The Award in Waste Management v Mexico (No 2) and Its Influence on the Minimum Standard of Treatment

Abstract

It is with a strong sense of gratitude that I contribute this piece to this col¬lection in honour of His Excellency Judge James Crawford AC SC. I was one of the many graduate students who benefited from James Crawford's tenure as Whewell Professor of International Law and Director of the Lauterpacht Centre for International Law at the University of Cambridge. Although Professor Crawford (as he then was) was not my doctoral supervisor, I was privileged to serve as one of his research assistants. He was characteristically unfailingly generous in taking an interest in my research, discussing various issues with which I was grappling, and providing sage advice, both during my time in Cambridge and long after I had left. Like so many others, I carry a debt that can never be discharged. As is evident from the other articles in this special volume, Judge Crawford's contributions to public international law were immense and covered a vast field, including State responsibility, international criminal law, State immu¬nity, international legal personality, the law of the sea, and the protection of human rights. The focus of this essay is on Judge Crawford's work in the field of international investment law, to which he made substantial contributions as a scholar, as an arbitrator, and as counsel, at a time when the field of inter¬national investment law was in a relatively embryonic stage of development. As a scholar, Judge Crawford's work in bringing the International Law Commission's work on State responsibility to a successful conclusion was significant and highly influential. He made the field of international investment law accessible through his co-authorship of a leading textbook on foreign invest¬ment disputes, and he delivered the seminal Freshfields Lecture on 'Treaty and Contract in Investment Arbitration', which was published in Arbitration International.1 Through his teaching and supervision of doctoral students, he inspired and influenced the thinking of a generation. As an arbitrator, Judge Crawford was a member of tribunals which issued significant awards on the relationship between claims for breach of contract and breach of treaty,2 the applicable standard of denial of justice in international law,3 the inter¬pretation of the 'umbrella clause',4 the minimum standard of treatment,5 the required standard for annulment under the ICSID Convention,6 the temporal jurisdiction of tribunals under investment treaties,7 the notion of 'investment' under Article 25 of the ICSID Convention,8 the scope and application of the 'police powers' exception,9 and the validity of the intra-EU (or 'Achmea') objection to the jurisdiction of tribunals constituted under the Energy Charter Treaty,10 among many other issues. As counsel, Judge Crawford appeared in many important investment cases too numerous to mention, in which he rep¬resented claimants as well as respondent States.11 The focus of this contribution is on the award of the tribunal constituted under Chapter 11 of the North American Free Trade Agreement ('NAFTA')12 in Waste Management v Mexico (No 2) ('Waste Management (No 2)'), in which Judge Crawford was appointed by the ICSID Secretary-General as the presid¬ing arbitrator.13 His co-arbitrators in that case were Mr Benjamin Civiletti, a United States national, who was appointed by the claimant, and Mr Eduardo Magallón Gómez, a Mexican national, who was appointed by the respondent.14 The dispute pertained to a Concession Agreement for the provision of waste disposal services which had been entered into by Acaverde, a Mexican wholly-owned subsidiary of the claimant, and the City of Acapulco, in the State of Guerrero, Mexico.15 The Concession Agreement envisaged that Acaverde would be the exclusive provider of waste disposal services in Acapulco, but Acaverde found that it in fact had competitors. Further difficulties arose from the Acapulco municipal authorities' failure to pay invoices issued by Acaverde, and to provide access to a landfill site in accordance with their obligations under the Concession Agreement. The State development bank, Banobras, had agreed to make payment in respect of Acaverde's invoices under a Line of Credit Agreement. However, it then ceased doing so, which caused Acaverde financial difficulties. Acaverde did not appear to be blameless in this situation; the Acapulco municipal authorities apparently had legitimate concerns about Acaverde's failure to keep the streets of the concession area 'consistently clean', and there were 'black spots' where the standard of cleaning was deficient.16 Certain disputes arose, and Acaverde commenced proceedings in domestic arbitration against the City of Acapulco under the Concession Agreement, and before the Mexican courts regarding the bank's non-performance of its obligations under the Line of Credit Agreement. The claim against the bank was unsuccessful (as was the subsequent appeal), and the proceedings against the City of Acapulco were discontinued. These and other matters gave rise to the dispute which was then submitted to the NAFTA tribunal, in which the claimant, Waste Management, Inc, argued that Mexico had breached its obli¬gations under Article 1105 (minimum standard of treatment) or alternatively Article 1110 (expropriation) of NAFTA.17 On 30 April 2004, the Waste Management (No 2) tribunal rendered its award, in which it dismissed the claimant's claims under both Articles 1105 and 1110. The award contains an important dictum on the content of the minimum standard of treatment under Article 1105 of NAFTA, which has been highly per¬suasive within the NAFTA context, in other investment treaty claims, and in the subsequent treaty practice of States. In light of the influence of the Waste Management (No 2) tribunal's dictum, it is appropriate to dedicate a few pages of this volume to an examination of this issue. Following this introduction, it is convenient to begin with the origins of the minimum standard of treatment as the customary international law stan¬dard and the emergence of the treaty-based fair and equitable treatment ('FET') standard (Part 2), before turning to the modern articulations of the minimum standard of treatment by early NAFTA tribunals (Part 3). The Waste Management (No 2) tribunal's dictum is then examined and its application by the tribunal discussed, along with the tribunal's determination of the claim for expropriation (Part 4), and the influence of the Waste Management (No 2) tribunal's dictum is then assessed (Part 5). It concludes that in a regime consist¬ing of ad hoc tribunals that issue awards which formally have no precedential value, the Waste Management (No 2) award is one of the more important and enduring arbitral decisions given its articulation of the content of the mini¬mum standard of treatment.