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INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES

In the arbitration proceeding between

LEGACY VULCAN, LLC

Claimant

and

UNITED MEXICAN STATES

Respondent

ICSID Case No. ARB/19/1

AWARD

Members of the Tribunal
Prof. Albert Jan van den Berg, President of the Tribunal
Prof. Sergio Puig, Arbitrator
Prof. Guido Santiago Tawil, Arbitrator

Secretary of the Tribunal
Ms. Sara Marzal

Assistant to the Tribunal
Ms. Emily Hay

Date of dispatch to the Parties: 27 July 2024

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Representation of the Parties

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Table of Contents

LIST OF DEFINED TERMS ... 7

I. INTRODUCTION ... 20

II. THE PARTIES ... 22

A. Claimant ... 22

B. Respondent ... 23

III. PROCEDURAL HISTORY ... 23

IV. FACTUAL BACKGROUND ... 53

A. The Investment Agreement, Port Concession, and Claimant’s Acquisition and Initial Development of La Rosita, Punta Venado, El Corchalito and La Adelita ... 53

B. Factual Background to the Original Claims ... 61

1. El Corchalito and La Adelita: Authorizations and Zoning ... 61

2. The 2014 Agreements and POEL 2009 Amendment Process ... 69

3. Shutdown of Operations at El Corchalito ... 78

4. Litigation regarding the CALICA Port Concession ... 81

C. Factual Background to the Ancillary Claim ... 83

1. Tourism in Southeastern Mexico ... 83

2. The President’s Morning Press Conferences ... 85

3. Clean Industry Certificates ... 89

4. PROFEPA Inspections and the Shutdown of La Rosita ... 91

5. Customs Permit: Renewal Delay and Cancellation Proceedings ... 94

6. SEMARNAT Dictamen ... 96

V. SUMMARY OF THE PARTIES’ POSITIONS AND RELIEF SOUGHT ... 97

A. Claimant’s Position and Relief Sought ... 97

1. Original Claim ... 97

2. Ancillary Claim and Counterclaim ... 99

B. Respondent’s Position and Relief Sought ... 102

1. Original Claim ... 102

2. Ancillary Claim ... 103

VI. INTRODUCTION TO THE TRIBUNAL’S ANALYSIS ... 105

A. Parties’ Submissions ... 105

B. Overview of This Award ... 105

VII. APPLICABLE LAW ... 106

VIII. JURISDICTION AND ADMISSIBILITY ... 108

A. Relevant Provisions ... 108

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B. Respondent’s Position ... 116

1. Jurisdiction Ratione Temporis ... 116

2. Investor and Investment ... 117

3. Port Tariff Claim ... 118

4. Ancillary Claim ... 120

5. Admissibility and Unclean Hands ... 122

6. Counterclaim ... 123

C. Claimant’s Position ... 131

1. Jurisdiction ratione temporis ... 131

2. Investor and Investment ... 132

3. Port Tariff Claim ... 133

4. Proceedings in Mexican Courts ... 134

5. Ancillary Claim ... 135

6. Admissibility and Unclean Hands ... 137

7. Counterclaim ... 137

D. NDP Submissions ... 151

1. US Second NDP Submission ... 151

2. Respondent’s Comments on US Second NDP Submission ... 153

3. Claimant’s Comments on US Second NDP Submission ... 153

E. Tribunal’s Analysis ... 155

1. Jurisdiction Ratione Temporis over Original Claims ... 155

2. The Investor under NAFTA ... 156

3. The Investment under NAFTA ... 157

4. Jurisdiction under the ICSID Convention ... 159

5. Admissibility of the Claims ... 160

6. The Port Tariff Claim ... 162

7. Proceedings before any Administrative Tribunal or Court ... 172

8. Ancillary Claim ... 173

9. Counterclaim ... 184

10. Conclusion on Jurisdiction ... 200

IX. APPLICABLE LEGAL STANDARDS ... 201

A. Relevant Provisions ... 201

B. Claimant’s Position ... 202

1. The Applicable Standard for NAFTA Article 1105 ... 202

2. The Applicable Standard for NAFTA Article 1103 ... 206

C. Respondent’s Position ... 209

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1. The Applicable Standard for NAFTA Article 1105 ... 209

2. The Applicable Standard for NAFTA Article 1103 ... 213

D. NDP Submissions ... 217

1. US First NDP Submission ... 217

2. Canada’s NDP Submission ... 220

3. US Second NDP Submission ... 222

4. Claimant’s Comments on NDP Submissions ... 223

5. Respondent’s Comments on NDP Submissions ... 224

E. Tribunal’s Analysis ... 225

1. The Applicable Standard for NAFTA Article 1105 ... 225

2. Applicable Standard for NAFTA Article 1103 ... 232

X. ALLEGED BREACHES IN RELATION TO LA ADELITA ... 235

A. Claimant’s Position ... 235

1. Legal Nature of the 2014 Agreements ... 237

2. Legitimate Expectations ... 238

3. Arbitrary Conduct, Due Process, Good Faith ... 244

4. Failure to Observe Obligations Under 2014 Agreements ... 248

B. Respondent’s Position ... 248

1. Legal Nature of the 2014 Agreements ... 248

2. No infringement based on Respondent’s alleged assurances ... 249

3. Alleged Violation of the MoU cannot be a denial of FET ... 253

4. Arbitrary Conduct ... 256

5. Failure to Observe Obligations under the 2014 Agreements ... 260

C. Tribunal’s Analysis ... 260

1. Pre-2009 Representations ... 262

2. Pre-2009 Requirement for CUSTF ... 266

3. The POEL 2009 ... 276

4. The 2014 Agreements ... 281

5. Binding Nature of the 2014 Agreements ... 285

6. Expectations Arising from the 2014 Agreements ... 289

7. Whether Respondent Breached Claimant’s Legitimate Expectations ... 295

XI. ALLEGED BREACHES IN RELATION TO EL CORCHALITO ... 302

A. Claimant’s Position ... 302

B. Respondent’s Position ... 305

C. Tribunal’s Analysis ... 308

1. Factual Background on El Corchalito ... 309

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2. Basis for Supplemental Inspection ... 316

3. Failure to Consider Expert Evidence ... 319

4. Basis for the Shutdown Order ... 331

5. October 2020 Resolution ... 341

6. “Catch 22” Situation ... 347

7. Domestic Legal Proceedings ... 356

8. Conclusion on El Corchalito ... 360

XII. ALLEGED BREACHES IN RELATION TO LA ROSITA ... 361

A. US Second NDP Submissions ... 362

B. Amicus Submission ... 363

XIII. ALLEGED BREACHES IN RELATION TO PORT TARIFFS ... 363

XIV. QUANTUM AND RELIEF SOUGHT ... 364

A. Relevant Provisions ... 364

B. The Applicable Standard and Scope of the Claim ... 365

1. Claimant’s Position ... 365

2. Respondent’s Position ... 367

3. Tribunal’s Analysis ... 370

C. La Adelita: Quantum and Relief Sought ... 386

D. El Corchalito: Quantum and Relief Sought ... 393

1. Causation ... 394

2. Overview of Valuations ... 395

3. The Calica Network ... 399

4. Appropriate CALICA-only Valuation ... 409

5. General Objection on Proof of Loss ... 414

6. Respondent’s Model: Issues/Objections Raised ... 418

7. Market Approach ... 432

8. Double Taxation ... 436

9. Conclusion ... 438

XV. INTEREST ... 439

A. Claimant’s Position ... 439

B. Respondent’s Position ... 440

C. Tribunal’s Analysis ... 441

1. Applicable Legal Standard ... 441

2. Function of Interest ... 441

3. Compounding Period ... 443

4. Interest Rate ... 444

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5. Period ... 445

6. Conclusion ... 445

XVI. COSTS ... 445

A. Relevant Treaty and ICSID Arbitration Rule Provisions ... 445

B. The Parties’ Positions ... 447

1. Claimant’s Position ... 447

2. Respondent’s Position ... 452

C. Tribunal’s Analysis ... 457

1. Applicable Legal Standard ... 457

2. Relative Success and Failure ... 458

3. Procedural Conduct ... 459

4. Reasonableness of Costs ... 460

5. Conclusion on Allocation of costs ... 460

6. Quantification of Costs ... 461

XVII. CONCLUSIONS ... 461

A. Claimant ... 462

1. Original Claims ... 462

2. Ancillary Claim and Counterclaim ... 464

B. Respondent ... 465

1. Original Claims ... 465

2. Ancillary Claim and Counterclaim ... 465

XVIII. DECISIONS ... 466

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LIST OF DEFINED TERMS

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I. INTRODUCTION

¶1. This case concerns a dispute submitted to the International Centre for Settlement of Investment Disputes (“ICSID” or the “Centre”) on the basis of the North American Free Trade Agreement, which entered into force on 1 January 1994 (“NAFTA”) and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which entered into force on 14 October 1966 (the “ICSID Convention”).

¶2. The claimant is Legacy Vulcan, LLC (“Legacy Vulcan” or “Claimant”), a company incorporated under the laws of the State of Delaware, United States of America.

¶3. The respondent is the United Mexican States (“Mexico” or “Respondent”).

¶4. Claimant and Respondent are collectively referred to as the “Parties”. The Parties’ representatives and their addresses are listed above on page (i).

¶5. Mexico, the United States of America (“United States”) and Canada are the three contracting parties to NAFTA (each a “Contracting Party” and collectively “Contracting Parties”). The United States and Canada are non-disputing Contracting Parties and are not party to this arbitration (“Non-Disputing Parties”). The Non-Disputing Parties are entitled to make submissions to the Tribunal on a question of interpretation of NAFTA pursuant to NAFTA Article 1128.

¶6. This dispute relates to measures alleged to have been taken by Respondent with respect to Claimant’s limestone quarrying operation. The quarrying operation was carried out by Claimant’s subsidiary, Calizas Industriales del Carmen, S.A. de C.V. (“CALICA”) in the state of Quintana Roo, located on the Yucatán peninsula, Mexico.

¶7. In 1986, CALICA, Mexico’s Federal Government, and the State of Quintana Roo entered into an investment agreement (“Investment Agreement”).¹

¶8. The Investment Agreement provides for the development of two lots, being (i) La Rosita (c. 930 hectares), where the main quarry and processing plant would be located; and (ii)

¹ C-0010-SPA, Agreement entered into between the Federal Government, the Government of the State of Quintana Roo, and CALICA, dated 6 August 1986 (“Investment Agreement”). ↩

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Punta Venado, where a port terminal would be built.² Quarrying operations commenced at La Rosita following its acquisition and port operations at Punta Venado were underway by approximately January 1990.³

¶9. In 1996, Claimant acquired two additional lots in the Municipality of Solidaridad, Quintana Roo (since 2025, renamed as the Municipality of Playa del Carmen, Quintana Roo) being El Corchalito (c. 369 hectares) and La Adelita (c. 882 hectares), for the expansion of quarrying operations.⁴ La Rosita, El Corchalito and La Adelita are adjacent to Punta Venado.⁵ Claimant’s claims relate to all three lots and to the port.

¶10. In 2001, CALICA commenced quarrying in El Corchalito.⁶ Quarrying was never commenced in La Adelita.

¶11. From 2013, CALICA entered into discussions with the Mexican authorities in relation to the ability to quarry La Adelita. The discussions led to the execution of certain documents in 2014 and 2015, the status of which is contested in these proceedings. Pursuant to one of those documents, a process to amend a zoning regime was entered into. The amendment process was not completed.

¶12. In 2017, an environmental inspection found that CALICA had exceeded its quarrying area limits in El Corchalito.⁷ In 2018, the authorities issued an order to shut down activities there.⁸ This was followed by a further administrative resolution in 2020.⁹

¶13. In parallel, a dispute arose regarding the payment of port fees by CALICA at Punta Venado, leading to a 2015 court decision, the consequences of which are contested between the Parties.

² C-0010-SPA, Investment Agreement, pp. 2-3. ↩

³ [Redacted] First Statement, ¶ 18. ↩

⁴ C-0034-SPA, El Corchalito Title Deed, dated 28 August 1996 (“El Corchalito Title Deed”); C-0035-SPA, La Adelita Title Deed, dated 21 June 1996 (“La Adelita Title Deed”); [Redacted] First Statement, ¶ 22. ↩

⁵ Memorial, ¶ 38. ↩

⁶ [Redacted] First Statement, ¶ 24. ↩

⁷ C-0115-SPA, First PROFEPA Inspection Report, dated 19 May 2017 (“First PROFEPA Inspection Report, 19 May 2017”). ↩

⁸ C-0117-SPA, Shutdown Order, dated 22 January 2018 (“Shutdown Order”). ↩

⁹ R-0005-ESP, PROFEPA, File PFPA/4.1/2C.27.5/00028-17, Resolution, 30 October 2020 (“October 2020 Resolution”). ↩

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¶14. In 2022, the La Rosita lot was shut down following an inspection of compliance with environmental regulations.¹⁰

¶15. Claimant alleges that Respondent has breached NAFTA Articles 1103 and 1105 in respect of its treatment of Claimant’s investments, including CALICA. Respondent, in turn, has filed a counterclaim against Claimant in relation to alleged breaches of environmental legislation and alleged environmental harm caused by CALICA’s operations.

¶16. Section II of this Award sets out the details of the Parties. Section III contains the procedural history. Section IV sets out the factual background to the dispute. In Section V, the Tribunal sets out a summary of the Parties’ respective positions and relief sought. Section VI is an introduction to the Tribunal’s analysis. Section VII deals with the applicable law. Section VIII addresses matters of jurisdiction and admissibility while Section IX covers applicable legal standards. Sections X and XI determine the alleged breaches in relation to La Adelita, El Corchalito respectively. Sections XII and XIII relate to the alleged breaches in relation to La Rosita and the port tariffs respectively. Section XIV concerns quantum and relief sought, while Section XV addresses interest and Section XVI covers costs. Section XVII contains the Tribunal’s conclusions and Section XVIII sets out the decisions.

II. THE PARTIES

A. CLAIMANT

¶17. Claimant is Legacy Vulcan LLC (“Claimant”), with registered address as follows:¹¹

2711 Centerville Road
Suite 400
Wilmington
Delaware 19808
United States

¹⁰ C-0171-SPA, PROFEPA Inspection Report on Environmental Impact, 2-5 May 2022 (“PROFEPA Environmental Report, 2-5 May 2022”), pp. 71-72 of the PDF; C-0172-SPA, PROFEPA Inspection Report on Forestry, 2-5 May 2022, (“PROFEPA Forestry Report, 2-5 May 2022”), pp. 61-62 of the PDF. ↩

¹¹ RfA, ¶ 11. ↩

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¶18. Claimant is a limited liability company organised and existing under the laws of Delaware, USA.

¶19. Claimant submits its investment claims to arbitration on its own behalf under NAFTA Article 1116(1) and on behalf of its subsidiary, Calizas Industriales del Carmen, S.A. de C.V. (“CALICA”), under NAFTA Article 1117(1).¹²

¶20. Claimant is a subsidiary of Vulcan Materials Company (“VMC”), a publicly-traded United States company that is the largest supplier of construction aggregates (primarily crushed stone, sand and gravel) in the United States and a major producer of aggregates-based construction materials, including asphalt and ready-mixed concrete.¹³

¶21. Claimant is represented in this arbitration by its duly authorised attorneys, identified on page 2 above.

B. RESPONDENT

¶22. Respondent is the United Mexican States (“Mexico” or “Respondent”).

¶23. Respondent is represented in this arbitration by its duly authorised attorneys, identified on page 2 above.

¶24. Claimant and Respondent are jointly referred to as the “Parties”. Claimant and Respondent are individually referred to as a “Party”.

III. PROCEDURAL HISTORY

¶25. On 3 December 2018, ICSID received a request for arbitration from the Claimant against the Respondent, supplemented by letters of 26 and 28 December 2018 (the “Request”). The Request was accompanied by Exhibits C-0001 through C-0022.

¶26. On 3 January 2019, the Secretary-General of ICSID registered the Request in accordance with Article 36(3) of the ICSID Convention and notified the Parties of the registration.

¹² Memorial, ¶ 20. ↩

¹³ Memorial, ¶ 18, citing C-0005-ENG, Certification of Ownership Structure of Calizas Industriales del Carmen, S.A. de C.V. and Related Mexican Subsidiaries (“CALICA Ownership Structure Certification”). ↩

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In the Notice of Registration, the Secretary-General invited the Parties to proceed to constitute an arbitral tribunal as soon as possible in accordance with Rule 7(d) of ICSID’s Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings.

¶27. As envisaged in NAFTA Article 1123, the Parties agreed that the Tribunal would comprise of three arbitrators, one arbitrator appointed by each of the disputing parties and the third, presiding arbitrator, appointed by agreement of the disputing parties.

¶28. On 8 March 2019, the Claimant appointed Prof. Guido Santiago Tawil, a national of Argentina and Portugal, as arbitrator. Prof. Tawil accepted his appointment on 19 March 2019.

¶29. On 22 March 2019, the Respondent appointed Prof. Sergio Puig, a national of Mexico and the United States of America, as arbitrator. Prof. Puig accepted his appointment on 1 April 2019.

¶30. On 17 June 2019, the Parties requested the Secretary-General of ICSID to prepare a list of at least five candidates for the appointment of the President of the Tribunal. Each Party could strike the candidates that it deemed necessary and rank the remaining candidates (strike-and-rank procedure). The list was sent on 6 September 2019 for the Parties’ consideration.

¶31. On 18 September 2019, the Centre informed the Parties the result of the strike-and-rank procedure pursuant to the Parties’ agreement. As a result, the Centre proceeded with the appointment of Prof. Albert Jan van den Berg, a national of the Netherlands, as the President of the Tribunal. Prof. van den Berg accepted his appointment on 19 September 2019.

¶32. On 20 September 2019, the Secretary-General, in accordance with Rule 6(1) of the ICSID Rules of Procedure for Arbitration Proceedings (the “Arbitration Rules”), notified the Parties that all three arbitrators had accepted their appointments and that the Tribunal was therefore deemed to have been constituted on that date. Ms. Sara Marzal, ICSID Legal Counsel, was designated to serve as Secretary of the Tribunal.

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¶33. In accordance with ICSID Arbitration Rule 13(1), the Tribunal held a first session with the Parties on 6 November 2019, by teleconference.

¶34. Following the first session, on 26 November 2019, the Tribunal issued Procedural Order No. 1 (“PO1”) recording the agreement of the Parties on procedural matters and the decision of the Tribunal on disputed issues. PO1 provides, inter alia, that the applicable Arbitration Rules would be those in effect from 10 April 2006, except to the extent that they are modified by Section B of NAFTA Chapter Eleven. It also provides that the procedural languages would be English and Spanish, and that the place of proceeding would be Washington D.C., United States of America. PO1 also sets out an agreed schedule for the proceedings (the “Procedural Calendar”). Lastly, PO1 provides in Sections 24.1 and 24.3 that the Tribunal will, after consultation with the Parties, issue a Confidentiality Order to govern matters concerning confidentiality and privacy of the arbitral proceedings, rulings, orders, decisions and the Award.

¶35. On 4 March 2020, the Parties notified the Tribunal that they wished to extend all the relevant deadlines and dates in the Procedural Calendar by seventy days to explore the potential resolution of the dispute.

¶36. On 6 March 2020, the Tribunal approved the Parties’ agreement to extend all relevant deadlines and dates by seventy days.

¶37. On 18 May 2020, the Claimant informed ICSID that the Parties had been unable to resolve the dispute, and filed a Memorial on Jurisdiction and the Merits (“Claimant’s Memorial” or “Memorial”) together with Factual Exhibits C-0023 through C-0139, Legal Authorities CL-0001 through CL-0106, the Witness Statements of [Redacted] (“[Redacted] First Statement”, with Exhibits [Redacted]-0001 through [Redacted]-0003) and [Redacted] (“[Redacted] First Statement”, with Exhibits [Redacted]-0001 through [Redacted]-0010), and the Expert Reports of [Redacted] (“[Redacted] First Report”, with Exhibits [Redacted]-0001 through [Redacted]-0038) and Mr. Darrell Chodorow (“Brattle First Report”, with Exhibits DC-0001 through DC-0125).

¶38. On 29 June 2020, the Tribunal inquired whether the Parties would agree to the appointment of Ms. Emily Hay, then at the firm Hanotiau & van den Berg, as Assistant to the Tribunal in this case. Neither Party had objections to the appointment and Ms.

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Hay’s signed declaration of independence, impartiality, and confidentiality, which was circulated to the Parties on 7 July 2020.

¶39. On 30 June 2020, the Claimant submitted the Parties’ agreed revised Procedural Calendar to the Tribunal. The Respondent confirmed its agreement on 2 July 2020 and on the same date the Tribunal approved the Parties’ agreement and issued a revised Procedural Calendar.

¶40. On 20 July 2020, the Respondent submitted a draft Confidentiality Order on behalf of the Parties. The draft submitted reflected the Parties’ joint proposal on all issues covered by the Confidentiality Order except for one section on which the Parties were unable to reach an agreement.

¶41. On the same date, and in accordance with the Procedural Calendar, as amended by the Parties, the Respondent submitted to the Tribunal its requests for the production of documents in the form of a Redfern Schedule (including the Claimant’s objections to the requests and the Respondent’s replies to such objections), together with some introductory remarks with general replies to the Claimant’s objections (the “Respondent’s Document Production Request”).

¶42. On 21 July 2020, the Claimant confirmed its agreement with the draft Confidentiality Order submitted by Respondent and explained its position on the disputed section.

¶43. On 30 July 2020, based on the Parties’ joint proposal and subsequent exchanges on the disputed issue, the Tribunal issued Procedural Order No. 2, resolving those issues in which there was disagreement between the Parties (the “Confidentiality Order” or “PO2”).

¶44. On the same date, the Tribunal issued Procedural Order No. 3 (“PO3”) deciding on the Respondent’s Document Production Request.

¶45. On 19 October 2020, the Parties notified the Tribunal that they wished to further extend all the relevant deadlines and dates in the Procedural Calendar. On 20 October 2020, the Tribunal approved the Parties’ agreement and issued a revised Procedural Calendar.

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¶46. On 23 November 2020, and in accordance with the revised Procedural Calendar, the Respondent filed a Counter-Memorial on Jurisdiction and the Merits (“Respondent’s Counter-Memorial” or “Counter-Memorial”), together with Factual Exhibits R-0001 through R-0075, Legal Authorities RL-001 through RL-075, the Witness Statements of Ms. Margarita Yolanda Balcázar Mendoza (RW-001 or “Balcázar First Statement”, with Exhibits MYBM-0001 through MYBM-0004), Ms. Silvia Rodríguez Rosas (RW-002 or “Rodríguez Rosas First Statement”, with Exhibits SRR-0001 and SRR-0002), Mr. Roberto Pérez Marín (RW-003, or “Pérez Marín Statement”, with Exhibits RPM-0001 through RPM-0007), Mr. Salomón Díaz Mondragón (RW-004 or “Díaz Mondragón Statement” with Exhibit SDM-0001), Mr. José Juan Hernández Chávez (RW-005 or “Hernández Chávez Statement”, with Exhibits JJHC-0001 through JJHC-0003) and Mr. José A. Atempa Lobato (RW-006 or “Atempa Statement”, with Exhibits JAAL-0001 through JAAL-0015), and the Expert Reports of Messrs. Gustavo Carvajal, Gustavo Alanís, Juan Pedro Machado and Carlos del Razo Ochoa (RE-001 or “SOLCARGO First Report”, with Exhibits CFRO-0001, GAO-0001, GCI-0001 through GCI-0009, and JPMA-0001 through JPMA-0012) and Mr. Timothy Hart and Ms. Rebecca Vélez (RE-002 or “Credibility First Report”, with Appendix A through Appendix C, Exhibits 1 through 7, Exhibits CRED-0001 through CRED-0065).

¶47. On 4 January 2021, the Claimant submitted to the Tribunal its requests for the production of documents in the form of a Redfern Schedule (including the Respondent’s objections to the requests and the Claimant’s replies to such objections), together with a pdf file containing the Claimant’s instructions and definitions relating to its requests, and the Respondent’s “general objections” referenced in the Redfern Schedule (the “Claimant’s Document Production Request”).

¶48. On 8 January 2021, the Tribunal issued Procedural Order No. 4 concerning the Claimant’s Document Production Request (“PO4”).

¶49. On 4 February 2021, the Claimant requested that the Tribunal draw adverse inferences from the Respondent’s alleged failure to comply with the Tribunal’s PO4 and, in particular, regarding the Respondent’s failure to produce the “Agreement between the Government of Quintana Roo and the Municipality of Solidaridad to amend the 2009

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POEL in respect of its soil use of the lots of CALICA to allow the production previously authorized by the 2001 POET.”

¶50. On 20 February 2021, the Respondent objected to the Claimant’s request arguing, inter alia, that the above-mentioned agreement did not exist.

¶51. On 13 February 2021, the Tribunal took note of the Parties’ respective positions with respect to the alleged existence or non-existence of the said agreement and indicated that the Tribunal shall, in due course, weigh the evidence before it and draw such inferences as it deems fit, taking into account its relevance, weight and materiality.

¶52. On 22 February 2021, the Claimant filed a Reply Memorial on Jurisdiction and the Merits (the “Claimant’s Reply” or “Reply”), together with Factual Exhibits C-0140 through C-0164, Legal Authorities CL-0107 through CL-0141, the Witness Statements of [Redacted] (“[Redacted] Statement”) and [Redacted] (“[Redacted] First Statement”, with Exhibits [Redacted] 0001 through [Redacted] 0003), the Second Witness Statements of [Redacted] (“[Redacted] Second Statement”, with Exhibits [Redacted] 0011 through [Redacted]-0013) and [Redacted] (“[Redacted] Second Statement”, with Exhibits [Redacted]-0004 through [Redacted]-0016), the Second Expert Reports of [Redacted] (“[Redacted] Second Report”, with Exhibits [Redacted] 0039 through [Redacted] 0050) and Mr. Darrell Chodorow (“Brattle Second Report”, with Appendix E through G, Exhibits DC-0052-Am, DC-0126 through DC-0162 and Workpapers DC-0163 and DC-0164), and the Expert Reports of [Redacted] (“[Redacted] Report”, with Exhibits [Redacted]-0001 through [Redacted]-0041), [Redacted] (“[Redacted] Report”) and Drs. Omar Darío [Redacted] and [Redacted] (“[Redacted] Report”, with Exhibits [Redacted]-001 through [Redacted]-012).

¶53. On 1 April 2021, the Tribunal invited the Parties to confer and to submit their views on the possibility of holding the hearing remotely, given the limitations imposed as a consequence of the COVID19 pandemic. On 9 April 2021, the Parties agreed to the possibility of a remote hearing and on 15 April 2021, the Tribunal confirmed the decision to hold the hearing remotely.

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¶54. On 14 April 2021, the Tribunal noted that the redacted versions of the briefs submitted by the Parties thus far were still outstanding and requested the Parties to submit an update, in accordance with the Confidentiality Order.

¶55. In light of the Parties’ responses of 16 April 2021 to the Tribunal’s update request, on 20 April 2021, the Tribunal invited the Parties to either agree on the redactions or submit any outstanding disagreements to the Tribunal for resolution in accordance with Sections 7.2 and 7.3 of the Confidentiality Order within 15 days.

¶56. On 5 May 2021, the Claimant submitted the outstanding disagreements on the proposed redactions. On 13 May 2021, the Respondent submitted its objection to the Claimant’s proposed redactions. On 18 May 2021, the Claimant submitted its reply to the Respondent’s objections and on 27 May 2021, the Respondent’s submitted its rejoinder comments.

¶57. On 12 May 2021, the Tribunal circulated a draft procedural order containing a remote hearing protocol and inviting the Parties to confer and submit their agreements and respective positions on points of disagreement.

¶58. On 24 May 2021, the Respondent filed its Rejoinder Memorial on Jurisdiction and the Merits (the “Respondent’s Rejoinder” or “Rejoinder”), together with Factual Exhibits R-0076 through R-0123, Legal Authorities RL-076 through RL-093, the Second Witness Statements by Ms. Silvia Rodríguez Rosas (RW-007 or “Rodríguez Rosas Second Statement”, with Exhibits SRR-0003 through SRR-0012) and Ms. Margarita Yolanda Balcázar Mendoza (RW-008 or “Balcázar Second Statement”, with Exhibits MYBM-0001 (re-submitted), MYBM-0005 and MYBM-0006), the Witness Statements of Mr. José Ángel Durán Désiga (RW-009 or “Durán Désiga Statement”) and Mr. Alfredo Miguel Paz Cetina (RW-010 or “Paz Cetina Statement”), the Second Expert Reports by Messrs. Gustavo Carvajal, Juan Pedro Machado and Carlos del Razo Ochoa (RE-003 or “SOLCARGO Second Report”, with Exhibits GCI-0010 through GCI-0014, and JPMA-0012 through JPMA-0013) and by Mr. Timothy Hart and Ms. Rebecca Vélez (RE-004 or “Credibility Second Report”, with Appendix A through Appendix C, Exhibits 1 through 4, Exhibits CRED-0066 through CRED-0083), the Expert Reports of Mr. Carlos Rábago Estela (RE-005, or “Rábago Estela Report”, with Exhibits CRE-

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¶0001 through CRE-0004) and of Dr. Javier Mijangos y González (RE-006, or “Mijangos Report”, with Exhibits JMG-0001 through JMG-0026).

¶59. On 28 May 2021, the Claimant submitted the Parties’ joint comments to the draft remote hearing protocol, indicating the Parties’ agreed edits or respective positions, as relevant.

¶60. On 3 June 2021, the Tribunal issued Procedural Order No. 5 (“PO5”), deciding on the outstanding disagreements on the proposed redactions.

¶61. On 4 June 2021, the Tribunal issued Procedural Order No. 6 (“PO6”), concerning the organization of the remote hearing, setting out the procedural rules that the Parties agreed upon and/or that the Tribunal determined will govern the conduct of the remote hearing.

¶62. On 7 June 2021, both the United States and Canada filed written submissions on questions of interpretation of the treaty as non-disputing State Parties pursuant to NAFTA Article 1128 (“Article 1128 Submissions”).

¶63. On 18 June 2021, the Tribunal held a pre-hearing organizational meeting with the Parties by video conference.

¶64. On 28 June 2021, the Claimant submitted its comments on the Article 1128 Submissions, together with Factual Exhibits C-0165-C-0166 and Legal Authorities CL-0147-CL-0166.

¶65. On 9 July 2021, the Claimant requested (i) that an additional hour be added to each hearing day so as to afford the Claimant sufficient time to effectively present its case, and (ii) leave to submit additional documents into the record in accordance with Section 16.3 of PO1.

¶66. On 15 July 2021, after considering the Respondent’s observations on the Claimant’s request, the Tribunal decided to reject both of Claimant’s requests.

¶67. From 26 to 30 July 2021, the Tribunal held a hearing on jurisdiction and the merits by video conference (the “Hearing”). The following persons were present at the Hearing:

Tribunal:
Prof. Albert Jan van den Berg            President
Prof. Sergio Puig                                Arbitrator
Prof. Guido Santiago Tawil               Arbitrator

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ICSID Secretariat:
Ms. Sara Marzal                                Secretary of the Tribunal
Mr. Federico Salon-Kajganich        Paralegal

Assistant to the Tribunal:
Ms. Emily Hay                                   Assistant to the Tribunal

For the Claimant:
Mr. Miguel López Forastier               Covington & Burling LLP
Mr. José E. Arvelo                            Covington & Burling LLP
Ms. Clovis Trevino                           Covington & Burling LLP
Mr. Santiago Zalazar                        Covington & Burling LLP
Ms. Kate McNulty                            Covington & Burling LLP
Mr. Alex Ely                                     Covington & Burling LLP
Mr. Gabriel Gates                             Covington & Burling LLP
Mr. Roy Goldsman                           Covington & Burling LLP
Mr. Carlos Martínez                          Creel, García-Cuéllar, Aiza y Enríquez, S.C.
Mr. Luis Jardón                                Creel, García-Cuéllar, Aiza y Enríquez, S.C.
Ms. Gabriela Schafler                       Creel, García-Cuéllar, Aiza y Enríquez, S.C.
Ms. Pamela Payró                            Creel, García-Cuéllar, Aiza y Enríquez, S.C.
Ms. Mariana Westendarp                  Creel, García-Cuéllar, Aiza y Enríquez, S.C.
Mr. Ernesto Enríquez                       Vulcan Materials Company
Mr. Gregg McCormick                    Vulcan Materials Company
Mr. Denson Franklin                       Vulcan Materials Company
Mr. Jason Nabors                            Vulcan Materials Company

For the Respondent:
Mr. Orlando Pérez Gárate                Secretaría de Economía
Ms. Cindy Rayo Zapata                   Secretaría de Economía
Mr. Francisco Diego Pacheco Román  Secretaría de Economía
Mr. Rafael Rodríguez Maldonado    Secretaría de Economía
Mr. Miguel Ángel Galindo Vega        Secretaría de Economía
Ms. Pamela Hernández Mendoza      Secretaría de Economía
Ms. Imelda Aime Anaid Silva Pacheco Secretaría de Economía
Mr. Fabián Arturo Trejo Bravo         Secretaría de Economía
Mr. Stephan E. Becker                   Pillsbury Winthrop Shaw Pittman LLP
Ms. David J. Stute                           Pillsbury Winthrop Shaw Pittman LLP
Mr. Greg Tereposky                       Tereposky & DeRose
Mr. Alejandro Barragán                   Tereposky & DeRose
Ms. Ximena Iturriaga                      Tereposky & DeRose
Ms. Blanca Alicia Mendoza Vera      Procuraduría Federal de Protección al Ambiente, PROFEPA
Ms. Margarita Yolanda Balcázar Mendoza Procuraduría Federal de Protección al Ambiente, PROFEPA
Mr. Juan Manuel Torres Burgos        Secretaría de Medio Ambiente y Recursos Naturales, SEMARNAT

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Mr. José Juan Hernández Chávez      Secretaría de Medio Ambiente y Recursos Naturales, SEMARNAT
Ms. Natalia García Nieto                  Secretaría de Medio Ambiente y Recursos Naturales, SEMARNAT

Court Reporters:
Mr. Dante Rinaldi                           Spanish Court Reporter
Mr. Paul Pelissier                           Spanish Court Reporter
Mr. David Kasdan                           English Court Reporter
Ms. Dawn Larson                            English Court Reporter

Interpreters:
Mr. Daniel Giglio                           Interpreter
Ms. Silvia Colla                              Interpreter
Mr. Charles Roberts                        Interpreter

Non-Disputing NAFTA Contracting Parties:
Ms. Lisa J. Grosh                            U.S. Department of State
Mr. John D. Daley                           U.S. Department of State
Ms. Nicole C. Thornton                   U.S. Department of State
Mr. Nathaniel E. Jedrey                   U.S. Department of State
Ms. Anne K. Cusick                        U.S. Department of State
Ms. Julia H. Brower                        U.S. Department of State
Mr. David B. Sullivan                      U.S. Department of State
Ms. Catherine H. Gibson                  Office of the U.S. Trade Representative

¶68. During the Hearing, the following persons were examined:

On behalf of the Claimant:

On behalf of the Respondent:

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¶69. In accordance with section 64 of PO6, on 11 August 2021, the Tribunal circulated a list of questions to the Parties. At the Claimant’s request, the Tribunal provided guidance on question 15 on 30 September 2021.

¶70. On 1 October 2021, the Claimant requested leave to submit into the record the expert report of Lt. Commander Juan Martín Ramírez Miranda of the Mexican Navy’s Engineers Service (the “Navy Expert Report”).

¶71. On 4 October 2021, the Respondent filed its observations on the Claimant’s request. On 8 October 2021, the Claimant filed a response to the Respondent’s observations. On 11 October 2021, the Respondent filed further observations.

¶72. On 20 October 2021, the Tribunal decided to grant the Claimant’s request and invited the Claimant to file the Navy Expert Report, together with any comments by 25 October 2021. The Tribunal also provided the Respondent the opportunity to make its observations concerning the Navy Expert Report and to file its comments together with any rebuttal evidence on 8 November 2021.

¶73. On 25 October 2021, the Claimant submitted the Navy Expert Report (as Exhibit C-0167), together with its comments.

¶74. On 1 November 2021, the Respondent requested leave to introduce into the record the decision dated 9 April 2021 from the Mexican Third Collegiate Court of the Twenty-Seventh Circuit on the recurso de revisión filed by CALICA and one of its subsidiaries against a decision dismissing an amparo (the “Sentencia”).

¶75. On 8 November 2021, the Claimant filed observations on the Respondent’s request of 1 November 2021, and the Respondent filed observations to the Navy Expert Report, together with Exhibits R-0125 and R-0126.

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¶76. On 9 November 2021, the Tribunal decided to grant the Respondent’s request and invited the Respondent to file the Sentencia, together with any comments by 11 November 2021. The Tribunal also provided the Claimant the opportunity to make its observations concerning the Sentencia and to file its comments together with any rebuttal evidence on 16 November 2021.

¶77. On 11 November 2021, the Respondent filed the Sentencia, together with its comments.

¶78. On 16 November 2021, the Claimant filed observations on the Sentencia.

¶79. On 17 November 2021, the Parties filed simultaneous Post-Hearing Briefs together with their responses to the Tribunal’s questions to the Parties of 11 August 2021 (“PHM”). The Claimant’s submission was accompanied by Legal Authorities CL-0167 to CL-0170. The Respondent’s submission was accompanied by Legal Authorities RL-094 to RL-098.

¶80. On 16 December 2021, the Parties filed simultaneous Reply Post-Hearing Briefs together with their comments on the other Party’s answers to the Tribunal’s questions of 11 August 2021 (“RPHM”). The Claimant’s submission was accompanied by Legal Authorities CL-0171 and CL-0172.

¶81. The Parties filed their submissions on costs on 11 February 2022. The Claimant’s submission was accompanied by Legal Authorities CL-0173 and CL-0174. The Respondent’s submission was accompanied by Legal Authorities RL-099 to RL-113.

¶82. On 8 May 2022, the Claimant filed a Request for Provisional Measures and for Leave to Submit an Ancillary Claim.

¶83. On 26 May 2022, the Respondent filed its Response to the Claimant’s Request for Provisional Measures and for Leave to Submit an Ancillary Claim.

¶84. On 2 June 2022, the Claimant filed its Reply to the Respondent’s Response to its Request for Provisional Measures and for Leave to Submit an Ancillary Claim.

¶85. On 7 June 2022, the Respondent filed its Rejoinder to the Claimant’s Request for Provisional Measures and for Leave to Submit an Ancillary Claim.

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¶86. Pursuant to the Tribunal’s instructions, on 21 and 22 June 2022, the Parties introduced into the record the following Factual Exhibits and Legal Authorities in support of their submissions of 8 and 26 May and of 2 and 7 June 2022: C-0168 to C-0199 and CL-0175 to CL-0200, for the Claimant, and R-0127 to R-0135 and RL-0116 to RL-0144, for Respondent.

¶87. On 11 July 2022, the Tribunal issued Procedural Order No. 7 (“PO7”) concerning the Request for Provisional Measures and for Leave to Submit an Ancillary Claim. PO7 provides, inter alia, a recommendation as provisional measures that “Mexico take no action that might further aggravate or extend the dispute between the Parties, including further public attacks that exacerbate the dispute between the Parties, unduly pressure CALICA or Legacy Vulcan, or render the resolution of the dispute potentially more difficult.” It also decides, by majority, to allow the Claimant to present an ancillary claim concerning Mexico’s alleged wrongful shutdown of Legacy Vulcan’s remaining quarrying operations in Mexico (the “Ancillary Claim”). Lastly, PO7 defers any decision on any counterclaim to be presented by the Respondent, subject to a reasoned application for leave by Respondent. Attached to PO7 is a partial dissenting opinion by arbitrator Prof. Puig regarding the majority’s decision to allow the Claimant to present an Ancillary Claim.

¶88. Pursuant to the procedural calendar agreed by the Parties for the Ancillary Claim, on 28 September 2022, the Claimant filed a Memorial on the Ancillary Claim (“Claimant’s Memorial on the Ancillary Claim” or “Memorial AC”), together with Factual Exhibits C-0200 through C-0279, Legal Authority CL-0201, the Third Witness Statement by [Redacted] (“[Redacted] Third Statement”), the Second Witness Statement by [Redacted] (“[Redacted] Second Statement”, with Exhibits [Redacted] 00 through [Redacted] 0019), the Third Expert Reports by [Redacted] (“[Redacted] Third Report”, with Exhibits [Redacted] 0051 through [Redacted] 0067), and of Messrs. Darrell Chodorow and Fabricio Núñez (“Brattle Third Report”, with Exhibits DC-0163 through DC-0245 and Workpapers DC-0246 through DC-0252).¹⁴

¹⁴ With the Respondent’s consent, on 9 December 2024, the Claimant submitted a corrected version of the Brattle Third Report and an updated Workpaper O. ↩

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¶89. On 19 December 2022, the Respondent filed a Counter-Memorial on the Ancillary Claim (“Respondent’s Counter-Memorial on the Ancillary Claim” or “Counter-Memorial AC”), together with Factual Exhibits R-0136 through R-0190, Legal Authorities RL-0145 through RL-0181, the Witness Statements by Mr. Iván Rico (RW-0011 or “Rico Statement”, with Exhibits IRL-0001 through IRL-0004), Mr. Patricio Rodolfo Vilchis (RW-0013 or “Vilchis Statement”, with Exhibits PRVN-0001 through PRVN-0005), and by Mr. Enrique Castañeda Sánchez (RW-0014 or “Castañeda Sánchez Statement”), the Third Witness Statement by Ms. Margarita Yolanda Balcázar Mendoza (RW-0012 or “Balcázar Third Statement”, with Exhibits MYBM-0008 through MYBM-0013), the Third Expert Reports of Mr. Timothy Hart and Ms. Rebecca Vélez (RE-0007 or “Credibility Third Report”, with Appendix A through Appendix C, Exhibits CRED-0084 through CRED-0096), and of Messrs. Gustavo Carvajal, Juan Pedro Machado, Carlos Rábago Estela y Carlos del Razo Ochoa (RE-0008 or “SOLCARGO Third Report”, with Exhibits JPMA-0014 through JPMA-0015). In Section IV of its Counter-Memorial on the Ancillary Claim, the Respondent included a request to submit a counterclaim against the Claimant for the alleged environmental damages caused by the latter during the development of its investment (the “Counterclaim”).

¶90. On 20 February 2023, the Claimant filed a Reply on the Ancillary Claim (“Claimant’s Reply on the Ancillary Claim” or “Reply AC”), together with Appendix A, Factual Exhibits C-0280 through C-0331, Legal Authorities CL-0202 through CL-0229, the Fourth Witness Statement by [Redacted] (“[Redacted] Fourth Statement”, with Exhibits [Redacted] 0014 through [Redacted] 0017), the Third Witness Statement by [Redacted] (“[Redacted] Third Statement”, with Exhibits [Redacted] 0020 through [Redacted] 0032), the First Witness Statements by [Redacted] Statement”, with Exhibits [Redacted]-0001 through [Redacted]-0009), and by [Redacted] (“[Redacted] Statement”, with Exhibits [Redacted]-0001 through [Redacted]-0010), the Fourth Expert Reports by [Redacted] (“[Redacted] Fourth Report”, with Exhibits [Redacted] 0068 through [Redacted] 0073), and of Messrs. Darrell Chodorow and Fabricio Núñez (“Brattle Fourth Report”, with Exhibits DC-0253 through DC-0276 and Workpaper DC-0246 (updated)), and the First Expert Report of Dr. Gino Bianchi Mosquera (“GSI First Report”, with Exhibits GSI-

[Page 37]

¶0001 through GSI-0031). In its Reply on the Ancillary Claim, the Claimant objected to the Respondent’s request for leave to file the Counterclaim.

¶91. On 23 February 2023, the Tribunal noted that in paragraph 203 of its Counter-Memorial on the Ancillary Claim, the Respondent requested the Tribunal to undertake a site visit at La Rosita and Claimant’s other sites, and that in footnote 192 of its Reply Memorial on the Ancillary Claim, the Claimant indicated that it had no objection to such a visit if the Tribunal considers it necessary. The Tribunal advised the Parties that it considered that a site visit may aid its further understanding of the Parties’ dispute and proposed two options for the timing of the visit for consideration by the Parties.

¶92. After hearing from both Parties, on 10 March 2023, the Tribunal proposed that a two-day site visit of all three of the Claimant’s lots would take place in the period 18-20 July 2023 (the “Site Visit”). Regarding the Respondent’s request to file a Counterclaim, the Tribunal decided that it deferred its decision on the admissibility and on its jurisdiction over the Counterclaim and joined it to the merits of the Counterclaim, all of them to be decided in the final award. On this basis, the Tribunal invited the Parties to confer and agree on a schedule of submissions to brief the Tribunal on the Counterclaim.

¶93. On 21 March 2023, the Claimant reported to the Tribunal that the Respondent had allegedly aggravated the dispute by forcefully entering into Punta Venado, in violation of PO7, and requested the assistance of the Tribunal.

¶94. On 23 March 2023, after hearing both Parties, the Tribunal provided further instructions on the procedural calendar to brief the Tribunal on the Counterclaim.

¶95. On 24 March 2023, the Respondent proposed a timetable for briefing its Counterclaim, requesting the bifurcation of damages issues relating to the Counterclaim.

¶96. On 28 March 2023, the Respondent submitted its observations on the Claimant’s request of 21 March 2023 regarding the Respondent’s alleged violation of PO7.

¶97. On 29 March 2023, the Claimant objected to the Respondent’s proposed timetable for the briefing of the Counterclaim and bifurcation request. The Claimant requested that the Tribunal decide on the scope of the Respondent’s Counterclaim as a preliminary issue.

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¶98. On 3 April 2023, the Claimant filed a response to the Respondent’s observations of 28 March 2023.

¶99. On the same date, the Tribunal provided instructions on the issue of the procedural calendar for the briefing of the Counterclaim. The Tribunal granted the Respondent’s request for bifurcation of the damages issues relating to the Counterclaim. The Tribunal further decided that it did not have sufficient materials before it at that stage to issue any directions with respect to the scope of the Counterclaim and invited the Parties to plead their respective cases on jurisdiction, admissibility and liability in relation to the Counterclaim as presented by the Respondent.

¶100. On 6 April 2023, the Respondent filed further observations on the Claimant’s request of 21 March 2023 regarding the Respondent’s alleged violation of PO7.

¶101. On the same date, the Parties submitted further comments on the procedural calendar for the briefing of the Counterclaim. The Claimant proposed that the merits of the Counterclaim (not just the damages issues) be bifurcated to be addressed later, if applicable. The Respondent accepted the Claimant’s bifurcation proposal on 12 April 2023.

¶102. On 13 April 2023, after considering the Parties’ agreement to bifurcate the merits of the Counterclaim, the Tribunal confirmed that the merits and quantum issues of the Counterclaim would be bifurcated. The Tribunal indicated that, at that stage, the Tribunal would determine the jurisdiction and admissibility of the Counterclaim only. On this basis, the Tribunal confirmed the procedural calendar for the briefing of the Counterclaim as well as the dates for the hearing on the Ancillary Claim and on the Jurisdiction and Admissibility of the Counterclaim.

¶103. On 19 April 2023, the Tribunal issued a decision on the alleged violations of PO7. The Tribunal granted leave to both Parties to file into the record documents in support of their correspondence by 26 April 2023 and invited the Parties to take no action that might further aggravate or extend the dispute between the Parties.

¶104. On 21 April 2023, the Respondent filed a Rejoinder on the Ancillary Claim (“Respondent’s Rejoinder on the Ancillary Claim” or “Rejoinder AC”), together with

[Page 39]

Factual Exhibits R-0191 through R-0219, Legal Authorities RL-0182 through RL-0201, the Witness Statements by Ms. Gloria Fermina Tavera Alonso (RW-0015 or “Tavera Alonso Statement”, with Exhibits GFTA-0001 through GFTA-0017), and by Mr. Adrián Pedrozo Acuña (RW-0016 or “Pedrozo Acuña Statement”, with Exhibits APA-0001 through APA-0006), the Fourth Expert Reports of Mr. Timothy Hart and Ms. Rebecca Vélez (RE-0009 or “Credibility Fourth Report”, with Appendix A through Appendix C and Exhibits CRED-0097 through CRED-0105), and of Messrs. Gustavo Carvajal, Juan Pedro Machado y Carlos del Razo Ochoa (RE-0010 or “SOLCARGO Fourth Report”, with Exhibits JPMA-0016 through JPMA-0030) and the Second Expert Report of Mr. Carlos Rábago Estela (RE-0011, or “Rábago Estela Second Report”, with Exhibits CRE-0005 through CRE-0012).

¶105. On 26 April 2023, the Parties submitted additional documents in support of their correspondence regarding the Respondent’s alleged violation of PO7: C-0332 to C-0350 for the Claimant, and R-0220 to R-0230 and RL-0202 to RL-0206 for the Respondent.

¶106. On 28 April 2023, following discussions between the Parties on a protocol for the Site Visit, the Parties provided a draft Site Visit protocol, including a number of disagreements and their respective positions.

¶107. On 12 May 2023, the Respondent filed a Memorial on Admissibility and Jurisdiction of the Counterclaim (“Respondent’s Memorial on Admissibility and Jurisdiction of the Counterclaim” or “Counterclaim Memorial on Jurisdiction”), together with Legal Authorities RL-0207 through RL-0231.

¶108. On 18 May 2023, the Tribunal held a case management conference with the Parties by videoconference in relation to the draft Site Visit protocol.

¶109. Further drafts of the Site Visit protocol and its Annexes were submitted on 2 and 9 June 2023 respectively, in relation to which the Tribunal issued further directions on 14 June 2023.

¶110. On 14 June 2023, the Tribunal received correspondence from Mr. Quetzal Tzab González on behalf of “hundreds of residents from marginalized and indigenous communities in

[Page 40]

Playa del Carmen, state of Quintana Roo, Mexico”, which was forwarded to the Parties the following day.

¶111. On 21 June 2023, the Parties submitted the final draft Site Visit protocol, subject to one final disagreement on the composition of the Parties’ delegations for the Site Visit.

¶112. On 22 June 2023, the Tribunal issued Procedural Order No. 8 (“PO8”) concerning the Site Visit, attaching an English and Spanish version of the Site Visit protocol and its Annexes (“Site Visit Protocol”). On the same date, the Tribunal also invited the Parties to comment on a number of matters relating to the organization of the hearing on the Ancillary Claim and jurisdiction/admissibility of the Counterclaim to be held remotely from 7-10 August 2023, with 10 August being a reserve day.

¶113. On the same date, and upon invitation of the Tribunal, the Parties provided comments on the correspondence of Mr. Tzab.

¶114. On 27 June 2023, the Claimant filed a Response on Admissibility and Jurisdiction of the Counterclaim (“Claimant’s Response on Admissibility and Jurisdiction of the Counterclaim” or “Response on Counterclaim Jurisdiction”), together with Factual Exhibits C-0332 through C-0353 and Legal Authorities CL-0230 through CL-0253. The Tribunal notes that Claimant used exhibit numbers that had already been assigned to previously filed exhibits (see ¶ 105 above). Accordingly, for the purposes of this Award the Tribunal will refer to these Exhibits as C-0332a through C-0350a, as appropriate.

¶115. On 30 June 2023, Mr. Tzab filed an application to file a written submission pursuant to ICSID Arbitration Rule 37(2) (the “Letter of 30 June 2023”). Attached to the Letter of 30 June 2023 was a document being a class action filed before the Mexican courts by Mr. Tzab in the matter Quetzal Tzab González y Otros, Todos Integrantes de la Colectividad Actora vs Calizas Industriales del Carmen, S.A. de C.V. (SAC TUN) y Rancho Piedra Caliza S.A. de C.V. (“Class Action Filing”).

¶116. On 7 July 2023, each Party filed its observations on the Letter of 30 June 2023 and the Class Action Filing. The Claimant’s observations were accompanied by Factual Exhibits C-0354 to C-0356 and Legal Authorities CL-0254 to CL-0264.

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¶117. On 13 July 2023, the Tribunal issued Procedural Order No. 9 (“PO9”) granting Mr. Tzab’s application to file a written submission as a non-disputing party pursuant to ICSID Arbitration Rule 37(2), and inviting the Parties to submit any written comments on 24 September 2023.

¶118. On 14 July 2023, the Claimant requested leave to submit into the record the transcript and a video excerpt of President Andrés Manuel López Obrador’s morning press conference (Mañanera) of 13 July 2023.

¶119. On 18 July 2023, a pre-hearing conference between the Tribunal and the Parties was held in person in Playa del Carmen, Mexico, to discuss the organization of the hearing on the Ancillary Claim and jurisdiction/admissibility of the Counterclaim.

¶120. Between 18 July 2023 and 20 July 2023, the Tribunal and the Parties visited the places at Playa del Carmen, Mexico, connected with the dispute pursuant to ICSID Arbitration Rule 37(1). During the Site Visit, the Claimant requested to introduce into the record (i) Oficio 401-7-1/958 of 29 November 2010 of the Instituto Nacional de Antropología e Historia (“INAH”) and (ii) the Mayan Ruins Guide brochure.

¶121. On 21 July 2023, the United States of America filed a second written submission as a non-disputing State Party pursuant to NAFTA Article 1128 (“Second Article 1128 Submission of the United States of America”).

¶122. On the same date, the Respondent submitted a response to the Claimant’s request of 14 July 2023 to introduce the transcript and a video excerpt of President López Obrador morning press conference of 13 July 2023.

¶123. On 25 July 2023, the Respondent submitted a response to Claimant’s request during the Site Visit to introduce into the record (i) INAH’s Oficio 401-7-1/958 of 29 November 2010 and (ii) the Mayan Ruins Guide brochure.

¶124. On 26 July 2023, the Tribunal issued Procedural Order No. 10 (“PO10”), concerning the organization of the hearing on the Ancillary Claim and jurisdiction/admissibility of the Counterclaim, setting out the procedural rules that the Parties agreed upon and/or that the Tribunal determined will govern the conduct of the hearing.

[Page 42]

¶125. On the same date, and in light of the Respondent’s non-objection to the Claimant’s request, the Tribunal granted the Claimant leave to introduce the new documents requested on 14 July 2023 and during the Site Visit. Pursuant to the Tribunal’s instructions, such new documents were submitted into the record by the Claimant on 28 July 2023 as C-0357 to C-0360.

¶126. Also on 28 July 2023, the Claimant informed that, in response to the President’s inquiry about the breakdown of the existing inventory at CALICA by grades during the Site Visit, it was prepared to introduce into the record reports indicating Legacy Vulcan's inventories both at CALICA’s Port Terminal and Plant as of 25 July 2023, segregated by product type. Additionally, the Claimant requested leave to submit into the record the transcript and a video excerpt of President López Obrador morning press conference (Mañanera) of 27 July 2023.

¶127. On 31 July 2023, the Tribunal circulated the draft minutes of the Site Visit prepared by the Secretary of the Tribunal and invited the Parties to submit any comments by 4 August 2023.

¶128. On the same date, the Tribunal granted the Claimant’s request to introduce the transcript and a video excerpt of President López Obrador’s Mañanera of 27 July 2023 in light of the Respondent’s non-objection.¹⁵ Additionally, the Tribunal invited the Respondent to comment on the Claimant’s request to introduce into the record reports of Legacy Vulcan’s inventories at CALICA’s Port Terminal and Plant as of 25 July 2023, segregated by product type. Pursuant to the Tribunal’s invitation, the Respondent objected to the Claimant's request on 2 August 2023.

¶129. On 4 August 2023, the Parties submitted their comments on the Site Visit minutes circulated by the Tribunal on 31 July 2023.

¶130. On the same date, the Tribunal rejected the Claimant’s request to introduce into the record reports on CALICA’s inventory segregated by product on the grounds that the requirement of exceptional circumstances set forth in Section 16.3 of PO1 was not met.

¹⁵ Such new evidence was introduced into the record as Factual Exhibits C-0361 and C-0362 on 2 August 2023. ↩

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¶131. On 6 August 2023, the Tribunal invited each Party to comment on the other Party’s comments on the Site Visit minutes. The Parties submitted their respective comments on 9 August 2023.

¶132. From 7 to 11 August 2023, the Tribunal held a hearing on the Ancillary Claim and the jurisdiction/admissibility of the Counterclaim by video conference (the “Hearing on the Ancillary Claim and Jurisdiction/Admissibility of the Counterclaim”). The following persons were present:

Tribunal:

ICSID Secretariat:

Assistant to the Tribunal:

For the Claimant:

For the Respondent:

[Page 44]

Court Reporters:

Interpreters:

Non-Disputing NAFTA Contracting Parties:

¶133. During the Hearing on the Ancillary Claim and Jurisdiction/Admissibility of the Counterclaim, the following persons were examined:

On behalf of the Claimant:

[Redacted]

[Page 45]

On behalf of the Respondent:

¶134. On 14 August 2023, the Tribunal, inter alia, circulated the minutes of the Site Visit incorporating the Parties’ agreed changes (the “Site Visit Minutes”) and invited the Parties to address any additional comments or views regarding the content of the Site Visit Minutes in their respective Post-Site Visit briefs. The Tribunal also informed the Parties that, in accordance with paragraph 64 of PO6, it would pose questions to the Parties by 25 August 2023 and invited them to address such questions in their post-hearing briefs.

¶135. On 15 August 2023, the Claimant requested leave to submit into the record the transcript and a video excerpt of President López Obrador’s morning press conference (Mañanera) of 14 August 2023. On 21 August 2023, the Respondent filed observations on the Claimant’s request. On 23 August 2023, considering the Respondent’s non-objection, the Tribunal decided to grant the Claimant’s request and invited the Claimant to file the complete transcript and video of the morning press conference of 14 August 2023 by 25 August 2023.

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¶136. On 23 August 2023, the Tribunal submitted questions to the Parties in accordance with paragraph 64 of PO6.

¶137. On 25 August 2023, the Claimant submitted the complete transcript and a video of President López Obrador’s morning press conference (Mañanera) of 14 August 2023 as Factual Exhibits C-0363 and C-0364.

¶138. On 20 September 2023, each Party filed a Post-Site Visit Brief (“Post-Site Visit Briefs”) and answers to the Tribunal’s questions.

¶139. On 25 September 2023, each Party submitted its comments on the Second Article 1128 Submission of the United States of America and the 30 June 2023 Letter, together with Factual Exhibits C-0365-C-0367, and Legal Authorities CL-0265-CL-0287 and RL-0232-RL-0233, respectively.

¶140. On 6 October 2023, the Respondent requested leave to submit into the record a letter issued by Mexico’s INAH on 6 September 2023 (Oficio No. 401.2C.7-2023/857), and its respective exhibits.

¶141. On 11 October 2023, the Claimant requested leave to submit into the record the transcript and a video excerpt of President López Obrador’s morning press conference (Mañanera) of 6 October 2023. On the same date, the Claimant filed observations on the Respondent’s request of 6 October 2023, agreeing to the introduction of the letter issued by INAH on 6 September 2023 (Oficio No. 401.2C.7-2023/857), provided the Tribunal allowed the Claimant to introduce another letter issued by INAH in August 2021.

¶142. On 16 October 2023, the Respondent filed its observations on the Claimant’s request of 11 October 2023, communicating that it did not object to the Claimant’s request, provided the full video and transcript were introduced into the record.

¶143. On 19 October 2023, considering the Parties comments and the non-objection to the other Party’s request, the Tribunal decided to grant (i) the Respondent’s request to file Oficio No. 401.2C.7-2023/857 and (ii) the Claimant’s request to file the letter issued by INAH in August 2021 and the complete transcript and video of President López

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Obrador’s morning press conference of 6 October 2023. The Tribunal invited the Parties to submit the documents by 20 October 2023.

¶144. On 20 October 2023, the Claimant submitted the (i) complete transcript and video of President Andrés Manuel López Obrador’s morning press conference (Mañanera) of 6 October 2023 as Factual Exhibits C-0368 and C-0369, and (ii) a letter issued by INAH in August 2021 as Factual Exhibit C-0370. On the same date, the Respondent submitted the letter issued by INAH on 6 September 2023 (Oficio No. 401.2C.7-2023/857) as Factual Exhibit R-0236.

¶145. On 24 October 2023, the Claimant requested leave to submit into the record the transcript and an excerpt video of President López Obrador’s morning press conference (Mañanera) of 20 October 2023. The Claimant also requested the Tribunal to reiterate its order recommending that the Respondent “take no action that might further aggravate or extend the dispute” pursuant to PO7.

¶146. On 27 October 2023, the Parties filed their Post-Hearing Briefs on the Ancillary Claim and Jurisdiction/Admissibility of the Counterclaim (“PHM on Ancillary Claim and Counterclaim” or “PHM AC”), together with Legal Authorities CL-0288 to CL-0297 and RL-0234 to RL-0253.

¶147. On 30 October 2023, the Respondent filed observations on the Claimant’s request of 24 October 2023, communicating that it did not object to the Claimant’s request, provided the full video and transcript were introduced into the record. On 2 November 2023, the Claimant filed a response to the Respondent’s observations of 30 October 2023, maintaining its request for the Tribunal to reiterate its provisional-measure order in PO7, recommending that Respondent refrain from further aggravating the dispute.

¶148. On 8 November 2023, considering the Respondent’s non-objection, the Tribunal decided to grant the Claimant’s request to file the transcript and a video of President López Obrador’s morning press conference (Mañanera) of 20 October 2023 by 10 November 2023. On the same date, the Claimant submitted the complete transcript and video of President Andrés Manuel López Obrador’s morning press conference (Mañanera) of 20 October 2023 as Factual Exhibits C-0371 and C-0372.

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¶149. On 9 November 2023, the Claimant requested the Tribunal (i) for leave to submit into the record a notice published in the Mexican Official Gazette on 8 November 2023 commencing the process to declare CALICA’s lots as a natural protected area (the “Notice”) and (ii) to reiterate the Tribunal’s order in PO7 recommending that the Respondent refrain from further aggravating the dispute.

¶150. On 16 November 2023, the Respondent filed observations on the Claimant’s request of 9 November 2023, communicating that it did not object to the Claimant’s request to introduce the Notice, provided that other documents that the Respondent referred to in its letter were introduced into the record.

¶151. On 17 November 2023, the Claimant requested leave to file a reply to the Respondent’s communication of 16 November 2023 regarding the introduction of new documents. On the same date, the Respondent requested leave to submit into the record two Acuerdos de Emplazamiento issued on 23 October 2023.

¶152. On 22 November 2023, the Claimant requested leave to submit its observations regarding (i) the Respondent’s request of 17 November 2023 on the introduction of the Acuerdos de Emplazamiento by 28 November 2023, and (ii) the Respondent’s request of 16 November 2023 on the introduction of the additional documents by 5 December 2023.

¶153. On the same date, the Tribunal (i) invited the Claimant to submit its observations on the Respondent’s request of 17 November 2023 regarding the Acuerdos de Emplazamiento by 28 November 2023, (ii) informed the Parties that, unless the Respondent had any objection, it would also invite the Claimant to submit its observations on the additional documents referred to by the Respondent in its letter of 16 November 2023 and made available by the Respondent to the Claimant on 21 November 2023 by 5 December 2023, and (iii) requested the Respondent to inform the Tribunal if it had any objection.

¶154. On the same date, the Respondent informed that it had objections regarding the Claimant’s request to submit its comments by 5 December 2023 and informed that it would not oppose to the Claimant submitting them by 28 November 2023, along with its comments on the Acuerdos de Emplazamiento.

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¶155. On 23 November 2023, the Claimant filed a response to the Respondent’s observations of 22 November 2023.

¶156. On 27 November 2023, the Tribunal granted the Claimant’s request to file the Notice published in the Mexican Official Gazette on 8 November 2023 and invited the Claimant to submit it by 28 November 2023. On the same date, after considering both Parties’ communications, the Tribunal amended the procedural calendar to address the Parties’ requests regarding the introduction of new documents by the Respondent.

¶157. On 28 November 2023, the Claimant submitted the Notice published in the Mexican Official Gazette on 8 November 2023. On the same date, the Claimant filed its observations to the Respondent’s request of 17 November 2023, regarding the Acuerdos de Emplazamiento.

¶158. On 4 December 2023, the Claimant filed its observations to the Respondent’s request of 16 November 2023, regarding the introduction of new documents made available by the Respondent to the Claimant on 21 November 2023.

¶159. On 7 December 2023, the Respondent filed its observations to the Claimant’s objection to admit any of the documents.

¶160. On 12 December 2023, the Tribunal issued directions on the admissibility of new evidence. Regarding the Respondent’s request of 16 November 2023, the Tribunal decided to amend its directions of 27 November 2023, instructing (i) the Respondent to provide the Claimant with PROFEPA’s files for 2005, 2012 and 2014 by 13 December 2023, (ii) the Respondent to file a submission identifying the specific documents it sought to rely on, together with an explanation on the relevance of those documents, and the respective documents by 20 December 2023, (iii) the Claimant to file a submission in response to the Respondent’s submission by 29 January 2024, and (iv) the Parties to simultaneously file their reply post-hearing briefs by 12 February 2024. Regarding the Respondent’s request of 17 November 2023, considering the Claimant’s non-objection to the introduction of the Acuerdos de Emplazamiento, the Tribunal invited the Respondent to submit these documents by 13 December 2023.

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¶161. On 13 December 2023, the Respondent submitted the Acuerdos de Emplazamiento as Factual Exhibits R-0237 and R-0238.

¶162. On 14 December 2023, the Claimant filed its observations to the Tribunal’s decision of 12 December 2023 regarding the PROFEPA’s files alleging that such documents were incomplete. On the same date, the Respondent filed its observations to the Claimant’s comments.

¶163. On 15 December 2023, the Tribunal clarified its request concerning the PROFEPA’s files and ordered the Respondent to provide the Claimant with the missing pages in PROFEPA’s files from 2003, 2008 and 2014. The Tribunal also directed the Respondent to submit the PROFEPA’s files to the Claimant for years 2005, 2012 and 2016 as well as complete any missing documents for 2003, 2008 and 2014 by 18 December 2023.

¶164. On 19 December 2023, the Tribunal issued Procedural Order No. 11 (“PO11”) rejecting both of Claimant’s pending requests: (i) in relation to President López Obrador’s morning press conference (Mañanera) of 20 October 2023, that the Tribunal reiterate its order in PO7 that the Respondent “take no action that might further aggravate or extend the dispute”, and (ii) in relation to the Notice that the Tribunal reiterate its order in PO7 “recommending that Respondent refrain from further aggravating the dispute”.

¶165. On 20 December 2023, the Respondent filed its submission regarding its request to introduce new documents of 16 November 2023, along with the respective documents as Factual Exhibits R-0239 to R-0242.

¶166. On 12 February 2024, each Party filed a Reply Post-Hearing Brief on the Ancillary Claim and Jurisdiction/Admissibility of the Counterclaim (“Reply PHMs on Ancillary Claim and Counterclaim” or “RPHM AC”). The Claimant’s submission was accompanied by Legal Authorities CL-0298 and CL-0299. The Respondent’s submission was accompanied by Legal Authorities RL-0254 to RL-0258.

¶167. On 15 March 2024, each Party filed a Submission on Costs (“Submissions on Costs” or “CS”). Claimant’s submission was accompanied by Legal Authorities CL-0300 to CL-0304.

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¶168. By letter of 13 June 2024, Claimant informed the Tribunal of certain new developments and requested leave to introduce new documents into the record. On 20 June 2024, following the Tribunal’s invitation, Respondent filed its observations on Claimant’s request of 13 June 2024.

¶169. On 25 June 2024, the Tribunal granted Claimant leave to introduce into the record, by 28 June 2024, the documents included in its request of 13 June 2024. On 28 June 2024, Claimant submitted the requested documents as Factual Exhibits C-0374 to C-0399.

¶170. By letter of 27 August 2024, Claimant informed the Tribunal of further developments concerning the declaration of CALICA’s lots as natural protected areas and requested leave to introduce new documents into the record. On 2 September 2024, at the Tribunal’s invitation, Respondent filed its observations on Claimant’s request and sought leave to introduce additional documents into the record. On 9 September 2024, Claimant filed its response to Respondent’s request of 2 September 2024.

¶171. On 13 September 2024, the Tribunal granted the Parties leave to introduce the documents requested in their respective applications. On 17 September 2024, within the deadline set by the Tribunal, Claimant filed Factual Exhibits C-0400 to C-0402, and Respondent filed Factual Exhibits R-0243 to R-0247 and Legal Authority RL-0259.

¶172. On 4 October 2024, Claimant informed the Tribunal that, on 23 September 2024, President Andrés Manuel López Obrador had signed a decree declaring CALICA’s lots a natural protected area (“ANP Decree”) and requested leave to introduce the ANP Decree into the record. By letter of 15 October 2024, at the Tribunal’s invitation, Respondent filed its observations on Claimant’s request of 4 October 2024 and, in turn, requested leave to introduce the following documents into the record: (i) Canada’s Counter-Memorial on Jurisdiction and the Merits, dated 15 July 2024, in the case Ruby River Capital LLC v. Canada (ICSID Case No. ARB/23/5) (“Canada’s Counter-Memorial in Ruby River”); and (ii) the “Estudio Previo Justificativo para el Establecimiento del ANP, Felipe Carrillo Puerto” of SEMARNAT and CONANP, dated July 2024 (“Estudio Previo Justificativo”).

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¶173. Pursuant to the Tribunal’s invitation, on 21 October 2024, Claimant filed observations on Respondent’s request of 15 October 2024, and, on 30 October 2024, Respondent filed its response to Claimant’s observations of 21 October 2024.

¶174. On 3 November 2024, the Tribunal granted the Parties leave to introduce into the record the documents requested in their respective applications of 4 October 2024 and 15 October 2024. In addition, the Tribunal invited Claimant to seek leave, by 7 November 2024, if it wished to file any responsive documents to Canada’s Counter-Memorial in Ruby River.

¶175. On 4 November 2024, Respondent submitted the Estudio Previo Justificativo and Canada’s Counter-Memorial in Ruby River as Factual Exhibit R-0248 and Legal Authority RL-0260, respectively. On the same date, Claimant submitted the ANP Decree as Factual Exhibit C-0403.

¶176. On 7 November 2024, Claimant requested leave to introduce into the record documents responsive to Canada’s Counter-Memorial in Ruby River. At the Tribunal’s invitation, on 13 November 2024, Respondent filed its observations on Claimant’s request of 7 November 2024.

¶177. On 15 November 2024, the Tribunal granted Claimant leave to introduce into the record the documents listed in its communication of 7 November 2024. On 19 November 2024, within the deadline set by the Tribunal, Claimant filed the responsive documents as Legal Authorities CL-0305 to CL-0308.

¶178. On 17 December 2024, Respondent filed an application for the Tribunal to (i) grant it leave to introduce additional documents into the record, and (ii) issue a decision on the admissibility and jurisdiction of the Respondent’s Counterclaim before issuing an award with respect to the original and Ancillary Claims. On 27 December 2024, following the Tribunal’s invitation, Claimant filed observations on Respondent’s application of 17 December 2024.

¶179. On 31 December 2024, the Tribunal decided as follows: (i) it granted Respondent leave to introduce the requested documents into the record by 3 January 2025, and (ii) it rejected Respondent’s request that the Tribunal first decide on the admissibility and jurisdiction

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of Respondent’s Counterclaim. On 3 January 2025, Respondent submitted the additional documents as Factual Exhibits R-0249 to R-0252.

¶180. On 4 December 2025, Respondent requested leave to introduce the award dated 21 November 2025 issued in Access Business Group LLC v. United Mexican States (ICSID Case No. ARB/23/15) (“ABG Award”) into the record. Pursuant to the Tribunal’s invitation, on 10 December 2025, Claimant filed observations on Respondent’s request of 4 December 2025. On 16 December 2025, the Tribunal granted Respondent leave to introduce into the record the ABG Award, provided that the dissenting opinion of Prof. Franco Ferrari was also included. On 19 December 2025, within the deadline set by the Tribunal, Respondent filed the ABG Award and Prof. Ferrari’s dissenting opinion as Legal Authorities RL-0261 and RL-0262.

¶181. On 16 June 2026, Respondent filed a request for the Tribunal to grant leave to introduce into the record the award in Silver Bull Resources, Inc. v. United Mexican States (ICSID Case No. ARB/23/24) (“Silver Bull Award”). On 22 June 2026, pursuant to the Tribunal’s invitation, Claimant filed observations on Respondent’s request of 16 June 2026. On 30 June 2026, the Tribunal granted the Respondent’s request, and, on 1 July 2026, the Respondent filed the Silver Bull Award into the record.

¶182. The proceeding was closed on 27 July 2026.

IV. FACTUAL BACKGROUND

¶183. In this Section, the Tribunal outlines the main factual background to the Parties’ dispute.

A. THE INVESTMENT AGREEMENT, PORT CONCESSION, AND CLAIMANT’S ACQUISITION AND INITIAL DEVELOPMENT OF LA ROSITA, PUNTA VENADO, EL CORCHALITO AND LA ADELITA

¶184. In the mid-1980s, Claimant partnered with a Mexican industrial and construction conglomerate Grupo Ingenieros Civiles Asociados (“Grupo ICA”) in a joint venture to (i) establish a limestone quarry in Quintana Roo; (ii) build an extraction and processing plant; (iii) construct a port close to the plant; (iv) deploy a fleet of cargo vessels to export production to the United States; and (v) create a network of distribution yards in the

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United States designed to receive CALICA’s production and market it throughout the US Gulf Coast.¹⁶

¶185. For convenience only, Claimant’s quarrying, shipping and distribution network is referred to in this Award as the “Project” or the “CALICA Network”. It is noted that “CALICA Network” is a contested term and the use of this language does not prejudge any determination by the Tribunal with respect to jurisdiction, liability, or any losses in respect of Claimant’s claims.

¶186. Claimant and Grupo ICA incorporated three operating entities for the joint venture:

1. (i) CALICA: responsible for operating the Project’s quarrying, processing and port operations in Mexico, including undertaking the construction of the processing plant and port.¹⁷
2. (ii) Vulica Shipping Company, Limited (“Vulica”): responsible for transporting CALICA’s production from Mexico to the United States with its fleet of vessels.¹⁸
3. (iii) Vulica/ICA Distribution Company (“Vulica/ICA”): until 2001, responsible for sales and marketing operations of the Project in the United States. That function is now performed by Vulcan Construction Materials, LLC.¹⁹

¶187. On 6 August 1986, CALICA, Mexico’s Federal Government, and the State of Quintana Roo entered into an agreement (“Investment Agreement”) pursuant to which government authorities: (i) confirmed that environmental impact studies had been carried out and that the Project was considered feasible; (ii) undertook, within the scope of their competences, to coordinate their functions and to provide the facilities to obtain the permits required to carry out the Project; and (iii) stated that the period of extraction would be subject to market conditions and economic feasibility.²⁰

¹⁶ C-0026-ENG, Vulcan Materials Company, The CALICA Story, VIMEO, uploaded on 13 May 2020. ↩

¹⁷ C-0010-SPA, Investment Agreement; [Redacted] First Statement, ¶¶ 20, 27, 46. ↩

¹⁸ [Redacted] First Statement, ¶ 47; Memorial, ¶ 24. ↩

¹⁹ [Redacted] First Statement, ¶ 14. ↩

²⁰ C-0010-SPA, Investment Agreement. ↩

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¶188. The Investment Agreement provides for the development of two lots, being (i) La Rosita, where the main quarry and processing plant would be located; and (ii) Punta Venado, where a port terminal would be built.²¹

¶189. La Rosita, El Corchalito and La Adelita are adjacent to Punta Venado as shown in the below aerial view of CALICA’s lots.²² Claimant’s claims relate to all three lots and to the port.

[Redacted]

¶190. To develop the lots, the Investment Agreement requires CALICA to keep the authorities informed of its work, including its potential expansion, and to obtain the necessary permits and authorizations. The Federal Government would, however, define the use and exploitation of the area, at a minimum at the end of the Project:²³

TERCERA - La EMPRESA hará del conocimiento de SEDUE [i.e., the Ministry of Urban Development and the Ecology], SCT [i.e., the Ministry of Communications and Transportation] y del GOBIERNO DEL ESTADO [i.e., the Government of the State of Quintana Roo] el calendario conforme al cual se realizarán los distintos trabajos que comprende e1 Proyecto, y se obliga a informarles bimestralmente, o cuando así se le requiera, sobre el avance de los mismos.

CUARTA. - SEDUE. SCT y el GOBIERNO DEL ESTADO, en el ámbito de sus respectivas competencias, inspeccionarán y vigilarán el cumplimiento de las obligaciones a cargo de la EMPRESA derivadas de este instrumento o de

²¹ C-0010-SPA, Investment Agreement, pp. 4-5. ↩

²² Memorial, ¶ 38. ↩

²³ C-0010-SPA, Investment Agreement, pp. 6, 14-16. ↩

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los permisos, licencias o autorizaciones que hubieren otorgado para la ejecución de los trabajos comprendidos en el Proyecto.

QUINTA – La EMPRESA deberá someter a la consideración de la SEDUE, SCT y al ESTADO, con dos meses de anticipación cuando menos, toda acción que modifique las características del Proyecto en los términos en que fue manifestado, evaluado o autorizado; o la suspensión o abandono de los trabajos antes de los plazos aprobados, para que intervengan de acuerdo con sus facultades.

[…]

OCTAVA. - El GOBIERNO DEL ESTADO definirá con base en sus Planes de Desarrollo para esa zona, el uso y aprovechamiento del escenario resultante al término de la vida útil del Proyecto, o en su caso durante alguna de las etapas del mismo, siendo del conocimiento de las partes el Anteproyecto de Desarrollo Turístico que forma parte de este Acuerdo como anexo 6²⁴ y que se incluye como una alternativa del uso probable de1 área.

NOVENA. - La EMPRESA con base en lo establecido en la cláusula anterior, deberá presentar a consideración de las partes que intervienen en este Acuerdo, el proyecto integral de restauración y aprovechamiento de la infraestructura creada durante el desarrollo del Proyecto que es motivo de este mismo Acuerdo.

DÉCIMA.- SEDUE, SCT y el GOBIERNO DEL ESTADO se comprometen, en la esfera de sus respectivas competencias, a coordinar sus funciones y a dar las facilidades para la obtención de los permisos requeridos para la realización del Proyecto a que se refiere el presente Acuerdo.

DECIMA PRIMERA.- La Empresa se obliga, antes de iniciar el Proyecto, a obtener con apego a las disposiciones legales aplicables, la expedición de 1os permisos, licencias y autorizaciones que fueren necesarias para la ejecución de1 referido Proyecto.

[…]

DECIMA TERCERA. - La duración de este Acuerdo dependerá de los plazos y tiempos establecidos en los permisos, 1icencias, autorizaciones y concesiones a que se refiere la cláusula Décima Primera.

¶191. In this context, the Investment Agreement foresees that the Project would be coordinated with the “National Development Plan” in place between 1983 and 1988, including its legal provisions and strategic guidelines:²⁵

²⁴ C-0010-SPA, Investment Agreement, pp. 15, 411. ↩

²⁵ C-0010-SPA, Investment Agreement, p. 13 (capital letters in original). ↩

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El Gobierno Federal, por conducto de SEDUE y de SCT, y el GOBIERNO DEL ESTADO, estiman conveniente, por las razones consignadas en estos antecedentes, coordinar y concertar sus acciones para la factibilidad del Proyecto, en los términos de las disposiciones legales que norman su actividad y competencia conforme a los lineamientos estratégicos que para la zona establece el Plan Nacional de Desarrollo 1983-1988 para asegurar que en la industria extractiva y de construcción, los empleos y las exportaciones estén vinculados con la conservación del ambiente y la calidad de vida de la región.

¶192. The Investment Agreement thus foresees that the Project area will cover CALICA’s quarrying and related transport activities and, at the end of its life, a study for its possible use for tourism:²⁶

La EMPRESA ha elaborado y presentado a la consideración de la SEDUE y del GOBIERNO DEL ESTADO, un Proyecto para la explotación del banco de materiales, para obtener agregados para la fabricación de materiales de construcción y para la utilización directa de la piedra caliza con los mismos fines. Los productos citados se destinarán, principalmente a la exportación por vía marítima. El Proyecto comprende también la construcción, en el mismo sitio, de las obras e instalaciones de infraestructura portuaria necesarias para el manejo y exportación de los productos, por medio de embarcaciones idóneas para el transporte de grandes volúmenes.

El proyecto elaborado por la EMPRESA, comprende los siguientes rubros: 1.- Explotación del yacimiento; 2. - Transportación del material extraído para su trituración; 3.- Instalación de la planta de trituración y clasificación; 4.-Almacenamiento, y 5.- Carga a bordo de los barcos. Dicho proyecto se agrega como anexo número 1.

Asimismo, contiene un estudio para el aprovechamiento del área excavada al término de la vida útil del banco de material pétreo con la posibilidad de utilizarlo como lago propicio para un desarrollo inmobiliario turístico. Además se cuenta con una propuesta de arquitectura del paisaje que se realizará en algunas partes en torno de la zona del Proyecto.

¶193. In all events, the Investment Agreement provides that failure to comply with the obligations contained therein will result in the termination of the Agreement and the Project:²⁷

²⁶ C-0010-SPA, Investment Agreement, p. 12. Annex 6 provides that the use of the land shall be based on economic aspects and the development of the existing area: “el aprovechamiento de los terrenos sobre los cuales la empresa desarrollará la explotación de agregados a que se refiere este convenio, estará en función de aspectos económicos y del desarrollo que exista en la zona en el momento en que decida utilizarlos.” C-0010-SPA, p. 411. ↩

²⁷ C-0010-SPA, Investment Agreement, p. 16. ↩

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DECIMA SEGUNDA. – El incumplimiento de cualquiera de las obligaciones que la Empresa contrae en este Acuerdo, así como de las que a su cargo deriven de los documentos anexos al mismo, dará lugar a la rescisión del Acuerdo.

Las faltas y omisiones de la EMPRESA serán sancionadas por las autoridades competentes, con arreglo a las disposiciones legales aplicables.

La Empresa no solamente se obliga a lo expresamente pactado en este Acuerdo y sus anexos, sino también a las consecuencias que, según su naturaleza son conformes a la buena fé [] el uso o la ley.

¶194. On 10 November 1986, Respondent granted CALICA a provisional permit authorizing the construction of a port terminal to load petrous materials in Punta Venado (“Port Terminal”).²⁸

¶195. On 21 April 1987, Mexico’s Ministry of Communications and Transportation (Secretaría de Comunicaciones y Transportes, “SCT”) granted CALICA a concession to build and operate a private port terminal to load petrous materials (“CALICA Port Concession”). Pursuant to the CALICA Port Concession, CALICA undertook to donate six hectares of land to the SCT to build a public terminal and committed to maintain and repair the Port Terminal as needed.²⁹

¶196. In 1986 and 1987, a Mexican subsidiary of CALICA (Rancho Piedra Caliza, S.A. de C.V., “RAPICA”), acquired two lots, La Rosita and Punta Venado, in the Municipality of Cozumel, Quintana Roo, and leased the lots to CALICA.³⁰

¶197. CALICA commenced quarrying operations at La Rosita in 1987. La Rosita is the location of CALICA’s first quarry and processing plant, comprising approximately 930 hectares.

¶198. By approximately January 1990, CALICA commenced port operations at Punta Venado, as it hosts the Port Terminal.³¹ Punta Venado is adjacent to La Rosita and covers approximately 202 hectares. La Rosita and Punta Venado are separated by a federal

²⁸ C-0028-SPA, Provisional Permit to Begin Building the Project No. 28/86, dated 10 November 1986 (“Project No. 28/86 Provisional Permit”). ↩

²⁹ C-0012-SPA, Concession granted by the Executive Branch through the SCT to CALICA, dated 21 April 1987, pp. 1-3. ↩

³⁰ C-0029-SPA, Punta Venado Title Deed, dated 18 December 1986 (“Punta Venado Title Deed”); C-0030-SPA, La Rosita Title Deed, dated 22 May 1987 (“La Rosita Title Deed”). ↩

³¹ [Redacted] First Statement, ¶ 18. ↩

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highway but connected by a bridge (for circulation of vehicles) and an underground tunnel (for transfer of the quarry’s production) built by CALICA.³² Claimant obtained a customs permit for the operations at the Port Terminal, allowing the export of production directly from Punta Venado to the United States, without the need to go through an official Mexican customs port to clear customs.³³ This customs permit was generally renewed every three years.³⁴

¶199. By 1991, Claimant had exported its first shipments of CALICA aggregates to the United States.³⁵

¶200. On 17 March 1993, PROFEPA conducted an inspection of La Rosita “con el fin de verificar y comprobar el cumplimiento [de CALICA] de las disposiciones contenidas en la [LGEEPA], de las normas técnicas ecológicas y demás disposiciones jurídicas aplicables, al otorgamiento de permisos, autorizaciones, y concesiones[.]”³⁶ PROFEPA inspectors observed and reported on CALICA’s production process, and went on to describe that CALICA:³⁷

presenta Manifestación de Impacto Ambiental de 1986 así como recomendaciones técnicas y medidas de mitigación principalmente para […] el proceso de explotación, [estas últimas fueron verificadas durante la visita observándose que se le da cumplimiento].

¶201. In its resolution dated 29 March 1993, PROFEPA concluded that:³⁸

En atención a lo expuesto y del análisis de la documentación legal y aprovechamiento físico de la empresa, manifestamos de manera preliminar que la citada persona moral realiza el aprovechamiento conforme a las normas aplicables.

¶202. On 19 July 1993, Mexico enacted the Ports Law (Ley de Puertos) which required that all port concessions be held by state-owned entities called Integral Port Administration

³² [Redacted] First Statement, ¶ 22. ↩

³³ See, e.g., C-0201-SPA, Letter No. DGJA.2022-0981 from Leonardo Contreras Gómez (Mexico’s National Customs Agency) to CALICA (30 March 2022) (“Letter DGJA.2022-0981, 30 March 2022”), p. 9. ↩

³⁴ See, e.g., C-0175-ENG, Vulcan Materials Co., Vulcan Reports Fourth Quarter & Full Year 2021 Results (16 February 2022), p. 7 of the PDF. ↩

³⁵ C-0031-ENG, Vulcan Materials Company, Form 10-K for the 1991 fiscal year, dated 27 March 1992. ↩

³⁶ C-0280-SPA, PROFEPA Inspection Report (17 March 1993) (“PROFEPA Inspection Report, 17 March 1993”), pp. 3-4, 11-12. ↩

³⁷ C-0280-SPA, PROFEPA Inspection Report, 17 March 1993, pp. 6, 14. ↩

³⁸ C-0281-SPA, PROFEPA Inspection Resolution (29 March 1993), p. 2. ↩

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(Administración Portuaria Integral, “API”).³⁹ Accordingly, in 1994, the State of Quintana Roo and its municipalities created the Integral Port Administration of the State of Quintana Roo (Administración Portuaria Integral de Quintana Roo, S.A. de C.V., “API Quintana Roo”).⁴⁰

¶203. The SCT granted API Quintana Roo a concession to operate all port facilities in the State of Quintana Roo (“API Quintana Roo Concession”) except CALICA’s Port Terminal, which remained under the CALICA Port Concession.⁴¹ The CALICA Port Concession runs until 20 April 2037, with a possible 50-year extension. As amended, it entitles CALICA to operate the private and public terminals.⁴²

¶204. In 1994, an agreement was reached between the Federal Government, State of Quintana Roo, and relevant municipalities to coordinate and implement an ecological management program for the Cancun-Tulum corridor.⁴³

¶205. In June and August 1996, Claimant acquired two additional lots in the Municipality of Solidaridad, Quintana Roo, (since 2025, renamed as Municipality of Playa del Carmen, Quintana Roo) being El Corchalito (c. 369 hectares) and La Adelita (c. 882 hectares), for the expansion of quarrying operations.⁴⁴ Despite formally being in a different municipality, La Rosita is physically located between El Corchalito and La Adelita and thus links the three quarrying lots.

¶206. In 2001, Claimant purchased Grupo ICA’s interest in CALICA, Vulica and Vulica/ICA.⁴⁵

³⁹ C-0047-SPA, Mexico Federal Official Gazette, Ports Act, dated 19 July 1993 (“Ports Act”). ↩

⁴⁰ C-0048-SPA, Quintana Roo Official Gazette, Decree creating API Quintana Roo, dated 15 March 1994. ↩

⁴¹ C-0049-SPA, Mexico Federal Official Gazette, API Quintana Roo Concession, dated 26 August 1994. ↩

⁴² C-0047-SPA, Ports Act; C-0013-SPA, Amendment to the Concession granted by the Federal Government through the SCT to CALICA, dated 13 August 1993; C-0014-SPA, Amendment to the Concession granted by the Federal Government through the SCT to CALICA, dated 7 June 1994; C-0015-SPA, Amendment to the Concession granted by the Federal Government through the SCT to CALICA, dated 30 September 1994; C-0016-SPA, Amendment to the Concession granted by the Federal Government through the SCT to CALICA, dated 13 May 2015; C-0050-SPA, Letter No. 7.3.1355.15 from Alejandro Hernández Cervantes (SCT) to [Redacted] (CALICA), dated 22 May 2015. ↩

⁴³ [Redacted] 0004, Mexican Official Gazette, Coordination Agreement for the Ecological Management of the Region known as 1994 Cancun-Tulum Corridor – Ecological Management Program, dated 26 October 1994. ↩

⁴⁴ C-0034-SPA, El Corchalito Title Deed; C-0035-SPA, La Adelita Title Deed; [Redacted] First Statement, ¶ 22. ↩

⁴⁵ C-0046-ENG, Vulcan Materials Company, Form 10-K for the 2001 Fiscal Year, dated 27 March 2002 (“Vulcan Form 10-K 2001”), p. 5; [Redacted] First Statement, ¶ 26. ↩

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B. Factual Background to the Original Claims

1. El Corchalito and La Adelita: Authorisations and Zoning

¶207. La Adelita and El Corchalito are subject to environmental regulation at the federal, state, and municipal levels through ecological management programs (programas de ordenamiento ecológico, or “POEs”). These POEs have an impact on the authorizations and zoning obtained for La Adelita.

¶208. By way of background, at the federal level, the Ministry of Environmental and Natural Resources (“SEMARNAT”) formulates general territorial POEs to determine guidelines and strategies for, inter alia, preserving, protecting, restoring, and using natural resources sustainably,⁴⁶ and marine POEs to do the same for Mexico’s marine zones.⁴⁷

¶209. At the state level, regional POEs can be formulated and issued by the state governments, except when they include an area under federal jurisdiction, in which case the regional POE must be prepared and approved jointly with SEMARNAT.⁴⁸

¶210. At the municipal level, local authorities can issue local POEs in accordance with local environmental laws, except when they include an area under federal jurisdiction, in which case the regional POE must be prepared and approved jointly with SEMARNAT.⁴⁹ The purpose of local POEs is to regulate land used “fundamentalmente en la realización de actividades productivas y la localización de asentamientos humanos”⁵⁰ and, to this end, can control, monitor and change land use.⁵¹

¶211. POEs are elaborated through a multi-step process, and once adopted, are capable of review and adjustment. The POE process starts with coordination agreements being signed between federal, state and municipal governments (depending on the type of POE in question) to: (i) determine its purpose, coverage, targeted results, etc.;⁵² and

⁴⁶ C-0127-SPA, Mexico’s General Law of Ecological Balance (Ley General del Equilibrio Ecológico y la Protección al Ambiente) (“LGEEPA”), Art. 20. ↩

⁴⁷ C-0127-SPA, LGEEPA, Art. 20 BIS 6. ↩

⁴⁸ C-0127-SPA, LGEEPA, Art. 20 BIS 2. ↩

⁴⁹ C-0127-SPA, LGEEPA, Art. 20 BIS 5. ↩

⁵⁰ C-0127-SPA, LGEEPA, Art. 20 BIS 4. ↩

⁵¹ C-0127-SPA, LGEEPA, Art. 8. ↩

⁵² R-0015-ESP, Regulations under the General Law of Ecological Balance and Environmental Protection for Ecological Management, Mexican Official Gazette, Mexico, 8 August 2003 (“LGEEPA Regulations”), Art. 8. ↩

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(ii) establish an ecological management committee to manage the actions necessary to carry out the POE, ecological/technical studies, and environmental logbook recording the progress of the POE’s process.⁵³ Thereafter a technical study is carried out in four stages to: (i) describe the study area, including environmental attributes and sectoral interests;⁵⁴ (ii) identify and analyze environmental conflicts in the study area;⁵⁵ (iii) examine the evolution of environmental conflicts based on natural, social and economic variables;⁵⁶ and (iv) propose an ecological management model.⁵⁷ A POE is then proposed, based on the model resulting from the technical study and the applicable ecological strategies.⁵⁸ The proposed POE is subject to public consultation⁵⁹ before being published in the official gazette. Once published, the POE is implemented, with the relevant authorities carrying out surveillance and inspections to verify compliance. An evaluation phase follows implementation to determine whether the POE needs modification considering its effectiveness and objectives.⁶⁰

¶212. With this background in mind, below are certain regulations in place at each level that are relevant to this case.

¶213. At the state level, Claimant’s lots are in the state of Quintana Roo. At the municipal level, El Corchalito and La Adelita are in the Municipality of Solidaridad. Albeit contiguous, La Rosita and Punta Venado are in the Municipality of Cozumel.⁶¹

¶214. The Quintana Roo regime in place from 2001 to 2009 was the Program for Territorial Environmental Regulation (Programa de Ordenamiento Ecológico Territorial, “POET 2001”). El Corchalito and La Adelita were zoned as Unidad de Gestión or Environmental Management Unit “UGA 30”, which lists “flora and fauna” as the predominant use, and “infrastructure, quarrying, tourism” as conditioned uses.⁶² One condition for quarrying

⁵³ R-0015-ESP, LGEEPA Regulations, Arts. 11, 71. ↩

⁵⁴ R-0015-ESP, LGEEPA Regulations, Art. 42. ↩

⁵⁵ R-0015-ESP, LGEEPA Regulations, Art. 43. ↩

⁵⁶ R-0015-ESP, LGEEPA Regulations, Art. 44. ↩

⁵⁷ R-0015-ESP, LGEEPA Regulations, Arts. 3, 6-7. ↩

⁵⁸ R-0015-ESP, LGEEPA Regulations, Arts. 3, 6-7. ↩

⁵⁹ R-0013-ESP, Ministry of Environment and Natural Resources. Ecological Management Course, available at: https://proyectos.cuaed.unam.mx/educacion_continua/ordenamientoecologico/Nivel03/index.html. ↩

⁶⁰ R-0015-ESP, LGEEPA Regulations, Art. 6. ↩

⁶¹ See Memorial, ¶ 78, Map 2; Memorial, ¶ 80, Map 3. ↩

⁶² C-0078-SPA, POET (Territorial Ecological Management Program), dated 16 November 2001 (“POET 2001”), pp. 13, 15-16. ↩

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under UGA 30 was that 20% of vegetation was required to be preserved.⁶³ Among the incompatible uses for UGA 30 is “forestry”.⁶⁴ La Rosita was zoned as UGA 19, with predominant use as “quarry”, and incompatible uses including “forestry”.⁶⁵

¶215. On 25 May 2009, the State of Quintana Roo replaced the POET 2001 zoning regime with the Program for Local Environmental Regulation (Programa de Ordenamiento Ecológico Local, “POEL 2009”), applicable to the Municipality of Solidaridad. Under the POEL 2009, about 90% of La Adelita is zoned as UGA 5, intended for conservation, where quarrying is prohibited.⁶⁶ The remaining approximately 9% of La Adelita’s area is zoned as UGA 12 for “sustainable extraction”, where quarrying is a conditional use. Within the UGA 12 area, only 30% of the area may be used for quarrying, with 70% to be maintained in natural vegetation.⁶⁷

¶216. Under the POEL 2009, El Corchalito was zoned as UGA 14, also for “sustainable extraction”.⁶⁸ According to Claimant, in 2011 El Corchalito became subject to the Urban Development Program of Solidaridad of 2010, which does not preclude quarrying activities in that lot.⁶⁹

¶217. The POEL 2009 specifies that its provisions would not apply retroactively,⁷⁰ and under the “Control de Constitucionalidad” provision of the POEL, it provides:⁷¹

Es muy importante precisar que este POEL, no se aplicará retroactivamente a los casos en concreto, que cuentan con documentos oficiales y vigentes hasta antes de su entrada en vigor, ni en lo general, ni en lo que toca a la futura renovación de los mismos, por parte de las autoridades competentes. Se reconocen y respetan pues, los derechos adquiridos concernientes, en los términos aquí precisados. (Emphasis added)

⁶³ C-0078-SPA, POET 2001, pp. 13, 24, condition “MAE 58”. ↩

⁶⁴ C-0078-SPA, POET 2001, p. 13. ↩

⁶⁵ C-0078-SPA, POET 2001, p. 9. ↩

⁶⁶ C-0080-SPA, POEL (Local Ecological Management Program), dated 25 May 2009 (“POEL 2009”), pp. 45, 62, 76. See Memorial, ¶ 80, Map 3. ↩

⁶⁷ C-0080-SPA, POEL 2009, p. 83. ↩

⁶⁸ C-0080-SPA, POEL 2009, pp. 45, 85. See Memorial, ¶ 80, Map 3. ↩

⁶⁹ C-0081-SPA, Solidaridad Municipal Program of Urban Development 2010-2050, p. III-27. See Memorial, ¶ 80, n. 171. ↩

⁷⁰ C-0080-SPA, POEL 2009, pp. 20-21. ↩

⁷¹ C-0080-SPA, POEL 2009, p. 69. ↩

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¶218. At the state level, prior to the purchase of La Adelita and El Corchalito, the State of Quintana Roo Ministry of Infrastructure, Environment, and Fisheries confirmed in April 1996 the feasibility of quarrying activities on those lots (at the time part of the 1994 Cancun-Tulum Corridor regional POE), without excluding that other licenses, permits and authorisations may be required and reserving the possibility for the authorities to review and inspect the lots and order a shutdown or request protective measures:⁷²

1ª: La presente FACTIBILIDAD se otorga sin perjuicio de que el titular tramite y en su caso obtenga de las entidades competentes otras Licencias, Permisos, Autorizaciones, Concesiones y similares que para el caso se requieran.

[. . .]

4ª: El Gobierno del Estado por conducto de la Secretaría de Infraestructura, Medio Ambiente y Pesca, tendrá en todo momento la facultad de revisar e inspeccionar las instalaciones y las áreas de los predios de referencia, y podrá ordenar la clausura parcial o total, temporal o definitiva. Así como también, requerir la realización de las medidas de protección que estime necesarias para prevenir de riesgos y daños graves e inminentes al medio ambiente.

¶219. On 2 September 1996, the Municipality of Solidaridad addressed a letter to CALICA stating that it “no tiene ningún inconveniente” in relation to the “factibilidad para la industria extractiva y conexas” at La Adelita and El Corchalito.⁷³

¶220. On 11 December 1996, the State of Quintana Roo Ministry of Infrastructure, Environment, and Fisheries issued the Corchalito/Adelita State Environmental Authorisation (Autorización de Impacto Ambiental Estatal), granting an environmental impact authorisation for CALICA to extract petrous materials above the water table in El Corchalito and La Adelita (the “State EIA”), without prejudice to obtaining other authorisations necessary to carry out the operations and reserving the possibility for the

⁷² C-0071-SPA, Letter No. SIMAP/792/996 from Sergio Pérez Perales (SIMAP) to Ricardo Dehesa Toledo (CALICA), dated 19 April 1996 (“Letter SIMAP/792/996, 19 April 1996”), pp. 6-7; C-0072-SPA, Letter No. SIMAP/791/1996 from Sergio Pérez Perales (SIMAP) to Jorge E. Ortega Joaquin (CALICA), dated 19 April 1996 (“Letter SIMAP/791/1996, 19 April 1996”). ↩

⁷³ C-0073-SPA, Letter from Rafael Ernesto Medina Rivero (Municipality of Solidaridad) to CALICA, dated 2 September 1996 (“Municipality of Solidaridad Letter, 2 September 1996”), p. 5. ↩

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authorities to review and inspect the lots and order a shutdown or request protective measures:⁷⁴

12.- Esta autorización se otorga sin perjuicio de que el titular tramite y en su caso obtenga otras autorizaciones, concesiones, licencias, permisos y similares que sean requisitos para la realización de las obras y su operación motivo de la presente.

[. . .]

15.- El Gobierno del Estado, por conducto de la Secretaría de Infraestructura, Medio Ambiente y Pesca, tendrá en todo momento la facultad de revisar e inspeccionar las instalaciones y las áreas y trabajos de explotación y restauración que se efectúen; y podrá ordenar la clausura parcial, total, temporal o definitiva si se infringen los principios y condiciones fijados en el presente documento y en la Ley de la materia, independientemente de los daños y perjuicios en que incidiera el titular de la presente; así como también, requerir la realización de las medidas de protección que estime necesarias para prevenir de riesgos y daños graves e inminentes al medio ambiente.

¶221. The State EIA was initially valid for five years,⁷⁵ and has been reviewed and/or amended in 2006, 2011 and 2016.⁷⁶ The 2016 renewal extends the term of operation from five to 20 years, i.e., until 2036.⁷⁷

¶222. In the meantime, the 1994 Cancun-Tulum Corridor regional POE was superseded by the 2001 Cancun-Tulum Corridor regional POE, which identified La Adelita and El Corchalito as “UGA 50” properties, corresponding to predominantly conservation land with conditional mining use, requiring a review and evaluation process in 3 to 5 years.⁷⁸

⁷⁴ C-0018-SPA, Corchalito/Adelita State Environmental Impact Authorization, dated 11 December 1996 (“Corchalito/Adelita State EIA, 11 December 1996”), p. 10 of the PDF. ↩

⁷⁵ C-0018-SPA, Corchalito/Adelita State EIA, 11 December 1996, p. 5. ↩

⁷⁶ C-0074-SPA, First Amendment to the Corchalito/Adelita State Environmental Impact Authorization, dated 3 March 2006 (“First Corchalito/Adelita State EIA Amendment, 3 March 2006”); C-0075-SPA, Second Amendment to the Corchalito/Adelita State Environmental Impact Authorization, dated 19 May 2011 (“Second Corchalito/Adelita State EIA Amendment, 19 May 2011”), C-0076-SPA, Third Amendment to the Corchalito/Adelita State Environmental Impact Authorization, dated 8 March 2016 (“Third Corchalito/Adelita State EIA Amendment, 8 March 2016”). ↩

⁷⁷ C-0076-SPA, Third Corchalito/ Adelita State EIA Amendment, 8 March 2016, p. 5. of the PDF ↩

⁷⁸ C-0078-ENG, POET 2001; R-0023-ESP, Cartographic Model of the Territorial Ecological Management Program of the Region known as Cancun-Tulum Corridor, Official Gazette of the State of Quintana Roo, 16 November 2001. ↩

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¶223. At the federal level, the plots are subject to the General Law on Ecological Equilibrium and Environmental Protection (Ley General de Equilibrio Ecológico y la Protección al Ambiente) (“LGEEPA”).⁷⁹ The purpose of the LGEEPA is to set forth a general framework to attribute competence between municipal, state, and federal authorities when exercising their respective powers in environmental matters as provided by Mexico’s Federal Constitution.⁸⁰

¶224. On 30 November 2000, SEMARNAT (the competent authority for that matter) granted CALICA the Federal Environmental Impact Authorization (Autorización de Impacto Ambiental) for quarrying in El Corchalito and La Adelita below the water table (the “Federal EIA”). The Federal EIA, which refers to the LGEEPA, specifies, inter alia, that:⁸¹

PRIMERO.- La presente resolución en materia de Impacto Ambiental, permite a [CALICA] realizar la operación y mantenimiento del proyecto “Aprovechamiento de Roca Caliza por Debajo del Manto Freático en los Predios El Corchalito y La Adelita en Solidaridad, Quintana Roo”, en una superficie total de 1,251.43 ha dividido en dos predios La Adelita de 882.13 ha y El Corchalito de 369.30 ha[.]

SEGUNDO.- La presente autorización tendrá una vigencia de veinte años para las obras de preparación del sitio, construcción, operación y mantenimiento del proyecto. Dicho plazo [. . .] será prorrogable a juicio de esta Secretaría, siempre y cuando [CALICA] lo solicite por escrito a esta Dirección General de Ordenamiento Ecológico e Impacto Ambiental, con treinta días naturales de antelación a la fecha de su vencimiento. Dicha solicitud deberá presentarse con la validación de la [PROFEPA], al último informe del cumplimiento de condicionantes.

[…]

CUARTO.- [CALICA] deberá hacer del conocimiento de esta Dirección General, de manera previa, cualquier eventual modificación a los términos previstos en [el proyecto después de la publicación de la autorización de impacto ambiental por SEMARNAT], para que con toda oportunidad se determine lo procedente. Queda prohibido desarrollar obras y actividades

⁷⁹ C-0127-SPA, LGEEPA. ↩

⁸⁰ C-0127-SPA, LGEEPA, Arts. 1, 4. ↩

⁸¹ C-0017-SPA, Corchalito/Adelita Federal Environmental Impact Authorization, dated 30 November 2000 (“Corchalito/Adelita Federal EIA, 30 November 2000”), pp. 31, 35, 36, 42-44. ↩

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de preparación, construcción, operación y mantenimiento distintas a las señaladas en la presente autorización.

QUINTO.- [L]a presente autorización sólo se refiere a los aspectos ambientales de las obras y actividades descritas en el Término PRIMERO[,] por lo que es la obligación de [CALICA] tramitar y obtener otras autorizaciones, concesiones, licencias, permisos y similares que sean requisito para la realización de las mismas y su operación[.]

SEXTO.- La operación y mantenimiento del proyecto “Aprovechamiento de Roca Caliza por Debajo del Manto Freático en los Predios El Corchalito y La Adelita en Solidaridad, Quintana Roo”, se deberán sujetar a la descripción contenida en la Manifestación de Impacto Ambiental, modalidad Regional, y en los planos incluidos en ésta, así como en lo dispuesto en la presente resolución, conforme a las siguientes CONDICIONANTES[.]

[…]

OCTAVO.- [CALICA] deberá elaborar y presentar para su análisis y validación a la Delegación de [PROFEPA] del estado de Quintana Roo, la información del cumplimiento de los términos y las condicionantes aquí señalados en forma cuatrimestral a partir del día siguiente a la recepción del presente. Los informes deberán ser complementados con anexos fotográficos y/o videocintas, y enviar con copia del acuse de recibo correspondiente a esta Dirección General y a la Delegación de la [SEMARNAT].

[…]

DECIMOTERCERO.- La [SEMARNAT] podrá evaluar nuevamente la Manifestación de Impacto Ambiental, de considerarlo necesario, con el fin de revalidar la autorización otorgada, modificarla, suspenderla, anular o revocarla si estuviera en riesgo el equilibrio ecológico o se produjeran afectaciones negativas imprevistas en el ambiente[.]

[…]

DECIMOQUINTO.- El incumplimiento de cualquiera de los Términos resolutivos y/o la modificación del proyecto en las condiciones en que fue expresado en la documentación presentada, podrá invalidar la presente resolución, sin perjuicio de la aplicación de las sanciones previstas en la [LGEEPA] y demás ordenamientos que resulten aplicables.

DECIMOSEXTO.- La [SEMARNAT], a través de la [PROFEPA], vigilará el cumplimiento de los términos establecidos en el presente instrumento, así como los ordenamientos aplicables en materia de Impacto Ambiental. Para ello ejercitará, entre otras, las facultades que le confiere los Artículo[s] 55, 59 y 61 del Reglamento en materia de Impacto Ambiental de la [LGEEPA]. (emphasis in original)

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¶225. The Federal EIA further specifies the area to be exploited in the La Adelita and El Corchalito properties, as follows:⁸²

¶226. In 2001, CALICA commenced quarrying in El Corchalito.⁸³

¶227. On 15 June 2009, CALICA commenced legal action against the State of Quintana Roo and the Municipality of Solidaridad to confirm its rights with respect to quarrying in La Adelita, seeing as the POEL 2009 zoned La Adelita as UGA 5 – prohibiting quarrying and promoting conservation, as opposed to UGA 30 under the POET 2001 (see ¶ 215 above). Specifically, CALICA challenged the POEL 2009’s approval by the Municipality of Solidaridad and the State decree publishing it.⁸⁴ On 25 March 2010 the High Court of Justice of the State of Quintana Roo dismissed the claim, holding the claim

⁸² C-0017-SPA, Corchalito/Adelita Federal EIA, 30 November 2000, p. 32. ↩

⁸³ [Redacted] First Statement, ¶ 24. ↩

⁸⁴ C-0080-SPA, POEL 2009. ↩

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to be inadmissible because CALICA’s “interests are not affected, as the [POEL 2009] does not apply to it”.⁸⁵

¶228. On 19 May 2011, the renewal of the State EIA stated that the lots were regulated by the zoning under the POET 2001.⁸⁶

¶229. On 14 April 2013, CALICA’s counsel met with SEMARNAT’s General Director of Forest and Soil Management to discuss, among other things, CALICA’s plans to start operations in La Adelita.⁸⁷ Part of the discussions touched upon the Authorization for Soil-Use Change in Forested Terrains (Autorización de Cambio de Uso del Suelo en Terrenos Forestales, “CUSTF”) to remove vegetation from La Adelita. The CUSTF is required for the total or partial removal of vegetation from forest land for non-forest activities.⁸⁸

2. The 2014 Agreements and POEL 2009 Amendment Process

¶230. From May 2013, CALICA, SCT, the State of Quintana Roo, API Quintana Roo and the Municipality of Solidaridad participated in negotiations in relation to a number of outstanding issues.⁸⁹

¶231. On 12 June 2014, CALICA, the SCT, the State of Quintana Roo, API Quintana Roo and the Municipality of Solidaridad signed two documents (the “2014 Agreements”), followed by an amendment on 13 May 2015, as set out below. The nature of these documents is a contested matter in this arbitration, but for simplicity the Tribunal refers to them as “agreements”.

⁸⁵ C-0087-SPA, Decision by the High Court of Justice of the State of Quintana Roo, dated 25 March 2010 (“Quintana Roo High Court Decision, 25 March 2010”), p. 8. See Memorial, ¶ 83. ↩

⁸⁶ C-0075-SPA, Second Corchalito/Adelita State EIA Amendment, 19 May 2011, p. 4. ↩

⁸⁷ [Redacted] First Statement, ¶ 25. ↩

⁸⁸ R-0026-ESP, General Law on Sustainable Forestry Development, Mexican Official Gazette, 5 June 2018 (“2018 Sustainable Forestry Law”). ↩

⁸⁹ Memorial, ¶ 87. ↩

[Page 70]

¶232. First, the Total Regularisation Scheme was signed by the SCT, CALICA and API Quintana Roo (as a witness) (“Total Regularisation Scheme”) with the purpose of determining actions to solve the legal disputes related to the CALICA Port Concession.⁹⁰

¶233. Under the Total Regularisation Scheme, CALICA agreed to pay concession fees as assessed by the INDAABIN and not to challenge them, and SCT agreed to cease the proceeding to revoke the CALICA Port Concession.⁹¹

¶234. In addition, CALICA agreed to relinquish its concessioned rights to the public terminal and continue to operate the private terminal under the terms of the original concession. For greater certainty of CALICA and the API Quintana Roo regarding the areas that concern each of them, the SCT would amend the API Quintana Roo Concession to specify which areas belong to CALICA or API Quintana Roo, and which areas are for common use.⁹²

¶235. The eleventh recital to the Total Regularisation Scheme provides:⁹³

La celebración y cumplimiento del MOU es motivo determinante de la voluntad para que CALICA celebre los términos y condiciones de este ESQUEMA DE REGULARIZACIÓN TOTAL.

¶236. Second, a Memorandum of Understanding (“MoU”) was signed between CALICA, API Quintana Roo, the State of Quintana Roo and the Municipality of Solidaridad, with the SCT acting as a witness. Its purpose was:⁹⁴

. . . llegar a un arreglo mutuo de los conflictos originados por el uso y explotación de la infraestructura portuaria localizada en Punta Venado Quintana Roo, principalmente, con respecto al uso y explotación por CALICA, de la Terminal Portuaria de Uso Particular, y por [API Quintana Roo], de la Terminal Portuaria de Uso Público, así como la resolución de otros temas pendientes en relación con las operaciones de CALICA en su actual ubicación de Quintana Roo, México.

⁹⁰ C-0020-SPA, Total Regularization Scheme entered into between the SCT and CALICA, dated 12 June 2014 (“Total Regularization Scheme”), p. 5. ↩

⁹¹ C-0020-SPA, Total Regularization Scheme, p. 5, s. 2. ↩

⁹² C-0020-SPA, Total Regularization Scheme, p. 6, s. 3(i). ↩

⁹³ C-0020-SPA, Total Regularization Scheme, pp. 5, 12. ↩

⁹⁴ C-0021-SPA, Binding Memorandum of Understanding entered into between CALICA, API Quintana Roo, the State of Quintana Roo, and the Municipality of Solidaridad, dated 12 June 2014 (“MoU”), pp. 3, 11 of the PDF. ↩

[Page 71]

¶237. The recitals stated, with respect to the Total Regularisation Scheme, that:⁹⁵

La ejecución y cumplimiento por parte de la SCT del ESQUEMA DE REGULARIZACIÓN TOTAL es el motivo determinante de la voluntad para que CALICA celebre este Memorándum de Entendimiento.

¶238. The parties to the MoU agreed, inter alia, in Section 3, to: ⁹⁶

Llevar a cabo las acciones necesarias ante las autoridades municipales o estatales, conforme a la legislación vigente, tendientes a promover la ejecución del objeto social y de negocios de CALICA y/o afiliadas en la Terminal de Uso Particular, consistentes en lo siguiente:

a) Programa de Ordenamiento Ecológico Local (“POEL”) de Solidaridad.- El Municipio de Solidaridad y la Secretaría de Ecología, revisarán EL POEL para el Municipio de Solidaridad para gestionar ante los órganos técnico y ejecutivo la incorporación del “Uso de Minería y explotación de material pétreo” con respecto a los inmuebles propiedad y/o en posesión de CALICA y/o afiliadas, conocidos como “LA ROSITA”, “EL CORCHALITO” y “LA ADELITA”.

Adicionalmente, el Municipio de Solidaridad y la Secretaría de Ecología gestionarán ante dichos órganos técnico y ejecutivo que el POEL permita que en cada uno de los referidos predios se lleve a cabo la extracción y explotación de piedra caliza, materiales pétreos, agregados y derivados, incluyendo cemento, en una superficie de 50 ha por año, y que dicha extracción y explotación pueda realizarse por un plazo de 20 años, con derecho a prorroga en términos de la legislación aplicable, lo cual se gestionará ante el Instituto de Impacto y Riesgo Ambiental (INIRA).

Para lo anterior CALICA proporcionará la información técnica necesaria y coadyuvará en la elaboración de los estudios técnicos para que la Secretaría de Ecología y Medio Ambiente del Estado de Quintana Roo y el Municipio de Solidaridad, otorguen lo anterior, por lo que procederá a la actualización del POEL de Solidaridad, lo cual demora de 2 a 4 meses, los cuales correrían a partir del momento que se emita la convocatoria lo que se hará en julio de 2014.

¶239. In addition, the MoU contains agreements with respect to a number of other matters including: (i) the issuance of a new or modified State EIA; (ii) administrative acts relevant to reforestation; (iii) extraction tax; and (iv) real estate taxes.⁹⁷

⁹⁵ C-0021-SPA, MoU, pp. 3, 11 of the PDF. ↩

⁹⁶ C-0021-SPA, MoU, pp. 4-5, 13 of the PDF. ↩

⁹⁷ C-0021-SPA, MoU, pp. 5, 13-14 of the PDF. ↩

[Page 72]

¶240. The MoU further provided that:⁹⁸

Una vez que CALICA haya obtenido todos los permisos, autorizaciones, aprobaciones de autocorrección y aprobaciones y/o modificaciones de descuentos señalados en los sub-incisos a), b), c), d) y e) anteriores en esta Sección 3, y una vez que los compromisos aquí adquiridos por [API Quintana Roo], el Gobierno del Estado de Quintana Roo y el Municipio de Solidaridad hayan sido cumplid[o]s, CALICA (i) otorgará a la [API Quintana Roo] en comodato por 18 meses, prorrogables por el mismo plazo, el edificio que actualmente es utilizado como terminal de ferry ubicado en terrenos que son propiedad de CALICA o sus afiliadas y que no son parte de la Terminal Pública. cuyas áreas de dicho edificio se identificarán de manera conjunta entre CALICA y [API Quintana Roo] en un Anexo que se agregará como parte integrante de este MOU y del Convenio de Comodato que en su oportunidad se celebre, y (ii) se desistirá de los litigios existentes y promovidos por CALICA en relación con el Impuesto de Extracción y el Impuesto Predial.

Asimismo, CALICA entregará al Gobierno Federal la Terminal Pública de Punta Venado la cual se compone por 49,363.315 m2 de tierra y 34,889.871 m2 de agua según el ESQUEMA DE REGULARIZACIÓN TOTAL y el Plano denominado SCT-CALICA-APIQROO, mismo que se adjunta al presente como Anexo, el cual ambas partes reconocen coma válido para efectos de este instrumento y en su caso para cualquier otro instrumento que derive del presente asunto.

Una vez que CALICA haya obtenido todos los permisos, autorizaciones, aprobaciones de autocorrección y aprobaciones y/o modificaciones de descuentos señalados en los sub-incisos a), b), c), d) y e) anteriores en esta Sección 3, y una vez que compromisos aquí adquiridos por [API Quintana Roo], el Gobierno del Estado de Quintana Roo y el Municipio de Solidaridad hayan sido cumplidas, las Partes [i.e., the parties to the MoU] acuerdan desistirse de los juicios o acciones legales generadas con anterioridad a la celebración del presente documento o renunciarán a la ejecución de sentencia que corresponda, así como la liberación por escrito incondicional e irrevocable de todas y cada una de las reclamaciones pendientes o que generen una posible acción legal respecto de las obligaciones antes señaladas, por lo que no se reservarán ningún tipo de acción o reclamación una parte para con la otra.

¶241. Following the signature of the Total Regularisation Scheme and the MoU, Claimant invested further money for the success of the Project. For instance, in July 2014,

⁹⁸ C-0021-SPA, MoU, pp. 6-7, 15-16 of the PDF. ↩

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Claimant commissioned the construction of two custom-built, bulk carrier vessels for [Redacted] to accommodate CALICA’s operations.⁹⁹

¶242. Third and finally, following further negotiations, on 13 May 2015 the parties to the MoU entered into an Addendum to the Memorandum of Understanding (“Amended MoU”).¹⁰⁰ The Amended MoU addressed two interrelated issues, namely, the amendment of the POEL 2009 and the payment of contested real estate taxes by CALICA.

¶243. Section 1 of the Amended MoU sets forth a detailed timeline for the stages of the amendment of the POEL 2009, as tied to the payment of the contested real estate taxes:¹⁰¹

Se modifican el inciso a) Programa de Ordenamiento Ecológico Local (POEL) del Municipio de Solidaridad de la sección 3 del “MOU”, para quedar en los términos siguientes:

3. Llevar a cabo las acciones necesarias ante las autoridades municipales y estatales, conforme a la legislación vigente, tendientes a promover la ejecución del objeto social y de negocios de CALICA y/o afiliadas en la Terminal de Uso Particular, consistentes en lo siguiente:

a) Programa de Ordenamiento Ecológico Local (“POEL”) del Municipio de Solidaridad.- El Municipio de Solidaridad y el Gobierno del Estado de Quintana Roo, a través de la SEMA [Secretaría de Ecología y Medio Ambiente del Estado de Quintana Roo], instalarán el Comité de Ordenamiento Ecológico Local para la actualización del POEL del Municipio de Solidaridad (el “Comité de Ordenamiento Ecológico”), conformado por un órgano ejecutivo y un órgano técnico, con el objeto que dentro de este proceso se proponga, gestione y actualice el Programa de Ordenamiento Ecológico Local (“POEL”) del Municipio de Solidaridad para que en esta actualización se reconozca el uso de minería y explotación de material pétreo en los inmuebles propiedad y/o en posesión de CALICA y/o afiliadas, conocidos como “LA ROSITA”, “EL CORCHALITO” y “LA ADELITA”.

Adicionalmente, el Municipio de Solidaridad y la SEMA gestionarán ante el Instituto de Impacto y Riesgo Ambiental (INIRA), previa solicitud de CALICA, la modificación de los términos y condicionantes de las autorizaciones mediante la emisión de los actos administrativos al efecto

⁹⁹ C-0088-ENG, Memorandum for Meeting of the Board of Directors, dated 11 July 2014 (“Board Memorandum, 11 July 2014”). ↩

¹⁰⁰ C-0022-SPA, Addendum to the Binding Memorandum of Understanding entered into between CALICA, API Quintana Roo, the State of Quintana Roo, and the Municipality of Solidaridad, dated 13 May 2015 (“Amended MoU”). ↩

¹⁰¹ C-0022-SPA, Amended MoU, pp. 3-5, 10-12 of the PDF [Capitalization in the quoted text reflects the original]. ↩

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necesarios para que en cada uno de los referidos predios se lleve a cabo la extracción y explotación de piedra caliza, materiales pétreos, agregados y derivados, incluyendo cemento, en una superficie total de 50 hectáreas por año y que dicha extracción y explotación pueda realizarse por un plazo de 20 años, con derecho a prórroga en términos de la legislación aplicable. Todo lo anterior con el fin de hacer congruentes entre sí las distintas autorizaciones en materia ambiental y portuaria de carácter federal y local con lo dispuesto en el Programa de Ordenamiento Ecológico Local del Municipio de Solidaridad.

Para lo anterior, CALICA hará la petición de parte ante el INIRA, proporcionará la información técnica necesaria y elaborará los estudios técnicos para que la SEMA y el Municipio de Solidaridad, gestionen lo anteriormente mencionado.

En virtud de lo anterior, el Gobierno del Estado de Quintana Roo, a través de la SEMA y el Municipio de Solidaridad se comprometen a gestionar ante el Comité de Ordenamiento Ecológico todas las acciones necesarias hasta la aprobación y publicación de las propuestas de modificación establecidas en el presente inciso a) de esta sección 3 del MOU de la manera siguiente:

(i) En las reuniones que celebre el Comité de Ordenamiento Ecológico se deberán documentar las discusiones y acuerdos de cada una, a través del acta correspondiente, emitida y firmada por los miembros del comité.

(ii) La reunión de instalación del Comité de Ordenamiento Ecológico para la actualización del POEL del Municipio de Solidaridad, deberá realizarse del 25 al 29 de mayo de 2015, por lo que el 26 de mayo de 2015, CALICA pagará al Municipio de Solidaridad la cantidad de $3,572,497.98, correspondientes al ejercicio de 2012 por concepto de actividades de reforestación.

(iii) La primera etapa, de caracterización, (que incluye la actualización, la presentación ante el Comité y su validación respectiva) y la segunda etapa, de diagnóstico, (que incluye actualización, presentación ante Comité y validación) se llevarán a cabo de manera conjunta del 15 de Junio al 31 de julio de 2015, por lo que el 14 de julio de 2015, CALICA pagaría al Municipio de Solidaridad la cantidad de $3,036,249.00, más actualizaciones y recargos, correspondientes al pago de predial de los primeros tres bimestres del ejercicio de 2013.

(iv) La tercera etapa, de pronóstico, (que incluye actualización, presentación ante Comité y validación), se llevará a cabo del 10 de Agosto al 4 de Septiembre de 2015.

(v) La cuarta y última etapa, de modelo, (que incluye propuesta, presentación ante Comité y validación), se llevará a cabo del 17 de Septiembre al 12 de Octubre de 2015.

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(vi) El periodo de consulta pública de la propuesta de Modelo del POEL se llevará a cabo del 14 al 27 de Octubre de 2015, por lo que el 14 de octubre de 2015, CALICA pagaría al Municipio de Solidaridad la cantidad de $3,036,249.00, más actualizaciones y recargos, correspondientes al pago de predial de los últimos tres bimestres del ejercicio de 2013.

(vii) La reunión del Comité para la aprobación del Modelo del POEL se llevará a cabo el 11 de Noviembre de 2015.

(viii) El Municipio de Solidaridad entregará al Cabildo del Ayuntamiento el POEL actualizado, aprobado por el Comité, el 13 de Noviembre de 2015 mismo que será analizado para su aprobación entre el 16 y el 19 de Noviembre de 2015.

(ix) Ya aprobado el POEL actualizado por el Cabildo del Ayuntamiento, el Municipio de Solidaridad lo enviará entre el 23 y el 27 de Noviembre al Ejecutivo Estatal para su publicación en el Periódico Oficial del Estado de Quintana Roo.

(x) A más tardar el 5 de Diciembre de 2015 deberá publicarse en el Periódico Oficial del Estado Quintana Roo el POEL actualizado del Municipio de Solidaridad. Al día inmediato siguiente a la publicación aquí referida, CALICA pagará al Municipio de Solidaridad la cantidad de $6,072,498.00, más actualizaciones y recargos, correspondientes al pago de predial del ejercicio de 2014.

La SEMA y el Municipio de Solidaridad se darán a la tarea de cumplir con el calendario propuesto, conforme vayan avanzando los dos órganos del Comité de Ordenamiento Ecológico (órgano técnico y órgano ejecutivo), en la validación de las etapas previstas en el procedimiento de actualización del POEL del Municipio de Solidaridad.

¶244. On 30 October 2014, the “Committee to Amend the POEL” (“Committee to Amend the POEL”) was established, made up of an executive body and a technical body.¹⁰² The executive body included representatives of SEMARNAT, the State of Quintana Roo, and the Municipality of Solidaridad. The technical body comprised members of other Mexican government entities, civil society, and the private sector, including CALICA.¹⁰³

¹⁰² C-0090-SPA, Minutes of the Meeting to Establish the Committee to Amend the POEL, dated 30 October 2014 (“POEL Committee Establishment Minutes, 30 October 2014”). ↩

¹⁰³ C-0090-SPA, POEL Committee Establishment Minutes, 30 October 2014, pp. 7-9. ↩

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¶245. On 10 November 2014, the Committee to Amend the POEL met for the first time to set the groundwork for the POEL 2009’s modification process.¹⁰⁴

¶246. On 21 November 2014, the Committee to Amend the POEL met for the second time, at which time CALICA requested support for amending the POEL 2009 to allow CALICA to obtain the CUSTF permit to remove vegetation and commence quarrying activities under its prior authorisations.¹⁰⁵

¶247. Following signature of the Amended MoU, on 29 May 2015, the Committee to Amend the POEL met for a third time and resolved to carry out the update of the POEL 2009, as follows:¹⁰⁶

Acuerdo 1/29/2015/: Se llevará a cabo la actualización del Program[a] de Ordenamiento Ecológico Local del Municipio de Solidaridad, publicado en 2009.

¶248. On 30 October 2015, at the Committee to Amend the POEL’s fourth meeting, Mr. Gerardo Gómez Nieto, an environmental expert engaged by the Committee to assist with the characterization and diagnostic phases of the POEL 2009 amendment process, submitted a report entitled “Update to the Local Environmental Regulation of the Municipality of Solidaridad: Diagnostic Phase”.¹⁰⁷ The report marked the areas of El Corchalito and La Adelita as most suitable for quarrying operations on a map of the Municipality of Solidaridad.¹⁰⁸

¶249. On 28 January 2016, the Committee to Amend the POEL met for a fifth time and formally approved the phases of characterization and diagnosis by majority vote.¹⁰⁹

¹⁰⁴ C-0091-SPA, Minutes of the First Session of the Committee to Amend the POEL, dated 10 November 2014. ↩

¹⁰⁵ C-0092-SPA, Minutes of the Second Session of the Committee to Amend the POEL, dated 21 November 2014 (“POEL Committee Second Session Minutes, 21 November 2014”), pp. 5-6. ↩

¹⁰⁶ C-0093-SPA, Minutes of the Third Session of the Committee to Amend the POEL, dated 29 May 2015, p. 5. ↩

¹⁰⁷ C-0097-SPA, Update to the Local Environmental Order Program of the Municipality of Solidaridad: Diagnostic Phase, dated 30 October 2015 (“Diagnostic Report”). ↩

¹⁰⁸ C-0097-SPA, Diagnostic Report, p. 136. ↩

¹⁰⁹ C-0095-SPA, Minutes of the Fifth Session of the Committee to Amend the POEL, dated 28 January 2016 (“POEL Committee Fifth Session Minutes, 28 January 2016”), p. 7. ↩

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¶250. On 19 April 2016, a sixth meeting of the Committee to Amend the POEL was held, but without presenting the text for the amendment of the POEL 2009. The Committee to Amend the POEL did not have further formal meetings.¹¹⁰

¶251. On 7 June 2016, state and municipal elections were held in Mexico. On 25 September 2016, Mr. Carlos Manuel Joaquín González was sworn in as Governor of the State of Quintana Roo (2016-2022) and on 30 September 2016, Ms. Cristina Torres was sworn in as Mayor of the Municipality de Solidaridad (2016-2018).¹¹¹

¶252. On 3 April 2017, the Legislature of the State of Quintana Roo approved a Point of Agreement introduced by state legislator (and later Solidaridad Mayor) Ms. Laura Beristain, opposing the amendment of the POEL 2009 to allow CALICA to quarry La Adelita.¹¹²

¶253. On 5 April 2017, Mayor Torres stated in a press conference that she was waiting for a status report from the Committee to Amend the POEL, following which she would make a final decision about the Point of Agreement introduced by Ms. Beristain.¹¹³

¶254. On 2 August 2017, Governor Joaquín informed CALICA in a meeting about the 2014 Agreements that amending the POEL 2009 would be difficult.¹¹⁴

¶255. In the meantime, local environmental groups and community organizers had started to object to the POEL 2009 amendment process under the Committee to Amend the POEL’s leadership.¹¹⁵

¹¹⁰ C-0096-SPA, Minutes of the Sixth Session of the Committee to Amend the POEL, dated 19 April 2016 (“POEL Committee Sixth Session Minutes, 19 April 2016”). ↩

¹¹¹ C-0098-SPA, Rotunda victoria para Carlos Joaquín en elecciones de Q. Roo, SIPSE.COM, dated 6 June 2016; C-0099-SPA, Cristina Torres conformará un gabinete ciudadano, SIPSE.COM, dated 7 June 2016; C-0101-SPA, Recibimos un municipio con muchos problemas, EL UNIVERSAL, dated 30 September 2016. ↩

¹¹² C-0102-SPA, Quintana Roo Lower House, Ordinary Session No. 15, Debate Log, dated 3 April 2017 (“Quintana Roo Lower House Session, 3 April 2017”), pp. 19-40. ↩

¹¹³ C-0104-SPA, No existe ninguna petición de Calica, Q.Roo para el cambio de uso de suelo: Cristina Torres, NOTICIAS CANAL 10, dated 5 April 2017. ↩

¹¹⁴ [Redacted] First Statement, ¶ 52. ↩

¹¹⁵ R-0050-ESP, Underwood, Carlos. “Calica: La minera que arrasa con todo e[n] playa del Carmen”, Revés, 15 February 2018; R-0051-ESP, Pacheco, Daniel. “‘Solo pedimos que se respete el uso de suelo previo’ Calica”. Novedades Quintana Roo, 27 March 2017; R-0052-ESP, Letter from environmental organizations, 3 February 2016 (“Environmental NGOs Letter, 3 February 2016”). ↩

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¶256. On 8 July 2018, Ms. Beristain was elected Mayor of the Municipality of Solidaridad. Under her administration, the Committee to Amend the POEL did not resume its work, and a new Municipal Ordinance Council was tasked with issuing a new POEL, in which CALICA did not participate.¹¹⁶

3. Shutdown of Operations at El Corchalito

¶257. On 12 May 2017, PROFEPA ordered an inspection to verify CALICA’s compliance with the Federal EIA.¹¹⁷ On 15-19 May 2017, PROFEPA’s inspectors visited El Corchalito and La Adelita, inter alia, to measure the area that CALICA had quarried in El Corchalito.¹¹⁸

¶258. In the Inspection Report issued on 19 May 2017 (“First PROFEPA Inspection Report”), PROFEPA’s inspectors stated that CALICA had exceeded the quarrying area limits in the Federal EIA.¹¹⁹ Further, the documentation presented by CALICA was checked, and PROFEPA granted CALICA five days to rectify certain documentation lacking with respect to the amount of limestone quarried in year 17 of the Project.¹²⁰

¶259. On 26 May 2017, CALICA made a submission to PROFEPA commenting on the First PROFEPA Inspection Report. It asserted, inter alia, that PROFEPA’s inspectors had: (i) failed to establish an inspection protocol; (ii) acknowledged that their measurements were “estimates” and “approximations”; and (iii) used inadequate and improperly calibrated instruments, including a Global Positioning System (GPS) device.¹²¹

¶260. CALICA offered to submit an expert report addressing whether its observations about the PROFEPA inspection were correct,¹²² which was permitted by PROFEPA. CALICA appointed Mr. Tomás de la Cruz, a civil engineer to review PROFEPA’s findings.¹²³

¹¹⁶ C-0105-SPA, Laura Beristain asegura que trabajará con la sociedad, SIPSE.COM, dated 10 July 2018. ↩

¹¹⁷ C-0114-SPA, First PROFEPA Inspection Order, dated 12 May 2017 (“First PROFEPA Inspection Order, 12 May 2017”). ↩

¹¹⁸ C-0115-SPA, First PROFEPA Inspection Report, 19 May 2017. ↩

¹¹⁹ C-0115-SPA, First PROFEPA Inspection Report, 19 May 2017. ↩

¹²⁰ C-0117, Shutdown Order, pp. 284-287. ↩

¹²¹ C-0116-SPA, CALICA’s Observations to the First PROFEPA Inspection Report, dated 26 May 2017 (“CALICA Observations to PROFEPA, 26 May 2017”), pp. 24-25. ↩

¹²² C-0116-SPA, CALICA Observations to PROFEPA, 26 May 2017, pp. 31-32. ↩

¹²³ See C-0117-SPA, Shutdown Order, p. 16. ↩

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PROFEPA engaged its own expert, Mr. David May, to additionally review PROFEPA’s inspection.¹²⁴

¶261. The report of Mr. May was submitted on 25 October 2017,¹²⁵ and the report of Mr. de la Cruz was submitted on 26 October 2017.¹²⁶

¶262. On 24 November 2017, PROFEPA ordered another inspection,¹²⁷ which took place on 27-29 November 2017.¹²⁸

¶263. With respect to El Corchalito, on 22 January 2018, PROFEPA issued an Acuerdo de Emplazamiento ordering the shutdown of activities at El Corchalito based on the findings of the additional inspection (“Shutdown Order”).¹²⁹ The Shutdown order imposed a partial and temporary closure of the El Corchalito Site as a “medida de seguridad” because of CALICA’s¹³⁰

probable incumplimiento detectado durante las visitas de inspección realizadas, al presuntamente haberse rebasado en 2.15 hectáreas el área autorizada para la extracción de roca caliza por debajo del manto freático, aunado a que la empresa ya realizó el aprovechamiento total de la superficie de extracción de roca caliza por debajo del nivel freático el cual le fue autorizado en anualidades hasta el 2020.

¶264. The Shutdown Order noted that, if CALICA did not temporarily close El Corchalito, this would constitute “delitos, de conformidad con [el] Código Penal Federal.”¹³¹

¶265. The Shutdown Order also imposed corrective measures on CALICA, ordering it to file, within ten days, a certified copy of any authorizations it had received from the Ministry of Environment and Natural Resources to carry out the Project.¹³²

¹²⁴ C-0144-SPA, Appointment by PROFEPA of David Antelmo May Gutiérrez, dated 13 September 2017. ↩

¹²⁵ C-0145-SPA, Expert Report of David Antelmo May Gutiérrez, dated 25 October 2017 (“May Gutiérrez Report”). ↩

¹²⁶ C-0120-SPA, Expert Report of De la Cruz Hernández, dated 26 October 2017 (“De la Cruz Hernández Report”). ↩

¹²⁷ C-0121-SPA, Supplemental PROFEPA Inspection Order, dated 24 November 2017 (“Supplemental PROFEPA Order, 24 November 2017”). ↩

¹²⁸ C-0118-SPA, Second PROFEPA Inspection Report, dated 27 November 2017 (“Second PROFEPA Inspection Report, 27 November 2017”). ↩

¹²⁹ C-0117-SPA, Shutdown Order. ↩

¹³⁰ C-0117-SPA, Shutdown Order, p. 280 (emphasis in original). ↩

¹³¹ C-0117-SPA, Shutdown Order, p. 280. ↩

¹³² C-0117-SPA, Shutdown Order, p. 281. ↩

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¶266. On 24 January 2018, PROFEPA notified the Shutdown Order to CALICA.¹³³ The same day, PROFEPA personnel executed the Shutdown Order at CALICA’s facilities.¹³⁴

¶267. On 14 February 2018, CALICA filed an expert report alleging deficiencies in the methodology and instruments used by PROFEPA’s inspectors.¹³⁵

¶268. On 30 October 2018, PROFEPA declined to consider the expert report of CALICA, noting:¹³⁶

En virtud de lo anterior, esta Dirección General considera procedente desechar la prueba pericial en materia de Ingeniería Civil ofrecida por el promovente, al no estar directamente relacionada con las actuaciones realizadas por esta autoridad, al no haberse realizado en ningún momento un “levantamiento topográfico” en el predio materia de la visita de inspección en cita. (Emphasis in original)

¶269. On 6 November 2020, PROFEPA notified to CALICA Administrative Resolution No. PFPA/4.1/2C.27.5/00028-17/012/2020, dated 30 October 2020 (the “October 2020 Resolution”).¹³⁷ This resolution determined that, as the 2.15 hectares exploited at El Corchalito beyond the 140 hectares authorised for CALICA’s extraction activities could not be returned to their natural condition,¹³⁸ PROFEPA imposed the following on CALICA:

• Fines in an amount of MXN $7,985,053.92 for non-compliance with the law and environmental damage;¹³⁹
• Imposition, as a sanction, of the partial, temporary closure of El Corchalito with respect to the additional 2.15 hectares exploited by CALICA;¹⁴⁰

¹³³ R-0007-ESP, PROFEPA, File PFPA/4.1/2C.27.5/00028-17, Service of Notice, 24 January 2018 (“PROFEPA Notice, 24 January 2018”). ↩

¹³⁴ C-0122-SPA, Profepa clausura proyecto de la empresa Calica en Playa, SIPSE.COM, dated 24 January 2018. ↩

¹³⁵ C-0124-SPA, CALICA’s Observations to the Shutdown Order, dated 14 February 2018 (“CALICA Observations to Shutdown Order, 14 February 2018”). ↩

¹³⁶ C-0125-SPA, PROFEPA Docket PFPA/4.1/2C.27.5/00028-17, dated 30 October 2018 (“PROFEPA Docket, 30 October 2018”), p. 18. ↩

¹³⁷ R-0005-ESP, October 2020 Resolution. ↩

¹³⁸ R-0005-ESP, October 2020 Resolution, pp. 198-200, 231-232. ↩

¹³⁹ R-0005-ESP, October 2020 Resolution, p. 234. ↩

¹⁴⁰ R-0005-ESP, October 2020 Resolution, pp. 169-198, 219-223, 234. ↩

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• Corrective measures to order CALICA to: (i) adhere to its Federal EIA in carrying out its activities; (ii) submit to PROFEPA the Federal EIA issued by SEMARNAT certifying the area of extraction for the additional 2.15 hectares exploited, or a modification to the Federal EIA extending the total authorised area below the water table and authorising the extraction exclusively in El Corchalito; and (iii) carry out reforestation and other actions necessary to recharge the aquifer damaged by CALICA’s activities.¹⁴¹

¶270. In addition, the October 2020 Resolution mentioned that CALICA did not prove that it had: (i) a signalling system to avoid accidents prior to the First PROFEPA Inspection Report; (ii) civil liability insurance for third party damage caused by its transporters; (iii) results of the evaluation of impacts of its extraction, with video support; or (iv) delivered semi-annual results to SEMARNAT during the period of the Restoration Program of the Reforested Area.¹⁴² CALICA was ordered to submit certain documentation to PROFEPA on these matters.¹⁴³

4. Litigation regarding the CALICA Port Concession

¶271. In parallel to the environmental issues discussed above, disputes arose between the Parties regarding the CALICA Port Concession. In this respect, there are two sets of litigation.

¶272. The first set regards port fees.

¶273. In February 2003, the SCT amended the API Quintana Roo Concession to include the terminals that CALICA had built and was operating and ordered CALICA to partially assign its rights over the public terminal to API Quintana Roo.¹⁴⁴

¹⁴¹ R-0005-ESP, October 2020 Resolution, pp. 230-234. ↩

¹⁴² R-0005-ESP, October 2020 Resolution, pp. 162, 163. ↩

¹⁴³ R-0005-ESP, October 2020 Resolution, pp. 230-234. ↩

¹⁴⁴ C-0051-SPA, API Quintana Roo First Concession Amendment, dated 27 February 2003, p. 2; C-0052-SPA, Letter No. 500.0194 from Francisco J. Ávila Camberos (SCT) to Armando Real Rueda (CALICA), dated 3 March 2003. ↩

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¶274. Upon CALICA challenging the SCT’s measures, on 5 July 2006, a Federal Court of Mexico ruled that they were illegal and null.¹⁴⁵

¶275. On 25 June 2007, the SCT amended the API Quintana Roo Concession again, excluding from API Quintana Roo’s rights the areas concessioned to CALICA. However, in July 2007 the SCT issued official letters stating that pursuant to the amended concession, API Quintana Roo had the right to collect port fees for vessels docking at the Punta Venado port terminals, including CALICA’s private terminal.¹⁴⁶

¶276. CALICA challenged the measure in court but paid the port fees while the litigation was pending.

¶277. On 25 January 2015, Mexico’s Supreme Court rendered a decision¹⁴⁷ that Claimant has interpreted as holding that API Quintana Roo could not collect fees from Claimant’s vessels docking at Punta Venado. Respondent disagrees with Claimant’s interpretation.

¶278. Based on Claimant’s interpretation of the Mexican Supreme Court’s decision, on 2 January 2018, CALICA initiated court proceedings to recover approximately [Redacted] in port fees that API Quintana Roo had charged and collected in relation to Punta Venado.¹⁴⁸

¶279. The second set of litigation relates to concession fees and revocation proceedings.

¶280. Under the CALICA Port Concession, concession fees are assessed by the Instituto de Administración y Avalúos de Bienes Nacionales (“INDAABIN”). In May 2010,

¹⁴⁵ C-0053-SPA, Judgment of the Federal Administrative Tribunal, Case No. 9566/03-17-10-6/51/06-PL-09-04, dated 5 July 2006, p. 176. ↩

¹⁴⁶ C-0054-SPA, Mexico Federal Official Gazette, Second Amendment to the API Quintana Roo Concession Issued by SCT, dated 25 June 2007, pp. 43, 45; C-0055-SPA, Letter No. API.DG.GJ.0405.07 from Javier F. Zetina González (State of Quintana Roo) to Oscar Amable Tenorio (Agencia Consignataria del Sureste, S.A. de C.V.), dated 4 July 2007 (“Quintana Roo Letter to Agencia Consignataria, 4 July 2007”); C-0056-SPA, Letter No. API.DG.GJ.0405.07 from Javier F. Zetina González (State of Quintana Roo) to [Redacted] (CALICA), dated 9 July 2007 (“Quintana Roo Letter to CALICA, 9 July 2007”); C-0057-SPA, Letter No. 7.3.3033.07 from Ángel González Rul A. (SCT) to [Redacted] (CALICA), dated 24 July 2007 (“SCT Letter to CALICA, 24 July 2007”); C-0058-SPA, Letter No. 7.3.-1679.09.4257 from Alejandro Hernández Cervantes (SCT) to Leonel Pereznieto del Prado (CALICA), dated 2 July 2009 (“SCT Letter to CALICA, 2 July 2009”). ↩

¹⁴⁷ C-0059-SPA, Decision of Mexico’s Supreme Court, Claim 1256/2016, dated 25 January 2017 (“Supreme Court Decision”). ↩

¹⁴⁸ C-0107-SPA, CALICA’s filing regarding port fees, dated 2 January 2018 (“CALICA port fees filing, 2 January 2018”). ↩

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INDAABIN carried out an appraisal that CALICA considered was higher than that allowed under the CALICA Port Concession.¹⁴⁹

¶281. On 11 June 2010, the SCT demanded payment of the concession fees based on INDAABIN’s assessment.¹⁵⁰

¶282. On 1 September 2010, CALICA challenged the appraisal in court,¹⁵¹ and prevailed in February 2016.¹⁵²

¶283. In the meantime, on 7 May 2013, the SCT commenced administrative proceedings to revoke the CALICA Port Concession on the basis that CALICA had not paid the concession fees.¹⁵³

¶284. In June 2013, CALICA paid approximately US$ 15 million in concession fees.¹⁵⁴

C. FACTUAL BACKGROUND TO THE ANCILLARY CLAIM

1. Tourism in Southeastern Mexico

¶285. It has long been part of Mexico’s development policy to encourage tourism in Southeastern Mexico. This policy operates at the federal, state, and municipal levels, through “National Development Plans”, “State Development Plans”, and “Municipal Development Plans”, respectively.

¶286. On 31 May 1983, the National Development Plan for 1983-1988 was published in the Official Gazette, including as an objective the “uso eficiente de la capacidad instalada para el turismo social” and “fomentar el mejor y más amplio aprovechamiento del potencial turístico nacional,” including through opening new recreational areas.¹⁵⁵

¹⁴⁹ C-0060-SPA, INDAABIN Appraisal, Generic No. G-40071-B, sequential No. 06-10-0648, dated 4 May 2010. ↩

¹⁵⁰ C-0061-SPA, Letter No. 7.3.2327.010 from Alejandro Hernández Cervantes (SCT) to Leonel Pereznieto del Prado (CALICA), dated 11 June 2010. ↩

¹⁵¹ C-0062-SPA, CALICA Filing Requesting Annulment of INDAABIN Valuation, dated 1 September 2010. ↩

¹⁵² C-0063-SPA, Judgment of the Federal Administrative Tribunal, Case No. 20699/10-17- 08-9/130/12-PL-05-04, dated 10 February 2016. ↩

¹⁵³ C-0064-SPA, Letter from Alejandro Hernández Cervantes (SCT) to Jorge Mario Chabolla Marquez (CALICA), dated 7 May 2013. ↩

¹⁵⁴ C-0065-SPA, Letter from Leonel Pereznieto del Prado (CALICA) to SCT, dated 18 June 2013. ↩

¹⁵⁵ R-0145-ESP, 1983-1988 National Development Plan, published in the Mexican Official Gazette on 31 May 1983, pp. 8, 105. ↩

[Page 84]

¶287. On 12 November 1984, the federal government and the government of the State of Quintana Roo signed a “Single Development Agreement”, aiming to promote the 1983-1988 National Development Plan by recognizing that Quintana Roo was a strategic zone for development of the tourism sector:¹⁵⁶

El Plan Nacional de Desarrollo considera a Quintana Roo como una zona estratégica en la región sureste del país, por su diversidad de recursos y potencialidades de crecimiento, entre los que destacan: el turismo, la pesca y la explotación forestal. Por ello, será necesario impulsar estas actividades para lograr el fortalecimiento integral de la Entidad.

Atendiendo a los lineamientos del Plan Nacional de Desarrollo, se pretende orientar la inversión pública hacia la realización de programas como: construcción de sistemas de agua potable; ampliación y mejoramiento de los servicios públicos de salud y educación; apoyo a la construcción de viviendas, ampliación de la red estatal de carreteras; fomento a la actividad pesquera y realización de proyectos de cabotaje turístico.

¶288. The 1983-1988 National Development Plan and Single Development Agreement were in place when the Investment Agreement was concluded, and the Investment Agreement makes express reference to the National Development Plan (see ¶ 191 above).

¶289. In 1989, when CALICA began quarrying activities at La Rosita, the 1989-1994 National Development Plan was in place. It contemplated the modernization of the tourism sector as one of its priorities:¹⁵⁷

México se encuentra situado favorablemente para la expansión de su comercio externo, y sus bellezas naturales y tradiciones culturales le proveen de un gran potencial para el turismo.

¶290. The 2019-2024 National Development Plan sought to guarantee employment, education, health and well-being through different regional projects, among which the so-called “Mayan Train”:¹⁵⁸

¹⁵⁶ R-0146-ESP, Quintana Roo Single Development Agreement entered into by the Federal Government and the Government of the State of Quintana Roo, published in the Mexican Official Gazette on 12 November 1984, p. 1. See also pp. 8-9, and R-0147-ESP, Single Development Agreement entered into by the Federal Government and the Government of the State of Quintana Roo, 22 August 1986, pp. 1, 11. ↩

¹⁵⁷ R-0148-ESP, 1989-1994 National Development Plan, published in the Mexican Official Gazette on 31 May 1989, p. 29 of the PDF. ↩

¹⁵⁸ R-0142-ESP, 2019-2024 National Development Plan, published in the Mexican Official Gazette on 12 July 2019 (“2019-2024 National Development Plan”), pp. 15-16. ↩

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[L]a creación de puestos de trabajo, el cumplimiento del derecho de todos los jóvenes del país a la educación superior, la inversión en infraestructura y servicios de salud y por medio de los programas regionales, sectoriales y coyunturales de desarrollo: […] Tren Maya.

¶291. The 2019-2024 National Development Plan described the Mayan Train as “el más importante proyecto de infraestructura, desarrollo socioeconómico y turismo del presente sexenio,” with the objective of developing tourism in the Yucatán Peninsula while, among other things, consulting local and Indigenous communities:¹⁵⁹

El Tren Maya es un proyecto orientado a incrementar la derrama económica del turismo en la Península de Yucatán, crear empleos, impulsar el desarrollo sostenible, proteger el medio ambiente de la zona – desalentando actividades como la tala ilegal y el tráfico de especies– y propiciar el ordenamiento territorial de la región. Se procurará integrar a la obra y a sus beneficios a los pobladores; se gestionarán los derechos de vía que aún no se tengan mediante acuerdos con los propietarios de los terrenos respectivos; se buscarán acuerdos benéficos en los casos en los que las vías de propiedad federal se encuentren invadidas y se pedirá la aprobación de las comunidades y pueblos originarios mediante consultas.

2. The President’s Morning Press Conferences

¶292. President López Obrador held morning press conferences five days a week at 7:00 am, which are generally referred to as “mañaneras” in Mexico (and in this Award).¹⁶⁰ During the period from 31 January 2022 to 2 May 2022, in approximately 16 of his mañaneras, President López Obrador made statements concerning, inter alia, CALICA’s activities in La Rosita, and the impact of these activities on the environment.¹⁶¹

¹⁵⁹ R-0142-ESP, 2019-2024 National Development Plan, p. 29. ↩

¹⁶⁰ Counter-Memorial AC, ¶ 62. ↩

¹⁶¹ C-0176-SPA, Transcript of President’s Morning Press Conference, 31 January 2022; C-0177-SPA, Transcript of President’s Morning Press Conference, 1 February 2022, pp. 16-17; C-0178-SPA, Transcript of President’s Morning Press Conference, 2 February 2022 (“2 February 2022 Press Conference”), p. 22; C-0246-SPA, Andrés Manuel López Obrador, Baja incidencia delictiva en Hidalgo, YouTube (uploaded 3 February 2022) https://www.youtube.com/watch?v=OyjJQJxJtrc; C-0215-SPA, Transcript of President’s Morning Press Conference, 7 February 2022, p. 17; C-0247-SPA, Andrés Manuel López Obrador, Llamado al diálogo entre normalistas de Ayotzinapa y autoridades, YouTube (uploaded 7 February 2022), https://www.youtube.com/watch?v=oBi2EPCTCKU; C-0216-SPA, Transcript of President’s Morning Press Conference, 10 February 2022, pp. 30-31; C-0248-SPA, Andrés Manuel López Obrador, Justicia para jubilados de Luz y Fuerza. Acuerdo de pensiones, YouTube (uploaded 10 February 2022), https://www.youtube.com/watch?v=UlTcgvrhzR0; C-0217-SPA, Transcript of President’s Morning Press Conference, 7 March 2022 (“7 March 2022 Press Conference”), p. 31; C-0249-SPA, Andrés Manuel López Obrador, Inicia entrega de fertilizantes nacionales en nueve estados, YouTube (uploaded 7 March 2022), https://www.youtube.com/watch?v=VtVoDxv3ba4; C-0220-SPA, Transcript of President’s ↩

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¶293. For instance, on 2 February 2022, in his mañanera, President López Obrador stated, inter alia, that:¹⁶²

Y, desde luego, que quiten las demandas y, si no, pues vamos a defendernos legalmente, como se está haciendo, y se va a proceder porque no tienen autorización, tienen vencidos permisos y no tienen tampoco autorización para sacar material, el gobierno federal tiene que autorizar la, en este caso, exportación.

¶294. On 6 February 2022, SEMARNAT issued a press release. The press release referred to the authorization of extraction activities under the water table granted to CALICA in 2000 on the last day in office of then-President Ernesto Zedillo and Secretary of the Environment, Natural Resources and Fisheries, and stated, in part:¹⁶³

Así, la responsabilidad de la Semarnap [i.e., the predecessor of SEMARNAT] respecto a los impactos al medio ambiente es ineludible, y resulta incongruente manifestar que se vela por la protección de los recursos

Morning Press Conference, 23 March 2022 (“23 March 2022 Press Conference”), pp. 21-23; C-0250-SPA, Andrés Manuel López Obrador, Sembramos árboles en toda la ruta del Tren Maya, YouTube (uploaded 23 March 2022), https://www.youtube.com/watch?v=xxLNbEHmR9o; C-0221-SPA, Transcript of President’s Morning Press Conference, 24 March 2022, (“24 March 2022 Press Conference”), pp. 44-45; C-0251-SPA, Andrés Manuel López Obrador, Acertada decisión asignar aduanas a Secretaría de Marina, YouTube (uploaded 24 March 2022), https://www.youtube.com/watch?v=QjSJy-5lINM; C-0227-SPA, Transcript of President’s Morning Press Conference, 28 March 2022, (“28 March 2022 Press Conference”), p. 48; C-0252-SPA, Andrés Manuel López Obrador, Gobierno prepara plan para fortalecer economía popular, YouTube (uploaded 28 March 2022), https://www.youtube.com/watch?v=NJQdhL7uBto; C-0182-SPA, Transcript of President’s Morning Press Conference, 30 March 2022; C-0183-SPA, Transcript of President’s Morning Press Conference, 31 March 2022 (“31 March 2022 Press Conference”), pp. 7-8; C-0254-SPA, Andrés Manuel López Obrador, Aseguramiento de drogas previene daños a la población, YouTube (uploaded 31 March 2022), https://www.youtube.com/watch?v=le04l59MZJg; C-0228-SPA, Transcript of President’s Morning Press Conference, 4 April 2022, (“4 April 2022 Press Conference”), pp. 26-27; C-0255-SPA, Andrés Manuel López Obrador, La democracia debe ser parte de la vida del país, YouTube (uploaded 4 April 2022), https://www.youtube.com/watch?v=b_xqxPrB40U; C-0184-SPA, Transcript of President’s Morning Press Conference, 19 April 2022, (“19 April 2022 Press Conference”); C-0185-SPA, Transcript of President’s Morning Press Conference, 20 April 2022, (“20 April 2022 Press Conference”), pp. 8-9; C-0257-SPA, Andrés Manuel López Obrador, Seguridad y bienestar, fundamentales para instaurar la paz, YouTube (uploaded 20 April 2022), https://www.youtube.com/watch?v=RoONYTUVQ-I; C-0186-SPA, Transcript of President’s Morning Press Conference, 22 April 2022, (“22 April 2022 Press Conference”), pp. 9-10; C-0258-SPA, Andrés Manuel López Obrador, Inversión pública y privada impulsa desarrollo en Veracruz, YouTube (uploaded 22 April 2022), https://www.youtube.com/watch?v=8qwS_raNJo4; C-0229-SPA, Transcript of President’s Morning Press Conference, 29 April 2022, (“29 April 2022 Press Conference”), pp. 32, 64, 65; C-0259-SPA, Andrés Manuel López Obrador, Comunidades confían en proyecto del Tren Maya del Gobierno de México, YouTube (uploaded 29 April 2022), https://www.youtube.com/watch?v=ABXBAf5I_JI_raNJo4.

¹⁶² C-0178-SPA, 2 February 2022 Press Conference, p. 23; C-0246-SPA, Andrés Manuel López Obrador, Baja incidencia delictiva en Hidalgo, YouTube (uploaded 3 February 2022), https://www.youtube.com/watch?v=OyjJQJxJtrc . ↩

¹⁶³ C-0214-SPA, SEMARNAT Press Release, Las decisiones ambientales trascienden en el tiempo, caso Calica, 6 February 2022, pp. 3-4. ↩

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naturales a través de condicionantes a una actividad cuyo desarrollo es irreparable en términos ambientales.

Como se señaló en el comunicado de prensa de fecha 3 de febrero de 2022 de esta Secretaría, la minería debajo del manto freático representa la pérdida definitiva e irrecuperable del subsuelo, afectaciones a los acuíferos y a los ecosistemas, entre otros elementos que, aunados a los impactos previos en la superficie por la minería a cielo abierto que destruyó la flora y la fauna, han representado un daño insalvable a la zona.

Por otro lado, la modificación que hizo el gobierno del estado en 2009 a su plan de ordenamiento ecológico fue para no permitir ese tipo de actividades extractivas en la zona, lo que pone en evidencia el conocimiento de que la autorización fue en detrimento del medio ambiente y la conciencia de que las responsabilidades al emitir autorizaciones de tal tipo trascienden en el tiempo y van más allá de lo que en papel se registra, pues sus efectos son directos en el territorio.

Actualmente, el Estado mexicano hace frente a un arbitraje internacional para detener estas prácticas que ponen en riesgo el patrimonio natural de las y los mexicanos y atentan contra el derecho a un medio ambiente sano para estas y las futuras generaciones.

¶295. Over the course of March and April 2022, President López Obrador made a series of statements against CALICA’s activities and former Mexican officials who had granted CALICA’s authorizations, also criticizing those officials and environmentalists for opposing his project to build the “Mayan Train” on environmental grounds.¹⁶⁴ SEMARNAT followed suit in certain public statements.¹⁶⁵ On 20 April 2022, the President therefore indicated that CALICA had three options – closure, accommodation for tourism, or selling the land:¹⁶⁶

La clausura, porque ya no se permite que extraigan material, eso ya no se puede permitir. Que tienen muchas influencias en el Departamento de Estado, porque es una empresa que se llama Vulcan, es de las empresas constructoras más importantes de Estados Unidos, pero yo creo que hasta los mismos accionistas de Vulcan van a entender que esto no es posible, no

¹⁶⁴ C-0217-SPA, 7 March 2022 Press Conference, p. 31; C-0220-SPA, 23 March 2022 Press Conference, pp. 21-23; C-0221-SPA, 24 March 2022 Press Conference, pp. 44-45; C-0227-SPA, 28 March 2022 Press Conference, p. 48; C-0183-SPA, 31 March 2022 Press Conference, pp. 7-8; C-0228-SPA, 4 April 2022 Press Conference, pp. 26-27; C-0184-SPA, 19 April 2022 Press Conference, p. 7; C-0185-SPA, 20 April 2022 Press Conference, p. 8; C-0186-SPA, 22 April 2022 Press Conference, pp. 9-10; C-0229-SPA, 29 April 2022 Press Conference, pp. 32, 64-65. ↩

¹⁶⁵ C-0226-SPA, SEMARNAT Press Release, ¿Dónde estaban los pseudoambientalistas cuando hace años empezó la verdadera devastación en el sureste de México?, 25 March 2022. ↩

¹⁶⁶ C-0185-SPA, 20 April 2022 Press Conference, p. 9. ↩

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puede haber un doble discurso de decir que nos preocupa el cambio climático y que estemos haciendo esta destrucción.

Entonces, si se van a tribunales, porque además hay denuncias, pues vamos a tribunales y vamos a hacer la denuncia formal en organismos internacionales. A ver qué van a hacer los de la ONU, a ver qué va a hacer Greenpeace, que nos ayuden en esto.

Esa es una opción.

La otra opción, que es importante para ellos y para todos, es buscar un acuerdo para que esa área impactada, más otras dos mil hectáreas que tienen ahí, se puedan convertir en un parque turístico. Tienen también pegado al mar la concesión de un puerto que puede ser utilizado como puerto de cruceros. Estamos hablando de una de las zonas más bellas del mundo en cuanto a playas, es el Caribe. Eso es lo segundo.

Y lo tercero es que les compramos el terreno completo, hacemos un avalúo de cuánto cuesta y tenemos recursos para convertir esto en un parque natural.

¶296. On 2 May 2022, President López Obrador announced that he had instructed SEMARNAT to stop CALICA’s extraction activities:¹⁶⁷

[E]s otra empresa, Calica, Vulcan, la empresa constructora más importante de Estados Unidos, que tiene un banco aquí, que está extrayendo grava para las carreteras de Estados Unidos y recibió permisos de los gobiernos neoliberales, y los ambientalistas nunca jamás dijeron nada, y es una destrucción al territorio sin precedente y lo siguen haciendo.

Acabo de estar el fin de semana. Y me habían engañado en que ya no estaban extrayendo material, y pasaba yo por ahí, sobrevolaba, siempre, como tres veces, y, en efecto, estaba todo parado, las grúas paradas, todo parado; pero ahora pasé, quizá no sabían o fue porque pasamos el viernes y sobrevolé y me di cuenta de que están trabajando con todo, extrayendo material y cómo están cargando un barco. Entonces, he dado instrucciones a la secretaria [of SEMARNAT] para proceder de inmediato.

[…]

Se va a proceder legalmente porque hay violación a las leyes y es una tremenda destrucción del medio ambiente. Además, es un atrevimiento burlarse de las autoridades de nuestro país.

¹⁶⁷ C-0168-SPA, Transcript of President’s Morning Press Conference, 2 May 2022, p. 14; C-0188-SPA, Andrés Manuel López Obrador, Tren Maya prioriza cuidado de zonas arqueológicas y del ambiente, YouTube (uploaded 2 May 2022), https://www.youtube.com/watch?v=VeiERG4QXhI (screenshot at 2:14:09). ↩

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[…]

Sí, hasta que se detenga la extracción[.]

¶297. During the mañanera of 28 June 2022, the President – when informed by a member of the press of a complaint against CALICA by local communities on environmental grounds – stated that the “problem with CALICA” would prevent him from “making deals”:¹⁶⁸

Si no tuviésemos el problema con Calica —el problema me refiero a que están destruyendo el territorio y no vamos a cambiar una cosa por otra— pues de aquí a aquí no tendríamos problema, porque este puerto de Calica tiene calado suficiente, tiene 12 metros; pero como tenemos aquí la denuncia, porque están destruyendo, no podemos hacer tratos.

3. Clean Industry Certificates

¶298. PROFEPA issued six Clean Industry Certificates to CALICA from 2003 to 2016, within the framework of the National Environmental Audit Program (Programa Nacional de Auditoría Ambiental), specifically, in 2003, 2005, 2008, 2012, 2014 and 2016.¹⁶⁹

¶299. The Clean Industry Certificates program was developed and administered by PROFEPA to audit the environmental performance of “companies in operation, which due to their location, dimensions, characteristics, and scopes can cause effects to negative impacts to the environment.”¹⁷⁰ These audits are conducted by PROFEPA-certified auditors tasked with verifying a “company’s compliance with Federal and Local Environmental Laws, Federal and Local Environmental Regulations, mandatory technical standards issued by SEMARNAT, and applicable municipal requirements.”¹⁷¹ The resulting report is presented to PROFEPA to review. If no material irregularities are found, PROFEPA

¹⁶⁸ C-0232-SPA, Transcript of President’s Morning Press Conference, 28 June 2022, pp. 65-66. ↩

¹⁶⁹ C-0208-SPA, Environmental Audit Report, March 2016 (“March 2016 Environmental Audit Report”), pp. 17-18; C-0037-SPA, Clean Industry Certificate, dated 23 June 2003 (“Clean Industry Certificate, 23 June 2003”); C-0038-SPA, Clean Industry Certificate, dated 16 December 2005; C-0039-SPA, Clean Industry Certificate, dated 31 July 2008; C-0040-SPA, Clean Industry Certificate, dated 28 February 2012; C-0041-SPA, Clean Industry Certificate, dated 2 June 2014; C-0042-SPA, Clean Industry Certificate, dated 27 July 2016 (“Clean Industry Certificate, 27 July 2016”). ↩

¹⁷⁰ C-0209-SPA, National Environmental Audit Program Explanatory Circular (“Environmental Audit Program Circular”), p. 5 (Translation by the Tribunal); C-0210-SPA, LGEEPA Regulation on Environmental Audits, 29 April 2010 (“LGEEPA Audit Regulation”), Art. 6. See Memorial AC, ¶ 21. ↩

¹⁷¹ C-0209-SPA, Environmental Audit Program Circular, p. 6 (Translation by the Tribunal); C-0210-SPA, LGEEPA Audit Regulation, Arts. 2(XXII), 6. See Memorial AC, ¶¶ 21-22. ↩

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issues a Clean Industry Certificate.¹⁷² The value of the Clean Industry Certificates is contested by the Respondent.¹⁷³

¶300. In November 2012 – one of the years in which a Clean Industry Certificate was issued to CALICA – PROFEPA carried out a formal inspection of CALICA’s operations for purposes of:¹⁷⁴

verificar física y documentalmente que el o los responsables de [CALICA] […] hayan dado cumplimiento con sus obligaciones ambientales en materia de impacto ambiental, en lo referente a sus autorizaciones, permisos o licencias, otorgadas por [SEMARNAT]; y si cuenta con autorización en materia de impacto ambiental vigente.

¶301. PROFEPA’s 2012 inspection report noted that, while the Investment Agreement did not technically constitute an environmental impact authorization under the LGEEPA, CALICA was nevertheless considered to have complied with its environmental obligations because it commenced operations at La Rosita before that law came into effect in 1988.¹⁷⁵ In this respect, PROFEPA reported that it had not “detectado hechos u omisiones presuntamente constitutivos de infracción a la normatividad ambiental” by CALICA.¹⁷⁶ PROFEPA further stated that CALICA “sí cuenta con el resolutivo o la autorización previa en materia de impacto ambiental para llevar·a cabo las obras o actividades que se realizan” in La Rosita.¹⁷⁷ PROFEPA concluded that “no existen irregularidades por las cuales se proceda a emplazar a procedimiento y en su caso, sancionar al establecimiento denominado [CALICA] por incumplimiento a sus obligaciones ambientales en materia de impacto ambiental.”¹⁷⁸

¶302. In 2016 – another year in which a Clean Industry Certificate was issued – an environmental audit by PROFEPA-certified auditors found CALICA to be in compliance with environmental regulations and parameters with respect to all its operations,

¹⁷² C-0210-SPA, LGEEPA Audit Regulation, Art. 16. See Memorial AC, ¶¶ 21-22. ↩

¹⁷³ See, e.g., Counter-Memorial AC, ¶¶ 9, 218. ↩

¹⁷⁴ C-0043-SPA, Letter No. PFPA03.2/2C27.5/0006/12/0037 from Arturo Estrada Rangel (PROFEPA) to CALICA, dated 10 December 2012 (“PROFEPA Letter to CALICA, 10 December 2012”), p. 2 of the PDF. ↩

¹⁷⁵ C-0043-SPA, PROFEPA Letter to CALICA, 10 December 2012, pp. 6-7 of the PDF. ↩

¹⁷⁶ C-0043-SPA, PROFEPA Letter to CALICA, 10 December 2012, p. 57 of the PDF. ↩

¹⁷⁷ C-0043-SPA, PROFEPA Letter to CALICA, 10 December 2012, p. 7 of the PDF. ↩

¹⁷⁸ C-0043-SPA, PROFEPA Letter to CALICA, 10 December 2012, pp. 56-57 of the PDF. ↩

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including in La Rosita.¹⁷⁹ The 2016 report stated that CALICA’s extractive activities at La Rosita would normally require an environmental impact authorization, but CALICA was considered to be in compliance with its environmental obligations because it was following the environmental requirements applicable when it started its activities:¹⁸⁰

[L]as actividades de extracción de mineral pétreo (roca caliza) que realiza CALICA, requieren de procedimiento de evaluación de la manifestación de impacto ambiental. No obstante se debe considerar que la empresa inició operaciones en 1987, antes de que entrara en vigor la Ley General del Equilibrio Ecológico y la Protección al ambiente (LGEEPA); se comenta que la empresa cumplió con los requerimientos en materia ambiental que le eran aplicables cuando comenzó sus actividades, con el paso del tiempo y de acuerdo a las necesidades de crecimiento de la auditada se han ido haciendo ajustes a las autorizaciones originales, para ello se han elaborado las respectivas manifestaciones de impacto ambiental.

Respecto a lo anterior, la empresa cuenta con autorizaciones en materia de Impacto Ambiental y Recurso Naturales.

¶303. The 2016 Clean Industry Certificate expired in July 2018.¹⁸¹ It was not renewed. (For context, it should be noted that El Corchalito was shut down in 2018 (see ¶¶ 263-270 above.)

4. PROFEPA Inspections and the Shutdown of La Rosita

¶304. On 29 April 2022 – the same day that President López Obrador had announced that SEMARNAT should stop CALICA’s extraction activities (see ¶ 295 above) – PROFEPA issued two inspection orders in relation to La Rosita. One focused on environmental impacts and the other on forestry and soil use.¹⁸²

¶305. On 2 May 2022, PROFEPA inspectors arrived at CALICA’s site in the evening.¹⁸³ The PROFEPA inspectors were accompanied by over thirty armed Mexican marines, armed

¹⁷⁹ C-0208-SPA, March 2016 Environmental Audit Report, pp. 12, 14, 61-385. See Memorial AC, ¶ 24. ↩

¹⁸⁰ C-0208-SPA, March 2016 Environmental Audit Report, p. 21. ↩

¹⁸¹ C-0042-SPA, Clean Industry Certificate, 27 July 2016, pp. 2-3. ↩

¹⁸² R-0127-ESP, Forestry inspection order No. OC00158RN2022 of 29 April 2022, issued by the Directorate-General for Forestry Inspection and Surveillance of PROFEPA, p. 2; R-0128-ESP, Environmental impact inspection order No. PFPA/4.1/2C.27.5/024/2022 of 29 April 2022, issued by the Director-General of Environmental Impact and the Federal Maritime-Terrestrial Zone of PROFEPA, p. 2. ↩

¹⁸³ C-0169-SPA, Pictures of Mexico’s Incursion into CALICA’s Facilities, 2-5 May 2022 (“Pictures of incursion”), pp. 1-6; R-0129-ESP, Certificate of inspection visit No. PFPA/4.1/2C.27.5/024/2022 dated 2 May 2022 and Forestry Inspection Certificate No. AI0158RN2022 (“2 May 2022 Inspection Certificate”), pp. 2, 8. ↩

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vehicles, drones and naval vessels, which were stationed at the gate and sea-harbor entrance of CALICA’s facilities.¹⁸⁴ In minutes of the inspection, PROFEPA recorded that the dispatch of armed personnel and vehicles was due to CALICA’s refusal to allow PROFEPA inspectors access to La Rosita.¹⁸⁵

¶306. That same day (2 May 2022), CALICA filed an amparo proceeding, referring to: (i) the President’s mañanera of 2 May 2022 “en el que manifestó que dio instrucciones a la Secretaría para proceder legalmente en contra de la moral quejosa, para que no continúe con la operación del proyecto”; and (ii) the shutdown and/or suspension and/or cancellation and/or revocation order of the project named “Aprovechamiento de roca caliza por debajo del manto freático en los predios el Corchalito y la Adelita.”¹⁸⁶ The amparo sought maintenance of the status quo, i.e., that the responsible authority refrain from shutting down, suspending, cancelling or revoking the project identified in item (ii) of this paragraph.¹⁸⁷

¶307. On 3 May 2022, the judge presiding on the amparo determined that the protection requested by CALICA was only with respect to El Corchalito and La Adelita, pursuant to the framework of the project as stated in the Federal EIA.¹⁸⁸

¶308. On 5 May 2022, PROFEPA inspectors shut down La Rosita.¹⁸⁹ This is because, upon conclusion of its inspections, PROFEPA’s inspectors found that CALICA was operating without: (i) an environmental impact authorization; and (ii) a CUSTF to remove vegetation in La Rosita.¹⁹⁰ In this respect, PROFEPA’s inspectors did not consider the documentation submitted to them by CALICA to be sufficient to establish the relevant

¹⁸⁴ C-0169-SPA, Pictures of incursion, pp. 7-11. ↩

¹⁸⁵ R-0129-ESP, 2 May 2022 Inspection Certificate, pp. 2-4. ↩

¹⁸⁶ C-0173-SPA, Seventh District Court in the State of Quintana Roo, Federal Judiciary, Provisional Stay, Stay Proceeding 431/2022-I (“Amparo proceeding”), p. 2 of the PDF. ↩

¹⁸⁷ C-0173-SPA, Amparo proceeding, p. 2. ↩

¹⁸⁸ R-0130-ESP, Seventh District Court in the State of Quintana Roo, Indirect amparo 431/2022, Provisional Stay, 3 May 2022. ↩

¹⁸⁹ C-0171-SPA, PROFEPA Environmental Report, 2-5 May 2022, pp. 71-72; C-0172-SPA, PROFEPA Forestry Report, 2-5 May 2022, pp. 61-62. See Reply AC, ¶ 14. ↩

¹⁹⁰ C-0171-SPA, PROFEPA Environmental Report, 2-5 May 2022, pp. 71-72; C-0172-SPA, PROFEPA Forestry Report, 2-5 May 2022, p. 62. See Memorial AC, ¶ 64. ↩

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environmental authorizations for La Rosita, namely, a copy of the Investment Agreement, and relevant annexes, and a copy of the 2000 Federal EIA.¹⁹¹

¶309. On 6 May 2022, SEMARNAT issued a press release in which it stated that in 1986, the federal and state governments had granted CALICA an authorization for the exploitation of limestone under the water table in La Rosita without establishing a term of duration or specific volume of production.¹⁹²

¶310. While CALICA sought to extend the amparo proceeding to cover La Rosita, on 9 May 2022, the judge found that the measures applied in La Rosita were not identical or related to the suspension granted for El Corchalito and La Adelita and ordered a new amparo proceeding to be processed separately for the measures imposed in La Rosita.¹⁹³

¶311. On 25 October 2022, members of a Mayan Indigenous community filed a class action against CALICA in the First District Court in the State of Quintana Roo (“Collective Action Lawsuit”).¹⁹⁴ Contemporaneous press reports refer to concerns on the part of the Indigenous community and others regarding:¹⁹⁵

1. (i) Protection of the rights of the Indigenous people, who were being affected by the limestone dust released by the extractive activities at CALICA;
2. (ii) Seven neighbouring communities affected by the result of CALICA’s activity; and

¹⁹¹ C-0171-SPA, PROFEPA Environmental Report, 2-5 May 2022, pp. 13-16; 77; C-0010-SPA, Investment Agreement, pp. 6, 14, 37, 401. See Memorial AC, ¶ 70. ↩

¹⁹² C-0174-SPA, PROFEPA Press Release, 6 May 2022, p. 3 (Translation by Claimant at Memorial AC, ¶ 71). ↩

¹⁹³ R-0131-ESP, Seventh District Court in the State of Quintana Roo, Indirect Amparo 431/2022, Agreement, 9 May 2022. ↩

¹⁹⁴ C-0283-SPA, Class Action Complaint (Quetzal Tzab González & Others) Against CALICA, 25 October 2022 (“Collective Action Lawsuit”). See also R-0162-ESP, Ramírez Ana, QRoo: Movimiento indígena interpone acción colectiva contra Calica, La Jornada Maya, 24 October 2022; R-0165-ESP, Rosales Sánchez, Juan José, Acciones Colectivas. Reflexiones desde la judicatura, Coords. Leonel Castillo González and Jaime Murillo Morales, Mexico, 1st. edition, Editorial del Poder Judicial de la Federación, Federal Judiciary Council, Institute of the Federal Judiciary- School of the Judiciary, 2013, p. 12. See Counter-Memorial AC, ¶ 139. ↩

¹⁹⁵ R-0167-ESP, Aristegui Noticias. Presentan demanda colectiva contra Calica por daños a salud y medio ambiente en Quintana Roo, 25 October 2022; R-0162-ESP, Ramírez Ana, QRoo: Movimiento indígena interpone acción colectiva contra Calica, La Jornada Maya, 24 October 2022. See Counter-Memorial AC, ¶ 139. ↩

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1. (iii) Explosives used by CALICA affecting houses built in concrete.

¶312. The Indigenous community further called for the closure of CALICA’s facilities and compensation from CALICA for alleged harm to the environment and health of children.¹⁹⁶

5. Customs Permit: Renewal Delay and Cancellation
Proceedings

¶313. In the course of its operations, CALICA secured and renewed, approximately every three years, a customs permit, authorizing the export of production directly from Punta Venado to the United States.¹⁹⁷

¶314. CALICA’s customs permit, which was due to expire on 2 January 2022, was not renewed until after its expiry, in April 2022.¹⁹⁸

¶315. The basis for the non-renewal of the customs permit is disputed between the Parties.

¶316. According to Claimant, the customs permit was not renewed based on an alleged lack of re-certification by the Mexican Navy of compliance with Mexico’s International Ship and Port Facility Security Code.¹⁹⁹ By Claimant’s account, the Navy refused to act on CALICA’s multiple requests to renew that certification. As a result of the delay in the renewal, CALICA was unable to export aggregates for approximately six weeks, from early January through mid-February 2022.²⁰⁰

¶317. On 2 February 2022, CALICA received the Navy’s certification, however, the customs permit was not renewed by Mexico’s National Customs Agency (“ANAM”) immediately.²⁰¹

¶318. According to Respondent, the customs authority did not refuse to renew the permit, but only required CALICA to submit its application in compliance with all the legal

¹⁹⁶ R-0162-ESP, Ramírez Ana, QRoo: Movimiento indígena interpone acción colectiva contra Calica, La Jornada Maya, 24 October 2022. See Counter-Memorial AC, ¶ 139. ↩

¹⁹⁷ C-0278-SPA, Customs Act, 15 December 1995, Art. 11; C-0201-SPA, Letter DGJA-2022-0981, 30 March 2022, p. 9. See Memorial AC, ¶ 18. ↩

¹⁹⁸ [Redacted] Third Statement, ¶¶ 12-22. See Memorial AC, ¶ 19. ↩

¹⁹⁹ [Redacted] Third Statement, ¶ 12. See Memorial AC, ¶ 32. ↩

²⁰⁰ [Redacted] Third Statement, ¶ 13. See Memorial AC, ¶ 32. ↩

²⁰¹ [Redacted] Third Statement, ¶ 14. See Memorial AC, ¶ 33. ↩

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requirements.²⁰² Therefore, according to Respondent, once all these requirements were met, the customs authority issued an authorisation for the exit of goods from the national territory (“para la salida de mercancías del territorio nacional por lugar distinto al autorizado”) and in accordance with the applicable Reglas de Comercio Exterior.²⁰³

¶319. On 10 February 2022, Respondent’s customs agency granted a temporary two-month renewal of CALICA’s custom permit. According to Claimant, this temporary renewal was granted after it pleaded with Mexican authorities at the highest level to address this delay.²⁰⁴

¶320. According to Claimant, during negotiations around the renewal of its customs permit, the Ministry of Interior demanded that CALICA refrain from carrying out quarrying operations in La Rosita in exchange for renewing the customs permit. CALICA did not agree to this proposal.²⁰⁵ Respondent denies Claimant’s account, stating that the customs permit was already issued one day before Legacy Vulcan’s communication that such a condition existed.²⁰⁶

¶321. From 11 February 2022 until 13 March 2022, Claimant temporarily focused its operations on shipping accumulated materials that were already extracted from its quarry, rather than quarrying more material.²⁰⁷ According to Claimant, this was done to give space to the then-ongoing discussions with the government and as a voluntary gesture of good faith.²⁰⁸ According to Respondent, Claimant verbally agreed to suspend its quarrying activities and work on the tourism development proposal.²⁰⁹

¶322. After 13 March 2022, Claimant states that it restarted quarrying activities in La Rosita and that it communicated this to Respondent.²¹⁰

²⁰² R-0177-ESP, General Administration of Customs, Requisition OF.G.800.02.03.00.00.00.21-526, 7 December 2021. See Counter-Memorial AC, ¶ 378. ↩

²⁰³ See Counter-Memorial AC, ¶ 378, citing R-0180-ESP, SAT, General Foreign Trade Rules for 2022, Rule 2.4.1. ↩

²⁰⁴ [Redacted] Third Statement, ¶¶ 15-16. See Memorial AC, ¶ 33. ↩

²⁰⁵ [Redacted] Third Statement, ¶ 15. See Memorial AC, ¶ 33. ↩

²⁰⁶ Rejoinder AC, ¶ 246. See C-0179-ENG, Letter from Thompson S. Baker to Ambassador Esteban Moctezuma, 11 February 2022 (“[Redacted] Letter, 11 February 2022”); [Redacted] Third Statement, ¶ 17. ↩

²⁰⁷ C-0179-ENG, [Redacted] Letter, 11 February 2022. See Memorial AC, ¶ 34. ↩

²⁰⁸ C-0179-ENG, [Redacted] Letter, 11 February 2022. See Memorial AC, ¶ 34. ↩

²⁰⁹ See Counter-Memorial AC, ¶ 114. ↩

²¹⁰ See Memorial AC, ¶ 34, citing [Redacted] Third Statement, ¶ 16. ↩

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¶323. In April 2022, according to Claimant, CALICA’s customs permit was renewed for a three-year term.²¹¹

¶324. On 10 May 2022, Respondent’s customs agency suspended CALICA’s renewed customs permit and commenced an administrative proceeding to revoke it. The document initiating the suspension and cancellation proceedings refers to PROFEPA’s temporary total closure of La Rosita and findings made in relation to environmental irregularities on that lot. It states, in part, as follows:²¹²

En razón de lo expuesto y fundado, [CALICA], se encuentra dentro del supuesto de cancelación, descrito en la fracción VI del artículo 144-A de la Ley Aduanera, en relación con el resolutivo Décimo Numeral 8, de la Autorización para la salida de mercancías de territorio nacional por lugar distinto al autorizado, contenida en el oficio DGJA.2022 0981 de 30 de marzo de 2022, puesto que existe evidencia de que cometió actos contrarios a las disposiciones establecidas en los artículos [list of provisions] de la Ley General del Equilibrio Ecológico y la Protección al Ambiente; [list of provisions] de la Ley Federal de Responsabilidad Ambiental, lo que vulnera el interés general, y que en consecuencia de ello fueron suspendidas por la SEMARNAT las actividades y las obras relacionadas con la autorización en cita atento a los documentos que obran en el expediente ANAM-3S.3.2022.5 "2" por lo cual se da inicio a un procedimiento de cancelación, ordenando la suspensión de operaciones de la autorizada y se le otorgará un plazo de diez días para que el interesado ofrezca las pruebas y alegatos que a su derecho convengan, debiendo dictar la resolución que corresponda en un plazo que no excederá de cuatro meses a partir de la notificación del inicio del procedimiento.

6. SEMARNAT Dictamen

¶325. On 18 August 2022, SEMARNAT published a report entitled Dictamen de impactos ambientales derivados del proyecto de extracción industrial de roca caliza a cargo de la empresa Calica (hoy SAC-TUN) en los municipios de Solidaridad y Cozumel, Quintana Roo (“SEMARNAT Dictamen”).²¹³ On the same date, SEMARNAT published a PowerPoint presentation on its website describing, inter alia, the purpose and findings of

²¹¹ See Memorial AC, ¶ 35. ↩

²¹² C-0194-SPA, Mexico’s National Customs Agency, Official Letter DGJA.2022.1658, 10 May 2022, p. 18. See Memorial AC, ¶ 35; Counter-Memorial AC, ¶ 380. ↩

²¹³ C-0237-SPA, SEMARNAT, Report on environmental impacts from the industrial limestone extraction project carried out by Calica (currently SAC-TUN) in the municipalities of Solidaridad and Cozumel, Quintana Roo, 18 August 2022 (“SEMARNAT Dictamen”). See Memorial AC, ¶ 86. ↩

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the SEMARNAT Dictamen (“SEMARNAT Dictamen PowerPoint”).²¹⁴ According to the SEMARNAT Dictamen PowerPoint, the SEMARNAT Dictamen was carried out for the purpose of quantifying the environmental impact caused by CALICA’s activities.²¹⁵

¶326. The SEMARNAT Dictamen was coordinated by SEMARNAT, with the involvement of the Instituto Mexicano de Tecnología del Agua (“IMTA”), the Comisión Nacional de Áreas Naturales Protegidas (“CONANP”) and the Instituto Nacional de Ecología y Cambio Climático (“INECC”).²¹⁶

¶327. According to the SEMARNAT Dictamen PowerPoint, the findings of environmental impacts by Claimant included, inter alia: (i) loss of vegetation; (ii) loss of habitat for endangered species; (iii) fragmentation of biological corridor; (iv) loss of soil; (v) changes in the flow of groundwater; (vi) contamination of water; and (vii) deforestation.²¹⁷

V. SUMMARY OF THE PARTIES’ POSITIONS AND RELIEF SOUGHT

A. CLAIMANT’ S POSITION AND RELIEF SOUGHT

1. Original Claim

¶328. Claimant argues that Respondent has carried out three wrongful measures, namely, it: (i) repudiated the 2014 Agreements when SEMARNAT would not issue the CUSTF permit to allow Claimant to remove vegetation from (and thus quarry at) La Adelita, and abandoned the POEL 2009 amendment process that was agreed to lead to the awarding of that permit;²¹⁸ (ii) failed to comply with the rulings of its own judiciary when API Quintana Roo charged CALICA for docking at the CALICA’s private Port Terminal despite the courts’ decision that such was unlawful;²¹⁹ and (iii) unlawfully shut down operations at El Corchalito and de facto barred further operations at La Adelita because

²¹⁴ C-0235-SPA, SEMARNAT, Environmental Disaster in Violation of the Human Right to a Healthy Environment, 18 August 2022 (“SEMARNAT Dictamen PowerPoint”). See Memorial AC, ¶ 86. ↩

²¹⁵ C-0235-SPA, SEMARNAT Dictamen PowerPoint, p. 17. ↩

²¹⁶ C-0235-SPA, SEMARNAT Dictamen PowerPoint, p. 17. ↩

²¹⁷ C-0235-SPA, SEMARNAT Dictamen PowerPoint, pp. 20-22. ↩

²¹⁸ Memorial, ¶¶ 111-131. ↩

²¹⁹ Memorial, ¶¶ 132-137. ↩

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of the finding that Claimant had exceeded its quarrying area limits under the Federal EIA.²²⁰

¶329. Claimant thus submits that Respondent has breached the NAFTA by failing to accord its investments fair and equitable treatment in violation of Article 1105 thereof. Through the most-favoured nation clause (“MFN Clause”) in NAFTA Article 1103, Claimant further contends that Respondent has failed to observe the international obligations it has assumed regarding Claimant’s investments.

¶330. In the Memorial, Claimant asks for an award in its favour as follows:²²¹

1. a. Upholding the claims asserted by the Claimant in this proceeding;
2. b. Declaring that the Respondent has breached NAFTA and applicable principles of international law:
   1. i. By failing to accord Claimant’s investments, including CALICA, fair and equitable treatment in violation of Article 1105; and
   2. ii. By failing to observe the obligations it has assumed regarding the Claimant’s investments (an international obligation that is applicable through the most-favored-nation clause of Article 1103 of NAFTA);
3. c. Determining that this breach has caused damages to Claimant;
4. d. Ordering the Respondent to pay to the Claimant compensation, in accordance with NAFTA and customary international law, in an amount sufficient to provide full reparation to the Claimant for the damages incurred as a result of the Respondent’s conduct in violation of NAFTA, including:
   1. i. Compensation for damages arising out of Mexico’s repudiation of the 2014 Agreements in the amount of [Redacted]
   2. ii. Compensation for damages arising out of Mexico’s shutdown of CALICA’s operations in El Corchalito in the amount of [Redacted] ;
   3. iii. Compensation for port fees that Mexico illegally charged CALICA and never reimbursed in the amount of [Redacted]

²²⁰ Memorial, ¶¶ 138-159. ↩

²²¹ Memorial, ¶ 347. ↩

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1. 1. iv. Compensation of [Redacted] to account for the double taxation that would result on a portion of this Award;
   2. v. Pre-Award compound interest at a rate reflecting the cost of short-term borrowing by the Government of Mexico from the date of each breach to the date of the award, and post-Award compound interest also reflecting the cost of short-term borrowing by the Government of Mexico from the date of the Award until actual and full payment by Mexico, even if the Award is converted into a judgement of a court of a State party to the ICSID Convention;
2. e. Giving Respondent the option to pay less than the full amount ordered above for items (i), (ii), (iv) and (v) if Mexico’s instrumentalities, (x) within three months from the issuance of the Award, were to amend the POEL to expressly allow quarrying operations by CALICA in La Adelita, and (y) immediately close all administrative and judicial proceedings against CALICA arising out of the inspection of El Corchalito, allowing CALICA to resume operations normally with no penalties to CALICA or any of its affiliates or any of their respective employees, agents, advisors or other representatives (collectively, the “Settlement Measures”), in which case Respondent shall pay the damages effectively incurred up to the performance of the Settlement Measures;
3. f. Ordering Respondent to pay all costs and expenses of this arbitration proceeding, including the fees and expenses of the Tribunal and the cost of legal representation, plus interest thereon; and
4. g. Such other or additional relief as may be appropriate under the applicable law or that may otherwise be just and proper.

¶331. In the Reply, Claimant asked the Tribunal to “dismiss the defenses raised in the Respondent’s Counter-Memorial” and otherwise repeated the same requests for relief, with a small addition to item d.iii in ¶ 330 above, as underlined: “Compensation for port fees that Mexico illegally charged CALICA and Vulica and never reimbursed in the amount of [Redacted]”.²²²

2. Ancillary Claim and Counterclaim

¶332. Claimant’s Ancillary Claim relates to Respondent’s shutdown of CALICA’s remaining quarrying and export operations in La Rosita and Punta Venado.

²²² Reply, ¶ 288. ↩

[Page 100]

¶333. In the Memorial on Ancillary Claim, Claimant seeks the following relief:²²³

1. a. Upholding Claimant’s ancillary claim;
2. b. Declaring that Respondent has breached NAFTA and applicable principles of international law by failing to accord Claimant’s investments, including CALICA, fair and equitable treatment in violation of Article 1105;
3. c. Determining that this breach has caused damages to Claimant;
4. d. Ordering Respondent to pay to Claimant compensation, in accordance with NAFTA and customary international law, in an amount sufficient to provide full reparation to Claimant for the damages incurred as a result of the wrongful conduct at issue regarding this ancillary claim, including;
   1. i. Compensation for damages arising out of Respondent’s wrongful measures in the amount of [Redacted]
   2. ii. Compensation of [Redacted] to account for the double taxation that would result on a portion of this Award;
   3. iii. Pre-Award compound interest at a rate reflecting the cost of short-term borrowing by the Government of Mexico from the date of the breach to the date of the Award, and post-Award compound interest also reflecting the cost of short-term borrowing by the Government of Mexico from the date of the Award until actual and full payment by Respondent, even if the Award is converted into a judgment of a court of a State party to the ICSID Convention;
5. e. Ordering Respondent to pay all costs and expenses of this arbitration proceeding (including this ancillary claim), including the fees and expenses of the Tribunal and the cost of legal representation, plus interest thereon; and
6. f. Such other or additional relief as may be appropriate under the applicable law or that may otherwise be just and proper.

¶334. In the Reply on Ancillary Claim, repeated a similar request for relief, with the following changes and additions as underlined:²²⁴

²²³ Memorial AC, ¶ 185. ↩

²²⁴ Reply AC, ¶ 281. ↩

[Page 101]

1. a. Upholding Claimant’s ancillary claim and dismissing Respondent’s jurisdictional objection to this claim;
2. b. Declaring that Respondent has breached NAFTA and applicable principles of international law by failing to accord Claimant’s investments, including CALICA, fair and equitable treatment in violation of Article 1105;
3. c. Determining that this breach has caused damages to Claimant;
4. d. Ordering Respondent to pay to Claimant compensation, in accordance with NAFTA and customary international law, in an amount sufficient to provide full reparation to Claimant for the damages incurred as a result of the wrongful conduct at issue regarding this ancillary claim, including;
   1. i. Compensation for damages arising out of Respondent’s wrongful measures in the amount of [Redacted]
   2. ii. Compensation of [Redacted] to account for the double taxation that would result on a portion of this Award;
   3. iii. Pre-Award compound interest at a rate reflecting the cost of short-term borrowing by the Government of Mexico from the date of the breach to the date of the Award, and post-Award compound interest also reflecting the cost of short-term borrowing by the Government of Mexico from the date of the Award until actual and full payment by Respondent, even if the Award is converted into a judgment of a court of a State party to the ICSID Convention;
5. e. Ordering Respondent to pay all costs and expenses of this arbitration proceeding (including this ancillary claim), including the fees and expenses of the Tribunal and the cost of legal representation, plus interest thereon;
6. f. Rejecting Respondent’s request for leave to file its counterclaim; and
7. g. Ordering such other or additional relief as may be appropriate under the applicable law or that may otherwise be just and proper. (citation omitted; emphasis added to reflect additions in the Reply on Ancillary Claim)

¶335. In its Response on Counterclaim Jurisdiction, Claimant requests that the Tribunal render an Award in its favour:²²⁵

²²⁵ Response on Counterclaim Jurisdiction, ¶ 185. ↩

[Page 102]

1. a. Dismissing Mexico’s counterclaim for lack of jurisdiction or because it otherwise is inadmissible;
2. b. Ordering Mexico to pay all costs and expenses incurred by Claimant in connection with Mexico’s counterclaim, including the fees and expenses of the Tribunal and the cost of legal representation, plus interest thereon; and
3. c. Ordering such other or additional relief as may be appropriate under the applicable law or that may otherwise be just and proper.

¶336. In its C-PHM AC, Claimant requests the Tribunal to “dismiss Mexico’s counterclaim and order Mexico to pay all costs and expenses associated with this wasteful litigation tactic.”²²⁶

B. RESPONDENT’ S POSITION AND RELIEF SOUGHT

1. Original Claim

¶337. Respondent disputes that the measures underlying Claimant’s original claim are unlawful. Specifically, Respondent argues that it: (i) did not repudiate the 2014 Agreements, considering that those Agreements are not legally binding;²²⁷ (ii) has complied with the Mexican courts’ decisions regarding the payment of the Port Terminal fees, considering that those decisions do not, contrary to Claimant’s assertions, stand for the proposition that API Quintana Roo had been unlawfully charging fees for Claimant’s use of CALICA’s private terminal;²²⁸ and (iii) lawfully shut down operations at El Corchalito considering that the Shutdown order was, inter alia, properly notified, justified by CALICA’s non-compliance with the Federal EIA, and needed as a safety measure to protect the environment.²²⁹

¶338. Respondent denies Claimant’s allegations and requests that the Tribunal reject Claimant’s claims. It requests as follows:²³⁰

²²⁶ C-PHM AC, ¶ 95. ↩

²²⁷ Counter-Memorial, ¶¶ 205-206. ↩

²²⁸ Counter-Memorial, ¶¶ 245-270. ↩

²²⁹ Counter-Memorial, ¶¶ 71-125. ↩

²³⁰ Counter-Memorial, ¶¶ 541-542. ↩

[Page 103]

541. La Demandada solicita este Tribunal ordenar a la Demandante a pagar los costos y gastos en los que ha incurrido a raíz de este arbitraje, incluidos:

(i) la parte de los gastos del Tribunal que corresponden a México;
(ii) la parte de los gastos de administración del procedimiento ante el CIADI que corresponden a México;
(iii) los honorarios de los asesores legales externos de México; y
(iv) el pago de los expertos contratados por México.

542.La Demandada tiene derecho a un laudo de costos a su favor por las siguientes razones:

1. La Demandada no violó ninguna de sus obligaciones conforme al TLCAN.
2. La Demandante ha presentado una reclamación carente de méritos para tratar de obtener un beneficio indebido.

¶339. Respondent repeats the above requests in its Rejoinder.²³¹

2. Ancillary Claim

¶340. Respondent denies Claimant’s allegations and requests that the Tribunal reject Claimant’s claims. It requests as follows:²³²

633. La Demandada solicita respetuosamente a este Tribunal resolver:

(i) Que la reclamación de la Demandante es inadmisible porque se basa en conductas irregulares en contravención de la normativa ambiental; y, en su caso,

(ii) Que carece de competencia ratione temporis respecto a las reclamaciones formuladas por la Demandante porque se basan en hechos que ocurrieron cuando el TLCAN ya no se encontraba vigente; o, en su caso,

(iii) Que la reclamación de la Demandante carece de méritos y, en consecuencia, México no es responsable de ninguna supuesta violación al TLCAN; o en su caso,

²³¹ Rejoinder, ¶¶ 502-503. See also R-PHM, ¶ 191. ↩

²³² Counter-Memorial AC, ¶¶ 633-635. ↩

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(iv) Que el monto de daños equivale al cálculo que presentó la Demandada.

634. La Demandada también solicita respetuosamente al Tribunal que, en caso de que determine alguno de los supuestos señalados en los incisos (i), (ii) o (iii) supra, ordene a la Demandante a pagar los costos y gastos en los que la Demandada ha incurrido a raíz de este arbitraje, incluidos:

(i) la parte de los gastos del Tribunal que corresponden a México;

(ii) la parte de los gastos de administración del procedimiento ante el CIADI que corresponden a México;

(iii) los honorarios de los asesores legales externos de México;

(iv) el pago de los expertos contratados por México;

(v) y cualquier otro gasto incurrido por el Gobierno de México en relación con este procedimiento; y

(vi) el pago de los intereses que se generen derivado de la falta de pago inmediato de los conceptos antes referidos.

635. La Demandada tiene derecho a un laudo de costos a su favor por las siguientes razones: (i) la Demandante presentó una reclamación respecto a la cual el Tribunal carece de jurisdicción; y, en su caso, (ii) la Demandada no violó ninguna de sus obligaciones conforme al TLCAN; y (iii) la Demandante ha presentado una reclamación carente de méritos con la única intención de obtener un indebido beneficio.

¶341. Respondent repeats the above requests in its Rejoinder on Ancillary Claim, with the following additions as underlined:²³³

492. La Demandada tiene derecho a un laudo de costos a su favor dado que: (i) la Demandante presentó una reclamación inadmisible por no tener las “manos limpias” al incumplir con la legislación nacional; (ii) el Tribunal carece de jurisdicción, dado que la Demandada no consintió en arbitrar estas reclamaciones al amparo del TLCAN; (iii) la Demandada no cometió ninguna violación a sus obligaciones previstas en el TLCAN; y (iv) la Demandante ha presentado una reclamación carente de méritos con la única intención de obtener un indebido beneficio.

493. La Demandada considera que, al tomar su decisión sobre costos, el Tribunal debe tener presente la evidencia aportada por la Demandada respecto a ilicitudes cometidas por la Demandante en el curso de sus actividades en México; la solicitud de la Demandante de sustanciar una nueva etapa de arbitraje, a pesar de estar claramente fuera de la jurisdicción

²³³ Rejoinder AC, ¶¶ 490-493. See also R-PHM AC, ¶ 225. ↩

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de este Tribunal; y el ocultamiento de información para hacer creer al Tribunal que la Demandada incumplió la RP 7, mediante las comunicaciones de la Demandante del 21 de marzo y 3 de abril del año en curso. (emphasis added to reflect additions in Rejoinder on Ancillary Claim)

¶342. In relation to the counterclaim, Respondent requests the Tribunal to:²³⁴

. . . determinar que tiene jurisdicción y competencia sobre la demanda reconvencional de la Demandada, y que es admisible, al cumplirse los requisitos para que un tribunal tenga jurisdicción sobre una reconvención: (i) estar dentro de los límites del consentimiento de las partes; (ii) caer dentro de la jurisdicción del CIADI, y (iii) relacionarse directamente con la reclamación principal.

VI. INTRODUCTION TO THE TRIBUNAL’S ANALYSIS

A. PARTIES’ SUBMISSIONS

¶343. In the analysis below, the Tribunal has considered not only the positions of the Parties as summarized in this Award, but also the numerous detailed arguments made in the Parties’ written submissions and during the Hearing. To the extent that these arguments are not referred to expressly, they have been subsumed into the Tribunal’s analysis.

B. OVERVIEW OF THIS AWARD

¶344. In the Sections that follow, the Tribunal sets out the Parties’ positions with respect to the various aspects of the Parties’ dispute, together with the Tribunal’s analysis and determinations on each matter. Section VIII concerns jurisdiction and admissibility. Section IX covers applicable legal standards. Sections X, XI and XII address Claimant’s claims for alleged breaches in relation to La Adelita, El Corchalito and La Rosita respectively. Section XIV deals with quantum and relief sought. Section XV covers interest and XVI addresses costs. The Tribunal’s conclusions are summarized in Section XVII and the decisions are contained in Section XVIII.

²³⁴ Counterclaim Memorial on Jurisdiction, ¶ 248. ↩

[Page 106]

VII. APPLICABLE LAW

¶345. NAFTA Article 1131(1) is entitled “Governing Law” and provides: “[a] Tribunal established under this Section shall decide the issues in dispute in accordance with this Agreement and applicable rules of international law.”

¶346. Likewise, NAFTA Article 102(2), addressing the objectives of NAFTA, states that “[t]he Parties shall interpret and apply the provisions of this Agreement in the light of its objectives set out in paragraph 1 and in accordance with applicable rules of international law.”

¶347. Article 42 of the ICSID Convention provides:

(1) The Tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the parties. In the absence of such agreement, the Tribunal shall apply the law of the Contracting State party to the dispute (including its rules on the conflict of laws) and such rules of international law as may be applicable.

(2) The Tribunal may not bring in a finding of non liquet on the ground of silence or obscurity of the law.

(3) The provisions of paragraphs (1) and (2) shall not prejudice the power of the Tribunal to decide a dispute ex aequo et bono if the parties so agree.

¶348. For the purposes of Article 42(1) of the ICSID Convention, the Tribunal considers that in accordance with NAFTA Article 1131(1), the Parties have agreed that their dispute shall be decided in accordance with the provisions of NAFTA and applicable rules of international law. This is in line with Claimant’s submission on this point.²³⁵

¶349. The Tribunal further notes the terms of NAFTA Article 1112(1) and Article 103(2), which provide additional clarity on the relevant applicable law in the event of any inconsistency between (i) NAFTA Chapter Eleven and other chapters of the NAFTA; or (ii) between the NAFTA and other agreements. In this regard, Article 1112(1) provides: “In the event of any inconsistency between this Chapter and another Chapter, the other Chapter shall prevail to the extent of the inconsistency.” Article 103(2) provides: “In the event of any inconsistency between this Agreement and such other agreements [to which

²³⁵ Memorial, ¶ 186. ↩

[Page 107]

the Parties to the NAFTA are party], this Agreement shall prevail to the extent of the inconsistency, except as otherwise provided in this Agreement.”

¶350. Also relevant is NAFTA Article 1131(2), which provides: “An interpretation by the [NAFTA Free Trade] Commission of a provision of this Agreement shall be binding on a Tribunal established under this Section.” In this regard, the Tribunal notes that the Commission adopted interpretations of, inter alia, NAFTA Article 1105(1), on 31 July 2001 (“FTC Note”).²³⁶

¶351. It is clear from the FTC Note insofar as it concerns NAFTA Article 1105(1) that a tribunal deciding a dispute concerning, inter alia, the interpretation and application of this provision is required to have regard, at the very least, to customary international law to determine the content, under customary international law, of the minimum standard of treatment requirement for purposes, inter alia, of interpreting and applying the concepts of “fair and equitable treatment” and “full protection and security”. It follows, and in the Tribunal’s view this accords with a plain reading of both NAFTA Article 1131(1) and Article 102(2), that the phrase “applicable rules of international law” in NAFTA Article 1131(1) addresses not only, for example, rules of interpretation of treaties, such as those reflected in Articles 31 and 32 of the Vienna Convention on the Law of Treaties (“VCLT”), but also any other applicable rules of international law that may be relevant to the case before it. This would include, for example, relevant and applicable rules on State responsibility for questions of attribution of conduct, as well as other relevant and applicable rules of international law that inform the interpretation and application of the provisions, inter alia, of Section A of NAFTA Chapter Eleven that are in issue in the proceedings. It will be a matter for each tribunal constituted under Section B of NAFTA Chapter Eleven to evaluate, with the assistance of submissions of the parties on the

²³⁶ Under the heading “Minimum Standard of Treatment in Accordance with International Law”, the Commission adopted the following interpretations: “1. Article 1105(1) prescribes the customary international law minimum standard of treatment of aliens as the minimum standard of treatment to be afforded to investments of investors of another Party. 2. The concepts of ‘fair and equitable treatment’ and ‘full protection and security’ do not require treatment in addition to or beyond that which is required by the customary international law minimum standard of treatment of aliens. 3. A determination that there has been a breach of another provision of the NAFTA, or of a separate international agreement, does not establish that there has been a breach of Article 1105(1).” C-0132-ENG, NAFTA FTC, Notes of Interpretation of Certain Chapter 11 Provisions, dated 31 July 2001 (“FTC Note”), pp. 2-3. ↩

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matter, the precise scope of the phrase “applicable rules of international law” in the circumstances of the case before it.

¶352. As regards the interpretation of NAFTA, the Tribunal will proceed by reference to the commonly accepted customary international law rules of interpretation of treaties reflected in Articles 31 and 32 of the VCLT.

¶353. Claimant does not base its claims on Mexican law, except insofar as it considers necessary to set out the factual context of the dispute.²³⁷ The Tribunal confirms that Mexican law is relevant, including to determine the facts related to the Parties’ dispute. In the present case, both Parties make submissions on the position under Mexican law which are disputed. Mexican law does not govern the Tribunal’s determinations on the merits of the dispute. Unless otherwise stated, to the extent that the Tribunal is required to resolve the Parties’ dispute about the position of Mexican law on a particular disputed issue, it does so as a matter of fact.

VIII. JURISDICTION AND ADMISSIBILITY

¶354. In this Section the Tribunal will decide upon various matters implicating the jurisdiction of the Tribunal and the admissibility of the claims and counterclaim. In Section I.A the Tribunal sets out legal provisions relevant to its analysis. Sections B and C contain Respondent’s and Claimant’s positions on jurisdiction and admissibility, respectively. Section D summarizes the US NDP and the Parties’ comments thereon insofar as it concerns jurisdiction and admissibility. Section E comprises the Tribunal’s analysis on the jurisdiction and admissibility matters raised.

A. RELEVANT PROVISIONS

¶355. NAFTA Article 201(1) provides, in part, as follows:

For purposes of this Agreement, unless otherwise specified:

[. . .]

enterprise means any entity constituted or organized under applicable law, whether or not for profit, and whether privately-owned or governmentally-

²³⁷ Memorial, ¶ 186; 2021 Hearing Transcript (English), Day 1, 76:2-6 (Tribunal Question to Claimant). ↩

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owned, including any corporation, trust, partnership, sole proprietorship, joint venture or other association;

enterprise of a Party means an enterprise constituted or organized under the law of a Party;

[. . .]

¶356. NAFTA Article 1101(1) relates to the scope and coverage of NAFTA Chapter 11 and provides:

This Chapter applies to measures adopted or maintained by a Party relating to:

(a) investors of another [Contracting] Party;

(b) investments of investors of another [Contracting] Party in the territory of the [Contracting] Party; and

(c) with respect to Articles 1106 and 1114, all investments in the territory of the [Contracting] Party.

¶357. NAFTA Article 1116 is entitled “Claim by an Investor of a Party on its Own Behalf” and provides:

¶1. An investor of a [Contracting] Party may submit to arbitration under this Section a claim that another [Contracting] Party has breached an obligation under:

(a) Section A or Article 1503(2) (State Enterprises), or

(b) Article 1502(3)(a) (Monopolies and State Enterprises) where the monopoly has acted in a manner inconsistent with the [Contracting] Party’s obligations under Section A,

and that the investor has incurred loss or damage by reason of, or arising out of, that breach.

¶2. An investor may not make a claim if more than three years have elapsed from the date on which the investor first acquired, or should have first acquired, knowledge of the alleged breach and knowledge that the investor has incurred loss or damage.

358. NAFTA Article 1117 is entitled “Claim by an Investor of a [Contracting] Party on Behalf of an Enterprise” and provides:

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¶1. An investor of a [Contracting] Party, on behalf of an enterprise of another [Contracting] Party that is a juridical person that the investor owns or controls directly or indirectly, may submit to arbitration under this Section a claim that the other [Contracting] Party has breached an obligation under:

(a) Section A or Article 1503(2) (State Enterprises), or

(b) Article 1502(3)(a) (Monopolies and State Enterprises) where the monopoly has acted in a manner inconsistent with the [Contracting] Party's obligations under Section A, and that the enterprise has incurred loss or damage by reason of, or arising out of, that breach.

¶2. An investor may not make a claim on behalf of an enterprise described in paragraph 1 if more than three years have elapsed from the date on which the enterprise first acquired, or should have first acquired, knowledge of the alleged breach and knowledge that the enterprise has incurred loss or damage.

¶3. Where an investor makes a claim under this Article and the investor or a non-controlling investor in the enterprise makes a claim under Article 1116 arising out of the same events that gave rise to the claim under this Article, and two or more of the claims are submitted to arbitration under Article 1120, the claims should be heard together by a Tribunal established under Article 1126, unless the Tribunal finds that the interests of a disputing party would be prejudiced thereby.

¶4. An investment may not make a claim under this Section.

359. NAFTA Article 1118 is entitled “Settlement of a Claim through Consultation and Negotiation” and provides that “the disputing parties should first attempt to settle a claim through consultation or negotiation.”

360. NAFTA Article 1119 is entitled “Notice of Intent to Submit a Claim to Arbitration” and states as follows:

The disputing investor shall deliver to the disputing [Contracting] Party written notice of its intention to submit a claim to arbitration at least 90 days before the claim is submitted, which notice shall specify:

(a) the name and address of the disputing investor and, where a claim is made under Article 1117, the name and address of the enterprise;

(b) the provisions of this Agreement alleged to have been breached and any other relevant provisions;

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(c) the issues and the factual basis for the claim; and

(d) the relief sought and the approximate amount of damages claimed.

361. NAFTA Article 1120 provides, in part:

(1) Except as provided in Annex 1120.1, and provided that six months have elapsed since the events giving rise to a claim, a disputing investor may submit the claim to arbitration under:

(a) the ICSID Convention, provided that both the disputing [Contracting] Party and the [Contracting] Party of the investor are parties to the Convention;

[. . .]

(2) The applicable arbitration rules shall govern the arbitration except to the extent modified by this Section.

362. NAFTA Article 1121 states as follows, in relevant part:

(1) A disputing investor may submit a claim under Article 1116 to arbitration only if:

(a) the investor consents to arbitration in accordance with the procedures set out in this Agreement; and

(b) the investor and, where the claim is for loss or damage to an interest in an enterprise of another [Contracting] Party that is a juridical person that the investor owns or controls directly or indirectly, the enterprise, waive their right to initiate or continue before any administrative tribunal or court under the law of any [Contracting] Party, or other dispute settlement procedures, any proceedings with respect to the measure of the disputing [Contracting] Party that is alleged to be a breach referred to in Article 1116, except for proceedings for injunctive, declaratory or other extraordinary relief, not involving the payment of damages, before an administrative tribunal or court under the law of the disputing [Contracting] Party.

(2) A disputing investor may submit a claim under Article 1117 to arbitration only if both the investor and the enterprise:

(a) consent to arbitration in accordance with the procedures set out in this Agreement; and

(b) waive their right to initiate or continue before any administrative tribunal or court under the law of any [Contracting] Party, or other dispute settlement procedures, any proceedings with respect

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to the measure of the disputing [Contracting] Party that is alleged to be a breach referred to in Article 1117, except for proceedings for injunctive, declaratory or other extraordinary relief, not involving the payment of damages, before an administrative tribunal or court under the law of the disputing [Contracting] Party.

(3) A consent and waiver required by this Article shall be in writing, shall be delivered to the disputing Party and shall be included in the submission of a claim to arbitration.

[. . .]

363. NAFTA Article 1122 is entitled “Consent to Arbitration” and provides:

(1) Each [Contracting] Party consents to the submission of a claim to arbitration in accordance with the procedures set out in this Agreement.

(2) The consent given by paragraph 1 and the submission by a disputing investor of a claim to arbitration shall satisfy the requirement of:

(a) Chapter II of the ICSID Convention (Jurisdiction of the Centre) and the Additional Facility Rules for written consent of the parties;

[. . .]

364. NAFTA Article 1139 includes a number of definitions, including the following:

For purposes of this Chapter:

enterprise means an “enterprise” as defined in Article 201 (Definitions of General Application), and a branch of an enterprise;

enterprise of a [Contracting] Party means an enterprise constituted or organized under the law of a [Contracting] Party, and a branch located in the territory of a [Contracting] Party and carrying out business activities there.

[. . .]

investment means:

(a) an enterprise;

[. . .]

(e) an interest in an enterprise that entitles the owner to share in income or profits of the enterprise;

[. . .]

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(g) real estate or other property, tangible or intangible, acquired in the expectation or used for the purpose of economic benefit or other business purposes; and

(h) interests arising from the commitment of capital or other resources in the territory of a [Contracting] Party to economic activity in such territory, such as under (i) contracts involving the presence of an investor’s property in the territory of the [Contracting] Party, including [. . .] concessions [. . .].

investor of a [Contracting] Party means a [Contracting] Party or state enterprise thereof, or a national or an enterprise of such [Contracting] Party, that seeks to make, is making or has made an investment;

(emphasis in original)

365. NAFTA Article 1121 is entitled “Conditions Precedent to Submission of a Claim to Arbitration.” Article 1121(1) provides:

A disputing investor may submit a claim under Article 1116 to arbitration only if:

(a) the investor consents to arbitration in accordance with the procedures set out in this Agreement; and

(b) the investor and, where the claim is for loss or damage to an interest in an enterprise of another [Contracting] Party that is a juridical person that the investor owns or controls directly or indirectly, the enterprise, waive their right to initiate or continue before any administrative tribunal or court under the law of any [Contracting] Party, or other dispute settlement procedures, any proceedings with respect to the measure of the disputing [Contracting] Party that is alleged to be a breach referred to in Article 1116, except for proceedings for injunctive, declaratory or other extraordinary relief, not involving the payment of damages, before an administrative tribunal or court under the law of the disputing [Contracting] Party.

366. NAFTA Art 2103(1) states that “[e]xcept as set out in this Article, nothing in this Agreement shall apply to taxation measures.”

367. ICSID Convention Article 25 provides, in relevant part:

(1) The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that State) and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the

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Centre. When the parties have given their consent, no party may withdraw its consent unilaterally.

(2) “National of another Contracting State” means:

[. . .]

(b) any juridical person which had the nationality of a Contracting State other than the State party to the dispute on the date on which the parties consented to submit such dispute to conciliation or arbitration and any juridical person which had the nationality of the Contracting State party to the dispute on that date and which, because of foreign control, the parties have agreed should be treated as a national of another Contracting State for the purposes of this Convention.

[. . .]

368. ICSID Convention Article 41 further provides:

(1) The Tribunal shall be the judge of its own competence.

(2) Any objection by a party to the dispute that the dispute is not within the jurisdiction of the Centre, or for other reasons is not within the competence of the Tribunal, shall be considered by the Tribunal which shall determine whether to deal with it as a preliminary question or to join it to the merits of the dispute.

369. ICSID Convention Article 46 provides:

Except as the parties otherwise agree, the Tribunal shall, if requested by a party, determine any incidental or additional claims or counterclaims arising directly out of the subject-matter of the dispute provided that they are within the scope of the consent of the parties and are otherwise within the jurisdiction of the Centre.

370. The Protocol Replacing the North American Free Trade Agreement with the Agreement between the United States of America, the United Mexican Sates, and Canada (“Protocol Replacing NAFTA”) is relevant to the Tribunal’s jurisdiction over Claimant’s ancillary Claim and Respondent’s counterclaim. It concerns the relationship between NAFTA and the Agreement between the United States of America, the United Mexican States, and Canada (“USMCA”). The Protocol Replacing NAFTA provides, in Article 1, that:²³⁸

²³⁸ C-0313-ENG, Protocol Replacing the North American Free Trade Agreement with the Agreement Between the United States of America, the United Mexican States, and Canada, 30 November 2018 (“Protocol Replacing NAFTA”), Art. 1. ↩

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Upon entry into force of this Protocol, the USMCA, attached as an Annex to this Protocol, shall supersede the NAFTA, without prejudice to those provisions set forth in the USMCA that refer to provisions of the NAFTA.

371. Annex 14-C of the USMCA is entitled “Legacy Investment Claims and Pending Claims”, and provides, in paragraph 1:²³⁹

Each [Contracting] Party consents, with respect to a legacy investment, to the submission of a claim to arbitration in accordance with Section B of Chapter 11 (Investment) of NAFTA 1994 and this Annex alleging breach of an obligation under:

(a) Section A of Chapter 11 (Investment) of NAFTA 1994;

(b) Article 1503(2) (State Enterprises) of NAFTA 1994; and

(c) Article 1502(3)(a) (Monopolies and State Enterprises) of NAFTA 1994 where the monopoly has acted in a manner inconsistent with the Party’s obligations under Section A of Chapter 11 (Investment) of NAFTA 1994.²⁴⁰

372. Paragraph 2 of Annex 14-C of the USMCA provides that “[t]he consent under paragraph 1 and the submission of a claim to arbitration in accordance with Section B of Chapter 11 (Investment) of NAFTA 1994 and this Annex shall satisfy the requirements of,” inter alia, Chapter II of the ICSID Convention.²⁴¹

373. Paragraph 3 of Annex 14-C of the USMCA provides that “[a] [Contracting] Party’s consent under paragraph 1 shall expire three years after the termination of NAFTA 1994.”²⁴²

374. Paragraph 4 of Annex 14-C of the USMCA provides:²⁴³

²³⁹ C-0314-ENG, USMCA, Annex 14-C. ↩

²⁴⁰ Footnote 20 to Annex 14-C of the USMCA provides: “For greater certainty, the relevant provisions in Chapter 2 (General Definitions), Chapter 11 (Section A) (Investment), Chapter 14 (Financial Services), Chapter 15 (Competition Policy, Monopolies and State Enterprises), Chapter 17 (Intellectual Property), Chapter 21 (Exceptions) and Annexes I-VII (Reservations and Exceptions to Investment, Cross-Border Trade in Services and Financial Services Chapters) of NAFTA 1994 apply with respect to such a claim.” Footnote 21 to Annex 14-C of the USMCA provides: “Mexico and the United States do not consent under paragraph 1 with respect to an investor of the other Party that is eligible to submit claims to arbitration under paragraph 2 of Annex 14-E (Mexico-United States Investment Disputes Related to Covered Government Contracts).” C-0314-ENG, USMCA, Annex 14-C. ↩

²⁴¹ C-0314-ENG, USMCA, Annex 14-C, ¶ 2. ↩

²⁴² C-0314-ENG, USMCA, Annex 14-C, ¶ 3. ↩

²⁴³ C-0314-ENG, USMCA, Annex 14-C, ¶ 4. ↩

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For greater certainty, an arbitration initiated pursuant to the submission of a claim under paragraph 1 may proceed to its conclusion in accordance with Section B of Chapter 11 (Investment) of NAFTA 1994, the Tribunal’s jurisdiction with respect to such a claim is not affected by the expiration of consent referenced in paragraph 3, and Article 1136 (Finality and Enforcement of an Award) of NAFTA 1994 (excluding paragraph 5) applies with respect to any award made by the Tribunal.

375. Paragraph 5 of Annex 14-C of the USMCA states as follows:

For greater certainty, an arbitration initiated pursuant to the submission of a claim under Section B of Chapter 11 (Investment) of NAFTA 1994 while NAFTA 1994 is in force may proceed to its conclusion in accordance with Section B of Chapter 11 (Investment) of NAFTA 1994, the Tribunal’s jurisdiction with respect to such a claim is not affected by the termination of NAFTA 1994, and Article 1136 of NAFTA 1994 (excluding paragraph 5) applies with respect to any award made by the Tribunal.

376. Paragraph 6 of Annex 14-C of the USMCA states that for the purposes of Annex 14-C:

(a) “legacy investment” means an investment of an investor of another [Contracting] Party in the territory of the [Contracting] Party established or acquired between January 1, 1994 and the date of termination of NAFTA 1994, and in existence on the date of entry into force of this Agreement;

(b) “investment”, “investor”, and “Tribunal” have the meanings accorded in Chapter 11 (Investment) of NAFTA 1994; and

(c) “ICSID Convention”, “ICSID Additional Facility Rules”, “New York Convention”, and “Inter-American Convention” have the meanings accorded in Article 14.D.1 (Definitions).

B. RESPONDENT’ S POSITION

1. Jurisdiction Ratione Temporis

377. In relation to jurisdiction ratione temporis, Respondent argues that the Tribunal does not have jurisdiction to analyze claims based on events prior to December 2015, due to the three-year statute of limitations under NAFTA. Respondent relies, in this regard, on NAFTA Articles 1116(2) (claim by an investor on its own behalf) and 1117(2) (claim by an investor on behalf of an enterprise) (see ¶¶ 357 and 358 above).

378. According to Respondent, Claimant’s account of the facts goes back to 1986 and spends nearly forty pages on events prior to 2000. While Claimant states that these are merely contextual references, Respondent argues that the Tribunal must be careful to avoid

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relying on these facts to support Claimant’s claims.²⁴⁴ Specifically, Respondent asserts that any commitments made by the Mexican authorities with respect to the establishment of La Rosita and the port are not relevant to Claimant’s efforts to expand its operations at El Corchalito and La Adelita.²⁴⁵ In its Rejoinder, Respondent acknowledges Claimant’s confirmation that it is not asserting that any events prior to December 2015 constitute breaches of NAFTA.²⁴⁶

379. Respondent further submits that the requirement to submit claims to arbitration within three years is a question of jurisdiction, not admissibility.²⁴⁷ Respondent relies, in support, on the decisions of a number of treaty arbitration tribunals,²⁴⁸ including NAFTA tribunals,²⁴⁹ as well as the positions of the United States and Mexico in NAFTA Article 1128 submissions.²⁵⁰

2. Investor and Investment

380. Respondent asserts that the Tribunal has no jurisdiction with respect to investments made in the Bahamas and the United States. Insofar as Claimant describes the CALICA Network as including (i) three cargo vessels owned and operated by a Bahamian company, Vulica Shipping Company Ltd; (ii) US sales distribution yards located along the US Gulf Coast; and (iii) the sales and marketing operations of a US company Vulcan Construction Materials, Respondent argues that these are not investments in Mexico and

²⁴⁴ Counter-Memorial, ¶¶ 271, 273; see Memorial, ¶¶ 6-109. ↩

²⁴⁵ Counter-Memorial, ¶ 281. ↩

²⁴⁶ Rejoinder, ¶ 300. See Reply, ¶¶ 117, 120. ↩

²⁴⁷ Counter-Memorial, ¶¶ 275-276, citing RL-002-ENG, Merrill & Ring Forestry L.P. v. Government of Canada, Opinion of W. Michael Reisman with respect to the effect of NAFTA Article 1116(2), ¶ 16; Rejoinder, ¶ 301. ↩

²⁴⁸ Counter-Memorial, ¶ 277, citing RL-003-ENG, Rusoro Mining Limited v. The Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/12/5, Award, 22 August 2016 (Rusoro v. Venezuela, Award), ¶¶ 203-240, also citing RL-004-ESP, Corona Materials LLC v. Dominican Republic, ICSID Case No. ARB(AF)/14/3, Award, 31 May 2016 (“Corona Materials v. Dominican Republic, Award”), ¶¶ 57, 238. ↩

²⁴⁹ Counter-Memorial, ¶ 278, citing RL-005-ENG, Resolute Forest Products Inc. v. Government of Canada, PCA Case No. 2016-13, Decision on Jurisdiction and Admissibility, 30 January 2018 (“Resolute Forest Products v. Canada, Decision on Jurisdiction”), ¶¶ 83, 85. ↩

²⁵⁰ Counter-Memorial, ¶¶ 279-280, citing RL-006-ENG, Eli Lilly and Company v. Government of Canada, UNCITRAL, ICSID Case No. UNCT/14/2, Submission of United States of America, 18 March 2016, ¶ 83; RL-007-ENG, Eli Lilly and Company v. Government of Canada, UNCITRAL, ICSID Case No. UNCT/14/2, Submission of Mexico pursuant to NAFTA Article 1128, ¶¶ 6, 8. ↩

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any claim regarding the treatment of non-Mexican investments is beyond this Tribunal’s jurisdiction.²⁵¹

381. In this regard, Respondent argues that pursuant to NAFTA Article 1117(1), Claimant may only bring a claim on behalf of “an enterprise of another Party that is a juridical person that the investor owns or controls directly or indirectly.” In Respondent’s view, the CALICA Network is not an enterprise of another Party under that provision, but a concept used by Claimant.²⁵² Respondent relies on the definition of “enterprise” (NAFTA Article 201) and “enterprise of a Party” (NAFTA Article 1139) in support.²⁵³

382. For Respondent, this point is particularly important with respect to Claimant’s claim for damages, and will be discussed further at ¶¶ 1244 et seq below.²⁵⁴ In this respect, Respondent submits that Claimant asserts that losses suffered by the Bahamian entity are losses to the US entity, without regard for its distinct legal personality.²⁵⁵

3. Port Tariff Claim

383. Respondent submits that Claimant’s fair and equitable treatment (“FET”) claim with respect to port charges is inconsistent with NAFTA Article 2103(1) (see ¶ 366 above). In Respondent’s view, taxation measure is broadly defined to include any measure that “is part of the regime for the imposition of a tax”.²⁵⁶ Relying on the decision of the Feldman v. Mexico tribunal, Respondent submits that while NAFTA contains some exceptions to the exclusion of jurisdiction over tax matters, a claim under Article 1105 is not one of those exceptions.²⁵⁷

384. According to Respondent, under Mexican law, those who make use of national ports or terminals for public use outside an authorized port are obliged to pay the Mexican State the deep-sea port fee for each vessel in deep-sea or cabotage traffic that enters such ports.

²⁵¹ Counter-Memorial, ¶¶ 282-283. See Memorial, ¶ 24; Chodorow First Report, ¶ 45. See also Rejoinder, ¶¶ 302-304, 307. ↩

²⁵² Counter-Memorial, ¶ 284, citing NAFTA, Art. 1117(1). ↩

²⁵³ Counter-Memorial, ¶ 285, citing NAFTA, Arts. 201, 1139. ↩

²⁵⁴ Counter-Memorial, ¶ 287. ↩

²⁵⁵ Rejoinder, ¶ 305. See Reply, ¶ 122. ↩

²⁵⁶ Counter-Memorial, ¶ 289, citing NAFTA, Art. 2103(1); RL-005-ENG, Resolute Forest Products v. Canada, Decision on Jurisdiction, ¶ 326. ↩

²⁵⁷ Counter-Memorial, ¶¶ 289-290, citing RL-008-ESP, Marvin Feldman v. Mexico, ICSID Case No. ARB(AF)/99/1, Award, 9 December 2002, ¶ 109, n. 9. ↩

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Respondent argues that these harbor dues, like taxes, are considered contributions under the Federal Tax Code.²⁵⁸

385. Specifically, Respondent asserts that the Federal Tax Code precisely determines the elements of this tax, i.e., an active subject (the Mexican State); a passive subject (the individuals or legal entities that use the ports), a taxable event (the entry or arrival to any land or water area that comprises the port) and a rate and taxable base (set based on the gross tonnage units). In Respondent’s view, when the port or terminal is concessioned to an API the charge takes the form of a port tariff, which does not mean that it loses its character as a contribution under the Federal Tax Code.²⁵⁹

386. Respondent further contends that Claimant is aware of this situation, since on at least three occasions tax review appeals have been filed against the determinations issued in the proceedings that have analyzed the validity of API Quintana Roo’s 2007 concession and the official notices of 24 July 2007 and 2 July 2009.²⁶⁰

387. On the merits of the claim, Respondent asserts, inter alia, that (i) the Mexican Supreme Court decision of 25 January 2017 does not establish that CALICA is entitled to any reimbursement, or that API Quintana Roo must make such reimbursement;²⁶¹ (ii) the claim made for port fees is the very fees that CALICA agreed to waive collection rights under the 2014 Agreements;²⁶² (iii) the Mexican courts have rejected Claimant’s request for an order specifying that CALICA is the only one authorized to collect the port fee at Punta Venado;²⁶³ (iv) CALICA has no right to collect the port fee;²⁶⁴ (v) CALICA did not make the payment for which it is claiming reimbursement;²⁶⁵ (vi) CALICA relinquished the public use terminal and thus any rights derived from it;²⁶⁶ and (vii) the

²⁵⁸ Counter-Memorial, ¶ 289, citing R-0054-ESP, Federal Duties Law, Mexican Official Gazette, 31 December 1981 (“Federal Duties Law”), Arts. 200, 200-A, 201, 201-A; R-0061-ESP, Federal Tax Code, Mexican Official Gazette, Mexico City, D.F., 31 December 1981 (“Federal Tax Code”), Art. 2, s. IV. ↩

²⁵⁹ Rejoinder, ¶ 310, citing R-0061-ESP, Federal Tax Code; see Rejoinder, § II.E.2. ↩

²⁶⁰ Rejoinder, ¶ 311; see Rejoinder, § II.E.1. ↩

²⁶¹ Counter-Memorial, ¶ 365, citing C-0059-SPA, Supreme Court Decision, p. 47. See also Counter-Memorial, ¶ 374; Rejoinder, ¶ 348. ↩

²⁶² R-PHM, ¶ 115, citing 2021 Hearing Transcript (Spanish), Day 2, 355 ([Redacted] Testimony). ↩

²⁶³ Counter-Memorial, ¶¶ 372-373, citing R-0073-ESP, TFJFA, File 26098/07-17-10.2, Judgment, 5 June 2013, pp. 24-25. ↩

²⁶⁴ Counter-Memorial, ¶ 376; see Counter-Memorial, § II.G.3. ↩

²⁶⁵ Counter-Memorial, ¶ 376; see Counter-Memorial, § II.G.2. ↩

²⁶⁶ Counter-Memorial, ¶ 376; see Counter-Memorial, § II.G.7. ↩

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request for payment made by CALICA to API Quintana Roo through the judicial procedure called “voluntary jurisdiction” does not grant it any right.²⁶⁷

4. Ancillary Claim

388. Respondent submits that the Tribunal does not have jurisdiction to decide the ancillary claim as the events forming part of the ancillary claim first occurred in 2022. Since NAFTA ceased to be in force as of 1 July 2020, Respondent argues that it is not possible for it to be in breach of NAFTA.²⁶⁸ In its view, Respondent and the other parties to the USMCA did not consent to NAFTA claims being adjudicated based on measures subsequent to the entry into force of the USMCA.²⁶⁹

389. Respondent disagrees with Claimant’s assertion that the Tribunal has already ruled on Respondent’s jurisdictional objection in PO7.²⁷⁰ Respondent contends that, in light of the ancillary claim being filed late, and the Tribunal including two new rounds of submissions and a rehearing, Respondent timely raised its jurisdictional objections pursuant to Rule 41 of the ICSID Arbitration Rules.²⁷¹ According to Respondent, its argument that the ancillary claim is brought pursuant to an incorrect treaty has not been considered by the Tribunal and therefore the Tribunal cannot dismiss it for allegedly being resolved or untimely.²⁷²

390. Respondent contends that it is now bound by the provisions of USMCA, which replaced the NAFTA provisions, and is different in scope.²⁷³ Respondent relies on the following in support of its argument: (i) Annex 14-C of USMCA;²⁷⁴ (ii) Article 13 of the International Law Commission’s Articles on Responsibility of States for Internationally Wrongful Acts (“ILC Articles on State Responsibility”);²⁷⁵ (iii) Article 1 of the

²⁶⁷ Counter-Memorial, ¶ 376; see Counter-Memorial, § II.G.8; Rejoinder, ¶ 348. ↩

²⁶⁸ Counter-Memorial AC, ¶ 407. ↩

²⁶⁹ Counter-Memorial AC, ¶ 414. ↩

²⁷⁰ Rejoinder AC, ¶ 255. See Reply AC, ¶¶ 134-137. ↩

²⁷¹ Rejoinder AC, ¶ 256. ↩

²⁷² Rejoinder AC, ¶ 257. ↩

²⁷³ Counter-Memorial AC, ¶ 407. ↩

²⁷⁴ Counter-Memorial AC, ¶ 408, citing C-0314-ENG, Annex 14-C of USMCA. ↩

²⁷⁵ Counter-Memorial AC, ¶ 408, citing RL-0147-ESP, ILC’s Articles on Responsibility of States for Internationally Wrongful Acts, Art. 13. ↩

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Protocol Replacing NAFTA;²⁷⁶ (iv) VCLT Articles 31 and 32 ;²⁷⁷ and (v) the Commentary to the VCLT.²⁷⁸

391. Respondent further submits that the investment that is the subject of the ancillary claim is not part of a covered sector.²⁷⁹ Respondent argues that a claim for breach of the MST can only be brought against Respondent if the claim qualifies for filing under Annex 14-E of USMCA, including that the investment falls under the “covered sector” as defined in USMCA Annex 14-E(6)(b).²⁸⁰

392. Respondent further argues that Claimant’s investments in La Rosita and Punta Venado are not a protected “legacy investment” within the meaning of USMCA Annex 14-C, because they were established in 1986 under the 1986 Investment Agreement and were acquired through sales and purchases in 1986 and 1987, almost eight years before the entry into force of NAFTA on 1 January 1994.²⁸¹

393. As well as its jurisdictional objections, Respondent opposes Claimant’s ancillary claim on the merits, arguing that it did not act arbitrarily or unfairly, without good faith or in violation of Claimant’s alleged expectations.²⁸² Respondent argues that the actions of the Mexican government authorities were reasonable and justified.²⁸³ Respondent further submits that NAFTA requires deference to environmental laws, and relies on NAFTA Article 1114(1) which in its view is based on the deference customary international law accords to sovereign acts to protect the environment.²⁸⁴

²⁷⁶ Counter-Memorial AC, ¶ 408, citing RL-0148-ESP, Protocol Replacing the North American Free Trade Agreement with the Agreement between Canada, the United States of America, and the United Mexican States, Art. 1. ↩

²⁷⁷ Rejoinder AC, ¶¶ 259-260, citing R-0185-ESP, Vienna Convention on the Law of Treaties (“VCLT”), Arts. 31-32. ↩

²⁷⁸ Rejoinder AC, ¶ 261, citing RL-0201-ENG, Draft Articles on the Law of Treaties with Commentaries, Yearbook of the International Law Commission, 1966, vol. II, p. 219. ↩

²⁷⁹ Counter-Memorial AC, ¶ 411. ↩

²⁸⁰ Counter-Memorial AC, ¶ 410. While Respondent did not specify which treaty it is referring to when making reference to Annex 14-E, the Tribunal understands the Respondent to be referring to Annex 14-E of the USMCA. ↩

²⁸¹ R-PHM AC, ¶ 20. ↩

²⁸² Counter-Memorial AC, ¶ 417. ↩

²⁸³ Counter-Memorial AC, ¶ 415. ↩

²⁸⁴ Counter-Memorial AC, ¶¶ 420, 422, citing RL-0150-ENG, Meg Kinnear, Andrea Bjorklund & John Hannaford, Investment Disputes under NAFTA: An Annotated Guide to NAFTA Chapter 11 (Kluwer 2006), ¶¶ 1114-1119, citing CL-0019-ENG, Metalclad Corporation v. The United Mexican States, ICSID Case ↩

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5. Admissibility and Unclean Hands

394. Respondent submits that Claimant’s ancillary claim should be declared inadmissible pursuant to the principle of nemo auditur propriam turpitudinem allegans (or no one can be heard to invoke his own turpitude).²⁸⁵ Respondent argues that Claimant should not be allowed to bring a claim against it based on the omission of information and alleged violations that result from Claimant’s own actions.²⁸⁶

395. According to Respondent, CALICA omitted information and failed to comply with its environmental obligations as determined by PROFEPA’s inspection visits.²⁸⁷ Respondent argues that CALICA: (i) did not have a current and valid environmental impact authorization; (ii) did not have a CUSTF authorization pursuant to which it carried out removal of vegetation in compliance with environmental laws; (iii) exceeded the extraction limits it requested;²⁸⁸ and (iv) concealed the fact that it intended to quarry for many more decades and in greater quantity than disclosed to Respondent.²⁸⁹

396. Respondent contends that parties with “unclean hands” have no standing in the arbitration.²⁹⁰ Respondent draws parallels between the present case and the Al-Warraq v. Indonesia case, wherein the tribunal found that the claimant benefitted economically through conduct that was detrimental to public interest, making the claim inadmissible pursuant to the “unclean hands” doctrine.²⁹¹

397. Similarly, Respondent submits that Claimant’s ancillary claim should be declared inadmissible as it is primarily premised on the closure of La Rosita for environmental breaches.²⁹² Respondent argues that Claimant obtained an economic benefit to the

No. ARB(AF)/97/1, Award, 30 August 2000 (“Metalclad v. Mexico, Award”), ¶ 98, citing CL-0003-ENG, Campbell McLachlan, Laurence Shore & Matthew Weiniger, International Investment Arbitration: Substantive Principles (Oxford, 2007) [Excerpts], ¶ 7.24; Rejoinder AC, ¶ 313.

²⁸⁵ Counter-Memorial AC, § III(A). ↩

²⁸⁶ Counter-Memorial AC, ¶ 396, citing RL-0145-ENG, Khan Resources Inc., Khan Resources B.V. and CAUC Holding Company Ltd. v. The Government of Mongolia and MonAtom LLC, PCA Case No. 2011-09, 25 July 2012, Decision on Jurisdiction (“Khan Resources v. Mongolia, Decision on Jurisdiction”). ↩

²⁸⁷ Counter-Memorial AC, ¶ 398; see also Counter-Memorial AC, ¶ 396. ↩

²⁸⁸ Counter-Memorial AC, ¶ 398. ↩

²⁸⁹ Rejoinder AC, ¶ 289. ↩

²⁹⁰ Counter-Memorial AC, ¶ 394, citing RL-003-ENG, Rusoro v. Venezuela, Award, ¶ 492. ↩

²⁹¹ Counter-Memorial AC, ¶ 394, citing RL-0124-ENG, Hesham Talaat M. Al-Warraq v. Republic of Indonesia, UNCITRAL, Final Award, 15 December 2014 (“Al-Warraq v. Indonesia, Final Award”), ¶¶ 634-641, 646. ↩

²⁹² Counter-Memorial AC, ¶ 395; Rejoinder AC, ¶ 294. ↩

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detriment of the public interest, i.e., the environment, due to alleged environmental breaches in La Rosita.²⁹³ Respondent contrasts Claimant’s actions with those of the environmental authorities and contends that the latter based their actions in good faith in accordance with the Mexican legal framework.²⁹⁴

398. Respondent contends that NAFTA’s objective of strengthening the development and enforcement of environmental laws and regulations, as opposed to an abstract obligation, requires investors and persons trading under NAFTA to conduct their activities in accordance with environmental laws and regulations throughout their activities.²⁹⁵ Respondent argues that this is reaffirmed by NAFTA Article 1114.²⁹⁶

399. Respondent argues that, contrary to Claimant’s view, the “unclean hands” doctrine applies generally to illegalities arising throughout the life of the investment, and not only at the time of the establishment of the investment.²⁹⁷

400. In Respondent’s view, the principle of nemo auditur propriam turpitudinem allegans should also lead to the dismissal of Claimant’s ancillary claim on the merits, as PROFEPA legitimately imposed security measures as a result of Claimant’s illegal act.²⁹⁸

6. Counterclaim

401. Respondent submits that the Tribunal has jurisdiction over its counterclaim. In this regard, Respondent submits that the environmental violations by Claimant are directly and closely related to the claims presented in this arbitration, including the measures initially claimed and the measures included in the ancillary claim.²⁹⁹ Respondent relies on the Limited Liability v. Ukraine case, wherein it was held that whether a tribunal has

²⁹³ Counter-Memorial AC, ¶ 395; Rejoinder AC, ¶ 294. ↩

²⁹⁴ Counter-Memorial AC, ¶ 395. ↩

²⁹⁵ Rejoinder AC, ¶ 299. ↩

²⁹⁶ Rejoinder AC, ¶ 300. ↩

²⁹⁷ Rejoinder AC, ¶ 288, citing, inter alia, RL-0187-ENG, Niko Resources (Bangladesh) Ltd. v. People’s Republic of Bangladesh, Bangladesh Petroleum Exploration & Production Company Limited, and Bangladesh Oil Gas and Mineral Corporation, ICSID Case No. ARB/10/11 and ICSID Case No. ARB/10/18, Decision on Jurisdiction, 19 August 2013, ¶ 482; RL-0189-ENG, Espíritu Santo Holdings, LP, and L1bre Holding, LLC v. United Mexican States, ICSID Case No. ARB/20/13, Non-Disputing Party Submission of the Government of Canada pursuant to NAFTA Article 1128, 21 March 2023, ¶ 4. ↩

²⁹⁸ Counter-Memorial AC, ¶ 399. ↩

²⁹⁹ Counter-Memorial AC, ¶ 496, citing Reply AC, ¶¶ 129-131, citing Rejoinder AC, ¶¶ 94-95; Counterclaim Memorial on Jurisdiction, ¶ 145. ↩

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jurisdiction over a party’s counterclaim depends on: (i) the dispute settlement terms of the invoked treaty; (ii) the nature of the counterclaim; and (iii) the relationship between the counterclaim and the claims in the arbitration.³⁰⁰

(a) NAFTA

402. Respondent contends that, contrary to Claimant’s contention, NAFTA and the applicable arbitration rules grant jurisdiction to the Tribunal to hear Respondent’s counterclaim.³⁰¹

403. In Respondent’s view, the counterclaim is within the limits of the consent of the Parties.³⁰² Respondent contends that NAFTA Articles 1121 and 1122 establish the conditions of its consent to arbitrate a claim, and within those conditions both the respondent party and the disputing investor consent to submit their claim to arbitration in accordance with the procedures set forth in the NAFTA.³⁰³

404. Respondent asserts that NAFTA Article 1120 contemplates the possibility for a disputing investor to submit its claim to arbitration under the arbitration rules listed, which in this case is the ICSID Convention and its arbitration rules.³⁰⁴ Respondent further argues that NAFTA Article 1120 states that the rules applicable to the arbitration procedure shall be followed, except to the extent modified by NAFTA.³⁰⁵ For Respondent, NAFTA does not contain any provision prohibiting the filing of a counterclaim under the ICSID Convention and its arbitration rules. It only limits the circumstances in which a party may file a counterclaim under NAFTA Article 1137(3).³⁰⁶

³⁰⁰ Counter-Memorial AC, ¶ 495, citing RL-0166-ENG, Limited Liability Company Amto v. Ukraine, SCC Case No. 080/2005, Final Award, 26 March 2008 (“Limited Liability v. Ukraine, Final Award”), ¶ 118, citing, inter alia, CL-0197-ENG, Iberdrola Energia S.A. (Spain) v. The Republic of Guatemala, UNCITRAL, PCA Case No. 2017/41, Final Award, 24 August 2020 (“Iberdrola v. Guatemala (II), Final Award”), ¶ 384; Counterclaim Memorial on Jurisdiction, ¶¶ 142-143, citing RL-0208-ENG, Oxus Gold v. The Republic of Uzbekistan, UNCITRAL, Final Award, 17 December 2015, ¶ 939. See Reply AC, ¶ 237. ↩

³⁰¹ Counter-Memorial AC, ¶ 497; Counterclaim Memorial on Jurisdiction, ¶ 146. See Reply AC, ¶ 259. See also Counterclaim Memorial on Jurisdiction, ¶¶ 166-167. ↩

³⁰² Counterclaim Memorial on Jurisdiction, § III.A.2.a. ↩

³⁰³ Counterclaim Memorial on Jurisdiction, ¶¶ 176, 190, citing C-0008-ENG, Legacy Vulcan, LLC’s and Calizas Industriales del Carmen, S.A. de C.V.’s executed instrument of consent and waiver pursuant to NAFTA Article 1121 (“Consent and Waiver pursuant to NAFTA Art. 1121”, p. 5. ↩

³⁰⁴ Counterclaim Memorial on Jurisdiction, ¶ 177. ↩

³⁰⁵ Counterclaim Memorial on Jurisdiction, ¶ 177. ↩

³⁰⁶ Counterclaim Memorial on Jurisdiction, ¶ 177. ↩

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405. By reference to NAFTA Article 1137(3), Respondent acknowledges that it is excluded from arguing as a counterclaim that Claimant will receive indemnification or other compensation for the alleged damages.³⁰⁷ This exclusion would make no sense, in Respondent’s view, unless a counterclaim is permitted in other circumstances.³⁰⁸

406. Respondent submits that its counterclaim is based on Claimant’s breaches of environmental legislation and on the environmental damages caused by said breaches, and therefore the described prohibition in NAFTA Article 1137(3) is not applicable.³⁰⁹

407. For Respondent, explicit authorization of counterclaims would be unnecessary and express language would be necessary to exclude counterclaims.³¹⁰ Respondent submits that a restrictive wording of the acceptance of the offer to arbitrate, embodied in a specific treaty, should not exclude a State’s counterclaim as an investment treaty is not an “à la carte selection” of provisions from which the investor can choose.³¹¹

408. Respondent relies on the Aven v. Costa Rica Award, wherein the tribunal analyzed Article 10.20(7) of the United States-Central America-Dominican Republic Free Trade Agreement, which Respondent argues is identical to NAFTA Article 1137(7), and held that “el derecho de la Demandada a una reconvención de conformidad con el Tratado se contempla y se encuentra dentro del alcance de la jurisdicción de un tribunal constituido en virtud del Tratado”³¹².

³⁰⁷ Counter-Memorial AC, ¶¶ 500-501; Counterclaim Memorial on Jurisdiction, ¶¶ 150-154, citing R-0186-ESP, Diccionario de la Real Academia Española, “Aducir”; R-0235-ENG, Cambridge Dictionary, “Assert”; R-0187-ESP, Diccionario de la Real Academia Española, “Reconvención”. ↩

³⁰⁸ Counter-Memorial AC, ¶ 502, citing RL-0167-ENG, A. Bjorklund, The Role of Counterclaims in Rebalancing Investment Law. ↩

³⁰⁹ Counterclaim Memorial on Jurisdiction, ¶¶ 154-157, citing RL-0210-ESP, United States - Guidelines for Reformulated and Conventional Gasoline, Report of the Appellate Body, p. 27, citing RL-0231-ENG, PNG Sustainable Development Program Ltd. v. Independent State of Papua New Guinea, ICSID Case No. ARB/13/33, Award, 5 May 2015, ¶ 267. ↩

³¹⁰ Counterclaim Memorial on Jurisdiction, ¶¶ 161-162, citing RL-0212-ENG, The Islamic Republic of Iran v. United States of America, Case ITL 83-B1-FT, Interlocutory Award, 9 September 2004 (“Iran v. United States, Award”) (Counterclaim), ¶ 87. See also Counterclaim Memorial on Jurisdiction, ¶¶ 162-163, citing RL-0212-ENG, Iran v. United States, Interlocutory Award (Counterclaim), ¶ 87; Counterclaim Memorial on Jurisdiction, ¶ 164. ↩

³¹¹ Counterclaim Memorial on Jurisdiction, ¶ 188. ↩

³¹² Counter-Memorial AC, ¶¶ 504-505, citing RL-0168-ESP, David Aven et al. v. The Republic of Costa Rica, ICSID Case No. UNCT/15/3, Final Award, 18 September 2018 (“Aven v. Costa Rica, Final Award”), ¶ 694; Counterclaim Memorial on Jurisdiction, ¶ 165. ↩

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409. Respondent submits that Claimant consented to the possibility of Respondent filing a counterclaim under “the procedures set forth [in NAFTA Article 1137(3)]” in light of its Notice of Intent (“Notice of Intent”), which states:³¹³

Legacy Vulcan and Calica hereby consent to submit to ICSID arbitration, pursuant to NAFTA Article 1121, the disputes described herein and any other disputes that have arisen or may arise in the future between the parties.

410. Respondent further argues that the procedural requirements for the filing of the application for counterclaim are satisfied through its application in the Counter-Memorial on ancillary claim and the factual and legal grounds on which the application is based.³¹⁴ In Respondent’s view, this is consistent with the Tribunal’s directions in PO7, wherein Claimant did not comply with the requirement to exhaust the consultation period and its ancillary claim was admitted.³¹⁵

(b) The ICSID Convention and ICSID Arbitration Rules

411. Respondent submits that the ICSID Convention grants jurisdiction to the Tribunal to hear the counterclaim.³¹⁶ Respondent argues that ICSID Convention Article 46 establishes the possibility for a tribunal, at the request of one of the parties, to rule on a counterclaim filed by a respondent State.³¹⁷ Respondent further relies on Rule 40 of the ICSID Arbitration Rules.³¹⁸

412. Respondent argues that the history of the ICSID Convention shows that the intention of Article 46, a mandatory provision, was to determine that the tribunal hearing a claim would be obliged to exercise jurisdiction over a counterclaim in order to avoid the need

³¹³ Counterclaim Memorial on Jurisdiction, ¶ 171, citing C-0007-SPA, Notice of Intent to Submit a Claim to Arbitration under NAFTA Chapter 11, dated 3 September 2018 (“Notice of Intent”), p. 9, also citing Request for Arbitration, ¶ 12. ↩

³¹⁴ Counter-Memorial AC, ¶ 518. ↩

³¹⁵ Counter-Memorial AC, ¶ 518. ↩

³¹⁶ Counter-Memorial AC, ¶ 506; Counterclaim Memorial on Jurisdiction, ¶ 173. ↩

³¹⁷ Counter-Memorial AC, ¶ 506, citing, inter alia, RL-0169-ENG, C. Schreuer, L. Malintoppi, A. Reinisch, and A. Sinclair, The ICSID Convention: A Commentary (Cambridge University Press 2009), pp. 641, 732, 751-752, citing C-0129-ENG, ICSID Convention, Article 46; Counterclaim Memorial on Jurisdiction, ¶¶ 174, 178. ↩

³¹⁸ Counter-Memorial AC, ¶ 507, citing ICSID Arbitration Rules (2006), Rule 40; Counterclaim Memorial on Jurisdiction, ¶¶ 174, 178. ↩

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to compose another tribunal to decide an issue directly related to the claim submitted to the arbitration.³¹⁹

413. Respondent contends that for a tribunal to adjudicate such a counterclaim under the ICSID Convention and the applicable rules: (i) the counterclaim must be within ICSID’s jurisdiction; and (ii) there must be a connection between the claims and counterclaims.³²⁰ Respondent submits that its counterclaim meets these conditions.³²¹

414. Respondent argues that the counterclaim is within the jurisdiction of ICSID as Claimant consented to the jurisdiction of the Centre in its Notice of Intent and Article 25 of the ICSID Convention states that the consent given by the parties may not be unilaterally withdrawn.³²²

415. Respondent argues, relying on the opinion of Professor Michael Reisman, that when the signatory parties to the applicable treaty, among other things, consent to ICSID jurisdiction, the consent component of ICSID Convention Article 46 imports itself into any ICSID arbitration that the investor chooses to pursue.³²³ Respondent contends that Professor Reisman’s opinion has been replicated by arbitral tribunals which have upheld their jurisdiction over counterclaims under the ICSID Convention without the need for the investor’s express consent to arbitrate such counterclaims.³²⁴ Respondent argues that such consent may be inferred from Claimant’s conduct in initiating the arbitration under

³¹⁹ Counterclaim Memorial on Jurisdiction, ¶ 193, citing RL-0220-ENG, Executive Directors of the International Bank for Reconstruction and Development, Report of the Executive Directors on the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, ¶ 13, citing RL-0221-ENG, History of ICSID Convention, ICSID, Vol. II-2, pp. 810-811. ↩

³²⁰ Counter-Memorial AC, ¶ 508, citing RL-0171-ENG, Metal-Tech Ltd. v. The Republic of Uzbekistan, ICSID Case No. ARB/10/3 Award, 4 October 2013 (“Metal-Tech v. Uzbekistan, Award”), ¶ 407. ↩

³²¹ Counter-Memorial AC, ¶ 508. ↩

³²² Counter-Memorial AC, ¶¶ 509-510; see Notice of Intent, p. 9; see also Request for Arbitration, ¶ 12; Counterclaim Memorial on Jurisdiction, ¶¶ 194-196; see also Counterclaim Memorial on Jurisdiction, ¶ 189, citing C-0007-SPA, Notice of Intent. ↩

³²³ Counterclaim Memorial on Jurisdiction, ¶ 179, citing RL-0215-ENG, Spyridon Roussalis v. Romania, ICSID Case No. ARB/06/1, Declaration of Prof. W. Michael Reisman, 28 November 2011, (“Roussalis v. Romania, Declaration of Prof. W. Michael Reisman”). ↩

³²⁴ Counterclaim Memorial on Jurisdiction, ¶¶ 180-187, citing, inter alia, RL-0216-ENG, Martin Jarrett, Sergio Puig and Steven Ratner, Towards Greater Investor Accountability: Indirect Actions, Direct Actions by States and Direct Actions by Individuals, Journal of International Dispute Settlement, p. 4, citing RL-0214-FR, Antoine Goetz & Others v. Republic of Burundi, ICSID Case No. ARB/01/2, Award, 21 June 2012, ¶¶ 279-280. ↩

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the permissive procedural rules of the ICSID Convention which contemplates the possibility of counterclaims.³²⁵

(c) Existence of Environmental Obligations under NAFTA

416. Respondent submits that NAFTA grants jurisdiction to hear claims from a State for environmental violations in the form of a counterclaim.³²⁶ In its view, obligations for the investor may be inferred from NAFTA Article 1114, with respect to the environmental legislation of the host State.³²⁷ Respondent relies, inter alia, on Aven v. Costa Rica, wherein, Respondent argues, the tribunal analyzed a provision similar to NAFTA Article 1114(2) and determined that: (i) the measures adopted by the host State for the protection of the environment should be considered binding on all those under the State’s jurisdiction, particularly foreign investors; and (ii) investors have an obligation not only under domestic law, but also the treaty.³²⁸

417. Respondent contends that the counterclaim is based on environmental devastation caused by Claimant with respect to non-renewable natural resources.³²⁹ Respondent relies on the decisions in Perenco v. Ecuador and Burlington v. Ecuador, wherein the tribunals decided the counterclaims and awarded costs to the State for the environmental damage caused.³³⁰

(d) Connection Between the Claim and the Counterclaim

418. Respondent further submits that there is a connection between the counterclaim and Claimant’s claims.³³¹ Respondent relies on ¶ 130 of PO7 where the Tribunal noted that Claimant’s Project encompassed four lots when establishing its jurisdiction over

³²⁵ Counterclaim Memorial on Jurisdiction, ¶ 187. ↩

³²⁶ Counter-Memorial AC, § IV(A)(2). ↩

³²⁷ Counter-Memorial AC, ¶¶ 512, 516, citing RL-0168-ESP, Aven v. Costa Rica, Final Award, ¶¶ 732, 738. ↩

³²⁸ Counter-Memorial AC, ¶ 513, citing RL-0168-ESP, Aven v. Costa Rica, Final Award, ¶ 734. See also Counter-Memorial AC, ¶ 516, citing RL-0174-ESP, Urbaser S.A. and Consorcio de Aguas Bilbao Biskaia, Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic, ICSID Case No. ARB/07/26, Award, 8 December 2016 (“Urbaser v. Argentina, Award), ¶¶ 1183, 1194-1195, 1200, 1207, 1210. ↩

³²⁹ Counter-Memorial AC, ¶ 515. ↩

³³⁰ Counter-Memorial AC, ¶ 515, citing CL-0102-ENG, Perenco Ecuador Limited v. The Republic of Ecuador, ICSID Case No. ARB/08/6, Award, 27 September 2019 (“Perenco v. Ecuador, Award”), ¶¶ 34, 889, 899, 1023; RL-0173-ESP, Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5, Decision on Counterclaims, 7 February 2017, ¶¶ 52, 104, 112, 878-879, 1075. ↩

³³¹ Counter-Memorial AC, § IV(A)(1)(b)(2); see also Counter-Memorial AC, ¶ 518; Counterclaim Memorial on Jurisdiction, ¶ 239. ↩

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Claimant’s ancillary claim.³³² Respondent argues that the counterclaim relates precisely to environmental damage generated by the development and implementation of the Project in the four lots identified by the Tribunal.³³³

419. Respondent contends that Claimant’s breaches of environmental legislation and environmental authorizations relate to the alleged effects of CALICA’s rock quarrying Project that are the subject of Claimant’s original claims.³³⁴

420. Respondent further contends that Claimant’s initial claim is based on the alleged right to mine at La Adelita and El Corchalito, pursuant to the Federal EIA and Investment Agreement, and the ancillary claim is based on the alleged indefinite authorization to mine La Rosita, while the counterclaim is based on the alleged non-compliance or non-existence of the environmental impact authorizations and other missing permits Claimant allegedly should have obtained for its Project.³³⁵ Accordingly, Respondent argues that all claims are based on the same facts, and both claims and counterclaim are based on NAFTA, with reference to the analysis of Mexican environmental law.³³⁶

421. Respondent submits that the harm caused by Claimant is indivisible, as noted by the Tribunal in PO7 in relation to the ancillary claim.³³⁷ Respondent argues that for the same reason that it is not possible to separate Claimant’s original claims from the ancillary claim, it is also not feasible to separate the environmental damage caused by Claimant, given that the alleged environmental damage is not related to the geographical division of Claimant’s properties, but derives directly from Claimant’s Project such that it goes beyond Claimant’s properties.³³⁸ Respondent contends that it makes no difference whether the counterclaim is related to the Project or measures complained of in the ancillary claim, as the link exists in both cases.³³⁹

³³² Counter-Memorial AC, ¶ 511; Counterclaim Memorial on Jurisdiction, ¶ 196. ↩

³³³ Counter-Memorial AC, ¶ 511; Counterclaim Memorial on Jurisdiction, ¶ 196. ↩

³³⁴ Counterclaim Memorial on Jurisdiction, ¶ 240. ↩

³³⁵ Counterclaim Memorial on Jurisdiction, ¶ 241. ↩

³³⁶ Counterclaim Memorial on Jurisdiction, ¶ 241. ↩

³³⁷ Counterclaim Memorial on Jurisdiction, ¶ 242, citing PO7, ¶¶ 137-138. ↩

³³⁸ Counterclaim Memorial on Jurisdiction, ¶ 243. See also Counter-Memorial AC, ¶ 518. ↩

³³⁹ Counterclaim Memorial on Jurisdiction, ¶ 243. See Reply AC, ¶¶ 275-277. ↩

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(e) Timeliness

422. Respondent submits that, contrary to Claimant’s contention, the request to file the counterclaim was in line with the applicable arbitration rules and with the Tribunal’s reasoning in PO7.³⁴⁰

423. Respondent argues that, in accordance with PO7, it requested to file its counterclaim in the Counter-Memorial to Ancillary Claim.³⁴¹ Respondent contends that pursuant to ICSID Arbitration Rule 40 and PO7, it was logical to expect that Respondent should have requested to file its counterclaim no later than in its Counter-Memorial, as it did.³⁴² In any event, Respondent relies on ICSID Arbitration Rule 40 to argue that just as the ancillary claim was authorized by this rule, its counterclaim is also authorized by this rule.³⁴³

424. Respondent further argues that a party’s right cannot be undermined solely because there is an agreed procedural schedule.³⁴⁴

(f) Procedural Efficiency and Fairness

425. Respondent submits that the counterclaim ensures procedural efficiency as the counterclaim and Claimant’s claims are connected.³⁴⁵ For Respondent, the claims and counterclaims should be heard by the same tribunal in order to avoid inconsistent or contradictory decisions.³⁴⁶ Respondent argues that the considerations afforded to the ancillary claim in PO7 should apply to the counterclaim as well, on grounds of fairness.³⁴⁷

³⁴⁰ Counterclaim Memorial on Jurisdiction, ¶¶ 198-199, citing PO7, ¶ 153. ↩

³⁴¹ Counterclaim Memorial on Jurisdiction, ¶ 202. ↩

³⁴² Counterclaim Memorial on Jurisdiction, ¶ 203. ↩

³⁴³ Counterclaim Memorial on Jurisdiction, ¶ 204, citing ICSID Arbitration Rule 40; see also Counterclaim Memorial on Jurisdiction, ¶ 200. ↩

³⁴⁴ Counterclaim Memorial on Jurisdiction, ¶ 205. ↩

³⁴⁵ Counterclaim Memorial on Jurisdiction, ¶ 207. ↩

³⁴⁶ Counter-Memorial AC, ¶ 518, citing, inter alia, RL-0175-ENG, Klöckner Industrie-Anlagen GmbH and Others v. United Republic of Cameroon and Société Camerounaise des Engrais, ICSID Case No. ARB/81/2, Excerpts of Award, 21 October 1983, ¶ 25. ↩

³⁴⁷ Counterclaim Memorial on Jurisdiction, ¶¶ 208-210, citing Request for Provisional Measures and for Leave to File a Subordinate Claim, ¶ 50, citing PO7, ¶ 146, citing RL-0215-ENG, Roussalis v. Romania, Declaration of Prof. W. Michael Reisman; RL-0223-ENG, Westinghouse Electric Corporation v. The Islamic Republic of Iran, The Islamic Republic of Iran Air Force, Iran Air, National Iranian Oil Company, Interlocutory Award No. ITL 67-389-2, 12 February 1987 “Westinghouse v. Iran and Others, Interlocutory Award”), ¶ 1. ↩

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Respondent contends that accepting its counterclaim would not affect Claimant, while dismissing it would affect Respondent’s procedural rights.³⁴⁸

426. Respondent contends that contrary to Claimant’s contention of a due process violation, the purpose of a counterclaim serves both as an independent claim for liability and damages, as well as a tool (incidentally) focused on the dismissal or set-off of the investor’s legal action and is a fundamental element of the respondent State’s right to present its case on an equal footing with the investor. In Respondent’s view, it is therefore to be treated as a general principle of law that rests on reasons of fairness.³⁴⁹ Respondent argues that the right of a State to present a counterclaim allows the investor’s failure to comply with its obligations to be sanctioned and held accountable.³⁵⁰

C. CLAIMANT’S POSITION

1. Jurisdiction ratione temporis

427. Claimant contends that its claims were brought within the three-year limitation period under NAFTA Articles 1116(2) and 1117(2). According to Claimant, the relevant breaches and losses it claims stem from (i) Respondent’s failure to amend the POEL 2009 by 5 December 2015, as required by the 2014 Agreements; (ii) Respondent’s disregard of its judiciary’s determination, made final in January 2017, that API Quintana Roo had no right to collect port fees from CALICA for over a decade; and (iii) Respondent’s shutdown of CALICA’s operations in El Corchalito in January 2018.³⁵¹

428. Since Claimant brought its claims to arbitration on 3 December 2018, it argues that they are timely and that Respondent does not refute this.³⁵² In Claimant’s view, the Tribunal

³⁴⁸ Counterclaim Memorial on Jurisdiction, ¶ 245. See Reply AC, ¶ 279. ↩

³⁴⁹ Counterclaim Memorial on Jurisdiction, ¶ 211, citing RL-0222-ENG, Crina Baltag and Ylli Dautaj, Regime Interaction in Investment Arbitration: Counterclaims, Kluwer Arbitration Blog, citing RL-0223-ENG, Westinghouse v. Iran and Others, Interlocutory Award, ¶ 1. ↩

³⁵⁰ Counterclaim Memorial on Jurisdiction, ¶ 211, citing RL-0216-ENG, Martin Jarrett, Sergio Puig and Steven Ratner, Towards Greater Investor Accountability: Indirect Actions, Direct Actions by States and Direct Actions by Individuals, pp. 4, 17. ↩

³⁵¹ Reply, ¶ 117. See Memorial, ¶¶ 184-185. ↩

³⁵² Reply, ¶¶ 117-118. ↩

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is not jurisdictionally constrained from considering background facts relevant to the dispute, as has been recognized by multiple arbitral tribunals.³⁵³

429. For Claimant, it is an academic question whether the timing requirement of NAFTA Articles 1116(2) and 1117(2) is an issue of admissibility or jurisdiction.³⁵⁴

2. Investor and Investment

430. Claimant files its investment claims on its own behalf under NAFTA Article 1116(1) and on behalf of its enterprise, CALICA, under NAFTA Article 1117(1).³⁵⁵ According to Claimant, CALICA is (i) an entity constituted and organized under the laws of Mexico; and (ii) indirectly owned and controlled by Legacy Vulcan. Claimant argues that CALICA is therefore both an enterprise and an investment of Claimant in Mexico under NAFTA Articles 201 and 1139.³⁵⁶

431. Claimant further argues that its investments in Mexico satisfy the definition of investment in NAFTA Chapter 11 (see ¶ 364 above). In addition to CALICA, an “enterprise” under NAFTA that is indirectly owned and controlled by Claimant, Claimant asserts that it indirectly (i) owns and controls real estate in Mexico, including the Punta Venado port area and the limestone reserves in La Rosita, El Corchalito, and La Adelita, acquired for the sole purpose of developing the Project; and (ii) holds the CALICA Port Concession. Claimant further submits that it has committed capital in Mexico in connection with the Project, including hundreds of millions of dollars to produce and export aggregates.³⁵⁷

432. Claimant agrees with Respondent that only investments located in Mexico qualify for protection under NAFTA.³⁵⁸ However, according to Claimant, Respondent conflates

³⁵³ Reply, ¶ 118, citing, CL-0009-ENG, William Ralph Clayton, William Richard Clayton, Douglas Clayton, Daniel Clayton and Bilcon of Delaware, Inc. v. Government of Canada, UNCITRAL, PCA Case No. 2009-04, Award on Jurisdiction and Liability, 17 March 2015 (“Bilcon v. Canada, Award”), ¶ 282; CL-0011-ENG, Mondev International Ltd. v. United States of America, ICSID Case No. ARB(AF)/99/2, Award, 11 October 2002 (“Mondev v. United States, Award”), ¶ 70, also citing RL-003-ENG, Rusoro v. Venezuela, Award, ¶ 223. ↩

³⁵⁴ Reply, ¶ 118. ↩

³⁵⁵ Memorial, ¶ 20; C-PHM, ¶ 13, citing 2021 Hearing Transcript (English), Day 1, 77:1-12 (Claimant’s Opening Statement); C-0009-ENG, NAFTA, Art. 1116(1). ↩

³⁵⁶ Memorial, ¶ 20. ↩

³⁵⁷ Memorial, ¶ 165; see Memorial ¶¶ 4, 20, 23-29, 28-38. ↩

³⁵⁸ C-PHM, ¶ 15, citing 2021 Hearing Transcript (English), Day 1, 120:22-121:11 (Claimant’s Opening Statement). ↩

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jurisdictional requirements with the causation requirement for compensation. Claimant argues that it has not submitted any claim on behalf of the CALICA Network under NAFTA Article 1117(1), but only the Mexican enterprise CALICA.³⁵⁹ In this respect, Claimant submits that the value of its integrated quarrying, shipping, and distribution business, i.e., the CALICA Network, has substantially decreased as a direct result of Respondent’s breaches. The fact that some elements of this network are located outside of Mexico does not, in Claimant’s view, deprive the Tribunal of jurisdiction over Claimant’s claim or preclude consideration of claimed loss or damage that was proximately caused to Claimant by Respondent’s breaches.³⁶⁰

3. Port Tariff Claim

433. Claimant contends that the port fees at issue in its port fee claim do not qualify as a tax under Mexican law and are therefore not an excluded “taxation measure” under NAFTA Article 2103.³⁶¹ Claimant submits, in this respect, that the port fees it claims (tarifas portuarias) are not taxes, as confirmed by Respondent’s witness Mr. Atempa. These are distinct from port duties (derechos de puerto), which Claimant has not claimed.³⁶²

434. Claimant submits, in this respect, that the Mexican Ports Law (Ley de Puertos) provides that port fees (tarifas portuarias) are amounts that port concessionaires such as CALICA may charge a third party for using their infrastructure or for related services. Port duties (derechos de puerto), on the other hand, are levies paid to the Mexican government for the use of public assets, including public ports.³⁶³

435. Claimant rebuts Respondent’s argument that CALICA’s terminal is concessioned to an API so the sums API Quintana Roo charged are fiscal contributions. Claimant submits, in this respect, that (i) CALICA is the sole concessionaire of the Punta Venado infrastructure so its terminal is not concessioned to an API; and as such (ii) the port fees arose from vessels docking at CALICA’s private port terminal.³⁶⁴

³⁵⁹ Reply, ¶ 122; C-PHM, ¶ 15. See Memorial, ¶¶ 20, 172; Request, ¶ 12. ↩

³⁶⁰ Reply, ¶ 123, citing C-0009-ENG, NAFTA, Art. 1116(1); see Memorial, ¶ 337; C-PHM, ¶ 18. ↩

³⁶¹ Reply, ¶ 124. See Counter-Memorial, ¶¶ 289-290, citing C-0156-ENG, NAFTA, Article 2013(1). ↩

³⁶² Reply, ¶ 125, citing Atempa Statement, ¶¶ 9, 13, 17. See Memorial, ¶¶ 66, 225; Counter-Memorial, ¶¶ 289-290. See also C-PHM, ¶ 28. ↩

³⁶³ C-PHM, ¶ 28. See Reply, ¶ 112, citing C-0155-SPA, Mexican Ports Law, Art. 40, Section X. ↩

³⁶⁴ C-PHM, ¶ 29, citing Rejoinder, ¶ 423; Atempa Statement, ¶ 17; see Rejoinder, ¶ 281. ↩

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4. Proceedings in Mexican Courts

436. In Claimant’s view, CALICA’s domestic litigation proceedings in Mexico are permitted by NAFTA Article 1121 (see ¶ 365 above) and do not impact the Tribunal’s ability to award compensation.³⁶⁵

437. According to Claimant, CALICA is not seeking compensatory but only declaratory relief in domestic proceedings. In this respect, Claimant asserts that CALICA commenced five legal actions challenging measures adopted by PROFEPA and SEMARNAT following the administrative proceeding before the agencies concerning El Corchalito. Of those five, two actions remained pending at the time of the post-hearing submissions on the original claims: (i) the annulment proceeding against the October 2020 Resolution, i.e., PROFEPA’s administrative resolution dated 30 October 2020; and (ii) the amparo proceeding against SEMARNAT’s decision to suspend its consideration of CALICA’s application to renew and amend the Federal EIA.³⁶⁶

438. Claimant argues that (i) multiple NAFTA tribunals have held that pending domestic proceedings seeking declaratory relief do not prevent a tribunal from determining liability for treaty claims premised on the same adverse measures;³⁶⁷ and (ii) the existence of pending domestic proceedings does not affect the Tribunal’s ability to award compensation regarding the El Corchalito dispute.³⁶⁸ Claimant relies, in support, on its undertaking to prevent double recovery which was referred to by the tribunal in Chevron v. Ecuador as removing the danger of duplicative recovery.³⁶⁹

439. Claimant further contends that there is no requirement to pursue domestic remedies before making an FET claim under NAFTA (unlike a denial of justice claim based on judicial conduct). Insofar as Claimant’s claims relate to administrative actions or inaction, it submits that such proceedings should be tested against the standards of due process and

³⁶⁵ C-PHM, ¶ 20. ↩

³⁶⁶ C-PHM, ¶ 21, citing RD-0003, Table I: CALICA’s Challenges against PROFEPA and SEMARNAT Measures; 2021 Hearing Transcript (English), Day 1, 74:9-75:13, 75:22-76:13 (Claimant’s Opening Statement). ↩

³⁶⁷ C-PHM, ¶ 23, citing, inter alia, CL-0168-ENG, Detroit International Bridge Company v. Government of Canada, PCA Case No. 2012-25, Award on Jurisdiction, 2 April 2015, ¶ 176. ↩

³⁶⁸ C-PHM, ¶ 23, citing RL-093-ENG, Chevron Corporation (USA) and Texaco Petroleum Company (USA) v. The Republic of Ecuador I, PCA Case No. 2007-02/AA277, Partial Award on the Merits, 30 March 2010 (“Chevron v. Ecuador I, Partial Award on the Merits”), ¶ 557. ↩

³⁶⁹ C-PHM, ¶ 23, citing RL-093-ENG, Chevron v. Ecuador I, Partial Award on the Merits, ¶¶ 517, 557. ↩

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procedural fairness applicable to administrative officials, as held by the Thunderbird v. Mexico tribunal.³⁷⁰

5. Ancillary Claim

440. Claimant’s ancillary claim with respect to La Rosita and CALICA’s remaining operations is that Respondent has breached its obligation to afford fair and equitable treatment to Claimant’s investments pursuant to NAFTA Article 1105.³⁷¹ According to Claimant, Respondent has engaged in arbitrary and unjust conduct in contravention of notions of due process and frustrated Claimant’s legitimate expectations.³⁷²

441. Specifically, Claimant submits that Respondent’s shutdown was arbitrary because it was: (i) politically motivated; (ii) contrary to good faith; and (iii) in contravention of basic notions of due process.³⁷³ It is Claimant’s position that Respondent has also frustrated its legitimate expectations by blocking its remaining operations in Mexico and contradicting its prior representations regarding Claimant’s and CALICA’s ability to quarry La Rosita for export to the United States for as long as economically feasible.³⁷⁴

442. Claimant argues that the Tribunal has jurisdiction to adjudicate its ancillary claim, referring to PO7 which states that the “ancillary claim [is] within the scope of the consent of the Parties and within the jurisdiction of ICSID.”³⁷⁵ Claimant contends that the ancillary claim is within the scope of the Parties’ consent to arbitrate the original claim as it is related to the Project.³⁷⁶ Accordingly, the NAFTA requirements of written notice of claim, expiry of six-months period and the investor’s consent and waiver are applicable and covered by compliance with these requirements in relation to the original claim.³⁷⁷

³⁷⁰ C-PHM, ¶¶ 25-26, citing CL-0004-ENG, International Thunderbird Gaming Corporation v. The United Mexican States, UNCITRAL Award, 26 January 2006 (“Thunderbird v. Mexico, Award”), ¶ 200. ↩

³⁷¹ Memorial AC, ¶¶ 91, 95. ↩

³⁷² Memorial AC, ¶ 91. ↩

³⁷³ Memorial AC, ¶ 96. ↩

³⁷⁴ Memorial AC, ¶¶ 125, 128, 136; Reply AC, ¶ 175, citing CL-0009-ENG, Bilcon v. Canada, Award, ¶ 470, citing CL-0004-ENG, Thunderbird v. Mexico, Award, ¶ 147. ↩

³⁷⁵ Memorial AC, ¶ 90, citing PO7, ¶ 150, citing C-0279-SPA, Mexican Geological Service, Mining Panorama of the State of Quintana Roo: Directorate of Research and Development (2021) (“Mining Panorama Report 2021”), pp. 29-32. ↩

³⁷⁶ Memorial AC, ¶ 90, citing PO7, ¶¶ 149-150, citing C-0279-SPA, Mining Panorama Report 2021, ¶¶ 149, 151-152. ↩

³⁷⁷ Memorial AC, ¶ 90, citing PO7, ¶ 149. ↩

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443. Further, Claimant argues that Respondent gave its consent to arbitrate the Parties’ investment dispute pursuant to ICSID Convention Article 25 and NAFTA Article 1122, and Claimant’s consent to arbitrate can be found in its original Notice of Intent to Submit a Claim to Arbitration.³⁷⁸

444. Claimant contends that Respondent, for the first time in its Counter-Memorial on Ancillary Claim, raises an entirely new jurisdictional objection by arguing that the Tribunal lacks jurisdiction as Respondent’s shutdown of CALICA’s remaining operations occurred in May 2022, after NAFTA was superseded by the USMCA.³⁷⁹ Claimant argues that, contrary to Respondent’s argument, Annex 14-C of USMCA makes it clear that NAFTA Chapter 11 protections remain in force for legacy investments, such as Claimant’s project in Mexico, for three years, i.e., until 30 June 2023. Claimant contends that, pursuant to principles of treaty interpretation in the VCLT, Respondent’s conduct falls within that timeframe.³⁸⁰

445. Claimant submits that NAFTA applies to the Parties’ dispute regarding Respondent’s treatment of Claimant’s Project in Mexico, and that treatment includes Respondent’s shutdown of La Rosita and Punta Venado.³⁸¹ Claimant contends that the facts that form the basis of Claimant’s ancillary claim are part of the series of acts in issue in the dispute.³⁸² Claimant relies on the Tribunal’s pronouncements in PO7 to argue that the subject matter of Claimant’s claim arose before the USMCA superseded the NAFTA in 2020 and that the subject matter cannot now be artificially split for jurisdictional purposes.³⁸³ Further, Claimant argues that the Tribunal already determined that it had the power to order provisional measures pursuant to NAFTA Article 1134, thereby applying provisions of NAFTA to Respondent’s conduct in 2022.³⁸⁴

³⁷⁸ Memorial AC, ¶ 90, citing PO7, ¶¶ 150-152. ↩

³⁷⁹ Memorial AC, ¶ 114. See Counter-Memorial AC, ¶¶ 407-414. ↩

³⁸⁰ Reply AC, ¶ 114. ↩

³⁸¹ Reply AC, ¶ 134, citing PO1; C-0010-SPA, Investment Agreement, pp. 2-3, citing PO7, ¶ 137. ↩

³⁸² Reply AC, ¶ 134. ↩

³⁸³ Reply AC, ¶ 135, citing PO7, ¶ 135, citing CL-0208-ENG, Alleged Violations of Sovereign Rights and Maritime Spaces in the Caribbean Sea (Nicaragua v. Colombia), ICJ Judgment, 21 April 2022, ¶¶ 45-47. ↩

³⁸⁴ Reply AC, ¶ 136, citing PO7, ¶¶ 98, 160(a). ↩

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6. Admissibility and Unclean Hands

446. Claimant submits that Respondent’s argument based on the “unclean hands” doctrine does not render Claimant’s ancillary claim inadmissible as Respondent is incorrect on the facts and application of the said doctrine.³⁸⁵

447. Claimant argues that Respondent’s own cited authorities require that for the “unclean hands” doctrine to apply, the investment be obtained or made illegally.³⁸⁶ However, according to Claimant, Respondent has not alleged or proven that Claimant made its investment illegally.³⁸⁷ Respondent only alleges that Claimant’s quarrying operations at La Rosita violated applicable environmental laws.³⁸⁸ Similarly, with regard to Respondent’s reliance on Al-Warraq v. Indonesia, Claimant contends that Respondent has failed to explain how Article 9 of the Agreement on Promotion, Protection and Guarantee of Investments among Member States of the Organisation of the Islamic Conference (“OIC Agreement”), an explicit provision on which the Tribunal in Al-Warraq relied, is connected to the provisions of NAFTA and thereby relevant to this case.³⁸⁹

7. Counterclaim

448. Claimant submits that Respondent’s request for leave to submit a counterclaim is untimely and should be rejected on this basis alone.³⁹⁰ Claimant further submits that neither NAFTA nor the ICSID Arbitration Rules vest the Tribunal with jurisdiction over Respondent’s counterclaim.³⁹¹ Claimant argues that Respondent’s counterclaim falls outside the scope of the Parties’ consent to arbitrate, does not implicate any cause of action arising under NAFTA, and is not closely related to Claimant’s ancillary claim.³⁹²

³⁸⁵ Reply AC, ¶ 138. ↩

³⁸⁶ Reply AC, ¶ 139, citing RL-0145-ENG, Khan Resources v. Mongolia, Decision on Jurisdiction, ¶¶ 382, 384, citing RL-003-ENG, Rusoro v. Venezuela, Award, ¶ 492, n. 406. ↩

³⁸⁷ Reply AC, ¶ 139. ↩

³⁸⁸ Reply AC, ¶ 139. See Counter-Memorial AC, ¶ 398. ↩

³⁸⁹ Reply AC, ¶ 140, citing CL-0124-ENG, Al-Warraq v. Indonesia, Final Award, ¶¶ 631-648. ↩

³⁹⁰ Reply AC, ¶ 248. ↩

³⁹¹ Reply AC, ¶ 248. ↩

³⁹² Reply AC, ¶ 257, citing RL-0166-ENG, Limited Liability v. Ukraine, Final Award, ¶ 118; Response on Counterclaim Jurisdiction, ¶ 77. ↩

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(a) Timeliness

449. Relying on ICSID Arbitration Rule 40(2), Claimant argues that Respondent is required to present any counterclaim no later than in its counter-memorial.³⁹³ Claimant contends that Respondent’s Counter-Memorial on Ancillary Claim only contains a request for leave to file a counterclaim because Respondent let months pass after the Tribunal issued PO7 without seeking leave to file its counterclaim.³⁹⁴

450. Claimant contends that at this stage of the proceeding, Respondent has filed two counter-memorials: (i) on 23 November 2020, addressing Claimant’s original claims; and (ii) on 12 May 2023, addressing Claimant’s ancillary claim.³⁹⁵ Claimant argues that its original claims were directed to CALICA’s La Adelita and El Corchalito lots, as well as port fees associated with Punta Venado.³⁹⁶ Accordingly, Claimant submits that pursuant to ICSID Arbitration Rule 40(2), Respondent was required to file any counterclaims relating to those claims with its first Counter-Memorial on 23 November 2020. By failing to do so, in Claimant’s view, Respondent waived its right to bring a counterclaim regarding alleged breaches of environmental law related to El Corchalito and La Adelita.³⁹⁷

451. Further, Claimant contends that Respondent had, or should have had, knowledge of the breaches and losses it alleges with respect to La Rosita well before the date it filed its first counter-memorial in November 2020.³⁹⁸ Claimant argues that given that Respondent did not file its counterclaim regarding that lot in its counter-memorial of November 2020, Respondent waived its right to bring a counterclaim alleging breaches of domestic environmental obligations in La Rosita.³⁹⁹

452. Claimant submits that even if Respondent’s allegations of environmental violations and damage had any merit, Respondent’s claims are time-barred under NAFTA

³⁹³ Reply AC, ¶ 252, citing ICSID Arbitration Rule 40(2); Response on Counterclaim Jurisdiction, ¶ 174. ↩

³⁹⁴ Reply AC, ¶ 252. ↩

³⁹⁵ Response on Counterclaim Jurisdiction, ¶ 175. ↩

³⁹⁶ Response on Counterclaim Jurisdiction, ¶ 175, citing PO7, ¶ 71. ↩

³⁹⁷ Response on Counterclaim Jurisdiction, ¶ 175. See also Reply AC, ¶¶ 277-278; Response on Counterclaim Jurisdiction, ¶ 162. ↩

³⁹⁸ Response on Counterclaim Jurisdiction, ¶ 176. ↩

³⁹⁹ Response on Counterclaim Jurisdiction, ¶ 176. ↩

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Articles 1116(2) and 1117(2) as Respondent had actual or constructive knowledge before 19 December 2019 of the breaches and damage it alleges.⁴⁰⁰

453. Claimant submits, relying on the decision in Resolute Forest v. Canada, that Respondent has failed to meet its burden of showing that it first acquired, or should have first acquired, knowledge of the alleged breaches and of the resulting loss or damage underpinning its claim after 19 December 2019, and that the Tribunal has the jurisdiction to hear its counterclaim.⁴⁰¹

(b) NAFTA Article 1121

454. Claimant contends that Respondent has failed to comply with the waiver requirement in NAFTA Article 1121(1)(b) and (2)(b), which defeats the Tribunal’s jurisdiction over the counterclaim.⁴⁰² In Claimant’s view, compliance with this requirement entails: (i) submission by Respondent of a waiver declaring its intent to adhere to the conditions of NAFTA Article 1121; and (ii) discontinuing or refraining from pursuing any relevant domestic dispute settlement proceedings relating to Claimant’s measures that Respondent alleges were in breach of NAFTA.⁴⁰³

455. Claimant submits that the compensatory damages Respondent imposed on CALICA regarding El Corchalito are duplicative of Respondent’s counterclaim.⁴⁰⁴ For Claimant, Respondent admits this when describing Claimant’s alleged breaches in El Corchalito as mirroring the purported violations identified in PROFEPA’s 2020 Resolution.⁴⁰⁵

⁴⁰⁰ Response on Counterclaim Jurisdiction, ¶¶ 120, 127; see also Response on Counterclaim Jurisdiction, ¶ 119. ↩

⁴⁰¹ Response on Counterclaim Jurisdiction, ¶¶ 125-126, citing CL-0246-ENG, Resolute Forest Products Inc. v. Government of Canada, PCA Case No. 2016-13, Decision on Jurisdiction and Admissibility, 30 January 2018 (“Resolute Forest v. Canada, Decision on Jurisdiction”), ¶ 85. ↩

⁴⁰² Response on Counterclaim Jurisdiction, ¶¶ 179, 181, 183, citing C-0009-ENG, NAFTA Art. 1121(1)(b) and 1121(2)(b), citing CL-0252-ENG, Waste Management, Inc. v. United Mexican States (I), ICSID Case No. ARB(AF)/98/2, Arbitral Award, 2 June 2000 (“Waste Management v. Mexico (I), Award”), § IV. See also Response on Counterclaim Jurisdiction, ¶ 180. ↩

⁴⁰³ Response on Counterclaim Jurisdiction, ¶ 180, citing CL-0252-ENG, Waste Management v. Mexico (I), Award, ¶ 24. ↩

⁴⁰⁴ Response on Counterclaim Jurisdiction, ¶ 181, citing R-0076-ESP, Specialized Chamber in Environmental and Regulatory Matters of the Federal Administrative Court, Annulment Proceeding No. 73/21-EAR-01-6, Initial Filing, 8 January 2021 (“Annulment Proceeding No. 73/21-EAR-01-6, Initial Filing”). See Counterclaim Memorial on Jurisdiction, ¶ 1. ↩

⁴⁰⁵ Response on Counterclaim Jurisdiction, ¶ 181, citing R-0005-ESP, October 2020 Resolution, pp. 200-202. See Counterclaim Memorial on Jurisdiction, ¶ 40. ↩

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456. [Redacted]

457. Claimant argues that Respondent has also taken the initial steps to launch administrative proceedings of the same nature against CALICA regarding La Rosita.⁴⁰⁸ According to Claimant, PROFEPA shut down La Rosita in May 2022, and while PROFEPA has unreasonably and inexplicably delayed issuing an Acuerdo de Emplazamiento to formally charge CALICA with infractions, a domestic proceeding similar to that regarding El Corchalito will follow its eventual issuance, requiring CALICA to pay compensation for the alleged environmental damage Respondent claims CALICA has caused.⁴⁰⁹

(c) Scope of Consent

458. Claimant submits that, contrary to Respondent’s contention, pursuant to ICSID Convention Article 46 and ICSID Arbitration Rule 40(1), absent consent in a treaty or a separate agreement between parties to arbitrate counterclaims, a tribunal would lack jurisdiction to consider a respondent’s counterclaim.⁴¹⁰

459. Claimant argues that for this Tribunal to have jurisdiction over Respondent’s counterclaim, it has to fall within the scope of the Parties’ arbitration agreement in NAFTA or some other agreement between them.⁴¹¹ For Claimant, the consent to arbitrate

⁴⁰⁶ Response on Counterclaim Jurisdiction, ¶ 181, citing R-0005-ESP, October 2020 Resolution, p. 219. ↩

⁴⁰⁷ Response on Counterclaim Jurisdiction, ¶ 181, citing R-0076-ESP, Annulment Proceeding No. 73/21-EAR-01-6, Initial Filing, 8 January 2021. ↩

⁴⁰⁸ Response on Counterclaim Jurisdiction, ¶ 182. ↩

⁴⁰⁹ Response on Counterclaim Jurisdiction, ¶ 182, citing, inter alia, C-0171-SPA, PROFEPA Environmental Report, 2-5 May 2022, p. 72; [Redacted] Fourth Report, ¶¶ 107-118; C-0114-SPA, First PROFEPA Inspection Order, 12 May 2017, p. 2. ↩

⁴¹⁰ Reply AC, ¶ 258, citing ICSID Convention, Art. 46, also citing ICSID Arbitration Rule 40(1); CL-0197-ENG, Iberdrola v. Guatemala (II), Final Award, ¶ 384; Response on Counterclaim Jurisdiction, ¶ 85. See Counterclaim Memorial on Jurisdiction, ¶¶ 177-178. ↩

⁴¹¹ Reply AC, ¶ 259. ↩

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must be unequivocal, clear, and unambiguous.⁴¹² Claimant submits that the Parties have not agreed to arbitrate Respondent’s counterclaim, and Respondent’s contention that the Tribunal nevertheless has jurisdiction pursuant to NAFTA Article 1137(3) is meritless.⁴¹³

460. Claimant denies that the ICSID Convention and ICSID Arbitration Rules constitute expressions of consent to arbitrate Respondent’s counterclaim.⁴¹⁴ Claimant argues that ICSID Convention Article 46 and ICSID Arbitration Rule 40(1) require that counterclaims fall within the scope of consent of the Parties.⁴¹⁵ In its view, there was no intention under ICSID Convention Article 46 to extend the jurisdiction of the arbitral tribunal.⁴¹⁶ Claimant submits that numerous tribunals have confirmed that the existence and scope of parties’ consent to arbitrate is dictated not by the ICSID Convention, but by the instrument of consent, which is usually the investment treaty under which the claim arises.⁴¹⁷

⁴¹² Response on Counterclaim Jurisdiction, ¶¶ 79, 94, citing CL-0032-ENG, ICS Inspection and Control Services Limited (United Kingdom) v. The Argentine Republic, PCA Case No. 2010-9, Award on Jurisdiction, 10 February 2012 (“ICS v. Argentina, Award on Jurisdiction”), ¶ 281. See also Response on Counterclaim Jurisdiction, ¶¶ 98-99, citing CL-0241-ENG, Declaration of the Government of the Democratic and Popular Republic of Algeria Concerning the Settlement of Claims by the Government of the United States of America and the Government of the Islamic Republic of Iran, (“Algiers Accord Claims Settlement Declaration”), Iran-U.S. C.T.R. 9, 19 January 1981), Art. II(1), citing CL-0242-ENG, Pope & Talbot Inc. v. The Government of Canada, UNCITRAL, Submission of the United Mexican States, 3 April 2000 (“Pope & Talbot v. Canada, Mexico’s Submission”), ¶ 9; Response on Counterclaim Jurisdiction, ¶ 83, citing CL-0234-ENG, Fireman’s Fund Insurance Company v. The United Mexican States, ICSID Case No. ARB(AF)/02/01, Decision on the Preliminary Question, 17 July 2003, ¶ 64, citing CL-0235-ENG, Canfor Corporation v. United States of America and Terminal Forest Products Ltd. v. United States of America (Consolidated), UNCITRAL, Decision on Preliminary Question, 6 June 2006, ¶ 186. See also Response on Counterclaim Jurisdiction, ¶ 99, citing RL-0212-ENG, Iran v. United States, Interlocutory Award (Counterclaim), ¶ 43. ↩

⁴¹³ Reply AC, ¶ 259. ↩

⁴¹⁴ Response on Counterclaim Jurisdiction, ¶ 86. ↩

⁴¹⁵ Response on Counterclaim Jurisdiction, ¶ 86, citing C-0129-ENG, ICSID Convention, Art. 46, also citing ICSID Arbitration Rule 40(1). ↩

⁴¹⁶ Response on Counterclaim Jurisdiction, ¶ 86, citing CL-0236-ENG, Summary Record of Proceedings, Geneva Consultative Meeting of Legal Experts, 17-22 February 1964 in History of the ICSID Convention, Vol. 2 (ICSID 1970) pp. 367, 422. ↩

⁴¹⁷ Response on Counterclaim Jurisdiction, ¶¶ 87-88, citing RL-0171-ENG, Metal Tech v. Uzbekistan, Award, ¶ 409, citing CL-0223-ENG, Roussalis v. Romania, Award, ¶¶ 775, 866; Reply AC, ¶ 260, citing, inter alia, CL-0224-ENG, Vestey Group Limited v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/06/4, Award, 15 April 2016, ¶ 333. See also Reply AC, ¶ 262, citing CL-0225-ENG, Karkey Karadeniz Elektrik Uretim AS v. Islamic Republic of Pakistan, ICSID Case No. ARB/13/1, Award, 22 August 2017 (“Karkey v. Pakistan, Award”), ¶¶ 1012-1013; Response on Counterclaim Jurisdiction, ¶ 116. ↩

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461. Claimant denies that NAFTA Article 1137(3) contains the Parties’ consent to arbitrate Respondent’s counterclaim.⁴¹⁸ Claimant contends that Respondent’s argument distorts the plain meaning of NAFTA Article 1137(3) and ignores the requirement that consent to arbitrate must be clear, unambiguous, and not inferred.⁴¹⁹ In its view, NAFTA Article 1137(3) is a substantive provision, as opposed to a procedural one,⁴²⁰ and reflects the incorporation into NAFTA of the “collateral source rule”, whereby “any recovery by a victim from a third party is not applied to reduce the liability of the wrongdoer”, thereby permitting “an investor to continue to pursue a claim notwithstanding the receipt of compensation through insurance”.⁴²¹

462. In Claimant’s view, even a cursory review of those provisions in NAFTA shows that only investors with covered investments may bring disputes to arbitration under the treaty.⁴²²

463. Claimant contends that NAFTA Article 1122(2) also confirms that the requirement “for written consent of the parties” under the ICSID Convention is satisfied by the consent found in NAFTA Article 1122(1). Claimant submits that NAFTA Article 1122, which specifically addresses “Consent to Arbitration”, limits submission of a claim to a “disputing investor” only.⁴²³ Accordingly, contrary to Respondent’s contention, Claimant’s Notice of Intent does not contain the consent to arbitrate counterclaims.⁴²⁴

⁴¹⁸ Response on Counterclaim Jurisdiction, ¶ 91; see also Response on Counterclaim Jurisdiction, ¶¶ 93, 102, 117, citing CL-0240-ENG, Hege Elizabeth Kjos, Applicable Law in Investor-State Arbitration: The Interplay between national and international law, 146 (Oxford University Press 2013), citing CL-0243-ENG, The Lopez-Goyne Family Trust and Ohters v. The Republic of Nicaragua, ICSID Case No ARB/17/44, Award, 1 March 2023 (“Lopez-Goyne v. Nicaragua, Award”), ¶ 587. ↩

⁴¹⁹ Response on Counterclaim Jurisdiction, ¶ 92, citing CL-0228-ENG, Marco Gavazzi and Stefano Gavazzi v. Romania, ICSID Case No. ARB/12/25, Decision on Jurisdiction, Admissibility and Liability, 21 April 2015 (“Gavazzi v. Romania, Decision on Jurisdiction, Admissibility and Liability”), ¶ 154; see Counterclaim Memorial on Jurisdiction, ¶ 151. ↩

⁴²⁰ Response on Counterclaim Jurisdiction, ¶ 106. ↩

⁴²¹ Response on Counterclaim Jurisdiction, ¶ 93, citing CL-0238-ENG, Kenneth J. Vandevelde, U.S. INTERNATIONAL INVESTMENT AGREEMENTS (2009), pp. 583, 659. See also Reply AC, ¶ 259, citing C-0009-ENG, NAFTA, Art. 1137(3). ↩

⁴²² Reply AC, ¶ 260. ↩

⁴²³ Reply AC, ¶ 260, citing C-0009-ENG, NAFTA, Art. 1112; Response on Counterclaim Jurisdiction, ¶ 89. ↩

⁴²⁴ Response on Counterclaim Jurisdiction, ¶ 111, citing C-0007-SPA, Notice of Intent, § 5; see Counterclaim Memorial on Jurisdiction, ¶ 171. See also Reply AC, ¶ 263. ↩

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464. In Claimant’s view, NAFTA Articles 1116, 1117, 1120 and 1121 confirm that only investors may file claims, by referring only to claims by an investor.⁴²⁵ Claimant submits that the text also clarifies that relief in the form of monetary damages or restitution is appropriate only where a NAFTA Contracting Party is found to have breached the treaty, and may only be imposed on a NAFTA Contracting Party, and not a disputing investor.⁴²⁶ Claimant argues that Respondent’s interpretation of NAFTA Articles 1116 and 1117 disregards the definitions of “disputing investor” and “disputing Party”, as well as the distinction between the two under NAFTA.⁴²⁷ Claimant contends that Respondent ignores the explicit roles assigned to each as set forth in NAFTA Articles 1116, 1117, 1119 through 1122, 1125, and 1135.⁴²⁸

465. Claimant contends that numerous tribunals have dismissed respondent counterclaims asserted under similarly worded investment treaties to NAFTA.⁴²⁹ Furthermore, Claimant argues that there is not a single decision by a NAFTA tribunal upholding jurisdiction to hear a counterclaim.⁴³⁰ Claimant contends that the near unanimous international investment law jurisprudence holds that where treaties specify that investment arbitration claims are to be filed by “investors”, there is no consent and thus no jurisdiction over a respondent’s counterclaim.⁴³¹

466. Contrary to Respondent’s contention, Claimant argues that consent may not be “inferred” from Claimant’s initiation of this arbitration.⁴³² Claimant relies on the decision in ICS

⁴²⁵ Reply AC, ¶ 260, citing C-0009-ENG, NAFTA, Art. 1134. See also Response on Counterclaim Jurisdiction, ¶¶ 104, 107, citing CL-0240-ENG, Hege Elizabeth Kjos, APPLICABLE LAW IN INVESTOR-STATE ARBITRATION: THE INTERPLAY BETWEEN NATIONAL AND INTERNATIONAL LAW 146 (Oxford University Press 2013); CL-0245-SPA, Alicia Grace and Others v. United Mexican States, ICSID Case No. UNCT/18/4, Statement of Defense, 1 June 2020, ¶ 591. See also Response on Counterclaim Jurisdiction, ¶ 108; Reply AC, ¶¶ 260-261, citing RL-003-ENG, Rusoro v. Venezuela, Award, ¶ 606. ↩

⁴²⁶ Response on Counterclaim Jurisdiction, ¶ 109. ↩

⁴²⁷ Response on Counterclaim Jurisdiction, ¶ 110; see Counterclaim Memorial on Jurisdiction, ¶ 172. ↩

⁴²⁸ Response on Counterclaim Jurisdiction, ¶ 110. While Claimant states “as set forth in Articles 1116, 1117, 1119 through 1112” in its submission, the Tribunal understands Claimant to be referring to NAFTA Articles 1119 through 1122. ↩

⁴²⁹ Response on Counterclaim Jurisdiction, ¶ 113. See also Response on Counterclaim Jurisdiction, ¶ 104. ↩

⁴³⁰ Response on Counterclaim Jurisdiction, ¶ 113; see Counterclaim Memorial on Jurisdiction, ¶ 167. ↩

⁴³¹ Response on Counterclaim Jurisdiction, ¶ 114, citing CL-0197-ENG, Iberdrola v. Guatemala (II), Final Award, ¶ 391. ↩

⁴³² Response on Counterclaim Jurisdiction, ¶ 80; see Counterclaim Memorial on Jurisdiction, ¶ 187. See also Response on Counterclaim Jurisdiction ¶ 82, citing CL-0233-ENG, B-Mex, LLC and others v. United Mexican States, ICSID Case No. ARB(AF)/16/3, Mexico’s Post-Hearing Brief, 17 August 2018 (“B-Mex v. Mexico, Mexico’s Post-Hearing Brief”), ¶ 21. ↩

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Inspection v. Argentina in this respect, as well as the fact that Respondent has taken a similar position in other NAFTA arbitrations.⁴³³

467. For Claimant, Respondent’s interpretation would render redundant the text that Respondent and Canada have included in subsequent treaties, such as Article 9.19(2) of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP”), to affirmatively authorize State parties to bring counterclaims against investors.⁴³⁴

468. Claimant contends that Respondent’s reliance on Aven v. Costa Rica is misplaced, as Respondent ignores several distinctions between the text of CAFTA-DR and NAFTA that renders the reasoning in Aven v. Costa Rica inapplicable in this arbitration.⁴³⁵ While several key procedural provisions in CAFTA-DR could conceivably be read neutrally to apply to State parties and investors alike, Claimant submits that NAFTA Articles 1116, 1117, 1118 and 1137 make reference to “Parties” (i.e., the NAFTA Contracting Parties) and “investors”, as opposed to the “claimant” and “respondent” found in CAFTA-DR.⁴³⁶

469. According to Claimant, even in cases where the applicable treaty text references counterclaims, tribunals have concluded that they lack jurisdiction over those claims.⁴³⁷

(d) The Nature of the Counterclaim

470. Claimant submits that the nature of Respondent’s counterclaim does not implicate any investor obligations under NAFTA Chapter 11.⁴³⁸ Contrary to Respondent’s contention, Claimant argues that NAFTA Article 1114 does not imply an obligation on the investor

⁴³³ Response on Counterclaim Jurisdiction, ¶¶ 80-82, citing CL-0032-ENG, ICS v. Argentina, Award on Jurisdiction, ¶ 280; CL-0233-ENG, B-Mex v. Mexico, Mexico’s Post-Hearing Brief, ¶ 2(ii). ↩

⁴³⁴ Response on Counterclaim Jurisdiction, ¶¶ 95-96. ↩

⁴³⁵ Response on Counterclaim Jurisdiction, ¶ 100. ↩

⁴³⁶ Response on Counterclaim Jurisdiction, ¶ 101, citing CL-0222-ENG, Aven v. Costa Rica, Final Award, ¶ 740. ↩

⁴³⁷ Response on Counterclaim Jurisdiction, ¶ 117, citing CL-0243-ENG, Lopez Goyne v. Nicaragua, Award, ¶ 605; CL-0222-ENG, Aven v. Costa Rica, Final Award, ¶ 743. ↩

⁴³⁸ Reply AC, ¶ 264; Response on Counterclaim Jurisdiction, ¶ 137. ↩

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to comply with Respondent’s environmental laws and this cannot be a basis for a counterclaim.⁴³⁹

471. For Claimant, NAFTA Article 1114(1) clarifies obligations imposed on NAFTA Contracting Parties elsewhere under Chapter 11 of NAFTA and confirms that the NAFTA Contracting Parties may enact and enforce environmental measures, provided such measures are “otherwise consistent with [NAFTA Chapter 11]”.⁴⁴⁰ In its view, NAFTA Article 1114(2) regulates the conduct of NAFTA Contracting Parties by discouraging derogation or waiving of certain domestic measures, and providing for State-to-State consultations between NAFTA Contracting Parties where such conduct may occur.⁴⁴¹ Claimant submits that neither paragraph of NAFTA Article 1114 mentions investor obligations or can reasonably be read to generate any treaty obligations to which investors are bound.⁴⁴²

472. Claimant relies on other NAFTA provisions to argue that they provide context for NAFTA Article 1114. In this respect, Claimant relies on NAFTA Article 1101 to argue that the scope of obligations set forth in NAFTA Chapter 11 applies only to “measures adopted or maintained by a Party” and not to investor conduct.⁴⁴³ Further, Claimant contends that the absence of any reference to investor compliance with environmental measures in NAFTA Article 102 underscores that Respondent’s argument lacks basis.⁴⁴⁴

473. Claimant relies on the decisions in Lopez Goyne v. Nicaragua and Gavazzi v. Romania to argue that absent explicit language, investment treaties do not impose any affirmative obligations on investors, nor do they allow respondent States to bring counterclaims on the basis of alleged violations of domestic law.⁴⁴⁵

⁴³⁹ Reply AC, ¶ 264; see Counter-Memorial AC, ¶ 512; Response on Counterclaim Jurisdiction, ¶¶ 138-139, citing C-0009-ENG, NAFTA, Art. 1114. See also Reply AC, ¶¶ 266-267, citing C-0009-ENG, NAFTA, Art. 1114(1). ↩

⁴⁴⁰ Response on Counterclaim Jurisdiction, ¶ 140, citing C-0009-ENG, NAFTA, Art. 1114; Reply AC, ¶ 267. ↩

⁴⁴¹ Response on Counterclaim Jurisdiction, ¶ 140; Reply AC, ¶ 267. ↩

⁴⁴² Response on Counterclaim Jurisdiction, ¶ 140. ↩

⁴⁴³ Response on Counterclaim Jurisdiction, ¶ 141, citing C-0009-ENG, NAFTA, Art. 1101. ↩

⁴⁴⁴ Response on Counterclaim Jurisdiction, ¶ 141, citing C-0009-ENG, NAFTA, Art. 102(2). ↩

⁴⁴⁵ Response on Counterclaim Jurisdiction, ¶¶ 142-143, citing CL-0243-ENG, Lopez Goyne v. Nicaragua, Award, ¶ 601; CL-0228-ENG, Gavazzi v. Romania, Decision on Jurisdiction, Admissibility and Liability, ¶¶ 154, 156, 162. ↩

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474. Claimant submits that the arbitral decisions Respondent cites in this respect do not support its position.⁴⁴⁶ Claimant argues that the tribunal in Aven v. Costa Rica held that, along with procedural shortcomings, the provision in CAFTA-DR, which is similar to NAFTA Article 1114(1), did not give rise to any corresponding obligation for investors that would support the filing of a counterclaim by a respondent under the treaty.⁴⁴⁷

475. Claimant argues that the tribunal in Urbaser v. Argentina explicitly rejected the argument Respondent makes in this arbitration, holding that reliance on mere reference to domestic measures in the text of treaty does not suffice to establish violation of domestic laws.⁴⁴⁸ In its view, the tribunal in that case held that even if counterclaims were theoretically possible under an investment treaty, under the treaty in question, there were no applicable obligations which claimant could have breached.⁴⁴⁹

476. Claimant contends that Respondent has expressly disclaimed reliance on NAFTA Article 1114 in this case.⁴⁵⁰ Claimant argues that to the extent Respondent’s proposed counterclaim is based exclusively on that allegedly waived provision, Respondent’s request to file the counterclaim should be rejected.⁴⁵¹ In its view, Respondent cannot reverse its position now, especially when the alleged violations and harms arising from quarrying in Claimant’s lots were well known, or should have been well known, to Respondent at the time of the waiver.⁴⁵² Claimant argues that allowing Respondent to backpedal its waiver of NAFTA Article 1114 at this late stage would cause undue prejudice to Claimant, given that Respondent had the opportunity to invoke that provision for alleged environmental violations and harm at a prior stage of this arbitration.⁴⁵³

477. With regard to Respondent’s reliance on the decision in Burlington v. Ecuador, Claimant contends that in that case both parties had agreed that the tribunal had jurisdiction, which

⁴⁴⁶ Reply AC, ¶ 268; see Counter-Memorial AC, ¶ 513. See also Response on Counterclaim Jurisdiction, ¶¶ 144-145. ↩

⁴⁴⁷ Reply AC, ¶ 268; Response on Counterclaim Jurisdiction, ¶ 146, citing CL-0222-ENG, Aven v. Costa Rica, Final Award, ¶¶ 734-735, 742-743. ↩

⁴⁴⁸ Response on Counterclaim Jurisdiction, ¶ 144, citing RL-0174-ESP, Urbaser v. Argentina, Award, ¶¶ 1185, 1206. ↩

⁴⁴⁹ Reply AC, ¶ 269, citing RL-0174-ESP, Urbaser v. Argentina, Award. ↩

⁴⁵⁰ Reply AC, ¶ 265; see Reply AC, § III.C; Response on Counterclaim Jurisdiction, ¶¶ 138, 148, citing 2021 Hearing Transcript (English), Day 1, 239:12-241:4. ↩

⁴⁵¹ Reply AC, ¶ 265; Response on Counterclaim Jurisdiction, ¶ 150. ↩

⁴⁵² Response on Counterclaim Jurisdiction, ¶ 149. ↩

⁴⁵³ Response on Counterclaim Jurisdiction, ¶ 150. ↩

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is not the case in this arbitration.⁴⁵⁴ Claimant argues that, contrary to Respondent’s assertion, Claimant's Notice of Intent was submitted in accordance with NAFTA Article 1121, which contemplates the conditions under which a disputing investor may submit a claim, as opposed to Claimant’s consent to arbitrate counterclaims by Respondent.⁴⁵⁵ In Claimant’s view, Respondent’s reliance on Perenco v. Ecuador is unavailing as in that case, the legal relationship giving rise to the counterclaim was a contract as opposed to a treaty.⁴⁵⁶

478. Claimant relies on the decisions in Gavazzi v. Romania and Anglo-American v. Venezuela in support of its position that there are no obligations that bind investors under NAFTA Chapter 11 that would sustain Respondent’s counterclaim.⁴⁵⁷

479. Claimant submits that with regard to Respondent’s reliance on environmental treaties, Respondent’s arguments find no basis in the text of NAFTA and are wholly contradicted by both prior NAFTA arbitral decisions and statements made by NAFTA Contracting Parties.⁴⁵⁸ Claimant argues that Respondent’s position is in conflict with the scope of claims that may be submitted under Section B of NAFTA Chapter 11, specifically pursuant to NAFTA Articles 1116(1) and 1117(1) of NAFTA, which provide that claims submitted under NAFTA Chapter 11 may not extend to alleged breaches of other NAFTA provisions or obligations arising under other international treaties that do not fall within the scope of Articles 1116(1) and 1117(1).⁴⁵⁹ Claimant contends that NAFTA tribunals, like Methanex v. United States of America and Bayview Irrigation District v. United Mexican States, have rejected attempts to broaden the scope of claims to cover breaches

⁴⁵⁴ Reply AC, ¶ 270; see Counter-Memorial AC, ¶ 515, citing CL-0222-ENG, Aven v. Costa Rica, Final Award, ¶ 736. ↩

⁴⁵⁵ Reply AC, ¶ 271, citing C-0007-SPA, Notice of Intent, § 5. ↩

⁴⁵⁶ Reply AC, ¶ 272; see Counter-Memorial AC, ¶ 515, n. 450, citing CL-0227-ENG, Perenco Ecuador Limited v. The Republic of Ecuador, ICSID Case No. ARB/08/6, Interim Decision on the Environmental Counterclaim, 11 August 2015, ¶¶ 4, 6, 36, n. 2. ↩

⁴⁵⁷ Reply AC, ¶¶ 273-274, citing CL-0228-ENG, Gavazzi v. Romania, Decision on Jurisdiction, Admissibility and Liability, ¶ 154, citing CL-0226-ENG, Anglo American PLC v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/14/1, Award, 18 January 2019, ¶¶ 529-530. ↩

⁴⁵⁸ Response on Counterclaim Jurisdiction, ¶ 151; see Counterclaim Memorial on Jurisdiction, ¶¶ 212, 219-220. ↩

⁴⁵⁹ Response on Counterclaim Jurisdiction, ¶¶ 152-153, citing C-0009-ENG, NAFTA, Arts. 1116(1) and 1117(1). ↩

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of other treaties.⁴⁶⁰ Claimant submits that all three NAFTA Contracting Parties have expressed the view that NAFTA does not allow claimants to bring claims alleging breaches of other treaties: (i) Mexico in Bayview v. Mexico; (ii) United States in Methanex v. United States of America; and (iii) Canada in Detroit International Bridge Company v. Canada.⁴⁶¹

480. Claimant contends that, contrary to Respondent’s argument, NAFTA Article 104 does not impose environmental obligations on investors that are susceptible of being enforced via NAFTA counterclaims by respondent States.⁴⁶² Claimant argues that the text of that provision makes it clear that the NAFTA Contracting Parties, and not investors, have the “choice among equally effective and reasonably available means of complying with such environmental obligations.”⁴⁶³ Claimant argues that this is further confirmed by the explicit application of NAFTA Article 104 only to “specific trade obligations”, which are undertaken by and applied only among State parties.⁴⁶⁴

(e) Connection Between the Claim and the Counterclaim

481. Claimant submits that, contrary to Respondent’s contention, the appropriate test is not whether there is a close connection between Respondent’s counterclaim and Claimant’s investment as a whole.⁴⁶⁵ Claimant argues that the appropriate test is whether Respondent’s counterclaim possesses a sufficiently close connection to the “primary claim” before this Tribunal.⁴⁶⁶ Claimant contends that the primary claim for the purposes

⁴⁶⁰ Response on Counterclaim Jurisdiction, ¶ 154, citing RL-020-ENG, Methanex Corporation v. United States of America, UNCITRAL, Final Award on Jurisdiction and Merits, 3 August 2025 (“Methanex v. United States, Final Award”), ¶ 5; CL-0248-ENG, Bayview Irrigation District and others v. United Mexican States, ICSID Case No. ARB(AF)/05/1, Award, 19 June 2007, ¶ 121. ↩

⁴⁶¹ Response on Counterclaim Jurisdiction, ¶ 157, citing CL-0247-ENG, Bayview Irrigation District and others v. United Mexican States, ICSID Case No. ARB(AF)/05/1, Mexico’s Memorial on Jurisdiction, 19 April 2006, ¶ 2(b); CL-0250-ENG, Methanex Corporation v. United States of America, UNCITRAL, Reply Memorial of Respondent United States of America on Jurisdiction, Admissibility and the Proposed Amendment, 12 April 2001, pp. 32-33, citing CL-0251-ENG, Detroit International Bridge Company v. Government of Canada, PCA Case No. 2012-25, Government of Canada’s Memorial on Jurisdiction and Admissibility, 15 June 2013, ¶ 288. ↩

⁴⁶² Response on Counterclaim Jurisdiction, ¶ 155, citing C-0009-ENG, NAFTA, Art. 104(1); see Counterclaim Memorial on Jurisdiction, ¶ 218. ↩

⁴⁶³ Response on Counterclaim Jurisdiction, ¶ 156, citing C-0009-ENG, NAFTA, Art. 104(1). ↩

⁴⁶⁴ Response on Counterclaim Jurisdiction, ¶ 156, citing C-0009-ENG, NAFTA, Art 104(1). ↩

⁴⁶⁵ Reply AC, ¶ 276. ↩

⁴⁶⁶ Reply AC, ¶ 276; Response on Counterclaim Jurisdiction, ¶ 159, citing RL-0176-ENG, Saluka Investments B.V. v. The Czech Republic, PCA Case No. 2001-04, Decision on Jurisdiction over the Czech Republic’s Counterclaim, 7 May 2004 (“Saluka v. Czech Republic, Decision on Jurisdiction over the Czech Republic’s Counterclaim”), ¶¶ 61, 63. ↩

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of this assessment is Claimant’s ancillary claim, which relates to Respondent’s shutdown of CALICA’s remaining quarrying and export operations in La Rosita and Punta Venado.⁴⁶⁷ Claimant contends that Respondent’s counterclaim is much broader as it encompasses purported environmental damage from quarrying in El Corchalito and La Adelita.⁴⁶⁸ Accordingly, Claimant argues that Respondent misrepresents the scope of the “primary claim” to relate more broadly to the entirety of Claimant’s investment and should be rejected.⁴⁶⁹

482. Claimant submits that even if the scope of Claimant’s “primary claim” were to be broadened, Respondent’s counterclaim would still lack sufficient factual connection to Claimant’s claims.⁴⁷⁰ Claimant contends that its claims in this arbitration relate to breaches by Respondent that occurred in 2015 and later while the events underpinning Respondent’s counterclaim occurred as early as the 1980s and span approximately 30 years.⁴⁷¹ Accordingly, Claimant argues that Respondent’s counterclaim covers a much broader timeframe than any of its claims, thereby lacking the sufficiently close connection necessary to establish jurisdiction in this case.⁴⁷²

483. Claimant relies on the decisions in Oxus Gold v. Uzbekistan, Saluka v. Czech Republic, and Paushok v. Mongolia, to argue that the cause of action for the primary claim and the counterclaim must arise from the same legal instrument. Given that Respondent’s counterclaim arises from domestic law while Claimant’s claim arises from NAFTA, in its view there is a lack of legal connection between Claimant’s claim and Respondent’s counterclaim.⁴⁷³

⁴⁶⁷ Reply AC, ¶ 276; Response on Counterclaim Jurisdiction, ¶ 161; see Memorial AC, ¶ 3. ↩

⁴⁶⁸ Reply AC, ¶ 276; Response on Counterclaim Jurisdiction, ¶ 161; see Counter-Memorial AC, ¶ 511. ↩

⁴⁶⁹ Reply AC, ¶ 276. ↩

⁴⁷⁰ Response on Counterclaim Jurisdiction, ¶ 163. ↩

⁴⁷¹ Response on Counterclaim Jurisdiction, ¶ 163; see Reply, ¶ 91; see also Memorial AC, ¶¶ 10-89; see also Counterclaim Memorial on Jurisdiction, ¶ 33. ↩

⁴⁷² Response on Counterclaim Jurisdiction, ¶ 163. ↩

⁴⁷³ Response on Counterclaim Jurisdiction, ¶¶ 164-168, citing RL-0208-ENG, Oxus Gold v. Uzbekistan, Final Award, ¶ 954; RL-0176-ENG, Saluka v. Czech Republic, Decision on Jurisdiction over the Czech Republic’s Counterclaim, ¶ 79; RL-0177-ENG, Sergei Paushok, CJSC Golden East Company and CJSC Vostokneftegaz Company v. The Government of Mongolia, UNCITRAL, Award on Jurisdiction and Liability, 28 April 2011, ¶¶ 694-695, citing, inter alia, CL-0253-ENG, Amco Asia Corporation and Others v. Republic of Indonesia, ICSID Case No. ARB/81/1, Decision on Jurisdiction in Resubmitted Proceeding, 10 May 1988, ¶¶ 125-127. ↩

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(f) Due Process and Procedural Efficiency

484. Claimant argues that Respondent’s counterclaim is duplicative of domestic proceedings Respondent has lodged and encouraged against CALICA, which predate the submission of Respondent’s counterclaim (see ¶ 455 above).⁴⁷⁴ On this basis, Claimant submits that allowing Respondent’s counterclaim will undermine order and procedural efficiency in this arbitration by triggering the very “duplication and inefficiency” and increased “transaction costs” against which Respondent warns.⁴⁷⁵

485. Claimant relies on the decisions in Bureau Veritas v. Paraguay and Euram v. Slovakia to argue that a finding that Respondent has waived its right to file a counterclaim would be consistent with fundamental principles of due process and procedural economy.⁴⁷⁶ Claimant submits that Respondent had ample opportunity, in the previous phase of this arbitration, to submit counterclaims, but it waited nearly 18 months after the post-hearing submissions in the prior phase to submit its counterclaim.⁴⁷⁷ Claimant argues that it would be contrary to due process and fairness, and be severely prejudicial to Claimant, if the counterclaim were to be entertained now.⁴⁷⁸

486. Claimant further contends that Respondent’s request for leave to file a counterclaim also disregards the established procedural calendar and risks upending it to Claimant’s detriment.⁴⁷⁹ Claimant submits that all of these effects on the procedural calendar could have been avoided had Respondent sought leave to submit its counterclaim in a timely

⁴⁷⁴ Response on Counterclaim Jurisdiction, ¶ 170, citing C-0117-SPA, Shutdown Order, pp. 291-294, 297-301; R-0005-ESP, October 2020 Resolution, pp. 163-164, 201-206,244-228; C-0171-SPA, PROFEPA Environmental Report, 2-5 May 2022, pp. 68-72; C-0172-SPA, PROFEPA Forestry Report, 2-5 May 2022, pp. 49-62; see Reply AC, ¶ 32. ↩

⁴⁷⁵ Response on Counterclaim Jurisdiction, ¶ 171; see Counterclaim Memorial on Jurisdiction, ¶ 209. ↩

⁴⁷⁶ Response on Counterclaim Jurisdiction, ¶ 177, citing CL-0229-ENG, Bureau Veritas, Inspection, Valuation, Assessment and Control, BIVAC B.V. v. The Republic of Paraguay, ICSID Case No. ARB/07/9, Decision of the Tribunal on Objections to Jurisdiction, 29 May 2009 (“Bureau Veritas v. Paraguay, Decision on Objections to Jurisdiction”), ¶ 52; CL-0221-ENG, European American Investment Bank AG (Austria) v. The Slovak Republic, PCA Case No. 2010-17, Second Award on Jurisdiction, 4 June 2014 (“European American Investment Bank v. Slovakia, Second Award on Jurisdiction”), ¶ 118. See also Reply AC, ¶¶ 277-278, citing CL-0229-ENG, Bureau Veritas v. Paraguay, Decision on Objections to Jurisdiction, ¶ 52; CL-0221-ENG, European American Investment Bank v. Slovakia, Second Award on Jurisdiction, ¶ 118; Response on Counterclaim Jurisdiction, ¶ 162. ↩

⁴⁷⁷ Response on Counterclaim Jurisdiction, ¶ 178. ↩

⁴⁷⁸ Response on Counterclaim Jurisdiction, ¶ 178. See also Reply AC, ¶ 279. ↩

⁴⁷⁹ Reply AC, ¶ 254. ↩

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manner, and Claimant should not be disadvantaged with unnecessary and avoidable procedural delays because of Respondent’s failure.⁴⁸⁰

487. As well as the additional submissions required, Claimant takes issue with the resulting need to lengthen what was envisioned to be a two-to-three-day hearing and having the award delayed further.⁴⁸¹

488. Claimant further argues that Respondent’s effort to pursue a counterclaim in this arbitration is another attempt at giving effect to President López Obrador’s threats and politically motivated attacks on CALICA.⁴⁸²

D. NDP SUBMISSIONS

489. In this Section, the Tribunal summarizes the US Second NDP Submission in relation to the Tribunal’s jurisdiction over the ancillary claim, as well as the Parties’ respective comments thereon.

1. US Second NDP Submission

490. In the US Second NDP Submission, the United States provides its interpretation of USMCA Annex 14-C. The US Second NDP appends: (i) Appendix 1: the United States of America’s Memorial on its Preliminary Objection, TC Energy Corporation and TransCanada Pipelines Limited v. United States of America, ICSID Case No. ARB/21/63 (12 June 2023) (ii) Appendix 2: Expert Report of Professor Richard Gardiner, TC Energy Corporation and TransCanada Pipelines Limited v. United States of America, ICSID Case No. ARB/21/63 (9 June 2023); and (ii) Appendix 3: Expert Report of Professor Hervé Ascensio, TC Energy Corporation and TransCanada Pipelines Limited v. United States of America, ICSID Case No. ARB/21/63 (8 June 2023). The Tribunal understands Appendix 1 to elaborate upon the United States’ position with respect to matters addressed in the US Second NDP Submission, and has included references to that position in the following summary. The Tribunal understands Appendix 2 and Appendix 3 to be provided in support of the US Second NDP Submission.

⁴⁸⁰ Reply AC, ¶ 256. ↩

⁴⁸¹ Reply AC, ¶ 255. ↩

⁴⁸² Reply AC, ¶ 280. ↩

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491. The United States submits that Annex 14-C of the USMCA is a mere agreement to arbitration that does not include any extension of substantive obligations.⁴⁸³ According to the United States, Annex 14-C only refers to Section B of NAFTA Chapter 11 and not to Section A of that same chapter. Whilst Section B contains provisions that relate to the consent to arbitration, Section A includes substantive obligations, which pursuant to the United States’ interpretation are not encompassed by Annex 14-C.⁴⁸⁴

492. In line with the above, the United States contends that although the USMCA contains some general transitional provisions, the extension of the NAFTA’s substantive provisions on investment protection whose breach could lead to arbitration does not figure among these general provisions.⁴⁸⁵ In its view, USMCA Article 34.1, the transitional provision from NAFTA, only provides for a continuation of NAFTA Chapter 19 after the NAFTA’s termination, and not NAFTA Chapter 11.⁴⁸⁶ Given that there are no further indications that the USMCA Parties intended to keep a substantial part of NAFTA in force after its termination (apart from very specific provisions on legacy investment claims⁴⁸⁷), and there is no mention of “transition” in Annex 14-C in general, the United States submits that Annex 14-C does not install a transitional period.⁴⁸⁸

493. Regarding the temporal element of the breach, the United States relies on VCLT Article 70, pointing out that the obligations contained in a treaty end with the termination of the latter.⁴⁸⁹ According to the United States, only breaches that have occurred before the termination of the NAFTA are admissible⁴⁹⁰, as the breach must refer to a legal rule in force⁴⁹¹. As such, the United States submits that the consent to arbitration expressed in Annex 14-C of the USMCA only pertains to acts that occurred before the NAFTA’s termination on 1 July 2020.⁴⁹²

⁴⁸³ US Second NDP Submission, Appendix 1, ¶¶ 13, 21, 24. ↩

⁴⁸⁴ US Second NDP Submission, Appendix 1, ¶¶ 20, 67. ↩

⁴⁸⁵ US Second NDP Submission, Appendix 1, ¶ 59, citing Appendix 2, ¶ C.6; Appendix 3, ¶ 19. ↩

⁴⁸⁶ US Second NDP Submission, Appendix 1, ¶ 59. ↩

⁴⁸⁷ US Second NDP Submission, Appendix 1, ¶ 17, citing Appendix 3, ¶ 32; see also Appendix 1, ¶¶ 20, 59. ↩

⁴⁸⁸ US Second NDP Submission, Appendix 1, ¶ 17, citing Appendix 3, ¶ 32; see also Appendix 1, ¶¶ 20, 59. ↩

⁴⁸⁹ US Second NDP Submission, Appendix 1, ¶ 12. ↩

⁴⁹⁰ US Second NDP Submission, Appendix 1 ¶ 6, citing Appendix 2, ¶ F.2; Appendix 3, ¶¶ 8, 33. ↩

⁴⁹¹ US Second NDP Submission, Appendix 1, ¶ 31, citing Appendix 2, ¶ E.3; Appendix 3, ¶ 28. ↩

⁴⁹² US Second NDP Submission, Appendix 1, ¶ 13, citing Appendix 2, ¶ F.2; Appendix 3, ¶ 8. ↩

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494. Lastly, the United States sets out its interpretation on the context of the NAFTA and the USMCA by pointing out that both the USMCA Preamble and the Protocol Replacing NAFTA emphasize NAFTA’s termination and its replacement by the USMCA.⁴⁹³ According to the United States, the USMCA replaces the NAFTA with the intention of entirely superseding it, which is not accomplished when admitting a three-year overlap of both treaties creating confusion due to the formal and substantive differences between NAFTA and USMCA.⁴⁹⁴

2. Respondent’s Comments on US Second NDP Submission

495. On 25 September 2023, Respondent filed its observations on the US Second NDP Submission (“Respondent’s NDP Observations”). Respondent shares the United States’ position on the interpretation of USMCA Annex 14-C, which in its view did not extend the substantive protections of NAFTA.⁴⁹⁵

496. According to Respondent, the NAFTA Contracting Parties are in agreement that NAFTA Article 1114 provides forceful protection of States’ right to adopt, maintain or enforce measures to ensure that investment is undertaken in a manner sensitive to environmental concerns.⁴⁹⁶

497. Respondent likewise agrees with the United States that a claimant may not be awarded reparation for losses to the extent of its contribution to such losses.⁴⁹⁷ In its view, NAFTA cannot protect investments that have been made contrary to the principle of good faith or where Claimant has contributed to the harm.⁴⁹⁸

3. Claimant’s Comments on US Second NDP Submission

498. On 25 September 2023, Claimant filed its observations on the US Second NDP Submission (“Claimant’s Second NDP Observations”). In Claimant’s view, the US Second NDP Submission repeats arguments made in another arbitration proceeding which is distinguishable from the present case. In the present case, Claimant submits that

⁴⁹³ US Second NDP Submission, Appendix 1, ¶ 34. ↩

⁴⁹⁴ US Second NDP Submission, Appendix 1, ¶ 62, citing Appendix 3, ¶ 30. ↩

⁴⁹⁵ Respondent’s NDP Observations, ¶ 15. ↩

⁴⁹⁶ Respondent’s NDP Observations, ¶ 11. ↩

⁴⁹⁷ Respondent’s NDP Observations, ¶ 20. ↩

⁴⁹⁸ Respondent’s NDP Observations, ¶ 22. ↩

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Respondent has consented to arbitrate the ancillary claim under NAFTA.⁴⁹⁹ Claimant argues, inter alia, that the Parties have chosen NAFTA as the applicable law, and the Tribunal is bound by NAFTA Article 1131 and ICSID Convention 42(1) to honour that choice.⁵⁰⁰

499. In addition, Claimant submits that unlike the TC Energy case in which the United States is Respondent, the present case was initiated under NAFTA Chapter 11, and may proceed to its conclusion including the ancillary claim, pursuant to paragraph 5 of USMCA Annex 14-C.⁵⁰¹ For Claimant, the ancillary claim is inextricably linked to its pre-existing claims, also unlike the TC Energy case in which the United States has made its submission.⁵⁰²

500. Claimant disagrees with the United States’ interpretation of USMCA Annex 14-C.⁵⁰³ In its view, Respondent consented to the submission of a claim to arbitration under NAFTA Chapter 11 with respect to measures taken during the three year transition period following the USMCA’s entry into force.⁵⁰⁴ This is supported, according to Claimant, by the context of other provisions in Annex 14-C, by the object and purpose of both NAFTA and the USMCA, and by public statements by the United States, Canada and Mexico.⁵⁰⁵

501. In Claimants’ view, contrary to the US Second NDP Submission, NAFTA Article 1114 is irrelevant in this dispute. For Claimant, it applies only to State acts taken for legitimate environmental reasons, which is not the case here, and Respondent has waived it in the present case.⁵⁰⁶ Claimant likewise denies that the principle of contributory fault is applicable in this arbitration, since CALICA was not negligent in operating its investment, and has not caused or materially contributed to its damage.⁵⁰⁷

⁴⁹⁹ Claimant’s Second NDP Observations, ¶¶ 2, 7. ↩

⁵⁰⁰ Claimant’s Second NDP Observations, ¶ 31. ↩

⁵⁰¹ Claimant’s Second NDP Observations, ¶¶ 35-36. ↩

⁵⁰² Claimant’s Second NDP Observations, ¶ 38. ↩

⁵⁰³ Claimant’s Second NDP Observations, ¶ 42 et seq. ↩

⁵⁰⁴ Claimant’s Second NDP Observations, ¶ 49. ↩

⁵⁰⁵ Claimant’s Second NDP Observations, ¶¶ 52-74. ↩

⁵⁰⁶ Claimant’s Second NDP Observations, ¶¶ 83, 85. ↩

⁵⁰⁷ Claimant’s Second NDP Observations, ¶¶ 86-87. ↩

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E. TRIBUNAL’S ANALYSIS

502. In this Section, the Tribunal analyses and decides upon various issues with respect to its jurisdiction over and the admissibility of the Claimant’s original claims, Claimant’s ancillary claim, and Respondent’s counterclaim in this arbitration. The Tribunal considers: (i) its jurisdiction ratione temporis with respect to Claimant’s original claims (Section 1); (ii) the investor under NAFTA (Section 2); (iii) the investment under NAFTA (Section 3); (iv) jurisdiction under the ICSID Convention with respect to Claimant’s original claims (Section 4); (v) the admissibility of Claimant’s original claims (Section 5); (vi) jurisdiction over the port tariff claim (Section 6); (vii) any implications of proceedings in the Mexican Courts (Section 7); (viii) jurisdiction over Claimant’s ancillary claim (Section 8); and (ix) jurisdiction over and admissibility of Respondent’s counterclaim (Section 9).

1. Jurisdiction Ratione Temporis over Original Claims

503. Respondent does not raise an objection as such to the Tribunal’s jurisdiction ratione temporis with respect to Claimant’s original claims. Respondent’s argument is rather that in light of Claimant’s detailed account of historical facts, the Tribunal should be mindful of the three-year limitation period in NAFTA Articles 1116(2) and 1117(2) to avoid relying on facts pre-dating the limitation period (see ¶¶ 377-378 above).

504. Claimant does not deny the application of the NAFTA three-year limitation, and confirms that its claims relate to alleged breaches within the limitation period in the form of (i) Respondent’s failure to amend the POEL 2009 by 5 December 2015, as required by the 2014 Agreements; (ii) Respondent’s disregard of its judiciary’s determination, made final in January 2017, that API Quintana Roo had no right to collect port fees from CALICA for over a decade; and (iii) Respondent’s shutdown of CALICA’s operations in El Corchalito in January 2018 (see ¶ 427 above). These events all fall within the three years prior to Claimant’s commencement of its claim on 3 December 2018, when ICSID received its request for arbitration.

505. Accordingly, there is no dispute in relation to the Tribunal’s jurisdiction ratione temporis over Claimant’s original claims. NAFTA Articles 1116(2) and 1117(2) require an

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investor to make a claim within three years of acquiring knowledge (or its enterprise acquiring knowledge) of the alleged breach and loss or damage.

506. The Tribunal confirms the Parties’ agreed understanding with respect to NAFTA Articles 1116(2) and 1117(2) and only makes a determination with respect to the claims put forward by Claimant which fall within the three-year limitation period set out at ¶ 504 above. In doing so, the Tribunal is free to, and does, take into account facts prior to that three-year period which provide background and context to the claims and defences made by the Parties.

2. The Investor under NAFTA

507. It is undisputed that Claimant is an investor with protection under NAFTA, in accordance with NAFTA Articles 201 and 1139 (see ¶¶ 355 and 359 above). In this regard, Claimant is a privately owned for-profit corporation organized under the laws of the United States, and therefore an enterprise of a NAFTA Contracting Party. Since it has made an investment in Mexico (see ¶ 514 below), Claimant is an investor entitled to bring a claim against Respondent under NAFTA Article 1116(1).

508. With respect to CALICA, Respondent disputes the Tribunal’s jurisdiction over investments made outside Mexico in what Claimant refers to as the “CALICA Network” (see ¶ 185 above). However, the Tribunal does not consider this to be a question of the Tribunal’s jurisdiction ratione personae over CALICA.

509. CALICA is a subsidiary of Claimant constituted and organized under the laws of Mexico. It is indirectly owned and controlled by Claimant.⁵⁰⁸ As such, pursuant to NAFTA Article 1117(1), Claimant is entitled to bring a claim in this arbitration on behalf of CALICA, being an “enterprise of another Party that is a juridical person that the investor owns or controls directly or indirectly” (see ¶ 358 above).

510. The question of the investments covered by Claimant’s claim and the scope of damages is a separate one. Insofar as Respondent contends that the CALICA Network is not an enterprise of another Party under NAFTA (see ¶ 381 above), the Tribunal agrees.

⁵⁰⁸ C-0005-ENG, CALICA Ownership Structure Certification; C-0006-SPA, Copy of Articles of Incorporation of Calizas Industriales del Carmen, S.A. de C.V. ↩

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However, Claimant does not claim that the CALICA Network is such an enterprise. Claimant’s claim under NAFTA Article 1117(1) relates to CALICA only.

3. The Investment under NAFTA

511. Respondent raises an issue with respect to the Tribunal’s jurisdiction over non-Mexican investments. The Tribunal finds it helpful to first determine Claimant’s protected investments under NAFTA, before turning to consider Respondent’s objection.

512. Claimant argues that its investment under NAFTA includes (i) CALICA, a corporation constituted under the laws of Mexico and an enterprise under NAFTA that is indirectly owned and controlled by Claimant; (i) indirect ownership and control of real estate in Mexico, including the Punta Venado port area and the limestone reserves in La Rosita, El Corchalito, and La Adelita, acquired for the sole purpose of developing the Project; (iii) indirectly holding the CALICA Port Concession; and (iv) committed capital in Mexico in connection with the Project, including hundreds of millions of dollars to produce and export aggregates.⁵⁰⁹

513. Pursuant to NAFTA Article 1101, NAFTA Chapter 11 applies to measures adopted or maintained by Respondent relating to (i) Claimant as an investor of another NAFTA Contracting Party; and (ii) Claimant’s investments in the territory of Respondent (see ¶ 356 above).

514. Respondent does not contest that Claimant indirectly holds the investments in Mexico set out at ¶ 512 above for the purposes of jurisdiction, although its position is that only CALICA is a protected investment under NAFTA Chapter 11.⁵¹⁰ The Tribunal accepts that these investments are all covered by the definition of an investment under NAFTA (see ¶ 359 above) and are protected thereunder, specifically:

(i) CALICA is an enterprise under item (a) of the definition of investment in NAFTA Article 1139

⁵⁰⁹ Memorial, ¶ 165; see Memorial, ¶¶ 4, 20, 23-29, 28-38. ↩

⁵¹⁰ Rejoinder, ¶ 380. ↩

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(ii) the indirect ownership and control of the Punta Venado port area and the limestone reserves in La Rosita, El Corchalito, and La Adelita is “real estate or other property, tangible or intangible, acquired in the expectation or used for the purpose of economic benefit or other business purposes” under item (g) of the definition of investment in NAFTA Article 1139;

(iii) the CALICA Port Concession is an “interest[] arising from the commitment of capital or other resources in the territory of a Party to economic activity in such territory, such as under (i) contracts involving the presence of an investor’s property in the territory of the Party, including . . . concessions” under item (h) of the definition of investment in NAFTA Article 1139; and

(iv) the commitment of capital in connection with the Project to produce and export aggregates includes “interests arising from the commitment of capital or other resources in the territory of a Party to economic activity in such territory, such as under (i) contracts involving the presence of an investor’s property in the territory of the Party…” under item (h) of the definition of investment in NAFTA Article 1139.

515. Respondent takes issue with Claimant’s claims insofar as they refer to, and include quantum claims connected with, the “CALICA Network”, which includes (i) three cargo vessels owned and operated by a Bahamian company, Vulica Shipping Company Ltd; (ii) US sales distribution yards located along the US Gulf Coast; and (iii) the sales and marketing operations of a US company Vulcan Construction Materials. Respondent argues that any claim regarding the treatment of non-Mexican investments is beyond this Tribunal’s jurisdiction (see ¶ 380 above).

516. Claimant agrees with Respondent that only investments located in Mexico qualify for protection under NAFTA.⁵¹¹ It therefore does not claim that the vessels, US distribution yards or sales and marketing operations referred to in ¶ 515 above are a part of the investment protected by NAFTA. However, relying on the decision in S.D. Myers v. Canada, Claimant argues that it is entitled to compensation for “the overall economic

⁵¹¹ C-PHM, ¶ 15, citing 2021 Hearing Transcript (English), Day 1, 120:22-121:11 (Claimant’s Opening Statement). ↩

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losses sustained by [the Claimant] that are a proximate result of [the Respondent’s] measure”.⁵¹² In its view, this does not exclude non-Mexican investments, in particular because its investment was devised and established as a fully-integrated business.⁵¹³

517. In the context of this case, the Tribunal considers the question of the scope of compensable losses to be an issue of quantum and not of jurisdiction. There is no dispute that NAFTA Chapter 11 does not protect Claimant’s investments outside the territory of Mexico from measures adopted by Respondent and the Tribunal has no jurisdiction over such a claim (see ¶ 432 above). As a matter of jurisdiction, therefore, there is no issue to be addressed at this stage.

518. The Tribunal shall consider and decide upon the separate question of whether Claimant’s claim for damages may include harm caused to the Claimant outside Mexico in Section XIV below. In doing so, it will take into account the Parties’ respective answers to Tribunal Question 1 on that issue.

4. Jurisdiction under the ICSID Convention

519. Having satisfied itself that Claimant is an investor with a protected investment under NAFTA, the Tribunal must also ensure that it has jurisdiction under the ICSID Convention. The requirements for such jurisdiction are set out in Article 25 of the ICSID Convention (see ¶ 367 above).

520. Claimant submits that the Tribunal has ratione personae jurisdiction under ICSID Convention Article 25(1), since Respondent is a Contracting State of the ICSID Convention and Claimant is a national of another Contracting State.⁵¹⁴ For Claimant, the Tribunal also has jurisdiction ratione materiae under the ICSID Convention since (i) there is a legal dispute; and (ii) this dispute arises directly out of Claimant’s investments.⁵¹⁵ The legal dispute, in Claimant’s view, centers around adverse measures adopted by Respondent, including its alleged repudiation of its pledge to amend the

⁵¹² C-PHM, ¶ 17, citing CL-0132-ENG, S.D. Myers, Inc. v. Government of Canada, UNCITRAL, Second Partial Award (Damages), 21 October 2002 (“S.D. Myers v. Canada, Second Partial Award (Damages)”), ¶ 122. ↩

⁵¹³ C-PHM, ¶ 8, citing C-0010-SPA, Investment Agreement, pp. 12, 14 (Translation by Claimant). See also CD-0001, Claimant’s Opening Presentation, slide 8. ↩

⁵¹⁴ Memorial, ¶¶ 167-170. ↩

⁵¹⁵ Memorial, ¶¶ 161-166. ↩

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POEL 2009, failure to comply with a decision of its judiciary confirming that API Quintana Roo had unlawfully collected port fees, and unlawful shutdown of operations at El Corchalito.⁵¹⁶

521. Respondent has not contradicted Claimant’s position with respect to the Tribunal’s jurisdiction under the ICSID Convention.

522. The Tribunal finds that Claimant’s original claims concern a legal dispute arising directly out of an investment, being the investments protected by NAFTA as identified at ¶ 514 above. The legal dispute is between Mexico, a Contracting State of the ICSID Convention, and Claimant, a juridical person with the nationality of the United States. The United States is also a Contracting State of the ICSID Convention and Claimant is therefore a “national of another Contracting State” within the meaning of Article 25 of the ICSID Convention.

523. Respondent gave its consent in writing to the Tribunal’s jurisdiction under the ICSID Convention in NAFTA Article 1122 (see ¶ 363 above).

524. Claimant and CALICA gave their consent in writing to submit Claimant’s original claims to ICSID in Claimant’s Notice of Intent dated 3 September 2018,⁵¹⁷ the executed instrument of consent and waiver pursuant to NAFTA Article 1121 dated 3 December 2018,⁵¹⁸ and was confirmed in Claimant’s Request for Arbitration.⁵¹⁹

525. The Tribunal therefore finds that the requirements of Article 25(1) of the ICSID Convention (see ¶ 367 above) are met and that it has jurisdiction in this case.

5. Admissibility of the Claims

526. Aside from the objections raised above, Respondent has not challenged the admissibility of Claimant’s original claims.

527. Under NAFTA Article 1120(1) (see ¶ 361 above), Claimant is required to wait six months from the events giving rise to a claim before submitting the claim to arbitration. Claimant

⁵¹⁶ Memorial, ¶ 166, ↩

⁵¹⁷ C-0007-SPA, Notice of Intent, p. 9. ↩

⁵¹⁸ C-0008-ENG, Consent and Waiver pursuant to NAFTA Art. 1121. ↩

⁵¹⁹ RfA, ¶ 28. ↩

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initiated arbitration by its Request for Arbitration dated 3 December 2018. Since the alleged measures giving rise to Claimant’s original claims date from (i) 5 December 2015 (alleged failure to amend the POEL 2009); (ii) January 2018 (shut down of operations in El Corchalito and La Adelita); and (iii) January 2017 (alleged failure to reimburse port fees);⁵²⁰ the Tribunal considers that Claimant complied with the waiting period.

528. NAFTA Article 1118 provides that the Parties should first attempt to settle a claim through consultation or negotiation (see ¶ 359 above). In the Notice of Intent, Claimant and CALICA requested consultations with representatives of Mexico to reach an amicable resolution of the dispute.⁵²¹ The Parties also extended the calendar in these proceedings by 70 days to explore the potential resolution of the dispute (see ¶¶ 35-36 above). The Tribunal therefore considers that NAFTA Article 1118 attempts were undertaken.

529. NAFTA Article 1119 requires Claimant to deliver a written notice of its intention to submit a claim to arbitration at least 90 days before the claim is submitted (see ¶ 360 above). Claimant did so on 3 September 2018, prior to its Request for Arbitration on 3 December 2018. It therefore complied with this requirement.

530. NAFTA Articles 1121(1) and (2) require Claimant and CALICA to “waive their right to initiate or continue before any administrative tribunal or court under the law of any Party, or other dispute settlement procedures, any proceedings with respect to the measure of the disputing Party that is alleged to be a breach referred to in Article 1116 [and Article 1117], except for proceedings for injunctive, declaratory or other extraordinary relief, not involving the payment of damages, before an administrative tribunal or court under the law of the disputing Party” (see ¶ 362 above). Claimant and CALICA did so by letter dated 3 December 2018, ratified in the Request for Arbitration.⁵²²

531. Claimant further contends that the fork-in-the-road provision of NAFTA Annex 1120(1) is inapplicable.⁵²³ This provision would bar Claimant from alleging in an arbitration that Mexico breached an obligation under NAFTA Chapter 11 if Claimant or CALICA had

⁵²⁰ See Memorial, ¶ 176, n. 391. ↩

⁵²¹ C-0007-SPA, Notice of Intent, p. 10. ↩

⁵²² C-0008-ENG, Consent and Waiver pursuant to NAFTA Art. 1121; Request for Arbitration, ¶ 24. ↩

⁵²³ Memorial, ¶ 183. ↩

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alleged in proceedings before a Mexican court or administrative tribunal that Mexico breached that obligation. Respondent has not alleged that Claimant is so precluded and the Tribunal finds that this provision does not apply to the present case.

6. The Port Tariff Claim

532. Claimant’s port tariff claim is based on its assertion that after ten years of litigation, on 25 January 2017 it obtained a ruling from Mexico’s Supreme Court that the collection of port fees by Mexico’s Ministry of Communications and Transportation for CALICA’s use of its own private terminal was illegal and void. Claimant contends that API Quintana Roo disregarded this ruling by continuing to collect fees for almost a year thereafter, and failing to reimburse CALICA the [Redacted] collected from 2007 to 2017.⁵²⁴

533. Respondent argues that Claimant’s claim for port fees is barred by NAFTA Article 2103, which limits the extent to which tax measures are subject to NAFTA (see ¶¶ 366 and 383 above). For the purpose of determining whether it has jurisdiction over Claimant’s claim for the port fees, the Tribunal’s analysis is limited to the question whether the fees that Claimant seeks reimbursement of have the character of a taxation measure.

534. In principle, the Tribunal agrees with Respondent that the terms “taxation measure” in NAFTA Article 2103 are defined broadly.⁵²⁵ As held in prior NAFTA cases, they refer to any measure that “is part of the regime for the imposition of a tax”.⁵²⁶

535. Claimant’s claim for port fees is in the amount of [Redacted]. To the extent that the port fees of [Redacted] are a taxation measure, Claimant’s claim would fall outside the Tribunal’s jurisdiction, pursuant to Article 2103 of NAFTA. Claimant does not appear to dispute this, but argues that the port fees do not have the character of a taxation measure.

536. The disagreement between the Parties over the payment of the port fees has been the subject of at least 10 years of litigation in Mexico. The factual background on this issue is introduced at ¶¶ 271-278 above. In brief, Claimant alleges that the fees in question

⁵²⁴ Memorial, ¶ 225; Reply, ¶¶ 180-182; C-PHM, ¶ 141; C-RPHM, ¶ 67; see Memorial, ¶¶ 132, 137. ↩

⁵²⁵ Counter-Memorial, ¶ 289. ↩

⁵²⁶ RL-005-ENG, Resolute Forest Products v. Canada, Decision on Jurisdiction and Admissibility, ¶ 326. ↩

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were unlawfully collected by API Quintana Roo from 2007 to 2017.⁵²⁷ Claimant submits that CALICA is the sole concessionaire of the Punta Venado infrastructure entitled to charge the fees, and that the port fees arose from vessels docking at CALICA’s private port terminal.⁵²⁸ In its view, the Mexican Supreme Court affirmed in 2017 that API Quintana Roo has no right to charge the fees in question.⁵²⁹

537. Respondent argues, inter alia, that the fees in question are derechos arising from use of national ports or terminals for public use outside an authorised port (puerto habilitado), obliging payment of a “harbour due”, or deep-sea port fee for vessels entering the port.⁵³⁰

538. Tribunal Question 2 was related to the port fees issue, as follows:

With respect to Claimant’s claim for port fees, are those port fees to be considered (i) port fees (tarifas de puerto) as a service fee; (ii) port duties (derechos de puerto); or (iii) other (see Reply, ¶ 125; Rejoinder, ¶ 310)?

539. Likewise, Tribunal Question 3 asked:

With respect to the Tribunal’s jurisdiction over Claimant’s claim for port fees, what is the relevance, if any, of Respondent’s assertion that Claimant has sought recourse (recursos de revisión fiscal) against the Mexican authorities in relation to those fees (see Rejoinder, ¶ 311)?

540. The Tribunal will examine whether the amount sought by Claimant relates to taxation measures. In the present case, Claimant’s claim would relate to a taxation measure to the extent that the contested port fees implicate “derechos” within the meaning of the Mexican Fiscal Code. This question of Mexican law is a matter of fact to be assessed by the Tribunal, and not a question of law (see ¶ 353 above).

541. The Tribunal considers it established that contributions falling under Article 2 of the Mexican Fiscal Code (Código Fiscal de la Federación) are taxes. Under this provision:⁵³¹

⁵²⁷ Memorial, ¶ 225. ↩

⁵²⁸ C-PHM, ¶ 29, citing Rejoinder, ¶ 423; Atempa Statement, ¶ 17; see Rejoinder, ¶ 281. ↩

⁵²⁹ Memorial, ¶ 67. ↩

⁵³⁰ Counter-Memorial, ¶ 289. ↩

⁵³¹ R-0061-ESP, Federal Tax Code, Art 2(IV). ↩

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Las contribuciones se clasifican en impuestos, aportaciones de seguridad social, contribuciones de mejoras y derechos, las que se definen de la siguiente manera:

. . . .

IV. Derechos son las contribuciones establecidas en Ley por el uso o aprovechamiento de los bienes del dominio público, excepto cuando se presten por organismos descentralizados u órganos desconcentrados cuando en este último caso, se trate de contraprestaciones que no se encuentren previstas en la Ley Federal de Derechos. También son derechos las contribuciones a cargo de los organismos públicos descentralizados por prestar servicios exclusivos del Estado.

542. The Mexican Federal Duties Law (Ley Federal de Derechos) is considered further at ¶ 546 below.

543. The Parties use different and overlapping terminology to describe the relevant port charges. Port duties (derechos de puerto) are levies paid to the Mexican government for the use of national ports or public port terminals and have the character of a tax. Port fees (referred to by Claimant as tarifas de puerto;⁵³² referred to by Respondent as tarifas portuarias⁵³³) are amounts that may be charged by port concessionaires to third parties for using their own infrastructure, and are not a tax. According to Respondent, “tarifa de puerto” (as opposed to tarifa portuaria) is a type of duty for the passage of vessels through territorial sea under Article 200 of the Federal Duties Law.⁵³⁴

544. Respondent’s witness Mr. Atempa explains the difference between port duties and port fees as follows:⁵³⁵

. . . existe una amplia diferencia entre los Derechos de Puerto y las tarifas portuarias, que se puede resumir bajo los siguientes aspectos:

a) Los Derechos de Puerto tienen el carácter de contribuciones. Las tarifas portuarias no son contribuciones, toda vez que son cobros por el uso de infraestructura o la prestación de servicios portuarios;

b) En su carácter de contribuciones, los Derechos de Puerto son propuestos por el Ejecutivo Federal y aprobadas por el Congreso de la Unión. Las tarifas portuarias, en cambio, son establecidas por la

⁵³² C-PHM, Appendix A, Answer to Tribunal Question 2. ↩

⁵³³ Counter-Memorial, ¶ 248. ↩

⁵³⁴ R-RPHM, Annex, ¶ 6. See also Atempa Statement, ¶¶ 9-17, 63. ↩

⁵³⁵ Atempa Statement, ¶ 17. ↩

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SCT conforme a las atribuciones que estipula la LP, a través de las bases de regulación tarifaria, cuando no existen condiciones de competencia razonable;

c) Los Derechos de Puerto se causan por la simple entrada de las embarcaciones a los puertos nacionales o a las terminales de uso público fuera de puerto habilitado. Las tarifas portuarias se originan por el uso de la infraestructura portuaria concesionada mediante un instrumento jurídico como el título de concesión; y

d) La titularidad del cobro y aprovechamiento de los Derechos de Puerto corresponden al Estado Mexicano, el cual está obligado a destinar la totalidad de los ingresos recaudados por este concepto al Fondo de Desarrollo de la Marina Mercante Mexicana. La titularidad del cobro de las tarifas portuarias corresponde a los concesionarios para la recuperación de inversiones en infraestructura o mantenimiento de ella.

545. Leaving aside the different use of terminology by the Parties, the Tribunal would consider the fees in question to be a taxation measure if they were either (i) levies paid to the Mexican government for the use of national ports or public port terminals; or (ii) duties for the passage of vessels through territorial sea. Such fees are both destined for the Mexican State. They are therefore of a character that is part of the regime for the imposition of a tax, and would be a taxation measure under NAFTA Article 2103.

546. Respondent’s position that the “tarifas de puerto” charged by API Quintana Roo are a tax is derived from the Mexican Federal Duties Law (Ley Federal de Derechos). This law sets out the relevant regime for ports in Chapter III, extracted in part as follows:⁵³⁶

Artículo 200. Las personas físicas y morales que usen los puertos nacionales o las terminales de uso público fuera de puerto habilitado, pagarán por cada embarcación en tráfico de altura que entre a los mismos, el derecho de puerto de altura conforme a la cuota de $7.39, por unidad de arqueo bruto o fracción.

Tratándose de embarcaciones que realicen tráfico mixto, se pagará el 90% de la cuota correspondiente al derecho de puerto de altura, por cada puerto o terminal de uso público fuera de puerto habilitado en que entren.

Artículo 200-A. Las personas físicas y morales cuyas embarcaciones entren a los puertos nacionales o a las terminales de uso público fuera de puerto habilitado pagarán, por cada embarcación de altura dedicada

⁵³⁶ R-0054-ESP, Federal Duties Law. ↩

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exclusivamente a actividades turísticas, el derecho de puerto de altura, conforme a la cuota de $3.27, por unidad de arqueo bruto o fracción.

Tratándose de las embarcaciones que realicen exclusivamente actividades turísticas y que en un viaje entren a diversos puertos nacionales, se pagará el 90% de la cuota a que se refiere el párrafo anterior, por cada uno de los puertos o terminales de uso público fuera de puerto habilitado, siguientes al primero.

Artículo 201. Las personas físicas y morales cuyas embarcaciones usen los puertos nacionales o las terminales de uso público fuera de puerto habilitado, pagarán por cada embarcación en tráfico de cabotaje que entre a los mismos, el derecho de puerto de cabotaje conforme a la cuota de $2.35, por unidad de arqueo bruto o fracción.

Las embarcaciones dedicadas exclusivamente a actividades turísticas pagarán el 75% de la cuota del derecho de puerto de cabotaje, por cada puerto o terminal de uso público fuera de puerto habilitado en que entren.

Artículo 201-A.- Los derechos a que se refieren los artículos 200, 200-A y 201 de esta ley se pagarán dentro de los 5 días siguientes a aquél en que entre a puerto la embarcación o previo a su salida, lo que ocurra primero.

Artículo 202.- Por las embarcaciones que atraquen en muelles propiedad de la Federación, por cada hora o fracción mayor de 15 minutos y por cada metro de eslora o fracción, se pagará el derecho de atraque conforme a las siguientes cuotas:

. . . .

Para los efectos de este artículo, se entiende por embarcación comercial cualquiera que se destine a la realización de actos de comercio; por yate, toda embarcación que esté destinada exclusivamente al placer personal de sus propietarios o poseedores, sin perseguir fines de lucro; por embarcación arrejerada, aquella que únicamente utiliza el muelle para ser amarrada, por lo que no atraca en el mismo, o bien sólo hace contacto con él con su proa o su popa por hallarse en posición perpendicular al muelle; y por embarcación local comercial, la que opera únicamente en un puerto y está registrada en el mismo.

El derecho a que se refiere este artículo se pagará previamente al desatraque de las embarcaciones.

Artículo 203.- Las embarcaciones que utilicen dos o más puertos que, por razones geográficas y operativas, se encuentren integrados en una unidad, pagarán el derecho de puerto de altura o el de cabotaje, según sea el caso, únicamente cuando entren al primero de los puertos que formen la unidad.

No se pagará el derecho de puerto por las embarcaciones que salgan de un puerto y regresen al mismo sin haber entrado a otro.

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Las embarcaciones extranjeras que estén autorizadas para realizar el tráfico de cabotaje pagarán el derecho de puerto de cabotaje de conformidad con las cuotas que establece el artículo 201 de esta Ley.

Las autoridades portuarias, antes de expedir el despacho de salida de una embarcación, verificarán el pago correspondiente de los derechos a que se refiere este capítulo.

Artículo 204.- No se pagarán los derechos a que se refiere este capítulo, por las embarcaciones siguientes:

. . . .

Artículo 204-A. La totalidad de los ingresos que se obtengan por la recaudación de los derechos señalados en el presente capítulo, se destinarán al Fondo de Desarrollo de la Marina Mercante Mexicana.

. . . .

Artículo 205.- Los derechos a que se refiere este capítulo no se causarán cuando el uso o aprovechamiento del puerto de que se trata hayan sido concesionados a un administrador portuario.

547. According to Respondent, Article 205 of the Federal Duties Law extracted at ¶ 546 above applied in the present case from 2007 to 2017, during which period API Quintana Roo held a concession at Punta Venado. Respondent argues that pursuant to this Article 205 of the Federal Duties Law, when a port or terminal is concessioned to an API, as was the case for Punta Venado, the relevant duty (derecho) takes the form of a port tariff (tarifa de puerto), without losing its character as a contribution within the meaning of the Mexican Fiscal Code.⁵³⁷

548. In this way, Respondent asserts that Claimant’s claim relates to a port duty (derecho) regulated by Article 200 of the Federal Duties Law.⁵³⁸ However, Article 205 of the Federal Duties Law states that the duties (derechos) referred to in Chapter III of the Federal Duties Law “will not be caused” (no se causarán) when the port has been concessioned to an API. On this basis, the Tribunal is not persuaded that the charges had the character of a derecho.

⁵³⁷ Rejoinder, ¶¶ 281, 310; R-PHM, Annex A, ¶ 15; R-RPHM, Annex A, ¶ 5. ↩

⁵³⁸ R-PHM, Annex A, ¶ 13. ↩

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549. Several items of contemporaneous correspondence from the Mexican authorities include references to the use of port infrastructure as the basis for the fees, rather than a form of duty for the passage of vessels through territorial sea.

550. In this regard, on 9 July 2007, the API Quintana Roo informed CALICA that from 1 July 2007, it would charge a tarifa de puerto to arrivals in Punta Venado for “uso de infraestructura portuaria”.⁵³⁹ In the same letter, one of the stated bases for the tarifa de puerto was Article 40, section X of the Mexican Port Law.⁵⁴⁰ This provision states:⁵⁴¹

Además de los derechos y obligaciones que se establecen para los concesionarios, corresponderá a los administradores portuarios:

. . . .

X. Percibir, en los términos que fijen los reglamentos correspondientes y el título de concesión, ingresos por el uso de la infraestructura portuaria, por la celebración de contratos, por los servicios que presten directamente, así como por las demás actividades comerciales que realicen.

551. The same correspondence relied upon and extracted the relevant provisions of the concession of API Quintana Roo with respect to charges for the use of port infrastructure (uso de infraestructura portuaria).⁵⁴²

552. Two items of correspondence were later annulled by the Mexican courts, being the letters dated 24 July 2007 and 2 July 2009.⁵⁴³ Accordingly, the Tribunal does not place weight on the assessment of the basis for the charges in those letters. In this regard, in response to CALICA’s correspondence disagreeing with the new fee to be charged, on 24 July 2007 (Oficio 7.3.3033.07 05963) the SCT informed CALICA that “es la API de Quintana Roo la única legitimada para cobrar la tarifa de puerto en Punta Venado por ser la concesionaria de dicho lugar”, while “CALICA está facultada para cobrar por el uso de la infraestructura y los servicios concesionados, lo cual es independiente del arribo de las embarcaciones al lugar habilitado como Punta Venado, Quintana Roo, en el mar

⁵³⁹ C-0056-SPA, Quintana Roo Letter to CALICA, 9 July 2007, p. 3. ↩

⁵⁴⁰ C-0055-SPA, Quintana Roo Letter to Agencia Consignataria, 4 July 2007, p. 4. ↩

⁵⁴¹ R-0053-ESP, Ports Law, DOF, Mexico City, 19 July 1993, Art. 40(X). ↩

⁵⁴² C-0055-SPA, Quintana Roo Letter to Agencia Consignataria, 4 July 2007, p. 4. ↩

⁵⁴³ C-0059-SPA, Supreme Court Decision; C-0057-SPA, Letter No. API.DG.GJ.0405.07 from Javier F. Zetina González (State of Quintana Roo) to [Redacted] (CALICA); C-0106-SPA, Decision of the Federal Tribunal on Fiscal and Administrative Matters, D.A. 482/2013-8536, dated 3 September 2014 (“Federal Tribunal Decision, 3 September 2014”). ↩

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territorial de la República Mexicana, por cuyo supuesto la tarifa de puerto no forma parte de la concesión de CALICA”.⁵⁴⁴ The 2 July 2009 letter from the SCT to CALICA refers back to the assessment provided in the letter of 24 July 2007 and was also annulled.⁵⁴⁵

553. Respondent further relies on a communication dated 13 November 2017 (Oficio 7.3.-2729.17 006538) to support the fiscal nature of the charge. This letter was issued to comply with the judgment of the Tribunal Federal de Justicia Fiscal y Administrativa of 3 September 2014 as confirmed by the Mexican Supreme Court on 25 January 2017.⁵⁴⁶ In it, the SCT instructed the captain of the port in Quintana Roo to charge a derecho de puerto to traffic entering “la Terminal de Uso Publico fuera de puerto habilitada y denominada Terminal Punta Venado” under Articles 200 and 201 of the Mexican Duties Law.⁵⁴⁷

554. However, the instruction to charge a port duty from 2017 does not shed light on the nature of the charges in the period 2007 to 2017. In this respect, in a separate letter on the same date the SCT informed CALICA that consistent with the same judgments of 2014 and 2017, the amended concession of API Quintana Roo had been annulled. By consequence, and as noted by Mr. Atempa, the territorial sea of Punta Venado was no longer concessioned to API Quintana Roo and reverted to the status of part of the public domain administered by the Mexican State.⁵⁴⁸ It is therefore not a scenario in which Article 205 of the Mexican Duties Law comes into play.

555. Respondent submits that the fact that tax review appeals have been filed in relation to the validity of the API Quintana Roo’s 2007 concession and the communications of 24 July 2007 and 2 July 2009 creates a presumption of the fiscal nature of the port fees.⁵⁴⁹ As both Parties acknowledged in response to Tribunal Question 3, the recurso de revision fiscal is a procedure available to Mexican authorities against any decision granting an

⁵⁴⁴ C-0057-SPA, SCT Letter to CALICA, 24 July 2007, p. 2. ↩

⁵⁴⁵ C-0058-SPA, SCT Letter to CALICA, 2 July 2009. ↩

⁵⁴⁶ R-RPHM, Annex, ¶ 11, citing JAAL-0015, Letter No. 7.3-2729.17 from Alejandro Hernández Cervantes (SCT) to José Ángel Suarez Vallejo, p. 3. ↩

⁵⁴⁷ JAAL-0015, Letter No. 7.3-2729.17 from Alejandro Hernández Cervantes (SCT) to José Ángel Suarez Vallejo, p. 3. ↩

⁵⁴⁸ Atempa Statement, ¶¶ 56(a), 57. ↩

⁵⁴⁹ Rejoinder, ¶ 311; R-PHM, Annex A, ¶ 17; R-RPHM, Annex, ¶ 14. ↩

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amparo, and is not reserved for tax matters.⁵⁵⁰ Respondent submits that the non-tax matters that could be covered by such a proceeding are not relevant to CALICA’s requests.⁵⁵¹ However, due to the mixed nature of such proceedings the Tribunal is not persuaded that a presumption is created in the manner Respondent contends, and rejects this argument.

556. Respondent further submits that the fiscal character of the charges was taken for granted by the Mexican courts.⁵⁵² In this respect, Respondent refers to the decision of the Tribunal Federal de Justicia Fiscal y Administrativa of 3 September 2014, which describes the question at issue in those proceedings as follows:⁵⁵³

. . . la Litis a dilucidar en el presente Considerando, lo es el determinar, si el Acuerdo de Modificación de Concesión portuaria integral de los puertos de Quintana Roo de 25 de junio de 2007, así como el Oficio número 7.3.3033.07 05963 de fecha 24 de julio de 2007, emitidos por el Director General de Puertos de la Coordinación General de Puertos y Marina Mercante de la Secretaria de Comunicaciones y Transportes, cumplen con la debida fundamentación y motivación para determinar que la empresa Administración Portuaria Integral de Quintana Roo, S.A. de C.V., es la única legitimada para cobrar la tarifa de puerto en Punta Venado.

557. The Tribunal does not find the above summary of the question before the Tribunal Federal de Justicia Fiscal y Administrativa to contain an assumption that the charges had a fiscal character.

558. In light of the foregoing, Respondent has not established to the satisfaction of the Tribunal that, as a matter of Mexican law, the fees charged by API Quintana Roo had the character of a derecho. According to Respondent, the charges are derived from the concession, and in particular, the use of maritime zones which contain infrastructure to facilitate safe entry and navigation through the port, requiring constant maintenance to prevent sedimentation and ensure maneuverability, among other things. Respondent argues that API Quintana Roo is obliged to maintain the concessioned assets.⁵⁵⁴ It does not follow, without further substantiation, that such fees have the character of a derecho. In particular, Respondent

⁵⁵⁰ C-PHM, Appendix A, Tribunal Question 3; R-PHM, Annex A, ¶¶ 17-18. ↩

⁵⁵¹ R-PHM, Annex A, ¶ 18. ↩

⁵⁵² R-RPHM, Annex, ¶ 10, citing C-0106-SPA, Federal Tribunal Decision, 3 September 2014, pp. 213, 250. ↩

⁵⁵³ C-0106-SPA, Federal Tribunal Decision, 3 September 2014, p. 213 of the PDF. ↩

⁵⁵⁴ Rejoinder, ¶¶ 278-288. ↩

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has not established that the fees were charged as a form of a duty for the passage of vessels through territorial sea (see ¶ 543 above).

559. However, and regardless of the Tribunal’s decision on the issue of whether the port fees should properly be classified as a taxation measure, the Tribunal notes that it would find that Claimant’s claim with respect to the port fees is without merit. Specifically, the Tribunal is not satisfied, based on the evidence presented by Claimant, that a Mexican court ordered repayment of the fees in question by API Quintana Roo to CALICA. To the contrary, the Tribunal Federal de Justicia Fiscal y Administrativa dated 3 September 2014 (upheld as binding by the Mexican Supreme Court in its decision of 25 January 2017) directed that the effect of its findings was, among other things, that the SCT was required to issue a new “Amended Agreement” in which it would duly give reasons for its determination that the API Quintana Roo was the only entity entitled to charge the tarifa de puerto in the entirety of the “terminal de uso público fuera de puerto denominada Punta Venado”.⁵⁵⁵

560. While there are pronouncements contained in the Mexican court decisions that refer to CALICA’s entitlement to charge the relevant fees as opposed to API Quintana Roo, those pronouncements stop short of any order to reimburse the fees in question.⁵⁵⁶ Claimant has not established to the satisfaction of the Tribunal that reimbursement of the fees is the legal consequence of those findings or that the findings of the Mexican courts were equivalent to a measure confirming CALICA’s entitlement to the repayment of the fees.

561. As such, the Tribunal finds Claimant’s submission that as “a matter of common sense and Mexican law” API Quintana Roo was obliged to reimburse the fees⁵⁵⁷ to be without merit and rejected by the Tribunal. To the extent that CALICA’s legal action seeking reimbursement of the fees is also relevant to the factual background of Claimant’s other claims, the Tribunal will consider those facts to the extent relevant.⁵⁵⁸

⁵⁵⁵ C-0106-SPA, Federal Tribunal Decision, 3 September 2014, p. 265 of the PDF. ↩

⁵⁵⁶ See C-0106-SPA, Federal Tribunal Decision, 3 September 2014, p. 269 of the PDF: “dicha empresa [i.e., CALICA] es la facultada para seguir cobrando la tarifa de puerto”; C-0059-SPA, Supreme Court Decision, p. 19 of the PDF: “Therefore, the . . . [API Quintana Roo] is not entitled to collect the port fee, with respect to vessels arriving at the geographical área of Punta Venado”. ↩

⁵⁵⁷ Reply, ¶ 116. ↩

⁵⁵⁸ See, e.g., Memorial, ¶ 135; Reply, ¶ 116. ↩

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562. In these circumstances, there can be no breach of NAFTA for failure to comply with a decision of the Mexican Court, as Claimant alleges, and Claimant’s claim is rejected on that basis.

7. Proceedings before any Administrative Tribunal or Court

563. In its C-PHM, Claimant submits that while Respondent emphasized CALICA’s domestic litigation proceedings at the Hearing, this has no bearing on the Tribunal’s jurisdiction. In terms of NAFTA Article 1121 (see ¶ 362 above), Claimant contends that such proceedings are expressly permitted as they do not involve claims for compensatory damages.⁵⁵⁹

564. In response, Respondent asserts that it never argued that CALICA’s legal proceedings before Mexican administrative tribunals or courts are inconsistent with the exemptions required by NAFTA.⁵⁶⁰ In Respondent’s view, the remedies pursued by Claimant before Mexican courts and tribunals undermine its claim of denial of fair and equitable treatment and risks unjust enrichment.⁵⁶¹

565. In the circumstances, the Tribunal does not consider any issue to arise with respect to its jurisdiction in relation to CALICA’s proceedings in Mexican courts or administrative tribunals. The Tribunal confirms that pursuant to NAFTA Article 1121, Claimant and CALICA have:

. . . waive[d] their right to initiate or continue before any administrative tribunal or court under the law of any Party, or other dispute settlement procedures, any proceedings with respect to the measure of the disputing Party that is alleged to be a breach referred to in Article 1116 [and 1117], except for proceedings for injunctive, declaratory or other extraordinary relief, not involving the payment of damages, before an administrative tribunal or court under the law of the disputing Party.

566. Since there is no assertion that the proceedings brought by CALICA are inconsistent with this provision, the Tribunal is satisfied that Claimant has provided and complied with the necessary waiver required by NAFTA.

⁵⁵⁹ C-PHM, ¶ 20; see 2021 Hearing Transcript (Spanish), Day 1, 228:4-229:14, 243:5-244:14; RD-0001, Respondent’s Opening Presentation, slides 28, 72. ↩

⁵⁶⁰ R-RPHM, ¶ 17. ↩

⁵⁶¹ R-RPHM, ¶ 18. ↩

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567. Despite the above, the issue of proceedings brought by CALICA will be addressed as relevant to the arguments made by Respondent on the merits of Claimant’s claims (see ¶¶ 1177 et seq. below).

8. Ancillary Claim

568. Respondent objects to this NAFTA Tribunal’s jurisdiction over the ancillary claim on the basis that NAFTA ceased to be in force as of 1 July 2020, and was superseded by the USMCA.⁵⁶² At the Hearing on the Ancillary Claim, Respondent further raised an issue as to whether Claimant holds a “legacy investment” within the meaning of Annex 14-C to the USMCA,⁵⁶³ i.e., “an investment . . . established or acquired between January 1, 1994, and the date of termination of NAFTA 1994, and in existence on the date of entry into force of this Agreement”.⁵⁶⁴ The Tribunal considers this issue to be a part of Respondent’s jurisdictional objection on the ancillary claim related to Annex 14-C of the USMCA.

569. The Tribunal will first consider the implications of PO7 for its jurisdiction over the ancillary claim. The Tribunal will then turn to the question whether Claimant holds a “legacy investment” within the meaning of Annex 14-C to the USMCA, before addressing other issues, as relevant.

(a) Implications of PO7

570. In Claimant’s view, the Tribunal already made a positive finding of jurisdiction over the ancillary claim in PO7.⁵⁶⁵ Claimant further disagrees with Respondent’s argument based on the USMCA.⁵⁶⁶

571. By PO7, the Tribunal permitted Claimant to present the ancillary claim.⁵⁶⁷ This permission was granted pursuant to Article 46 of the ICSID Convention and ICSID Arbitration Rule 40, which require an incidental or additional claim or counterclaim to

⁵⁶² Counter-Memorial AC, ¶ 407. ↩

⁵⁶³ 2023 Hearing Transcript (English), Day 1, 130:18-131:6. ↩

⁵⁶⁴ C-0314-ENG, USMCA, Annex 14-C, ¶ 6(a). ↩

⁵⁶⁵ Memorial AC, ¶ 90, citing PO7, ¶ 150, citing C-0279-SPA, Mining Panorama Report 2021, pp. 29-32. ↩

⁵⁶⁶ Memorial AC, ¶ 114. ↩

⁵⁶⁷ PO7, ¶ 160(b). ↩

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be “within the scope of the consent of the parties and . . . otherwise within the jurisdiction of the Centre.”

572. In this respect, PO7 noted that the ancillary claim was to be considered in conjunction with the original claim, and that the requirements of written notice of a claim, the expiry of a six-month period and the investor’s consent and waiver are covered by compliance with those requirements in relation to the original claim.⁵⁶⁸ The Tribunal further stated that it “otherwise considers the ancillary claim to be within the scope of the consent of the Parties and within the jurisdiction of the ICSID”.⁵⁶⁹

573. PO7 further specified that “consideration of the ancillary claim [would] be carried out respecting due process for both sides, including at a minimum further written submissions and evidence, and not based on the observations made to date”.⁵⁷⁰

574. This issue was the subject of a Tribunal question to the Parties, asking (i) whether any of the Tribunal’s findings in PO7 can be revised in light of the arguments regarding the USMCA raised by Respondent and by Claimant subsequent to the issuance of PO7; and (ii) what are the implications, if any, of the fact that Respondent brought its jurisdictional objection based on the supersession of NAFTA by the USMCA together with its Counter-Memorial on the Ancillary Claim of 19 December 2022.⁵⁷¹

575. Respondent contends that the Tribunal may review PO7, but it is not necessary to do so, taking into account that PO7 was limited to ruling on the application for leave to file the ancillary claim.⁵⁷² In its view, its objection was raised timely with the Counter-Memorial on the Ancillary Claim, consistent with ICSID Arbitration Rule 41.⁵⁷³ Respondent further relies on the case of The Lopez Goyne Family Trust which found that case-law and academic literature largely endorse the view that tribunals must address jurisdictional objections irrespective of when they were raised.⁵⁷⁴

⁵⁶⁸ PO7, ¶ 149. ↩

⁵⁶⁹ PO7, ¶ 150. ↩

⁵⁷⁰ PO7, ¶ 157. ↩

⁵⁷¹ Tribunal Questions to the Parties dated 23 August 2023, ¶ 1. ↩

⁵⁷² R-PHM AC, ¶ 13. See also Counter-Memorial AC, ¶ 414. ↩

⁵⁷³ R-PHM AC, ¶ 16. ↩

⁵⁷⁴ R-PHM AC, ¶ 17, citing CL-0243-ENG, Lopez Goyne v. Nicaragua, Award, ¶ 364. ↩

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576. Claimant argues that the Tribunal’s finding of jurisdiction in PO7 was correctly and definitively determined. Since Respondent was aware of the USMCA in May and June 2022, for Claimant there is no new fact nor exceptional circumstance that would justify reconsideration of PO7.⁵⁷⁵

577. Claimant further submits that the finding with respect to jurisdiction in PO7 should not be reconsidered, on the basis that Respondent cannot unilaterally withdraw its consent once perfected. The principle of res judicata additionally counsels against revising PO7, in its view.⁵⁷⁶ According to Claimant, Respondent previously argued its case on the basis that NAFTA governs the Tribunal’s jurisdiction over the ancillary claim, confirming the Parties’ understanding that NAFTA is the law applicable to the ancillary claim.⁵⁷⁷

578. On this point, Respondent submits that Claimant is confusing the Parties’ consent to arbitration and the law applicable to the merits of a dispute.⁵⁷⁸ It argues that the Tribunal’s jurisdiction is governed by USMCA Annex 14-C.⁵⁷⁹ For Respondent, its consent is set out in the investment treaty and cannot be modified unilaterally, rendering Claimant’s argument that it accepted jurisdiction under NAFTA by its written submissions to be meritless.⁵⁸⁰

579. The Tribunal agrees with Respondent that PO7 was issued for the purpose of admitting the ancillary claim in this arbitration. In this Award, the Tribunal does not revisit or reconsider that determination. To the extent that the Tribunal found, at the time of PO7, that the ancillary claim was within the scope of the consent of the Parties and within the jurisdiction of the ICSID, that finding was for the purpose of admitting the claim, and is necessarily subject to the rest of the Tribunal’s directions in PO7, as well as the ICSID Convention and ICSID Arbitration Rules. In this respect, PO7 specified that due process would be respected, giving the Parties the opportunity to make further submissions in relation to the ancillary claim (see ¶ 573 above).

⁵⁷⁵ C-PHM AC, ¶ 102; C-RPHM AC, ¶ 6. ↩

⁵⁷⁶ C-PHM AC, ¶ 96; C-RPHM AC, ¶ 7. ↩

⁵⁷⁷ C-PHM AC, ¶ 98; C-RPHM, ¶ 8. See also C-RPHM, ¶¶ 9-10. ↩

⁵⁷⁸ R-PHM AC, ¶ 21. ↩

⁵⁷⁹ R-PHM AC, ¶ 24. ↩

⁵⁸⁰ R-PHM AC, ¶ 25, citing RL-0242-ENG, Zachary Douglas, The International Law of Investment Claims (Cambridge University Press 2009), p. 141. ↩

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580. ICSID Arbitration Rule 41(1) sets out that an objection to jurisdiction over an ancillary claim is, in principle, to be filed no later than the filing of the rejoinder:

[a]ny objection that the dispute or any ancillary claim is not within the jurisdiction of the Centre or, for other reasons, is not within the competence of the Tribunal shall be made as early as possible. A party shall file the objection with the Secretary-General no later than the expiration of the time limit fixed for the filing of the counter-memorial, or, if the objection relates to an ancillary claim, for the filing of the rejoinder – unless the facts on which the objection is based are unknown to the party at that time.

581. In the present case, the ancillary claim was not yet admitted at the time of Respondent’s Rejoinder on the original claims. As such, the basis for the objection was unknown to Respondent at that time.

582. Claimant correctly points out that Respondent could still have raised the objection earlier, since the issue of the USMCA superseding NAFTA was already known to it at the time of its submissions in relation to the admission of the ancillary claim. However, the Tribunal considers that Respondent has still respected the time limit in ICSID Arbitration Rule 41(1). Taking into account the procedural calendar for the filing of submissions in relation to the ancillary claim, Respondent’s objection to the Tribunal’s jurisdiction with the Counter-Memorial on the Ancillary Claim is timely. In this regard, Respondent’s objection is not precluded by the Tribunal’s directions in PO7 in the context of the admission of the ancillary claim.

583. Nor is it precluded by Respondent’s own prior submissions which appear to acknowledge NAFTA as the basis for the Tribunal’s jurisdiction over the ancillary claim. In this respect, Claimant argues that those submissions record a mutual agreement between the disputing parties on the applicable law, and a consent to arbitrate the ancillary claim under NAFTA, which cannot be unilaterally withdrawn by Mexico and which the Tribunal is bound to respect.⁵⁸¹ Claimant clarifies that it is not arguing consent by estoppel.⁵⁸² The Tribunal agrees with Respondent that its submissions do not modify its consent pursuant to a treaty, or by extension the Tribunal’s jurisdiction. The Tribunal is not persuaded that by making those submissions, Respondent deprived itself of the opportunity to present

⁵⁸¹ C-PHM AC, ¶¶ 7, 105. ↩

⁵⁸² C-RPHM AC, ¶ 8. ↩

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its jurisdictional objection in accordance with ICSID Arbitration Rule 41(1), as it is common practice in ICSID cases.

584. The Tribunal does not consider the principle of res judicata to prevent it from considering Respondent’s jurisdictional objection either. The directions in PO7 were not issued as a decision or an award, and the cases relied on by Claimant therefore do not assist it on this point.⁵⁸³

585. The Tribunal further notes that Claimant had the opportunity to make written and oral submissions on Respondent’s jurisdictional objection in its Reply on the Ancillary Claim, at the Hearing on the Ancillary Claim and Jurisdiction and Admissibility of the Counterclaim, and in two rounds of post-hearing submissions, which include responses to the Tribunal’s questions related to this objection. This included the opportunity to respond to Respondent’s argument that Claimant does not hold a “legacy investment” within the meaning of USMCA Annex 14-C, which was raised at the Hearing on the Ancillary Claim and Jurisdiction and Admissibility of the Counterclaim.⁵⁸⁴

(b) Whether Claimant Holds a Legacy Investment

586. The Tribunal will now decide on Respondent’s objection that Claimant does not hold a “legacy investment” within the meaning of USMCA Annex 14-C, i.e., “an investment . . . established or acquired between January 1, 1994, and the date of termination of NAFTA 1994, and in existence on the date of entry into force of [the USMCA]”.⁵⁸⁵ The Tribunal recalls that Claimant’s ancillary claim only concerns its quarrying site at La

⁵⁸³ See CL-0290-ENG, Waste Management, Inc. v. United Mexican States (II), ICSID Case No. ARB(AF)/00/3, Decision of the Tribunal on Mexico’s Preliminary Objection concerning the Previous Proceedings, 26 June 2002, ¶ 45; CL-0291-ENG, Landesbank Baden-Württemberg et al. v. Kingdom of Spain, ICSID Case No. ARB/15/45, Decision on the “Intra-EU” Jurisdictional Objection, 25 February 2019, ¶¶ 34-37; CL-0061-ENG, RREEF Infrastructure (G.P.) Limited and RREEF Pan-European Infrastructure Two Lux S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30, Decision on Responsibility and on the Principles of Quantum, 30 November 2018, ¶ 209; CL-0288-ENG, JSC Tashkent Mechanical Plant and others v. Kyrgyz Republic, ICSID Case No. ARB(AF)/16/4, Award, 17 May 2023, ¶ 437; CL-0292-ENG, Jan Oostergetel and Theodora Laurentius v. The Slovak Republic, UNCITRAL, Final Award, 23 April 2012, ¶ 135. See also C-PHM AC, ¶ 101; R-RPHM AC, ¶ 13. ↩

⁵⁸⁴ It is noted that, in Respondent’s view, the argument regarding whether Claimant holds a “legacy investment” was raised prior to the Hearing on the Ancillary Claim and Jurisdiction and Admissibility of the Counterclaim, in the Rejoinder-AC, ¶¶ 278-279. While at Rejoinder-AC, ¶ 279, Respondent mentions that “Legacy comenzó su inversion en CALICA antes de que existiera el TLCAN”, the Tribunal does not find an argument made that Claimant did not hold a “legacy investment” under USMCA Annex 14-C. See 2023 Hearing Transcript (English), 187:15-188:3 (Tribunal Question to Respondent). ↩

⁵⁸⁵ C-0314-ENG, USMCA, Annex 14-C, ¶ 6(a). ↩

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Rosita and its operations at Punta Venado, and not the quarrying sites at El Corchalito or La Adelita, which are in a different Municipality and subject to a different authorization.⁵⁸⁶

587. The legacy investment issue was the subject of two related Tribunal questions to the Parties: (i) is Claimant’s investment in La Rosita a “legacy investment” for the purpose of USMCA Annex 14-C?; and (ii) is an investment made prior to 1994 an investment for the purpose of Chapter 11 of NAFTA?⁵⁸⁷

588. For Respondent, the USMCA parties decided to limit the scope of application of USMCA Annex 14-C to an investment acquired or established from the date of entry into force of NAFTA, rather than maintaining the scope of note 39 to NAFTA.⁵⁸⁸ NAFTA note 39 provides that Chapter 11 “covers investments existing on the date of entry into force of this Agreement as well as investments made or acquired thereafter”.⁵⁸⁹

589. In Respondent’s view, La Rosita and Punta Venado were established in 1986 under the 1986 Investment Agreement and were acquired through sales and purchases in 1986 and 1987.⁵⁹⁰ Respondent cites Claimant’s account that by 1991, it had completed construction of a state-of-the-art processing plant in La Rosita and the first year of production was in 1990.⁵⁹¹ According to Respondent, a corporate restructuring of Claimant in 2015 is not sufficient to evade the definition of a legacy investment.⁵⁹²

590. Claimant submits that investments in existence when NAFTA entered into force are investments for the purpose of NAFTA Chapter 11, as per note 39 to NAFTA. In its view, it would be illogical and inconsistent with the purpose of the USMCA if Annex 14-C included only one category of NAFTA Chapter 11 protected investments and excluded others.⁵⁹³

⁵⁸⁶ Memorial AC, ¶¶ 3-8. ↩

⁵⁸⁷ Tribunal Questions to the Parties dated 23 August 2023, ¶ 2. ↩

⁵⁸⁸ R-PHM AC, ¶ 19. See CL-0297-ENG, Notes to NAFTA text, 1 January 1992. ↩

⁵⁸⁹ CL-0297-ENG, Notes to NAFTA text, p. 8 of the PDF, Note 39. ↩

⁵⁹⁰ R-PHM AC, ¶ 20, citing C-0029-SPA, Punta Venado Title Deed; C-0030-SPA, La Rosita Title Deed. ↩

⁵⁹¹ R-PHM AC, ¶ 20, citing Memorial, ¶ 12; Memorial, ¶ 5; Chodorow First Report, ¶ 41; Memorial AC, ¶ 13. ↩

⁵⁹² R-RPHM AC, ¶ 16. ↩

⁵⁹³ C-PHM AC, ¶ 112, citing CL-0297-ENG, Notes to NAFTA text, Note 39; C-0319-ENG, USMCA, Art. 34.1(1); C-0318-ENG, USMCA, Preamble. See also C-PHM AC, ¶ 114; C-RPHM AC, ¶ 14. ↩

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591. Claimant contends that it fully acquired its investment in La Rosita after 1 January 1994, and that the investment existed as at 1 July 2020. While the Project was launched in the late 1980s, prior to NAFTA, Claimant asserts that it acquired all rights and obligations from Legacy Vulcan Corporation in 2015.⁵⁹⁴

592. The Tribunal shall interpret the language of NAFTA, the Protocol Replacing NAFTA and the USMCA (in particular, paragraph 6(b) of Annex 14-C thereof) in good faith in accordance with the ordinary meaning to be given to their terms in their context and in the light of the object and purpose of the treaties, as per Article 31 of the VCLT.

593. It is undisputed that NAFTA has been superseded by the USMCA, which entered into force on 1 July 2020.⁵⁹⁵

594. The parties to the USMCA decided to put in place a transitional regime with respect to legacy investment claims and pending claims that would provide a level of continuity between the NAFTA and USMCA regimes. In that respect, the Protocol Replacing NAFTA specifies that the USMCA shall supersede NAFTA “without prejudice to those provisions set forth in the USMCA that refer to provisions of the NAFTA.”⁵⁹⁶

595. USMCA Annex 14-C sets out the specific regime for “legacy investment claims and pending claims.” The relevant provisions are set out at ¶¶ 371 et seq. above. Those provisions of USMCA Annex 14-C refer to NAFTA.

596. The question of NAFTA arbitrations pending at the time NAFTA was terminated is addressed in paragraph 5 of USMCA Annex 14-C, stating that an arbitration commenced while NAFTA was in force “may proceed to its conclusion” (see ¶ 375 above). Claimant argues on the basis of this provision that because this arbitration was commenced in December 2018, before the entry into force of the USMCA, it may proceed to its conclusion.⁵⁹⁷ This is of no assistance to Claimant, because paragraph 5 states that “the Tribunal’s jurisdiction with respect to such a claim is not affected by the termination of

⁵⁹⁴ C-PHM AC, ¶ 109, citing, inter alia, [Redacted] First Statement, ¶¶ 13, n. 1, 26; Memorial, ¶ 17, n. 2; Reply AC, ¶ 119; C-0046-ENG, Vulcan Form 10-K 2001. See also C-PHM AC, ¶ 111. ↩

⁵⁹⁵ Counter-Memorial AC, ¶ 407; Reply AC, ¶ 116. ↩

⁵⁹⁶ C-0313-ENG, Protocol Replacing NAFTA, Art. 1. ↩

⁵⁹⁷ Claimant’s Comments on the Second Article 1128 Submission of the United States of America and the 30 June 2023 Letter of Mr. Quetzal Tzab, ¶¶ 32-33. ↩

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NAFTA 1994” (emphasis added). The Tribunal understand the words “such a claim” to refer to the original claims submitted to the Tribunal, i.e., the “arbitration initiated pursuant to the submission of a claim…” It thus does not answer the question of jurisdiction over an ancillary claim filed after the termination of NAFTA in a case that was initiated prior to the termination of NAFTA.

597. Paragraph 1 of USMCA Annex 14-C provides the USMCA Contracting Parties’ consent to submit claims “with respect to a legacy investment” to arbitration under Section B of Chapter 11 of NAFTA, in relation to an alleged breach of Section A of Chapter 11 of NAFTA (see ¶ 371 above). The consent expires three years after the termination of NAFTA, i.e., 1 July 2023.⁵⁹⁸ A legacy investment is one established between 1 January 1994 and the date of termination of NAFTA.⁵⁹⁹

598. Paragraph 4 of USMCA Annex 14-C provides that arbitrations initiated pursuant to paragraph 1 may also proceed to their conclusion, unaffected by the expiration of consent referred to in paragraph 3 (see ¶ 374 above).

599. In relation to the definition of a legacy investment, the Tribunal is not persuaded that USMCA Annex 14-C incorporates or follows the temporal approach to investments under NAFTA note 39, as the language of Annex 14-C does not support that interpretation. Annex 14-C covers legacy investments “established or acquired between January 1, 1994, and the date of termination of NAFTA 1994”.⁶⁰⁰ It does not adopt the wording of NAFTA note 39 which provides that Chapter 11 “covers investments existing on the date of entry into force of this Agreement as well as investments made or acquired thereafter”.⁶⁰¹ Importantly, the words “existing on the date of entry into force” of NAFTA are missing from Annex 14-C. The Contracting Parties to the USMCA agreed on a specific, narrower definition of legacy investments to which the extended protection of Annex 14-C would apply. The Tribunal must interpret the treaty language in good faith, and it is not for the Tribunal to rewrite that agreement, or to second-guess it. The Tribunal cannot give effect to an unexpressed intention of the USMCA Contracting Parties by implying a broader

⁵⁹⁸ C-0314-ENG, USMCA, Annex 14-C, ¶ 3. ↩

⁵⁹⁹ C-0314-ENG, USMCA, Annex 14-C, ¶ 6(a). ↩

⁶⁰⁰ C-0314-ENG, USMCA, Annex 14-C, ¶ 6(a). ↩

⁶⁰¹ CL-0297-ENG, Notes to NAFTA text, Note 39. ↩

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definition of covered investments that is not in the text. In this regard, the rules on treaty interpretation are rooted in a textualist approach.

600. While nothing turns on this in the present case, the Tribunal observes that notes which do not appear in the text of a treaty but accompany it (without constituting an annex), and equally footnotes that do appear as notes in the text of a treaty but not in the main text, are to be given effect in accordance with the intentions of the parties to a treaty, even if it is not the most elegant form of treaty drafting.

601. Being a limited extension of the protections provided under NAFTA beyond its termination, the Tribunal does not find it illogical or inconsistent with the object and purpose of the USMCA that a different and narrower temporal scope of protection would apply under Annex 14-C as compared to NAFTA. In this respect, the Preamble to the USMCA resolves to establish a “clear, transparent, and predictable legal and commercial framework for business planning, that supports further expansion of trade and investment.”⁶⁰² There are many ways to achieve that purpose, and the clear regime set out in Annex 14-C is the manner agreed upon by the Contracting Parties to the USMCA.

602. To the extent that Claimant would consider its protection under NAFTA Chapter 11 to have abruptly expired under this interpretation, depriving it of an opportunity to reconfigure or reconsider its investments (being an argument that Claimant made primarily in relation to the expiration of substantive protections),⁶⁰³ the Tribunal does not consider that a basis for a different interpretation of the plain language of the treaty.

603. The ordinary meaning of the words “established or acquired” in Annex 14-C to the USMCA refers to the stage of initiating or obtaining an investment, as opposed to expanding or restructuring an existing investment. This language is also to be distinguished from an investment “made” in a certain period, which would be capable of referring more generally to ongoing or additional investments. The Tribunal therefore

⁶⁰² C-0318-ENG, USMCA, Preamble. ↩

⁶⁰³ See Reply AC, ¶ 126, citing CL-0141-ENG, Vienna Convention on the Law of Treaties, 1155 U.N.T.S. 331, 23 May 1969 (“VCLT”), Art. 31(1)-(2), citing C-0317-ENG, NAFTA, Preamble, citing C-0318-ENG, USMCA, Preamble; Reply AC, ¶ 127, citing, inter alia, CL-0206-ENG, Frédéric G. Sourgens, Chapter 15: Living on a Prayer: Termination of Intra-EU BITs and the Law of Treaties, in THE VIENNA CONVENTION ON THE LAW OF TREATIES IN INVESTOR-STATE DISPUTES: HISTORY, EVOLUTION AND FUTURE (E. Shirlow, K. Gore eds. 2022), p. 325. ↩

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understands the protection of Annex 14-C to the USMCA to be granted in respect of investments that are started (“established”) or obtained (“acquired”) between 1 January 1994 and the termination of NAFTA on 1 July 2020.

604. In the ancillary claim, Claimant seeks protection of its investments in La Rosita and Punta Venado. As set out in Claimant’s own submissions and evidence, the timeline for the establishment of those investments is as follows:

• 6 August 1986: CALICA and Respondent entered into the Investment Agreement.⁶⁰⁴
• 1986-1987: CALICA “acquired and developed the lots that additionally comprised the Project – La Rosita and Punta Venado”.⁶⁰⁵ A Mexican subsidiary of CALICA acquired the lots and leased them to CALICA.⁶⁰⁶ CALICA received a permit and the CALICA Port Concession authorizing the construction and use of a port terminal in Punta Venado.⁶⁰⁷
• Mid-1987: site preparation at La Rosita was underway.⁶⁰⁸
• 1989: dredging of the harbour at Punta Venado was completed.⁶⁰⁹ Approximately 75,000 tons of crushed stone base material were produced at La Rosita by a temporary processing plant.⁶¹⁰
• January-February 1990: CALICA commenced port operations, making the first shipments to sales yards in the United States. Over 1.8 million tons were shipped in 1990.⁶¹¹

⁶⁰⁴ Memorial AC, ¶ 10; Memorial, ¶ 25; C-0010-SPA, Investment Agreement. ↩

⁶⁰⁵ Memorial AC, ¶ 10, citing C-0029-SPA, Punta Venado Title Deed, p. 8; C-0030-SPA, La Rosita Title Deed, p. 3. ↩

⁶⁰⁶ Memorial, ¶ 29, citing C-0029-SPA, Punta Venado Title Deed; C-0030-SPA, La Rosita Title Deed. ↩

⁶⁰⁷ C-0028-SPA, Project No. 28/86 Provisional Permit. See Memorial, ¶ 29. ↩

⁶⁰⁸ [Redacted] First Statement, ¶ 16. ↩

⁶⁰⁹ [Redacted] First Statement, ¶ 16. ↩

⁶¹⁰ [Redacted] First Statement, ¶ 17. ↩

⁶¹¹ [Redacted] First Statement, ¶ 18; Memorial, ¶ 30. ↩

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• Early 1991: construction of a permanent processing plant in La Rosita was commenced and a Panamax vessel was acquired and converted into a self-unloading vessel.⁶¹²
• 1991: CALICA’s private port terminal was completed, the state-of-the-art permanent processing plant began operations, and the initial sales yards in the United States were ready. Shipments from CALICA to the United States in 1991 were 2.5 million tons.⁶¹³
• October 1992: A second Panamax class bulk carrier purchased for conversion into a self-unloading vessel was placed in service.⁶¹⁴

605. From the above timeline, it is clear that as at 1 January 1994, Claimant’s investments in La Rosita and Punta Venado were mature, in the sense that the quarrying and shipping activities were underway at those sites and were producing revenue. In these circumstances, the Tribunal considers it artificial to describe Claimant’s investment as having been “established or acquired” thereafter.

606. After 1 January 1994 Claimant did expand its investments. In 2015, for example, Claimant invested [Redacted] for a supplemental processing plant at La Rosita.⁶¹⁵ However, the Tribunal considers this to be an expansion of an existing investment and not the establishment or acquisition of an investment within the meaning of USMCA Annex 14-C, paragraph 6(b).

607. Claimant’s primary argument is that it acquired all rights and obligations relating to the Project from Legacy Vulcan Corporation in 2015. As described by Claimant:⁶¹⁶

At the time Legacy Vulcan started investing in Mexico, the company was called Vulcan Materials Company and was organized under the laws of the State of New Jersey, United States. In 2007, as part of a merger, Vulcan Materials Company was renamed Legacy Vulcan Corp. and became a subsidiary of a newly formed parent company named Vulcan Materials

⁶¹² [Redacted] First Statement, ¶ 19. ↩

⁶¹³ [Redacted] First Statement, ¶¶ 19-20; Memorial, ¶ 30; Memorial AC, ¶ 13. ↩

⁶¹⁴ [Redacted] First Statement, ¶ 20. ↩

⁶¹⁵ C-0089-ENG, Authorization for Expenditure (AFE) Project Description, Plant 4511 Sac Tun, MX, Supplemental Plant, dated 24 April 2015 (“AFE Project Description”); [Redacted] First Statement, ¶ 54. ↩

⁶¹⁶ Memorial, ¶ 17, n. 2. ↩

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Company that was organized under the laws of the State of New Jersey, United States. In 2015, Legacy Vulcan Corp. was merged into Legacy Vulcan, a limited liability company.

608. It would be inaccurate to describe the 2015 merger of Legacy Vulcan Corp. into Legacy Vulcan LLC as an acquisition, in the sense of Claimant “obtaining” an investment that it did not previously own. The Tribunal agrees with Respondent that this transaction was rather a corporate restructuring.

609. Claimant itself does not emphasise the 2001 acquisition of Grupo ICA’s share in the joint venture by Legacy Vulcan Corporation.⁶¹⁷ In any event, the Tribunal considers this to be another expansion of an existing investment and not the establishment or acquisition of an investment within the meaning of USMCA Annex 14-C, paragraph 6(b).

610. While the Tribunal accepts that the establishment of an investment is a process, often composed of a number of transactions and activities, the Tribunal is unable to disregard the specific language of Annex 14-C to the USMCA on the scope of protection of legacy investments. Claimant’s investments in La Rosita and Punta Venado were not established or acquired between 1 January 1994 and 1 July 2022.

611. In light of the above, the Tribunal does not have jurisdiction over the ancillary claim.

612. In light of this finding, the Tribunal does not consider it necessary to address Respondent’s additional arguments that USMCA Annex 14-C does not extend the substantive protections of NAFTA, but only the procedural right to make a claim based on events while NAFTA was in force,⁶¹⁸ or that the ancillary claim is inadmissible on the basis of the “unclean hands” doctrine,⁶¹⁹ both of which were opposed by Claimant.⁶²⁰

9. Counterclaim

613. In its directions of 10 March 2023, the Tribunal deferred its decision on its jurisdiction over and the admissibility of the counterclaim. In accordance with Articles 41 and 46 of the ICSID Convention (see ¶¶ 368 and 369 above) and Rules 40 and 41 of the ICSID

⁶¹⁷ See C-PHM AC, ¶ 109, n. 304. ↩

⁶¹⁸ R-PHM AC, ¶ 21. ↩

⁶¹⁹ See Counter-Memorial AC, ¶¶ 394-399; Rejoinder AC, ¶¶ 288-301. ↩

⁶²⁰ See, inter alia, Memorial AC, ¶ 114; Reply AC, ¶¶ 138-141. ↩

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Arbitration Rules, the Tribunal joined the question of the admissibility and jurisdiction over the counterclaim to the merits of the counterclaim, to be decided in the final award. By agreement of the Parties, on 13 April 2023, the question of the admissibility of and jurisdiction over the counterclaim was subsequently bifurcated from the merits and quantum of the counterclaim, if any.

614. Accordingly, the Tribunal now decides on its jurisdiction over and the admissibility of the counterclaim. For the avoidance of doubt, Respondent’s counterclaim was not already admitted on 10 March 2023, but Respondent’s request for leave to brief the Tribunal on the counterclaim was granted.⁶²¹ For the purposes of the present analysis, the Tribunal assumes, without deciding, that counterclaims by respondent States against investors fall within the scope of, and is permitted by, NAFTA Chapter 11. The Tribunal takes no position on this point because, for other reasons, the counterclaim in this case is inadmissible.

615. The Tribunal will first address the implications of its finding on jurisdiction over the ancillary claim for Respondent’s counterclaim, as well as the timeliness of the counterclaim, before turning to other issues as necessary.

(a) Criteria for Jurisdiction over and Admissibility of the
Counterclaim

616. In ¶ 160 of PO7, the Tribunal decided to defer “any decision on any counterclaim to be presented by Respondent . . . to a reasoned application for leave by Respondent.” With reference to this direction, the Tribunal subsequently asked the Parties two questions:

12. Is Respondent’s counterclaim directed against Claimant’s original claim and/or against Claimant’s ancillary claim? Was it brought timely with respect to each, as applicable?

13. Is the Tribunal’s jurisdiction over Respondent’s counterclaim contingent on the Tribunal having jurisdiction over Claimant’s ancillary claim?

a. Assuming, without deciding, that the Tribunal has no jurisdiction over Claimant’s ancillary claim, does this have as a consequence that the Tribunal does not have jurisdiction over Respondent’s counterclaim?

⁶²¹ See Counterclaim Memorial on Jurisdiction, ¶ 202. ↩

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617. According to Claimant, if the Tribunal lacks jurisdiction over the ancillary claim, it also lacks jurisdiction over the counterclaim, since the counterclaim must be closely related to the primary claim and based on the same investment treaty that gives rise to the primary claim.⁶²² In its view, if the Tribunal adopts Respondent’s view that NAFTA obligations terminated in July 2020, then the cause of action on which Respondent bases its counterclaim likewise terminated before that date.⁶²³ Claimant asserts that Respondent has not made any claim that the Tribunal would have jurisdiction over its counterclaim under the USMCA.⁶²⁴

618. In Respondent’s view, the Tribunal’s jurisdiction over the counterclaim does not depend on its jurisdiction over the ancillary claim. It argues that the only requirement is that there be a factual connection between the counterclaim and the dispute under ICSID Arbitration Rule 40.⁶²⁵ Because the counterclaim arises out of the investment, Respondent submits that there is a factual connection to the original claim. On this basis, Respondent contends that the counterclaim can survive even if the Tribunal decides that it does not have jurisdiction over the ancillary claim.⁶²⁶

619. Assuming, without deciding, that a respondent State may make a counterclaim under NAFTA (which is a disputed issue), the admission of such a counterclaim in this arbitration and the Tribunal’s jurisdiction over it would be governed by the provisions of NAFTA, the ICSID Convention, and the ICSID Arbitration Rules.

620. ICSID Convention Article 46 provides:

Except as the parties otherwise agree, the Tribunal shall, if requested by a party, determine any incidental or additional claims or counterclaims arising directly out of the subject-matter of the dispute provided that they are within the scope of the consent of the parties and are otherwise within the jurisdiction of the Centre.

⁶²² C-PHM AC, ¶ 155; Response on Counterclaim, ¶¶ 159, 164-168; 2023 Hearing Transcript (English), Day 1, 178:12-179:11 (Claimant’s Opening Statement). See also C-PHM AC, ¶ 157, citing RL-0171-ENG, Metal-Tech v. Uzbekistan, Award, ¶ 413. ↩

⁶²³ C-RPHM AC, ¶ 67. ↩

⁶²⁴ C-RPHM AC, ¶ 68, n. 186. ↩

⁶²⁵ R-PHM AC, ¶ 38. ↩

⁶²⁶ R-PHM AC, ¶ 39, citing RL-0208-ENG, Oxus Gold v. Uzbekistan, Final Award, ¶ 954; RL-0121-ENG, Tethyan Copper Company Pty Limited v. Islamic Republic of Pakistan, ICSID Case No. ARB/12/1, Decision on Jurisdiction and Liability, 10 November 2017, ¶ 1414. ↩

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621. ICSID Arbitration Rule 40, paragraphs (1) and (2) further provide as follows:

(1) Except as the parties otherwise agree, a party may present an incidental or additional claim or counter-claim arising directly out of the subject-matter of the dispute, provided that such ancillary claim is within the scope of the consent of the parties and is otherwise within the jurisdiction of the Centre.

(2) An incidental or additional claim shall be presented not later than in the reply and a counter-claim no later than in the counter-memorial, unless the Tribunal, upon justification by the party presenting the ancillary claim and upon considering any objection of the other party, authorizes the presentation of the claim at a later stage in the proceeding.

622. It follows from the above that any counterclaim must arise “directly out of the subject-matter of the dispute”, be “within the scope of the consent of the parties” and otherwise “within the jurisdiction of the Centre”. It must be presented “no later than in the counter-memorial”, unless the Tribunal authorizes later presentation on a justified basis.

623. Respondent characterizes its counterclaim as covering factual issues referred to in both the original claim and in the ancillary claim, because the environmental damage generated by Claimant’s breaches of environmental law is indivisible between its properties.⁶²⁷ For Respondent, if the Tribunal has jurisdiction over an investment under Article 25 of the ICSID Convention, counterclaims arising out of the same investment should fall under ICSID jurisdiction.⁶²⁸ Respondent argues that it is not necessary to have identity between the legal instruments being the basis for the claims and the counterclaim.⁶²⁹

624. Respondent submits that NAFTA is the basis of the counterclaim.⁶³⁰ It does not base the counterclaim on the provisions of the USMCA. The Tribunal notes that paragraph 5 of USMCA Annex 14-C states that an arbitration commenced while NAFTA was in force “may proceed to its conclusion” (see ¶ 375 above).⁶³¹ Paragraph 5 states that “the Tribunal’s jurisdiction with respect to such a claim is not affected by the termination of

⁶²⁷ R-PHM AC, ¶ 29; Counterclaim Memorial on Jurisdiction, ¶¶ 240-244. See also R-RPHM AC, ¶¶ 87-88. ↩

⁶²⁸ R-PHM AC, ¶ 30. ↩

⁶²⁹ R-PHM AC, ¶ 37; R-RPHM AC, ¶ 90. ↩

⁶³⁰ R-RPHM AC, ¶ 90. See also Counter-Memorial AC, ¶ 494; Counterclaim Memorial on Jurisdiction, ¶ 246(i). ↩

⁶³¹ C-0314-ENG, USMCA, Annex 14-C, ¶ 5. See also 2023 Hearing Transcript (English), Day 1, 53:10-16, 56:2-5 (Claimants Opening Statement). ↩

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NAFTA 1994” (emphasis added). As held at ¶ 596 above, the Tribunal understand the words “such a claim” to refer to the original claims submitted to the Tribunal, i.e., the “arbitration initiated pursuant to the submission of a claim…” It thus does not answer the question of a counterclaim filed after the termination of NAFTA in a case that was initiated prior to the termination of NAFTA. Like the ancillary claim, the counterclaim must fulfil the relevant requirements as set out at ¶¶ 620-622 above.

625. In order to determine whether the counterclaim fulfils the requirements, the Tribunal will first examine the subject-matter of the counterclaim before turning to its timeliness.

(b) Subject-matter of the Counterclaim

626. Under ICSID Convention Article 46 and ICSID Arbitration Rule 40(1), any counterclaim must arise “directly out of the subject-matter of the dispute” (see ¶¶ 620 and 621 above). The same criteria were applied by the Tribunal in relation to the admission of an ancillary claim in PO7.⁶³² In its Decision on Jurisdiction over the Czech Republic’s Counterclaim, relied on by Claimant, the Saluka Investments v. Czech Republic tribunal referred to a “general legal principle” requiring a close connection between a counterclaim and the primary claim, being a common requirement under multiple legal instruments and procedural rules.⁶³³ The Tribunal does not consider it necessary to apply a general legal principle on close connection in the present case, there being a specific requirement set out in the ICSID Convention and the ICSID Arbitration Rules.

627. It does not appear to be in dispute that a legal connection in addition to a factual connection is required between a claim and a counterclaim.⁶³⁴ In that regard, the Parties have different understandings of what kind of legal connection is required. The Tribunal confirms that the “arising directly out of the subject-matter of the dispute” requirement in ICSID Convention Article 46 and ICSID Arbitration Rule 40(1) requires a factual and legal connection with the dispute, which is to be assessed in the circumstances of the case.

⁶³² PO7, ¶¶ 130-138. ↩

⁶³³ RL-0176-ENG, Saluka v. Czech Republic, Decision on Jurisdiction over the Czech Republic’s Counterclaim, ¶ 61. See Response on Counterclaim Jurisdiction, ¶ 159. ↩

⁶³⁴ Counterclaim Memorial on Jurisdiction, ¶¶ 238-239; Response on Counterclaim Jurisdiction, ¶ 164. ↩

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628. The connection requirement is separate to the assessment whether the counterclaim is “within the scope of the consent of the parties and is otherwise within the jurisdiction of the Centre”. For present purposes, the Tribunal does not address the question whether the claim and the counterclaim must arise from the same legal instrument, which Claimant refers to as the “legal connection” requirement.⁶³⁵ The Tribunal assumes, for present purposes, that a legal connection between the claims and the counterclaim exists and that NAFTA permits counterclaims (see ¶ 614 above).

629. Both Parties refer to the close connection requirement as a jurisdictional one,⁶³⁶ although Respondent does cite the decision in Metal-Tech v. Republic of Uzbekistan which found that the connected subject-matter requirement is “generally deemed an admissibility and not a jurisdictional requirement”.⁶³⁷ Whether considered as a matter of jurisdiction or admissibility, the non-fulfilment of the connected subject-matter requirement would be the same, in that the Tribunal would be precluded from deciding on the counterclaim. Accordingly, while the Tribunal considers the connected subject-matter requirement to be jurisdictional, nothing turns on that question in the present case.

630. The Tribunal accepts that if a counterclaim by Respondent were possible under NAFTA, it may conceivably arise in relation to Claimant’s investment as a whole, as opposed to being limited to those lots that were the subject of Claimant’s original claims. This is because a counterclaim in relation to La Rosita, Punta Venado, La Adelita and El Corchalito may arise directly out of the subject-matter of the dispute, even if Claimant’s original claims were only made in relation to El Corchalito, La Adelita and Punta Venado.

631. This is consistent with the Tribunal’s directions in PO7 that the interconnection between La Adelita, El Corchalito and La Rosita is evident as a matter of fact from the record of these proceedings.⁶³⁸ In PO7, the Tribunal noted that the “Project”, as described by Claimant, includes “Claimant’s Extraction Plant, Port Terminal and fleet of vessels to export the petrous materials quarried at La Rosita, El Corchalito, and La Adelita.”⁶³⁹ In

⁶³⁵ See Response on Counterclaim Jurisdiction, ¶ 164. ↩

⁶³⁶ Counterclaim Memorial on Jurisdiction, ¶ 174; Response on Counterclaim Jurisdiction, ¶ 159. ↩

⁶³⁷ RL-0171-ENG, Metal-Tech v. Uzbekistan, Award, ¶ 407. See Counterclaim Memorial on Jurisdiction, ¶ 174, n. 174. ↩

⁶³⁸ PO7, ¶ 136. ↩

⁶³⁹ Request for Arbitration, p. 31; see PO7, ¶ 136. ↩

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the Tribunal’s view, alleged non-compliance with environmental obligations arising from Claimant’s activities in the Project as a whole arises directly out of the subject-matter of Claimant’s original claims in this arbitration, which concern its investment in Punta Venado, El Corchalito and La Adelita.

632. It is true that Respondent’s initial indication was that it reserved its right to file a counterclaim only with respect to the subject of Claimant’s “new” claim (“relacionada con el objeto de la nueva reclamación”).⁶⁴⁰ The broader scope of the counterclaim that Respondent now seeks to admit is still closely connected to the subject-matter of Claimant’s original claims. The question raised by this broader scope is rather a question of timeliness, which the Tribunal will address in the following Section.

(c) Timeliness of the Counterclaim

633. The Tribunal will examine the timeliness of the counterclaim filed by Respondent, noting that the subject-matter of the counterclaim concerns Claimant’s operations in the Project as a whole, including La Rosita, El Corchalito and La Adelita, and is not limited to La Rosita.

i. Date of Filing of the Counterclaim

634. Under ICSID Arbitration Rule 40(2), any counterclaim must be presented “no later than in the counter-memorial”, unless the Tribunal authorizes later presentation on a justified basis. The Tribunal will consider whether the counterclaim has been filed timely pursuant to this rule. While there would be no difference in the result, the Tribunal agrees with both Parties that the timely filing of the counterclaim is a matter of procedure or admissibility, as opposed to jurisdiction.⁶⁴¹ At this stage of the analysis, the Tribunal leaves aside Claimant’s additional timeliness objection on the basis of NAFTA Articles 1116 and 1117.⁶⁴²

⁶⁴⁰ Respondent’s Response to the Claimant’s Request for Provisional Measures and Leave to File an Ancillary Claim, ¶ 130. ↩

⁶⁴¹ Counterclaim Memorial on Jurisdiction, ¶ 206; Response on Counterclaim Jurisdiction, ¶ 173. ↩

⁶⁴² Response on Counterclaim Jurisdiction, ¶ 121, citing CL-0246-ENG, Resolute Forest Products Inc. v. Government of Canada, PCA Case No. 2016-13, Decision on Jurisdiction and Admissibility, 30 January 2018, ¶ 83; see Counter-Memorial, ¶ 275. ↩

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635. In Respondent’s view, it timely requested leave to file the counterclaim on 26 May 2022, in response to Claimant’s application for admission of the ancillary claim.⁶⁴³ It further argues that the counterclaim was timely filed with the Counter-Memorial AC.⁶⁴⁴

636. The relevant dates and steps to consider are the following:

• On 23 November 2020, Respondent filed its Counter-Memorial in relation to Claimant’s original claims.
• On 26 May 2022, Respondent stated in its Response to Claimant’s Request for Provisional Measures and Leave to File an Ancillary Claim that in the event the Tribunal would admit Claimant’s ancillary claim, it reserved the right to file a request for authorization to present a counterclaim related to the new claim (“relacionada con el objeto de la nueva reclamación”).⁶⁴⁵ No counterclaim in relation to Claimant’s original claims was mentioned at that time.
• In PO7 dated 11 July 2022, the Tribunal stated in relation to an application for leave to file a counterclaim:⁶⁴⁶

  The Tribunal is open to considering any such application for leave by Respondent, which Respondent is at liberty to file. The Tribunal shall decide upon any application for leave to submit a counterclaim in accordance with the procedural rules, after giving Claimant the opportunity to comment.

• On 19 December 2022, Respondent filed its Counter-Memorial AC which included a request to file a counterclaim (“Solicitud de Reconvención”).⁶⁴⁷ The counterclaim sought to be introduced covered alleged environmental harm and failure to comply with environmental obligations in all three of Claimant’s quarrying sites, i.e., covering both the original claims and the ancillary claim.⁶⁴⁸

⁶⁴³ R-PHM AC, ¶ 32; Counterclaim Memorial on Jurisdiction, ¶ 201, citing PO7, ¶ 159. ↩

⁶⁴⁴ R-PHM AC, ¶ 33. ↩

⁶⁴⁵ Respondent’s Response to Claimant’s Request for Provisional Measures and Leave to File an Ancillary Claim, ¶ 130: “. . . México desea enfatizar que en caso de que el Tribunal autorice la presentación de la nueva reclamación que la Demandante pretende hacer pasar por subordinada, se reserva el derecho de presentar una solicitud de autorización para presentar una reconvención relacionada con el objeto de la nueva reclamación.” ↩

⁶⁴⁶ PO7, ¶ 159. ↩

⁶⁴⁷ Counter-Memorial AC, ¶ 494. See also Counter-Memorial, ¶¶ 518, 521, 523, 524. ↩

⁶⁴⁸ Counter-Memorial AC, ¶ 520. ↩

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637. The Tribunal therefore considers that Respondent’s application for leave to file the counterclaim was made together with its Counter-Memorial AC, i.e., on 19 December 2022. Contrary to Respondent’s submission, no application was filed on 26 May 2022. As noted in PO7, at that time Respondent only reserved its right to introduce a counterclaim and had not submitted a particularized application for leave to do so.⁶⁴⁹

638. Under ICSID Arbitration Rule 40(2), Respondent’s Counter-Memorial in relation to Claimant’s original claims was filed on 23 November 2020. In principle, the deadline for filing a counterclaim arising directly out of the subject-matter of the dispute was therefore 23 November 2020.

639. The Counter-Memorial on the Ancillary Claim is not the Counter-Memorial referred to in ICSID Arbitration Rule 40(2), at least with respect to the Parties’ dispute that existed prior to the ancillary claim. Respondent argues that it was logical to expect that it would request leave to file the counterclaim no later than the Counter-Memorial on the Ancillary Claim, taking into account the Tribunal’s directions in PO7.⁶⁵⁰ However, the Tribunal’s directions in PO7 were that any application for leave to submit a counterclaim is to be decided in accordance with the procedural rules, i.e., the ICSID Arbitration Rules (see ¶ 635 above). As Respondent’s counterclaim had not been particularized and no request for leave had yet been filed, no determination on timeliness could have been made.

640. As noted by the Tribunal in PO7 in relation to the ancillary claim,⁶⁵¹ the later submission of the counterclaim does not exclude it from consideration, because ICSID Arbitration Rule 40(2) contemplates the potential admission of ancillary claims and counterclaims at a later stage, with the Tribunal’s authorization.

641. The filing of Respondent’s counterclaim on 19 December 2022 falls approximately two years after the relevant deadline under the ICSID Arbitration Rules. The question is whether the later submission is justified, taking into account the views of both Parties.

642. In the case of the ancillary claim, the Tribunal found that later admission was not excluded, inter alia on the basis that the ancillary claim arose from new facts that were

⁶⁴⁹ PO7, ¶ 159. ↩

⁶⁵⁰ Counterclaim Memorial on Jurisdiction, ¶ 203. ↩

⁶⁵¹ PO7, ¶ 153. ↩

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directly connected to the existing dispute between the Parties. In particular, the ancillary claim concerns new alleged measures by Respondent in relation to Claimant’s quarrying operations.⁶⁵² The Tribunal will consider whether this reasoning also applies in relation to the counterclaim in the following section.

ii. Whether the Counterclaim Concerns New Facts or
New Awareness of Facts

643. New factual developments may justify the admission of an ancillary claim or counterclaim later than the default procedural deadline because such a claim could not have been brought earlier. This is not a rule, but reasoning applied by the Tribunal in the circumstances of the present case. In line with this reasoning, Respondent’s position is that new awareness of pre-existing facts could likewise justify the late admission on the counterclaim, as set out below. Without deciding whether it accepts Respondent’s position as a general proposition, the Tribunal will examine whether Respondent only became aware of new facts forming the basis for the counterclaim after the procedural deadline for filing such a counterclaim.

644. Respondent bases its counterclaim on (i) Claimant’s alleged breaches of environmental legislation; (ii) Claimant’s alleged breaches of environmental authorizations and agreements; and (iii) the evidence of damage to the ecosystem and surrounding inhabitants.⁶⁵³

645. According to Respondent, it only gained knowledge of Claimant’s concealed breaches and misrepresentations, and identified the need to file a counterclaim, when considering Claimant’s misrepresentation of President López Obrador’s statements and the claims presented both in the arbitration and in the internal proceedings related to the May 2022 inspection.⁶⁵⁴ Respondent further submits that it could only estimate the magnitude of the damage caused by CALICA’s activities in the State of Quintana Roo upon issuance in 2022 of the SEMARNAT Dictamen.⁶⁵⁵ It was this report which, in its view, provided

⁶⁵² PO7, ¶¶ 139, 153-154. ↩

⁶⁵³ Counterclaim Memorial on Jurisdiction, ¶ 23. See also Counter-Memorial AC, ¶ 30 et seq. ↩

⁶⁵⁴ R-PHM AC, ¶ 34. ↩

⁶⁵⁵ R-PHM AC, ¶ 35. See C-0237-SPA, SEMARNAT Dictamen. ↩

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Respondent with sufficient elements to confirm that Claimant is directly responsible for the environmental damage caused to the region’s ecosystem.⁶⁵⁶

646. Respondent submits that Claimant’s omissions were only detected by PROFEPA in May 2022, when reviewing:⁶⁵⁷ (i) six self-assessment reports; (ii) two environmental impact statements;⁶⁵⁸ (iii) an authorization;⁶⁵⁹ (iv) the 1986 Investment Agreement;⁶⁶⁰ (v) two inspection reports; (vi) three writs of offering documentary evidence; and (vii) related documents, being the request for modification of validity of the Federal EIA.⁶⁶¹ According to Respondent, the analysis of these documents required several months and indicated over 20 years of partial and inconsistent information from Claimant.⁶⁶²

647. Claimant does not agree. In its view, any counterclaim in respect of alleged violations of environmental law in El Corchalito and La Adelita has been waived, as these were the subject of Claimant’s original claim submitted long ago.⁶⁶³ In relation to La Rosita and Punta Venado, being the subject of the ancillary claim, Claimant argues that a counterclaim is also waived, as Respondent was also well aware of CALICA’s activities in those lots prior to November 2020.⁶⁶⁴

648. To illustrate Respondent’s knowledge of CALICA’s activities since at least 1993, Claimant argues that Respondent complains that CALICA cleared forest vegetation for more than 30 years without the corresponding CUSTF authorization, however, Respondent had knowledge of CALICA’s plan to clear vegetation since 1986.⁶⁶⁵ Claimant asserts that: (i) during the 1993 PROFEPA inspection of La Rosita, PROFEPA described CALICA’s production process, including the vegetation-clearing activities;⁶⁶⁶

⁶⁵⁶ Counterclaim Memorial on Jurisdiction, ¶ 56. ↩

⁶⁵⁷ R-PHM AC, ¶ 47. ↩

⁶⁵⁸ C-0010-SPA, Investment Agreement, Annex 2; C-0077-SPA, CALICA’s Environmental Impact Statement, Chapter II, dated 23 October 2000 (“CALICA EIS”). ↩

⁶⁵⁹ C-0017-SPA, Corchalito/Adelita Federal EIA, 30 November 2000. ↩

⁶⁶⁰ C-0010-SPA, Investment Agreement. ↩

⁶⁶¹ C-0149-SPA, CALICA’s Corchalito/Adelita Federal Environmental Authorization Renewal Application, dated 27 August 2020 (“Corchalito/Adelita Renewal Application, 27 August 2020”). ↩

⁶⁶² R-PHM AC, ¶ 48. ↩

⁶⁶³ C-PHM AC, ¶ 152. See also Response on Counterclaim Jurisdiction, ¶ 135. ↩

⁶⁶⁴ C-PHM AC, ¶ 153. ↩

⁶⁶⁵ Response on Counterclaim Jurisdiction, ¶¶ 128-130, citing C-0010-SPA, Investment Agreement, p. 20; see Counterclaim Memorial on Jurisdiction, ¶ 33. ↩

⁶⁶⁶ Response on Counterclaim Jurisdiction, ¶ 130, citing C-0280-SPA, PROFEPA Inspection Report, 17 March 1993, pp. 5, 13. ↩

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and (ii) CALICA made mention of its vegetation-clearing activities in 1999, when requesting authorization to quarry El Corchalito.⁶⁶⁷

649. Claimant argues that the same is true regarding El Corchalito as Respondent has been aware of CALICA’s quarrying there from the moment it commenced in the early 2000s and of CALICA clearing vegetation there for decades.⁶⁶⁸

650. The Tribunal agrees with Claimant that even assuming the Tribunal could have jurisdiction over Respondent’s counterclaim, which it does not decide, the counterclaim is untimely under ICSID Arbitration Rule 40(1). It is a matter of record that the allegations made by Respondent in the counterclaim reflect assertions made by it throughout the course of this arbitration. As Respondent itself submits, throughout this arbitration it has alleged that Claimant failed to comply with its environmental impact authorizations and failed to obtain necessary authorizations to carry out its activities.⁶⁶⁹ The allegation of potential environmental harm by CALICA also appears in the contemporaneous evidence. For example, PROFEPA documents dating from at least 2018 identify potential environmental harm at El Corchalito (“la posible existencia de un daño al ambiente”).⁶⁷⁰

651. The counterclaim therefore does not concern newly-discovered facts or recent developments. Respondent was aware of the relevant facts that it now contends are the basis of the counterclaim, in particular the alleged breaches of environmental legislation, authorizations and agreements. It is not sufficient that Respondent has only recently reviewed or compiled the information that was previously available to it for it to constitute new information or new awareness. For those assertions that are newly-particularized, the Tribunal does not consider there to be a justified basis for raising them now, over two years after Respondent’s Counter-Memorial on the original claims.

⁶⁶⁷ Response on Counterclaim Jurisdiction, ¶ 130, citing C-0077-SPA, CALICA EIS, p. 240. See also Response on Counterclaim Jurisdiction, ¶¶ 131-132. ↩

⁶⁶⁸ Response on Counterclaim Jurisdiction, ¶ 133, citing, inter alia, C-0018-SPA, Corchalito/Adelita State EIA, 11 December 1996; C-0017-SPA, Corchalito/Adelita Federal EIA, 30 November 2000. See also Response on Counterclaim Jurisdiction, ¶ 133, citing C-0113-SPA, CALICA’s Eleventh Quadrimester Report and Corresponding Acknowledgements of Receipt, dated 23 May 2005 (“CALICA Eleventh Quadrimester Report, 23 May 2005”), p. 19 of the PDF; Response on Counterclaim Jurisdiction, ¶ 134. ↩

⁶⁶⁹ Counterclaim Memorial on Jurisdiction, ¶ 24. ↩

⁶⁷⁰ C-0117-SPA, Shutdown Order, p. 308. ↩

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652. In this regard, Respondent has not explained what was detected by its inspection of La Rosita in 2022 that was not previously known to it, or how this would relate to information about alleged breaches by Claimant in respect of all of its lots that was also not already known. Respondent argues that it was only after the May 2022 inspection of La Rosita that it detected that CALICA has fraudulently submitted misrepresented information and omissions regarding its compliance with environmental obligations.⁶⁷¹ The documents that were reviewed and apparently evidence this assessment appear to comprise the body of authorizations, inspection reports, self-assessment reports and similar dating back to the 1986 Investment Agreement.⁶⁷² While there are documents among those referenced that are more recent,⁶⁷³ there is no indication that there was a basis in more recent documentation for Respondent to be alerted to Claimant’s allegedly fraudulent conduct that it could not have known before.

653. Likewise, while the SEMARNAT Dictamen was issued in 2022,⁶⁷⁴ and includes a study of the alleged environmental impacts of Claimant’s extractive activities,⁶⁷⁵ it does not reflect new or unknown actions by Claimant. The issuance of a new study cannot provide a basis for a counterclaim outside the procedural calendar in this arbitration. The Tribunal does not address the merits of the SEMARNAT Dictamen with respect to whether it accurately records the alleged impacts of Claimant’s activities on flora and fauna, biodiversity, landscape and land and aquatic ecosystems. It is noted that its provenance and findings are challenged by Claimant.⁶⁷⁶

654. Nor is the Tribunal persuaded that alleged inconsistencies between Claimant’s statements to the Mexican authorities and this Tribunal or the fact that Claimant “dared to distort” the statements of President López Obrador served as a trigger for it to discover Claimant’s breaches for the first time (“la apariencia de legalidad se perdió ante las autoridades mexicanas cuando la Demandante se atrevió a distorsionar los dichos del Presidente de México ante el Tribunal y ante un juez mexicano.”).⁶⁷⁷

⁶⁷¹ R-PHM AC, ¶ 47. ↩

⁶⁷² See R-PHM AC, ¶ 47. ↩

⁶⁷³ See, e.g., C-0149-SPA, Corchalito/Adelita Renewal Application, 27 August 2020; R-PHM AC, ¶ 47. ↩

⁶⁷⁴ C-0235-SPA, SEMARNAT Dictamen PowerPoint, p. 17. ↩

⁶⁷⁵ See Counter-Memorial AC, ¶ 129, citing C-0237-SPA, SEMARNAT Dictamen, p. 41. ↩

⁶⁷⁶ See, inter alia, Response on Counterclaim Jurisdiction, ¶¶ 26-57. ↩

⁶⁷⁷ Counterclaim Memorial on Jurisdiction, ¶ 140. ↩

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655. Along the same lines, Respondent alleges that it was confirmed, during the arbitration proceedings, that Claimant systematically and intentionally concealed its extraction projections and defaults from Respondent.⁶⁷⁸ As evidence of Claimants “omissive attitude”, Respondent relies on the conduct of and submissions made by Claimant during the arbitration in various respects.⁶⁷⁹ For the avoidance of doubt, the Tribunal does not consider these allegations to provide a basis for a counterclaim by Respondent against Claimant at this stage of the arbitration.

656. Other evidence on the record, relied on by Claimant,⁶⁸⁰ is inconsistent with Respondent’s submission that the basis for the counterclaim was only detected after May 2022. The Tribunal observes that prior to the filing of the counterclaim, in February, March and April 2022 President López Obrador made a number of statements in press briefings referring to an intention to make an international claim against CALICA:

3 February 2022:⁶⁸¹

. . . si ellos dicen que no, que quieren seguir explotando sin autorización, llevándose material o la denuncia pensando de que les vamos a pagar porque en los tribunales internacionales ellos tienen mucha influencia, pues yo creo que eso no va a ser conveniente para nadie, porque nosotros no nos quedaríamos nada más con esta denuncia, nosotros vamos, si es necesario, a acudir a la ONU y a otros tribunales internacionales, porque es destrucción de nuestro territorio. No puede permitirse que se destruya la naturaleza, el medio ambiente. (emphasis added)

31 March 2022:⁶⁸²

Pero les dije: Si no se termina de extraer material en sus predios, que destruyen el medio ambiente, lo voy a dar a conocer, voy a hacer un video y

⁶⁷⁸ R-PHM AC, ¶ 50. ↩

⁶⁷⁹ R-PHM AC, ¶ 51, citing 2023 Hearing Transcript (Spanish), Day 1, 101-106; R-0234-ESP, File No. PFPA/29.4/1S.3/00008-11, 2011, pp. 32, 67, 161, 248, 252, 260; Respondent’s Inspection Visit Brief, ¶¶ 45-48, C-0237-SPA, SEMARNAT Dictamen, pp. 69-70; C-0208-SPA, March 2016 Environmental Audit Report; C-0126-SPA, Bathymetric study of the extraction area of CALICA in Quintana Roo, Mexico, dated February 2018. See Counter-Memorial AC, § II.K.2.c.(1). See also Counterclaim Memorial on Jurisdiction, ¶¶ 41, 125; R-0236-ESP, INAH Letter No. 401.2C.7-2023/857; Counter-Memorial AC, ¶¶ 223-235; Rejoinder AC, ¶¶ 216-218, 238-243; PO 8, Section 8.2 of the Site Visit Protocol, n. 3. See also, C-0168-SPA, Transcript of President’s Morning Press Conference, 2 May 2022. See also R-0218-ENG, Vulcan Materials Company, Form 10-K, 2022, p. 31, n. 5. ↩

⁶⁸⁰ Response on Counterclaim Jurisdiction, ¶ 12. ↩

⁶⁸¹ C-0178-SPA, 2 February 2022, Press Conference, p. 23. ↩

⁶⁸² C-0183-SPA, 31 March 2022 Press Conference, p. 7. ↩

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voy a presentar una demanda en organismos internacionales y les voy a acusar de que destruyen el medio ambiente. (emphasis added)

20 April 2022:⁶⁸³

Entonces, si se van a tribunales, porque además hay denuncias, pues vamos a tribunales y vamos a hacer la denuncia formal en organismos internacionales. A ver qué van a hacer los de la ONU, a ver qué va a hacer Greenpeace, que nos ayuden en esto. (emphasis added)

657. Should Respondent have wished to file a counterclaim with respect to the breaches it alleges, which could readily have been identified earlier, it was at liberty to seek leave and proceed under the timelines set out in the applicable procedural rules.

658. In these circumstances, the Tribunal is not persuaded by Respondent’s assertion that the counterclaim only materialized after May 2022, and is not persuaded that late admission of the counterclaim more than two years after the Counter-Memorial is justified. The events in 2022 cited by Respondent as justification for the late submission are not relevant to Respondent’s ability to identify the breaches it alleges. Nor does the Tribunal consider any other circumstances to justify the late admission of the counterclaim.

659. The Tribunal will consider the procedural fairness implications of this conclusion in the following section.

iii. Procedural Fairness

660. The Tribunal’s decision not to admit the counterclaim is consistent with considerations of procedural fairness to both Parties and the efficiency of the arbitration. The Tribunal concurs, in this respect, with other arbitral tribunals that have had to decide upon the admission of arguments raised late in proceedings, as relied on by Claimant.⁶⁸⁴ In Euram v. Slovakia, the tribunal held that:⁶⁸⁵

[i]n deciding whether a plea is “justifiably late”, the [t]ribunal must […] have regard to whether there has been undue delay by the [r]espondent once it became aware of the facts and to whether there will be undue prejudice to the [c]laimant if the plea is admitted.

⁶⁸³ C-0185-SPA, 20 April 2022 Press Conference, p. 9. ↩

⁶⁸⁴ See Response on Counterclaim Jurisdiction, ¶ 177. ↩

⁶⁸⁵ CL-0221-ENG, European American Investment Bank v. Slovakia, Second Award on Jurisdiction, ¶ 118. ↩

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661. In the present case, Respondent’s counterclaim is not justifiably late, and was raised with undue delay by Respondent which was already aware of the relevant facts. In these circumstances, undue prejudice would be caused to Claimant by admission of the counterclaim.

662. In addition, the tribunal in Bureau Veritas v. Paraguay noted that:⁶⁸⁶

. . . it would not be consistent with principles of due process and procedural economy to introduce new arguments into the preliminary phase when both parties had already agreed to an orderly procedural schedule, and where the parties had had ample opportunities to present their arguments.

663. The same considerations apply in the present case, as Respondent had ample opportunity to seek leave to file the counterclaim at an earlier stage in the proceedings.

(d) New Evidence

664. If the Tribunal finds that it does not have jurisdiction over the counterclaim, Respondent asserts that the Tribunal must consider the evidence of Claimant’s misrepresentations and concealment pursuant to ICSID Arbitration Rule 38(2).⁶⁸⁷ Rule 38 provides:

(1) When the presentation of the case by the parties is completed, the proceeding shall be declared closed.

(2) Exceptionally, the Tribunal may, before the award has been rendered, reopen the proceeding on the ground that new evidence is forthcoming of such a nature as to constitute a decisive factor, or that there is a vital need for clarification on certain specific points.

665. According to Respondent, the evidence on the counterclaim is relevant to the outcome of the case, in order to determine the manner and extent of Claimant’s contribution to its own claims. As it is directly related to and dependent on the original proceeding, Respondent argues that it will allow the Tribunal to decide on damages.⁶⁸⁸ In this context, Respondent makes reference to the SEMARNAT Dictamen, which in its view could not have been filed earlier.⁶⁸⁹

⁶⁸⁶ CL-0229-ENG, Bureau Veritas v. Paraguay, Decision on Objections to Jurisdiction, ¶ 52. ↩

⁶⁸⁷ R-PHM AC, § II.C. ↩

⁶⁸⁸ R-PHM AC, ¶ 45. ↩

⁶⁸⁹ R-PHM AC, ¶ 44. ↩

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666. Claimant denies that counterclaim-related allegations and evidence (specifically, the SEMARNAT Dictamen) could justify exceptional circumstances to reopen the record of the first phase of this arbitration, or that the SEMARNAT Dictamen is decisive over the issues raised in that phase.⁶⁹⁰ In its view, it would prejudice Claimant to reopen the first phase of the arbitration to new evidence without giving Claimant the opportunity to rebut it in respect of the issues addressed in the first phase of this proceeding.⁶⁹¹

667. The Tribunal did not declare the proceedings in this arbitration to be closed until 27 July 2026. Accordingly, there is no need to reopen the proceedings in order to admit the evidence on the counterclaim, which is already on the record.⁶⁹²

(e) Conclusion on the Counterclaim

668. In light of the above considerations, the Tribunal finds that the counterclaim is untimely pursuant to ICSID Arbitration Rule 40(2) and inadmissible in this arbitration. Accordingly, the Tribunal rejects Respondent’s request for leave to file the counterclaim.

669. The Tribunal therefore does not consider it necessary to decide other matters in dispute between the Parties with respect to the counterclaim, including whether the Tribunal has jurisdiction over a counterclaim pursuant to NAFTA, whether NAFTA includes substantive obligations upon investors, whether the counterclaim made by Respondent is duplicative of domestic proceedings in Mexico, and the merits of the counterclaim.

10. Conclusion on Jurisdiction

670. For the above reasons, the Tribunal finds that it does have jurisdiction over Claimant’s original claims, which are likewise admissible, although it rejects Claimant’s claim with respect to the port tariff (see ¶ 562 above). The Tribunal finds by majority that it has no jurisdiction over Claimant’s ancillary claim (see ¶ 611 above), and that Respondent’s counterclaim is inadmissible (see ¶ 668 above).

⁶⁹⁰ C-RPHM AC, ¶ 65. ↩

⁶⁹¹ C-RPHM AC, ¶ 65. ↩

⁶⁹² Further and in any event, the Tribunal does not consider the evidence filed in relation to the counterclaim to justify an adjustment to the damages to be awarded to Claimant on the basis of alleged contributory negligence. ↩

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IX.     APPLICABLE LEGAL STANDARDS

671. In this Section, the Tribunal addresses the legal standards applicable to its decisions on Claimant’s claims. Section A extracts relevant provisions of NAFTA. Sections B and C contain Claimant’s and Respondent’s positions on the applicable legal standards, respectively. Section D summarizes the NDP submissions, insofar as they relate to legal standards, as well as the Parties’ comments on those submissions. Section E contains the Tribunal’s analysis on these issues.

A. RELEVANT PROVISIONS

672. NAFTA Article 1103 is entitled “Most-Favored-Nation Treatment” (“MFN Treatment”), and states as follows:

¶1. Each [Contracting] Party shall accord to investors of another [Contracting] Party treatment no less favorable than that it accords, in like circumstances, to investors of any other [Contracting] Party or of a non-[Contracting ]Party with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments.

¶2. Each [Contracting] Party shall accord to investments of investors of another [Contracting] Party treatment no less favorable than that it accords, in like circumstances, to investments of investors of any other Party or of a non-[Contracting ]Party with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments.

673. NAFTA Article 1105 is under the heading “Minimum Standard of Treatment” (“MST”) and provides:

¶1. Each [Contracting] Party shall accord to investments of investors of another [Contracting] Party treatment in accordance with international law, including fair and equitable treatment and full protection and security.

¶2. Without prejudice to paragraph 1 and notwithstanding Article 1108(7)(b), each [Contracting] Party shall accord to investors of another [Contracting] Party, and to investments of investors of another Party, non-discriminatory treatment with respect to measures it adopts or maintains relating to losses suffered by investments in its territory owing to armed conflict or civil strife.

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¶3. Paragraph 2 does not apply to existing measures relating to subsidies or grants that would be inconsistent with Article 1102 but for Article 1108(7)(b).

B. CLAIMANT’S POSITION

674. The Tribunal follows the sequence in which the legal provisions were addressed in Claimant’s submissions, i.e., NAFTA Article 1105 followed by NAFTA Article 1103.⁶⁹³

1. The Applicable Standard for NAFTA Article 1105

(a) The Minimum Standard of Treatment

675. Claimant invokes NAFTA Article 1105(1), pursuant to which each NAFTA Contracting Party is obliged to “accord to investments of investors of another [Contracting] Party treatment in accordance with international law, including fair and equitable treatment and full protection and security.”⁶⁹⁴

676. Claimant relies on the decisions of prior NAFTA tribunals to assert that the MST under customary international law enshrined in NAFTA Article 1105(1) is infringed by conduct that “is unjust, arbitrary, unfair, discriminatory or in violation of due process,”⁶⁹⁵ that involves a “complete lack of transparency and candour in an administrative process,”⁶⁹⁶ or contravenes the investor’s legitimate expectations.⁶⁹⁷ In addition, Claimant argues that NAFTA tribunals have held that the MST is “infringed by conduct attributable to the State and harmful to the claimant if the conduct is arbitrary, grossly unfair, unjust or idiosyncratic”.⁶⁹⁸

677. Claimant submits that the content of the MST standard evolves and is shaped by the protections afforded by the fair and equitable treatment (“FET”) standard included in more than two thousand bilateral investment treaties.⁶⁹⁹ In its view, tribunals have

⁶⁹³ See Memorial, §§ V.B; V.C. ↩

⁶⁹⁴ Memorial, ¶ 188, citing C-0009-ENG, NAFTA, Art. 1105(1). ↩

⁶⁹⁵ Memorial, ¶ 188, citing CL-0005-ENG, Merrill & Ring Forestry L.P. v. The Government of Canada, ICSID Case No. UNCT/07/1, Award, 31 March 2010 (“Merrill & Ring v. Canada, Award”), ¶ 208. See also Reply, ¶ 127. ↩

⁶⁹⁶ Memorial, ¶ 188, citing CL-0007-ENG, Waste Management, Inc. v. United Mexican States (II), ICSID Case No. ARB(AF)/00/3, Award, 30 April 2004 (“Waste Management v. Mexico (II), Award”), ¶ 98. See also Reply, ¶ 127. ↩

⁶⁹⁷ Memorial, ¶ 188, citing CL-0004-ENG, Thunderbird v. Mexico, Award, ¶ 147. ↩

⁶⁹⁸ Memorial, ¶ 191, citing, inter alia, CL-0007-ENG, Waste Management v. Mexico (II), Award, ¶ 98. ↩

⁶⁹⁹ Memorial, ¶¶ 189-190, citing, inter alia, CL-0011-ENG, Mondev v. United States, Award, ¶ 125. ↩

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recognized that the standard now affords foreign investors essentially the same level of protection as the autonomous FET standard.⁷⁰⁰

678. For Claimant, the autonomous FET standard requires:⁷⁰¹

. . . the host State to act in a consistent manner, free from ambiguity and totally transparently in its relations with the foreign investor, so that it may know beforehand any and all rules and regulations that will govern its investments, as well as the goals of the relevant policies and administrative practices or directives.

679. Even if the MST under NAFTA Article 1105 has not evolved to the same level as the autonomous FET standard, Claimant argues that it is still entitled to protection at the level of the autonomous standard by virtue of the MFN treatment clause in NAFTA Article 1103.⁷⁰² In this regard, Claimant submits that the MFN clause imports the autonomous FET provisions contained in Mexico’s BITs with Korea, Germany, Greece and the Netherlands, all of which post-date NAFTA.⁷⁰³

680. Claimant disagrees with Respondent’s argument that the FTC Note precludes the application of the autonomous FET standard. For Claimant, the FTC Note did not impact or interpret NAFTA Article 1103 or NAFTA Annex IV. Claimant relies, in this respect, on the decision in Pope & Talbot Inc. v. Canada where it was stated that:⁷⁰⁴

[E]very NAFTA investor is entitled, by virtue of Article 1103, to the treatment accorded to nationals of other states under BITs containing the

⁷⁰⁰ Memorial, ¶ 192, citing CL-0005-ENG, Merrill & Ring v. Canada, Award, ¶ 211. See also Memorial, ¶ 193; Reply, ¶ 128; C-PHM, ¶ 35. ↩

⁷⁰¹ Reply, ¶ 128, citing CL-0052-ENG, Técnicas Medioambientales Tecmed S.A. v. The United Mexican States, ICSID Case No. ARB (AF)/00/2, Award, 29 May 2003 (“Tecmed v. Mexico, Award”), ¶ 154. ↩

⁷⁰² Memorial, ¶ 194, citing C-0009-ENG, NAFTA, Art. 1103. See also C-PHM, ¶ 36. ↩

⁷⁰³ Memorial, ¶ 197, citing C-0134-ENG, Agreement between the Government of the United Mexican States and the Government of the Republic of Korea for the Promotion and Reciprocal Protection of Investments, signed on 14 November 2000, in force as of 6 July 2002; C-0135-ENG, Agreement between the United Mexican States and the Federal Republic of Germany on the Promotion and Reciprocal Protection of Investments, signed on 25 August 1998, in force as of 23 February 2001; C-0136-ENG, Agreement between the Government of the United Mexican States and the Government of the Hellenic Republic on the Promotion and Reciprocal Protection of Investments, signed on 30 November 2000, in force as of 17 September 2002; C-0137-ENG, Agreement on Promotion, Encouragement and Reciprocal Protection of Investments Between the Kingdom of the Netherlands and the United Mexican States, signed on 13 May 1998, in force as of 1 October 1999; Reply, ¶ 129. ↩

⁷⁰⁴ C-PHM, ¶ 38, citing CL-0031-ENG, Pope & Talbot Inc v. Government of Canada, UNCITRAL, Award in Respect of Damages, 31 May 2002 (“Pope & Talbot v. Canada, Damages Award”), n. 54. ↩

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fairness elements unlimited by customary international law. The [FTC] Interpretation did not purport to change that fact, nor could it.

(b) Legitimate Expectations

681. Claimant relies on the cases of Thunderbird v. Mexico and Grand River v. United States in support of its submission that NAFTA Article 1105 protects Claimant’s and CALICA’s legitimate expectations arising from Respondent’s representations.⁷⁰⁵

682. Claimant further submits that arbitral tribunals have consistently recognized that specific assurances play a decisive role in the creation of legitimate expectations.⁷⁰⁶

683. Likewise, Claimant rebuts Respondent’s contention that an investment in a developing country cannot justify legitimate expectations as to the stability of the investment environment. Claimant submits that it is seeking relief based on Respondent’s repudiation of its specific written assurances that it would be allowed to quarry La Adelita, and Claimant’s expectations regarding profitability are not relevant to the merits of that issue.⁷⁰⁷

684. While Claimant submits that Respondent has not embraced the concept of legitimate expectations, Claimant asserts that this is immaterial because (i) it has accepted the Waste Management v. Mexico II standard, which calls for a consideration of representations made by the host State which an investor relied upon to its detriment;⁷⁰⁸ and (ii) it acknowledges that Article 1105 is breached when a NAFTA Contracting Party acts contrary to its specific representations or repeated encouragements to an investor.⁷⁰⁹

⁷⁰⁵ Memorial, ¶ 227. ↩

⁷⁰⁶ Reply, ¶¶ 132-133, citing CL-0009-ENG, Bilcon v. Canada, Award, ¶¶ 468-471, 589, also citing CL-0019-ENG, Metalclad v. Mexico, Award, ¶¶ 97-101. See also C-PHM, ¶ 44. ↩

⁷⁰⁷ Reply, ¶ 137; see Counter-Memorial, ¶ 303; RL-019-ENG, MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7, Award, 25 May 2004 (“MTD v. Chile, Award”), ¶¶ 42, 169, 172. ↩

⁷⁰⁸ C-PHM, ¶ 32, citing CL-0009-ENG, Bilcon v. Canada, Award, ¶ 589. See Counter-Memorial, ¶ 306; Rejoinder, ¶ 326. ↩

⁷⁰⁹ C-PHM, ¶ 32, citing Rejoinder, ¶ 326. ↩

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(c) Arbitrary Conduct, Due Process, Good Faith

685. Claimant argues that State conduct has been held to be arbitrary and contrary to the FET standard when it is (i) politically motivated;⁷¹⁰ (ii) contrary to due process and good faith;⁷¹¹ and (iii) infringes the rule of law.⁷¹²

686. Claimant submits that Respondent has recognized in other proceedings that NAFTA Article 1105 protects against arbitrary conduct.⁷¹³ According to Claimant, conduct is arbitrary if it is “founded on prejudice or preference rather than on reason or fact”.⁷¹⁴ Claimant submits that State conduct is arbitrary when it is not based on facts and legal norms but is based on domestic politics and discretion.⁷¹⁵ Claimant draws parallels to the cases of Abengoa v. Mexico and Tecmed v. Mexico where tribunals found a breach of the FET standard where investment sites were closed for political reasons rather than based on legitimate considerations.⁷¹⁶

687. According to Claimant, it is also recognized that NAFTA Article 1105 includes the obligation to act in good faith, which requires Respondent (i) not to “manifestly violate the requirements of consistency, transparency, even-handedness and non-discrimination;”⁷¹⁷ (ii) to abstain from using legal instruments for purposes other than those for which they were created;⁷¹⁸ and (iii) not to take measures disproportionate to

⁷¹⁰ Memorial, ¶ 201, citing CL-0046-ENG, Eureko B.V. v. Republic of Poland, UNCITRAL, Partial Award, 19 August 2005 (“Eureko v. Poland, Partial Award”), ¶ 233. ↩

⁷¹¹ Memorial, ¶ 201, citing, inter alia, CL-0007-ENG, Waste Management v. Mexico (II), Award, ¶ 98. ↩

⁷¹² Memorial, ¶ 201, citing, inter alia, CL-0048-ENG, Waguih Elie George Siag and Clorinda Vecchi v. The Arab Republic of Egypt, ICSID Case No. ARB/05/15, Award, 1 June 2009 (“Siag v. Egypt, Award”), ¶¶ 453-454. ↩

⁷¹³ Memorial, ¶ 200, citing CL-0042-ENG, Metalclad Corporation v. The United Mexican States, ICSID Case No. ARB(AF)/97/1, Mexico’s Counter-Memorial, 22 May 1998 (“Metalclad v. Mexico, Mexico’s Counter-Memorial”) ¶ 841. ↩

⁷¹⁴ Memorial, ¶ 200, citing CL-0043-ENG, UNITED NATIONS CONFERENCE OF TRADE AND DEVELOPMENT, FAIR AND EQUITABLE TREATMENT (United Nations, 2012), p. 78. See also Reply, ¶ 154. ↩

⁷¹⁵ Memorial, ¶ 202, citing CL-0050-ENG, Rudolph Dolzer, Fair and Equitable Treatment: Today’s Contours, 12 Santa Clara J. Int’l L. 7 (2014), p. 31. See also Reply, ¶ 155. ↩

⁷¹⁶ Memorial, ¶¶ 202-203, citing, inter alia, CL-0047-SPA, Abengoa S.A. and COFIDES S.A. v. United Mexican States, ICSID Case No. ARB(AF)/09/2, Award, 18 April 2013, ¶¶ 647-652; CL-0052-ENG, Tecmed v. Mexico, Award, ¶ 164. ↩

⁷¹⁷ Memorial, ¶ 216, citing CL-0027-ENG, Saluka Investments BV (The Netherlands) v. The Czech Republic, UNCITRAL, Partial Award, 17 March 2006 (“Saluka v. Czech Republic, Partial Award”), ¶ 307; C-PHM, ¶ 33, citing 2021 Hearing Transcript (English), Day 1, 89:15-86:1; Claimant’s Comments on NAFTA Article 1128 Submissions, ¶¶ 17-21; CL-0042-ENG, Metalclad v. Mexico, Mexico’s Counter-Memorial, ¶ 841. ↩

⁷¹⁸ Memorial, ¶ 216, citing CL-0056-ENG, Frontier Petroleum Services Ltd. v. The Czech Republic, UNCITRAL, Final Award, 12 November 2010 (“Frontier v. Czech Republic, Award”), ¶ 300. ↩

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the ends they pursue.⁷¹⁹ Claimant further submits that repudiation of contractual obligations by a State may indicate failure to act in good faith.⁷²⁰

2. The Applicable Standard for NAFTA Article 1103

688. Claimant submits that via the MFN clause in NAFTA Article 1103, Respondent is required to accord Claimant and CALICA treatment no less favourable than that accorded to investors and investments in other post-NAFTA investment agreements.⁷²¹

689. Claimant relies on the Mexico-Switzerland bilateral investment treaty (“BIT”), pursuant to which Mexico guarantees to “observe any other obligation it has assumed with regard to investments in its territory by investors of [Switzerland]”. Since NAFTA contains no such guarantee, Claimant argues that this provision constitutes more favourable treatment and Claimant is entitled to receive at least the same treatment. If Claimant were not to enjoy substantive protection against Respondent’s breach of “other obligations”, such as those assumed in the 2014 Agreements, Claimant contends that it would receive treatment less favourable than that accorded by Mexico to Swiss investors.⁷²²

690. According to Claimant, Respondent seeks to create uncertainty where there is none by advocating for a reading of NAFTA Article 1103 that is not supported by NAFTA’s text.⁷²³ In Claimant’s view, in NAFTA Annex IV, Respondent recognizes that (i) NAFTA Article 1103 applies when the more favourable treatment is granted through treaties that postdate NAFTA; and (ii) “treatment” in Article 1103 encompasses substantive protections afforded in those treaties.⁷²⁴

⁷¹⁹ Memorial, ¶ 216, citing, inter alia, CL-0060-ENG, Occidental Petroleum Corporation and Occidental Exploration and Production Company v. The Republic of Ecuador, ICSID Case No. ARB/06/11, Award, 5 October 2012 (“Occidental v. Ecuador, Award”). ↩

⁷²⁰ Memorial, ¶ 217, citing, inter alia, CL-0063-ENG, BIN CHENG, GENERAL PRINCIPLES OF LAW AS APPLIED BY INTERNATIONAL COURTS AND TRIBUNALS (Cambridge University Press, 1953), p. 113; CL-0067-ENG, Sapphire International Petroleums Ltd. v. National Iranian Oil Company, Arbitral Award, 15 March 1963 (“Sapphire v. National Iranian Oil Company, Award”), pp. 172-173. ↩

⁷²¹ Memorial, ¶ 238; see Memorial, ¶ 194. ↩

⁷²² Memorial, ¶¶ 239-240, citing C-0138-ENG, Agreement between the Swiss Confederation and the United Mexican States on the Promotion and Reciprocal Protection of Investments, signed 10 July 1995, entered into force 14 March 1996, Art. 10(2). See also C-PHM, ¶ 41. ↩

⁷²³ Reply, ¶ 183. ↩

⁷²⁴ Memorial, ¶ 241; see Memorial, ¶ 195, citing C-0133-ENG, NAFTA, Annex IV – Schedule of Mexico: Exceptions from Most-Favored-Nation Treatment (Chapter 11) (“NAFTA, Annex IV”); Reply, ¶ 186, citing CL-0141-ENG, VCLT, Art. 31(1). See also Reply, ¶ 184; Counter-Memorial, ¶ 411. ↩

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691. Claimant argues that international tribunals have confirmed that umbrella clauses, such as Article 10(2) of the Mexico-Switzerland BIT, may be applied through MFN provisions.⁷²⁵

692. In Claimant’s view, Respondent mischaracterizes the state of international law on this issue and the relevance of the cases it invokes. Claimant emphasizes that it is not seeking to import dispute settlement provisions from other BITs, but import substantive obligations from other treaties. According to Claimant, the importation of substantive obligations is a well-established principle,⁷²⁶ recognized by multiple arbitral tribunals and commentators.⁷²⁷ Claimant submits that Respondent’s own authorities support this conclusion.⁷²⁸ In addition, Claimant cites several decisions of investment treaty tribunals specifically validating the importation of umbrella clauses from other treaties.⁷²⁹

693. Contrary to Respondent’s assertion, Claimant contends that NAFTA tribunals have not yet ruled directly on whether an umbrella clause may be imported from other treaties through Article 1103. Since the recently-negotiated USMCA explicitly restricts

⁷²⁵ Memorial, ¶ 242, citing CL-0078-ENG, EDF International S.A., SAUR International S.A., and León Participaciones Argentinas S.A. v. Argentine Republic, ICSID Case No. ARB/03/23, Award, 11 June 2012 (“EDF v. Argentina, Award”), ¶ 933; CL-0079-ENG, Mr. Franck Charles Arif v. Republic of Moldova, ICSID Case No. ARB/11/23, Award, 8 April 2013 (“Arif v. Moldova, Award”), ¶ 396. ↩

⁷²⁶ Reply, ¶ 188, citing, inter alia, CL-0038-ENG, Patrick Dumberry, The Importation of “Better” Fair and Equitable Treatment Standard Protection Through MFN Clauses: An analysis of NAFTA Article 1103, 14(1) TDM 1 (2017), pp. 2, 13-14; see Counter-Memorial, ¶ 407, n. 521. ↩

⁷²⁷ Reply, ¶ 189, citing, inter alia, CL-0031-ENG, Pope & Talbot v. Canada, Damages Award, n.54; CL-0032-ENG, ICS v. Argentina, Award on Jurisdiction, ¶ 286; CL-0035-ENG, United Parcel Service of America Inc v. Government of Canada, ICSID Case No. UNCT/02/1, Award on Jurisdiction, 22 November 2002 (“UPS v. Canada, Award on Jurisdiction”), ¶ 97; CL-0115-ENG, Vladimir Berschader and Moïse Berschader v. The Russian Federation, SCC Case No. 080/2004, Award, 21 April 2006, ¶ 179; see also CL-0116-ENG, White Industries Australia Limited v. The Republic of India, UNCITRAL, Final Award, 30 November 2011, ¶¶ 11.2.3-11.2.4; RL-030-ENG, Rudolph Dolzer & Cristoph Schreuer, Principles of International Investment Law (Oxford 2012), p. 211; CL-0117-ENG, Ieva Kalnina, White Industries v. The Republic of India: A Tale of Treaty Shopping and Second Chances, 9(4) Transnat’l Disp. Mgmt. 1, 6 (2012); CL-0118-ENG, J.R. Weeramantry, TREATY INTERPRETATION IN INVESTMENT ARBITRATION (Oxford University Press, 2012), p. 177; CL-0119-ENG, S. Vesel, Clearing a Path Through a Tangled Jurisprudence: Most-Favored-Nation Clauses and Dispute Settlement Provisions in Bilateral Investment Treaties, 32 YALE J. INT’L L. 125, 163 (2007). ↩

⁷²⁸ Reply, ¶¶ 190-191, citing RL-040-ENG, Simon Batifort & J. Benton Heath, The New Debate on the Interpretation of MFN Clauses in Investment Treaties: Putting the Brakes on Multilateralization, 111 Am. J. Int’l L. 873 (2017). ↩

⁷²⁹ Reply, ¶ 193, citing, inter alia, CL-0078-ENG, EDF v. Argentina, Award, ¶ 933; CL-0079-ENG, Arif v. Moldova, Award, ¶ 396; CL-0122-ENG, Noah Rubins, Thomas-Nektarios Papanastasiou and N. Stephan Kinsella, The Substantive Law of Contemporary International Investment Protection in INTERNATIONAL INVESTMENT, POLITICAL RISK, AND DISPUTE RESOLUTION: A PRACTITIONER’S GUIDE (2ND EDITION) (2020), ¶ 6.145. ↩

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application of the MFN clause, Claimant argues that the restriction would have been unnecessary if the NAFTA language already had the same restrictive effect.⁷³⁰

694. According to Claimant, the majority of tribunals have also concluded that the principle of esjusdem generis does not preclude investors from using the MFN clause to rely on the umbrella clause, even if that specific provision is absent from the base treaty. In this regard, Claimant asserts that a number of tribunals have stated that MFN clauses are designed to import standards of treatment unless specific treaty text expresses a clear intent to the contrary.⁷³¹

695. Claimant submits that, contrary to Respondent’s suggestion, most arbitral tribunals have held that a comparator investor is not needed when invoking the MFN clause to import a provision from another treaty. Relying on commentary by Prof. Stephan Schill, Claimant contends that the case of İçkale v. Turkmenistan relied on by Respondent erred in finding that the MFN treatment obligation only protects against de facto discrimination.⁷³² Claimant submits that under the prevailing approach to the MFN clause, it is sufficient for an investor to identify a third-party treaty that sets the standard of treatment that a hypothetical third-country investor “in like circumstances” would enjoy.⁷³³

696. In Claimant’s view, the exceptions in NAFTA Annex IV (Schedule of Mexico) would not be needed at all if the qualifier “in like circumstance” already excluded benefits granted under third-party treaties. This would be contrary to the effet utile principle.⁷³⁴

⁷³⁰ Reply, ¶ 192; C-0157-ENG, USMCA, Ch. 14, n. 22; see Counter-Memorial, ¶ 425. ↩

⁷³¹ Reply, ¶ 193, citing, inter alia, CL-0121-ENG, EDF International S.A., SAUR International S.A. and León Participaciones Argentinas S.A. v. Argentine Republic, ICSID Case No. ARB/03/23, Annulment Proceeding, Decision, 5 February 2016, ¶¶ 237-238; CL-0062-ENG, MTD v. Chile, Award, ¶ 104; see Counter-Memorial, ¶¶ 417-422. ↩

⁷³² Reply, ¶ 194, citing CL-0130-ENG, Stephan W. Schill, MFN Clauses as Bilateral Commitments to Multilateralism: A Reply to Simon Batifort and J. Benton Heath, 111 Am. J. Int’l L. (2017); see Counter-Memorial, ¶¶ 421-422; RL-050-ENG, İçkale İnşaat Limited Şirketi v. Turkmenistan, ICSID Case No. ARB/10/24, Award, 8 March 2016 (“Şirketi v. Turkmenistan, Award”). ↩

⁷³³ Reply, ¶¶ 195-196, citing CL-0130-ENG, Stephan W. Schill, MFN Clauses as Bilateral Commitments to Multilateralism: A Reply to Simon Batifort and J. Benton Heath, p. 932; CL-0126-ENG, Bayindir Insaat Turizm Ticaret Ve Sanayi A.Ş. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/29, Award, 27 August 2009, ¶¶ 156-158; CL-0131-ENG, ATA Construction, Industrial and Trading Company v. The Hashemite Kingdom of Jordan, ICSID Case No. ARB/08/2, Award, 18 May 2010, ¶ 73. ↩

⁷³⁴ Reply, ¶ 197, citing CL-0130-ENG, Stephan W. Schill, MFN Clauses as Bilateral Commitments to Multilateralism: A Reply to Simon Batifort and J. Benton Heath, p. 933. ↩

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C. RESPONDENT’S POSITION

1. The Applicable Standard for NAFTA Article 1105

(a) The Minimum Standard of Treatment

697. Respondent submits that the customary international law minimum standard under NAFTA Article 1105 is high, and prohibits conduct that is “arbitrary, grossly unfair, unjust or idiosyncratic, is discriminatory and exposes the claimant to sectional or racial prejudice, or involves a lack of due process leading to an outcome which offends judicial propriety”.⁷³⁵ In addition, Respondent relies on the decision of the tribunal in Cargill referring, inter alia, to “gross misconduct, manifest injustice or . . . bad faith or the wilful neglect of duty.”⁷³⁶ For Respondent, allegations of violation of domestic law, general claims of unfairness, and self-defined “expectations” are not sufficient to breach this standard.⁷³⁷

698. In Respondent’s view, Claimant has failed to discharge its burden to establish the existence and applicability of a rule of customary international law in line with its description of the legal standard.⁷³⁸ Respondent relies, in this regard, on the test derived from the North Sea Continental Shelf case of the International Court of Justice setting out the two-step inquiry into (i) whether there is a general practice; and (ii) whether such general practice is accepted as law, i.e., opinio juris.⁷³⁹

699. Respondent further submits that arbitral awards rendered by ad hoc tribunals are not a source of customary international law, and awards that apply an autonomous standard are not relevant for the interpretation of NAFTA Article 1105.⁷⁴⁰

⁷³⁵ Counter-Memorial, ¶ 299, citing RL-014-ESP, Waste Management v. Mexico (II), Award, ¶ 98; Rejoinder, ¶ 321. ↩

⁷³⁶ Counter-Memorial, ¶ 298, citing RL-009-ESP, Cargill, Incorporated v. United Mexican States, ICSID Case No. ARB(AF)/05/2, Award, 18 September 2009 (“Cargill Inc. v. Mexico, Award”), ¶¶ 285-286. ↩

⁷³⁷ Counter-Memorial, ¶ 299. ↩

⁷³⁸ Counter-Memorial, ¶¶ 293-294, citing RL-009-ESP, Cargill Inc. v. Mexico, Award, ¶ 273. ↩

⁷³⁹ Counter-Memorial, ¶ 295, citing RL-013-ENG, Jurisdictional Immunities of the State (Germany v. Italy: Greece intervening) I (Judgment of 3 February 2012), I.C.J., pp. 99, 122-123. ↩

⁷⁴⁰ Rejoinder, ¶ 315, citing RL-011-ENG, Glamis Gold, Ltd. v. United States of America, UNCITRAL, Award, 8 June 2009 (“Glamis Gold v. United States, Award”), ¶ 605; RL-009-ESP, Cargill Inc. v. Mexico, Award, ¶ 277. ↩

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700. According to Respondent, it is misleading for Claimant to try to avoid the FTC Note by implying that NAFTA governments did not intend to reject the autonomous standard of FET or that customary international law has changed radically in just a few years.⁷⁴¹ In its view, one of the reasons for adopting the FTC Note was to exclude the Pope & Talbot tribunal’s interpretation that the FET standard was additive to the requirements of international law.⁷⁴²

701. In addition, Respondent rebuts Claimant’s reliance on the Tecmed v. Mexico decision, on the basis that (i) it did not interpret NAFTA; (ii) it held that the FET provision it applied was “free-standing”; and (iii) the concept of legitimate expectations on which it relied has been widely criticized.⁷⁴³

702. In relation to Claimant’s invocation of NAFTA Article 1103 to import the autonomous FET standards under other treaties entered into by Mexico, Respondent contends that the FTC Note excludes that possibility.⁷⁴⁴ Moreover, Respondent submits that Claimant has not identified a comparable subject in like circumstances as required by NAFTA Article 1103.⁷⁴⁵

(b) Legitimate Expectations

703. Respondent submits that the crux of Claimant’s case rests on its alleged legitimate expectations arising from Respondent’s representations. Respondent argues that the Tribunal must be careful not to base its analysis on Claimant’s expectations as if they were a source of Respondent’s obligations.⁷⁴⁶

704. Moreover, Respondent asserts that the word “legitimate” entails that the host State should not be liable for losses resulting from risky or erroneous business decisions.⁷⁴⁷ In this

⁷⁴¹ Rejoinder, ¶ 317. ↩

⁷⁴² Rejoinder, ¶ 317, citing RL-052-ENG, Pope & Talbot Inc. v. The Government of Canada, UNCITRAL, Award on the Merits of Phase 2, 10 April 2001, ¶¶ 110, 117. ↩

⁷⁴³ Rejoinder, ¶ 318, citing RL-015-ESP, MTD Equity Sdn Bhd. & MTD Chile S.A. v. The Republic of Chile, ICSID Case No. ARB/01/7, Decision on Annulment, 21 March 2007 (“MTD v. Chile, Decision on Annulment”), ¶ 67. ↩

⁷⁴⁴ Rejoinder, ¶ 319. ↩

⁷⁴⁵ Rejoinder, ¶ 320. ↩

⁷⁴⁶ Counter-Memorial, ¶ 301, citing RL-015-ESP, MTD v. Chile, Decision on Annulment, ¶ 67. ↩

⁷⁴⁷ Counter-Memorial, ¶ 302, citing RL-016-ENG, Peter Muchlinski, ‘Caveat Investor’? The Relevance of the Conduct of the Investor Under the Fair and Equitable Treatment Standard, 55 Int’l & Comp. L. Q., 542 (2006). ↩

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regard, Respondent contends that investing in developing countries sometimes involves a higher degree of risk that is offset by a higher rate of return, meaning that an investment in a developing country cannot justify legitimate expectations as to the stability of the investment environment.⁷⁴⁸ Respondent relies on the case of MTD v. Chile in support of this point, where it was found that the investor’s negligence was a significant cause of its own loss and subtracted 50% of the claimed damages. In that case, the respondent had argued, inter alia, that the claimants had invested without performing significant due diligence.⁷⁴⁹

705. Even in a developed economy, Respondent contends that investor expectations must be justified by a proper risk assessment.⁷⁵⁰ Respondent relies on decisions of other arbitral tribunals, some of which it contends have been selectively cited by Claimant, as follows:

(i) Thunderbird v. Mexico: where the tribunal found that there was no legitimate expectation where the investor had knowledge that the planned investment might violate host State law;⁷⁵¹

(ii) Grand River v. United States: where the tribunal found that due to the “unsettled nature in relevant respects [of US domestic law], it is implausible to find that Mr. Montour could have reasonably expected, and reasonably relied on such an expectation as a prudent investor, that states would refrain from applying the MSA measures to him as they have done.”⁷⁵²

⁷⁴⁸ Counter-Memorial, ¶ 303, citing RL-017-ENG, Michele Potestà, Legitimate Expectations in Investment Treaty Law: Understanding the Roots and the Limits of a Controversial Concept, 28 Foreign Inv. L.J. 88 (2013), p. 119; RL-018-ENG, Parkerings-Compagniet AS v. Republic of Lithuania, ICSID Case No. ARB/05/8, Award, 11 September 2007 (“Parkerings-Compagniet v. Lithuania, Award”), ¶¶ 335-336. ↩

⁷⁴⁹ Counter-Memorial, ¶ 303, citing RL-019-ENG, MTD v. Chile, Award, ¶¶ 169-170. ↩

⁷⁵⁰ Counter-Memorial, ¶ 304, citing RL-020-ENG, Methanex v. United States, Final Award, ¶¶ 9-10. See also Counter-Memorial, ¶ 307, citing RL-016-ENG, Peter Muchlinski, ‘Caveat Investor’? The Relevance of the Conduct of the Investor Under the Fair and Equitable Treatment Standard. ↩

⁷⁵¹ Counter-Memorial, ¶ 305, citing RL-021-ESP, Thunderbird v. Mexico, Award, ¶¶ 137-163. ↩

⁷⁵² Counter-Memorial, ¶ 306, citing RL-023-ENG, Grand River Enterprises Six Nations, Ltd., et al. v. United States of America, UNCITRAL, Award, 12 January 2011 (“Grand River v. United States, Award”), ¶¶ 141-142. ↩

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(iii) Glamis Gold v. United States: where the legitimate expectations claim failed in part because the claimant was “operating in a climate that was becoming more and more sensitive to the environmental consequences of open-pit mining.”⁷⁵³

706. Respondent further relies on decisions in the cases of S.D. Myers v. Canada, International Thunderbird Gaming v. Mexico, Glamis Gold, Chemtura v. Canada and UPS v. Canada in support of its view that the role of a NAFTA Chapter 11 tribunal is not to second-guess or substitute for governmental decision-making.⁷⁵⁴

707. Respondent rebuts Claimant’s reliance on the tribunal’s decision in Metalclad v. Mexico, which it contends never used the term “legitimate expectations”. Moreover, Respondent asserts that the portion of the award on which Claimant relies was overturned by the British Columbia Supreme Court.⁷⁵⁵

708. In addition, Respondent argues that the Bilcon v. Canada tribunal articulated a very high legitimate expectations standard, which it considered to have been met on facts clearly distinguishable from the present case.⁷⁵⁶

709. Respondent also relies on Parkerings v. Lithuania where it was stated that “not every hope amounts to an expectation under international law . . . . [C]ontracts involve intrinsic expectations from each party that do not amount to expectations as understood in international law.”⁷⁵⁷ Citing Schreuer in support, Respondent argues that the opposite approach would bring all investor-State contracts under the FET standard, effectively constituting an umbrella clause.⁷⁵⁸

⁷⁵³ Counter-Memorial, ¶ 307, citing RL-011-ENG, Glamis Gold v. United States, Award, ¶ 767. ↩

⁷⁵⁴ Counter-Memorial, ¶¶ 310-313, citing RL-026-ENG, S.D. Myers v. Government of Canada, UNCITRAL, Partial Award, 13 November 2000, ¶ 261; RL-021-ESP, Thunderbird v. Mexico, Award ¶ 160; RL-011-ENG, Glamis Gold v. United States, Award, ¶¶ 803-805; RL-027-ENG, Chemtura Corporation (formerly Crompton Corporation) v. Government of Canada, UNCITRAL, Award, 2 August 2010, ¶ 134; RL-029-ENG, 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. See also Rejoinder, ¶ 325. ↩

⁷⁵⁵ Rejoinder, ¶ 326, citing RL-077-ENG, Metalclad Corporation v. The United Mexican States, ICSID Case No. ARB(AF)/97/1, Decision of the Supreme Court of British Columbia on the Challenge by the Petitioner 2001 BCSC 664, 2 May 2001. ↩

⁷⁵⁶ Rejoinder, ¶ 326, citing RL-078-ENG, Bilcon v. Canada, Award, ¶ 589. ↩

⁷⁵⁷ Counter-Memorial, ¶ 399, citing RL-018-ENG, Parkerings-Compagniet v. Lithuania, Award, ¶ 344. ↩

⁷⁵⁸ Counter-Memorial, ¶ 400, citing RL-033-ENG, United Nations Conference on Trade and Development, Fair and Equitable Treatment, UNCTAD/DIAE/IA/2011/5 (2012), p. 70. ↩

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2. The Applicable Standard for NAFTA Article 1103

710. Respondent contends that there is no umbrella clause in NAFTA. Respondent disputes that the MFN clause in NAFTA Article 1103 can be used to import new substantive obligations, which it argues has never successfully been invoked under NAFTA.⁷⁵⁹

711. With reference to NAFTA Annex IV relied on by Claimant, Respondent argues that the Annexes deal with the Parties’ reservations with respect to the regulatory treatment of investments. Thus, for Respondent, NAFTA Article 1103 does not refer to the concept of “treatment” broadly, as argued by Claimant, but to treatment “with respect to the establishment, acquisition, expansion, management, conduct, operation, sale or other disposition of investments”.⁷⁶⁰ Specifically, in its view, Article 1103 does not establish any legal standard for proving the existence of an arbitral claim. Respondent submits that there is no evidence that the NAFTA Contracting Parties intended to import broad and vague obligations, such as the umbrella clause, through the MFN clause.⁷⁶¹

712. In this respect, Respondent submits that when interpreting an MFN clause, investment tribunals should perform the same detailed analysis undertaken in interpreting a national treatment standard.⁷⁶² In its view, this analysis was not carried out in the EDF v. Argentina or Arif v. Moldova cases, and they are therefore not persuasive references or interpretations.⁷⁶³

713. Respondent characterizes the interpretation and application of MFN clauses as one of the most controversial issues in international investment law, meaning that the Tribunal must undertake a rigorous analysis in resolving this issue.⁷⁶⁴ In Respondent’s view, the arbitral

⁷⁵⁹ Counter-Memorial, ¶¶ 401-402; Rejoinder, ¶ 350. ↩

⁷⁶⁰ Rejoinder, ¶ 351. ↩

⁷⁶¹ Rejoinder, ¶ 352, citing RL-081-ESP, Hochtief AG v. Argentine Republic, ICSID Case No. ARB/07/31, Separate and Dissenting Opinion of J. Christopher Thomas, Q.C., 7 October 2011, ¶¶ 61-68. ↩

⁷⁶² Counter-Memorial, ¶ 403, citing RL-036-ENG, Facundo Pérez-Aznar, The Use of Most-Favoured-Nation Clauses to Import Substantive Treaty Provisions in International Investment Agreements, 20 J. Int’l Econ. L. 777 (2017), ¶ 7.275. See also Rejoinder, ¶ 355. ↩

⁷⁶³ Counter-Memorial, ¶¶ 404-405, citing RL-037-ENG, EDF v. Argentina, Award; RL-038-ENG, Arif v. Moldova, Award, also citing RL-039-ENG, Tarcisio Gazzini and Attila Tanzi, Handle with care: Umbrella clauses and MFN treatment in investment arbitration, 14 J. World Investment & Trade 978 (2013); RL-040-ENG, Simon Batifort & J. Benton Heath, The New Debate on the Interpretation of MFN Clauses in Investment Treaties: Putting the Brakes on Multilateralization. ↩

⁷⁶⁴ Counter-Memorial, ¶ 407, citing RL-041-ENG, Daimler Financial Services AG v. Argentine Republic, ICSID Case No. ARB/05/1, Award, 22 August 2012, ¶ 160; RL-040-ENG, Simon Batifort & J. Benton ↩

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tribunals in the cases of Bayindir v. Pakistan and ATA Construction, Industrial and Trading Company v. Jordan lack persuasive elements, for failing to address the qualifying language, which apparently was not addressed by the parties.⁷⁶⁵

714. According to Respondent, MFN is not a customary international law standard and specific treaty provisions are not uniformly drafted. It therefore submits that such provisions should not be approached with a preconceived notion of their essential nature or purpose.⁷⁶⁶ In addition, Respondent invokes concerns that from a policy perspective, broad application of MFN clauses by tribunals could make it difficult for States to predict the scope of potential liability under investment agreements.⁷⁶⁷ In this regard, Respondent argues that allowing investors to “pick and choose” via MFN clauses may allow an investor to construct a cause of action that may never have been in the contemplation of the contracting States.⁷⁶⁸

715. Relying on the VCLT, Respondent emphasizes that it is necessary to conduct a careful and treaty-specific interpretation of an MFN clause.⁷⁶⁹ Respondent further highlights the principle of ejusdem generis, according to which the MFN clause only operates in “cases where there is a close identity between the subject-matter of the two sets of clauses at issue”.⁷⁷⁰ In its view, this is simply an elaboration of the general principle of the VCLT

Heath, The New Debate on the Interpretation of MFN Clauses in Investment Treaties: Putting the Brakes on Multilateralization, pp. 881-882; RL-043-ENG, Krederi Ltd. v. Ukraine, ICSID Case No. ARB/14/17, Excerpts from the Award, 2 July 2018 (“Krederi v. Ukraine, Award”), ¶ 289. See also Rejoinder, ¶ 356.

⁷⁶⁵ Rejoinder, ¶ 364, citing RL-084-ENG, Julian Arato, The Margin of Appreciation in International Investment Law, 54 Va. J. Int’l L. 545 (2014), pp. 33, 35; RL-085-ENG, Irene M. Ten Cate, The Costs of Consistency: Precedent in Investment Treaty Arbitration, 51 Colum. J. Transnat’l L. 418 (2013), p. 27. ↩

⁷⁶⁶ Counter-Memorial, ¶ 408, citing RL-044-ESP, International Law Commission, Report of the International Law Commission on the work of its 30th session, UN Doc. A/33/10 (1978), 11(2); RL-040-ENG, Simon Batifort & J. Benton Heath, The New Debate on the Interpretation of MFN Clauses in Investment Treaties: Putting the Brakes on Multilateralization, p. 886. ↩

⁷⁶⁷ Counter-Memorial, ¶ 409, citing RL-040-ENG, Simon Batifort & J. Benton Heath, The New Debate on the Interpretation of MFN Clauses in Investment Treaties: Putting the Brakes on Multilateralization, pp. 875, 876. ↩

⁷⁶⁸ Counter-Memorial, ¶ 410, citing RL-045-ENG, Sundaresh Menon, The Transnational Protection of Private Rights: Issues, Challenges, and Possible Solutions, 108 ASIL Proc. 219 (2015), pp. 232-233. ↩

⁷⁶⁹ Counter-Memorial, ¶¶ 411, 415, citing RL-030-ENG, Rudolph Dolzer & Christoph Schreuer, Principles of International Investment Law, p. 208; RL-043-ENG, Krederi v. Ukraine, Award, ¶ 289. ↩

⁷⁷⁰ Counter-Memorial, ¶ 413, citing RL-047-ESP, Yearbook of the International Law Commission, Volume II, Part II (1978), p. 31. See also Counter-Memorial, ¶¶ 412-415. ↩

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that one must look at the specific terms of a treaty provision to determine its scope and effect.⁷⁷¹

716. Based on the wording of NAFTA Article 1103, which requires no less favourable treatment only “in like circumstances”, Respondent submits that it is an MFN clause with an unusually restrictive approach, in that it defines the comparator.⁷⁷² In this regard, Respondent argues that none of the MFN clauses applicable in the cases of EDF v. Argentina, Arif v. Moldova, Consutel v. Algeria or MTD v. Chile included similar restrictive language.⁷⁷³

717. Respondent relies on the decision in İçkale İnşaat Limited Şirketi v. Turkmenistan where, by contrast, an MFN clause similarly contained a limitation to “treatment accorded in similar situations”, where the tribunal held that the MFN clause prohibits discriminatory treatment of investments of investors when compared with the treatment accorded by the host State to investments of investors of any third State. This obligation only exists, in the İçkale tribunal’s view, insofar as the investors are in a “similar situation”.⁷⁷⁴

718. Likewise, Respondent relies on the decision in Muhammet Çap v. Turkmenistan which held, inter alia, that the benefit of the MFN clause is “not ‘automatic’”, and “[i]t must be shown that actual investors, found in a similar situation, were treated differently.”⁷⁷⁵

⁷⁷¹ Counter-Memorial, ¶ 415, citing RL-040-ENG, Simon Batifort & J. Benton Heath, The New Debate on the Interpretation of MFN Clauses in Investment Treaties: Putting the Brakes on Multilateralization, p. 885. ↩

⁷⁷² Counter-Memorial, ¶ 417, citing RL-024-ENG, Campbell McLachlan, Laurence Shore & Matthew Weiniger, International Investment Arbitration: Substantive Principles (Oxford 2^nd ed. 2017), ¶ 7.310. See also Rejoinder, ¶ 354, citing RL-082-ENG, Stephan W. Schill, MFN Clauses as Bilateral Commitments to Multilateralism: A Reply to Simon Batifort and Benton Heath, Amsterdam Law School Legal Studies Research Paper No. 2018-01, Amsterdam Center for International Law No. 2018-0, p. 17. ↩

⁷⁷³ Rejoinder, ¶¶ 357-360, citing R-0121-ESP, Agreement between the Government of the French Republic and the Government of the Argentine Republic on the Reciprocal Promotion and Protection of Investments, Paris, 3 July 1991, Article 4; R-0122-ENG, Agreement between the Government of the French Republic and the Government of the Republic of Moldova on the Reciprocal Promotion and Protection of Investments, 8 September 1997; RL-083-ENG, Consutel Group S.p.A. in liquidazione (Italy) v. People’s Democratic Republic of Algeria, PCA Case No. 2017-33, Final Award, 3 February 2020, ¶¶ 355, 358-359; RL-019-ENG, MTD v. Chile, Award, ¶ 104. ↩

⁷⁷⁴ Counter-Memorial, ¶¶ 421-422, citing RL-050-ENG, Şirketi v. Turkmenistan, Award, ¶¶ 326-329. See also Rejoinder, ¶¶ 361-362. ↩

⁷⁷⁵ Rejoinder, ¶ 362, citing RL-092-ENG, Muhammet Çap and Bankrupt Sehil Inşaat Endustri ve Ticaret Ltd. Sti. v. Turkmenistan, ICSID Case No ARB/12/6, Award, 4 May 2021, ¶ 783. ↩

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719. According to Respondent, Claimant has not even attempted to identify an investor from another country that has received more favourable treatment than that accorded to CALICA in similar circumstances.⁷⁷⁶

720. Contrary to Claimant’s argument that the comparable subject of the “in like circumstances” requirement could be hypothetical, Respondent contends that the term “in like circumstances” is also used in NAFTA Article 1102, so a claimant cannot evade the comparable subject requirement by simply pointing out that there is “theoretically” a domestic investor that could have received better treatment.⁷⁷⁷

721. Respondent finds further support for its interpretation of NAFTA Article 1103 in the language of Article 1103 which refers to treatment with respect to the “establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments”, and is therefore limited to specific categories of activities. According to Respondent, this does not include the types of claims that may be made in a dispute settlement proceeding.⁷⁷⁸

722. Moreover, Respondent argues that it would be peculiar if the result of Claimant’s interpretation would be that Respondent had obligations under the umbrella clause to US and Canadian investors while those countries had no such obligation to Mexican investors. In Respondent’s view, the clause was intended to apply when Respondent had a more liberal reservation towards another country, e.g., to allow European investors to have majority ownership of companies in a particular industry, where NAFTA did not do the same for investors in similar circumstances from the US and Canada.⁷⁷⁹

723. According to Respondent, NAFTA arbitral decisions and subsequent practice in the form of NAFTA Article 1128 submissions do not support the importation of substantive provisions by NAFTA Article 1103.⁷⁸⁰ Respondent relies on the FTC Note as well as

⁷⁷⁶ Rejoinder, ¶ 355. ↩

⁷⁷⁷ Rejoinder, ¶ 353, citing RL-024-ENG, Campbell McLachlan, Laurence Shore & Matthew Weiniger, International Investment Arbitration: Substantive Principles, ¶ 7.268; see Reply, ¶¶ 194-196. ↩

⁷⁷⁸ Counter-Memorial, ¶ 423. ↩

⁷⁷⁹ Counter-Memorial, ¶ 424. ↩

⁷⁸⁰ Counter-Memorial, ¶ 425, citing RL-040-ENG, Simon Batifort & J. Benton Heath, The New Debate on the Interpretation of MFN Clauses in Investment Treaties: Putting the Brakes on Multilateralization, p. 899, 882. ↩

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submissions made by the NAFTA Contracting Parties in various proceedings in support of its interpretation.⁷⁸¹

724. While no NAFTA tribunal to date has ruled on the introduction of an umbrella clause under NAFTA Article 1103, Respondent submits that the tribunal in ADF v. United States rejected the MFN claim due to the NAFTA Article 1108 procurement exception. It further noted that the claimant had failed to document, inter alia, the more favourable nature of other treaties’ FET provisions and had failed to show a breach of FET.⁷⁸²

D. NDP SUBMISSIONS

1. US First NDP Submission

725. In its First NDP Submission, the United States provides its interpretation regarding (i) NAFTA Article 1105 and the MST, (ii) NAFTA Article 1103 and the MFN treatment and (iii) NAFTA Articles 1116 and 1117 and limitations on loss and damage.

726. With respect to item (i) of ¶ 725 above, the United States submits that FET as well as full protection and security do not go beyond the requirements of the customary international law minimum standard of treatment of aliens.⁷⁸³ As this minimum standard is an umbrella concept, in its view NAFTA Article 1105 is not automatically breached when another provision of NAFTA or another international agreement is breached.⁷⁸⁴ Therefore, the United States argues that a claimant needs to prove the existence and the applicability of

⁷⁸¹ Counter-Memorial, ¶¶ 427-433, citing, inter alia, RL-054-ENG, Methanex Corporation v. United States of America, UNCITRAL, Response of Respondent United States of America to Methanex’s Submission Concerning the NAFTA Free Trade Commission’s July 31, 2001 Interpretation, 26 October 2011, pp. 9, 11; RL-055-ENG, Methanex Corporation v. The United States of America, UNCITRAL, Third Submission of Canada Pursuant to NAFTA Article 1128, 8 February 2002, ¶ 11; RL-040-ENG, Simon Batifort & J. Benton Heath, The New Debate on the Interpretation of MFN Clauses in Investment Treaties: Putting the Brakes on Multilateralization, pp. 901-902; RL-010-ENG, ADF Group Inc. v. United States of America, ICSID Case No. ARB(AF)/00/1, Award, 9 January 2003 (“ADF v. United States, Award”), ¶ 197; RL-057-ENG, Chemtura Corporation (formerly Crompton Corporation) v. Government of Canada, UNCITRAL, Respondent’s Counter-Memorial, 20 October 2008, ¶¶ 861-911; RL-058-ENG, Chemtura Corporation (formerly Crompton Corporation) v. Government of Canada, UNCITRAL, Respondent’s Rejoinder, 10 July 2009, ¶¶ 234, 236, 238-241; see also RL-059-ENG, Chemtura Corporation v. Government of Canada, UNCITRAL, Submission of the United States of America, 31 July 2009, ¶ 5; RL-060-ENG, Chemtura Corporation v. Government of Canada, UNCITRAL, Submission of Mexico Pursuant to Article 1128 of NAFTA, 31 July 2009, ¶¶ 2-5. See also Rejoinder, ¶ 365. ↩

⁷⁸² Counter-Memorial, ¶ 428, citing RL-010-ENG, ADF v. United States, Award, ¶ 197. ↩

⁷⁸³ US First NDP Submission, ¶ 3. ↩

⁷⁸⁴ US First NDP Submission, ¶¶ 3-4. ↩

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the relevant obligation under customary international law.⁷⁸⁵ The United States further submits that in this context the failure to comply with domestic law does not necessarily lead to a violation of international law since domestic authorities have extended rights within their territory.⁷⁸⁶ According to the United States, policy decisions of States, arbitral awards and judgements of international courts do not extend the scope of NAFTA Article 1105 as those decisions are not part of customary international law.⁷⁸⁷ Further, the United States submits that the concept of FET under customary international law does not contain an obligation for the host State not to frustrate the investors’ expectations.⁷⁸⁸

727. With respect to item (ii) of ¶ 725 above, the United States submits that the MFN principle cannot be used to extend the principle of FET.⁷⁸⁹ The United States argues that three conditions need to be fulfilled in order to confirm a breach of the MFN principle, being that a claimant or its investments (i) were accorded “treatment”; (ii) were in “like circumstances” with identified investors or investments; and (iii) received treatment “less favourable” than that accorded to the identified investors or investments.⁷⁹⁰ Highlighting the criteria of “less favourable treatment”, the United States contends that although all parties to the NAFTA filed for the exceptions of Annex IV of the NAFTA⁷⁹¹, the MFN principle is not to be interpreted as a “choice-of-law clause” but rather addressing the comparison of the actual treatment accorded to the investors.⁷⁹²

728. With respect to item (iii) of ¶ 725 above, the United States firstly submits that NAFTA Articles 1116 and 1117 only provide compensation for loss or a damage that occurred due to a breach of a substantive obligation of NAFTA Chapter 11 Section A.⁷⁹³ The United States contends that, in order to establish loss or a damage, all NAFTA Contracting Parties have agreed to require the investor to demonstrate proximate

⁷⁸⁵ US First NDP Submission, ¶¶ 8-9. ↩

⁷⁸⁶ US First NDP Submission, ¶ 9. ↩

⁷⁸⁷ US First NDP Submission, ¶ 10. ↩

⁷⁸⁸ US First NDP Submission, ¶ 12. ↩

⁷⁸⁹ US First NDP Submission, ¶¶ 13-14. ↩

⁷⁹⁰ US First NDP Submission, ¶ 16. ↩

⁷⁹¹ Annex IV of NAFTA contains the exception “to Article 1103 for treatment accorded under all bilateral or multilateral international agreements in force or signed prior to the date of entry into force of this Agreement” (US First NDP Submission, ¶ 18) (emphasis omitted). ↩

⁷⁹² US First NDP Submission, ¶ 18. ↩

⁷⁹³ US First NDP Submission, ¶ 19. ↩

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causation.⁷⁹⁴ According to the United States, this requirement has also been imposed by NAFTA tribunals, as damages were only awarded in the presence of a “sufficient causal link.”⁷⁹⁵

729. Secondly, the United States submits that the NAFTA definition of an investor is limited to a person that is seeking to make, making or having made an “investment” in the territory of another NAFTA Contracting Party, a definition which, according to the United States, all NAFTA Contracting Parties have agreed upon.⁷⁹⁶ In the context of this definition, the United States underlines that this definition does not apply to persons other than investors, and that the investment must be in the territory of the respondent party.⁷⁹⁷ According to the United States, the definition poses limitations with regard to the term “investment”, as no “revenues or profits” can be considered an investment under NAFTA.⁷⁹⁸

730. Thirdly, the United States contends that only the loss or the damage that has been suffered by the investor itself (NAFTA Article 1116) or the loss or the damage that has been suffered by the enterprise of another party that the investor owns or controls (NAFTA Article 1117) can be invoked.⁷⁹⁹ However, the United States stresses that NAFTA Article 1117 is not applicable to loss or damage that is incurred by an enterprise of a non-Contracting Party or of the same NAFTA Contracting Party as the investor.⁸⁰⁰

731. According to the United States, the distinction between NAFTA Articles 1116 and 1117 is based on two principles of customary international law: the first principle addresses the impossibility to claim loss or damage directly suffered by or on behalf of a shareholder, due to the separate legal personality of corporations.⁸⁰¹ Based on this principle, the United States opines that the decisive factor to characterize loss or a damage is not whether it was directly or indirectly suffered but whether the infringed right belonged to the

⁷⁹⁴ US First NDP Submission, ¶ 21. ↩

⁷⁹⁵ US First NDP Submission, ¶ 22. ↩

⁷⁹⁶ US First NDP Submission, ¶¶ 23-24. ↩

⁷⁹⁷ US First NDP Submission, ¶¶ 24-25. ↩

⁷⁹⁸ US First NDP Submission, ¶ 27. ↩

⁷⁹⁹ US First NDP Submission, ¶¶ 29-30. ↩

⁸⁰⁰ US First NDP Submission, ¶ 31. ↩

⁸⁰¹ US First NDP Submission, ¶ 33. ↩

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shareholder or the corporation.⁸⁰² The second principle invoked by the United States is that an international claim may not be brought against a State on behalf of its own nationals.⁸⁰³ This principle is respected by NAFTA Article 1117, as only claims of an injury suffered by an “enterprise of another party” are invocable.⁸⁰⁴

732. Since nothing in the text of NAFTA Article 1116 implies permission for an investor to base a claim on an indirect injury, the United States submits that NAFTA Article 1117 is the only way for an investor to invoke indirect injuries – and that only in specific circumstances.⁸⁰⁵

2. Canada’s NDP Submission

733. In its NDP Submission, Canada provided its interpretation regarding (i) NAFTA Article 1105 and the Minimum Standard of Treatment, (ii) NAFTA Article 1103 and MFN treatment and (iii) NAFTA Articles 1116 and 1117.

734. With respect to item (i) of ¶ 733 above, Canada submits that the MST is accorded by NAFTA Contracting Parties to investments of investors of another NAFTA Contracting Party.⁸⁰⁶ This view is confirmed in the FTC Note, which in Canada’s view has been confirmed as the definitive and binding interpretation of NAFTA Article 1105.⁸⁰⁷ According to Canada, the MST is an objective standard of treatment for investors that is limited by customary international law.⁸⁰⁸ In line with that, Canada argues that investment arbitration cannot be seen as a customary international law limitation of the MST.⁸⁰⁹ Canada argues that even though decisions by investment arbitration tribunals can contain valuable analysis of State practice, it is not sufficient to prove State practice.⁸¹⁰

735. Further, Canada submits that NAFTA Article 1105 should not be used by tribunals to question government practices and decision making as NAFTA Article 1105 is not

⁸⁰² US First NDP Submission, ¶ 34. ↩

⁸⁰³ US First NDP Submission, ¶ 36. ↩

⁸⁰⁴ US First NDP Submission, ¶ 37. ↩

⁸⁰⁵ US First NDP Submission, ¶¶ 37-38. ↩

⁸⁰⁶ Canada NDP Submission, ¶ 3. ↩

⁸⁰⁷ Canada NDP Submission, ¶ 4. ↩

⁸⁰⁸ Canada NDP Submission, ¶¶ 4-5. ↩

⁸⁰⁹ Canada NDP Submission, ¶ 8. ↩

⁸¹⁰ Canada NDP Submission, ¶ 8. ↩

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intended to provide an overall protection for investors for any kind of government action and so far, only a few concrete rules have been attributed to the standard.⁸¹¹ In Canada’s view, the investor’s legitimate expectations are not part of the provided protection.⁸¹²

736. With respect to item (ii) of ¶ 733 above, Canada provides an enumeration and interpretation of the three conditions required to invoke a breach of the MFN treatment.⁸¹³

737. Concerning the first criterion of “treatment”, Canada argues that hypothetical treatment resulting from obligations of other treaties is not sufficient to allege a breach of the NAFTA MFN obligation.⁸¹⁴ As actual treatment is required, in its view the existence of a treaty and the obligations flowing from that treaty are not sufficient.⁸¹⁵

738. With respect to the second criterion of “like circumstances”, Canada submits that this criterion requires a case-by-case approach and argues that the criterion is a substantive part of the MFN obligation and cannot be invoked as a defence by the NAFTA Contracting Parties.⁸¹⁶

739. Canada further submits that NAFTA Article 1103 cannot alter the content of NAFTA Article 1105 nor the content of the MST standard of customary international law.⁸¹⁷

740. With respect to item (iii) of ¶ 733 above, Canada submits that the authentic interpretation of NAFTA Article 1116 concerning losses suffered directly by the investor, and NAFTA Article 1117 concerning losses suffered directly by the enterprise and indirectly by the investor, has been approved by all NAFTA Contracting Parties.⁸¹⁸ According to Canada, NAFTA Article 1117 constitutes a derogation from customary international law as it allows a shareholder to claim damages for the enterprise in which it holds shares.⁸¹⁹ For

⁸¹¹ Canada NDP Submission, ¶¶ 9-10. ↩

⁸¹² Canada NDP Submission, ¶¶ 11-13. ↩

⁸¹³ Canada NDP Submission, ¶ 16. ↩

⁸¹⁴ Canada NDP Submission, ¶¶ 22-23. ↩

⁸¹⁵ Canada NDP Submission, ¶¶ 24-25. ↩

⁸¹⁶ Canada NDP Submission, ¶¶ 18-20. ↩

⁸¹⁷ Canada NDP Submission, ¶ 26. ↩

⁸¹⁸ Canada NDP Submission, ¶¶ 27-30. ↩

⁸¹⁹ Canada NDP Submission, ¶ 31. ↩

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both provisions, Canada stresses the need of a proximate causation between the alleged breach and the alleged loss, with the burden of proof lying with the investor.⁸²⁰

741. As to the capacity of an investor, Canada relies on the requirements of VCLT Article 31 when submitting that NAFTA Articles 1116 and 1117 need to be interpreted in the context of other relevant NAFTA articles – such as NAFTA Articles 1139 and 1101.⁸²¹ On that basis, Canada argues that “an investor may only recover for damages it incurred in its capacity as an investor seeking to make, making, or having made, an investment in the territory of the other Party.”⁸²²

742. According to Canada, an investor can only be compensated for the loss it has suffered, not for the loss suffered by third parties over which the Tribunal has no jurisdiction.⁸²³

3. US Second NDP Submission

743. In the US Second NDP Submission, the United States provides its interpretation regarding: (i) the content of the MST included in NAFTA Article 1105; (ii) the provisions of NAFTA Chapter 11 in the context of environmental issues (NAFTA Article 1114); and (iii) the notion of contributory fault.

744. With respect to item (i) of ¶ 743 above, the United States submits that the MST does not require the same due process in administrative decisions as for adjudicatory proceedings.⁸²⁴ Further, the United States refers to the principle of good faith which is included in the NAFTA.⁸²⁵ According to the United States, this principle only binds the parties to the Treaty among each other, but does not serve third parties, such as investors, as a source of obligation.⁸²⁶ In consequence, in its view, it would not be possible for third parties to base a State’s liability on a breach of good faith.⁸²⁷

⁸²⁰ Canada NDP Submission, ¶ 32. ↩

⁸²¹ Canada NDP Submission, ¶ 37. ↩

⁸²² Canada NDP Submission, ¶ 40. ↩

⁸²³ Canada NDP Submission, ¶ 41. ↩

⁸²⁴ US Second NDP Submission, ¶ 3. ↩

⁸²⁵ US Second NDP Submission, ¶ 4. ↩

⁸²⁶ US Second NDP Submission, ¶ 4. ↩

⁸²⁷ US Second NDP Submission, ¶ 5. ↩

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745. With respect to item (ii) of ¶ 743 above, the United States submits that States are not hindered in taking environmental measures, even in case these measures are disadvantageous to a certain investment.⁸²⁸

746. With respect to item (iii) of ¶ 743 above, the United States relies on Article 39 of the ILC Articles on State Responsibility, contending that when determining the reparation, Claimant’s contribution to the injury needs to be taken into account.⁸²⁹

4. Claimant’s Comments on NDP Submissions

747. On 28 June 2021, Claimant filed its observations on the US First NDP Submission and Canada NDP Submission (“Claimant’s First NDP Observations”) in which it addressed the issues of interpretation of NAFTA Articles 1105, 1103 and 1116 put forward by the United States and Canada, as summarized below.

748. First, Claimant contends that pleadings by States do not constitute subsequent agreements or practice under VCLT Article 31.⁸³⁰ According to Claimant, these subsequent agreements and practices do not need to be considered by the Tribunal as they do not constitute objective interpretations but mainly reflect a specific defensive position of the NAFTA Contracting Parties.⁸³¹

749. Second, with regard to NAFTA Article 1105, Claimant submits that it is undisputed by the United States and Canada that NAFTA Article 1105 applies the customary international law MST, and that this standard has evolved over time.⁸³² Further, contrary to the United States and Canada’s position, Claimant contends that NAFTA Article 1105 prohibits conduct that is arbitrary or inconsistent with reasonable investor expectations and therefore provides equal protection as under the autonomous FET standard.⁸³³

⁸²⁸ US Second NDP Submission, ¶ 6. ↩

⁸²⁹ US Second NDP Submission, ¶ 7. ↩

⁸³⁰ Claimant’s First NDP Observations, ¶ 3. ↩

⁸³¹ Claimant’s First NDP Observations, ¶ 4. ↩

⁸³² Claimant’s First NDP Observations, ¶¶ 11, 13; see also, ¶ 12, citing Canada NDP Submission, ¶¶ 3-4 and US First NDP Submission, ¶ 4. ↩

⁸³³ Claimant’s First NDP Observations, ¶ 14. ↩

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750. Third, Claimant contends that it is entitled to treatment consistent with the autonomous FET standard under NAFTA Article 1103, even if the autonomous FET standard was not covered by NAFTA Article 1105.⁸³⁴

751. Lastly, Claimant submits with regard to NAFTA Article 1116 that: (i) it allows an investor of a party to recover all losses incurred, irrespective of their direct or indirect causation,⁸³⁵ even if Claimant only claims directly suffered losses in this case;⁸³⁶ (ii) the recovery of damages through NAFTA Article 1116 is not limited by the “capacity” of the investor;⁸³⁷ and (iii) even if there was such a “capacity” limitation, Claimant has suffered losses in its capacity as investor since the losses are triggered through the direct interference of Respondent affecting CALICA as an integrated business.⁸³⁸

752. On 25 September 2023, Claimant filed its observations on the US Second NDP Submission (“Claimant’s Second NDP Observations”). Claimant submits that the issue before the Tribunal is not whether due process requirements in administrative and judicial proceedings are the same, but whether denial of basic due process in administrative proceedings constitutes a breach of NAFTA Article 1105. In its view, it does.⁸³⁹

753. Claimant further disagrees with the United States in relation to good faith, arguing that NAFTA Article 1105 does include an obligation upon States to act in good faith.⁸⁴⁰

5. Respondent’s Comments on NDP Submissions

754. Respondent did not file observations on the Canada NDP Submission or the US First NDP Submission.

755. On 25 September 2023, Respondent filed its observations on the US Second NDP Submission (“Respondent’s NDP Observations”). Respondent argues that the United States’ submission is aligned with its own arguments about NAFTA Article 1105, i.e.,

⁸³⁴ Claimant’s First NDP Observations, ¶ 22; see also Claimant’s First NDP Observations, ¶¶ 23-26, citing CL-0038-ENG, Patrick Dumberry, The Importation of “Better” Fair and Equitable Treatment Standard Protection Through MFN Clauses: An Analysis of NAFTA Article 1103, pp. 2, 4. ↩

⁸³⁵ Claimant’s First NDP Observations, ¶¶ 30-33. ↩

⁸³⁶ Claimant’s First NDP Observations, ¶¶ 34-36. ↩

⁸³⁷ Claimant’s First NDP Observations, ¶ 57; see also, ¶¶ 58-63. ↩

⁸³⁸ Claimant’s First NDP Observations, ¶¶ 64, 70-71. ↩

⁸³⁹ Claimant’s Second NDP Observations, ¶ 75; see also Claimant’s Second NDP Observations, ¶¶ 76-77. ↩