Tereposky & DeRose LLP recently had the privilege of representing The United Mexican States on instructions from La Secretaría de Economía in an investor-state set aside proceeding before the Ontario Superior Court of Justice.

In short, Joshua Dean Nelson (the “Applicant”) and his business, Tele Fácil México SA De CV, failed to convince a Canadian Court that he ought to be allowed to resurrect an investment claim under NAFTA. The Applicant alleged he and Tele Fácil suffered almost US$ half billion in losses following investments in Mexico’s telecommunications industry. The original arbitral Award ( Joshua Dean Nelson v. The United Mexican States ) of 5 June 2020 had dismissed all of the claim and ordered the Applicant to pay over US$2 million in costs to Mexico. (See Mexico Defeats Half a Billion ISDS Arbitration Claim Under NAFTA)

In a Judgment and Reasons dated 16 February 2022, (See  Nelson v. The Government of the United Mexican States, 2022 ONSC 1193), Judge Michael A. Penny of the Ontario Superior Court of Justice upheld the arbitral tribunal’s ruling in its entirety. Penny J. dismissed the application alleging a denial of natural justice and procedural fairness during the arbitral proceedings and ordered the Applicant to pay costs of $100,000 to Mexico.

The Applicant had argued before Penny J. that the arbitral tribunal inappropriately relied on arguments that had not been raised by the parties when it concluded that the Applicant’s business had never actually secured the interconnection rights that it claimed to have been stripped of by Mexican regulators. The Applicant also argued that the arbitral tribunal failed to consider expert evidence.

Penny J. held that fairness and natural justice are well-established principles embodied in Article 34(2)(a)(ii). His Honour went on to confirm that the standard of review in Ontario for setting aside an award under Article 34(2)(a)(ii) is whether the tribunal’s conduct was “sufficiently serious to offend our most basic notions of morality and justice” and “that it cannot be condoned under the law of the enforcing State”. However, a party is not permitted to review the award on its merits under the guise of alleged breaches of Article 34(2)(a)(ii).

Penny J. also recognized that the principle that a tribunal cannot decide a case on a basis that was not pleaded or argued is well established. In dismissing the Applicant’s claims, he made the following observations:

• there was no failure of fairness or natural justice as both parties put their positions squarely before the tribunal on the issue of the nature of the interconnection rights at issue.
• it is generally accepted that a trier of fact cannot ignore or fail to evaluate relevant portions of the evidence. The evidence that the Tribunal relied upon was not repeated verbatim in the award but detailed and extensive citations were made referring to the parties’ positions and evidence on each issue and argument. No one could reasonably be in any doubt about whether the tribunal considered the Applicant’s evidence or why the tribunal decided the case the way it did.

Tereposky & DeRose has extensive experience in international investment arbitrations and set-aside proceedings in Ontario.