In <span class="news-text_italic-underline">Legacy Vulcan, LLC v United Mexican States (ICSID Case No ARB/19/1)</span>, the claimant, a Delaware company, indirectly owned Calizas Industriales del Carmen, SA de CV (CALICA), a Mexican subsidiary that quarried, processed and exported limestone. The dispute concerned Mexico’s alleged abandonment of a process to amend a state land-use programme to permit quarrying at one property and the closure of operations at another by the Mexican environmental regulator, PROFEPA.
The tribunal rejected claims concerning Mexican government measures taken in 2022 and 2023, which accounted for the vast majority of the damages sought. It did, however, find that a 2018 measure affecting operations at one property breached the fair and equitable treatment obligation in article 1105 of the North American Free Trade Agreement (NAFTA). The majority awarded USD15,884,117 plus interest in respect of that property.
The majority also found an article 1105 breach concerning the other property, but awarded no damages. The claimant had not established that the proposed land-use amendment would probably have succeeded.
The claimant’s attempt to rely on the umbrella clause in the Mexico–Switzerland bilateral investment treaty also failed. Addressing NAFTA’s most-favoured-nation provision in article 1103, the majority required a strong factual comparison with treatment actually afforded to another investor. The existence of a third-party treaty was not enough and the claimant had identified no comparator.
In assessing damages, the majority valued CALICA separately from its wider shipping and distribution network. It considered the claimed downstream losses insufficiently proximate and adopted Mexico’s transfer-price model, while correcting the weighted average cost of capital to 7.97%. Dissenting arbitrator Professor Guido S Tawil disagreed, arguing that transfer pricing did not reflect actual sale prices.
The tribunal also addressed port tariffs. The majority found that no Mexican court had ordered reimbursement, whereas Professor Tawil read the relevant decisions as declaring the collection of those tariffs illegal.
The award illustrates the difficulty of recovering downstream losses in an investment arbitration, even where the host state knew from the outset that the investment formed part of an integrated business.
<span class="news-text_medium">Case:</span> <span class="news-text_italic-underline">Legacy Vulcan, LLC v United Mexican States (ICSID Case No ARB/19/1)</span>, award dated 27 July 2026. The tribunal comprised Professor van den Berg (president), Professor Tawil (claimant-appointed, dissenting) and Professor Puig (respondent-appointed).
