Alicia Grace and others v. United Mexican States, ICSID Case No. UNCT/18/4
ICSID · Investment (ICSID and treaty) · Mexico · 19 Aug 2024
Why it matters
This award clarifies the strict limits on investor standing under NAFTA Articles 1116 and 1117, holding that minority shareholders cannot bring claims for indirect harm to the enterprise. It also underscores that claims must be brought by the enterprise itself under Article 1117, not by shareholders under Article 1116, reinforcing the distinction between direct and indirect claims in investment treaty arbitration.
Summary
The case involved 26 US investors (the Grace family and others) who held shares in Integradora, a Mexican holding company that owned Perforadora, which had contracts with PEMEX (Mexico's state oil company). The investors claimed that Mexico, through acts of PEMEX and other authorities, expropriated their investment and violated fair and equitable treatment. They sought damages under NAFTA. The Tribunal first addressed jurisdiction. It found that most claimants were US nationals and had made an investment, but the key issue was standing under Articles 1116 and 1117. Article 1116 allows an investor to claim for loss or damage by reason of a breach of NAFTA. Article 1117 allows an investor to claim on behalf of an enterprise it owns or controls. The Tribunal held that the claimants did not own or control Integradora (they were minority shareholders), so they could not bring claims under Article 1117. Under Article 1116, the claimants alleged indirect harm from measures against Oro Negro. The Tribunal, following NAFTA jurisprudence (e.g., Loewen, Waste Management), held that Article 1116 does not permit claims for indirect harm to the enterprise; only direct harm to the investor's rights is covered. Since the alleged state interference was against Oro Negro, not the claimants directly, the claims failed. The Tribunal also found that two claimants (Mr. Williamson-Nasi and Mr. Cañedo-White) had dual nationality and could not bring claims against Mexico under NAFTA. Consequently, the Tribunal lacked jurisdiction over all claims and dismissed them. On costs, the Tribunal noted that Mexico failed to comply with document production orders, which it considered sanctionable misconduct. Therefore, while claimants were the unsuccessful party, the Tribunal ordered each party to bear its own legal costs, and allocated 75% of the tribunal and ICSID costs to claimants and 25% to Mexico, resulting in claimants paying Mexico USD 397,619.3 for the expended portion of Mexico's advances.
The detail
Parties: Alicia Grace and others v. United Mexican States, ICSID Case No. UNCT/18/4
Case number: italaw/cases/7430
Outcome: The Tribunal lacked jurisdiction over all claims; claims dismissed in their entirety.
Applicable law: NAFTA (Articles 1116, 1117, 1120, 1121, 1105, 1110); UNCITRAL Rules (1976); VCLT; ILC Articles on State Responsibility
Issues in play: The case involved interpretation of NAFTA Articles 1116 and 1117 regarding standing for indirect claims, and the definition of 'investment' under NAFTA. The Tribunal also considered attribution of acts of state-owned enterprise PEMEX to Mexico.
Read the full decision at italaw ↗
Locus Standi links to the source decision and publishes its own plain-language summary. It does not reproduce the text of the award.