Tecnicas Medioambientales Tacmed S.A.(“Tecmed”) v. Mexico

Technicas Medioambientales Tecmed S.A. (Claimant) (P), a Spanish company, was the parent company of Technicas medioambientales Mexico, S.A. de C.V. (Tecmed), a company incorporated under Mexican law. The parent company owned 99 percent of the shares of Tecmed, who in turn held over 99 percent of the stock of Cytrar, S.A. de C.V. (Cytrar,) also a Mexican company. Tecmed had organized Cytrar to run a hazardous industrial waste landfill (the Landfill) in the municipality of Hermosillo, which is located in the State of Sonora, Mexico. Cytrar was issued a license for its operation by the Mexican agency for hazardous waste known as the INE in 1996. This license was issued at the request of Tecmed. Subsequently, the license was to be renewed yearly at the request of the applicant. The license was renewed each year till 1998 when INE relying on a resolution (the “Resolution”) refused to renew the license and instead sought to have Cytrar close the Landfill. The action taken by the INE was due to the political change of government of the Municipality of Hermosillo. The claimant alleged that the not renewing the license constitutes expropriation and on this premise, sought damages and compensation for damage to reputation and interest in connection with damages alleged to have accrued as at the date INE rejected the renewal application. Also, permit to operate the Landfill until the end of its useful life was also sought by the plaintiff who later brought a claim for arbitration before the International Centre for Settlement of Investment Disputes (ICSID) under its Rules and under the Agreement on the Reciprocal Promotion and Protection of Investments (the “Agreement”) between Spain and Mexico (D). This agreement was meant to protect foreign investors and their investments from whatever form of expropriation such as measures which are tantamount to direct expropriation. On this ground, the claimant claimed that the action of INE constituted a denial of benefits associated with the operation of the Landfill. All these allegations brought against Mexico (D) was countered by Mexico (D) on the premise that the INE had discretionary powers to grant and deny permits and that such issues, with the exception of special cases, are exclusively governed by domestic and not international law. Mexico (D) also affirmed that the INE was operating within its powers and its Resolution was neither arbitrary nor discriminatory but constituted a regulatory measure which was issued in compliance with the state’s police power.