On January 11, Mexico signed the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention). ICSID is a World Bank organization that administers investor-State arbitrations and is the leading institution for the resolution of international investment disputes.
It is important to note that Mexico signed the ICSID Convention but has not yet ratified the ICSID Convention, something that would be necessary to formally join ICSID. Under the Mexican Constitution, the Mexican Senate must first ratify the Convention before it becomes effective. Under ICSID Convention rules, the treaty will not enter into force for Mexico until 30 days after Mexico deposits its instrument of ratification with ICSID. Given the upcoming presidential elections in the summer of 2018 and the intrinsic uncertainty that elections sometimes bring, it is possible that Mexico’s membership in ICSID may be delayed or never confirmed.
If the ICSID Convention is ratified, investors may be able to choose to initiate international investment arbitration against Mexico before ICSID. Favorable awards would be directly enforceable in the courts of any of the over 150 ICSID State Parties as if they were final judgments of their own local courts. As a member State, Mexico would participate in ICSID’s Administrative Council and would also have the right to name arbitrators and conciliators to the ICSID Panels.
By signing the ICSID Convention, some commentators have suggested that Mexico may be viewing the dispute settlement provisions of ICSID as a “plan B” in the event that the NAFTA renegotiations with the United States fail. If the United States were to pull out of NAFTA, the signing of the ICSID Convention would signal investors that it is still open to investor-State dispute resolution.
Mexico’s signing of the ICSID Convention should be viewed as a significant step forward not only for Mexico but for the investor-State Dispute Settlement (ISDS) system. By signing the ICSID Convention the Mexican government is sending a message to investors that it apparently intends to continue to provide international dispute resolution protections to foreign investors as a way to continue to attract foreign investment. Moreover, by signing the ICSID Convention Mexico is also signaling a vote of confidence to the ISDS system—despite recent criticisms—which may influence other countries in the region.