US mining company sues Mexico over tax and environmental regulations

January 8, 2019: Using the Investor-State Dispute provisions of the North America Free Trade Agreement, a USA mining company, Legacy Vulcan, lodged a claim for US$500 million against the Mexican government on January 3, 2019. It cited tax and environmental regulations in its claim, of which it first gave formal notice on September 3, 2018.

Legacy Vulcan and its subsidiary, Calica, have been mining limestone in Mexico’s Yucatan Peninsula since the 1980s, both for local construction materials and for export to the USA. Mining operations expanded from 1996 at two sites: La Adelita and El Corchalito.

The company has accused the Mexican State of Quintana Roo of seizing funds from the company’s bank accounts to recover taxes which the company argues are not payable.

The company has also objected to changes to the Ecological Ordinance Program of the Cancun-Tulum Corridor an environmentally sensitive area. The changes mean that limestone mining is prohibited at La Adelita and at El Corchalito. The company claims that the closure at El Corchalito is expropriation.

Under NAFTA, ISDS arbitration cases are managed under the World Bank’s International Centre for Settlement of Investment Disputes.

Under the new US-Mexico-Canada Agreement (USMCA) there will no longer be Investor-State disputes between Canada and the USA, and only oil industry cases against Mexico. ISDS cases on existing investments can be lodged up to three years after the USMCA comes into force, and as yet, it has not been ratified by any of the three governments. Legacy Vulcan would not be able to sue Mexico under the USMCA provisions, because it is not an oil company.