At a glance: investment treaty practice in Mexico – Lexology

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Investment treaty practice

Model BIT

Does the state have a model BIT?

Mexico does not have a publicly available model bilateral investment treaty (BIT). However, earlier BITs have a similar language to the one used in the North American Free Trade Agreement (NAFTA), Chapter XI. Over the past decades, BITs and other agreements show an evolution from NAFTA’s materials. The latest BITs, or investment chapters contained in Mexico’s free trade agreements (FTAs), could serve as a reference as to what the Mexican government would agree to in future negotiations. Mexico also has more than 12 FTAs in force, which are broader in scope than the BITs.

Preparatory materials

Does the state have a central repository of treaty preparatory materials? Are such materials publicly available?

The Mexican government has a repository of all signed commercial treaties. However, Mexico does not have a public record of preparatory materials. Mexican law provides for public access to any information not considered classified. Requests for access to information can be made by any individual to the appropriate authorities, for example, the Ministry of Economy, which is the entity responsible for the negotiation of BITs and FTAs. In any event, NAFTA parties made all of the Chapter XI draft texts created during NAFTA’s negotiation publicly available.

Scope and coverage

What is the typical scope of coverage of investment treaties?

Regarding investment, most older treaties provide for broad definitions of investment, which includes every kind of asset that is owned or controlled by the investor. Exceptionally, some treaties refer to investment characteristics such as commitment of capital or other resources or the expectation of gain or profit (eg, Mexico–Panama FTA). Some of the more recent BITs (over the last decade) have provided for a close list type of definition. Less than half of the treaties also contain a denial-of-benefit clause. Nearly all BITs cover investments made before the entry into force of the treaty.

Regarding investors, most treaties provide a definition based only on nationality or place of its constitution. Recent treaties have begun to include a requirement of substantial business activity in the territory (eg, Mexico–Kuwait BIT). For purposes of the definition, please note that Mexico became a party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States 1965 (ICSID Convention) in 2018.

Regarding procedural rights, all BITs contain a cooling-off period provision and allow for a dispute to be heard by a local court or through arbitration. Most treaties also contain fork-in-the-road provisions.

Regarding specific investment protections, Mexico’s treaties contain common language for most standards. A few points to notice are:

  • most treaties contain unqualified fair and equitable treatment (FET) protections, although some link FET with the minimum standard of treatment;
  • nearly all treaties expressly protect against direct and indirect expropriation; and
  • regarding most favoured nation and national treatment policies, nearly all BITs make a reservation regarding taxation (FTAs are broader in scope and regulation).

Protections

What substantive protections are typically available?

Nearly all BITs and FTAs contain fair and equitable treatment, expropriation, full protection and security and most favoured nation protections. Very few FTAs contain only some, but not all. Finally, only about 12 BITs contain umbrella clauses, and such clauses are not included in FTAs.

Mexico is also a party to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a multilateral trade agreement that includes an investment chapter. The signatory states are Australia, Brunei, Canada Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Since Mexico already has investment treaties with some of these countries, protections may overlap.

Dispute resolution

What are the most commonly used dispute resolution options for investment disputes between foreign investors and your state?

Nearly all BITs provide for arbitration under International Centre for Settlement of Investment Disputes (ICSID), ICSID Additional Facility or United Nations Commission on International Trade Law (UNCITRAL) rules.

In rare cases, some BITs provide for arbitration under the Permanent Court of Arbitration Rules (eg, the Mexico–India BIT) or other institutional rules. Since Mexico’s accession to the ICSID Convention in 2018, the ICSID Additional Facility Rules are no longer available, unless the other party is not a member of the ICSID Convention, which is a rare exception.

Confidentiality

Does the state have an established practice of requiring confidentiality in investment arbitration?

No. Some older treaties state that the award will only be made public with the consent of the parties (eg, the Mexico–Netherlands BIT), however, this is not reflected in newer treaties.

Insurance

Does the state have an investment insurance agency or programme?

No.

Law stated date

Correct on

Give the date on which the above content is accurate.

September 2020.