Finley Resources Inc., MWS Management Inc., and Prize Permanent Holdings, LLC v. United Mexican States

Case summary

At a glance

Parties: Finley Resources Inc., MWS Management Inc. and Prize Permanent Holdings, LLC (all of Texas, United States) v. United Mexican States
Case no.: ICSID Case No. ARB/21/25
Forum and rules: ICSID Convention arbitration; ICSID Arbitration Rules in force from 10 April 2006, as modified by NAFTA Chapter Eleven Section B and USMCA Annex 14-D
Treaty: NAFTA (legacy investment claims under USMCA Annex 14-C) and USMCA (Annex 14-E)
Tribunal: Manuel Conthe Gutiérrez (President), Franz X. Stirnimann Fuentes, Alain Pellet
Sector: Oil and gas; oilfield drilling services for Pemex
Outcome: Decision on Jurisdiction and Liability (4 November 2024; revised 8 January 2025): Mexico found in breach of NAFTA Articles 1105 and 1102 over the 821 Contract; the claims on the 803 and 804 Contracts and on the TUCMA Judgment were dismissed; quantum phase pending.
Amount: No damages awarded yet; quantum is decided in a later phase. PEP called the full Dorama performance bond of USD 41,830,362.16 (about USD 41.8 million). Costs are reserved to the final award.

The dispute

The three Texas claimants and their Mexican affiliates held three oilfield service contracts with Pemex Exploración y Producción (PEP): the 803 and 804 Contracts (MWS and Bisell) and the 821 Contract of 28 February 2014 (Finley, Drake-Mesa and Drake-Finley) for drilling and completing onshore wells in the Chicontepec (ATG) project. After oil prices fell in 2014, PEP stopped issuing work orders. It then rescinded the 821 Contract on 28 August 2017 for failure to perform a single work order (028/2016) and for unfinished community and environmental (PACMA) works. The Federal Tribunal of Administrative Justice (TFJA) upheld the rescission on 4 October 2018. PEP later issued a unilateral finiquito on 10 November 2021 and called the USD 41.8 million Dorama Bond. The claimants alleged denial of justice and unfair treatment under NAFTA Article 1105 and USMCA Article 14.6, and discrimination under NAFTA Article 1102, comparing themselves with Mexican contractors Integradora and Zapata, which PEP had paid and settled with. Mexico objected to consolidation, the existence of an investment, attribution of PEP's conduct, time bars, the fork-in-the-road clause, the waiver requirement and the contractual nature of the dispute; on the merits it relied on the government procurement exception and denied any breach.

Key holdings

Interim measures refused. Events after the date of consent (25 March 2021), such as completion of the finiquito or a call on the Dorama Bond, cannot remove jurisdiction, so there was no risk of irreparable harm to the Tribunal's jurisdiction. Decision on Interim Measures, ¶¶ 34–43
Jurisdiction upheld only in part. The Tribunal has jurisdiction over the USMCA claim on court delays in the 803/804 litigation, the NAFTA Article 1105 claims on the TUCMA and TFJA judgments, and NAFTA Articles 1105 and 1102 claims for PEP acts after 25 March 2018. It lacks jurisdiction ratione temporis to find a breach in the rescission of 28 August 2017 itself, although it found that rescission to be part of a PEP "scheme" built on a bogus work order. All other claims fall outside its jurisdiction. Decision on Jurisdiction and Liability, ¶¶ 666, 865
Denial of justice by the TFJA (breach of NAFTA Article 1105). Taken together, five defects made the outcome "notoriously unjust" and offensive to judicial propriety: the patently wrong reading of Clause 15.1 s), which ignored the 15-work-order threshold in Clause 15.1 r); the total disregard of the Escrito de Alegatos; the finding that the works were never suspended; the outright rejection of the exceptio non adimpleti contractus; and the neglect of clear signs of PEP's misuse of power. The amparo and Supreme Court rulings do not change this conclusion. Decision on Jurisdiction and Liability, ¶¶ 729–772
The unilateral finiquito and the call on the Dorama Bond were administrative acts of PEP attributable to Mexico, not purely contractual acts. Exacting a USD 41.8 million sanction for one bogus work order was "notoriously unjust and even vindictive" and an egregious breach of the minimum standard of treatment and fair and equitable treatment. Decision on Jurisdiction and Liability, ¶¶ 795–802
Breach of national treatment (NAFTA Article 1102). The 803, 804 and 821 Contracts were not "government procurement". Integradora and Zapata were Mexican companies, and Mexico offered no evidence to the contrary. The two sets of contractors were in like circumstances: the force majeure component of the Mexican companies' settlement was minor, and resorting to the courts cannot justify different treatment. PEP paid the Mexican companies close to USD 15 million and settled, while it rescinded the claimants' contract. Decision on Jurisdiction and Liability, ¶¶ 818–863
Claims dismissed on the merits: the USMCA Article 14.6 claim on delays in the Mexican court cases on the 803 and 804 Contracts, and the NAFTA Article 1105 claim on the TUCMA Judgment. The alleged ex parte meeting at "La Aceituna" was not proven to show judicial bias. Costs are reserved. Decision on Jurisdiction and Liability, ¶¶ 685–689, 865
Mexico's request for clarification was dismissed in full. Its questions were either a tacit appeal against the Decision or requests for guidance on quantum issues, and none identified any ambiguity in the dispositive part. Decision on Clarification Request, ¶¶ 27–40