Mexico to Appeal Landmark Ruling

ORANGE COUNTY, CA-A high-ranking official in the Mexican government says his nation will appeal a world tribunal’s potentially far-reaching order that would force Mexico to pay $16.7 million to a California company that built a $20-million project south of the border but then was prevented from opening it.

Luis de la Calle, Mexico’s Deputy Secretary of Commerce, says his government will submit its challenge to the ruling to another international tribunal in Vancouver by the end of November. Last week’s ruling was issued by a panel in Washington, D.C. that was comprised of one expert from the US, a second from Mexico and a third from England.

Legal experts say last week’s ruling is the first legal victory favoring a US investor under the 1994 North American Free Trade Agreement. If the ruling stands, it could force the Mexican government to do a better job of sticking to written contracts and international laws, which at times have been broken by local officials in Mexico.

The case involves Metalclad Corp., a Newport Beach, CA-based firm that provides construction services and specializes in handling toxic material. The trouble started brewing around 1993, when Metalclad began building a $20-million landfill for hazardous waste about 250 miles northwest of Mexico City.

After Metalclad finished the project, the state’s governor said the company had not obtained the proper permits and declared a large area near the dump an ecological preserve. Metalclad sued, citing a NAFTA provision that guarantees all investors “fair and equitable treatment.”

Though the world tribunal last week ordered the Mexican government to pay $16.7 million to Metalclad, the ruling wasn’t a total victory for the Orange County firm. Metalclad had asked for $90 million, which is the amount it says it would have earned over the landfill’s expected 20-year life.

Nonetheless, the ruling heartened some other American developers. Many builders over the years have suffered huge financial losses after Mexican officials simply stopped their projects in midstream or essentially confiscated their property using questionable legal tactics.