On 11 January 2018, Mexico signed (pending the approval of the Mexican Senate) the Agreement on Settlement of Investment Disputes between States and Nationals of other States of the International Center for Settlement of Investment Disputes (ICSID Convention). This represents a radical change of the traditional position of Mexico for over 50 years. The ICSID Convention and the North American Free Trade Agreement discussions raised the issue of the protection of foreign investments in Mexico in case of a possible nationalization or expropriation.
Mexico has signed Agreements for the Promotion and Reciprocal Protection of Investment and Free Trade Agreements with Investment Chapters with over 40 countries (collectively called APPRIs). The APPRIs contain provisions that offer protection to foreign investments from the States with which such agreements are in effect, providing them with rights and defenses in the event of the expropriation of their foreign investment. In the event of a violation of such rights, the foreign investor could use international arbitration as a method of dispute resolution and, often, even absent an express arbitration clause signed between the investor and Mexico.
The APPRIs usually establish:
- That the host State of the investment must provide the investor and its investments fair and equitable treatment, full protection and security, while establishing a prohibition of discriminatory treatment in case of exchange controls; and
- That in case of nationalization or expropriation, the investor has the right to receive a fair compensation.
Although the structure and content of the APPRIs may seem similar, they should be analyzed case-by-case and it is advisable to paid special attention to the clauses that deal with: •Definition of the protected investments and investor;
- Methods of alternative dispute resolutions;
- Most favoured nation; and
- Protection of investments after the termination of the APPRI.