Mexico Among Latin American States With Most Arbitration Claims
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Mexico Among Latin American States With Most Arbitration Claims

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Paloma Duran By Paloma Duran | Journalist and Industry Analyst - Wed, 09/14/2022 - 11:38

In recent years, several arbitration claims have been filed against the authorities of key mining jurisdictions in Latin America. Mexico is among the jurisdictions with the most cases. Experts explained that these disputes highlight the risk that mining companies face when carrying out projects in the region. Most of these hazards are related to concessions, permits, taxes and royalty payments.

Currently, Latin America has 17 arbitration claims against eight mining jurisdictions. The country with the highest number of arbitrations is Colombia with six, followed by Mexico and Peru with three and the Dominican Republic, Panama, Costa Rica, Guatemala and Ecuador with one. In Mexico, arbitrations have been requested by Legacy Vulcan, a subsidiary of Vulcan Materials, First Majestic Silver and Odyssey Marine Exploration.

Vulcan Materials has mined limestone in Quintana Roo since 1986. However, in 2018, the company initiated a legal arbitration case against Mexico under the USMCA due to the revocation of its port concessions. The company explained that this cancelation shuttered its operations and generated significant monetary losses, therefore it requested US$500 million in compensation. According to the company, the government's actions were taken unilaterally and violated agreements. Meanwhile, the Mexican government has proposed several alternatives, such as a tourism project, for the company to make use of the concession without resorting to mining.

On May 23, 2022, López Obrador received Thomas Hill, CEO, Vulcan Materials, after tension between the company and the Mexican government escalated following the latter’s accusation that the company extracts and exports limestone to the US without the required permits. However, no agreement was reached.

Meanwhile, First Majestic Silver initiated arbitration proceedings against the Mexican government in May 2020, after the government requested the company to pay US$500 million in overdue taxes. Company officials explained that the Federal Court ordered the annulment of the Advance Price Agreement, which since 2012 has allowed First Majestic to pay taxes at a lower rate in Mexico. However, the Mexican Revenue Service (SAT) claims that the company owes debt due to missing taxes between 2010 and 2018.

In 2020, First Majestic warned Mexican authorities of its intention to request the support of the International Centre for Settlement of Investment Disputes. The company stated that Mexican authorities have not responded. Subsequently, it filed a request for international arbitration based on NAFTA’s Chapter 11.

In 2011, Odyssey Marine’s Oceanica identified the Don Diego deposit and in 2012 it encountered ExO. A subsidiary of Odyssey Marine received a 50-year exclusive exploration concession to develop the phosphate project in Baja California. In 2014, ExO received two additional adjacent concessions. Odyssey applied for environmental permits, providing information about wildlife following a request from the environmental ministry, SEMARNAT. Nonetheless, SEMARNAT rejected the project.

Following the government’s denial to grant the environmental permit, the company requested compensation of more than US$2 billion. Odyssey already obtained US$15 million through a direct offering of equity securities.

Photo by:   Tingey Injury Law Firm

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