ICSID Orders Mexico to Pay $15.9 Million Over Calica Quarry, Leaves AMLO-Era Claims Pending

Playa del Carmen, Quintana Roo — The World Bank’s International Centre for Settlement of Investment Disputes (ICSID) has ruled that Mexico violated its investor-protection obligations under NAFTA when it partially closed a limestone quarry operated by Calica south of Playa del Carmen, and ordered the government to pay $15,884,117.

The ruling, issued Wednesday, resolved only the earliest claims in a case in which the U.S.-owned company, a subsidiary of Vulcan Materials, had sought more than $1.7 billion in damages, including for the quarry’s full shutdown during the administration of Andrés Manuel López Obrador. Both sides will split the fees owed to the panel members, a total of $2,499,514.

The three-member tribunal was chaired by Dutch arbitrator Albert Jan van den Berg. It left pending the claims tied to López Obrador’s government, noting that the arbitration began in 2019, when NAFTA was still in force, while the later actions occurred under the USMCA, which replaced it.

Breach of Fair Treatment Rules

According to the 530-page ruling, Mexico violated Article 1105 of NAFTA, which guarantees fair and equitable treatment, by shutting down the site known as El Corchalito in January 2018. The property forms part of Calica’s concession zone for extracting stone material.

At the time, the Federal Attorney’s Office for Environmental Protection (Profepa) took over the site after determining that the company had exceeded its limestone extraction permit by more than 2.15 hectares, according to a statement issued at the time.

Calica challenged the move through injunctions and also contested a fine of 7,985,053 pesos imposed by Profepa. Those original grievances were the basis of the case filed with ICSID, docketed as No. ARB/19/1, Vulcan v. United Mexican States.

“The Respondent’s conduct with respect to the Claimant’s investment in El Corchalito was arbitrary, notoriously unfair, unlawful and idiosyncratic, and involved an absence of due process leading to a result that offends judicial discretion with regard to: (i) Profepa’s refusal to take into account expert evidence,” the ruling states.

At the end of July, President Claudia Sheinbaum declined to discuss the matter in depth after the arbitration decision was announced without further details.

AMLO-Era Claims Still Unresolved

Although the original complaint concerned the 2018 closure under President Enrique Peña Nieto, Calica focused its claims on actions taken during López Obrador’s term, which intensified from 2022 and pushed its compensation demand above $1.7 billion.

The company described a systematic campaign waged from the daily presidential news conference at the National Palace, the cancellation of its customs permit and a military takeover of the Punta Venado port in Playa del Carmen, from which it shipped extracted material to the United States.

Those actions culminated in the closure of the roughly 2,000-hectare extraction zone, which now forms part of a protected natural area decreed by López Obrador at the end of his term, adding legal safeguards against any attempt to resume quarrying.

“On May 2, 2022, Profepa inspectors arrived at the Calica site at night. The inspectors were accompanied by more than 30 Mexican Navy infantry, armored vehicles, drones and naval vessels, which took up positions at the main entrance and the maritime access of the Calica facilities,” Calica said in testimony submitted to ICSID.

The tribunal declined to analyze those points, arguing that they occurred under USMCA rules rather than NAFTA, the framework the company invoked when it filed the arbitration.

A Vulcan source cited by the newspaper Proceso said ICSID will examine those claims at a later stage, though the ruling contains no legal element indicating how the case will proceed.

Calica, which began operating in 1986 under a series of PRI administrations, remains idle. In its decision, ICSID upheld the claim for monetary compensation rather than ordering the quarry to reopen.