Carlos Esteban Sastre v. United Mexican States

Case summary

At a glance

Parties: Carlos Esteban Sastre and others (Mr. Sastre, CETSA-Tierras del Sol and HLSA/Hamaca Loca; Mónica Galán Ríos and Graham Alexander; Renaud Jacquet; Eduardo Nuno Vaz Osorio dos Santos Silva and Margarida Oliveira Azevedo de Abreu) v. the United Mexican States
Case no.: ICSID Case No. UNCT/20/2
Forum and rules: UNCITRAL Arbitration Rules (1976), administered by ICSID
Treaty: NAFTA; France–Mexico BIT; Portugal–Mexico BIT; Argentina–Mexico BIT
Tribunal: Prof. Eduardo Zuleta (President), Dr. Charles Poncet, Mr. Christer Söderlund
Sector: Tourism; hotels on ejido (agrarian) land in Tulum
Outcome: The Tribunal bifurcated the proceedings and heard Mexico's jurisdictional objections first (13 August 2020). The published documents do not show the decision on jurisdiction.

The dispute

Six claimants of different nationalities filed one joint claim against Mexico under four treaties: NAFTA and the BITs of Mexico with Argentina, France and Portugal. Each claimed investments in hotels in Tulum, Quintana Roo (Tierras del Sol, Hamaca Loca, Behla Tulum, Uno Astrolodge and Hotel Parayso). The hotels stood on land they said they held through assignments, possession certificates and other contracts derived from the Ejido José María Pino Suárez. The claimants alleged treaty breaches by Mexico between 31 October 2011 and 17 June 2016, including a denial of justice and a judicial expropriation that crystallised in 2015. Mexico objected that it never consented to this "self-consolidation" of claims. It also argued that the claimants were not covered investors with covered investments at all relevant times, that the investments were illegal, that Mr. Sastre's Argentine claims were time-barred and affected by his Mexican nationality and domicile, that the notices of intent were defective, and that the HLSA/Hamaca Loca claim was an abuse of rights. Mexico's agrarian-law expert gave the opinion that the plots lay outside the land granted to the ejido, that foreigners cannot acquire ejido rights by assignment, and that the claimants' contracts are null.

Key holdings

The Tribunal was validly constituted and, under the kompetenz-kompetenz rule, may decide whether to hear the preliminary objections first or together with the merits. For efficiency, it will hear all of Mexico's objections under all four treaties in one single proceeding. PO2 ¶¶ 27–31
Under both the 1976 and the 2010 UNCITRAL Rules, the Tribunal has broad discretion on bifurcation. It applies the Glamis Gold test: the objection must be serious and substantial; if upheld, it must materially reduce the proceedings; and it must not be too intertwined with the merits. All three criteria must be met, and they serve as guidance only. PO2 ¶¶ 37–46
The objection to the joint filing ("self-consolidation", which the claimants call a multiparty arbitration) meets the test. Consent is essential, deciding the objection would save time and costs, and the question is one of interpretation with no bearing on the merits. The Tribunal did not decide whether the objection is jurisdictional or procedural. PO2 ¶¶ 49–53
The objections that the claimants are not covered investors with covered investments at all relevant times, including legality of the investments, also meet the test. They can be examined without deciding whether Mexico breached the treaties. PO2 ¶¶ 54–58
The objections specific to Mr. Sastre and the NAFTA claimants also meet the test: Mr. Sastre's dual nationality and domicile under Article 2(3) of the Argentina–Mexico BIT; the four-year time limit in Article 1(2) of that BIT's Annex; the notices of intent under that BIT and NAFTA Article 1119; and abuse of rights for HLSA/Hamaca Loca. PO2 ¶¶ 59–75
The proceedings are bifurcated and Mexico's preliminary objections will be heard in a preliminary phase. Costs are reserved to the decision on the objections. PO2 ¶¶ 77–78
On document production, the Tribunal was guided by Articles 3 and 9 of the IBA Rules (2010). It ordered the claimants to confirm that they had searched diligently and in good faith and found no responsive documents in many of Mexico's request categories, and to file a privilege log for category 7. PO4 ¶¶ 2, 9–10