|TABLE OF LEGAL MATERIALS|
|1.||ADC Affiliate Limited and ADC & ADMC Management Limited v. Republic of Hungary (ICSID Case No. ARB/03/16), Award of 2 October 2006|
|2.||ADF Group Inc. v. United States of America (ICSID Case No. ARB(AF)/00/1), Award of 9 January 2003|
|3.||AMCO Asia Corp. v. Indonesia (ICSID Case No. ARB/81/1), Final Award of 5 June 1990|
|4.||American International Group, Inc. v. The Islamic Republic of Iran, 4 Iran-U.S. C.T.R. 96, Award No. 93-2-3, 19 December 1983|
|5.||Amoco International Finance Corp. v. The Government of the Islamic Republic of Iran, et al., 15 Iran-U.S. C.T.R. 189, Partial Award No. 310-56-3, 14 July 1987|
|6.||Asian Agricultural Products, Ltd. v. Republic of Sri Lanka (ICSID Case No. ARB/87/3), Final Award of 27 June 1990|
|7.||Azinian v. United Mexican States (ICSID Case No. ARB(AF)/97/2), Award of 1 November 1999|
|8.||Azurix Corp v. Argentine Republic (ICSID Case No. ARB/03/30), Award of 14 July 2006|
|9.||Antoine Biloune v. Ghana, UNCITRAL, Award on Jurisdiction and Liability of 27 October 1989|
|10.||CME Czech Republic B. V. v. Czech Republic, UNCITRAL (The Netherlands/Czech Republic BIT), Award of 13 September 2001|
|11.||CMS Gas Transmission Company v. Argentine Republic (ICSID Case No. ARB/01/8), Award of 12 May 2005|
|12.||CMS Gas Transmission Company v. Argentine Republic (ICSID Case No. ARB/01/8), Decision of the ad hoc Committee on the Application for Annulment of the Argentine Republic, 25 September 2007|
|13.||Ebrahimi v. The Government of the Islamic Republic of Iran, 30 Iran-U.S. C.T.R. 170, Award No. 560-44/46/47-3, 12 October 1994|
|14.||Case concerning Elettronica Sicula S.p.A (United States of America v. Italy), I.C.J. Rep. 1989. 15, Judgment of 20 July 1989|
|15.||EnCana Corporation v. Republic of Ecuador, LCIA Case No. UN3481, UNCITRAL (Canada/Ecuador BIT), Award of 3 February 2006|
|16.||Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic (ICSID Case No. ARB/01/3), Award of 22 May 2007|
|17.||Eureko B. V. v. Republic of Poland, UNCITRAL (Netherlands/Poland BIT), Partial Award of 19 August 2005|
|18.||Case Concerning the Factory at Chorzow (Germany v. Poland), 1927 PCIJ, Series A, No 9 (Jurisdiction); 1928 PCIJ, Series A, No 17 (Merits)|
|19.||Marvin Feldman v. Mexico (ICSID Case No. ARB(AF)/99/1), Award on Merits of 16 December 2002|
|20.||Garni Investments, Inc. v. Mexico, UNCITRAL (NAFTA), Final Award of 15 November 2004|
|21.||Alex Genin, Eastern Credit Limited, Inc., andA.S. Baltoil v. Republic of Estonia (ICSID Case No. ARB/99/2), Award of 25 June 2001|
|22.||Antoine Goetz et consorts c. République du Burundi (ICSID Case No. ARB/95/3), Award of 10 February 1999|
|23.||Impregilo S.p.A. v. Islamic Republic of Pakistan (ICSID Case No. ARB/03/3), Decision on Jurisdiction of 22 April 2005|
|24.||INA Corp. v. Iran, 8 Iran-U.S. C.T.R. 373, Award No. 184-161-1, 13 August 1985|
|25.||International Thunderbird Gaming Corporation v. United States of Mexico, UNCITRAL (NAFTA), Award of 26 January 2006|
|26.||LETCO v. Republic of Liberia (ICSID Case No. ARB/83/2), Award of 31 March 1986|
|27.||LG&E Energy Corp., LG&E Capital Corp., LG&EInternational, Inc. v. Argentine Republic (ICSID Case No. ARB/02/1), Award of 25 July 2007|
|28.||Loewen Group. Inc., et al v. United States of America (ICSID Case No. ARB(AF)/98/3), Award on Merits of 26 June 2003|
|29.||Emilio Agustín Maffezini v. The Kingdom of Spain (ICSID Case No. ARB/97/7), Award of 13 November 2000|
|30.||Metalclad Corporation v. United States of Mexico (ICSID Case No. ARB(AF)/97/1), Award of 30 August 2000|
|31.||Middle East Cement Shipping and Handling Co. S.A. v. Arab Republic of Egypt (ICSID Case No. ARB/99/6), Award of 12 April 2002|
|32.||Mondev International Ltd. v. United States of America (ICSID Case No. ARB(AF)99/2), Award of 11 October 2002|
|33.||MTD Equity Sdn, Bhd. and MTD Chile S.A. v. Republic of Chile (ICSID Case No. ARB/01/7), Award of 25 May 2004|
|34.||MTD Equity Sdn, Bhd. and MTD Chile S.A. v. Republic of Chile (ICSID Case No. ARB/01/7), Decision on Annulment of 21 March 2007|
|35.||Occidental Exploration and Production Company v. Republic of Ecuador, LCIA Case No. UN3467 (US/Ecuador BIT), Final Award of 1 July 2004|
|36.||Phillips Petroleum Company Iran v. The Islamic Republic of Iran, et ai, 21 Iran-U.S. C.T.R. 79, Partial Award No. 425-39-2, 29 June 1989|
|37.||Rankin v. Islamic Republic of Iran, 17 Iran-U.S. C.T.R. 135, Award No. 326-10913-2, November 3, 1987|
|38.||James M. Saghi et al v. Iran, 29 Iran-C.T.R. 20, Award No. 544-298-2, 22 January 1993|
|39.||Salini Costruttori S.p.A. and Italstrade S.p.A. v. Jordan (ICSID Case No. ARB/02/13), Award of 31 January 2006|
|40.||Saluka Investments BVv. Czech Republic, UNCITRAL, (Dutch/Czech BIT), Award, 17 March 2006|
|41.||Compañía del Desarrollo de Santa Elena, S.A. v. The Republic of Costa Rica (ICSID Case No. ARB/96/1), Award of 17 February 2000|
|42||Sapphire International Petroleums, Ltd. v. National Iranian Oil Company, 35 ILR 136 (1963)|
|43.||S.D. Myers, Inc. v. the Government of Canada, UNCITRAL (NAFTA), Second Partial Award (Damages) of 21 October 2002|
|44.||Sempra Energy International v. Argentine Republic (ICSID Case No. ARB/02/16), Award of 18 September 2007|
|45.||SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan (ICSID Case No. ARB/01/13), Award of 6 August 2003|
|46.||Southern Pacific Properties (Middle East) Limited v. Arab Republic of Egypt (ICSID Case No. 84/3), Award of 20 May 1992|
|47.||Starrett Housing Corp., et al. v. The Government of the Islamic Republic of Iran, et al., 16 Iran-U.S. C.T.R. 112, Final Award No. 314-24-1 of 14 August 1987|
|48.||Técnicas Medioambientales Tecmed S.A. v. United Mexican States (ICSID Case No. ARB(AF)/00/2), Award of 29 May 2003|
|49.||Tippetts, Abbett, McCarthy, Stratton v. TAMS-AFFA Consulting Engineers of Iran, et al., 6 Iran-U.S. C.T.R. 219, Award No. 141-7-2, 29 of June 1984|
|50.||Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic (ICSID Case No. ARB/97/3), Decision on Annulment of 3 July 2002|
|51.||Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic (ICSID Case No. ARB/97/3), Award of 20 August 2007|
|52.||Waste Management, Inc. v. United Mexican States (ICSID Case No. ARB(AF)/00/3), Award of 30 April 2004|
|53.||Wena Hotels Ltd. v. Arab Republic of Egypt (ICSID Case No. ARB/98/4), Award on Merits of 8 December 2000|
|54.||Crawford, The International Law Commission’s Articles on State Responsibility (CUP, 2002).|
|55.||Kantor, Valuation for Arbitration: Compensation Standards, Valuation Methods and Expert Evidence (Kluwer, 2008)|
|56.||Kazazi, Burden of Proof and Related Issues (Kluwer, 1996)|
|57.||Ripinsky & Williams, Damages in International Investment Law (BIICL, 2008)|
|58.||McGregor, Damages (18th ed; 2009)|
|59.||Chaplin v Hicks  2 KB 786|
Resolution of Disputes between an Investor of one of the Contracting Parties and the other Contracting Party
1. This Article only applies to disputes between one Contracting Party and an investor of the other Contracting Party in relation to an alleged breach by the Contracting Party under this Agreement which causes loss or damage to the investor or his investment.
2. In relation to submission of a claim to arbitration:
a) An investor of one of the Contracting Parties may not allege that the other Contracting Party has breached an obligation under this Agreement, both in arbitration proceedings in accordance with this Article and in proceedings before a competent judicial or administrative tribunal of the former Contracting Party who is party to the dispute;
b) Also, when a company from one of the Contracting Parties, which is a legal person owned or controlled by an investor from the other Contracting Party, alleges, during the course of proceedings before a competent judicial or administrative tribunal of the Contracting Party involved in the proceedings, that the Contracting Party has breached an obligation under this Agreement, the investor may not allege the same breach in arbitration proceedings under this Article.
3. Any dispute under this Article shall be settled amicably between the Parties concerned.
4. A dispute under this Article may be submitted to arbitration, provided that six months have passed since the events giving rise to the request for arbitration occurs, but in any event no later than four years from the date when the investor first became aware or should have become aware of the events giving rise to the dispute, and that the investor has delivered to the Contracting Party that is a party to the dispute written notification of its intention to submit a claim to arbitration at least 60 days in advance:
i) before the International Centre for Settlement of Investment Disputes ("The Centre "), established under the Convention on the Settlement of Investment Disputes between States and Nationals from other States ("the ICSID Convention"), if the investor’s Contracting Party and the Contracting Party which is a party to the dispute are both signatories to the ICSID Convention;
ii) before the Centre in accordance with the Rules of the Additional Facility of ICSID, if either the Contracting Party of the investor or the Contracting Party which is a party to the dispute but not both is a party to the ICSID Convention;
iii) before an ad hoc arbitration tribunal constituted in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law ("UNCITRAL");
iv) before the International Chamber of Commerce, by an ad hoc tribunal constituted in accordance with its arbitration rules.
5. The arbitration shall be governed by the applicable rules of arbitration except to the extent modified by this Article.
6. Unless otherwise agreed between the Parties to the dispute, the arbitration tribunal shall be composed of three members. Each disputing party shall nominate one member and two members will agree on the appointment of a third member, who shall act as president.
The members of the tribunal shall have experience in international law and in investment matters.
Where an arbitration has not been constituted within 90 days of the date and the claim was submitted to arbitration, either because one disputing party has not nominated a member or because the two nominated members have not agreed a president, the Secretary General of ICSID, at the request of any one of the disputing Parties, shall appoint at his discretion the member or members not yet appointed. However, in appointing the president, the Secretary General of ICSID shall ensure that the president is not a national of one of the Contracting Parties.
7. A tribunal constituted in accordance with this Article shall decide the dispute by majority vote in accordance with the terms of this Agreement and any applicable rules and principles of international law.
8. Arbitration awards may provide for the following types of remedy:
a) a declaration that the Contracting Party has breached its obligations under this Agreement;
b) monetary indemnification including interest incurred from the occurrence of the loss or damage to the date of the payment;
c) restitution in kind, where this is appropriate, except if the Contracting Party pays monetary indemnification in place of restitution where such restitution is not feasible; and
d) with the consent of both disputing Parties, any other form of remedy.
Arbitral awards shall be final and binding only on the disputing Parties and only in respect of the particular case.
The final award shall only be published with the written consent of both disputing Parties.
An arbitration tribunal cannot order a Contracting Party to pay punitive damages. "
1. All disputes arising from the provisions of this Agreement between an investor of one Contracting Party and the other Contracting Party, shall, as far as possible, be resolved amicably or by negotiation.
2. This Article and the corresponding Annex establish a mechanism for the resolution of investment disputes, which arise from the date of entry into force of this Agreement, and ensure both equal treatment between investors from the Contracting Parties in accordance with the principle of international reciprocity and due process before an impartial arbitration tribunal, when appropriate.
3. If the dispute has not been resolved within six months of the date when the relevant disputing party raised the dispute, it may be submitted, at the investor’s request:
- to the competent court of the Contracting Party in whose territory the investment was made; or
- to international arbitration under the terms and conditions established in paragraph (4).
Once an investor has submitted the dispute to the jurisdiction of the Contracting Party involved or to international arbitration, the election of either of these procedures shall be final.
4. The investor shall notify in writing the Contracting Party of its intention to submit the dispute to international arbitration at least 90 days in advance, a term which may run parallel to the second half of the term to which paragraph (3) refers.
In the event of recourse to international arbitration, the investor may submit the dispute under:
a) the International Convention on the Settlement of Investment Disputes between States and Nationals from other States, signed in Washington on 18 March 1965, ("the ICSID Convention "), when both Contracting Parties are signatories thereof; the Rules of the Additional Facility of the International Centre for the Settlement of Investment Disputes ("ICSID ") when one of the Contract Parties is a signatory of the ICSID Convention; or
b) the arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL), approved by the General Assembly of the United Nations on 15 December, 1976.
5. The arbitration body shall rule on the disputes submitted for its consideration on the basis of the provisions of this Agreement and the applicable rules and principles of international law. The interpretation of a provision in this Agreement made by the Contracting Parties, by mutual agreement in writing, shall be binding upon any arbitration body established in accordance with this Agreement.
6. The arbitration award shall be limited to determining whether a Contracting Party has breached this Agreement, whether this breach has caused a loss to the investor and, if so:-
a) fix the amount of compensatory indemnification for the damage suffered;
b) restitution of property or, if that is not possible, the corresponding compensatory indemnification.
c) any applicable interest.
The arbitration body may not order payment of punitive damages.
The award shall not affect the rights of any third Parties under applicable local legislation.
7. Arbitration awards shall be final and binding for the Parties to the dispute. Each Contracting Party shall enforce them pursuant to its legislation; otherwise the investor may have recourse to enforcement of an arbitration award under the ICSID Convention, the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, signed in New York on 10 June 1958 ("New York Convention") or the Inter-American Convention on International Commercial Arbitration, signed in Panama, on 30 January, 1975 ("Inter-American Convention").
For the purposes of Article One of the New York Convention, the claim submitted to arbitration shall be held to have arisen from a commercial relationship or transaction.
8. In all investment arbitrations, a Contracting Party may not allege, either as defence, counterclaim, objection to compensation or any other action, that the investor received or will receive, pursuant to an insurance contract or warranty agreement, indemnification of other compensation for all or part of the alleged loss. "
(It is agreed that the Annex to the Argentina BIT is not relevant for present purposes: see Article 10(2) of the Argentina BIT cited above).
(1) L. Yves Fortier, CC, QC, a national of Canada, appointed as Arbitrator by the Claimants by letter dated 12 November 2004, of Ogilvy Renault LLP, now of 1 Place Ville Marie, Suite 2500, Montréal QC, H3B 1R1, Canada;
(2) Eduardo Magallón Gómez, a national of Mexico, appointed as Arbitrator by the Respondent by letter dated 12 January 2005, of Magallón, Peniche y Del Pino Abogados, Fuego 719, Col. Jardines del Pedregal, México, DF 01900, Mexico; and
(3) V.V. Veeder, QC, a national of the United Kingdom, as President of the Arbitral Tribunal, appointed by the Parties by letters dated 22 February and 23 February 2005, of Essex Court Chambers, 24 Lincoln’s Inn Fields, London WC2E 3EG, United Kingdom.
(References to the verbatim transcript of the oral hearings are made thus: "DI. 132" signifies the first day of the main hearing, 18 February 2008, at page 132 of the transcript. Also in reference to the verbatim transcripts, the Tribunal has used their English version, and, whenever possible, it has resorted to the Spanish transcripts for the purposes of the Spanish version of this Award, or it has otherwise included a Spanish translation of the relevant portions of the English transcripts.)
For the Claimants: Mr Eduardo Salgado [D2,242-355]; Mr Roberto Siegrist [D2,356-491 & D3,500-567]; Mr Víctor Taíariol [D3,587-721]; Ms Maria Elena Barrera [D3,730-736, D4,745-812]; Mr José Rojas [D4,813-55]; and Mr Charles Tormo [D4,857-59, 861-948, 950-59].
For the Respondent: Mr Herminio Blanco [D5,968-1100]; Ms Jimena Valverde [D5.1102-1161]; Ms Esperanza Gómez-Mont [D6.1172-1346]; Mr Guillermo González [D6.1347-1375]; Mr Javier Gallardo [D6.1376-1400 & D7.1408 & 1460-64]; and Mr Pablo Ríon [D7.1465-1647].
(i) a declaration that the Government of Mexico has acted arbitrarily and (1) has failed to accord the Claimants’ investments fair and equitable treatment; (2) has failed to accord the Claimants’ investments no less favourable treatment and/or most favoured nation treatment; (3) has breached its treaty obligation not to harm the management, maintenance, use, enjoyment or order of such investments with arbitrary or discriminatory measures; (4) has expropriated and dispossessed the Claimants’ investments without just cause and without compensation; and/or (5) has adopted measures equivalent to expropriation without just cause and without compensation;
(ii) their losses set out at paragraph 52 of their Request for Arbitration: "The investment of Gemplus/SLP/Gemplus Industrial is quantified as (a) 20% of the profits that Renave would have made during the initial 10-year Concession period and the further 10-year term pursuant to Article 19 of the Concession Agreement; alternatively (b) the value, immediately prior to the expropriation and breach of the BITs, of Gemplus Industrial’s shareholding in Renave, if to be quantified by any measure other than (a); alternatively (c) such other quantification as may be assessed."
(iii) interest pursuant to Article 5.3 of the France BIT; and
(iv) legal costs and costs of this arbitration, including ICSID and Tribunal fees.
(A) Gemplus, SLR and Gemplus Industrial'.
(1) Rejection of the Respondent’s objections to jurisdiction as without merit;
(2) Damages for violations of Articles 4.1, 4.2, 4.3, 5.2 and 5.3 of the France BIT;
(3) Their share of the costs of these arbitration proceedings, including but not limited to expert and legal fees and disbursements and the costs of the Arbitral Tribunal;
(4) An assessment of the share of the costs incurred by the Gemplus Claimants to the date of the Award and an order that the Respondent is liable to pay for those costs;
(5) Interest on the sums claimed in subparagraphs (2), (3) and (4) until such time as they are paid.
(1) Rejection of the Respondent’s objection to jurisdiction as without merit;
(2) Damages for violations of Articles 3.1, 3.2, 5.1, 5.2 and 5.3 of the Argentina BIT;
(3) Its share of the costs of these arbitration proceedings, including but not limited to expert and legal fees and disbursements and the costs of the Arbitral Tribunal;
(4) An assessment of the share of the costs incurred by Talsud to the date of the Award and an order that the Respondent is liable to pay for those costs;
(5) Interest on the sums claimed in subparagraphs (2), (3) and (4) until such time as they are paid.
The Claimants reject the Respondent’s argument that the acts constituting expropriation were lawful because they were taken pursuant to rights under the Concession Agreement and Mexican law. In any event, the Claimants submit, relying on the Tecmed v. Mexico award, that the Respondent’s acts were unjustified and disproportionate, amounting therefore to unlawful expropriation.
Scope of Application of this Agreement
1. It is understood that investments covered by this Agreement are those which have already been made or might be made after this Agreement enters into force, in accordance with the laws of the Contracting Party on whose territory or in whose maritime zone the investments are made.
2. This Agreement applies to the territory and maritime zone of each of the Contracting Parties.
3. Nothing in this Agreement shall be interpreted so as to prevent either Contracting Party from taking any measure to control investments made by foreign investors and the way in which these investors carry out their investments, within the framework of measures aiming to preserve and encourage cultural and linguistic diversity."
Protection and Treatment of Investments
1. Each of the Contracting Parties undertakes to ensure, within its territory and its maritime zone, a fair and equitable treatment, in accordance with principles of International Law, of investments made by investors of the other Contracting Party and shall ensure that the exercise of their recognized rights shall not be impeded either in law or in practice.
2. Each of the Contracting Parties shall grant, within its territory and maritime zone, to investors of the other Contracting Party a treatment no less favourable than it would grant its own investors or treatment granted to investors of the Most Favoured Nation, if the latter is more favourable, with regard to their investments and the operation, administration, maintenance, use, enjoyment or disposition of such investments.
Notwithstanding the principle of national treatment, each of the Contracting Parties may require an investor from the other Contracting Party, or a company located in its territory which is owned or controlled by said investor, to provide routine information relating to its investments for statistical purposes.
This treatment shall not, however, extend to privileges granted by a Contracting Party to investors from a third State pursuant to its participation or its association with a free trade area, a customs union, a common market or any other form of regional economic organization.
The provisions of this article shall not apply to fiscal matters.
3. Investments made by investors of one Contracting Party within the territory or the maritime zone of the other Contracting Party shall benefit from full and complete protection and security within the territory and maritime zone.
4. Each Contracting Party shall favourably examine, within the framework of its domestic law, applications for the entry and the authorization to reside, work and travel presented by nationals of a Contracting Party, pursuant to an investment made within the territory or maritime zone of the other Contracting Party."
Expropriation and Indemnification
1. Neither Contracting Party shall nationalize or expropriate directly or indirectly, or take any other measure of equivalent effect, with respect to an investment of the other Contracting Party in its territory or its maritime zone, except:
i) for reasons of public interest;
ii) provided that such measures are non-discriminatory;
iii) in accordance with due process;
iv) on payment of indemnification in accordance with the provisions ofparagraphs 2 and 3 of this Article.
2. Indemnification shall be paid without delay, shall be freely transferable and fully realizable.
3. The indemnification shall be equivalent to the fair market value or, in the absence of such value, to the actual value of the expropriated or nationalized investment immediately before the expropriation or nationalization was carried out and shall not reflect any changes in the value which arise as a result of the expropriation becoming known prior to the date of expropriation. Valuation criteria shall include going concern value, asset value including the declared tax value of tangible property and any other criteria which, in the circumstances, are appropriate to determine fair market value. The aforementioned indemnification, its amount and its mode of payment shall be fixed no later than the date of deprivation. Indemnification will be subject to interest calculated at the applicable rate until the date of payment."
"DESIRING to strengthen the ties of friendship between their nations and seeking to extend and intensify the economic relationship between the Contracting Parties, particularly with regard to the investments made by investors of one Contracting Party in the territory of the other Contracting Party;
ACKNOWLEDGING that a bilateral agreement on the promotion and protection of investments is necessary to foster economic development and stimulate the flow of capital and technology between the Contracting Parties;
WISHING to create favourable conditions for investment of investors from one Contracting Party in the territory of the other Contracting Party, in accordance with the principle of international reciprocity;"
"ARTICLE 2. Scope of Application
1. This Agreement applies to measures adopted or maintained by a Contracting Party in relation to the investors of a Contracting Party as regards its investments and the investments made by those investors in the territory of the other Contracting Party.
2. This Agreement applies to the whole territory of the Contracting Parties as defined in Article First, paragraph (6). The provisions of this Agreement shall prevail over any incompatible rule which exists in the domestic law of the Contracting Parties.
3. With regard to the provisions foreseen in Articles Fourth and Tenth, natural persons who are nationals of one Contracting Party and who are domiciled in the territory of the other Contracting Party in which the investment is located, may only avail themselves of the treatment granted by this Contracting Party to its own nationals.
4. This Agreement shall apply to all investments made before or after its entry into force, but the provisions of this Agreement shall not be applicable to any disputes, claims or differences of any kind which arose before the date of its entry into force.
5. This Agreement shall not apply to:
a. economic activities reserved to the State pursuant to the legislation of each Contracting Party;
b. measures adopted by a Contracting Party for reasons of national security or public order;
c. financial services except as authorized by the legislation of each Contracting Party.
6. Article Third shall not apply to any measure which a Contracting Party still maintains pursuant to its legislation in force at the time this Agreement enters into force. As of this date, any incompatible measure which a Contracting Party adopts shall not be more restrictive than those in place at the time this Agreement enters into force."
"ARTICLE 3. National Treatment and Most Favoured Nation Treatment
1. - Each Contracting Party shall ensure at all times a fair and equitable treatment of all investors and investments of investors of the other Contracting Party, and shall not damage the management, maintenance, use, enjoyment or disposition of their investments through arbitrary or discriminatory measures.
2. - Each Contracting Party, after admitting in its territory investments from investors of the other Contracting Party, shall provide full legal protection to those investors and their investments and shall grant them a treatment no less favourable than that granted to investors and investments of its own investors or investors from third States.
3. - If a Contracting Party grants special treatment to investors or investments of investors coming from a third State, as a result of agreements containing provisions to avoid double taxation, create free trade areas, customs unions, common markets, regional agreements, economic or monetary unions or other similar institutions, that Contracting Party shall not be obliged to grant such treatment to investors or investments of investors of the other Contracting Party.
4.- Each Contracting Party shall grant the investors of the other Contracting Party, in respect of investments which suffer losses in their territory due to armed conflicts, a state of national emergency or insurrection, no less favourable treatment than that granted to its own investors or to investors of a third State, with regard to restitution, indemnification, compensation or other redress"
"ARTICLE 5. Expropriation and Indemnification
1. - Neither of the Contracting Parties may nationalize or expropriate, either directly or indirectly, an investment of an investor of the other Contracting Party in its territory or adopt any measures equivalent to the expropriation or nationalization of that investment, except:
a) for reasons of public utility;
b) on a non-discriminatory basis;
c) in accordance with due process; and
d) with indemnification, pursuant to paragraphs (2) through (4).
2. - The indemnification shall be equivalent to the market value of the expropriated investment immediately before the expropriatory measure was implemented ("date of expropriation") or before the expropriatory measure was made public. The valuation criteria shall include current value, declared tax value of tangible goods, and other criteria that are appropriate to determine market value.
3. - Indemnification shall be paid without delay, fully realizable and freely transferable.
4. - The amount paid shall be no less than the equivalent amount which would have been paid as indemnification on the date of expropriation in a freely-convertible currency on the international financial market, that currency having been converted to the standard market quotation on the date of valuation, plus interest corresponding to a reasonable commercial rate for that currency until the date ofpayment"
• To establish the rules to which the reception, storage and transmission of the Registry’s information should be subject and, in general, the operation, functioning and administration of the public service it provides;
• To operate and, as the case may be, to concession and regulate the Registry’s operation;
• To enter into coordination agreements with the state and Federal District governments, in order to facilitate the Registry’s coverage, to try to achieve its proper functioning and effect the exchange of information;
• To collaborate with the National System of Public Security for the fulfillment of its objectives; and
• To verify the compliance with this law, and if applicable, to penalize infractions of the same.1
"Article 16. The Secretariat may grant one or more concessions for the provision of the public service of the Register, to those who meet the following requirements:
I. Being a corporation with variable capital incorporated under Mexican laws.
II. Having a corporate capital without right to withdraw and paid in full, and that cannot be less than that set by the Secretariat, and
III. Demonstrate its technical, administrative andfinancial capacity.
Foreign investment may participate up to no more than 49% of the concessionaire’s capital stock. A favourable resolution from the National Commission of Foreign Investment is required for foreign investors to participate in a higher percentage. "
Accordingly, the concessionaire had to be a Mexican entity; and if there were to be any foreign interest, the foreign investor would have to invest in that Mexican entity.
"Article 25. In case of any imminent peril for the national security, the country’s peace or the national economy, the Secretariat may request the operations centre and other facilities, immovable or movable goods and equipment used for the Registry’s operation. The Secretariat shall be equally entitled to use the staff working for the operating companies whenever it deems it necessary. The requisition shall last as long as the conditions that prompted it subsist. "
|Completeness||That includes all the possible sources of creation, destruction and modification of the legal status of vehicles|
|Binding nature||That assures the maximum coverage and usefulness of the information|
|National coverage||That attains the necessary centralization of the information to meet national problems That improves the safety of the register by controlling only one database|
|Public access||That provides information to the agents participating in the automobile markets -including individuals - financial and insurance agents, to promote its better operation|
|Automated||That shall be designed taking advantage of the available equipment and communication technology, which shall allow to rely on updated information|
Shareholder % Ownership Series
Gemplus Industrial 20% "C"
Talsud, S.A. 29% "B"
Henry Davis Signoret 51% "A"
(Mr Henry Davis subsequently transferred his shares to a Mexican company owned and controlled by his family, Aplicaciones Informáticas S.A. de C.V., with the Secretariat’s approval).
"I. Registration - Which shall consist in the incorporation of Vehicles to the Registry’s control through the issuance of the Proof of Registration.
II. Notices of Change of Status - Which shall consist in the updating of the Information on the vehicle and the Owner’s Personal Data.
III. Constitution and removal of Lien - Which shall consist in the registration and elimination of registration of any lien on the Vehicle.
IV. First Hand Sale - The Registration Service granted to Distributors.
V. Consultation - Which shall permit Users to consult certain information on a specific Vehicle identified by its Registration number.
VI. Physical Revision - Which shall enable Users or Owners to request the Concessionaire to verify Vehicle characteristics, and for the latter to issue a report on the Vehicle’s status at the time of the inspection.
VII. Exceptional Services - The following shall be considered as Exceptional Services:
a. The replacement of the Proof of Registration and, if appropriate, of the Confidential Code;
b. The reactivation of a previous procedure;
c. The correction of mistakes;
d. The reactivation of an acknowledgement of receipt or a number of Proof of Registration that has been reported;
e. The authorization of procedures based on a final judicial ruling; and
f. Any other specifically contemplated by the Operation Manual.
VIII. Services for Registered Users - The following:-
a. User’s Registration - Which shall consist in the creation of a directory of Registered Users, and their permission to access the Database;
b. Changes in the registration parameters - Which shall consist of the procedure to modify the data or conditions under which the Registered User was registered in the Registry;
c. Report - The Concessionaire shall send a monthly account statement to the Registered Users with information on the transactions carried out before the Registry, the charges generated as a consequence thereof, and the current balance of the account;
d. Receipt of payments - The Concessionaire shall put in place processes and procedures to receive periodic payments of the prices from the Registered Users; and
e. Administration of the Authentication Codes.
"The Concessionaire shall have the following rights:
1. To charge the price, which will be published in the Official Gazette of the Federation for the provision of the Services;
2. To request the Secretariat to revise the prices charged for the Services pursuant to the terms and conditions established by the General Guidelines and the Operation Manual.
3. In case the Registry’s start-up is postponed or its structure is changed due to a decision taken by the Secretariat, the Concessionaire will be able to submit to the Secretariat’s consideration an adjustment to the program of commitments established in the Operation Manual; the Secretariat shall have absolute discretion to make said adjustments, and shall respond within 30 calendar days at the latest following receipt of the Concessionaire’s application;
4. To exploit the information of the Registry’s Database in accordance with the Contract of Construction by Commission and the License Agreement entered into on this same date by the Secretariat and the Concessionaire;
5. In the event that the Registry’s start-up is postponed, its structure is changed, or the terms and conditions under which the winner of the bid submitted its Technical and Economic Bid are directly or indirectly altered, for reasons not attributable to the Concessionaire, it may submit for the Secretariat’s consideration the modification of its obligations established in this Title of Concession, or in any other provision issued by the competent authority. The Secretariat shall evaluate and, if appropriate, proceed to make the proposed modifications, seeking at all times to maintain the same correlation between the Concessionaire’s rights and obligations existing at the time this Title of Concession is granted.
6. To participate with the Secretariat in the definition of the terms of the Coordination Agreements that it enters into with several entities of the Federal and State Public Administration, as well as of the International Treaties and inter-institutional Agreements with regard to the information exchange with other countries.
The Concessionaire shall have the following obligations:
1. To provide the Services in accordance with the applicable legal framework;
2. To notify immediately the Secretariat of any suspension in the provision of any of the Services;
3. To have, directly or indirectly, at least the required minimum infrastructure;
4. To grant and update the guarantees securing the fulfillment of all its obligations under the applicable legal framework.
5. Not to assign, encumber, transfer or in any way dispose of the concession or rights derived therefrom, except with the Secretariat’s prior and written authorization;
6. To guarantee the security of the information contained in the Registry, in accordance with the terms and conditions established by the applicable legal frame;
7. To comply with the provisions of the Coordination Agreements to be entered into with several entities of the Federal and State Public Administrations; as well as of the agreements with respect to the exchange of information with entities of other countries.
8. To comply with the service quality levels established in this Title of Concession, the Operation Manual, and the General Guidelines;
9. To comply with the promotional and coordination of other sources of information requirements contemplated in the Operation Manual and the General Guidelines;
10. To make timeously the payment established in this Title of Concession;
11. To allow the Secretariat access to its facilities to oversee and verify compliance with the applicable legal framework, as well as to provide the necessary conditions that will allow it to verify and perform informatics, operations and results audits by the authorities, as well as the special ones that might be necessary;
12. To submit to the Secretariat’s approval the modifications to its articles of incorporation and by-laws; including, without limitation, any change to its capital structure;
13. To obey final judicial rulings in accordance with the procedure described in the Operation Manual;
14. To comply with the Calendar of activities hereto attached as Exhibit "13 "; and
15. Others that are established in the applicable legal framework. "
"The Concession shall terminate, be revoked by the Secretariat or be subject to requisition by it, pursuant to the terms and conditions established in the Law.
If, for any reason or event of a political or social nature at the federal level, the Registry’s operations start-up is prevented, the Secretariat, at the Concessionaire’s request, shall take the necessary steps before the Secretariat of the Treasury and Public Credit for the prompt refund of the payment made by the Concessionaire, providing that the term does not exceed sixty (60) calendar days following the acknowledgement of said event or cause by the Secretariat with the understanding, however, that there will be no reimbursement of the expenses incurred by the Secretariat by reason of the grant of the concession the subject-matter thereof.
In case the Registry cannot operate at the level of certain states or municipalities for reasons not attributable to the Concessionaire, the latter shall be freed from its responsibilities in connection with said state or municipality, and therefore, from paying any conventional penalty to the Secretariat. "
"Pursuant to the provisions of Article 17 of the Act this Concession shall be in force for a term of ten (10) years, to be counted as of the date of signature of the document. The Concession may be prorogated at the Secretariat’s discretion, up to for a term equal to the one originally established, provided that the Concessionaire has complied with the conditions foreseen in the Concession and requests it not later than three (3) years before its conclusion. "
The "date of signature" was 15 September 1999; and accordingly the Concession was to expire on 14 September 2009 or, if all the specified conditions were met as to compliance, notice and the exercise of the Secretariat’s discretion, up to 14 September 2019.
"Any dispute which arises in connection with the interpretation, execution, or compliance with the provisions of the same, shall be submitted to the competent federal courts located in Mexico, Federal District. "
|Service||Maximum fee (MXN $P)|
|Registration of First Hand Sales||$375|
|Registration of Second Hand Sales||$100|
|Inquiries/Confirmation of Vehicular Information||$25|
"FIRST ITEM: In relation to the first item of the Agenda, the Chairman informed those present that to this date, the Company has been financing itself solely on the basis of cash flow, and as a consequence, the Company has stopped paying some of its suppliers because the actual cash flow is not sufficient given the level of the Company’s costs.
Consequently, the Chairman stated that it was necessary to increase the capital of the Company and proposed the Board of Directors to present to the shareholders of the Company a request to increase the capital of the Company in the amount of P$10,000,000 (Ten Million Pesos National Currency). After an extensive discussion of this matter, the Chairman requested those present to take a resolution in this respect.
1. It was approved by unanimous decision of those present that the shareholders be presented with a request to increase the capital to the Company in the amount of P$10,000,000 (Ten Million Pesos National Currency).
2. It was approved that if necessary, once the contribution of capital referred to above had been made, Banco Invex, SA. will be requested to provide an additional amount of P$10,000,000 (Ten Million Pesos National Currency) under the line of credit contracted with said financial institution.
SECOND ITEM: In relation to the second item on the Agenda, the Chairman informed those present that to date, the Board had not received information pertinent to the technical processes and the structure of the systems of the Company having doubts over its functioning, and consequently, he proposed that a technical audit be conducted by a company with recognized prestige, which shall review and evaluate the technical processes, the structure of the systems database, and any questions in relation to informatics, systems, administration and the technical areas of the Company.
‘1. The conduct of a technical audit of the Company is approved.
2. The company that will conduct said audit will be designated in the next few days by Mr Henry Davis Signoret, Chairman of the Board of Directors. "’
"SIXTH ITEM: In discussion of the Sixth Item of the Agenda, the Chairman [Mr Henry Davis Signoret] commented to those present that the presence of Mr Victor Taiariol as Commercial Director of the Company was not entirely favourable for either the internal or external image of the Company, and it made the accountability and the evaluation of his performance more difficult, since Mr Taiariol is also a Principal Member of the Board of Directors. To this, Mr Taiariol tendered his resignation as Commercial Director of the Company. The Chairman requested those present to evaluate Messrs. Domenico Suave or Slim Masmoudi as possible candidates to hold the position of Commercial Director of the Company. The Chairman asked those present if they wish to make a decision in that respect, and after ample discussion, the following was unanimously agreed:
‘1. The resignation of Mr Victor Taiariol from the position of Commercial Director of the Company is accepted with effect as of today, thanking him for his efforts during the time that he held this position. ’[...]"
"2. Mr Guillermo Bilbao made a presentation on the financial, administrative and human resources situation of the Company. The most relevant points were the following:
• There is an important delay in the preparation of the Financial Statements and consequently it is not possible to reconcile, completely, the income of the Company vs. the operations.
• There are some claims for delays in payments to the CTDs [Document Processing Centers]. It was agreed to develop an easy process to notify the CTDs of the receipt of the corresponding invoices so that both parties are aware of the date in which the 15 day period to effect payment begins to run.
• The total revenues of the Company to date are 67.4 Million Pesos.
• It is necessary to identify which operations correspond to used automobiles and which correspond to new autos because that affects the "floating" of the Company.
• As regards to the loan with INVEX, it was proposed to GE Capital Bank to establish bridging accounts with the banks to concentrate the revenue. In that respect, Banorte and Banamex have not responded although the other banks have.
• The works for the security systems for the offices of the Company are hoped to be finished in about 3 weeks.
"I Situation of the Line of Credit issued by Banco Invex, SA. ("INVEX") to the Company.
The Chairman [Mr Davis] reported to those present on INVEX’s concerns regarding the political situation which confronts the Company at the present moment and consequently, its financial situation to face its payment obligations in relation to the Line of Credit granted by INVEX.
II. Guarantees granted by the shareholders of the Company under contracts with suppliers entered into by the Company.
The Chairman indicated that to date, there are inconsistencies in the guarantees and/or guarantors granted by the shareholders of the Company (the "Shareholders") in favour of the same Company. In this respect, the Chairman requested the General Director [Mr Ricardo Cavallo] to prepare a list of the pending payment obligations for the Company pointing out which are guaranteed by the Shareholders and in what proportions, with the objective of evaluating the situation in detail and reorganizing the issuance of the guarantees and/or guarantors by the Shareholders in order for the three Shareholders to guarantee the total amount of said obligations in the same proportions as their participation in the shareholding capital of the Company.
At the same time, the Chairman stated that once the study of the pending payment obligations of the Company has been completed, they should contemplate the possibility of requesting the Shareholders to increase the capital stock of the Company in order to be able to face said obligations. [...]
VI. Legal situation of the Company in relation to the Concession for the Operation of the Public Service of Operating the National Vehicle Registry and the Contract signed with SECO FI: position of the Company and defense of the Amparos brought against the Act and SECOFI.
8 Amparos have been brought, of which only in four cases does the Company appear as an affected third party. A firm of lawyers has been retained to oversee the cases against the Company, SECOFI and the law [the Act].
VIII. Plans and measure for modifying the political opposition to the project.
• The General Director [Mr Cavallo] will be requested to request the Public Relations area to make a presentation to the Board.
• Each Director of each area shall make a presentation of 10 minutes to the Board in each Session, starting with the next Meeting of the Board. The General Director was requested to inform the directors in this respect.
• The General Director and Mr Bertrand Moussel will coordinate to inform the Board on the possibility of using a simpler smart card.
• A meeting was held with Advantage on the past 14 August 2000, at which it was agreed that Advantage would begin production to reach 5MM overlays by the end of the year. However, it was warned that it would be informed of the project’s status by 15 September 2000 as to the situation of the project and the decision to continue or not with the production of the overlays. "
"III. Legal Actions
It was agreed by the Board that, with the opinion and assistance of the Legal Direction of the Company and the external lawyers, the possibility of bringing legal actions against SECOFI and/or before the competent tribunals will be evaluated in order to protect the interests of the Company and the patrimony of its shareholders.
VII. Obligations under the Title Concession [the Concession Agreement] :
• It was evident that in accordance with the decrees published in the Official Gazette of the Federation on 29 August 2000 and 13 September 2000, SECOFI ordered a technical intervention and subsequently an administrative intervention into the company.
• Those present recognized that as long as the Concession is not revoked in strict compliance with the applicable legal provisions, the Company, inasmuch as is possible and insofar as the intervention allows, will continue to comply with its obligations under the Title of Concession. "
(The Tribunal describes these Technical and Administrative Interventions below).
"Based on the audit ordered by the Board as requested by the General Director appointed after 25 August 2000 [Mr Bilbao], which was conducted by the accounting firm of Deloitte Touche, which was discussed in this meeting, it was determined that in said administration there were important deficiencies in the execution and control of different aspects that affected the adequate and efficient operation of the company. In particular the lack of order and administrative controls and certain irregularities in the exercise of the powers of certain officers with responsibility for the management of the company were underscored. It was pointed out that the General Director [Mr Carvallo] did not timely and adequately present the information regarding the Company’s business, the financial situation of the same, nor the problems and deficiencies derived from the contracts with the principal suppliers of goods and services to the Company. It was also mentioned that, under that administration, the administrative, accounting and information systems, necessary for the adequate functioning of the Company, were not implemented, and that the General Director omitted to inform the Board of the problems that were faced in their implementation. "
"Pursuant to our discussion during our last meeting and pursuant to Condition Fifth of the Title of Concession of the public service of operating the National Vehicle Registry, I submit to the Secretariat’s consideration the advisability of defining the maximum price that the Document Processing Centers [CTDs] will be able to charge for the procedures contemplated in the Agreement published in the Official Gazette on 20 June 2000.
The foregoing, in view of the unfavourable comments caused by said fees and protests by the users and the media who believe that a charge in excess of 300% of the maximum fee charged by the Operator of the Registry is unjustified.
In addition and notwithstanding the publicity campaign that has been effected, there is a lot of confusion at a national level among the users of the National Vehicle Registry due to the diversity in said commissions.
It should be noted that this measure may generate dissatisfaction among the Document Processing Centers, and hence, a reduction in the coverage, as well as claims for compensation by users who have already paid the current fee. "
"The information published by the media in respect of Mr Ricardo Miguel Cavallo, Director of the National Vehicle Registry, has increased the concerns and preoccupations that I previously conveyed to you with respect to the legal uncertainty that can be generated for the citizens by leaving the operation of the Registry in the hands of a private party.
As you already know, the Permanent Commission of Congress approved on the 29th [July], an agreement by which it proposed to revise the law to eliminate the fee for registration at the National Vehicle Registry and eliminate the possibility of tendering it to private parties.
For that reason, I respectfully request that all the necessary measures are taken to suspend application of the Registry in the Federal District and to reimburse the citizens that have already registered, the total amount paid for this concept as a provisional measure, while we await a decision by Congress. "
On the materials adduced in these proceedings, it can be reasonably assumed that the media in Mexico City had received information on Mr Cavallo from sources close to Mayor Robles: the timing of her letter and the media reports was therefore no coincidence.
"Well, my contact with the Cavallo case came about through a long-time friend, who gave me his observation about Cavallo and sent me information about the background of this individual, who to us, at the time, was totally unknown because he appeared on the Mexican scene as a concessionaire who won a call for him to manage a National System for Vehicle Registration.
This, even though it is not the main topic, is for us Mexicans an important one because, at that time, a serious discussion between the Government of the National [Federal] District and the Federal Government precisely about the establishment of the vehicle registration system was occurring.
And precisely what drew attention to its connection with Cavallo, it has to be said, is that, Cavallo, being Argentine and apparently owner of a concessionaire company, it had been brought to our attention that he had a criminal background and also a background in political repression in Argentina.
Immediately, this appeared very important to us. We received lots of information about the case, such as Cavallo’s aliases and origin in terms of military hierarchy. Additionally we learned about the businesses that he had set up in the Republic of Argentina from his participation in the repression. This, in Mexico immediately drew attention, well it drew my attention.
I was in Mexico, the holder of this information and I immediately discussed it with my boss at that time, [Mayor] Rosario Robles. We also discussed it once during a cabinet meeting; I submitted the information and introduced the topic. And for us, this had a double path: on the one hand, we are talking about someone who apparently had participated in the repression in Argentina, but on the other hand, we are also talking about a person representing a project with which we were not in agreement in Mexico, in terms of vehicle registration.
So, then, it was discussed and analyzed and I made the information available to the head of government [of the Federal District], and well, after a time of evaluating the information, we decided that we had to handle the information not through the government, but through a communication medium. "
This is politics, in Mexico as elsewhere. It was a political attack by the Mayor of the Federal District on the Federal Government and on the Secretariat in particular. It was hardly attractive as a form of good public administration. Yet by itself, the conduct of the Federal District’s Government was not a breach by Mexico of international law or of the two BITs here at issue. (The Tribunal considers its broader implications below).
"Ricardo Miguel Cavallo, director of the National Vehicle Registry in Mexico, was identified yesterday [sic] in a photograph by five Argentinean former political prisoners as the person who tortured them in the Mechanics School of the Argentinean Navy (ESMA), during the military dictatorship between 1976 and 1983.
The evidence also points to businessman Ricardo Miguel Cavallo as the alleged former military man and Argentinean torturer then known as Miguel Angel Cavallo now accused in Spain of auto theft, document forgery, terrorism, and torture by Judge Baltazar Garzón.
Paradoxically, Cavallo is a director at Talsud, which together with the companies Aplicaciones Informáticas, S.A. [Mr Davis’ company] and Gemplus Industrial, S.A. incorporated Renave [the Concessionaire], which was created by Mexican authorities to try to thwart auto theft and document forgery.
Although the accused denies being the person accused, an investigation by Grupo Reforma based on the testimony of former Argentinean political prisoners, an identity study performed by an expert and confidential information belie his statement..."
"Renave partners desert Mexico
Representatives of the Argentinean company Talsud leave Cavallo behind. Gemplus criticizes the absence and announces a lawsuit if irregularities are confirmed.
The principal executives of the Argentinean company Talsud, one of the three firms that were granted control of the National Vehicle Registry (Renave), deserted Mexico and left Ricardo Miguel Cavallo, the partner facing extradition, by himself.
The president of Talsud, Mr Taiariol, is in San Salvador. He said he went there to "show his face " at the scandal caused by the Cavallo case with its partners in that country.
In a telephone interview from El Salvador, Taiariol commented that he did not leave Mexico to escape justice, but to be "where I am most needed".
"Due to this situation, the problems that initiated in Mexico, I am facing consequences not only in El Salvador, but also in Argentina, and other places where we directly or indirectly operate, and hence, at every moment, I will have to be where I am most needed, " said Taiariol.
"According to Taiariol, both Davis and executives from Gemplus, which is a minority shareholder in the concessionaire, were notified of his trip to Central America.
The Argentinean denied any support for Cavallo, who is responsible for the scandal. "He will have to defend himself at a personal level, " he insisted.
On the other hand, Gemplus, through its legal representative, Eduardo Salgado, said it was disappointed andfelt defrauded in its association with Talsud. "
"Pursuant to article 34 subsection XXX of the Federal Public Administration Law; 16 subsections II and VIII, 50, 62, 63, 64, 65, 66, 67, 68 and 69 of the Federal Administrative Proceedings Law; 3 subsection VII of the Law of the National Vehicle Registry and; 59 subsection III and 60 subsection II of its Regulations, a Verification Visit is issued under the following terms:
Allow access to the National Vehicle Registry’s Computing Centre located in the facilities of Hewlett Packard, located in Prolongacion Reforma # 700 in Lomas de Santa Fe, zip code 01210 in Mexico City...
The inspection will start at 19:00 hours on 24 August 2000 and will last as long as it takes to complete these objectives... "
The eventual outcome of these audits and inspection was reassuring to the Secretariat, confirming that the confidentiality of information held by the Concessionaire had not been breached from the Registry’s start-up onwards, such that no-one would have been able to make improper use of the database's information. However, this did not suffice to calm public concerns within Mexico.
That the operation of the National Vehicle Registry is a public service whose purpose is the identification of vehicles manufactured, assembled, imported or circulating in the national territory, as well as providing the service of information to the public;
That this system of vehicle identification in all the country contributes to the legal security of the legitimate owners of vehicles and discourages the theft of the same;
That the current legal status of the former director of the concessionaire referenced, due to the presumption of responsibility for illegal acts imported to it, has generated uncertainty among the users of the service and the public in general with respect to the confidentiality of the information contained in the database that is necessary to provide the service;
That this secretariat may use the [provision] in the second paragraph of Article 25 of the Law of the National Vehicle Registry [cited earlier in this Part IV of the Award, at Paragraph 4-28 above], to intervene in the administration of the public service, in any circumstance which prevents the concessionaire from maintaining the optimal operation of the service, and due to these circumstances, it is imperative and urgent to take immediate measures, therefore I have decided to issue the following:
DECREE WHICH DECLARES THE INTERVENTION OF THE PUBLIC SERVICE OF THE NA TIONAL REGISTRY OF VEHICLES
ARTICLE l.-The Federal Government, through the Secretariat of Commerce and Industrial Development, declares the intervention of the public service of operation of the National Vehicle Registry.
ARTICLE 2.-The Federal Government, through the Secretariat of Commerce and Industrial Development, shall appoint a technical intervener who shall exercise the powers necessary to guarantee the integrity and confidentiality of the information contained in said registry.
ARTICLE 3.-Concesionaria RENAVE, S.A. de C.V. [the Concessionaire] shall grant the intervener all powers necessary for the fulfillment of its objectives, in accordance with all powers of Article 20, numeral X, of the Law of the National Vehicle Registry.
ARTICLE 4.-The Secretariat shall decide when this intervention shall cease, after the evaluation of the conditions which motivated it. "
Within the Secretariat, the individual officer responsible for this decree was the Secretary, Dr Blanco, to whose testimony the Tribunal returns below. It is to be noted that this decree was not based on any "imminent peril for the national security" under the first part of Article 25 of the Act.
• "[...] Currently, there is a place in the company Hewlett Packard where the central computers and official databases of RENAVE function. Additionally, there is an installation and equipment for disaster recovery in the Concessionaire’s building, however, due to its function and to the capacity of this equipment, the latter does not meet the need and convenience of having a "mirror" installation which should be located outside and far from HP.
Due to the increasing importance of this data base at the national level and due to the circumstances such as that diverse private organizations operationally intervene in the process of vehicle registration; it is necessary and convenient to design and build a mirror centre in SECOFI. The mirror centre should not be conceived as a non-operating centre, a "dark room" with a terminal that monitors the network and periodical controlled updates. The mirror centre of SECOFI should have terminals that are connected with the workflow system that allows monitoring the operation of each of the actors of the systems of the company and of the databases that are not completely linked. In this way it could be publicly confirmed that the database is secure with the redundancy and with the controlled updating in the Public Sector premises.
• The company Keon of Mexico, as part of a network of companies that make up the RENA VE system, has as a main duty to make the final review of the documentation submitted by the individual that requests the registration; likewise to capture the information of the owners and the vehicles; verify them internally and "scan" the copies of documents received in order to build a database that will permit the verification of the precision of the content of a database of RENAVE.
• During the visit of 1st September  it was observed that the system’s operation of said organization was completely interrupted from 30th [August,] supposedly by failures in the Informix database; simultaneously due to that same failure and a failure in one of the two Scanners, the scanning was also interrupted. To date the system is still not working and since yesterday, the technical personnel continue to try to re-establish the operation or obtain a backup to be operated at IBM.
The data obtained and the facts witnessed have led us to verify on one side, the importance of this process for the company and on the other side, the great vulnerability of the same...."
"In order to confirm the assessments expressed to you and to Mr Raul Ramos during our meeting on the 5th [September], and due to the first review of the two main databases that provide the fundamental support for the functioning of the RENAVE database; we have observed that in their real actual operative conditions, they are unable to satisfy the needs of the service offered to individuals and companies who own used vehicles.
Given the conditions of the system’s operation and the situation of nonconformity expressed in the media and in the Chamber of Deputies, it is advisable to redefine the strategy to implant [sic] the system to continue only with the registration of new vehicles and federal public transport, during the time that is necessary in order to secure that the other data bases can be in conditions to provide the updated, sufficient and appropriate information to the service offered by RENAVE...
Further to the letter submitted to you on the 5th of this month, the cause of the failure in the computing equipment and the backup tapes that Keon Mexico has in order to attend to RENAVE’s service, which occurred on the 30th of last month, has not been identified or corrected. Therefore, its operation has not been reestablished, as a result of which twelve days have passed without the processing of any of the registration requests.
Regarding our recommendation to establish in SECOFI, a "mirror installation" in which the database of RENAVE users is updated continuously; I inform you that the proposal by Hewlett Packard has been submitted to Ing. Luis Young which contains two options which could satisfy the needs that were raised. It is convenient for the General Directorate of RENAVE in SECOFI to carefully analyze these or other options in view of the actual circumstances, and to determine the best solution for SECOFI to have the effective control of the public database of Renave. Pursuant to article 5 of the Law, "The database remained exclusive property of the Federal Government... "; measures suggested could further guarantee the control and security of said database. "
"... Iam a clean man. Iam an honest man. I have always been one. I have never unduly benefited from office. My life is an open book in which there is nothing to hide.
The bid for the concession of the National Vehicle Registry was carried out fully consistent with the law and with complete transparency. The audits that are about to be made undoubtedly will show that. I have no doubts about that. Moreover, the operation of the Concessionaire has been professional and clean and the operative difficulties that it faced can be explained by the fact that the administrative unit under my charge has been unable to provide certain necessary operation criterion rules in a timely manner.
We did not do so because we were overwhelmed with work. For that reason alone, there is no plot or conspiracy to make the National Vehicle Registry an instrument to perform criminal acts, there never was, on the contrary, we made a serious and professional effort to comply with our duties despite the increasingly difficult conditions, created by the media, which insisted on making us look like true criminals...."
That the Law of the National Vehicle Registry establishes that the Registry shall have a database, integrated with information about each vehicle provided by the authorities, manufacturers, assemblers, commercial entities, insurers, individuals or any other source;
That the Law of the National Vehicle Registry and its Regulation provide that the obligation to register vehicles in circulation before the National Vehicle Registry and the obligation to provide the notifications set out in the said regulations shall be completed according to the calendar that shall be published by the Secretariat of Commerce and Industrial Development for such purpose;
That on 28 April 2000, the Agreement, which sets out the calendar of registration and notification obligations to register before the National Registry of Vehicles by establishing dates for the compliance of the obligations derived from the Law of the National Vehicle Registry in its pilot phase for the states of Hidalgo and San Luis Potosí, as well as the calendar for the fulfillment of the obligations which derive from the same law and its regulation in its national phase in respect to new vehicles, was published in the Official Gazette of the Federation.
That on 8 June of the present year, the Agreement, which sets out the calendar of registration and notification obligations before the National Registry of Vehicles in its national phase, with the purpose that the individuals that are bound by the Law of the National Vehicle Registry and the Regulation submit the notifications and register vehicles in circulation which are referred to in the ordinances, was published in the Official Gazette of the Federation.
That in order to achieve the well-functioning and coverage of the National Registry of Vehicles, suspension of the obligation to register vehicles in circulation has been considered while the execution of coordination agreements with the federative entities is concluded so that the information contained in the vehicle lists of the federative entities and of the Federal District can be relied on and the cost to the individual can be removed;
That auto theft mainly affects recent vehicle models, and in order to prevent andfight this offence, it is considered imperative to give continuity to the public service of the Registry in relation to new vehicles. As provided by article two of the Agreement which sets out the calendar of obligations to register and give notice to the National Vehicle Registry, published on 28 April 2000 in the Official Gazette of the Federation, I have decided to issue the following:
DECREE THAT REVOKES ARTICLE ONE OF THE AGREEMENT WHICH SETS OUT THE CALENDAR OF THE OBLIGATIONS TO REGISTER AND GIVE NOTICE TO THE NATIONAL VEHICLE REGISTRY AND REVOKES THE AGREEMENT WHICH SETS OUT THE CALENDAR OF THE OBLIGATIONS TO REGISTER AND GIVE NOTICE TO THE NATIONAL VEHICLE REGISTRY IN ITS NATIONAL PHASE. "
That with the aim of urgently confronting a situation which has generated uncertainty among the users of the service and the public in general, in relation to the confidentiality of information contained in the database of the National Vehicle Registry, the Secretariat has published a decree ordering the technical intervention of the public service of the said Registry in the Official Gazette of the Federation.
That it is of great importance to address the concerns generated by the functioning of the concession of the public service as to the operation of the National Vehicle Registry, which led to the cessation of the registration of used vehicles; and
That the foregoing lets us conclude that circumstances subsist which prevent the concessionaire from maintaining the optimal operation of the service. Therefore, the Secretariat is authorized to intervene, not only in the technical aspects in relation to the integrity and confidentiality of the Registry’s database, but also to intervene in the administration of the concessionaire, as a precautionary and necessary measure. That will enable supervision of its functioning. Due to the extraordinary circumstances which have arisen, I have decided to issue the following:
DECREE WHICH DECLARES THE ADMINISTRATIVE INTERVENTION OF THE PUBLIC SERVICE OF THE NATIONAL REGISTRY OF VEHICLES
ARTICLE 1. The Federal Government, through the Secretariat of Commerce and Industrial Development, declares the administrative intervention of the public service of operation of the National Vehicle Registry in all the national territory.
ARTICLE 2. The Federal Government, through the Secretariat of Commerce and Industrial Development, shall appoint an administrative intervener, as well as other persons who may be required to perform his duties.
The administrative intervener, with the purpose of maintaining the optimal operation of the public service:
I.- Shall hold the office of intervener with the authorities and powers inherent to the general director.
II.- Shall take administrative and operative control.
III.- Shall answer to the Secretary and shall inform him periodically about the development of the intervention.
IV.- Shall exercise the necessary authority to guarantee the integrity and confidentiality of information contained in the Registry.
V.- Shall take all other actions which the Secretary authorizes.
ARTICLE 3. Concesionaria RENAVE, S.A. de C.V. shall grant the intervener all the necessary powers for the achievement of its objectives in accordance with article 20, numeral X of the Law of the National Vehicle Registry and the provisions established in the twelfth condition, paragraph 15 of the Title of Concession.
ARTICLE 4. The Secretary shall decide when this intervention shall cease, after evaluating the conditions which gave rise to it. "
Within the Secretariat, the individual officer responsible for these two decrees of 15 September 2000 was again Dr Blanco (as with the earlier decree of 29 August 2000). It is to be noted that neither of these two decrees was based on any "imminent peril for the national security" under the first part of Article 25 of the Act (cited above). It was not intended that the suspension of the legal obligation to register used vehicles should be permanent; and this administrative intervention was to be temporary: see Article 4 of the second decree above.
The evaluation reveals a wide variety of insecure conditions in the vehicle registration service of information security operations as well as express and implied suggestions for the correction of these conditions. The analysis was centred on the three main nodes located at the premises of Hewlett Packard Mexico, Keon de México, and of Concesionaria Renave itself. It covered the equipment, applications, operating systems, databases, measures to protect the physical and logical aspects of the operations, processing, accesses, teleprocessing, information integrity, etc.
Within the overall scope of the study, and the different levels of impact, importance and significance that the inadequate security conditions encountered may have, which are directly related to the security levels specified in the "prospectus" and the bid terms on which this service is based, below is a summary of the most significant:
• "The security specification of the equipment, components, databases, and operating systems must be at least B2. " (page 124 of the prospectus). The technical evaluation verified that the B2 security level is not reached at any of the computing nodes in the concessionary’s network, not even at the main node located at HP Mexico. [...]
• As a corollary to the above and in accordance with your instructions to "evaluate the operation of the company to determine possible grounds for termination of the concession ", the conclusion to be drawn is that it has been demonstrated that the points mentioned constitute clear grounds for terminating the concession. Assuming the possibility that the concession might be revoked, I consider that it is essential to:
o Determine and prepare all the technical, administrative, legal, and media necessary activities.
o Define a new "prospectus " in which the Renave’s operating process is redesigned and resized to include only new vehicles (May 2000 and later) and changes of ownership of the same, as well as miscellaneous appropriate notices established provided for in the prospectus....
REGISTRATION CARDS FOR USED VEHICLES. About 200,000 applications for registration with different dates of origin are currently being processed. In accordance with regulations, within three months of the receipt of an application a registration card should be issued or an explanation given as to why a card has not been issued. Given the very few cooperation agreements with the States and the incompleteness of the information contained in the federal databases (SAT and SNSP), the resumption of the used vehicle registration service will translate into the necessity of informing the people who submitted an application the reasons why they will not receive their card, or if the cards are delivered, of the restrictions attached to them because it will not have been possible to make full checks of their conditions in the databases. The sensitive nature of this matter warrants the definition by SECOFI of an appropriate strategy in order to prevent dissatisfaction and further inconvenience. If deemed necessary, this issue should be jointly agreed beforehand with the appropriate authorities and appropriate social representatives. If the service is definitely to be discontinued, the source of the money to be refunded to the owners of the used cars shall need to be determined, as well as the cost of this refund and proceed in the short-term to publish the procedure for paying the people who have claimed refunds. The total amount involved is estimated between 8 million and 12 million pesos, and that the cooperation of the competent authorities will be necessary to authorize the deduction of this expense.
REGISTRATION CARDS FOR NEW VEHICLES. These applications continue to be processed normally. However, it is necessary to initiate a communication campaign focusing particularly on new car owners (May 2000 or later) to inform them and future purchasers of their obligations and benefits in terms of security by timely reporting changes in ownership and the transfer of the registration card and the scratch-off card to the new owner. The value and level of confidence associated with this solution would be derived from the RENAVE database without the necessity of resorting to the S.A.T. and S.N.S.P. databases. It will also be necessary gradually to replace the services provided by the CTDs and CTDCs since they are practically closed and do not offer the service anymore. It is advisable to redesign the current regulations given that the new circumstances do not correspond to it. Additionally, it will be necessary to define the legal status that Renave smart card might have. "
• "The drastic fall in the number of used-vehicle registrations and the subsequent suspension of the obligation to register them caused several problems in the service contractual relationship with Keon de Mexico S.A. de C.V. As a result of this situation, registration was interrupted and information on almost 50% of the people who applied to register their used vehicles is missing. Furthermore, although it will not all be useful now, the physical file containing the copies of documents delivered by the applicants is in a sense being held "semi-hostage " in Keon because of the financial problems caused by the known events. One of the critical problems caused by this situation is that it is impossible to obtain the minimum information needed to correctly make refunds to almost 50% of those applicants.
Given the important public nature of this physical file, it is necessary that the Secretariat decides and orders the physical relocation of this file to the Concessionaire’s premises or to another location, in accordance with its instructions. By acting on this suggestion, we would have the security required to make the refund mentioned earlier.
• The report dated 22 November 2000 described the severe difficulties experienced and the mistakes committed by both the Concessionaire and "GemPlus", which impeded production of new-vehicle registration cards as of that date. As of today, although some progress has been made, not a single new registration card has yet been produced.
This failure is in breach of the regulation and merits an official warning from the Secretariat. [...]"
At this time, there was apparently no suggestion that the Concession might be requisitioned, revoked or terminated by the Secretariat under the Act or the Concession Agreement itself.
"SERVICES NOT A WARDED
At the express request of Mr Luis Young [of the Secretariat’s Undersecretary], the Concessionaire commenced evaluation of the degree of compliance with entry in the tax register, particularly for new vehicles. To date, talks have been held with organisations offering both finance lease and true lease arrangements. In both cases, it has been confirmed that as the vehicles are invoiced to the lessor, which therefore holds ownership, entry in the tax register is not applicable.
As regards the automobile finance companies and other non-specialised finance companies that also work in the automobile market, entry in the tax register is applicable. Of the total number of approximately 300 finance companies, only 11 are entered in the system. To date, of 466,000 new vehicles registered, only 135,000 have been entered in the tax register, a figure that is below the forecast result.
As regards this situation, four main errors are observed. 1.- An insufficient number of notifications from vehicle Distributors. 2.-Wrongful collection of the fee [...] from owners. 3.- Lack of confirmation sent to RENAVE by finance companies and 4. - Payment of the fee applicable to them.
The aforementioned errors mean that the legislation is not complied with and that significant financial losses are incurred by the company. It is estimated that to date approximately 3.5 million pesos have not been collected.
As a result of the aforementioned, the necessary instructions have been issued to reorganise and activate the required systems and procedures so that within the shortest possible period of time (March): 1° No new vehicle may be sold on credit without the corresponding tax being registered. 2° A review of the previous months will be undertaken to endeavour to recover and update the databases and corresponding charges. "
"PROGRESS IN THE DELIVERY OF REGISTRATION CARDS
As previously mentioned, this has been one of the critical problems with the Concessionaire’s operations; the procedures that have somehow delayed delivery have been reactivated; we have established controls to keep a daily track of the production process, we have sustained conversations and established schedules to comply with the commitment of the timely delivery of cards and have made strong complaints to the provider for the significant backlog, however, to this date, we have been unable to recover and it is practically in worse condition than a month ago.
From a total of approximately 420,000 registration applications received in the course of this month approximately 242,000 registrations we have delivered to the provider Gemplus, of which only 12,500 have been produced and sent to the users. The situation is still serious. Adding to the situation is the fact that the provider [Gemplus] is also an important shareholder in the Concessionaire.
Once again we are seeing a problem of management control and this indicates the urgent need to structure the MANAGEMENT CONTROL function. The company Freysinnier y Morin has already been requested to provide a proposal with a view to institutionalizing the control of all the Concessionaire’s administrative and service processes. "
"First general conclusion. This first analysis shows that the technological infrastructure does not represent the most significant account asset although it supports the entire operation; paradoxically, since it is a financially sound operation, liquidity exceeds by far the normal requirements of its activity.
On the other hand it is important to draw the Second Conclusion [...] regarding the positive Treasury changes that enable current liabilities to be covered more than enough by current assets as of these dates.
Important changes such as cancellation of the KEON service, reduction of the A VANTEL service and termination of the Tecmarketing service lead us to a third conclusion, namely, to take the necessary action for the appropriate regrouping and relocation of the several cost items and accounts so that the operating costs may be reviewed more accurately.
Fourth conclusion: The imminent termination of the concession entails studying the total financial plan in order to forecast the return once all the services which are now incipient or which have not been provided are fully expedited. "
It is to be noted that Mr Marin here refers to the "imminent termination" of the Concession. It is to be inferred that between his report of 1 February 2001 and this report of 16 April 2001, a decision was taken within the Secretariat to terminate the Concession, communicated to Mr Marin. This conclusion is confirmed by a later passage in the report of 16 April 2001 and other evidence to which the Tribunal returns below.
"Mr. Luis Young has been made aware of this matter and, in principle, it has been concluded that since there are no applicable rules clearly and specifically requiring owners of new cars to register them with RENAVE, there is no power to demand that they do so. As regards the above, I consider that our efforts in this respect will be unsuccessful since the responsibility to register is limited to the distributors or dealers that sell new cars.
We are concerned about the fact that the Federal District Government’s attitude of denial may be imitated by other entities in the Republic. "
"It is publicly known that the population is waiting for significant changes in the service and operation of the RENAVE. Likewise the Concessionaire’s personnel is concerned about its future and that of its staff. Termination of the concession is presumed and the legal way in which the service will be continued or changed remains unknown. It is acknowledged that it is wholly unlikely that the present situation will be maintainedfor a long time.
In view of such reality and my duties I wish to tell you that I assume my obligation to support the Secretariat as regards all such matters as are deemed to be necessary and for that reason I hereby request that a hearing be held so that I may receive your guidelines and thus pave the way for the future transformation of this entity.
On Tuesday 10th of this current month [i.e. 10 April 2001] I received a warning from [the General Director of the National Vehicle Registry] [...] reading as follows:
I require that in your capacity as controller of the public service of the National Vehicle Registry subordinate to this Secretariat of Finance, you limit your action to verify that Concesionaria Renave S.A. de C.V. guarantees security of the information contained in the National Vehicle Registry by observing the principles of confidentiality of the information and that you supervise Concesionaria Renave SA. de C.V. ’s management as regards the provision of the public service and inform this Secretariat of Finance of the course of supervision as established in the Agreement ...’ dated September 15th, 2000.
I am not aware of the reason for the ‘requirement ’ because this is not explained in the written notice in question. With all due respect and as you will understand I cannot accept such a requirement without a broad and satisfactory explanation thereon.
In view of the above, I request that I get a fair hearing so that I can understand the reasons for the requirement and, if pertinent, give you all the answers that may be necessary to clarify any misunderstanding regarding the difficult responsibility which has been conferred upon me.
You may be sure that I fully complied with the duties of my office. Likewise, I confirm to you that I remain at your disposal to tender my resignation to the office when circumstances may so require or when you may so decide. "
By the date of this report (16 April 2001), it is clear that active consideration was being given within the Secretariat as to how to terminate of the Concession Agreement in one form or another, including the dismissal of Mr Marin as the administrative intervener. As this report records, "Termination of the concession is presumed and the legal way in which the service will be continued or changed remains unknown"; but it was evidently to be linked, somehow, to the "security of the information contained in the National Vehicle Registry".
"2.2.1 Agreement with the National Public Security Service, and/or otherwise agreements with the States’ Attorney’s Office regarding the exchange of information as to Vehicle Theft Notices or certification of Change of Ownership Notices. This is an essential tool in the quality and reliability RENAVE offers to users, to be supported by the timely certification of a vehicle’s ownership. Notwithstanding that in September 2000 the authorization registration [sic] in the second hand vehicle system was suspended, the natural aging of new vehicles in circulation from May 2000, requires certification of vehicle ownership in the national database, given the increasing number of changes in ownership. Without such a process in place, the RENAVE is unwarranted and lacks grounds to exist.
2.2.2 Agreement with the Tax Administration Service and/or otherwise, agreements with States and Municipalities to exchange information from their vehicle registries. Similarly to the previous item, the possibility of querying the system from across the whole country is beneficial and necessary for all the States as well as vehicle owners.
2.2.3 Reinstatement of the service of Change of Ownership Notice for New Vehicles beginning in May 2000. The incentive to reinstate this service through Distributors and Dealers and given the closure of over 2000 CTDs and CTDCs has not been fruitful. From October to present, only less than 100 Change of Ownership notices have been registered. "
"4.1 Production of smart cards by Assemblers and delivery of smart cards with the vehicle of Distributors or Dealers.
4.2 Customization of smart cards at the Distributors and production of invoices therein to deliver them to owners with the vehicle.
4.3 Coordination agreements with S.A. I, S.N.S.P. andS. C. T.
4.4 New official incentives with States and Federal District Administrations for the acceptance and support of a National Vehicle Registry, with an electronic connection to their vehicle ‘registries’ at the state and municipal level, that renders a high quality public service to citizens overall.
4.5 In view of the uncertainty expressed by the public, users, and related organizations as to the future of the public service created by the National Vehicle Registry Act, it is necessary to decide upon the future of the service and the Concession. "
"Throughout the period of administrative intervention, 15 September 2000 to date), the intervener has been carrying out his tasks in the terms requested by this Ministry; however, given the time the intervention has lasted, Ifeel he has lost power and presence with the concessionaire.
This is detrimental to the intention of the intervention and is causing, among other things, problems in the information flow necessary for the process of valuing the concessionaire and terminating the concession. There is thus a need to take relevant steps to reinforce the process. "
Mr Monreal concluded his memorandum by proposing the appointment of a new administrative intervener. It is to be noted that the memorandum reflects a decision by the Secretariat to terminate the Concession, as at mid-April 2001. This conclusion is supported by the passages in Mr Marin’s report of 16 April 2001: see above.
"1. In fact, Article 25 of the Law regarding RENAVE stipulates the seizure of the operations and installations centre, movable property, immovable property and equipment assigned for operating the Register, always and whenever ‘there is any imminent danger to national security, peace within the country or to the national economy’. From the perspective of the working team, none of these assumptions can be demonstrated for the time being. Moreover, one could consider the fact that the RENAVE Law does not indicate whether indemnity is appropriate; other laws which provide for seizures, in certain cases consider indemnity whilst in other cases they do not. Lastly, it is fitting to point out that in the case of RENAVE, there is no similarity either with the labour requisitions or with the bank interventions, since both have been developed in each applicable law.
2. From this perspective, it would be much closer to the law and much safer to begin work through intervention according to the terms of the intervention Agreement and leave seizure until a later stage, if this is the case. In our opinion, the intervener would be the one indicated to inform the Secretary if in the development of the tasks inherent in the intervention there are to be found elements which make it possible a) to revoke the dealership; b) to impose legal sanctions; c) to carry out the seizure.
3. It is possible that up to now intervention did not work adequately. However, this fact may have various explanations: a) the conditions in which the current intervener began; b) the personality of the intervener; c) the way in which the intervener is linked to the concessionaire and d) the uncooperative attitude of the latter. The new intervention is based on healthier grounds, whereby it seems sensible to expect positive results.
6. It is necessary to point out that although seizure is an aspect provided for by the same law, according to the historical experience it was only resorted to in very specific cases with regard to imminent danger, which in the case of RENA VE would tend to be for national security or the economy. Seizure would be justified if the intervener were to find huge missing elements in the automobile register, misuse of information provided by individuals, handling of false documents, knowing that they were being duplicated for the benefit of third parties or some similar assumptions. If that is not so, the Ministry of the Economy would find it impossible to take any action. "
Accordingly, this senior legal adviser was expressing, unambiguously, her opinion as to the lack of any present basis for the Requisition or Revocation of the Concession under Article 25 of the Act and, in particular, the absence of any grounds based on national security. Her advice also suggested an alternative strategy: first, the appointment of a new intervener and, subject to new and material information provided by that intervener, the possible seizure of the Concession "at a later stage", if this is the case.
That the deterioration in the operation of the public service of the National Vehicle Registry threatens national security since, as the legislator stated in the reasons for enacting the Law of the National Vehicle Registry, said Registry guarantees the protection of the rights of vehicle ownership of the Mexican people;
That by means of the Agreement published in the Official Gazette of the Federation on 29 August 2000, the Secretariat of Commerce and Industrial Development, now the Secretariat of the Economy, declared the technical intervention of the public service of the National Vehicle Registry, with the purpose of confronting the uncertainty generated among the users of the National Vehicle Registry and the public in general, in relation to the confidentiality of the information contained in the database necessary for the rendering of the service;
That the then-Secretariat of Commerce and Industrial Development, now the Secretariat of the Economy, determined the existence of circumstances preventing Concesionaria Renave, SA. de C. V. from operating the service in an optimal fashion, which persisted, and therefore, by means of the Decree published in the Official Gazette of the Federation on 15 September 2000, declared, as a precautionary measure, the administrative intervention of the public service of the National Vehicle Registry, with the purpose of intervening not only the technical aspects related to the integrity and confidentiality of the database, but also the administration of the company;
That the results recently obtained during the aforementioned administrative intervention demonstrate that Concesionaria Renave, S.A. de C.V., has provided the public service of operation of the National Vehicle Registry in a deficient manner, and consequently the registry is not fully complying with its purpose, and as a consequence, not providing legal security to users of the same and not guaranteeing the confidentiality of information provided by them in relation to the vehicles, with imminent peril to national security;
That the deficient provision of the public service undertaken by Concesionaria Renave, S.A. de C.V, is due, amongst other things, to inadequate administration and operation practices, which, together with the lack of measures taken by the Concessionaire aimed at avoiding them may provoke deterioration of the security measures necessary to guarantee the adequate functioning of the Registry, which represents an imminent peril to national security, since it generates incongruities in the information contained in the Registry’s database, and uncertainty with respect to the legal origin of the vehicles registered in it;
That the foregoing requires that the Federal Executive, through the Secretariat of the Economy, take immediate action to correct such practices, reorienting the operation of the public service by means of the requisition, which will allow the broadening of the controls currently available to the administrative intervention; and
That Article 25 of the Law of the National Vehicle Registry, grants the Secretariat of the Economy, the power to requisition the operations centre and other facilities, real estate, goods and equipment committed to the operation of the Registry, as well as to dispose of the personnel employed by the company that operates the registry, when imminent peril to national security exists, I have decided to issue the following:
DECREE FOR THE REQUISITION OF THE PUBLIC SERVICE OF THE OPERATION OF THE NATIONAL VEHICLE REGISTRY GRANTED IN FAVOUR OF CONCESIONARIA RENAVE, S.A. DE C. V.
ARTICLE FIRST.- The Federal Executive, through the Secretariat of the Economy, pursuant to Article 25 of the Law of the National Vehicle Registry, requisitions the operations centre and other facilities, real estate goods and equipment committed to the operation of the public service of the National Vehicle Registry performed by Concesionaria Renave, S.A. de C.V, due to the imminent peril to national security that its inadequate functioning represents.
On several occasions, Concesionaria Renave, S.A. de C.V., infringed the rules applicable to the Registro Nacional de Vehículos; therefore, pursuant to Sections 21, subsections III and 22, subsections I, V and IX of the Law of the Registro Nacional de Vehículos, on December 13, 2002, the Secretariat of Economy revoked the Concession Instrument of the public service of operation of the Registro Nacional de Vehículos, granted to Concessionaria Renave, S.A. de C.V.; such revocation was notified to Concesionaria Renave, S.A. de C. V. on December 16, 2002 and published in the Official Bulletin of the Federation on December 17, 2002;
One of the reasons for the revocation of the Concession Instrument of the public service of operation of the Registro Nacional de Vehículos consisted in Concessionaria Renave, S.A. de C. V. ’s failure to implement the infrastructure required and the necessary systems for the public service of the operation of the Registro Nacional de Vehículos to be rendered in the manner provided for by the applicable rules;..."
"30. Gemplus Mexico subscribed for 20% of the shares in Concesionaria (all of the Series "C " shares issued by the company).
31. Gemplus Mexico was and remains to the present day a Mexican company. At the time of the granting of the Concession it was owned by a French company, Gemplus, SA.
32. It is trite law that in the absence of clear unambiguous treaty text to the contrary, a national of a State has no right to initiate an international claim against its own State.
33. Consistent with customary international law, Gemplus Industrial is not an "investor from the other Contracting Party" within the meaning of Article 9, "Settlement of disputes between an investor of one Contracting Party and the other Contracting Party " of the Mexico-France Treaty.
34. Article 9 plainly distinguishes between the investor and its investment. In addition to its title, paragraph 1 states:
This Article only applies to disputes between one Contracting Party [i.e., Mexico] and an investor of the other Contracting Party in relation to an alleged breach by the Contracting Party under this Agreement which causes loss or damage to the investor or his investment .
35. This is further underscored by the article’s treatment of the interaction between local and international proceedings in paragraph 2. Article 9(2) states:
2. In relation to submission of a claim to arbitration:
a) An investor of one of the Contracting Parties may not allege that the other Contracting Party has breached an obligation under this Agreement, both in arbitration proceedings in accordance with this Article and in proceedings before a competent judicial or administrative tribunal of the former Contracting Party who is party to the dispute.
b) Also, when a company from one of the Contracting Parties, which is a legal person owned or controlled by an investor from the other Contracting Party, alleges, during the course of proceedings before a competent judicial or administrative tribunal of the Contracting Party involved in the proceedings, that the Contracting Party has breached an obligation under this Agreement, the investor may not allege the same breach in arbitration proceedings under this Article.
36. Article 9 does not permit a national of a State to submit an international claim against its own State. "
[The Respondent’s emphasis; footnotes omitted]
"38. Gemplus France initially had standing to advance this claim because, as a French national, it owned and controlled Gemplus Mexico [i.e. Gemplus Industrial]. However, on 22 March 2004, Gemplus France entered into a Stock Purchase Agreement to sell to a Luxembourgian company, Gemplus International S.A. (hereinafter "Gemplus Luxembourg"), all or substantially all the issued and outstanding shares of a number of its subsidiaries with effect as of 1 January 2004.
39. The subsidiaries listed in Exhibit A to that Stock Purchase Agreement included Gemplus Mexico, and therefore, as of 1 January 2004, the French owner of the Mexican enterprise, which originally held the 20% shareholding interest in the Concessionaire, transferred it [sic: its] shares to a Luxembourgian national.
40. With the transfer of the ownership of Gemplus Mexico to a Luxembourgian company, Gemplus France lost its standing to advance an international claim in respect of that enterprise’s interest in the Concessionaire. "
"45. Mr Salgado [of Gemplus] testifies that:
12. On 27 April 2004 Gemplus transferred all its shares in Gemplus Industrial to SLP. SLP continues to be the holder of more than 99% of the share capital of Gemplus Industrial carrying voting rights and it controls Gemplus Industrial by virtue of this shareholdings. I attach charts indicating the changes in the corporate structure related to Gemplus Industrial from the date of its incorporation [A19].
46. The first sentence of this paragraph can easily be misinterpreted. The reference to "Gemplus" should be understood in the following manner: Gemplus Luxembourg, which five weeks previously had purchased the shares of Gemplus Mexico with effect as of 1 January 2004 gave instructions to the former owner to transfer the shares of Gemplus Mexico to SLP. By the express terms of the Share Purchase Agreement (see section II.B. 2), with effect as of 1 January 2004, the "Seller hereby irrevocably sells, conveys and assigns, and Purchaser purchases and accepts, the issued and outstanding stock of the Transferred Subsidiaries", including those of Gemplus Luxembourg, which later exercised its right under section 7.1 of the Share Purchase Agreement to "designate an affiliate to whom the Seller shall transfer the Shares with respect to the applicable Transferred Subsidiary. "
47. The charts attached to Mr Salgado’s witness statement omit to indicate that, between 31 October 2003 (Mr Salgado’s fourth chart) and 27 April 2004 (his fifth chart, this being the date of the designation of SLP as the holder of the shares in Gemplus Mexico), the shares of Gemplus Mexico were exclusively owned by Gemplus Luxembourg.
48. This was done by means of an "Acknowledgement" agreement pursuant to the Share Purchase Agreement with effect "as of April 27, 2004. " In the Acknowledgement, Gemplus Luxembourg designated an affiliate transferee "for the purchase of the shares of Gemplus Industrial S.A. de C.V."
49. An updated confidential Memorandum of Understanding ("MOU") between Gemplus Luxembourg, Gemplus France, Gemplus Mexico, and SLP sets out the general terms governing the transfer of Gemplus Mexico to SLP. This MOU is exclusively concerned with the parties’ attempt to resuscitate the requisite standing to bring the international claim.
50. SLP, a once operating company that was inactive at the time of the Acknowledgement, was selected because of its French nationality. Paragraph 5 of the MOU states:
5. The parties acknowledge that SLP is within the group of companies affiliated with GISA (the "Gemplus Group") ["GISA" is the acronym for Gemplus Luxembourg] and has had significant operational activities. Those prior operations for the Gemplus Group ceased in or before the year 2003. SLP remains a suitable entity to act as a designated transferee for GISA and for the purposes of receiving and holding the Shares in connection with the Stock Purchase Agreement and this Memorandum. SLP shall not need any employees for any of the activities it may have as a designated transferee of the Shares.
51. Paragraph 6 then refers to the fact that the present dispute concerning the Concessionaire arose with Mexico and reflects the agreements by the parties to the MOU:
To the fullest extent permitted by law, GSA [Gemplus France] and Gemplus Industrial [Gemplus Mexico] retain all rights they currently have in relation to the Claims and there shall be no effect on such rights by virtue of the transfer of the Shares to SLP. SLP shall provide all assistance and take all necessary action and sign all documents, including the joining of any legal proceedings, such as any arbitration, brought in connection with the Claims ("Legal Proceedings") and act jointly and cooperate with GSA and Gemplus Industrial in connection therewith, as may be requested by GSA and Gemplus Industrial.
52. The purport of this clause is of no legal effect because Gemplus France and Gemplus Mexico have no right to the claims (Gemplus Mexico never had any rights in the first place, and Gemplus France lost its rights in the claims when it irrevocably conveyed ownership in Gemplus Mexico to Gemplus Luxembourg). Nor can they eliminate by means of a contract the international legal effects of the transfer of ownership of Gemplus Mexico to Gemplus Luxembourg. [...]
53. The MOU also contemplated that SLP might not be effective for the transactions contemplated thereunder to be fully effective and enforceable to the satisfaction of the Luxembourgian company. Accordingly, Gemplus Luxembourg retains the right to revoke the transfer and to designate a different transferee:
10. In the event that SLP is unable to complete actions reasonably necessary for the transactions contemplated hereunder to remain fully effective and enforceable in manner to the satisfaction of GISA, then GISA shall designate a different transferee (including, at its election, GISA itself) and the Parties will take all actions reasonably requested to effectuate the transfer of the Shares to such alternate transferee so as to have the same economic and the same effective date as of any previously made or intended transfer.
54. The MOU was executed under the laws of the Grand Duchy of Luxembourg and the competent courts of that State have sole and exclusive jurisdiction over any legal proceedings arising thereunder. "
[The Respondent’s emphasis; footnotes omitted]
"55. Article 9(7) of the Mexico-France BIT requires the Tribunal to resolve this dispute in accordance with the terms of the Agreement and "applicable rules and principles of international law". Those include the rules of customary international law which continue to apply to relations between France and Mexico except to the extent that they are varied by treaty.
56. One such rule of customary international law is the principle of "continuous nationality ", described by Oppenheim ’s as follows:
It may accordingly be stated as a general principle that from the time of the occurrence of the injury until the making of the award the claim must continuously and without interruption have belonged to a person or a series of persons (a) having the nationality of the state by whom it is put forward, and (b) not having the nationality of the state against whom is [sic: it is] put forward.
57. Brownlie cites this passage with approval. He notes that some argue that the rule does not require continuous nationality from the injury up to the date of the award (the dies ad quern). Brownlie comments:
The first part of the rule of continuity does not give rise to much difficulty: the relevant nationality must exist at the time of injury. The second part of the rule is variously stated in terms of nationality continuing until the ‘presentation of the award’, or the fding of a claim before a tribunal, or the formal presentation of the diplomatic claim in the absence of submission to a tribunal. However, the majority of governments and of writers take the date of the award or judgment as the critical date.
58. Regardless of where the dies ad quern falls between date of presentation and date of the award, there is consensus that continuous and uninterrupted nationality must exist at a minimum until the presentation of the claim or its submission to arbitration. In this case the claim was submitted to arbitration on 10 August 2004, after ownership was transferred to Gemplus Luxembourg.
59. With respect to the assignment of claims, Brownlie notes:
If during the critical period a claim is assigned to or by a nonnational of the claimant state, the claim must be denied. However, assignment does not affect the claim if the principle of continuity is observed.
60. Oppenheim’s agrees:
In cases... of assignment, a claim will normally be allowed if the continuity of nationality is maintained and disallowed if it is not.
61. In this case, continuity of nationality was not maintained in the critical period. With the transfer of ownership of Gemplus Mexico, the claim passed from a French company to a Luxembourgian company and then back to another French company (and even then only conditionally). In short, to use Brownlie’s terms, the continuous nationality rule is triply offended because the claim has been assigned to a non-national and by a non-national of France and it remains susceptible to being further reassigned by that non-national. "
[The Respondent’s emphasis; footnotes omitted]
"35. To begin with, it is submitted by the Gemplus Claimants that Article 9 must be read as being subject to the definition of "Investor " in Article 1. The heading of Article 9 reads as follows:
‘Resolution of disputes between an Investor from one of the Contracting Parties and the other Contracting Party. ’
36. The reference to "Investor" in this heading requires reference to be made to the definition in Article 1. Article 9 must be read by reference to Article 1, which defines this word. A failure to do so would otherwise leave the term "Investor " bereft of a definition.
37. By Article l(2)(b) of the BIT an "Investor" includes:
‘any moral entity constituted in the territory of one of the Contracting States in accordance with the laws of that country and with its registered office in that country, or directly or indirectly controlled by nationals of one of the Contracting Parties, or by moral entities which have a registered office within the territory of one of the Contracting Parties and are constituted in accordance with the laws of that country. A moral entity is deemed to be controlled if the majority of its issued shares carrying voting rights is held by a national or a moral entity which has its registered office within the territory of a Contracting Party and is constituted in accordance with the laws of that Contracting Party. ’
38. Gemplus Mexico [i.e. Gemplus Industrial] is, for the purposes of this definition, a moral entity directly or indirectly controlled by moral entities which have their registered office within the territory of one of the Contracting Parties (namely Gemplus, S.A. and/or SLP) and are constituted in accordance with the laws of that Contracting Party. It is deemed to be controlled as provided in the last sentence of that Article 9(2)(b) because the majority of its issued shares carrying voting rights is held by a moral entity which has its registered office within the territory of a Contracting State (France) and is constituted in accordance with the laws of that Contracting State (France).
39. This provision permits the nationality of an investor to be identified by the Contracting State in which its controllers have their registered office and are constituted. Applied to a claim by a French company, the definition extends to a company constituted and with its registered office in France or to a company directly or indirectly controlled by one or more companies having their registered office in and constituted in France. "
"46. The primary contention of the Gemplus Claimants is that Gemplus France retained its rights to the claims in this arbitration, notwithstanding the SPA. This is because Gemplus Mexico and Gemplus France entered into a Memorandum of Understanding ("MOU"), to which Gemplus Luxembourg is also a party, which contains the following provision:
‘7. The Parties acknowledge that prior to the transfer of the Shares in connection herewith, there arose a dispute with the Government of the United States of Mexico concerning Concesionaria Renave S.A. de C. V. ("Renave "). Renave was incorporated as a consequence of the granting by the Mexican government to Gemplus Industrial and its partners of the concession title to manage and operate the National Vehicle Registry of Mexico and which was subject to a series of confiscatory actions in the years 2000 through 2002, all of which have given rise to claims regarding such actions (the "Claims"). To the full extent permitted by law, GSA [Gemplus France] and Gemplus Industrial [Gemplus Mexico] retain all rights they currently have in relation to the Claims and there shall be no effect on such rights by virtue of the transfer of the Shares to SLP. SLP shall provide all assistance and take all necessary action and sign all documents, including the joining of any legal proceedings, such as any arbitration, brought in connection with the Claims ("Legal Proceedings ") and act jointly and co-operate with GSA and Gemplus Industrial in connection therewith, as may be requested by GSA and Gemplus Industrial. ’
47. It is the Claimants’ case that the impact of this provision could not be clearer: the shares were transferred by Gemplus France, but the right to bring this claim was not.
48. The response of the Respondent is that this clause has no legal effect for three reasons:
(i) Gemplus Mexico has no rights in the first place. This is wrong for the reasons given above.
(ii) Gemplus France lost its rights when it transferred the shares under the SPA. Leaving aside the identity and nationality of the transferee, this assertion is self-serving: it ignores the provision on which the Gemplus Claimants rely. The SPA must be read together with the Acknowledgment and the MOU to obtain an understanding of what the parties did and intended: the shares were transferred but the rights in relation to the claims in this arbitration were expressly retained by Gemplus France, "to the fullest extent permitted by law ". No reasons are advanced by the Respondent to explain why effect should not be given to the plainly expressed intentions of the parties to the MOU; and
(iii) The Gemplus companies cannot "eliminate by means of a contract the international legal effects of the transfer of ownership of Gemplus Mexico [...]". No attempt is made to define "international legal effects " or to explain how or why these should inhibit the parties in defining what rights in addition to the shares are transferred or retained. It is accepted by the Gemplus Claimants that the transfer of shares to a non-French company would not give any rights to the transferee to make a claim under the Mexico-France BIT. But there is no reason why a French transferor should not retain the right to pursue claims which it is acknowledged by the Respondent were validly held by it up to the date of the transfer. "
"51.... These documents make it clear that:
(i) The transfer of shares under the SPA is expressly made "Subject to the Terms of this Agreement" (Clause 1.1);
(ii) The SPA is intended as a "framework agreement" and is subject to "Additional Agreements" as defined in Clause 7.1 (third recital);
(iii) The Additional Agreement provides for the designation of an affiliate to whom Gemplus France shall transfer shares in Gemplus Mexico instead of Gemplus Luxembourg;
(iv) Such designation was done by the Acknowledgment, whereby SLP is identified as the Transferee;
(v) Gemplus France as seller represents and warrants that it is the lawful owner of the shares on the Closing Date (Clause 3.5);
(vi) The Closing Date is "as the Parties may agree" (Clause 2.1). By the terms of the Acknowledgment, that date is 27 April 2004. This is confirmed in the MOU (Clause 12); and
(vii) The governing law of the SPA is that of Luxembourg. "
"52. The Gemplus Claimants refer to and rely on the opinion of Mr Patrick Kinsch, a member of the Luxembourg bar and Adjunct Professor of Law at the University of Luxembourg. His view is that:
"[...] In order to decide that property has passed to a specific party, the Arbitral Tribunal would have to find both that (i) under Luxembourg law as the law applicable to the contract, property was intended to pass, and that (ii) under Mexican law as the lex situs such steps as may be necessary to effectuate the passing of title in the shares have been taken. The property will have passed only after the requirements of both laws have been satisfied. "
53. Having considered the general rules of Luxembourg law on the transfer of ownership by contract of sale and the wording of the SPA, the Acknowledgment and the MOU, Professor Kinsch reaches the following conclusion:
"It follows from the Stock Purchase Agreement and from the Acknowledgment that the description, given in the Memorandum of Understanding and in Mr Salgado’s witness statement, of the transfer of ownership in the shares in Gemplus Industrial, as having taken place not between Gemplus and Gemplus International, but between Gemplus and SLP, is entirely in line with Mexican law. In fact, under Luxembourg law the theory of the Counter-Memorial, according to which there has been, by virtue of the signing of the Stock Purchase Agreement, an immediate passing of ownership of the shares of Gemplus to Gemplus International, is contrary to the parties’ clearly expressed intention and therefore also contrary to Luxembourg law. "
54. To the extent that the position under Mexican law may be relevant to this question, the Gemplus Claimants refer to and rely on the opinion of Mr José Antonio Chávez Vargas, an experienced Mexican business lawyer and partner in the Mexico City office of Thacher Proffitt & Wood, S.C. Mr Chávez, having examined the Gemplus Industrial share certificates and share register, expresses his conclusion as follows:
"41. The share certificates, endorsements and other means employed to implement the stock transfer, as well as the structure used for the transaction and the intention of the parties expressed in the Agreement, the Acknowledgment and MOU, all point clearly to the conclusion that the shares in Gemplus Industrial were transferred directly to and are held by SLP (with the exception of the three shares transferred to Gemplus Finance, S.A.) and that no shares in Gemplus Industrial were transferred to Gemplus International at any time. "