This submission written by Celeste Corridor, JD Candidate on the College of Pittsburgh Faculty of Legislation and World Authorized Scholar.
The authorized information has been awash recently within the recognition and enforcement of funding arbitration awards by U.S. courts. Many of the press is on the long-running and still-unfolding saga concerning Spain (see right here and right here). And a brand new determination recognizing an award in opposition to Zimbabwe was simply subject on the finish of December, as effectively. Right here, nevertheless, we want to add to the information with the current determination recognizing an funding arbitration award in opposition to Mexico in United Mexican States v. Lion Mexico Consolidated.
Like most funding arbitrations, the choice tells a sordid story. Lion Mexico Consolidated (LMC) is a Canadian firm which supplied financing to a Mexican businessman, Mr. Hector Cardenas Curiel, to develop actual property tasks in Nayarit and Jalisco, Mexico. Cardenas’ firm didn’t pay on the loans, and LMC tried for years to acquire fee, all to no avail. Cardenas then started what was described as a “advanced judicial fraud” to keep away from fee, together with a forgery and a subsequent lawsuit in a Jalisco court docket to cancel the loans. LMC was by no means knowledgeable of the go well with and subsequently, by no means appeared. The Jalisco Courtroom issued a default judgment discharging the loans and ordering LMC to cancel the mortgages; Cardenas then organized for an legal professional to behave fraudulently on LMC’s behalf to file after which purposefully abandon the enchantment. LMC solely realized of your entire scheme once they tried to file their very own constitutional problem and had been rejected. The Mexican Courts refused to permit LMC to submit proof of the forgeries, so LMC introduced a NAFTA Chapter 11 arbitration in opposition to Mexico for its failure to accord Lion’s investments safety below Article 1105(1) of NAFTA.
Within the arbitration, Mexico argued that Article 1105(1)(b) solely applies to investments, and since LMC is an investor, it couldn’t search aid below Article 1105(1). The arbitral tribunal disagreed and awarded LMC over US$ 47 million in damages. Within the U.S. courts, Mexico petitioned to vacate the Award, and LMC cross-petitioned to affirm it.
Mexico conceded that the DC Circuit’s energy to vacate an arbitral award is restricted: so long as the tribunal “interpreted” 1105(1) the Courtroom should verify the award even when severe interpretive error was dedicated. Mexico tried to skirt this subject by claiming that the Tribunal didn’t “interpret” something. As a substitute, in Mexico’s view, they merely ignored the literal that means of investments of buyers by granting aid to Lion.
The Courtroom was not impressed by this argument. It held that “[t]he Tribunal addressed Mexico’s interpretation of Article 1105(1) head on, employed frequent interpretative instruments to succeed in a distinct conclusion, cited authorities in assist of its studying, and defined its reasoning. By any definition of the phrase, the Tribunal interpreted Article 1105(1). As a result of the Courtroom can’t second-guess that interpretation, the Courtroom DENIED Mexico’s Petition to Vacate the Arbitral Award, and GRANTED LMC’s Cross- Petition for Affirmation, Recognition, and Enforcement of the Arbitral Award.”
Moreover, the Courtroom denied a movement to intervene filed Hector Cardenas Curiel. Cardenas knew that the arbitral case hinged upon his fraud however didn’t pursue intervention on the arbitral stage. The Courtroom discovered that Cardenas’ try to intervene at this stage was “too little too late”, and Cardenas didn’t meet the necessities for intervention below Federal Rule of Civil Process 24(a)(2) or 24(b).
This determination is vital as a result of it follows a protracted line of circumstances giving deference to arbitrators in funding treaty circumstances; once they interpret the governing treaty and determine circumstances thereunder, their choices won’t be second-guessed by U.S. courts later.
