Bayview Irrigation District and others v. United Mexican States - ICSID Case No. ARB(AF)/05/1 - Award - 19 June 2007
Country
Year
2007
Summary
AWARD
Before the Arbitral Tribunal constituted under Chapter XI of the North American Free Trade Agreement, and comprised of:
Professor Vaughan Lowe
Professor Ignacio Gomez-Palacio
The Honorable Edwin Meese III
Date of dispatch to the parties: June 19, 2007
...
112) That brings us to the crucial question: whether the Claimants have an investment "in the territory of [Mexico]".
113) In our view it is clear that they do not. They have substantial investments in Texas, in the form of their businesses and, in the context of these proceedings, more particularly in the form of the infrastructure for the distribution of the water that they extract from the Rio Bravo / Rio Grande. They have investments in the form of the water rights granted by the State of Texas. They are certainly "investors"; but their investments are in Texas, and they are not investors in Mexico or vis-?-vis Mexico.
114) The Tribunal does not accept that the Claimants own water in Mexico, in the sense of the ownership of personal property rights in the physical waters of rivers flowing in Mexican territory.
115) There is an evident and inescapable conceptual difficulty in positing the existence of property rights in water up-river in Mexico in a context where the entitlement of each Claimant depends upon the apportionment of a certain volume of water, measured over a five-year period (or possibly longer, if the possibility of repayment of water debts in subsequent cycles is taken into account), which can be determined only by reference to the volume of water that actually reached the main channel of the Rio Bravo / Rio Grande.
116) One owns the water in a bottle of mineral water, as one owns a can of paint. If another person takes it without permission, that is theft of one's property. But the holder of a right granted by the State of Texas to take a certain amount of water from the Rio Bravo / Rio Grande does not 'own', does not 'possess property rights in', a particular volume of water as it descends through Mexican streams and rivers towards the Rio Bravo / Rio Grande and fmds its way into the right-holders irrigation pipes. While the water is in Mexico, it belongs to Mexico, even though Mexico may be obliged to deliver a certain amount of it into the Rio Bravo / Rio Grande for taking by US nationals.
117) Thus, the Claimants do not own any of the water within Mexico. Nor do the Claimants possess any water rights in Mexico and enforceable against the State of Mexico. Their water rights are granted by the State of Texas. Those rights are created in Texas and exercised in Texas.
118) Furthermore, it is plain that under the Mexican Constitution and Mexican law, the Claimants could have no such property rights in water in Mexican rivers.
Article 27 of the Mexican Constitution stipulates that the ownership of waters within the boundaries of the national territory originally belongs to the Nation, and that water from its rivers and tributaries are the property of the nation. Exploitation or use of those waters can only be carried out through concessions granted by the Federal Executive. The Mexican Law of National Waters confirms the need for the grant of a concession for the exploitation or use of waters, and specifies that a concession does not guarantee the existence or permanence of the water that is the subject of the concession. And Mexico's General Law of National Assets stipulates specifically, in Article 16, that concessions do not create ownership rights (derechos reales) but simply grant a right of use and exploitation, without prejudice to third parties, and subject to conditions imposed by law and by the concession.106
119) The Claimants sought, with arguments of considerable subtlety and ingenuity, to identify a supervening right that overcame all such problems, by saying that in the 1944 Treaty Mexico alienated or relinquished title to one-third of the waters in the 'six rivers', just as States sometimes relinquish land territory in treaties. According to this view, approximately one-third of the water in the 'six rivers' belongs to Mexico, and approximately two-thirds belongs to the United States -- although who owns what cannot be accurately determined at any given moment because the sharing formula under Article 4 of the 1944 Treaty applies a combination of fixed amounts and percentage shares measured over periods of several years.
120) The Tribunal can find no evidence in the 1944 Treaty to suggest that this imaginative interpretation of the Treaty, whose legal coherence and practical operability are open to considerable doubt, was intended by the Parties. The ordinary reading of the Treaty is that it is an agreement to apportion such waters as arrive in the international watercourse -- the Rio Bravo / Rio Grande -- between Mexico and the United States; and the Tribunal sees no reason whatever to doubt the correctness of that reading.
121) Any improper diversion of river flows prior to the flow joining the main flow of the Rio Bravo / Rio Grande is a different matter. If such a diversion were to occur, it may or may not amount to a breach of the 1944 Treaty. That would be a matter for the two States, who are the only Parties to that Treaty. If the interests of US nationals were thought to be prejudiced by any action alleged to amount to a violation of the Treaty, that is an issue which could be taken up by the US Government under the dispute resolution procedures in the 1944 Treaty.
But the 1944 Treaty does not create property rights amounting to investments within the meaning of the NAFTA which US national themselves may protect by action under NAFTA Chapter Eleven. The Tribunal expresses no views on the interpretation or application of the 1944 Treaty in the circumstances of this case.
122) In the view of the Tribunal it has not been demonstrated that any of the Claimants seeks to make, is making or has made an investment in Mexico. That being the case, the Tribunal does not have the jurisdiction to hear any of these claims against Mexico because the Claimants have not demonstrated that their claims fall within the scope and coverage of NAFTA Chapter Eleven, as defined by NAFTA Article 1101.
123) Having reached this conclusion it is unnecessary to consider further issues, because it is plain that the Tribunal cannot have jurisdiction over these claims.
124) For these reasons the Tribunal finds that it lacks jurisdiction over all of the claims.
IV. COSTS
125) The Tribunal has considered the question of the allocation of costs. The claims were not frivolous, and they were pursued in good faith and with all due expedition. The claims were, equally, defended in good faith and with due expedition. Both sides agreed to the separation of the jurisdictional issue, and this proved a sensible and economical step. The Tribunal does not consider that there is any reason to depart from the normal practice in such cases, according to which each Party shall bear its own costs, and the costs of the Tribunal shall be divided equally between the Parties.
V. DECISION ON JURISDICTION
For the reasons set forth above, the Tribunal has decided:
a) The Arbitral Tribunal does not have jurisdiction over the dispute submitted to it in this arbitration;
b) Each Party shall bear its own costs, and the costs of the Tribunal shall be divided equally between the Parties.
Made as at Toronto, Canada, in English and Spanish, both versions being equally authentic.
...
OCR errors may be present, footnotes omitted