Essay Example on COTERIE owns and operate a landfill

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COTERIN owns and operate a landfill located in the municipality of Guadalcazar in the State of San Luis Potosi Mexico since 1990 Due to some violations the federal ordered for its closure on September 1991 On the same year COTERIN applied to the Municipality for a permit to construct a hazardous waste landfill however the application was denied in 1992 when the newly elected municipal came into office In 1993 Metalclad purchase COTERIN with the condition that either a municipal permit was issued to COTERIN or COTERIN had received a definitive judgment from the Mexican courts that a municipal permit is not required for the construction of the landfill Metalclad completed its purchase of COTERIN however neither of the conditions was satisfied The Tribunal found that the Mexican federal officials gave an assurance to Metalclad that COTERIN had all the authorities to undertake the landfill project COTERIN began the construction site without the municipal construction permit Although after the construction began the federal authorities issued further construction permit in January 1995 authorizing the construction of the final aspects of the facility On October 26 1994 the Municipality issued a stop work order due to the absence of a municipal construction permit They applied for a municipal permit on November 15 1994 and continued the construction of the facility at the Site

However on December 5 1995 the municipality officially denied their application Metalclad entered into a negotiation with the federal authorities regarding the operation of the landfill facility Metalclad and the federal authorities arrived with the Convenio agreement The agreement was entered by Metalclad together with the two sub agencies of the Secretariat of the Environment The highlight of the Convenio is that Metalclad would be permitted to operate the landfill for an initial period of five years and that it would remediate the previous contamination during the first three years of this period Shortly after the Convenio was entered into the Municipality formally denied CONTERIN s application for a construction permit on December 5 1995 The first consideration taken into account by the municipal council in denying the application was COTERIN had been denied a construction permit in 1991 2 Second COTERIN had begun construction before applying for the permit and finished the construction while the permit application was pending Third the environmental concerns from the facility And finally the residents of the Municipality do not agree with granting the permit Again CONTERIN requested from the Municipality for a reconsideration regarding their construction permit application but the Municipality once more rejected their request in April 1996 CONTERIN filed a writ of amparo in a Mexican federal court in respect of the Municipality s refusal to issue a construction permit 



The proceeding was dismissed on the basis that CONTERIN had not exhausted its administrative remedies CONTERIN appealed to the Mexican Supreme Court but afterwards did not pursue the case as a sign of good faith to the Municipality for the purpose of negotiations Since both parties cannot arrived on an agreement Metalclad delivered a Notice of Intent to Submit a Claim to Arbitration under Article 1119 of the NAFTA to Mexico in October 1996 The arbitration proceeding started by filing a Notice of Settlement of Investment Dispute Metalclad opted for Additional Facility Rules of ICSID to govern the arbitration Before the hearing in the arbitration was held the Governor of the State of San Luis Potosi issued an ecological decree the Ecological Decree prior to the expiration of the Governor's term on September 20 1997 As per the Ecological Decree an area of 188 758 hectares within the Municipality which included the site will be an ecological preserve for the stated purpose of protecting species of cacti 



Description of the Relevant Issues Metalclad Corporation a US company claims that the Mexican local governments of San Luis Potosi and Guadalcazar interfered with its development and operation of a hazardous waste landfill Metalclad Corporation s claims that the interference of the governments of San Luis Potosi and Guadalcazar violated Chapter 11 of the investment provisions of NAFTA North American Free Trade Agreement According to Metalclad the following are the provisions violated by the United Mexican States i Article 1105 which required each Party to NAFTA to accord to investments of investors of another Party treatment in accordance with international law that includes fair and equitable treatment and full protection and security ii Article 1110 states that no Party to NAFTA may directly or indirectly nationalize or expropriate an investment of an investor of another Party in its territory or take a measure that would tantamount to nationalization or expropriation of an investment except for a public purpose on a non discriminatory basis in accordance with the due process of law and on payment of compensation in accordance with paragraphs 2 through 6 or Article 1110 However the United States of Mexico denies all the allegations


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