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Metalclad Corporation v. United Mexican States
Published online by Cambridge University Press: 01 January 2021
Abstract
State responsibility — nafta Article 201(2) — State internationally responsible for acts of local or provincial governments — Exemptions of Article 1108(1) do not extend to states or local governments
Expropriation — nafta Article 1105 — Requirement of fair and equitable treatment — Duty to ensure “transparency” — nafta Article 1110 — Prohibition of expropriation — Deliberate and acknowledged takings — Applies equally to outright seizure or covert or incidental interference — Effect to deprive owner of use or expected benefit of property — Measure tantamount to expropriation — Permitting or tolerating conduct of municipality — Participation or acquiescence in deprivation of rights — Indirect expropriation — Reliance on representations of federal government — Absence of substantive basis for denial of permit — Subsequent Ecological Decree barring operation of landfill
Municipal law — Limited extent of municipal authority — Denial of permit improper — Municipality acting outside authority
Damages — Arising under nafta Articles 1105 and 1110 — Compensation for complete frustration of meaningful return on investment — nafta Article 1135 — Award of monetary damages and applicable interest for violation of Chapter 11 — Claim for negative effect on other business operations — Causal relationship too remote and uncertain — Expenses — Evidential weight of tax returns and independent audit documents — Difficulty in verifying expense items does not invalidate claims
Valuation — Fair market value of a going concern — History of profitable operation — Estimate of future profits subject to discounted cash flow analysis — nafta Article 1110(2) — Fair market value of investment immediately before expropriation — Valuation based on going concern value, asset value including declared tax value of tangible property and other criteria — Expenses from different projects aggregated and allocated to another project — Concept of “bundling” not applicable in the circumstances
Remediation — Requirement of remediation accounted for in calculation of damages
Interest — nafta Article 1135(1) — Inclusion of interest in calculation of damages — Integral part of compensation — Interest to run from date when international responsibility engaged — Selection of appropriate date from which to impose interest
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- © Cambridge University Press 2002