Legacy Vulcan, LLC v. United Mexican States

At a glance

Parties

Legacy Vulcan, LLC (USA), also claiming on behalf of its Mexican subsidiary Calizas Industriales del Carmen, S.A. de C.V. (CALICA), v. United Mexican States

Case no.

ICSID Case No. ARB/19/1

Forum and rules

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

Treaty

NAFTA (Articles 1103 and 1105); USMCA Annex 14-C for the Ancillary Claim

Tribunal

Prof. Albert Jan van den Berg (President), Prof. Sergio Puig, Prof. Guido Santiago Tawil (dissenting)

Sector

Limestone quarrying and export; aggregates

Outcome

Award of 27 July 2026: Mexico breached NAFTA Article 1105 at La Adelita and El Corchalito, but damages were awarded only for El Corchalito. The La Rosita Ancillary Claim was dismissed for lack of jurisdiction and Mexico's counterclaim was held inadmissible. Prof. Tawil dissented.

Amount

Claimed in the Memorial: US$1,569 million, including interest as of 30 April 2020. Awarded: USD 15,884,117.00, plus compound interest at the six-month US Treasury bill rate + 2% from 24 January 2018. Each Party bears half of the arbitration costs (USD 3,102,975.56 in total) and its own legal costs.

The dispute

Legacy Vulcan, a Delaware subsidiary of Vulcan Materials Company, quarried limestone in Quintana Roo through CALICA. The project began with a 1986 Investment Agreement with Mexico's Federal Government and the State of Quintana Roo, and covered the La Rosita quarry, the Punta Venado port terminal and two lots acquired in 1996, El Corchalito and La Adelita. The claimant alleged four things: that Mexico repudiated 2014 agreements to amend the 2009 local zoning program (POEL 2009) so that La Adelita could be quarried; that PROFEPA wrongfully shut down El Corchalito in 2018 and confirmed the shutdown in an October 2020 resolution; that Mexico failed to reimburse port fees; and, in a later Ancillary Claim, that Mexico shut down La Rosita in 2022. It claimed breaches of fair and equitable treatment under NAFTA Article 1105, and of an umbrella clause imported through the MFN clause in Article 1103. Mexico objected to jurisdiction and admissibility (including the "unclean hands" doctrine), defended its measures as lawful environmental enforcement, and filed a counterclaim for environmental damage.

Key holdings

1. The Tribunal had jurisdiction over the original claims. The port tariff claim failed: the Tribunal was not satisfied that any Mexican court had ordered API Quintana Roo to repay the fees to CALICA. Award ¶ 1516(i)–(ii) (citing ¶¶ 562, 670, 1202)
2. By majority, the Tribunal declined jurisdiction over the Ancillary Claim on La Rosita, although PO7 had allowed the claim to be presented. The claimant did not hold a "legacy investment" under USMCA Annex 14-C. Mexico's counterclaim was held inadmissible. Award ¶¶ 1516(iii)–(iv), 1543, 1545, 1550 (citing ¶¶ 611, 668)
3. The Article 1103 claims failed. The claimant could not import an autonomous FET standard or the umbrella clause of the Mexico–Switzerland BIT, because it did not show more favourable actual treatment given to a comparable investor in like circumstances. Award ¶ 1516(v) (citing ¶¶ 776, 800)
4. Mexico breached Article 1105 at La Adelita by acting arbitrarily and frustrating the claimant's legitimate expectations. No damages were awarded, because on the balance of probabilities the POEL amendment would not have succeeded in any event. Award ¶ 1516(vi), (viii) (citing ¶¶ 988, 1288–1291)
5. Mexico breached Article 1105 at El Corchalito. PROFEPA's measures were pretextual, lacked due process and left CALICA in a "catch-22" situation. Damages were set at USD 15,884,117.00 using Mexico's CALICA-only model: the CALICA Network valuation was rejected, the transfer price to VMC was used, the discount rate was 7.97% without a size premium, PTU and dividend tax were excluded, and USD 1.5 million was added for below-water drilling and blasting costs. Award ¶¶ 1361, 1396, 1417, 1423, 1447
6. Interest runs at the six-month US Treasury bill rate + 2%, compounded annually, from the valuation date of 24 January 2018 until full payment. The Tribunal rejected the claimant's "forced lender" theory and its request for a double-taxation gross-up. Award ¶¶ 1446, 1465, 1477
7. Costs: the Parties had roughly equal success, and most of the damages claim was rejected. Each Party bears half of the arbitration costs of USD 3,102,975.56 and its own legal costs. Award ¶¶ 1520, 1526, 1528
8. Prof. Tawil dissented on five points. In his view, the claimant held a legacy investment, so the Tribunal had jurisdiction over the Ancillary Claim. The MFN clause needs no actual comparator. The port tariffs were collected illegally. No CUSTF was required at La Adelita before 2009, and compensation should have been awarded for La Adelita. The transfer-price valuation for El Corchalito undercompensated the claimant. Dissenting Opinion ¶¶ 1–57

Procedural history

1. 3 December 2018Request for Arbitration received by ICSID; registered on 3 January 2019.
2. 20 September 2019Tribunal constituted.
3. 26 November 2019Procedural Order No. 1 on procedural rules; the first session had been held on 6 November 2019.
4. 26–30 July 2021Remote hearing on jurisdiction and the merits.
5. 11 July 2022Procedural Order No. 7: the Tribunal recommends that Mexico avoid aggravating the dispute and, by majority over Prof. Puig's partial dissent, allows the Ancillary Claim on La Rosita.
6. 13 July 2023Procedural Order No. 9 admits Mr. Quetzal Tzab González's letter as a non-disputing party submission.
7. 18–20 July 2023Site visit to the lots near Playa del Carmen.
8. 7–11 August 2023Remote hearing on the Ancillary Claim and on the jurisdiction and admissibility of the counterclaim.
9. 19 December 2023Procedural Order No. 11 rejects the claimant's requests to reiterate the PO7 non-aggravation recommendation.
10. 27 July 2026Award dispatched to the Parties, with Prof. Tawil's dissenting opinion.

Tribunal, counsel and experts

Decided by

• Albert Jan van den Berg President — appointed by the institution (appointed by ICSID through the strike-and-rank procedure agreed by the Parties)
• Guido Santiago Tawil Co-arbitrator — appointed by the claimant (dissented)
• Sergio Puig Co-arbitrator — appointed by the respondent (dissented in part from PO7 on admission of the Ancillary Claim)

For the claimant

Covington & Burling LLP · Creel, García-Cuéllar, Aiza y Enríquez, S.C. · Vulcan Materials Company

For the respondent

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

Experts

Darrell Chodorow (claimant) · Fabricio Núñez (claimant) · Gino Bianchi Mosquera (claimant) · Juan Martín Ramírez Miranda (claimant) · Timothy Hart (respondent) · Rebecca Vélez (respondent) · Gustavo Carvajal Isunza (respondent) · Gustavo Alanís (respondent) · Juan Pedro Machado Arias (respondent) · Carlos Federico del Razo Ochoa (respondent) · Jorge Gómez de Silva (respondent) · Carlos Rábago Estela (respondent) · Javier Mijangos y González (respondent)

Run a conflict check on these names →

Keywords

• NAFTA Chapter Eleven
• fair and equitable treatment
• minimum standard of treatment
• most-favoured-nation clause
• umbrella clause
• legitimate expectations
• USMCA Annex 14-C
• legacy investment
• ancillary claim
• counterclaim
• provisional measures
• non-aggravation
• limestone quarrying
• CALICA
• PROFEPA
• POEL 2009
• transfer pricing
• amicus curiae

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