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

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Citation. Int’l Centre for Settlement of Investment Disputes, ICSID Case No. ARB (AF)/00/2, Award, 43 I.L.M. 133 (2004).

Brief Fact Summary.

The arbitration tribunal awarded the plaintiff money damages and interest after it had determined that Mexico (D) had expropriated Technicas Medioambientales Tecmed S.A.’s (Claimant’s) (P) property by refusing to issue a permit for the operation of a landfill (the “Landfill”) owned by the Claimant’s (P) subsidiary (for the facts of the case and the tribunal’s findings and ruling, (see the brief at page 130, supra). The tribunal did not however award moral damages or litigation expenses and attorney’s fees.

Synopsis of Rule of Law.

(1) What constitutes compensatory money damages when awarded for the expropriation of property may include amounts proven to make up the market value of the property as well as amounts for projected increase in revenue and goodwill.
(2) Compensatory money damages awarded for expropriation of property may include compound interest.
(3) In a situation where there is no evidence of injury to reputation, moral damages will not be awarded.
(4) Claimant who has been only partially successful will not be awarded arbitration expenses and counsel fees.

Facts.

Mexico (D) was found  by the tribunal to have expropriated Tecnias Mediambientales Tecmed S.A.’s (Claimant’s) (P) property by not issuing a license for the operation of a landfill (the “Landfill”) owned by the Claimant’s (P) subsidiary (for the facts of the case and the tribunal’s findings and ruling, see the brief at page 130, supra). The onus now rested on the tribunal to determine the appropriate damages. The primary request of the Claimant (P) was money damages and secondarily restitution in kind. Request was also for interest, moral damages, litigation expenses and attorney’s fees. The decision the tribunal took was explained in each item.

Issue.

(1) Does an amount proven to make up the market value of property as well as amounts for projected increase in revenue and goodwill constitute compensatory money damages when awarded for the expropriation of property?
(2) Is compound interest included in the compensatory money damages awarded for expropriation?
(3) In a situation where there is no evidence of injury to reputation, will moral damages be awarded?
(4) Will a claimant who has been partially successful be awarded arbitration expenses and legal fees?

Held.

(1) Yes. What constitutes compensatory money damages when awarded for the expropriation of property may include amounts proven to make up the market value of the property as well as amounts for projected increase in revenue and goodwill. The capital investments and profits for the two years in which the Landfill was operational, the market value of the Landfill was $5,553,017.12 while basing the Landfill acquisition value at $4,028,788.
The value of additional investment was valued by the Claimant’s (P) expert as $1,951,473,237 but no evidence was available to support this figure, though Mexico (D) claimed that the amount was $439,000 based on the accounting data. The valuation of Mexico (D) was however accepted by the tribunal and it also determined the profit of the Landfill to be $1,085,229.12 based on the growing revenues and profits and increasing goodwill. In order to provide an integral compensation for the damage inflicted, the amount of closing the Landfill will not be deducted from such amount, since the decision which forced the closure contravened the Agreement between Spain and Mexico (D).
(2) Yes. Compensatory money damages awarded for expropriation of property may include compound interest. In other cases involving expropriation, compound-versus-simple interest have been awarded in other expropriation cases and is at present deemed the appropriate standard of interest in international law for expropriation cases. In this case, 6 percent compound interest rate is justified.
(3) No. In a situation where there is no evidence of injury to reputation, moral damages will not be awarded. There is no evidence to determine whether the actions of Mexico (D) caused injury to the Claimant’s (P) reputation and therefore caused it to lose business opportunities. This implies that whatever adverse press coverage of the Claimant’s (P) companies cannot be ascribed to the actions of Mexico (D).
(4) No. Claimant who has been only partially successful will not be awarded arbitration expenses and counsel fees. Since Mexico’s (D) defenses and challenges were admitted and the Claimant (P) has been successful only with respect to some of its claims, both parties will have to bear its costs, expenses and legal counsel fees. Also, the two parties would prorate equally the costs incurred by the tribunal and the ICSID. The Claimant (P) will take all necessary steps to transfer the Landfill to Mexico (D) after Mexico (D) pays the amount required by the award.

Discussion.

The award of the damages in respect of expropriation or nationalized property, expropriated business on a going concern basis is valued by the tribunal rather than on a liquidation basis and this would include measures of goodwill and profitability in the value determination. Hence, the indicia must be based on reliable data and projections as with other measures of value.