Cargill, Incorporated v. United Mexican States
ICSID · Investment (ICSID and treaty) · Mexico · 18 Sep 2009
Why it matters
This award is significant for clarifying that NAFTA Chapter 11 investors have independent rights that cannot be overridden by a host state's countermeasures against another state. It also applied the 'like circumstances' test for national treatment and found that a tax conditioning an advantage on domestic content violated the prohibition on performance requirements. The case is a landmark on the interplay between investment treaty protections and state countermeasures.
Summary
Cargill, a US company, invested in Mexico through its subsidiary Cargill de Mexico to sell high fructose corn syrup (HFCS). Mexico imposed a 20% tax on soft drinks using HFCS and restricted import permits, aiming to protect domestic sugar producers. Cargill claimed these measures breached NAFTA Articles 1102 (national treatment), 1103 (MFN), 1105 (fair and equitable treatment), 1106 (performance requirements), and 1110 (expropriation). The Tribunal found that Cargill de Mexico was in 'like circumstances' with domestic sugar suppliers and received less favorable treatment, violating Article 1102. It also found that Mexico's willful targeting of HFCS suppliers to pressure US trade policy breached Article 1105. The IEPS Tax conditioned a tax advantage on using domestic sugar, violating Article 1106(3). However, the Tribunal rejected the MFN claim (no comparator investor of another party) and expropriation claim (no radical deprivation). Mexico argued its measures were lawful countermeasures against US trade violations, but the Tribunal held that countermeasures do not preclude wrongfulness vis-à-vis investors with independent rights. Damages were calculated based on lost net cash flow from June 2002 to December 2007, totaling USD $77,329,240 plus interest. The Tribunal also ordered Mexico to pay all arbitration costs and half of Cargill's legal costs.
The detail
Parties: Cargill, Incorporated v. United Mexican States
Case number: ICSID Case No. ARB(AF)/05/2
Outcome: Tribunal found Mexico breached NAFTA Articles 1102, 1105, and 1106; awarded Cargill USD $77,329,240 plus interest and costs.
Quantum: USD $77,329,240
Applicable law: NAFTA Chapter 11, ICSID Additional Facility Rules, international law
Issues in play: NAFTA national treatment (Art. 1102), fair and equitable treatment (Art. 1105), and performance requirements (Art. 1106) vs. Mexico's defense of lawful countermeasures under state responsibility.
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