Mexico Has US$1.5 Billion In Open Arbitrations

Mexico has seven different open arbitration processes related to international investments made in the energy sector, which amount to over US$1.5 billion.

Most of these processes are related to events which occurred before the present administration under President López Obrador.

Five of them specifically, are the direct result of the Oceanografía shipping line case, which operated as a contractor for state-owned PEMEX,  and which came under the control of the Mexican government in 2014, following Citigroup’s accusation that the company was requesting credits with false invoices.

Another case is related to Oro Negro drilling rig, a company founded by Gonzalo Gil White, son of former Minister of Finance Francisco Gil Díaz, who worked as a contractor for PEMEX, which declared itself bankrupt following PEMEX defaulting on some of the payments it owed to the company.

The plaintiffs are a group of American companies that indirectly own about 43 percent of Oro Negro shares, which, under the old free-trade agreement NAFTA, accused PEMEX of “modifying the contracts under which it leased five platforms to the company, in addition to omitting a series of payments that forced the company to undergo a restructuring.” This group of shareholders are demanding a payment from the Mexican government for US$700 million.

An additional case involves PEMEX. Finley Resources and two other companies are filing a US$100 million lawsuit payment from the Mexican government through the World Bank courts. These companies are alleging that PEMEX “improperly” suspended the execution of several contracts, violating the protection granted to investors by way of the USMCA.

All of these cases come as a result of what these companies consider “fair and equitable treatment, avoiding the most-favored-nation treatment, and non-expropriation or compensation in the event of changes that threaten their investments.”

Alfonso Cortez-Fernández, coordinating partner of litigation and arbitration for Bayer McKenzie Mexico, has said that companies make the decision to access an arbitration only after long negotiations with the countries involved, and “after reaching the conclusion that property damage they can claim is greater than the large costs involved in one of these processes, which usually last between one to two years.” Their main complaints are the investment they have already made and the potential money they are withheld from earning, he added.