Archer Daniels Midland Company and Tate & Lyle Ingredients Americas, Inc. v. The United Mexican States, ICSID Case No. ARB (AF)/04/5
ICSID · Investment (ICSID and treaty) · Mexico · 21 Nov 2007
Why it matters
This case is a landmark NAFTA Chapter 11 decision addressing the scope of the countermeasures defense in investor-state arbitration. The tribunal held that a state cannot invoke countermeasures to justify discriminatory treatment of investors unless the measures are proportionate and directed at the state responsible for the prior breach. It also clarified the distinction between expropriation and non-discriminatory regulatory measures, and set a precedent for calculating damages based on lost profits from discriminatory taxes.
Summary
Archer Daniels Midland Company (ADM) and Tate & Lyle Ingredients Americas, Inc. (TLIA), U.S. companies, owned ALMEX, a Mexican joint venture producing high-fructose corn syrup (HFCS). In 2002, Mexico imposed a 20% tax on soft drinks and syrups using any sweetener other than cane sugar, effectively targeting HFCS. The tax was repealed in 2007. Claimants alleged violations of NAFTA Articles 1102 (National Treatment), 1106 (Performance Requirements), and 1110 (Expropriation). Mexico defended the tax as a lawful countermeasure under customary international law, arguing that the U.S. had breached NAFTA by restricting Mexican sugar exports and blocking panel appointments under Chapter 20. The tribunal rejected the countermeasure defense, finding that the tax was not directed at the U.S. but at private investors, and was disproportionate. It found that the tax violated National Treatment because it discriminated against HFCS in favor of cane sugar, and violated Performance Requirements by conditioning tax exemption on the use of domestic sugar. However, it found no expropriation because the tax did not deprive claimants of all beneficial use of their investment. The tribunal awarded US$33,510,091 in damages for lost profits from 2002 to 2006, plus simple interest at U.S. Treasury rates. Each party bore its own costs and half of the arbitration costs.
The detail
Parties: Archer Daniels Midland Company and Tate & Lyle Ingredients Americas, Inc. v. The United Mexican States, ICSID Case No. ARB (AF)/04/5
Case number: italaw/cases/91
Outcome: Mexico violated NAFTA Articles 1102 (National Treatment) and 1106 (Performance Requirements) but not Article 1110 (Expropriation); Mexico ordered to pay US$33,510,091 plus simple interest.
Quantum: US$33,510,091
Applicable law: NAFTA Chapter 11; ICSID Additional Facility Rules; international law on countermeasures
Issues in play: NAFTA's national treatment and performance requirements provisions collided with Mexico's defense of lawful countermeasures under customary international law for alleged U.S. breaches of NAFTA.
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