Espíritu Santo Holdings, LP and L1bre Holding, LLC v. United Mexican States

At a glance

Parties

Espíritu Santo Holdings, LP (Alberta, Canada) and L1bre Holding, LLC (Delaware, United States) v. United Mexican States

Case no.

ICSID Case No. ARB/20/13 (L1bre Holding's separate case, ICSID Case No. ARB/21/55, was discontinued when its claims were joined to this case)

Forum and rules

ICSID Convention arbitration; ICSID Arbitration Rules 2006 as modified by Section B of NAFTA Chapter Eleven; place of proceeding Washington, D.C.

Treaty

NAFTA Chapter Eleven (Articles 1102, 1105 and 1110)

Tribunal

Eduardo Zuleta Jaramillo (President), Charles Poncet, Raúl Emilio Vinuesa

Sector

Telecommunications concession; digital taximeters and taxi ride-hailing in Mexico City

Outcome

Award of 26 March 2026: by majority, the claims were rejected. Charles Poncet dissented and would have upheld the claim and awarded compensation. The Claimants then applied for revision of the Award.

The dispute

Espíritu Santo Holdings (ESH) set up the Mexican company Lusad to run a concession granted in June 2016 by Mexico City's Mobility Secretariat (Semovi) after a "Declaration of Necessity" procedure. The concession gave Lusad the exclusive right to install digital taximeters in Mexico City taxis and to develop a ride-hailing application, the L1bre system. The Claimants alleged that the concession was suspended in 2018 and that a new city administration, opposed to the project, replaced it with its own "Mi Taxi" application. They claimed indirect expropriation (NAFTA Article 1110), breach of the minimum standard of treatment (Article 1105) and breach of national treatment (Article 1102). Mexico objected to jurisdiction on the Claimants' nationality, a waiver in Lusad's articles of incorporation, ESH's ownership of the investment and the legality requirement in Article 1139. On the merits it argued that Lusad had only a draft concession ("proyecto de concesión") and that several of the Claimants' documents were not authentic.

Key holdings

1. The majority found no convincing evidence that Lusad's representative, Mr. Zayas, was forced or induced by false pretences to sign the document of 6 November 2018 that changed the concession terms. Award ¶ 386, as cited in the Poncet dissent
2. The majority held that it was more likely than not that Mexico imposed no indefinite suspension of the concession on the Claimants in the summer of 2018. It relied in part on visual discrepancies in the Claimants' exhibits, although the parties' handwriting experts did not agree. Award ¶¶ 458–469, as described in the Poncet dissent
3. The majority found that the Kroll report of Joshua M. Mitchell did not show that the Claimants had a functioning L1bre system and were ready to operate in 2018. It held that the Claimants were not ready to implement the concession by 2018. Award ¶¶ 470–485, as described in the Poncet dissent
4. The majority held that Mexico City's development and release of the Mi Taxi application did not breach NAFTA, absent exclusive rights held by the Claimants. On this basis the claims were rejected. Award ¶¶ 500–514, as described in the Poncet dissent
5. Charles Poncet dissented. He would have drawn adverse inferences from Mexico's failure to call witnesses and found that the concession had been suspended and the system was ready to operate. He also considered that Mi Taxi was inconsistent with fair and equitable treatment and came close to expropriation, and that the claim should have been upheld with compensation. Poncet dissenting opinion ¶¶ 25–53
6. The Tribunal rejected the Claimants' application for provisional measures to stay criminal proceedings against their witnesses Mr. Zayas and Mr. León. Those proceedings involved third-party complaints, and retaliation for the arbitration was not shown. The Tribunal did invite Mexico to consider deferring Mr. León's extradition and expected it to let Mr. Zayas meet counsel and testify without fear. Procedural Order No. 3 ¶¶ 127–156
7. By majority, the Tribunal dismissed a renewed request to have Mr. Zayas transferred to house arrest. The criminal case arose from a third-party complaint unrelated to the NAFTA claim, and the requirements of jurisdiction, necessity, proportionality and urgency were not met. Procedural Order No. 8 ¶¶ 55–69

Procedural history

1. 1 May 2020ESH files its Request for Arbitration. ICSID registers it on 11 May 2020.
2. 27 January 2021Tribunal constituted under NAFTA Article 1123.
3. 29 March 2021Procedural Order No. 1 sets the procedural rules; Washington, D.C. is the place of proceeding.
4. 7 March 2022Procedural Order No. 2 adds L1bre Holding as a claimant. ICSID Case No. ARB/21/55 is discontinued.
5. 3 June 2022Procedural Order No. 3: the application for provisional measures concerning criminal actions is rejected, with recommendations to Mexico.
6. 13 September 2023Procedural Order No. 12 admits 13 internal Semovi emails and postpones the October 2023 hearing.
7. 8–12 April 2024Hearing on jurisdiction and merits held at ICSID in Washington, D.C.
8. 2–3 October 2024Hearing on closing submissions.
9. 26 March 2026Award: the claims are rejected by majority, with Charles Poncet dissenting.
10. 25 August 2026In the revision proceeding brought by the Claimants under ICSID Convention Article 51, Procedural Order No. 1 is issued; the Tribunal had been reconstituted on 7 July 2026. The published documents do not show the outcome of the revision.

Tribunal, counsel and experts

Decided by

• Eduardo Zuleta President — appointed by the parties jointly
• Charles Poncet Co-arbitrator — appointed by the claimant (dissented)
• Raúl E. Vinuesa Co-arbitrator — appointed by the respondent

For the claimant

Hogan Lovells US LLP · Freshfields Bruckhaus Deringer LLP · Sidley Austin LLP

For the respondent

Dirección General de Consultoría Jurídica de Comercio Internacional, Secretaría de Economía · Pillsbury Winthrop Shaw Pittman LLP · Tereposky & DeRose LLP

Experts

Howard Rosen (claimant) · Joshua M. Mitchell (claimant) · Alejandro Corral Serrano (claimant) · Marco Antonio de la Peña Sánchez (claimant) · Angélica Armenta Pichardo (respondent) · Francisco Elías Bartolo Sánchez (respondent) · Max Alberto Diener Sala (respondent) · Jorge González Gallástegui (respondent) · Timothy Hart (respondent) · Rebecca Vélez (respondent) · George Thomas Edwards (respondent)

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Keywords

• NAFTA Chapter Eleven
• L1bre
• Mi Taxi
• digital taximeters
• Mexico City
• Semovi
• concession
• indirect expropriation
• fair and equitable treatment
• minimum standard of treatment
• national treatment
• effective nationality
• legality requirement
• document authenticity
• graphoscopy
• provisional measures
• criminal proceedings against witnesses
• revision

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