follows: 3,4,5 Claimant is a company incorporated in Spain, which acquired property, buildings, facilities and other assets in Mexico pertaining to a controlled landfill of hazardous industrial waste. It was granted license to operate by the Mexican government, effective until 1998. In 1998, Tecmed’s application for permit renewal was rejected by respondent ostensibly based on certain minor breaches in landfill operation. Claimant felt that the refusal was arbitrary and politically motivate. Claimant incurred loss of profits and business opportunities, failure to fulfil contracted obligations, negative impact on company image, and failure to recover the cost of investments. 6
The issue is whether or not Mexico’s non-renewal of license for Claimant to operate the landfill constitutes violation of the Bilateral Investment Treaty between Spain and Mexico. 7 The legal basis relied upon is the Bilateral Investment Treaty (BIT) between Mexico and Spain, under the dispute settlement clause, pursuant to the ICSID Arbitration Rules. 8
While formally an expropriation means a forcible taking by the Government of tangible or intangible property owned by private persons by means of administrative or legislative action, what the case contemplates is a de facto expropriation, where such actions deprive persons of their ownership over such assets, without allocating said assets to either third parties or to the Government. Such “indirect” or “creeping” expropriation was implied by the terms in the Agreement, when it referred to acts “equivalent to expropriation” or “tantamount to expropriation”.
The Arbitral tribunal observed that the licensing agency’s decision not to renew the license meant that the landfill will be permanently and irrevocably closed, thus losing its economic value. 9 Furthermore, the Mexican authorities failed to maintain a reasonable proportionality between the interest protected (i.e., environmental welfare) and the protection of