Talsud S.A. v. The United Mexican States
ICSID · Investment (ICSID and treaty) · Mexico · 16 Jun 2010
Why it matters
This award is significant for its detailed analysis of the fair and equitable treatment standard and indirect expropriation in the context of a state's regulatory measures. It also addressed the 'loser pays' principle in investment arbitration, awarding costs to the successful claimants. The case illustrates the application of multiple BITs to a single investment structure and the valuation of lost profits using the DCF method.
Summary
The case arose from a concession granted by Mexico to Renave S.A. de C.V. to operate a national vehicle registry. The Claimants (Gemplus, SLP, Gemplus Industrial, and Talsud) held 49% of Renave's shares. After political opposition and allegations of corruption, Mexico took a series of measures: a technical intervention, two administrative interventions, a requisition, and ultimately revocation of the concession in 2002. The Claimants alleged these measures violated the fair and equitable treatment (FET) and expropriation provisions of the France-Mexico and Argentina-Mexico BITs. The Tribunal, constituted under ICSID Additional Facility Rules, rejected Mexico's jurisdictional challenge against Gemplus S.A. and found that Mexico had breached both FET and expropriation standards. It held that the measures were disproportionate and arbitrary, and that the concession was effectively expropriated without compensation. The Tribunal awarded compensation based on the fair market value of the investment as of June 24, 2001, using a discounted cash flow (DCF) method, but reduced the amount due to the concession's inherent risks. It also awarded compound interest and costs, applying the 'loser pays' principle. The award is notable for its thorough treatment of causation, valuation, and the interplay between state regulatory powers and investor protections.
The detail
Parties: Talsud S.A. v. The United Mexican States
Case number: ICSID Case No. ARB(AF)/04/4
Outcome: The Tribunal found Mexico liable for breaching fair and equitable treatment and unlawfully expropriating the Claimants' investments. Mexico was ordered to pay compensation: US$4,483,164 to Gemplus S.A. and US$6,458,721 to Talsud S.A., plus compound interest and costs totaling US$5,450,000.
Quantum: US$10,941,885 (principal) plus interest and costs
Applicable law: France-Mexico BIT (1998) and Argentina-Mexico BIT (1996); ICSID Additional Facility Rules
Issues in play: The case involved the fair and equitable treatment standard and expropriation provisions under two BITs. The Tribunal assessed whether Mexico's regulatory actions (including administrative interventions and revocation of a concession) amounted to indirect expropriation and breach of FET.
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