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Developments in Investment Arbitration - WAMR 2006 Vol. 17, No. 5

Author(s): 
Frédéric Bachand
Page Count: 
7 pages
Media Description: 
PDF from World Arbitration and Mediation Report (WAMR) 2006 Vol. 17, No. 5
Published: 
May, 2006
Jurisdictions: 
International,
Mexico
Practice Areas: 
Arbitrators and Arbitral Tribunals,
Investment Disputes,
Costs and Damages,
Statement of Claim and Defense/ Counterclaims/ Set-Offs,
NAFTA
Author Detail: 

 

Frédéric Bachand, Investment Arbitration, McGill Law Faculty (Montréal)

PDF129.6 KB

$40.00
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International News
Developments in Investment Arbitration
by Frédéric Bachand, WAMR Editor for Investment Arbitration
In a Split Decision, NAFTA Chapter 11 Tribunal Dismisses Claim
Submitted by International Thunderbird Gaming Corporation against
Mexico
An arbitral tribunal recently dismissed a $100,000,000.00 claim
against Mexico submitted by a publicly-held Canadian corporation,
International Thunderbird Gaming Corporation, pursuant to Section B of
NAFTA’s Chapter 11. The dispute related to the closure of gaming
facilities opened by Mexican subsidiaries of Thunderbird in 2000 and
2001. The closure occurred after the gaming equipment used in the
facilities were found by Mexican authorities to constitute gambling
equipment that was prohibited under domestic law. Those
determinations—which were argued by Thunderbird to have breached its
legitimate expectations—were unsuccessfully challenged before local
courts, and Thunderbird commenced NAFTA Chapter 11 arbitration,
asserting that Mexico had breached the NAFTA provisions guaranteeing
national treatment (Article 1102), most-favoured nation treatment (Article
1103), fair and equitable treatment (Article 1105), and protection against
expropriatory measures (Article 1110).
The tribunal started by dismissing two preliminary objections
raised by Mexico. The first asserted that Thunderbird did not “own or
control” the Mexican entities that operated the impugned gaming facilities
within the meaning of NAFTA Article 1117. While these entities were
only partly owned by Thunderbird—the level of ownership varied from
33.3% to 40.1%— the tribunal found that “a showing of effective or ‘de
facto’ control [was…] sufficient for the purposes of Article 1117 of the
NAFTA,” adding that “[i]n the absence of legal control […] de facto
control must be established beyond any reasonable doubt” (¶ 106). Based
on the evidence submitted, the tribunal came to the conclusion that this
relatively high threshold had been met.
The second preliminary objection related to NAFTA Article 1121,
which sets out certain conditions precedent to the submission of a claim to
arbitration. In particular, Article 1121 requires from claiming investors
that they “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” being challenged. Mexico had contended that Thunderbird’s