Mexico could be on the hook for US $270 million after a Canadian court overturned a 2024 arbitration award that had seemed to terminate the case in Mexico’s favor.
The court ordered that proceedings be reopened in a lawsuit filed by Mexican oilfield services provider Oro Negro against Mexico’s state-run oil company Pemex, claiming violation of the rules of NAFTA, the trilateral trade agreement that preceded the current USMCA.
The new court decision reverses the previous status of the case, which had been closed in August 2024 after an arbitration tribunal favored Mexico by declaring itself incompetent to hear the case based on the claimants’ Mexican nationality and their close connection to it.
According to reports from Global Arbitration Review, the Canadian court found that “the [arbitration] tribunal wrongly declined jurisdiction and Chilean arbitrator Andrés Jana failed to disclose a potential conflict from his counsel work.”
Additionally, the Canadian court ordered Mexico to cover US $100,000 in legal costs within 30 days.
As a result of this week’s ruling, international investors linked to Oro Negro revived their legal offensive against Mexico and the case returns to the substantive analysis stage presumably leading to an eventual ruling on its merits, rather than on jurisdictional issues.
Although it does not imply a conviction against Mexico, this new procedural twist prolongs a high-profile litigation that keeps the relationship between private investors and Mexico’s state-run energy sector under scrutiny, particularly in disputes related to contracts with Pemex.
Should the final ruling be unfavorable to Mexico, its treasury could face a potential payment of US $270 million.
The dispute dates back to the 2013-2017 contractual relationship between Oro Negro and Pemex when Oro Negro leased five oil platforms.
The plaintiffs initiated their lawsuit in 2017, alleging that Pemex manipulated agreed-upon tariffs in 2015, induced Oro Negro to accept reduced lease rates and prematurely terminated existing contracts. The accusations included breach of contract and preferential treatment of competitors.
The conflict triggered the bankruptcy of Oro Negro and gave rise to one of the most significant energy disputes under NAFTA (the North American Free Trade Agreement).
Pemex bribery mechanism revealed at meeting with Israeli investigators
The case eventually became a NAFTA investor versus state dispute under Chapter 11 as investors claimed Mexico breached NAFTA obligations regarding fair and equitable treatment and expropriation.
In 2019, the Wall Street Journal reported that the Israeli private investigation company Black Cube secretly recorded senior officials at Pemex describing widespread bribery and corruption at the state-run oil company in 2017.
The investigators were hired by Oro Negro and the oilfield services company submitted the recordings as evidence while claiming that Pemex intentionally drove it into bankruptcy because it refused to pay bribes.
Mexico maintained the recordings lacked probative value and were obtained illegally.
With reports from El Universal, Milenio and Aristegui Noticias
