B-Mex, LLC and others v. United Mexican States

Case summary

At a glance

Parties: B-Mex, LLC, B-Mex II, LLC, Palmas South, LLC, Gordon G. Burr, Erin J. Burr, John Conley, Oaxaca Investments, LLC, Santa Fe Mexico Investments, LLC and 30 other U.S. investors v. United Mexican States
Case no.: ICSID Case No. ARB(AF)/16/3
Forum and rules: ICSID Additional Facility Rules (in force from 10 April 2006), as modified by NAFTA Chapter Eleven, Section B; seat Toronto, Canada
Treaty: NAFTA Chapter Eleven
Tribunal: Gaëtan Verhoosel (President), Gary Born, Raúl Emilio Vinuesa
Court: Ontario Superior Court of Justice (Dietrich J.), set-aside application against the Partial Award
Underlying award(s): Partial Award on jurisdiction of 19 July 2019
Sector: Gaming; casinos
Outcome: Partial Award (19 July 2019): the majority upheld jurisdiction over all 38 Claimants and over the claims on behalf of all the Mexican Companies except Operadora Pesa. The Ontario court dismissed Mexico's set-aside application (20 July 2020). Final Award (21 June 2024): the majority found that SEGOB breached the fair and equitable treatment standard of Article 1105 but that Mexico's courts did not deny justice. Vinuesa dissented on both awards.
Amount: Claimed: about USD 100 million (as described by the Ontario court). The amount awarded is not shown in the extracted text of the Final Award. Ontario court costs: CAD 100,000, payable by Mexico.

The dispute

U.S. individuals and companies invested, through Mexican companies (the five "Juegos Companies", Exciting Games (E-Games) and Operadora Pesa), in casinos at Naucalpan, Villahermosa, Puebla, Cuernavaca and Mexico City. They also planned expansion projects in Cabo, Cancún and online. The Ministry of the Interior (SEGOB) revoked E-Games' 2012 gaming permit and closed the casinos in 2014. Court proceedings in Mexico followed, including Amparo 1668/2011. The Claimants sued under NAFTA Articles 1116 and 1117, alleging expropriation (Article 1110), breach of the minimum standard of treatment including denial of justice (Article 1105), and breaches of national treatment and most-favoured-nation treatment (Articles 1102 and 1103). Mexico objected to jurisdiction on several grounds: 31 "Additional Claimants" were not named in the 23 May 2014 Notice of Intent (Article 1119); consents were defective (Article 1121); and the Claimants did not own or control the Mexican Companies (Article 1117). On the merits it argued that it had closed the casinos under court orders, that the Claimants' operations were illegal, and that the Claimants contributed to their own loss.

Key holdings

All Claimants validly consented under Article 1121. Powers of attorney delivered with the Request satisfied Article 1121(3). Partial Award ¶¶ 53–60 (as cited in the dissent)
Article 1119 does not condition Mexico's consent in Article 1122(1). The failure to name the 31 Additional Claimants in the Notice of Intent therefore does not deprive the Tribunal of jurisdiction over them, and their claims are admissible. Partial Award ¶¶ 72–79 (as cited in the dissent)
The Claimants controlled the Juegos Companies and E-Games at the relevant dates. Even on the shareholdings recorded in the 2006–2008 asambleas, they held more than 50% of the shares, which gave them the legal capacity to control. Jurisdiction was declined only for Operadora Pesa, which the Claimants did not own or control. Partial Award ¶¶ 186, 236 et seq.; Ontario judgment ¶¶ 23, 25
Vinuesa dissented in part. In his view, the Tribunal lacked jurisdiction over the Additional Claimants and Operadora Pesa because no Notice of Intent named them. It also lacked jurisdiction under Article 1117 over the Juegos Companies other than JVE Mexico. He would have held the Tribunal had jurisdiction only over the Original Claimants' own claims and their claims on behalf of JVE Mexico and E-Games. Dissent ¶ 151
The Ontario Superior Court found that Mexico had not shown the Tribunal was wrong in its reading of Articles 1119 and 1121. It held that the Article 1128 submissions of the United States and Canada did not amount to subsequent practice under the Cargill standard. The application was dismissed with costs of CAD 100,000. 2020 ONSC 2376 ¶¶ 217–221
In the Final Award the majority held that SEGOB's treatment of the investments fell below the Article 1105 standard. In its view, SEGOB acted on the predisposition of its new political leadership rather than on public or regulatory policy, and it chose to end the business when it could have preserved it. Mexico's courts did not deny justice, but that does not relieve Mexico of responsibility for SEGOB's conduct. Vinuesa dissented. The award then addresses causation, contributory fault and quantum, but the extracted text does not show the amounts. Final Award, Section VI (table of contents)