Waste Management, Inc. v. United Mexican States ("Number 2")
ICSID · Investment (ICSID and treaty) · Mexico · 30 Apr 2004
Why it matters
This award is a landmark in investment treaty arbitration for its detailed analysis of the minimum standard of treatment under NAFTA Article 1105 and the distinction between contractual breach and expropriation under Article 1110. It established that mere non-performance of a contract by a state does not amount to expropriation unless accompanied by a definitive denial of rights and lack of legal recourse. The case also clarified the standard for denial of justice and the requirement of finality in domestic proceedings.
Summary
Waste Management, Inc., a US company, invested in a Mexican waste management concession through its subsidiary Acaverde. The concession was with the City of Acapulco. Waste Management alleged that Mexico, through various state organs, breached NAFTA Articles 1105 (minimum standard of treatment) and 1110 (expropriation) by failing to pay invoices, obstructing the concession, and denying justice in Mexican courts. The Tribunal first rejected Mexico's jurisdictional objection based on prior proceedings. On the merits, it held that Article 1105 requires treatment in accordance with customary international law, not a higher standard. It found no breach because Mexico's conduct did not rise to the level of arbitrariness, discrimination, or denial of justice. The Tribunal also rejected the expropriation claim, distinguishing between contractual non-performance and expropriation. It held that Waste Management retained its contractual rights and could pursue remedies in Mexican courts. The claim was dismissed in full.
The detail
Parties: Waste Management, Inc. v. United Mexican States ("Number 2")
Case number: ICSID Case No. ARB(AF)/00/3
Outcome: The Tribunal dismissed Waste Management's claims in their entirety, finding no breach of NAFTA Articles 1105 or 1110. Each party bore its own costs and half of the arbitration costs.
Applicable law: NAFTA Chapter 11, ICSID Additional Facility Rules
Issues in play: The case involved the interpretation of NAFTA Article 1105 (minimum standard of treatment) and Article 1110 (expropriation). The Tribunal considered whether Mexico's conduct, including non-payment under a concession contract and alleged denial of justice, violated these provisions.
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