Waste Management, Inc. v. United Mexican States
ICSID (Additional Facility) · Investment (ICSID and treaty) · Mexico · 2 Jun 2000
Why it matters
This case is a landmark on the strict interpretation of NAFTA Article 1121's waiver requirement. It established that an investor must unconditionally waive the right to pursue domestic proceedings concerning the same measures alleged to breach NAFTA, even if those proceedings are based on domestic law. The decision underscores the importance of the waiver as a condition precedent to arbitration and clarifies that conditional or qualified waivers are invalid.
Summary
Waste Management, Inc., a US company, initiated arbitration against Mexico under NAFTA Chapter XI, alleging that Mexican state entities (BANOBRAS, Guerrero, and Acapulco) breached NAFTA Articles 1105 (fair and equitable treatment) and 1110 (expropriation). The dispute arose from a concession agreement for waste disposal services in Acapulco, under which Acapulco failed to pay invoices, and BANOBRAS, as guarantor, also failed to pay. Before filing the NAFTA claim, Waste Management's Mexican subsidiary, ACAVERDE, had already sued BANOBRAS and initiated arbitration against Acapulco in Mexican forums. NAFTA Article 1121 requires an investor to waive its right to initiate or continue any proceedings before other tribunals or courts regarding measures alleged to breach NAFTA. Waste Management submitted a waiver but added language stating that the waiver did not apply to proceedings alleging violations of other laws (e.g., Mexican municipal law). Mexico objected, arguing that the waiver was invalid because it was conditional and because ACAVERDE continued domestic proceedings. The Tribunal agreed with Mexico, finding that the waiver did not comply with Article 1121. The Tribunal held that the waiver must be unconditional and cover all proceedings relating to the same measures, regardless of the legal basis. Since ACAVERDE continued domestic proceedings after the waiver, the condition precedent was not met. Consequently, the Tribunal declined jurisdiction and ordered Waste Management to pay the arbitration costs. The decision highlights the strict procedural requirements for NAFTA Chapter XI claims.
The detail
Parties: Waste Management, Inc. v. United Mexican States
Case number: ICSID Case No. ARB(AF)/98/2
Outcome: The Tribunal held that it lacked jurisdiction due to the claimant's failure to provide a valid waiver under NAFTA Article 1121, and ordered the claimant to pay the costs of the arbitration.
Applicable law: NAFTA Chapter XI, ICSID Additional Facility Rules, Vienna Convention on the Law of Treaties
Issues in play: The dispute centered on the interpretation of NAFTA Article 1121's waiver requirement, which prohibits an investor from initiating or continuing domestic proceedings regarding measures alleged to breach NAFTA. The claimant's waiver was conditioned on its understanding that it could pursue domestic claims not invoking NAFTA, but the tribunal found that the domestic proceedings involved the same measures, thus violating the waiver.
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