ICSID Panel Dismisses Silver Bull Claim Against Mexico

An ICSID arbitration panel's dismissal of Silver Bull Resources' claim over the Sierra Mojada project underscores the strict enforcement of jurisdictional and temporal boundaries under legacy trade agreements like NAFTA and the USMCA. While this ruling shields the Mexican government from significant financial liabilities, ongoing multi-billion-dollar disputes with firms like Odyssey Marine Exploration and Almaden Minerals highlight a highly volatile and contested regulatory landscape for foreign mining concessions. Consequently, stakeholders across the international mining and extractive industries face strict, independent oversight that continues to reshape risk assessments for resource investments in Mexico.

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The Ministry of Economy (SE) announced that the World Bank’s International Center for Settlement of Investment Disputes (ICSID) ruled in favor of the Mexican government in an international arbitration case brought by Silver Bull Resources, which filed a claim in June 2023 seeking damages in excess of US$315 million against Mexico. The legal dispute was initiated under the framework of NAFTA and USMCA. 

The three-member tribunal issued a unanimous ruling dismissing the entirety of Silver Bull's financial claims due to a lack of jurisdiction or for being time-barred. Under NAFTA Article 1110, the tribunal concluded it held no jurisdiction, while claims under Articles 1102, 1103, and 1105 were dismissed because they fell outside the tight temporal boundaries permitted by the treaty transition regime. Specifically, the panel ruled it could not consider state conduct before June 28, 2020, or after June 30, 2020, leaving a non-viable two-day window for damage claims. In addition to the dismissal, the tribunal ordered Silver Bull to reimburse Mexico approximately US$998,000 for its legal defense fees and expenses.

What Happened Between the Mexican Government and Silver Bull? 
The arbitration stemmed from a dispute involving the Sierra Mojada project in Coahuila, Silver Bull's sole asset. The company alleged that Mexican authorities failed to act against an illegal blockade that has halted the project since September 2019 and remains ongoing.

From Silver Bull's perspective, the decision represents a profound failure to address a continuing injustice. Tim Barry, President and CEO, Silver Bull, stated that the tribunal applied a tight and narrow interpretation of NAFTA’s expiry provisions, arguing that the company submitted its claims before the expiration of the three-year legacy period permitted under the USMCA transition regime. “The company also believes the ruling demonstrates a limited understanding of the practical realities of mining and exploration by the tribunal, where temporary blockades and local disputes are often addressed through domestic legal and governmental processes before a company can reasonably conclude that a project has been permanently impaired,” Barry further stated. 

Can the Sierra Mojada Project Go Back Online?
Moving forward, Silver Bull is consulting with legal advisers to evaluate challenging the decision through the ICSID Convention's annulment process, a remedy that must be pursued within 120 days and could take 18 to 36 months to resolve. Despite the ruling, the company is evaluating a potential restart of the Sierra Mojada project. Management maintains that the asset remains highly viable due to radically changed economics, citing current commodity prices of approximately US$75/oz silver and US$1.60/lb zinc.

According to the company's mineral resource estimate, the open-pittable oxide deposit has a compliant Measured and Indicated mineral resource of 70.4Mt grading 3.4% zinc and 38.6g/t silver, containing 5.35 billion lb of zinc and 87.4Moz silver. This global resource includes a high-grade zinc zone of 13.5Mt with an average grade of 11.2% zinc at a 6% cutoff, representing 3.336 billion lb of contained zinc, alongside a high-grade silver zone of 15.2Mt with an average grade of 114.9g/t silver at a 50g/t cutoff, representing 56.3Moz silver. Management believes that the project, which remains open in the east, west, and northerly directions, holds significant additional exploration upside potential once the ongoing blockade is resolved.

Mixed Outcomes: Mexico’s Varying Record in Investor-State Disputes
While the Silver Bull ruling marks a significant victory for the Mexican State, Mexico's legal record within international tribunals highlights that the government does not always emerge triumphant.

On Sep. 23, 2024,  MBN reported that ICSID ruled against the Mexican government in a high-profile maritime dispute involving US-based critical minerals company Odyssey Marine Exploration. In that case, the tribunal ordered Mexico to pay US$37.1 million in compensation, plus administrative costs and interest, after determining that Mexico's Ministry of Environment and Natural Resources (SEMARNAT) arbitrarily and unlawfully denied an environmental impact assessment (EIA) for the Don Diego deep-sea phosphate mining project in the Gulf of Ulloa, Baja California Sur. The decision triggered fierce pushback from Mexican authorities, who criticized the tribunal for overriding sovereign environmental protections aimed at safeguarding endangered loggerhead turtles and gray whales.

Compounding these challenges, Mexico's attempts to utilize procedural mechanisms to delay or dismiss major investment claims have faced resistance from international panels. An ICSID arbitration panel rejected a formal request by the Mexican government to bifurcate, or separate, the proceedings in an ongoing investment claim filed by Canadian mining companies Almaden Minerals and Almadex Minerals. Mexico had petitioned the tribunal to address its jurisdictional objections as a preliminary question before reviewing the core merits of the dispute. By dismissing this request, the panel ordered the case to move forward on a non-bifurcated timeline, joining the jurisdictional objections directly to the main trial. 

The Almaden and Almadex dispute arose from the effective cancellation of the mineral concessions underpinning their Ixtaca precious metals project in Puebla. Following a 2022 Mexican Supreme Court ruling that mandated indigenous consultations, SE ultimately cancelled the project's mineral rights over application technicalities, bypassing the consultations entirely.