Carlos Sastre and others v. United Mexican States

At a glance

Parties

Carlos Esteban Sastre (Argentina), Renaud Jacquet (France), Margarida Oliveira Azevedo de Abreu and Eduardo Nuno Vaz Osorio dos Santos Silva (Portugal), Graham Alexander and Mónica Galán Ríos (Canada) v. United Mexican States

Case no.

ICSID Case No. UNCT/20/2

Forum and rules

UNCITRAL Arbitration Rules (1976), administered by ICSID; seat Washington, D.C.

Treaty

NAFTA; Mexico–Argentina BIT; Mexico–France BIT; Mexico–Portugal BIT

Tribunal

Prof. Eduardo Zuleta (President), Dr. Charles Poncet, Mr. Christer Söderlund

Sector

Tourism; beachfront hotels on ejido land

Outcome

Award on Jurisdiction (21 November 2022): the Tribunal declined jurisdiction over the claims of all six Claimants.

Amount

Respondent claimed costs of USD 1,055,131.47. Costs of the arbitration were USD 584,019.60, borne in equal shares; each side bears its own legal costs.

The dispute

Six individuals ran beachfront hotels and related businesses on land in the Ejido José María Pino Suárez, Tulum, Quintana Roo. The businesses were Tierras del Sol and Hamaca Loca (Sastre), Behla Tulum and La Tente Rose (Jacquet), Uno Astrolodge (Silva and Abreu) and Hotel Parayso (Galán and Alexander). They alleged that Mexican authorities unlawfully took these properties: on 19 and 31 October 2011 (Sastre) and on 17 June 2016 (the others). Each Claimant brought claims under a different treaty (the Mexico–Argentina, Mexico–France and Mexico–Portugal BITs and NAFTA), all in one joint notice of arbitration. Mexico raised several jurisdictional objections: that it had not consented to this "self-consolidation"; Sastre's domicile in Mexico; the Claimants' renunciation of their nationalities on naturalization; dominant and effective nationality; the illegality of acquiring ejido and restricted-zone rights without a fideicomiso; lack of standing; limitation periods; and defective notices of intent.

Key holdings

1. Mr. Sastre was domiciled in Mexico at the time of the alleged measures. Under Article 2(3) of the Mexico–Argentina BIT he therefore could not use the treaty's investor–State dispute settlement. The MFN clause covers only substantive treatment and cannot be used to import consent from the Mexico–France BIT. The Tribunal had no jurisdiction ratione voluntatis. ¶¶ 189–208
2. When they were naturalized, Mr. Sastre, Ms. Abreu and Mr. Silva expressly renounced their nationalities of origin and all rights that treaties grant to foreigners. This was a valid agreement with Mexico. Under good faith, estoppel and pacta sunt servanda, they cannot now invoke their Argentine or Portuguese nationality against Mexico under the BITs, so jurisdiction ratione personae is lacking. ¶¶ 245–272
3. The Hamaca Loca claim was assigned to Mr. Sastre on 12 June 2017, after the alleged breaches. Any claim by the Swiss investors would be time-barred under the Swiss–Mexico BIT's three-year period. The period under the Mexico–Argentina BIT had also expired, except for denial of justice, which the Tribunal did not need to address. ¶ 210
4. Mr. Jacquet held only commodatum agreements. No fideicomiso was set up and the Ejido Assembly did not approve the transfers of common land. His alleged investment therefore breached mandatory Mexican law and was not made 'in accordance with' that law as Article 2(1) of the Mexico–France BIT requires. There was no jurisdiction. ¶¶ 298–307
5. Ms. Galán, Mexican by birth, acquired her rights as a Mexican national under the regime for Mexicans, before she became Canadian, and she invoked her Mexican nationality throughout. Under Articles 13–14 of the Nationality Law, hers was a Mexican investment that NAFTA does not protect. ¶¶ 327–338
6. There was no evidence that Mr. Alexander held rights in the land or owned or controlled Hotel Parayso. On the evidence the rights appeared, prima facie, to belong to Rancho Santa Monica Developments, Inc. He sued on his own behalf under Article 1116, not on the company's behalf, so he lacked standing. ¶¶ 353–361
7. Because no claim survived, the 'self-consolidation' objection was moot. The issues were complex and new, and no party misconducted itself, so the costs of the arbitration are shared equally and each side bears its own legal costs. ¶¶ 163, 371–373

Procedural history

1. 29 December 2017Mr. Sastre's first Notice of Arbitration received by Mexico.
2. 17 January 2019Notice of Intent from Jacquet, Alexander, Galán, Silva and Abreu.
3. 14 June 2019Amended Notice of Arbitration filed by all six Claimants; Charles Poncet appointed by the Claimants.
4. 11 February 2020The Parties agree to appoint Eduardo Zuleta as presiding arbitrator (Christer Söderlund had been appointed by Mexico on 7 October 2019).
5. 28 May 2020Procedural Order No. 1 issued after the first session; seat fixed in Washington, D.C.
6. 13 August 2020Procedural Order No. 2: proceedings bifurcated so that the preliminary objections are heard first.
7. 17 September 2020Procedural Order No. 3: the 1976 UNCITRAL Rules apply, and a calendar is adopted.
8. 17 December 2021Canada and the United States file NAFTA Article 1128 submissions.
9. 28 March – 1 April 2022Virtual hearing on preliminary objections.
10. 21 November 2022Award on Jurisdiction: the Tribunal declines jurisdiction over all claims.

Tribunal, counsel and experts

Decided by

• Eduardo Zuleta President — appointed by the parties jointly
• Charles Poncet Co-arbitrator — appointed by the claimant
• Christer Söderlund Co-arbitrator — appointed by the respondent

For the claimant

Shook, Hardy & Bacon LLP

For the respondent

Dirección General de Consultoría Jurídica de Comercio Internacional, Secretaría de Economía · Tereposky & DeRose LLP

Experts

Sergio Bonfiglio Macbeath (claimant) · Pablo Gutiérrez de la Peza Gutiérrez (respondent) · Ricardo Sánchez Núñez (respondent)

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Keywords

• Tulum
• ejido
• restricted zone
• fideicomiso
• beachfront hotels
• domicile requirement
• Mexico–Argentina BIT
• Mexico–France BIT
• Mexico–Portugal BIT
• NAFTA Chapter 11
• renunciation of nationality
• dual nationality
• dominant and effective nationality
• most-favoured-nation clause
• legality of investment
• estoppel
• multiparty arbitration
• shareholder standing

Summary generated with AI from the published documents — refer to the award for the authoritative text.