Under the NAFTA, First Majestic started a case against Mexico for damages on its investments.
The company is engaged in the production, development, exploration and acquisition of mineral properties with a focus on silver production in Mexico.
Fisrt Majestic owns and operates three producing mines in Mexico:
- San Dimas gold/silver mine in the state of Durango.
- The Santa Elena Gold / Silver Mine in the State of Sonora.
- La Encantada Silver Mine in the State of Coahuila.
The company has already submitted a Request for Arbitration to the International Center for Settlement of Investment Disputes (ICSID), on its own behalf and on behalf of Primero Empresa Minera (PEM), its subsidiary in Mexico.
Chapter 11 of NAFTA establishes a mechanism for the resolution of controversies that ensures both equal treatment between investors of the parties, in accordance with the principle of international reciprocity, and due legal process before an impartial tribunal.
A NAFTA investor who alleges that a host government has violated its investment obligations may choose one of the following arbitration mechanisms: The ICSID of the World Bank; the ICSID Additional Facility Rules; and the rules of the United Nations Commission on International Trade Law (UNCITRAL Rules).
The company also owns three temporarily suspended mines and a fourth that is now under care and maintenance:
- San Martín Silver Mine in the State of Jalisco.
- La Parrilla Silver Mine in the State of Durango
- The Del Toro Silver Mine in the State of Zacatecas
- La Guitarra Silver Mine in the State of Mexico
In addition, it has two advanced-stage silver development projects in Mexico, the La Luz Silver Project in the State of San Luis Potosí and the La Joya Silver Project in the State of Durango, as well as several exploration projects in Mexico.
Until the end of March 2020, the company also owned the Plomosas Silver Project, an additional advanced-stage silver project located in the state of Sinaloa.
Now this Plomosas Silver Project has been acquired by GR Silver Mining Ltd. through the purchase of all the issued and outstanding shares of Minera La Rastra S.A. de C.V. which owns 100% of the Plata Plomosas Project.
“Despite repeated attempts by the Company to encourage the Government of Mexico to enter into good faith negotiations to resolve the dispute, the Government has refused to participate,” the company said in a statement.
According to First Majestic, the Government’s actions are contrary to the terms of the Advance Price Agreement, which established the methodology to determine PEM’s income and taxes for fiscal years 2010 to 2014 and which, according to the Company’s Mexican lawyer , remains valid in accordance with the Tax Code of the Mexican Federation unless and until it is annulled by a Court of last instance.
First Majestic has instructed its international arbitration attorney in Washington DC, Arent Fox LLP, to initiate the process under ICSID rules to constitute a neutral and independent arbitration tribunal to resolve the dispute under NAFTA Chapter 11 with the Government of Mexico.
Production from its mines is projected to be between 12.5 and 13.9 million ounces of silver or between 20.6 and 22.9 million ounces of silver equivalent in 2021.
USMCA VS NAFTA
In force since July 2020 and a substitute for NAFTA, the Agreement between Mexico, the United States and Canada (USMCA) would eliminate Investor-State Dispute Resolution (ISDS) for Canada, after the termination of the NAFTA.
At the same time, it maintains ISDS only between the United States and Mexico for claimants with respect to government contracts in the oil, natural gas, power generation, infrastructure, and telecommunications sectors; and maintains ISDS between the United States and Mexico in other sectors, provided the claimant first exhausts domestic remedies.