial, ¶ 427 ↩

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compensation because, as tribunals have found, “[o]bjectivity could be impaired if an expert participated in an arbitration proceeding and it was shown that she/he would obtain an economic benefit if the outcome of the proceeding were favorable to the retaining party.”⁶²⁶ Jeffrey Waincymer, citing the Chartered Institute of Arbitrators Protocol, states the obvious in opining that “most would see a contingency fee based on success in the proceedings as being an unacceptable interference with independence.”⁶²⁷ For the same reason, bar ethics rules expressly prohibit the practice.⁶²⁸

F. Merits

1. The Claimant has not demonstrated the existence of a violation of the Minimum Level of Treatment standard of Article 1105 of the NAFTA

337. As discussed below, (i) the Claimant has not demonstrated the existence of the standard under customary international law that it requests the Tribunal to apply; (ii) the Claimant’s claim based on alleged “command orders” does not meet the threshold of violation of customary international law; (iii) the Claimant has not established arbitrary conduct or conduct that is inconsistent with due process; (iv) the Claimant has no legitimate expectation that can be protected under customary international law; (v) the Claimant has not exhausted the means of defense available under the Mexican legal system; and (vi) the Claimant has waived its claim on “Full Protection and Security”.

⁶²⁶ Italba Corp. v. Oriental Republic of Uruguay, Case CIADI No. ARB/16/9, Award, March 2, 2019. ¶ 157. RL-0011. ↩

⁶²⁷ Jeffrey Waincymer, Procedure and Evidence in International Arbitration (Kluwer 2012), pp. 942-43. RL-0012 ↩

⁶²⁸ For instance, see Model Rule 3.4(3) de las Model Rules of Professional Conduct de la American Bar Association (“it is improper to pay an expert witness a contingent fee”). RL-0100. Rule 3.4(b) of the New York Rules of Professional Conduct (counsels are prohibited “[to] offer an inducement to a witness that is prohibited by law or pay, offer to pay or acquiesce in the payment of compensation to a witness contingent upon the content of the witness’s testimony or the outcome of the matter”). RL-0101. Rule 3.4 de las California Rules of Professional Conduct (“A member shall not [...] (B) Directly or indirectly pay, offer to pay, or acquiesce in the payment of compensation to a witness contingent upon the content of the witness’s testimony or the outcome of the case.”). RL-0102. Rule 4.4(a) of the Washington, D.C. Rules of Professional Conduct (“In representing a client, a lawyer shall not use means that have no substantial purpose other than to embarrass, delay, or burden a third person, or knowingly use methods of obtaining evidence that violate the legal rights of such a person.”). RL-0014. ↩

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a. The Claimant has not shown the existence of the standard under customary international law that it asks the Tribunal to apply

338. The Claimant has still failed to establish the content of the mínimum standard of treatment under customary internaiontal law that it asks the Tribunal to apply, which is a burden it must carry. Although the mínimum standard of treatment may evolve, “there is no confirmation that States when referencing FET in treaties meant anything other than the minimum standard of treatment, as classically understood.”⁶²⁹ Moreover, “[p]roving advances to existing customary norms is difficult. This has put a natural breaking effect on the expansion of the FET standard, understood as a customary minimum norm [in the NAFTA context].”⁶³⁰

339. Simply citing to some arbitral awards, as the Claimant does, does not suffice to establish a new standard of treatment under customary international law.⁶³¹ In contrast, “State endorsement of a particular articulation of an international rule by an arbitral tribunal is itself evidence of State practice and of opinion juris,”⁶³² and the NAFTA Parties have made clear that they exclude from FET coverage legitimate expectations, discrimination based on national treatment, and transparency.⁶³³

340. The Claimant is mistaken in citing indiscriminately to non-NAFTA awards in discussing the FET standard. As should be plain, “[t]he manner in which the notion of fairness and equity to

⁶²⁹ Christophe Bondy, Fair and Equitable Treatment – Ten Years On, in Evolution and Adaptation: The Future of International Arbitration (Kluwer 2019), p. 216 (emphasis added). RL-0103. ↩

⁶³⁰ Christophe Bondy, Fair and Equitable Treatment – Ten Years On, in Evolution and Adaptation: The Future of International Arbitration (Kluwer 2019), p. 214. RL-0103. ↩

⁶³¹ See, e.g., Mesa Power Group LLC v. Government of Canada, PCA Case No. 2012-17, Canada’s Response to Non-Disputing Party Submissions, June 26, 2015, ¶ 12 (“the Claimant cannot turn to the decisions of international tribunals as evidence of State practice that the protection of an investor’s expectations is required by the customary international law minimum standard of treatment”), RL-0104; Mesa Power Group LLC v. Government of Canada, PCA Case No. 2012-17, United States Non-Disputing Party Submission, July 26, 2014, ¶ 6 (“[a]rbitral decisions interpreting ‘autonomous’ fair and equitable treatment and full protection and security provisions in other treaties, outside of the context of customary international law, do not constitute evidence of the content of the customary international law standard”), RL-0105. ↩

⁶³² Christophe Bondy, Fair and Equitable Treatment – Ten Years On, in Evolution and Adaptation: The Future of International Arbitration (Kluwer 2019), p. 215. RL-0103. ↩

⁶³³ Christophe Bondy, Fair and Equitable Treatment – Ten Years On, in Evolution and Adaptation: The Future of International Arbitration (Kluwer 2019), p. 214. RL-0103. ↩

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be granted to the investor is represented a treaty may vary,” and “[t]he manner in which a treaty structures the standard and its association with other standards will be decisive in defining its meaning.”⁶³⁴ “[C]laimants have relied upon decisions of arbitral tribunals interpreting FET as a stand-alone treaty standard, to assert novel content for FET as a customary standard[,] [but t]ribunals typically have rejected such attempts, on the understanding that arbitral tribunals’ decision do not count as State practice.”⁶³⁵ Whereas NAFTA tribunals must “apply the minimum standard of treatment existing under custom,”⁶³⁶ the same, of course, is not true of all multi- or bilateral investment treaties. “The result [under NAFTA] has been a standard that includes a more limited range of obligations than FET as a treaty standard open to arbitral interpretation, and one with a relatively higher threshold for breach.”⁶³⁷

341. For example, “[t]he conclusion reached by NAFTA tribunals that Article 1105 does not include any obligation of transparency is in sharp contrast with that prevailing under BITs outside of the NAFTA context where tribunals have recognized that transparency is an element of the FET standard”,⁶³⁸ and unlike NAFTA, “a great number of BITs that include an FET clause contain [...] additional substantive content, such as specific prohibition of arbitrary, unreasonable and discriminatory measures.”⁶³⁹

342. For these reasons, the Glamis tribunal rejected the assertion by the Claimant here that “it is not a valid argument” to distinguish the mínimum standard of treatment under NAFTA from awards that discuss an autonomous or treaty-specific mínimum standard of treatment.⁶⁴⁰ The Glamis tribunal explained:

⁶³⁴ Marcela Klein Bronfman, Fair and Equitable Treatment: An Evolving Standard, 10 Max Planck Yearbook of United Nations Law (2006), pp. 625-26. RL-0106. ↩

⁶³⁵ Christophe Bondy, Fair and Equitable Treatment – Ten Years On, in Evolution and Adaptation: The Future of International Arbitration (Kluwer 2019), p. 214. RL-0103. ↩

⁶³⁶ Andrew Newcombe & Lluís Paradell, Law and Practice of Investment Treaties: Standards of Treatment (Kluwer 2009), p. 128. RL-0029. ↩

⁶³⁷ Christophe Bondy, Fair and Equitable Treatment – Ten Years On, in Evolution and Adaptation: The Future of International Arbitration (Kluwer 2019), p. 214. RL-0103. ↩

⁶³⁸ Patrick Dumberry, The Fair and Equitable Treatment Standard: A Guide to NAFTA Case Law on Article 1105 (Kluwer 2013), p. 180. RL-0022. ↩

⁶³⁹ Id., p. 201. RL-0022. ↩

⁶⁴⁰ Reply, ¶ 178. ↩

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Certainly, it is possible that some BITs converge with the requirements established by customary international law; there are, however, numerous BITs that have been interpreted as going beyond customary international law, and thereby requiring more than that to which the NAFTA State Parties have agreed.⁶⁴¹

343. Indeed, the Claimant basically concedes that the FET standard under NAFTA is more limited than it previously claimed by stating that “these concepts . . . are merely lenses, each grounded in canonical sources of public international law, that are available to assist tribunals in construing what ‘fair and equitable treatment’ means in any given context.”⁶⁴² Indeed:

Out of the large number of elements that are typically enumerated by writers as components of the FET standard, NAFTA tribunals have found that only a few of them are actually covered by Article 1105. In this respect, NAFTA case law sharply contrasts with the position adopted by non-NAFTA tribunals. Thus, non-NAFTA tribunals have been increasingly willing to recognize new requirements as components of the ever-enlarged concept of the FET.⁶⁴³

344. Regarding good faith, the Claimant now appears to concede that good faith is not a free-standing obligation.⁶⁴⁴ Rather, “[w]hat is clear is that good faith is not an autonomous stand-alone obligation under the FET standard (such as arbitrariness or denial of justice).”⁶⁴⁵ As such, good faith “adds only negligible assistance in the task of determining or giving content to a standard of fair and equitable treatment.”⁶⁴⁶

⁶⁴¹ Glamis Gold, Ltd. v. The United States of America, UNCITRAL, Award, June 8, 2009, ¶ 609. CL-0055. ↩

⁶⁴² Reply, ¶ 179. ↩

⁶⁴³ Patrick Dumberry, The Fair and Equitable Treatment Standard: A Guide to NAFTA Case Law on Article 1105 (Kluwer 2013), p. 264 (emphasis added). RL-0022. ↩

⁶⁴⁴ Reply, ¶¶ 181-83. ↩

⁶⁴⁵ Patrick Dumberry, The Fair and Equitable Treatment Standard: A Guide to NAFTA Case Law on Article 1105 (Kluwer 2013), pp. 222-23. RL-0022. ↩

⁶⁴⁶ ADF v. United States, ICSID Case No. ARB(AF)/00/1, Award, January 9, 2003, ¶ 191, CL-0005; see also Técnicas Medioambientales Tecmed, S.A. c. México, ICSID Case No. ARB (AF)/00/2, Award, May 29, 2003 ¶ 153, CL-0112; Sempra Energy International c. Argentina, ICSID Case No. ARB/02/16, Award, Sept. 28, 2007, ¶ 298. RL-0032; Siemens AG v. Argentina, Award and Separate Opinion, Jan. 17, 2007, ¶ 308, RL-0108. Siemens AG c. la República Argentina, Caso CIADI No. ARB/02/8, Separate Opinion from Professor Domingo Bello Janeiro, Arbitrator, 30 de enero de 2007. RL-0109. ↩

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b. The Claimant has not been able to demonstrate that its claim based on “secret command orders” constitutes a violation of customary international law.

345. As already mentioned supra, the Claimant was the one who initially based its claim under Article 1105 on the alleged existence of “secret command orders.”⁶⁴⁷ However, because Mexico identified the coincidence of its claim with the one formulated in the Vento v. Mexico case, the Claimant has omitted to refer to that concept and, instead, now asserts that Mexico “mischaracterizes Odyssey’s claim.”⁶⁴⁸ This is erroneous. Although the Claimant points out that “what matters is the reason for that refusal” i.e., “political motivations and personal conflicts”,⁶⁴⁹ in Vento v. In Mexico, the Claimant indeed argued that the officials were given a command order to arrive at a predetermined result for an improper purpose,⁶⁵⁰ as precisely the Claimant argues in this arbitration.

346. Despite the fact that the Claimant has tried to identify “factual grounds for the decision in Vento” that in its opinion “are completely different from those in this case,”⁶⁵¹ all of them are actually irrelevant as they are aspects that deviate from the part Claimant’s claim, as demonstrated below:

• Vento is related to motorcycle import tariffs.⁶⁵² This difference is meaningless since obviously there is no single arbitration case that specifically addresses a denial of environmental impact authorization for a dredging project to extract phosphorite. Furthermore, the only non-arbitral cases with these characteristics have not been authorized or suspended.⁶⁵³ In any case, the Don Diego Project planned to be carried out in an area unique to its biodiversity, affecting various species of turtles and other threatened or

⁶⁴⁷ Memorial, ¶ 221. ↩

⁶⁴⁸ Reply, ¶ 194. ↩

⁶⁴⁹ Reply, ¶ 194. ↩

⁶⁵⁰ Vento Motorcycles Inc. v. United Mexican States, ICSID Case No. ARB (AF) / 17/3, Award, July 6, 2020, ¶¶ 270, 273, 302 and 317. RL-0020. ↩

⁶⁵¹ Reply, ¶ 197. ↩

⁶⁵² Reply, ¶ 197 a. ↩

⁶⁵³ Even some more advanced projects like Chatam Ridge and Sandpiper have not been able to obtain the necessary permits to start operations. First WGM Report, ¶ 22. ↩

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threatened marine animals in danger of extinction,⁶⁵⁴ which hardly makes it comparable to any other project.

• Validation of the authorities‘decision by domestic courts.⁶⁵⁵ Although the Claimant also argues that her case is different from Vento’s because in the latter the Mexican courts confirmed that the authorities’ decision was legally correct, it should be remembered that DGIRA’s own decision is also being validated by a Mexican court at the request of ExO.⁶⁵⁶
• Lack of identification of the official who gave the orders.⁶⁵⁷ It is true that in the Vento case the court indicated that of the four former public officials who acted as witnesses, only one declared that he had acted under orders of command. It is also true that the testimony of that former official was rejected not only for having failed to identify the hierarchical superior who supposedly issued the command orders, but also for his lack of credibility, as occurs in these proceedings.⁶⁵⁸ Although the Claimant argues that “there is no doubt as to who was responsible for the order to deny the MIA and the circumstances in which said order was given,”⁶⁵⁹ the truth is that, unlike in the Vento case, the person identified and accused by the Claimant’s witnesses supposedly issuing the “command orders” has appeared in this arbitration rejecting those accusations.⁶⁶⁰
• In Vento, the former public official who claimed to have received orders of command was responsible for ensuring the legality of the resolution.⁶⁶¹ This is another aspect on which the Claimant intends to rely to distinguish its case from that of Vento, however, it also is unfavorable. Although the Claimant erroneously asserts that “[Redacted]”⁶⁶² in

⁶⁵⁴ See Verónica Morales Report, ¶¶ 6-10. Urbán-Viloria Report, ¶ 13-14; Group of Experts on Sea Turtles Report, ¶¶ 7-27. ↩

⁶⁵⁵ Reply, ¶ 197 a. ↩

⁶⁵⁶ See supra, Section II.A.1. ↩

⁶⁵⁷ Reply, ¶ 197 b. ↩

⁶⁵⁸ See supra, Section II.B. ↩

⁶⁵⁹ Reply, ¶ 198. ↩

⁶⁶⁰ See First WS Rafael Pacchiano and Second WS Rafael Pacchiano. ↩

⁶⁶¹ Reply, ¶ 197 b. ↩

⁶⁶² Reply, ¶ 199. ↩

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Vento the court highlighted the fact that it was not credible that the former public official who claimed to have received command orders has been the one who “was personally and directly involved [...] in the drafting and issuance of the resolutions, [and who, in fact, was the one who] initialed the resolution [...] before [...] signed it”,⁶⁶³ the official responsible for doing so in accordance with the powers established by law. [Redacted] as clearly established by Mexican regulations (RISEMARNAT) and as confirmed by the legal experts of Mexico.⁶⁶⁴

347. Following the foregoing, and without prejudice to the similarities already identified in the Counter-Memorial,⁶⁶⁵ the Vento case is illustrative to show what are the relevant factors to consider to determine [Redacted] command orders is seriously compromised. On the pretext that “this Tribunal [is not] in any way constrained by the factual findings of the Vento tribunal,”⁶⁶⁶ the Claimant has avoided addressing the following aspects that led to the dismissal of Vento’s claim:

• [Redacted]⁶⁶⁷
• Considering the existence of checks and balances in the hierarchical structures of authority or command, it is difficult to believe that [Redacted]⁶⁶⁸
• [Redacted]

⁶⁶³ Vento Motorcycles Inc. c. Estados Unidos Mexicanos, Caso CIADI No. ARB(AF)/17/3, Award, July 6, 2020, ¶ 290. RL-0020. ↩

⁶⁶⁴ See Second Solcargo-Rábago Report, ¶¶ 19-42. ↩

⁶⁶⁵ Counter-Memorial, ¶ 456. ↩

⁶⁶⁶ Reply, ¶ 196. ↩

⁶⁶⁷ Vento Motorcycles Inc. v. Estados Unidos Mexicanos, Caso CIADI No. ARB(AF)/17/3, Award, July 6, 2020, ¶ 290. RL-0020. See Counter-Memorial, ¶¶ 458-459. See supra, Sections II.C. ↩

⁶⁶⁸ Vento Motorcycles Inc. v. Estados Unidos Mexicanos, Caso CIADI No. ARB(AF)/17/3, Award, July 6, 2020, ¶¶ 291 and 312. RL-0020. See Counter-Memorial, ¶¶ 460-462. See supra, Sections II.B.3. ↩

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[Redacted]⁶⁶⁹

• [Redacted]⁶⁷⁰ has very little credibility.⁶⁷¹

348. All of the aforementioned points are applicable mutatis mutandis to the Claimant’s claim. Therefore, contrary to what it asserts, the case of Vento v. Mexico is comparable and applicable to the facts of this arbitration.

c. The Claimant has not established arbitrary conduct nor conduct that fails to accord due process

349. As discussed below, (i) the Claimant misapprehends the meaning of “arbitrary” under international law, (ii) the evidence overwhelmingly shows that the denial of the 2015 MIA was carried out in an appropriate manner, and (iii) the arguments of the Claimant regarding “political motivation” that allegedly caused the 2015 MIA to be rejected by DGIRA are without merit.

(1) The Claimant mischaracterized the meaning of “arbitrary” under international law

350. Claimant’s discussion of arbitrariness and due process in administrative decision making is no more than a distraction. Under customary international law, “arbitrariness” means “a wilful disregard of due process of law, an act which shocks, or at least surprises, a sense of juridical propriety.”⁶⁷² However, this standard is not intended to impede states’ ability to make policy choices — even if mistakes are made in implementing those choices.⁶⁷³ Indeed, “[a] finding that the State has committed an international delict by failing to afford fair and equitable treatment in

⁶⁶⁹ Vento Motorcycles Inc. c. Estados Unidos Mexicanos, Caso CIADI No. ARB(AF)/17/3, Award, July 6, 2020, ¶ 291. RL-0020. See Counter-Memorial, ¶¶ 463-464. See supra, Sections II.B.5. ↩

⁶⁷⁰ In the case of [Redacted]. See Second Solcargo-Rábago Report, ¶¶ 203-204. ↩

⁶⁷¹ Vento Motorcycles Inc. c. Estados Unidos Mexicanos, Caso CIADI No. ARB(AF)/17/3, Award, July 6, 2020, ¶ 292. RL-0020. See Counter-Memorial, ¶¶ 465-470. See supra, Sections II.B.1 y 2. ↩

⁶⁷² Sicula S.p.A. (ELSI) (United States v. Italy), ICJ Rep. 1989, Judgment, July 20, 1989, p. 124. CL-0028. ↩

⁶⁷³ S.D. Myers, Inc. v. Canada, First Partial Award, Nov. 13, 2000, ¶ 261, CL-0103; Cargill, Inc. c. Estados Unidos Mexicanos, Caso CIADI No. ARB(AF)/05/2, Award, September 18, 2009, ¶¶ 292-93, CL-0027. ↩

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its regulatory processes requires misconduct of a particularly serious kind.”⁶⁷⁴ That is because “[t]he processes of administrative decision-making cannot be judged by the standards expected of judicial proceedings.”⁶⁷⁵ Further, as stated by the International Court of Justice in the ELSI case:

the fact that an act of a public authority may have been unlawful in municipal law does not necessarily mean that that act was unlawful in international law, as a breach of treaty or otherwise. A finding of the local courts that an act was unlawful may well be relevant to an argument that it was also arbitrary; but by itself, and without more, unlawfulness cannot be said to amount to arbitrariness.⁶⁷⁶

351. The Claimant improperly puts heavy reliance on the discredited majority opinion in Bilcon v. Canada, where the tribunal took it upon itself “to step into the shoes of” a Canadian Federal Court to rule an environmental measure unlawful under domestic law and thus “arbitrary” for purposes for Article 1105.⁶⁷⁷ As dissenting panel member of Bilcon tribunal, Professor Donald McRae explained:

[A] potential breach of Canadian law does not meet the high threshold of the Waste Management standard. Thus, the only basis for meeting the high threshold of Article 1005 is the assertion that the JRP’s conduct was arbitrary. But here, with respect, I find the majority’s reasoning somewhat circular. The majority concludes that the [Canadian administrative] Panel actions were arbitrary. But the manifest arbitrariness seems to be that instead of applying Canadian law, the Panel ‘effectively created, without legal authority or notice to Bilcon, a new standard of assessment’. In short, by deviating from Canadian law, the Panel acted arbitrarily. This reasoning suggests that any departure from Canadian law is arbitrary and thus any departure from Canadian law meets the threshold of arbitrariness under the Waste Management standard. Breach of NAFTA Article 1105, then is equated with a breach of Canadian law.⁶⁷⁸

352. Like McRae, all three NAFTA parties have voiced their disapproval of the Bilcon majority’s finding of arbitrariness.⁶⁷⁹ The United States, for example, has stated in its capacity as

⁶⁷⁴ Campbell McLachlan, Laurence Shore & Matthew Weiniger, International Investment Arbitration: Substantive Principles (Oxford 2017), ¶ 7.195. RL-0021. ↩

⁶⁷⁵ Campbell McLachlan, Laurence Shore & Matthew Weiniger, International Investment Arbitration: Substantive Principles (Oxford 2017), ¶ 7.193. RL-0021. ↩

⁶⁷⁶ Sicula S.p.A. (ELSI) (United States v. Italy), ICJ Rep. 1989, Judgment, July 20, 1989, p. 74. CL-0028. ↩

⁶⁷⁷ Reply, ¶¶ 186-87. ↩

⁶⁷⁸ William Ralph Clayton and others v. Government of Canada, PCA Case No. 2009-04, Dissenting Opinion of Professor Donald McRae, Mar. 17, 2015, Dissent ¶¶ 36-38. RL-0110. ↩

⁶⁷⁹ Mesa Power Group LLC v Government of Canada, UNCITRAL, PCA Case No 2012-17, Canada Observations on the Bilcon Award, May 14, 2015; RL-0111 Mesa Power Group LLC v Government of Canada, UNCITRAL, PCA Case No 2012-17, Mexico Submission on the Bilcon Award, June 12, 2015, ↩

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a non-disputing party in a subsequent proceeding: “International tribunals [...] do not sit as appellate courts with authority to review the legality of domestic measures under a Party’s own domestic law. A failure to satisfy requirements of national law, moreover, does not necessarily violate international law.”⁶⁸⁰ This is significant because with this, the concurrent and harmonious briefs and arguments of the NAFTA Parties show a “subsequent practice,” or “subsequent agreement” for the purposes of the interpretation of the treaty.⁶⁸¹

353. After all, “where a respondent state makes general submissions about treaty interpretation and these are supported by the other treaty parties, they may evidence agreement,” similarly, “[w]here interventions by all of the other treaty parties support interpretations by the respondent state, this subsequent practice constitutes good evidence of an agreement on interpretation and thus should be given considerable weight.”⁶⁸²

354. Like the NAFTA parties, McLachlan has likewise been highly critical of the “controversial” majority opinion in Bilcon, explaining that:

[t]he standard will not be breached simply because the host State’s administrative procedures did not comply with its internal law. In the same way that legality under national law does not determine legality under international law, so too illegality under national law does not ipso facto lead to a breach of international law. This is the principal difficulty with the controversial award in Bilcon.⁶⁸³

355. Other commentators have referred to the majority’s reasoning on arbitrariness as the “misdirected Bilcon approach to domestic regulation and administrative decision-making,”⁶⁸⁴ and have explained that “the reasoning given by the majority in Bilcon for adopting a lower threshold

RL-0112; Mesa Power Group, LLC, v. Government of Canada, PCA Case No. 2012-17, Second Submission of the United States of America, June 12, 2015, RL-0035.

⁶⁸⁰ Mesa Power Group, LLC, v. Government of Canada, PCA Case No. 2012-17, Second Submission of the United States of America, June 12, 2015, ¶¶ 21-22. RL-0035. ↩

⁶⁸¹ See, e.g., Lee M. Caplan & Jeremy K. Sharpe, United States, en Chester Brown, “Commentaries on Selected Model Investment Treaties”, (2013), p. 833, RL-0113; Anthea Roberts, Power and Persuasion in Investment Treaty Interpretation: The Dual Roles of States, 104 AJIL 179 (2010), p. 219, RL-0114; Tarcisio Gazzini, Interpretation of International Investment Treaties (2016), pp. 193-95, RL-0115. ↩

⁶⁸² Anthea Roberts, Power and Persuasion in Investment Treaty Interpretation: The Dual Roles of States, 104 AJIL 179 (2010), pp. 217, 219. RL-0114. ↩

⁶⁸³ Campbell McLachlan, Laurence Shore & Matthew Weiniger, International Investment Arbitration: Substantive Principles (Oxford 2017), ¶ 7.198. RL-0021. ↩

⁶⁸⁴ Kate Miles, Investment, en The Oxford Handbook of Environmental Law (Lavanya Rajamani & Jacqueline Peel eds., Oxford 2008), p. 777. RL-0117. ↩

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in finding a breach of FET under Article 1105, rests on faulty assumptions and a misreading of the development and content of the MST of aliens at CIL [customary international law].⁶⁸⁵ What is more, the recent NAFTA decision in Joshua Dean Nelson v. Mexico, while referring to Bilcoin, declined to adopt its standard on arbitrariness.⁶⁸⁶ As such, Bilcon is a misguided deviation from NAFTA jurisprudence:

NAFTA tribunals and tribunal members issuing separate opinions have referred on several occasions to the diserability of deference, policy space, regulatory autonomy and the expertise of primary decisión-makers, and have stated that their rule was not to second-guess the policy decisions of governments. NAFTA tribunals have rarely adopted an excessively strict approach to the standard of review in relation to regulatory or administrative acts of states.⁶⁸⁷

356. The repeated efforts of the Claimant to rely on Tecmed and Abengoa are misplaced. The Respondent already distinguished Tecmed in the Memorial de Contestacíon, but will repeat the key points here:

• Tecmed arose under a different treaty (Mexico-Spain BIT) with different legal standards.⁶⁸⁸
• The tribunal in Tecmed found that there had been a failure to give notice, which is not alleged here.⁶⁸⁹
• In Tecmed, the investor’s hazardous waste facility was well-established and the renewal of its permit was denied, which is not analogous to the situation in this case, in which the project never came close to starting.⁶⁹⁰

357. The Respondent also emphasizes that it does not agree with the dicta in Tecmed, and that the award’s persuasive authority has been eviscerated by wide-ranging subsequent criticism.⁶⁹¹

⁶⁸⁵ Michael Carfagnini, Too Low a Threshold: Bilcon v. Canada and the International Minimum Standard of Treatment, 53 Can. Y.B. Int’l L. 244 (2015), p. 276. RL-0118. ↩

⁶⁸⁶ Joshua Dean Nelson v. Estados Unidos Mexicanos, Caso CIADI No. UNCT/17/1, Award, June 5, 2020, ¶ 326. CL-0127. ↩

⁶⁸⁷ Caroline Henckels, Proportionality and Deference in Investor-State Arbitration: Balancing Investment Protection and Regulatory Autonomy (Cambridge 2015), p. 180 n.26 (“The majority decisión in Bilcon v. Canada was also criticized on this basis by the dissenting arbitrator.”). RL-0119. ↩

⁶⁸⁸ Counter-Memorial, ¶ 451. ↩

⁶⁸⁹ Counter-Memorial, ¶ 490. ↩

⁶⁹⁰ Counter-Memorial, ¶¶ 499, 554. ↩

⁶⁹¹ See, eg: Zachary Douglas, Nothing If Not Critical for Investment Treaty Arbitration: Occidental, Eureko and Methanex, 22 Arb Int’l 27 (2006), p. 28 (“The Tecmed ‘standard’ is actually not a standard at all; it is rather a description of perfect public regulation in a perfect world, to which all states should aspire but very few (if any) will ever attain.”) RL-0044; Campbell McLachlan, Laurence Shore & Matthew ↩

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358. The Respondent has also explained that in Abengoa, also arising under the Mexico-Spain BIT, the plant at issue had already been issued all of the administrative and environmental authorizations necessary to operate, and the tribunal found that governmental authorities had repeatedly confirmed that the plant met all applicable requirements.⁶⁹²

359. The situation, in this case, is far different: The Claimant never obtained the necessary approvals and never started operations, the review of the proposed MIA was conducted on the record with total transparency, and the decision was exhaustively justified in writing.

360. Importantly, “the NAFTA [exhibits a] general reluctance to substitute arbitral for governmental decision-making on matters within the purview of each NAFTA Party.”⁶⁹³ NAFTA Article 1114, as consistently interpreted by the NAFTA parties, “recognizes the sovereign right to protect the environment.”⁶⁹⁴ Similarly, the Metalclad tribunal noted that Article 1114 "permits a

Weiniger, International Investment Arbitration: Substantive Principles (Oxford 2017), ¶ 7.180-7.181(“In the first phase of investment treaty arbitral case law, a number of tribunals referred to the formulation of legitimate expectations given in Tecmed v Mexico [...] This formulation cannot be taken at face value.") RL-0021; Christophe Bondy, Fair and Equitable Treatment – Ten Years On, in Evolution and Adaptation: The Future of International Arbitration (Jean Engelmayer Kalicki & Mohamed Abdel Raouf eds., Kluwer 2019), pp. 209-210 (“The challenge with this doctrine [as expressed by by the Tecmed tribunal] was that it risked imposing a standstill requirement on States. Indeed, even within the four corners of VCLT interpretation, the approach adopted in relation to investor expectations has tended to soften over time.") RL-0103; MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7, Decision on Annulment, March 21, 2007, ¶ 67 (“TECMED Tribunal's apparent reliance on the foreign investor's expectations as the source of the host State's obligations (such as the obligation to compensate for expropriation) is questionable. The obligations of the host State towards foreign investors derive from the terms of the applicable investment treaty and not from any set of expectations investors may have or claim to have. A tribunal which sought to generate from such expectations a set of rights different from those contained in or enforceable under the BIT might well exceed its powers, and if the difference were material might do so manifestly”). RL-0041; White Industries Australia Ltd. V. The Republic of India, Final Award, Nov. 30, 2011, ¶¶ 10.3.5-10.3.6 (“[T]he Tribunal notes that the [dicta in Tecmed regarding legitimate expectations] has been subject to what it considers to be valid criticism.") RL-0120; Biwater Gauff Ltd v. United Republic of Tanzania, ICSID Case No ARB/05/22, July 24, 2008, ¶ 600 (“The Arbitral Tribunal notes . . . that certain expressions of a lower threshold have been the subject of some criticism – even outside of NAFTA. In particular, the frequently cited test set out in TECMED v. Mexico.”) RL-0121; El Paso Energy International Company c. La República Argentina, Caso CIADI No. ARB/03/15, Award, ¶ 343 (“Este Tribunal encuentra interesante que el comité de anulación del caso MTD haya optado por apartarse de la amplia definición del caso Tecmed citada por el tribunal de MTD.”) RL-0122.
⁶⁹² Counter-Memorial, ¶ 552. ↩
⁶⁹³ United Parcel Service of America Inc. v. Government of Canada, ICSID Case No. UNCT/02/1, Separate Statement of Dean Ronald A. Cass, 24 May 2007, ¶ 125. RL-0037. ↩
⁶⁹⁴ Meg Kinnear, Andrea Bjorklund & John Hannaford, Investment Disputes under NAFTA: An Annotated Guide to NAFTA Chapter 11 (Kluwer 2006), p. 1114-9. RL-0123. ↩

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party to ensure that investment activity is undertaken in a manner sensitive to environmental concerns.”⁶⁹⁵ This explicit treaty provision thus builds upon customary international law's deferential posture toward sovereigns' acts to protect the environment. In McLachlan's words, “[i]nternational tribunal[s] should give particular weight to governmental regulatory decisions taken in good faith in the interests of public morals, health or the environment.”⁶⁹⁶

361. Regrettably, instead of engaging with the appropriate legal standard that this Tribunal should apply to the evidentiary record, the Claimant, unfortunately, limits itself to arguing that it is not really “asking this Tribunal to second-guess good faith, science-based decision-making by a specialized Mexican agency.”⁶⁹⁷ The evidence shows otherwise and the Respondent is emphatic that this claim is totally inappropriate.

(2) The denial of the MIA was carried out in a fully
reasonable and transparent manner

362. The DGIRA’s second resolution is very thorough and exhaustively explains the basis of its decisión. To be clear, notwithstanding the effort of the Claimant to distract the Tribunal by arguing that the denial was based only on potential impacts on turtles,⁶⁹⁸ the second resolution of 2018 expressly states that the denial was also based on the potential impact on whales and other cetaceans, as explained in Sections II.A.2.a and II.D.3 of this Rejoinder⁶⁹⁹. In said Sections, the DGIRA analysis reflected in the 2018 Resolution on the potential impact of the Don Diego Project on whales that inhabit the Gulf of Ulloa is explained in an exhaustive manner. Similarly, Drs. Urbán and Viloria, leading academics and researchers specialized in marine mammals give an account of this.⁷⁰⁰

⁶⁹⁵ Metalclad Corporation c. los Estados Unidos Mexicanos, Caso CIADI No. ARB(AF)/97/1, Award, August 30, 2000, ¶ 98. CL-0071. ↩
⁶⁹⁶ Campbell McLachlan, Laurence Shore & Matthew Weiniger, International Investment Arbitration: Substantive Principles (Oxford 2017), ¶ 7.24 RL-0021. ↩
⁶⁹⁷ Reply, ¶ 224. ↩
⁶⁹⁸ See, eg., Reply, ¶¶ 18, 21, 77, 81-85. ↩
⁶⁹⁹ C-0009, p. 516 (“... considering that the, chelonians species mentioned above, as well as the large sea mammals species mentioned in the Legal Reasoning No. XVII of this Resolution, ...” (emphasis added) ↩
⁷⁰⁰ Urbán-Viloria Report, ¶11, 44-45. ↩

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363. In the Counter-Memorial, the Respondent explained in detail that multiple governmental and nongovernmental organizations raised serious concerns about the proposed project, including the following ⁷⁰¹:

• La Comisión Nacional de Áreas Naturales Protegidas (CONANP) (government agency)
• Centro Mexicano de Derecho Ambiental, A.C. (nonprofit)
• Oceans Future Society (nonprofit)
• La Asociación Interamericana para la Defensa del Ambiente (AIDA) (nonprofit)
• WildCoast/Costa Salvaje (nonprofit)
• Greenpeace (nonprofit)
• Centro de Investigaciones Biológicas del Noreste, S.C. (research institute)
• El Instituto de Ciencias del Mar de la UNAM (university institute)
• Society for Marine Mammalogy (scientific association)
• UNESCO (United Nations Agency)
• Sociedadas Pesqueras de Baja California (association of fishermen)
• Baja California Sur Congress (State Government Congress)

364. The involvement of these organizations reinforces that there were serious reasons to be concerned about the impact of the Project on the Golfo de Ulloa. The Claimant arrogantly dismisses the concerns of all these organizations, asserting that all of them were totally wrong, and that ExO had proven conclusively that the project was completely safe for all aspects of the environment.⁷⁰²

365. Strangely, the Claimant argues that resolution 2018 states that all the concerns expressed by the organizations, during the EIA procedure of the Don Diego Project, were resolved. However, the resolution 2018 (including the pages cited by the Claimant in paragraph 72 of the Reply) only says that the DGIRA incorporated the questions and the concerns of the comments into its own requests to ExO.⁷⁰³ The resolution 2018 does not say that the questions and concerns were resolved by ExO.

⁷⁰¹ Counter-Memorial, ¶¶ 279-305. ↩
⁷⁰² See, e.g., Reply, ¶ 83. ↩
⁷⁰³ See, e.g., C-0009, p. 177-178: ↩

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366. The Claimant supports its claim that the concerns were resolved with (i) the testimony of [Redacted], who cannot point to any documentary evidence, and (ii) its obviously false claim that the 2018 resolution did not discuss any impact on whales (ignoring the express conclusions of the DGIRA and Section XVII of the resolution).

367. Further, the resolution carefully explains that DGIRA is relying on the “principio precautorio," stating:

The application of the precautionary principle is justified not only from the legal point of view, as can be appreciated from the scientific papers analyzed below, which, due to their specificity, knowledge, advertisement and recent data, are considered the most reliable scientific information; thus, this agency makes it theirs, adopting it as technical grounds for the project's assessment.⁷⁰⁴

368. The resolution analyzed this issue in great detail, stating:

The international experience above mentioned reinforces the certainty of this environmental authority in the sense that it is not possible to apply the prevention principle for the case where there are any projects with a risk, with effects that are yet unknown and hence unforeseeable (Berros, 2013), in that sense, the precaution principle shall be privileged.
Therefore, if the project does not guarantee that, as a result of the activities for the dredging of the seabed in the project area AP, in the influence area of the project (Gulf of Ulloa) and in SAR (Baja California Peninsula) and the prevention and mitigation measures proposed by the petitioner do not prove that the project would not cause any serious or irreversible damage, this DGIRA deems that the appropriate thing would be that, given the insufficiency of scientific evidence, the decision made thereby shall invariably be subject to the precaution principle.
Scientists know a great part of harmful effects, but in some occasions, science lacks the necessary explanations. That is why it is convenient to adopt precautionary measures with which it is possible to act in favor of the environment and the ecosystems, in that sense DGIRA, instead of establishing additional prevention and mitigation measures, applies the precaution principle, which consists in whenever there is an evident threat or a serious or irreversible damage against the environment, the lack of scientific evidence may not represent an obstacle to propose measures that prevent environmental

“This DGIRA requested the petitioner to submit additional information to clarify several aspects expressed in the opinion of CIBNOR, including:-clarify the criteria used to define physical, chemical and biological characteristics and the magnitudes of biotopes identified in the SAR, as well as to explain the conglomerate analysis used to group said characteristics, and their level of significance-broaden the documented and field data on the characterization of the SAR on a scale of the order of hundreds of meters to a few kilometers in the space domain, and from weeks to the annual cycle, on the time scale-elaborate and analyze physical-chemical interactions that occur in the project area using the Stomel methodology.” There is nothing in the above quotation that indicates the concerns were resolved.

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deterioration, without that meaning that the lack of scientific certainty obliges the authority to approve the performance of projects and “alleviate" the adverse effect thereof through theoretical or dogmatic “mitigation” measures. Consequently, the precaution principle obliges not to approve or even cancel all those activities that suppose a threat against the environment, even in those cases where scientific evidence was not conclusive.⁷⁰⁵

369. Since the MIA 2015 was submitted, ExO affirmed that it was “very unlikely that there were turtles close to the dredge".⁷⁰⁶ In the Memorial and in the Reply, Odyssey affirms that it is "unlikely", "there is a low probability”, “there is a small chance” or that it would be “very limited” that the Project might affect the Caretta caretta turtle.⁷⁰⁷ The witnesses of Odyssey talk about a "high probability that the Project will not cause the death of the loggerhead turtle.⁷⁰⁸ The experts of Odyssey characterize the spatial coincidence between the dredging and individual activities of the loggerhead turtle in the Don Diego Project area and its impacts, as “unlikely” or “very limited”.⁷⁰⁹ All these assertions are debunked by the witness statement of Dr. Smirnoff, who has confirmed that even with the most stringent mitigation procedures, it cannot be confirmed that the Don Diego Project will not cause any impact on the Caretta caretta turtles.⁷¹⁰ The foregoing, along with the fact that the Claimant submitted inaccurate information lacking scientific rigor and methodology about the number of specimens that might be affected by the project,⁷¹¹ evidences the fact that there is no exact scientific information to determine that the activities of the Don Diego Project will not affect the environment and the endangered species.

370. Resolution 2018 considered that the MIA 2015 and the information provided by ExO, during the EIA Procedure, created uncertainty because it did not show a rigorous analysis. To arrive at this conclusion, the DGIRA also took into consideration the information presented by ExO during the whole EIA Procedure of the MIA 2015:

⁷⁰⁵ Id., ps. 512-513 (emphasis original). ↩
⁷⁰⁶ MIA 2015, p. 424. C-0002. ↩
⁷⁰⁷ Memorial, ¶107 (f). Reply, ¶¶ 31, 45, 50. ↩
⁷⁰⁸ First WS Doug Clarke, ¶ 74.5. ↩
⁷⁰⁹ See First Sergio Flores Report, ¶¶, 28, 113. Deltares Report about extraction of sands and its impacts, p. 4. ↩
⁷¹⁰ WS Jeffrey Seminoff, ¶ 17. ↩
⁷¹¹ C-0009, pp. 287. See Verónica Morales Report, ¶¶ 85-87. Group of Experts on Sea Turtles Report, ¶¶ 135-139. ↩

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Thus, this DGIRA conclusively considers, based on the information submitted in the MIA, IF and IC, as well as the most reliable scientific information available when accrediting the existence of the Caretta caretta turtle habitat, and underwater mining having irreversible impacts on the habitat where it is developed, without no proven mitigation measures that can reveres it, as much as possible, to its original condition, just as analyzed in Consideration XVIII of this Resolution.⁷¹²

371. Given that, the DGIRA took into consideration the prevention and precaution principles, which are recognized by the international environmental law.⁷¹³

In this sense, in addition to the technical aspects that this DGIRA is making its own, there is a legal reference that can clarify the reach of an adverse consequence derived from mining, which entails the application of the precautionary principle provided in article 5, section II, of the General Law for Wildlife, according to which in no case may the lack of scientific certainty be used as a justification to delay the adoption of efficient measures for the comprehensive preservation and handling of wildlife and its habitat.⁷¹⁴

372. As it was established in the First Report of Solcargo-Rábago, the precautionary principle is applicable when there is an empiric and scientific knowledge that warns the existence of possible consequences, which makes it necessary to adopt preventive measures to avoid it. The precautionary principle establishes that, in light of the existence of a danger of a serious and irreversible harm, necessary measures must be taken to avoid any negative affectation to the environment, even if there is no scientific certainty about the harm that might be caused.⁷¹⁵ In this sense, “la aplicación del principio precautorio justifica la negativa de la AIA, pues ExO no desvirtuó la presunción de impactos inaceptables sobre las especies amenazadas”.⁷¹⁶

373. Resolution 2018 further explains the support for the decisión to apply el principio precautorio by discussing the Rio Declaration on Environment and Development, United Nations Convention on the Law of the Sea, and Wildlife General Law, article 5º, secction 11.⁷¹⁷

⁷¹² DGIRA Resolution 2018, pp. 471-475. C-0009. ↩
⁷¹³ In the judgment of April 24, 2019 that was resolved an appeal submitted by ExO –from which the Claimant has prefered not to make any mention- the TFJA recognized that the DGIRA founded and motivated the 2018 Resolution in accordance with the precaution principle, as established in article 15 of the Rio Declaration, article 194 of UNCLOS, article 15 of the General Law of Wildlife and the principles established in article 15 of the LGEEPA. Judgment of the TFJA, pp. 112-113. R-0140. ↩
⁷¹⁴ DGIRA Resolution 2018, p. 329. C-0009. ↩
⁷¹⁵ Counter-Memorial, ¶¶ 151-152. First Solcargo-Rábago Report, ¶¶ 88-92. ↩
⁷¹⁶ Second Solcargo-Rábago Report, ¶¶ 4 m, 86, 87 and 150. ↩
⁷¹⁷ C-0009, pp. 513-514. Principles 2 and 15 of the Rio Declaration. R-0055. Articles 192, 193 and 194 of the United Nations Convention on the Law of the Sea. RL-0124. (CL-0130 english version) (“The ↩

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374. Both principles are part of customary international law, as resolved by the Inter American Court of Human Rights in the Advisory Opinion OC-23/17.⁷¹⁸ Similarly, in the Advisory Opinion of "Legality of the Threat or Use of Nuclear Weapons", the ICJ established that “[T]he existence of the general obligation of States to ensure that activities within their jurisdiction and control respect the environment of other States or of areas beyond national control is now part of the corpus of international law relating to the environment”.⁷¹⁹

375. In Gabčíkovo-Nagymaros Project, the ICJ resolved, in respect of the construction of dam and its environmental impact in the Danube river:

The Court is mindful that, in the field of environmental protection, vigilance and prevention are required on account of the often irreversible character of damage to the environment and of the limitations inherent in the very mechanism of reparation of this type of damage. Throughout the ages, mankind has, for economic and other reasons, constantly interfered with nature. In the past, this was often done without consideration of the effects upon the environment. Owing to new scientific insights and to a growing awareness of the risks for mankind - for present and future generations - of pursuit of such interventions at an unconsidered and unabated pace, new norms and standards have been developed, set forth in a great number of instruments during the last two decades. Such new norms have to be taken into consideration, and such new standards given proper weight, not only when States contemplate new activities but also when continuing with activities begun in the past. This need to reconcile economic development with protection of the environment is aptly expressed in the concept of sustainable development.⁷²⁰

376. In the recent award issued by the tribunal in The South China Sea Arbitration, articles 192 y 194 of the UNCLOS, that establish the international obligation to protect the sea environment, were analyzed:

States have the obligation to protect and preserve the sea environment"). Article 14 of the Convention on Biological Diversity. RL-0081.
⁷¹⁸ Advisory opinion OC-23/17 issued on November 15, 2017 by the Inter American Court of Human Rights, ¶¶ 129 y 177. RL-0082 (“The principle of prevention of environmental damage is part of customary international law. Such protection not only covers land, water and the atmosphere, but also includes flora and fauna [...] the precautionary approach has initiated a tendency to become part of customary international law."). ↩
⁷¹⁹ Legality of the Threat or Use of Nuclear Weapons, Advisory Opinion, July 8, 1996, CIJ, ¶ 29. RL-0125. The International Court of Justice adopted the same position in the Pulp Mill on the River of Uruguay ("The Court points out that the principle of prevention, as a customary rule, has its origins in the due diligence that is required of a State in its territory.”). Case concerning Pulp Mills on the River Uruguay (Argentina v. Uruguay), Judgment of April 20, 2010, ICJ, ¶ 101. RL-0126 ↩
⁷²⁰ Case Concerning Gabčíkovo-Nagymaros Project (Hungary/Slovakia), Judgment, September 25, 1997, ICJ, ¶140. RL-0127. ↩

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Article 192 of the Convention provides that “States have the obligation to protect and preerve the marine environment". Although phrased in general terms, the Tribunal considers it well established that Article 192 does impose a duty on States Parties, the content of which is informed by the other provisions of Part XII and other applicable rules of international law. This “general obligation" extends both to “protection" of the marine environment from future damage and “preservation" in the sense of maintaining or improving its present condition. Article 192 thus entails the positive obligation to take active measures to protect and preserve the marine environment, and by logical implication, entails the negative obligation not to degrade the marine environment. [...] Thus States have a positive "duty to prevent, or at least mitigate' significant harm to the environment when pursuing large-scale construction activities. [...]
Articles 192 and 194 set forth obligations not only in relation to activities directly taken by States and their organs, but also in relation to ensuring activities within their jurisdiction and control do not harm the marine environment. [...]
The fifth paragraph of Article 194 covers all measures under Part XII of the Convention (whether taken by States or those acting under their jurisdiction and control) that are necessary to protect and preserve “rare or fragile ecosystems” as well as the habitats of endangered species.⁷²¹

377. The claims of Odyssey and the expert reports provided in this arbitration are based on “probabilities” –not to say speculations-, which evidences a high degree of uncertainty in respect of the damage that the Don Diego Project might cause to the environment and its impact on endangered species, e.g. sea turtles and whales.

378. La Demandante has only addressed this aspect of the resolution in the Memorial, asserting that the precautionary principle does not apply because “there is no risk of serious or irreversible damage to the environment."⁷²² This statement is both ludicrous on its face and is thoroughly contradicted by the evidence and analysis in the resolution itself. The Claimant and its experts are minimizing the effect of the precautionary and prevention prnciples, which establish that a State has "a duty to prevent, or at least mitigate significant harm to the environment when pursuing large-scale construction activities”.⁷²³

⁷²¹ The South China Sea Arbitration (The Republic of The Philippines v The People's Republic of China), PCA No 2013-9, Award, July 12, 2016, ¶¶ 941-944. RL-0128. See Chagos Marine Protected Area Arbitration (Mauritius v. United Kingdom), Award, March 18, 2015, ¶¶ 320, 538. (“Article 194 is accordingly not limited to measures aimed strictly at controlling pollution and extends to measures focused primarily on conservation and the preservation of ecosystems."). ↩
⁷²² Memorial, ¶ 6. ↩
⁷²³ Indus Waters Kishenganga Arbitration (Pakistan v. India), PCA, Partial Award, February 18, 2013, ¶ 451. RL-0130. (“the “principle of general international law" that States have “a duty to prevent, or at least mitigate" significant harm to the environment when pursuing large-scale construction activities."), citando Arbitration Regarding the Iron Rhine (Kingdom of Belgium v. the Kingdom of the Netherlands) PCA, Award, May 24, 2005, ¶ 59. ↩

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379. In essence, the Claimant is requesting that the Tribunal stand in the place of the DGIRA, evaluate or disregard the thousands of pages of evidence, analyses and comments that were submitted, reject the precautionary principle in its entirety, and conclude that the Project was totally safe for turtles, whales, and all other sealife in the Gulf of Ulloa. In doing do, the Tribunal would also have to conclude that the decisión of the DGIRA was completely unsupported and "arbitrary." There is simply no basis under the NAFTA or on the factual record for the Tribunal to make such radical findings.

380. The second resolution was correct in its result and moreover, even if for some reason the Tribunal thought the outcome was wrong, it is obvious that the decision was well-supported with substantial evidence and comprehensive reasoning.⁷²⁴

(3) The Claimant has not established any “political
motivation”

381. Claimant’s argument that the denial is based on “political motivation” falls apart when put in the proper context. The essence of the argument of the Claimant is that (i) one individual could arbitrarily make the decision without regard to the record evidence and technical anlysis by DGIRA and (ii) that criticism of an administrative agency by the media, the general public, or other interest groups creates an irrefutable presumption that all decisions are improperly motivated by politics in violation of international law.

382. With regard to the first element, the Claimant has already established that no individual person, including Mr. Pacchiano, had the legal authority to compel a decision not already developed and supported by technical and scientific evidence.⁷²⁵

383. With regard to the second element, it is a fact that governments are constantly subject to criticism of some form, and therefore the position of la Demandante would mean that every decisión by the governments of Mexico, the United States and Canada must be deemed politically motivated and somehow therefore a violation of the NAFTA. That position is not sustainable.

384. Also, as explained by Mr. Pacchiano in his second statement:

Being a public servant, and especially a Secretary of State, implies being under constant pressure, and it is part of the work and responsibility that one assumes. In this regard,

⁷²⁴ See Group of Experts in Sea Turtles Report, ¶ 125. Urbán-Viloria Report, ¶ 44. ↩
⁷²⁵ See supra, Section II.C.1. ↩

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my work was always in accordance with the law, regardless the repercussions or opinions that could affect my personal and public image. Contrary to what [Redacted] and Odyssey assume, my position as Secretary of State was always to comply with the law and not to be popular.⁷²⁶

385. La Demandada refers the Tribunal to paragraphs 518 to 523 of the Counter-Memorial, where the Respondent set out the discussions of complex regulatory matters by the tribunals in Methanex, S.D. Meyers, Thunderbird, Glamis Gold Chemtura y Johua Dean Nelson. It is particularly important to focus again on the statement por el tribunal en S.D. Myers c. Canada:

When interpreting and applying the “minimum standard,” a Chapter 11 tribunal does not have an open-ended mandate to second-guess government decision-making. Governments have to make many potentially controversial choices. In doing so, they may appear to have made mistakes, to have misjudged the facts, proceeded on the basis of a misguided economic or sociological theory, placed too much emphasis on some social values over others and adopted solutions that are ultimately ineffective or counterproductive. The ordinary remedy, if there were one, for errors in modern governments is through internal political and legal processes, including elections.⁷²⁷

386. Also in relation to this issue, the effort of the Claimant to distinguish Vento is unavailing. The Claimant simply provides a short summary that says Vento involved a different fact pattern involving the customs treatment of imports of motorcycles.⁷²⁸ The Claimant did not claim that the present case involved the same industry sector or domestic laws, rather the Claimant explained in great detail the similar nature of the types of arguments regarding “marching orders” that were made in Vento, [Redacted]

387. In this case, the Claimant has no answer for the facts that (i) [Redacted] the MIA, (ii) there is a well-established structure and system within SEMARNAT that prevents the Secretary or Undersecretary from interfering in technical decisions by the DGIRA, (iii) [Redacted], and (iv) [Redacted]⁷²⁹

⁷²⁶ Second WS Rafael Pacchiano, ¶ 18. ↩
⁷²⁷ S.D. Myers, Inc. v. Government of Canada, UNCITRAL, Partial Award, Nov. 13, 2000, ¶ 261. CL-0103. ↩
⁷²⁸ Reply, ¶ 197. ↩
⁷²⁹ Counter-Memorial, ¶¶ 455-470. ↩

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388. In summary, la Demandante has not demonstrated that the denial of the MIA was the result of any improper conduct.

d. The Claimant had no legitimate expectations that would
be protected under customary international law

389. As the Claimante now concedes,⁷³⁰ the concept of “legitimate expectations" is not an element of FET under customary international law – and in turn not under NAFTA Article 1105(1).⁷³¹ Rather, expectations, to the extent that they are legitimate, may at most constitute a factor to be considered in evaluating an alleged FET breach.⁷³²

390. But that categorization issue alone is only the beginning of the required analysis. Once again, the Claimant skips over the meaning of “legitimate expectations" – thus failing to carry its burden. In particular, as explained in the Counter Memorial,⁷³³ legitimate expectations stand or fall depending on whether, objectively, specific representations have in fact been made. Such expectations must “arise through targeted representations or assurances made explicitly or implicitly by a state party"⁷³⁴ so as to so “definitive, unambiguous and repeated" as to constitute a quasi-contractual relationship.⁷³⁵

⁷³⁰ Reply, ¶ 202. ↩
⁷³¹ Patrick Dumberry, The Fair and Equitable Treatment Standard: A Guide to NAFTA Case Law on Article 1105 (Kluwer 2013), pp. 158-59 (“[T]here is little support for the assertion that there exists under customary law any obligation for host States to protect investors' legitimate expectations."); see also., p. 265 ("In the present author's view, there is indeed little evidence to support the assertion that there exists under custom an obligation for host States to protect investors' legitimate expectations. Scholars have also interpreted the concept of legitimate expectations as a general principle of law based on its recognition in many domestic legal systems. This argument is of limited relevance in the specific context of Article 1105. This is because the binding FTC Note is clear to the effect that NAFTA tribunals should look solely to custom as a source of international law in their interpretation of Article 1105, and not at general principles of law."). RL-0022. ↩
⁷³² Campbell McLachlan, Laurence Shore & Matthew Weiniger, International Investment Arbitration: Substantive Principles (Oxford 2017), ¶ 7.179 (legitimate expectations are "a relevant factor in the application of the investment treaty's guarantee of fair and equitable treatment and does not supply an independent treaty standard of its own"). RL-0021. ↩
⁷³³ Counter-Memorial, ¶¶ 509-527. ↩
⁷³⁴ Grand River Enterprises Six Nations, Ltd., et al. v. United States of America, UNCITRAL, Award, Jan. 12, 2011, ¶¶ 141-42. CL-0057. ↩
⁷³⁵ Glamis Gold Ltd. v. United States of America, Award, June 8, 2009, ¶ 802 (quoting Metalclad). CL-0055. ↩

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391. Importantly, the Claimant now agrees that “Odyssey could not have an expectation that the Project would be approved ....".⁷³⁶ Instead, the Claimant shifts to claiming that it had a vague expection "that Mexico would follow its own laws ....' ."⁷³⁷ But general complaints of injustice and perceived subjective “expectations” are insufficient to support a violation of the standard on fair and equitable treatment. Thus, “the absence of representations is a material factor in leading to a finding that the standard has not been breached."⁷³⁸

392. The Claimant also tosses out a casual allegation that it was promised that the MIA would be approved if certain letters of support were obtained, but in support repeatedly cites to a single email exchange not involving any SEMARNAT officials in which a representative of ExO discusses that there has been no request for such letters in relation to the resubmission of the MIA.⁷³⁹ The Claimant also cites to a witness statement of Mr. Lozano, a former employee, who presented "hearsay” testimony that Mr. Pacchiano told Mr. Ancira (the chairman of AHMSA) that the MIA would be approved if the letters of support were submitted;⁷⁴⁰

393. The Tribunal should take note that the Claimant has not submitted a statement from Mr. Ancira, thereby making the testimony of Mr. Lozano wholly incredible. The new claim by [Redacted] strains credibility, and is strongly denied by Mr. Pacchiano.

e. The Claimant has not exhausted all the available
remedies in Mexico

394. The allegations of the Claimant that it was denied due process and that it was the victim of an arbitrary decision constitutes a claim of denial of justice by SEMARNAT in its role as adjudicator of requests for environmental approvals. Apart from the reasons set forth above, the claim of the Claimant must fail because it has continued to pursue remedies in the Mexican courts, which remain pending, and therefore it cannot demonstrate a failure of the Mexican legal system.

⁷³⁶ Reply, ¶ 204. ↩
⁷³⁷ Reply, ¶ 204. ↩
⁷³⁸ Campbell McLachlan, Laurence Shore & Matthew Weiniger, International Investment Arbitration: Substantive Principles (Oxford 2017), ¶¶ 7.185, 7.187. RL-0021. ↩
⁷³⁹ Reply, ¶¶ 88, 101, 118, 205. ↩
⁷⁴⁰ Reply, ¶ 205. ↩

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In this regard, it is important to note that the Claimant has not complained in any manner about its treatment in the courts.

395. As established in Section II.A., the Claimant pretends that the Tribunal review the same claims that were submitted to domestic courts. Effectively, Tables 1 and 3 evidenced the similarity between the arguments and claims presented by ExO and the Claimant either in front of domestic courts or in the present arbitration.

396. As explained in Section II.A.1, the appeal submitted by ExO –which is pending of resolution from the TFJA- will invariably affect the arguments of the Claimant in this arbitration. This is so, because there is a chance that the denial to the MIA authorization be confirmed as legal. In accordance with this, the argument of the Claimant will lack any merit because the conclusion of the TFJA will be contrary to the allegations of the Claimant, which are based in the denial of the MIA due to political motives. It has to be considered that the Claimant has not submitted any claims against Mexican judicial or administrative tribunals.

397. Another possible scenario for the appeal initiated by ExO before domestic tribunals could be that the TFJA determines that the Resolution 2018 is not properly founded and motivated. In that case, the TFJA might order the DGIRA to issue a new resolution to remedy the deficiencies that were identified, such as what happen with resolution 2016. Finally, even if there is also a chance that the TFJA might authorize the MIA and order the DGIRA to do it, it is clear that in that case, the Claimant, while seeking an economic compensation for a measure that is not a matter in this arbitration, would obtain a double remedy.

398. Even if the legal experts of the Claimant have omitted to discuss this important aspect, the legal experts of Mexico (Solcargo-Rábago) explained this scope of the appeal procedure in the Resolution 2018 before the TFJA.⁷⁴¹ In this sense, the legal experts of Mexico agree that the procedure remains pending and is not definitive, thus, there are multiple scenarios that might derive from the TFJA decision, specially they established the following:

The fact that ExO has promoted a nullity lawsuit against this second resolution does not imply that the DGIRA must authorize the Project. Again, the TFJA will have to rule on the validity of the resolution and, where appropriate, may order the DGIRA to issue a new resolution. In this order of ideas, if the resolution issued again by the TFJA is contrary to the interests of ExO, it has the opportunity to challenge it via a direct amparo

⁷⁴¹ Second Solcargo-Rábago Report, Section VII.C ↩

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trial. [...] if the resolution of October 12, 2018 is decreed again, it is likely that SEMARNAT will have to issue a new resolution, in accordance with the points indicated by the TFJA. The Experts of Mexico understand that the nullity trial initiated by ExO against the resolution of October 12, 2018 is still pending, therefore, there is still no final judgment.⁷⁴²

399. In Corona Materials, LLC c. Dominican Republic, the Environment Ministry of the Dominican Republic had denied the claimant an approval for a concession on the basis that the project was not environmentally viable. In dismissing a claim for denial of justice within the context of fair and equitable treatment, the tribunal stated:

... Tribunal does not believe that an administrative act, in and of itself, particularly as the level of a first instance decisionmaker, can constitute a denial of justice under customary international law, when further remedies or avenues of appeal are potentially available under municipal law.⁷⁴³

400. The tribunal stated further that "[e]xhaustion of local remedies is, as the Claimant correctly pointed out in its Rejoinder, typically not a jurisdictional prerequisite to an investor's submitting an international claim, but the exhaustion of local remedies is relevant in a consideration of the merits, as a substantive element of the alleged breach.”⁷⁴⁴ The tribunal added:

In order to exhaust local remedies, the general requirement (subject to the futility exception discussed below) is as expressed by the United States in its intervention: the investor must proceed to the highest court in the whole system, which may include more than one line of tribunals or courts where the legal system of the respondent or host state has a multiple hierarchy of fora which can provide redress.⁷⁴⁵

401. Thus, the tribunal concluded that “a finding of denial of justice under international law necessarily depends on the final product of the State's domestic legal system,” and “there can be no denial of justice without a final decision of a State's highest judicial authority.”⁷⁴⁶

402. The same principle has been affirmed by other tribunals, such as in Apotex v. United States:

[A] claimant cannot raise a claim that a judicial act constitutes a breach of international law, without first proceeding through the judicial system that it purports to challenge, and thereby allowing the system an opportunity to correct itself. In the words of Jan Paulsson, Denial of Justice in International Law 108 (2005): “For a foreigner's

⁷⁴² Second Solcargo-Rábago Report, ¶¶ 102, 104 y 106. ↩
⁷⁴³ Corona Materials LLC v. República Dominicana, ICSID Case No. ARB(AF)14/3, Award, May 31, 2016, ¶ 248. RL-0132. ↩
⁷⁴⁴ Id., ¶ 259. RL-0132. ↩
⁷⁴⁵ Id., ¶ 260 (citation and internal quotation marks omitted). RL-0132. ↩
⁷⁴⁶ Id., ¶ 264. RL-0132. ↩

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international grievance to proceed as a claim of denial of justice, the national system must have been tested. Its perceived failings cannot constitute an international wrong unless it has been given a chance to correct itself."⁷⁴⁷

403. The Loewen tribunal said similarly:

The purpose of the requirement that a decision of a lower court be challenged through the judicial process before the State is responsible for a breach of international law constituted by judicial decision is to afford the State the opportunity of redressing through its legal system the inchoate breach of international law occasioned by the lower court decision.⁷⁴⁸

404. Following the Loewen tribunal's holding, the tribunal in Waste Management II highlighted that, for an investor to succeed in a denial of justice claim, “the [domestic judicial] system must be tried and have failed, and thus in this context the notion of exhaustion of local remedies is incorporated into the substantive standard and is not only a procedural prerequisite to an international claim."⁷⁴⁹

405. As summarized by Professor Douglas, “international responsibility towards foreign nationals for acts and omissions associated with an adjudicative procedure can only arise at the point at which the adjudication has produced its final result; it is only at that point that a constituent element of that responsibility has been satisfied, which is the existence of damage to the foreign

⁷⁴⁷ Apotex Inc. v. United States of America, ICSID Case No. UNCT/10/2, Award on Jurisdiction and Admissibility, June 14, 2013, ¶ 282. RL-0036. ↩
⁷⁴⁸ Loewen Group, Inc. and Raymond L. Loewen v. United States, ICSID Case No. ARB(AF)98/3 Award, June 26, 2003, ¶ 156. RL-0038. See also International Thunderbird Gaming Corp. c. México, UNCITRAL, Laudo, 26 de enero de 2006 (RL-0003): ↩

"As to the alleged failure to provide due process (constituting an administrative denial of justice) and the alleged manifest arbitrariness in administration (constituting proof of an abuse of right) in the SEGOB proceedings, the Tribunal cannot find sufficient evidence on the record establishing that the SEGOB proceedings were arbitrary or unfair, let alone so manifestly arbitrary or unfair as to violate the minimum standard of treatment." ¶ 197.
"Finally, the SEGOB proceedings (including the Administrative Resolution) were subject to judicial review before the Mexican courts. The Tribunal notes in this regard that EDM filed a nullification (juicio de nulidad) of the 10 October Ruling before the federal tax and administrative court (in which it did not raise any complaint about Lic. Aguilar Coronado's absence at the Administrative Hearing). EDM went on to appeal the court's decision on the nullification (juicio de amparo), but subsequently withdrew from the proceedings, which decision cannot be attributed to Mexico." ¶ 201.

⁷⁴⁹ Waste Management Inc. c. Estados Unidos Mexicanos, ICSID Case No. ARB (AF)/00/3, Laudo, April 30, 2004, ¶¶ 97, 116. RL-0133. ↩

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national.").⁷⁵⁰ To the same effect, McLachlan summarizes that “[t]here is now a consistent line of investment treaty jurisprudence, considering denial of justice within the context of fair and equitable treatment, to the effect that: ‘As long as such decisions are not final and binding and can be corrected by the internal mechanisms of appeal, they do not deny justice. . . .”⁷⁵¹

406. In this case, where the resolution is still being reviewed by the TFJA, there has not been a final result, and therefore the allegations of la Demandante cannot amount to a violation of Article 1105.

f. The Claimant Has Waived Its "Full Protection and
Security" Claim

407. In its Memorial, the Claimant asserted, in a summarized way, that the Respondent violated the obligation of full protection and security “[b]y denying Claimants environmental approval based on improper motives, and where based on the law and reason, the permit should have been granted ....".⁷⁵² The Counter-Memorial provided a detailed explanation of why the scope of “full protection and security" under NAFTA Article 1105 is limited to physical protection, and therefore is not applicable to the facts as alleged by the Claimant.⁷⁵³

408. The Claimant's Reply does not even mention its full protection and security claim (except in its petition for relief) and does not respond in any manner to the points made by the Respondent.⁷⁵⁴ Therefore, it is obvious that the Claimant has dropped – or should be deemed to have waived – its full protection and security claim, in accordance with NAFTA.

⁷⁵⁰ Zachary Douglas, International Responsibility for Domestic Adjudication: Denial of Justice Deconstructed, 63(3) Int'l. & Comp. L.Q. (2014), p. 28. RL-0134. ↩
⁷⁵¹ Cambell McLachlan, Laurence Shore & Matthew Weiniger, International Arbitration: Substantive Principles (Oxford 2017), ¶ 7.140. RL-0021. ↩
⁷⁵² Memorial, ¶ 298. ↩
⁷⁵³ Counter-Memorial, ¶¶ 528-44. ↩
⁷⁵⁴ The sole reference to “full protection and security” in la Demandante's 240-page reply appears in the request for relief, where la Demandante requests that the Tribunal “DECLARE that Mexico violated NAFTA Article 1105(1) by failing to accord ... full protection and security." Reply, ¶ 585. ↩

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2. The Claimant has not been the object of an indirect
expropriation, as established in NAFTA article 1110

409. The Claimant is still not clear about what exactly was taken from it: was it ExO (which belongs under the same property), a business opportunity that belongs to ExO (but not to Odyssey), or is it something else? Is important to establish that the reference to “indirect expropriation” in NAFTA article 1110 refers to a regulatory expropriation, and not to the taking of an investment in which a person only has an indirect property. Also, if the alleged investment that was taken is ExO, then the Claimant has not tried to explain why it would have a right to compensation for the 47% of ExO that it decided not to possess.

410. In any case, the Claimant cannot escape the fact that it had no right capable of expropriation. As explained previously, the Claimant had no vested right to exploit the deposits.⁷⁵⁵ In fact, the Claimant had never received the necessary approvals to mine these deposits, any other deposits in Mexico, or any other deposits anywhere else in the world.⁷⁵⁶ As such, the purported rights of the Claimant were merely contingent in nature and thus incapable of expropriation.

411. In a weak attempt to circumvent this issue, the Claimant continues to state the obvious in arguing a different point – namely, that intangible property rights would be capable of expropriation.⁷⁵⁷ Similarly ineffective, the Claimant quotes its own expert report to the effect that Mexican tax law defines “intangible assets” as including those that “shall generate future financial benefits."⁷⁵⁸ There is no indication here that the Claimant's contingent right will generate any future benefit, and the tax law is thus irrelevant.

412. Even if the Claimant could establish a contingent right to develop the deposit at some future point in time, such right would not be cognizable for expropriation purposes. That is so because not every potential harm to future valuation of an investment constitutes a protected property interest for expropriation purposes.⁷⁵⁹

⁷⁵⁵ Counter-Memorial, ¶¶ 546-50. ↩
⁷⁵⁶ Counter-Memorial, ¶ 549. ↩
⁷⁵⁷ Reply, ¶ 242. ↩
⁷⁵⁸ Reply, ¶ 245. ↩
⁷⁵⁹ Generation Ukraine Inc. v. Ukraine, ICSID Case No. ARB/00/9, Award, Sept. 16, 2003, ¶ 6.2 ("Since expropriation concerns interference in rights in property, it is important to be meticulous in identifying the rights duly held by the Claimant at the particular moment when allegedly expropriatory acts ↩

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413. Next, the Claimant's attempt attempt to align the factual matrix of this case with those in prior awards fails for a simple reason: The Claimant omits the fact that the rights involved in those cases differed from the contingent right purportedly held by Odyssey that was subject to an extensive range of regulatory approvals.⁷⁶⁰

414. In particular, the Tethyan v. Pakistan decision, currently stayed by ICSID itself and additionally still subject to an annulment proceeding before the federal district court in Washington, D.C.,⁷⁶¹ concerned a joint venture agreement between the investor and the state to convert an exploration license into a mining lease.⁷⁶² This led the claimant to spent “more than US$240 million on its exploration work” only to then see the government itself use the feasibility study of the claimant to effectively take over the project.⁷⁶³ In South American Silver v. Bolivia, the "Bolivian authorities themselves in their public statements referred to the measures as a 'nationalization,'”⁷⁶⁴ which means that the respondent conceded that the claimant's rights had been expropriated, and that the only remaining question was whether the expropriation was nevertheless lawful.⁷⁶⁵ None of these dispositive facts are present here. As to Bear Creek v. Peru, the Claimant

occurred." (emphasis added)), RL-0057; Methanex v. United States, UNCITRAL, Award, Final Award on Jurisdiction and Merits, Aug. 3, 2005, Part IV, ¶ 17 (holding that “items such as goodwill and market share may ... constitute ... an element of the value of an enterprise and as such ... may figure in valuation. But it is difficult to see how they might stand alone, in a case like the one before the Tribunal[.]”), CL-0074.
⁷⁶⁰ Reply, ¶ 246. ↩
⁷⁶¹ Tethyan Copper Company Pty Limited v. Islamic Republic of Pakistan, Docket No. 1-19-cv-02424, D.C. District Court, Request for Annulment of the Award dated 12 July 2019, Nov. 8, 2019, RL-0058; see also Tethyan Copper Company Pty Limited v. Islamic Republic of Pakistan, Docket No. 1-19-cv-02424, D.C. District Court, Joint Status Report, Mar. 23, 2021 (“On March 16, 2021, the Secretary General of ICSID notified the parties that she registered the Application, and that the “enforcement of the Award is provisionally stayed” in accordance with ICSID Rule 54, which provides for an automatic stay on request pending a decision by the arbitral tribunal regarding whether a stay of enforcement should be continued pending further ICSID proceedings."), RL-0135. ↩
⁷⁶² Tethyan Copper Company Pty Limited v. Islamic Republic of Pakistan, ICSID Case No. ARB/12/1, Decision on Jurisdiction and Liability, November 10, 2017, ¶ 217. RL-0058. ↩
⁷⁶³ Tethyan Copper Company Pty Limited v. Islamic Republic of Pakistan, ICSID Case No. ARB/12/1, Decision on Jurisdiction and Liability, November 10, 2017, ¶ 1328-29. RL-0058. ↩
⁷⁶⁴ South American Silver Limited (Bermuda) c. El Estado Plurinacional de Bolivia, CPA Caso No. 2013-15, Laudo, Nov. 22, 2018, ¶ 650. CL-0108. ↩
⁷⁶⁵ South American Silver Limited (Bermuda) c. El Estado Plurinacional de Bolivia, CPA Caso No. 2013-15, Laudo, Nov. 22, 2018, ¶ 551. CL-0108. ↩

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cannot deny that the investor in this case had already obtained the authorizations to “acquire, own, and operate the corresponding mining concessions.⁷⁶⁶ That is not the case here.

415. On the role of investor expectations, the Claimant do not contest that "[l]egitimate expectations . . . have also entered the law governing indirect expropriations"⁷⁶⁷ As stated in the Counter Memorial, McLachlan establishes that, “the absence of specific representations is a material factor in leading to a finding that the standard has not been breached."⁷⁶⁸ Indeed:

[A]s a matter of general international law, a non-discriminatory regulation for a public purpose, which is enacted in accordance with due process and, which affects, inter alios, a foreign investor or investment is not deemed expropriatory and compensable unless specific commitments had been given by the regulating government to the then putative foreign investor contemplating investment that the government would refrain from such regulation.⁷⁶⁹

416. The Claimant does not address these or any of the legal authorities used by the Respondent. Instead, the Claimant, without offering a single authority, merely seeks to draw a terminological distinction between “investment-backed expectations” and “legitimate expectations,”⁷⁷⁰ but, e.g., McLachlan and the many authorities cited discuss expectations in the context of indirect expropriation as “legitimate expectations" – not, as the Claimant would have it, “investment-backed expectations."⁷⁷¹ At any rate, this is nothing but a weak attempt at a semantic distinction with no substantive effect on the case.

417. In sum, aside from the inability of the Claimant to point to a non-contingent right, likewise the Claimant fails to identify any specific representations that could have given rise to legitimate expectations from the investor.

⁷⁶⁶ Bear Creek Mining Corporation v. Republic of Peru, ICSID Case No. ARB/14/21, Award, Nov. 30, 2017, ¶ 149. CL-0016. ↩
⁷⁶⁷ Rudolph Dolzer & Christoph Schreuer, Principles of International Investment Law (Oxford 2012), p. 115. RL-0031. ↩
⁷⁶⁸ Campbell McLachlan, Laurence Shore & Matthew Weiniger, International Investment Arbitration: Substantive Principles (Oxford 2017), ¶¶ 7.187, 8.122 n. 228 (cross-referencing the legitimate expectations discussion in the FET context). RL-0021. ↩
⁷⁶⁹ Methanex v. United States, UNCITRAL, Final Award on Jurisdiction and Merits, Aug. 3, 2005, Part IV, ¶ 7. CL-0074. ↩
⁷⁷⁰ Reply, ¶ 252. ↩
⁷⁷¹ Campbell McLachlan, Laurence Shore & Matthew Weiniger, International Investment Arbitration: Substantive Principles (Oxford 2017), ¶¶ 8.121-122, 8.133, 8.134, 8.154. RL-0021. ↩

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418. In fact, the Claimant concedes that “states are vested with a legitimate right to exercise police powers.".⁷⁷² That is so, for instance, where an environmental agency renders a determination as to the discontinuation of a certain chemical.⁷⁷³ Most importantly, however, as discussed above an international investment tribunal should not second-guess the findings of such an agency.⁷⁷⁴

3. The Claimant has not been able to prove that it received less
favorable treatment as established in NAFTA article 1102

419. As the Claimant states, “[t]he parties appear to be in general agreement on the components of the national treatment analysis," including “treatment” “in like circumstances” that is “no less favorable."⁷⁷⁵

420. As previously addressed by the Claimant, “[t]he legal burden to establish the affirmative requirements of the national treatment standard rests always on the claimant.”⁷⁷⁶ The Claimant also reiterates that the circumstances are necessarily context dependent⁷⁷⁷:

The Parties did not take issue with the concept expressed by the Pope & Talbot tribunal, that “circumstances' are context dependent and have no unalterable meaning across the spectrum of fact situations." In addition, the Parties accepted, as the Archer Daniels tribunal put it, that “all ‘circumstances' in which the treatment was accorded are to be taken into account in order to identify the appropriate comparator." These obviously include the legal and regulatory regime that governs parties that are being compared for the purposes of NAFTA Article 1102.⁷⁷⁸

421. Even if treatment violates the standard, it may nevertheless be justified if it has “a reasonable nexus to rational government policies that (1) do not distinguish, on their face or de

⁷⁷² Reply, ¶ 255. ↩
⁷⁷³ Crompton (Chemtura) Corp. v. Government of Canada, PCA Case No. 2008-01, Award, Aug. 2, 2010, ¶ 29. CL-0033. ↩
⁷⁷⁴ Crompton (Chemtura) Corp. v. Government of Canada, PCA Case No. 2008-01, Award, Aug. 2, 2010, ¶¶ 134-35. CL-0033. ↩
⁷⁷⁵ Reply, ¶ 257. ↩
⁷⁷⁶ Campbell McLachlan, Laurence Shore & Matthew Weiniger, International Investment Arbitration: Substantive Principles (Oxford 2017), ¶ 7.275. RL-0021. ↩
⁷⁷⁷ Counter-Memorial, ¶ 577. ↩
⁷⁷⁸ Apotex v. United States of America, ICSID Case No. ARB(AF)/12/1, Award, Aug. 24, 2014, ¶ 8.42. RL-0036. ↩

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facto, between foreign-owned and domestic companies, and (2) do not otherwise unduly undermine the investment liberalizing objectives of [the treaty]."⁷⁷⁹

422. As established in the Counter-Memorial, the National Treatment claim submitted by Odyssey lacks any merit, which again is demonstrated in the Reply.

423. As a starting point, the Respondent finds it unconvincing for Odyssey to assert that Don Diego is "fundamentally different” from the Chatham Rise in New Zealand and Sandipiper in Namibia, based on “technological” aspects, despite the fact that all three (Don Diego, Chatham Rise and Sandpiper) are offshore seabed dredging projects focused on removing phosphate ore.⁷⁸⁰ Contrary to this situation, the Claimant presents unconvincing arguments to cliam that the Don Diego project “is comparable” with the Six Projects. In a simplistic way, Odyssey argues that the Don Diego project was similar to the Six Projects because the activities were the dredging, transporting, and deposit of sands to another place.⁷⁸¹ In other words, the Claimant is trying to differentiate the Don Diego Project from Sandipiper and Chatham Rise, since they do not have the same "geology, environment, resource characteristics, and other circumstances", but, at the same time, is trying to equate the Don Diego project with harbor and infrastructure projects which have no similarity with it.⁷⁸² This situation lacks any basis.

424. Notwithstanding that the Respondent explained in detail in its Counter-Memorial that it did not breach the National Treatment standard, as established in NAFTA article 1102, the Respondent reiterates that: i) the Six Projects are not comparable subjects or objects; ii) the subjects or objects indentified by the Claimant are not under genuine similar circumstances to the ones of the Don Diego Project, and iii) the SEMARNAT had not granted a less favorable treatment to the Don Diego Project.⁷⁸³ Thus, the Tribunal might conclude that the Claimant did not breach the standard of National Treatment. An explanation of the elements of this standard is featured below.

⁷⁷⁹ Pope & Talbot Inc. v. Government of Canada, UNCITRAL, Award on the Merits of Phase 2, Apr. 10, 2001, ¶ 78. CL-0090. ↩
⁷⁸⁰ Reply, ¶ 47-49, 366, 460-461. See Counter-Memorial, ¶¶ 524-527. ↩
⁷⁸¹ See Reply, ¶ 282. ↩
⁷⁸² Reply, ¶ 461. ↩
⁷⁸³ See Counter-Memorial, ¶¶ 579-611. ↩

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a. The agencies in charge of the Six Projects are not
comparable subjects or objects

425. The Claimant chose six projects from different industries and activities carried on by public agencies, with the purpose of supporting its claims related to discriminatory treatment. Solcargo-Rábago considers that “the selection of the same [Six Projects] does not imply that the Mexican State has given preferential treatment to the subjects of public law, but simply, the Claimant found six dredging projects authorized by the Mexican State in environmental matters, which were promoted by parastatal entities."⁷⁸⁴

426. Indeed, some of the agencies in charge of the Six Projects belong to local governments (Proyecto Sayulita of the Comisión Estatal de Agua y Alcantarillado de Nayarit), are sate-owned companies (Proyecto Laguna Verde a cargo de CFE), or are entities of the state (Proyecto El Chaparrito a cargo de ESSA; Proyecto Puerto Veracruz de la API Veracruz; Proyecto Santa Rosalía de la API Baja California Sur, y Proyecto Matamoros de la API Tamaulipas). Clearly, none of these entities in charge of the Six Projects has a stock listing abroad like Odyssey.

427. In any case, the reality is that the Claimant had to at least identify one national investor (of public or private nature) that was looking to start a dredging project in the Gulf of Ulloa for the extraction of phosphate stone, and, that had obtained an environmental authorization from the DGIRA, to be able to present a case of National Treatment, as established in NAFTA article 1102. However, Odyssey never did that.

428. The Claimant correctly points out that the standards and environmental evaluation procedures do not make a distinction between projects, or whether were handled by private or public entities.⁷⁸⁵ The problem of the claim of Odyssey about National Treatment is that it has not proved that the DGIRA has “relaxed” the environmental standards to approve the AIA of the Six Projects, or that the DGIRA granted a more favorable treatment to ESSA, the API Veracruz, the API Baja California Sur, the API Tamaulipas, the CFE or the Comisión de Aguas de Nayarit, with prejudice to ExO.

⁷⁸⁴ Second Solcargo-Rábago Report, ¶ 158. ↩
⁷⁸⁵ Reply, ¶ 266. ↩

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429. Again, the cherry-picking (“selección a modo”) of the Six Projects is aimed at providing a false appearance that public entities received a more favorable treatment from the DGIRA.

b. The Six projects are not under the same circumstances
as the Don Diego Project

430. The Claimant considers that the activities of a national investor might be compared with the activities of a foreign investor, even if there are clear disparities between both of them. This argument is not only wrong and unsustainable, but it might also create a dangerous precedent in investment arbitration. The Second Report of Solcargo-Rábago illustrates this situation:

The Applicant tries to compare its project against projects in other sectors whose only resemblance is that they contemplate marine dredging activity, being almost as absurd its comparison, as comparing the excavation involving a pit mine with the excavation of the construction of a building. That disparity was even pointed out to the applicant by the dredging specialist Boskalis, who would be its potential contractor.⁷⁸⁶

431. Contrary to the affirmations of Odyssey, the Six Projects cannot be “comparable subjects/objects” to Don Diego since they are not genuinely under the similar circumstances. The fact that in all of those projects exist some type of activities of sea dredging does not mean that they can be comparable, and much less, if there are clear differences about the magnitude, extension, duration, temporality, location, ecosystems, vegetation, and fauna, environmental impacts, industry sectors or exploitation activities, among other factors.⁷⁸⁷

432. The Respondent does not consider necessary to explain again some of the differences between the Don Diego Project and the Six Projects which were explained in the Counter-Memorial (i.e., sector, investment area; lex specialis of the mining concession; legal framework applicable to the mining sector; products or goods object of the investment).⁷⁸⁸ However, the Respondent is under the necessity to reiterate those five aspects.

433. First, in the Six Projects, maintenance dredging is made and not capital dredging as it might had happened with the Don Diego Project. Even this situation was identified by Boskalis, who would have been the contractor of ExO during the activities of the Project.⁷⁸⁹

⁷⁸⁶ Second Solcargo-Rábago Report, ¶ 162. ↩
⁷⁸⁷ Second Solcargo-Rábago Report, ¶ 170-173. ↩
⁷⁸⁸ Counter-Memorial, ¶¶ 587-590. ↩
⁷⁸⁹ Second Solcargo-Rábago Report, ¶¶ 162-165. ↩

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434. In simple terms, the magnitude, duration, and conditions of the type of dredging of the Six Projects and Don Diego are totally different. Just the capital dredging of the Don Diego Project, which had been made for 50 years –the 365 days of the year and 24 hours a day- is not comparable to the maintenance dredging of the Six Projects that was made on one occasion or in a partial way, and in private places that were previously dredged, with the exclusive purpose of taking away sediments.⁷⁹⁰

435. Second, the Claimant argues that NAFTA article 1102 does not require investors to be under identical but under similar circumstances.⁷⁹¹ The Respondent does not question the scope of NAFTA article 1102. The problem is not the claims of Odyssey, but the fact that the Don Diego Project and the alleged "comparable subjects/objects" (the Six Projects) are not under the same circumstances and, much less, under identical circumstances; on the contrary, the Don Diego Project and the Six Projects are under totally different circumstances.⁷⁹²

436. Third, the simple fact that the Six Projects and the Don Diego Project were subject to environmental impact procedures in accordance with the LGEEPA (“legal regime”) does not mean that they are under similar circumstances, as baselessly alleged by Odyssey.⁷⁹³ This argument just shows a clear ignorance of the domestic and international environmental legal framework. The obligation to obtain environmental authorization for projects that might produce environmental impacts, deriving from environmental impact procedures, is established in national legal systems and international treaties.⁷⁹⁴

437. Fourth, in contrast to the Six Projects, for the implementation of the Don Diego Project, ExO needed a mining concession, without prejudice of obtaining an environmental authorization

⁷⁹⁰ Second Solcargo-Rábago Report, ¶¶ 169, 184. ↩
⁷⁹¹ Counter-Memorial, ¶ 271. ↩
⁷⁹² Veronica Morales Report ¶¶ 89-92, 108. Urbán Viloria Report ¶¶ 12-14. Group of Experts in Sea Turtles Report, ¶¶ 52-69. ↩
⁷⁹³ See Reply, ¶ 289. ↩
⁷⁹⁴ First Solcargo-Rábago Report, ¶¶ 81, 85. Advisory Opinion OC-23/17 of November 15, 2017 of the Inter American Court of Human Rights, ¶ 157. RL-0082. (“the Court notes that the obligation to make an environmental impact assessment also exists in relation to any activity that may cause significant environmental damage".) Principle 17 of the Rio Declaration. Case concerning Pulp Mills on the River Uruguay (Argentina v. Uruguay), Judgment, April 20, 2010, CIJ, ¶¶ 204-205. RL-0126 ↩

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to carry on extraction activities.⁷⁹⁵ The Respondent is not trying to “deviate the attention" of the Tribunal, as argued by Odyssey.⁷⁹⁶ On the contrary, the Respondent is just emphasizing something evident: the regulatory regime applicable to the Don Diego Project is a factor of comparison that distinguish it from the Six Projects .

438. Fifth, it is not true that the Six Projects and the Don Diego Project might cause similar environmental risks only based on the fact that in all them there will be dredging activities in coastal areas.⁷⁹⁷ In particular, Mr. Pliego points out that the Six Projects are comparable with the Don Diego Project because “son proyectos que tienen un potencial impacto ambiental similar en función de la actividad humana que se realiza, el dragado del fondo marino".⁷⁹⁸ The Respondent disagrees with the argument of Mr. Pliego. Again, the type and purpose of the dredging is not the same.

439. Without prejudice to the fact that the Six Projects are not carried on in the Gulf of Ulloa, as would have happened with the Don Diego Project, the Respondent has provided sufficient evidence that shows the relevancy of the Gulf of Ulloa, as well as the importance of the protection of that zone from environmental impacts that could affect its flora and fauna. In fact, the Six Projects presented by the Claimant are different from the Don Diego Project in multiple substantial aspects that have been discussed by the Respondent's experts:

• The comparison of the presence of turtles in the Gulf of México or in the Golf of California taking into consideration only one species is not valid. The region of the Golf of Ulloa presents a density of loggerhead turtles which is well above any of the Six Projects, thus, it is not possible to compare them in terms of “presence/absence” of sea turtles.⁷⁹⁹
• In opposition to the places of the other Six Projects, the Gulf of Ulloa presents a high degree of concentration of Caretta caretta turtles, which are in its juvenile and pre-adult stages,

⁷⁹⁵ Memorial, ¶ 587. ↩
⁷⁹⁶ See Reply, ¶ 291. ↩
⁷⁹⁷ Reply, ¶ 272. ↩
⁷⁹⁸ Second Vladimir Pliego Report, ¶ 90. ↩
⁷⁹⁹ Verónica Morales Report ¶ 90. ↩

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and they use the Golf of Ulloa as a feeding zone for long periods, and also as an area of reproduction.⁸⁰⁰

• The Golf of Ulloa is the only place among the compare projects in which the permanence and concentration of sea turtles makes it a critical habitat.⁸⁰¹
• The Don Diego Project is the only project with a permanent dredging activity.⁸⁰²
• The Don Diego Project is the only one that is not in the vicinity of the coastline and/or in the navigation channels established in the past.⁸⁰³
• None of the Six Projects pretend to dredge in depths over 20 mts.⁸⁰⁴
• The Don Diego Project is the only one that proposes to return the dredge and treated material to the place from where it was extracted.⁸⁰⁵
• The Don Diego Project is the only one whose dredge product has commercial purposes.⁸⁰⁶
• The Don Diego Project is the only project whose dredging activities require multiple ships working simultaneously.⁸⁰⁷
• Mr. Pliego presents aspects that are not applicable to the effects of comparison of projects, like the determination of a minor or mayor biodiversity in the areas of the projects.⁸⁰⁸

440. All the foregoing was confirmed by the experts in subsistence and conservation of the Caretta caretta turtle, because after a proper analysis of each project, they conclude that these projects are not comparable with the Don Diego Project, due to the differences in the circumstances regarding each zone and regarding the biodiversity of the Gulf of Ulloa (e.g., critical habitat, the situation in highly disturbed areas, etc.) In particular, the Group of Experts in

⁸⁰⁰ Verónica Morales Report ¶ 89. ↩
⁸⁰¹ Verónica Morales Report ¶ 92. ↩
⁸⁰² Verónica Morales Report ¶ 92. ↩
⁸⁰³ Verónica Morales Report ¶ 92. ↩
⁸⁰⁴ Verónica Morales Report ¶ 92. ↩
⁸⁰⁵ Verónica Morales Report ¶ 92. ↩
⁸⁰⁶ Verónica Morales Report ¶ 92. ↩
⁸⁰⁷ Verónica Morales Report ¶ 92. ↩
⁸⁰⁸ Verónica Morales Report ¶ 93 and 94. ↩