The Mexican Government Will Challenge the Decision Requiring Payment of $37 Million to Odyssey Marine Exploration
The ministries of Economy and Environment and Natural Resources (Semarnat) have announced that Mexico will challenge the ruling in favor of Odyssey Marine Exploration due to the failure to meet its obligations under the old NAFTA agreement. Recently, the U.S. firm reported that it received notification from the International Centre for Settlement of Investment Disputes (ICSID) regarding the arbitral award related to the claims involving Odyssey and its subsidiary, Exploraciones Oceánicas S. de RL de CV (ExO), against Mexico.
The award demands that the country pay $37.1 million plus interest, calculated at the rate of Mexico's one-year Treasury bonds, compounded annually, from October 12, 2018, until the payment is completed, in addition to the arbitrators' fees and administrative costs. In response, the Government of Mexico has expressed its disagreement with the ruling issued by an international tribunal under ICSID. "More than two years after the procedure concluded, on September 17, the majority of the tribunal issued an award in favor of Odyssey Marine Exploration, requiring our country to compensate with $37.1 million for the denial of a permit for a marine dredging project in Baja California Sur. This amount represents about 1.18% of the total originally requested in the arbitration," the Mexican agencies explained. Between 2016 and 2018, Semarnat rejected the Environmental Impact Assessment (EIA) for the project “Dredging of black phosphate sands in the Don Diego deposit,” leading Odyssey to initiate international arbitration under NAFTA. The Mexican government emphasized that among the partners were figures like Diego Fernández de Cevallos and Alonso Ancira. During the arbitration process, Mexico demonstrated that the company lacked the necessary experience to extract phosphate sands from the seabed. "In its defense, Mexico argued that the project threatened an ecologically sensitive area that is home to species such as loggerhead turtles, blue and gray whales, and sea lions, among others. Furthermore, evidence was presented revealing Odyssey's lack of experience in the mining sector, as its primary activity is searching for marine treasures. It was also shown that the dredging techniques they wanted to implement had not been tested anywhere in the world," they noted. Authorities mentioned that undue weight was given to the testimonies of two former officials from Semarnat's General Directorate of Environmental Impact and Risk, who were presented as witnesses by Odyssey and claimed that the EIA denial was politically motivated rather than scientifically grounded. However, the Mexican defense proved that both witnesses had conflicts of interest due to substantial payments they received for testifying, which was not considered by the majority of the tribunal. For this reason, the Ministry of Economy will initiate annulment proceedings regarding the award before the competent courts, and the government of Mexico will explore all available defense resources.
It is remarkable how decisions by international tribunals can impact a country's economy, especially in situations involving environmental issues. It is essential for the Mexican government to not only challenge this ruling but also to strengthen its protocols and defense structures to protect its interests and natural resources in the future. This represents a delicate process, but also an opportunity to refine its response capabilities in the face of new international challenges.
