Joshua Dean Nelson v. United Mexican States

At a glance

Parties

Joshua Dean Nelson (United States), on his own behalf and on behalf of Tele Fácil México, S.A. de C.V., v. the United Mexican States. Jorge Luis Blanco was a co-claimant until he withdrew in April 2019.

Case no.

ICSID Case No. UNCT/17/1

Forum and rules

UNCITRAL Arbitration Rules 1976, administered by ICSID; place of arbitration Toronto, Canada

Treaty

NAFTA Chapter Eleven (Articles 1105, 1110, 1116, 1117)

Tribunal

Eduardo Zuleta (President), V.V. Veeder (died 8 March 2020, before the award was signed), Mariano Gomezperalta Casali

Sector

Telecommunications; interconnection

Outcome

Final Award of 5 June 2020: Mexico's jurisdictional objection under Article 1117 was rejected, but the expropriation and fair and equitable treatment claims were dismissed.

Amount

Claimant ordered to pay Mexico USD 2,054,199 in costs. Claimant's stated costs: USD 6,406,160.63. Mexico's stated costs: USD 2,525,014.36. Costs of the arbitration: USD 948,375.03.

The dispute

Mr. Nelson, a US national, invested in Tele Fácil, a Mexican company that sought to enter the Mexican telecommunications market. It needed interconnection with Telmex. In Resolution 381 (26 November 2014), the regulator IFT decided a dispute between Tele Fácil and Telmex on indirect interconnection and portability charges. Tele Fácil read the resolution as also confirming an agreed interconnection rate. The IFT then went through a confirmation-of-criteria process and issued Decree 77 (8 April 2015), which held that Resolution 381 had not decided the rates; Resolution 127 (7 October 2015) followed. Mexican courts denied Tele Fácil's amparo against Decree 77 and dismissed its appeal as filed late. The claimant alleged expropriation (Article 1110) and breach of the minimum standard of treatment, including denial of justice (Article 1105). Mexico denied any breach. After Mr. Blanco's bankruptcy came to light, Mexico also argued that Mr. Nelson did not control Tele Fácil for the purposes of Article 1117.

Key holdings

1. Jurisdiction upheld. The Tribunal rejected Mexico's objection that Mr. Nelson did not control Tele Fácil within the meaning of NAFTA Article 1117. Award ¶ 396(1)
2. No expropriation under Article 1110. Resolution 381 gave Tele Fácil no rights to specific interconnection rates. The IFT had authority only over the disputed terms (indirect interconnection and portability) and could not decide whether the parties had agreed on rates. Award ¶¶ 330, 349, 396(2)
3. The Waste Management test defines the Article 1105 standard, and the threshold for a breach is particularly high. The confirmation-of-criteria request and Decree 77 were not arbitrary. A legitimate doubt had arisen about what Resolution 381 meant, and the IFT acted within its powers. The claimed collusion between the IFT and Telmex was speculation. Award ¶¶ 322–323, 343–350
4. No discrimination and no lack of due process. No comparable investor had been treated differently; the case was unique because of Tele Fácil's own conduct. The confirmation-of-criteria proceedings followed the applicable rules, and Tele Fácil was heard at the IFT plenary session of 5 March 2015. Resolution 127 could not breach Article 1105 'derivatively'. Award ¶¶ 353–373
5. No denial of justice. Disagreeing with the reasoning of the amparo court is not enough. The appeal failed because of Tele Fácil's own lack of diligence: its counsel reached the court at 11:58 pm on the last day of the deadline. Award ¶¶ 376–384
6. Costs. The claimant lost on all his claims. Mexico lost its jurisdictional objection, but the delays around that objection came from the late disclosure of Mr. Blanco's bankruptcy. The claimant therefore bears all costs of the arbitration (USD 948,375.03) and 80% of Mexico's costs (USD 1,580,011.49). He must pay Mexico USD 2,054,199. Award ¶¶ 394–396
7. Correction decision. The Tribunal added a breakdown of each arbitrator's fees and removed references to the ICSID Convention as a clerical error. It refused the other corrections the claimant asked for, concerning how the Award describes his costs submissions. Decision on Correction Request ¶¶ 20–27

Procedural history

1. 21 April 2016Notice of Intent delivered to Mexico.
2. 26 September 2016Notice of Arbitration filed under NAFTA Articles 1116, 1117 and 1120 and the UNCITRAL Rules.
3. 1 May 2017ICSID Secretary-General appoints Eduardo Zuleta as presiding arbitrator.
4. 18 July 2017Procedural Order No. 1 fixes Toronto as the place of arbitration and English and Spanish as the languages.
5. 13 February 2018Procedural Order No. 5 applies US attorney-client privilege and work-product rules to document production, and finds that privilege over advice the claimants relied on in their pleadings has been lost.
6. 17 April 2019Procedural Order No. 13 accepts Mr. Blanco's withdrawal as co-claimant after disclosure of his 2011 bankruptcy.
7. 22–26 April 2019Hearing on jurisdiction and merits.
8. 24 July 2019Procedural Order No. 16 sets the schedule for further submissions on jurisdiction (the bankruptcy order, de facto control and the share transfer).
9. 5 June 2020Final Award: jurisdiction upheld; all claims dismissed; costs awarded against the claimant.
10. 31 July 2020Decision on the claimant's correction request: corrections granted in part.

Tribunal, counsel and experts

Decided by

• Eduardo Zuleta President — appointed by the institution
• V.V. Veeder Co-arbitrator — appointed by the claimant (died 8 March 2020; award not signed by him)
• Mariano Gomezperalta Casali Co-arbitrator — appointed by the respondent

For the claimant

Arent Fox LLP

For the respondent

Dirección General de Consultoría Jurídica de Comercio Internacional, Secretaría de Economía · Womble Bond Dickinson (US) LLP · Innovista Law · Tereposky & DeRose LLP · J. Cameron Mowatt, Law Corporation · RuyakCherian LLP

Experts

Christian Dippon (claimant) · Elisa Mariscal (claimant) · Paolo Buccirossi (respondent) · Analysys Mason (respondent) · Rodrigo Buj Garcia (respondent)

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Keywords

• NAFTA Chapter Eleven
• Tele Fácil
• Telmex
• IFT
• interconnection rates
• Resolution 381
• Decree 77
• indirect expropriation
• fair and equitable treatment
• minimum standard of treatment
• denial of justice
• amparo
• Article 1117 control
• shareholder bankruptcy
• attorney-client privilege
• document production
• telecommunications

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