EconomyFinancialThe American Monterra files notice of arbitration against Mexico

The American Monterra files notice of arbitration against Mexico

The Monterra energy company, owned by the US-based KKR, submitted an arbitration notice to the Mexican government for the closure of one of its storage terminals, according to an article published Monday by The Wall Street Journal (WSJ).

The company would not yet be in international courts. Notice is a step prior to arbitration. After that, the company could continue with the process before an international court by referring to the trade agreement between Mexico, the United States and Canada.

According to the American newspaper, Monterra would have sent a notice to the Ministry of Economy to notify his intention. Investors are seeking, says the WSJ, a compensation of 667 million dollars plus interest and legal costs for the closure of a storage terminal in Tuxpan, Veracruz.

The document sent would include a 90-day reflection period for the Mexican government to allow the operation of the new account terminal. After that, the company could go to an international court to start the arbitration process.

The Ministry of Economy was consulted, but has not issued comments.

The WSJ article assures that the terminal was expropriated in violation of the commitments signed between the United States, Mexico and Canada. Monterra obtained a 30-year permit in May 2018 for the construction and operation of the Tuxpan terminal, after the opening of the sector.

“The Monterra investors are not yet in court. They have only notified Mexico of their “intention to submit claims to arbitration” under the T-MEC. The government of President López Obrador could respond to the notification by restoring Monterra’s rights to operate its facilities. But after a cooling-off period of 90 days, the company can go to arbitration before an international court”, says the WSJ article signed by Mary Anastasia O’Grady.

The terminal that is at the center of the dispute was temporarily closed at the beginning of last September because its operators supposedly did not have the necessary documentation that was required during an audit, the Argus agency reported at the time. But six months after the temporary closure, the asset is still out of operation.

“Mexico was not interested in the legality of the product stored in the Storage Terminal; its sole objective was to close the storage terminal to further Mexico’s protectionist policies,” says the dispute notice seen by the WSJ. The company accuses a series of simulated inspections in its facilities.

Since last year, the federal administration implemented The Mexican government has also tightened the rules for foreign trade in fuels. Just a few days ago, it resumed an agreement to reduce the validity of new import and export permits and previously it also canceled a series of authorizations.

In the text, the newspaper criticizes the energy policy of President López Obrador and assures that “any financial agreement that Mexico may be forced to pay is likely to dwarf the damage caused to the country’s reputation as a capital destination.”

Mexico has already received other arbitration notices during the six-year term. A few months ago, the American Talos did the same with respect to the Zama field, whose operation was transferred to the state-owned Pemex.

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