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EXHIBIT 4(a)(11)

 

 

AMENDED NOTICE OF ARBITRATION AND STATEMENT OF CLAIM

UNDER THE ARBITRATION RULES

OF THE

UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW

AND THE

 

THE NORTH AMERICAN FREE TRADE AGREEMENT

 

Between:

 

INTERNATIONAL THUNDERBIRD GAMING CORPORATION

Claimant / Investor

And

  GOVERNMENT OF MEXICO ("MEXICO")

Respondent / Party

 

 

Pursuant to Article 3 of the United Nations Commission on International TradeLaw ("UNCITRAL") and Articles 1116, 1117 and 1120 of the North AmericanFree Trade Agreement ("NAFTA"), the Claimant initiates recourse to arbitrationunder the UNCITRAL Rules of Arbitration (Resolution 31/98 Adopted by the GeneralAssembly on December 15, 1976).

A.             DEMAND THAT THE DISPUTE BE REFERRED TO ARBITRATION
Pursuant to Article 1120(1)(c) of the NAFTA, the Claimant hereby demands thatthe dispute between it and the Respondent be referred to arbitration under theUNCITRAL Rules of Arbitration. 
**B.             NAMES AND ADDRESSES OF THE PARTIES
Claimant /                 INTERNATIONAL THUNDERBIRD GAMING CORPORATION

Investor****                  THUNDERBIRD GREELEY INC.                               11545 West Bernardo Court Suite 307                               San Diego, California                               92127

Respondent /            GOVERNMENT OF THE UNITED MEXICAN STATES

Party**                        **Direccion General de Inversion Extranjera                               Secretaria de  Comercio y Fomento Industrial                               Avenida Insurgentes 1940, Colonia Florida                               Mexico D.F.                                01030 
**C.             REFERENCE TO THE ARBITRATION CLAUSE OR THE SEPARATE ARBITRATION AGREEMENT THATIS INVOKED
The Claimant invokes Section B of Chapter 11 of the NAFTA, and specificallyArticles 1116, 1117, 1120 and 1122 of the NAFTA, as authority for thearbitration.  Section B of Chapter 11 of the NAFTA sets out the provisionsconcerning the settlement of disputes between a Party and an investor of anotherParty.               
**D.             REFERENCE TO THE CONTRACT OUT OF OR IN RELATION TO WHICH THE DISPUTE ARISES
The dispute concerns Claimant's investments in Mexico and  damages resulting from breaches by the Government of the United Mexican States("Mexico") of its obligations under Section A of Chapter 11 of the NAFTA. 
**E.         THE GENERAL NATURE OFTHE CLAIM AND AN INDICATION OF THE AMOUNT INVOLVED
Facts

1.                 International Thunderbird Gaming Corporation is a Canadian Corporation("Thunderbird"), whose stock is traded on the Toronto Stock exchange (INB-www.thunderbirdgaming.com<http://www.thunderbirdgaming.com/>).  Its principal offices arein San Diego, California.  Thunderbird was involved in Indian gaming inCalifornia in the early 1990's. In the mid-1990's, Thunderbird shifted itactivities to Latin America. Since that time, it has been exclusively involvedin gaming and entertainment operations in Latin America. Thunderbird owns (inwhole or in part) and operates gaming facilities in Panama, Venezuela,Guatemala, and Nicaragua.  

2.                 In early 2000, Thunderbird began a dialogue with GOBERNACION (the MexicanDept of the Interior that by law has jurisdiction over all gaming activity andenforcement) to determine the legality of "skill machines."   Skillmachines are commonly understood in the gaming industry to differ from slotmachines in that the skill machine player is able to start and stop theactivity of the play, to make decisions about which games and which symbols tohold, and to affect, through his skill and dexterity, the outcome of the game.None of these elements is present with a slot machine where the player simplywaits after pulling the arm to see if he has won anything.

3.                 After numerous discussions with officials of GOBERNACION and in August,2000, Thunderbird petitioned GOBERNACION in writing for permission to operateand an opinion upon  whether current law permitted or prohibited theoperation of skill machines in Mexico. This request for permission and anopinion, known as "solicitud," is required under Mexican law to be formallyanswered by GOBERNACION. The answer is considered under Mexican law to belegally binding. In it's solicitud, Thunderbird not only made the request forclarification as to the legality. It also specifically identified the make andmodel of the skill machines it intended  to import and operate if theopinion was favorable.

4.                 GOBERNACION provided a favorable reply to Thunderbird's solicitud. Itstated that it did not have jurisdiction to exercise in this matter because, inits opinion, skill machines were not prohibited under  Mexican law. This opinion was a declaration by the governing authority that the activityThunderbird sought to engage in was not prohibited.

5.                 In reliance on this favorable and binding opinion, Thunderbird obtainedover 6.5 million dollars in financing from U.S. and Canadian investors andcommenced its investment activities in Mexico. Thunderbird  intended toeventually operate between 8 and 10 facilities in various locations throughoutthe country.  Between August 1, 2000 and August 1, 2001, Thunderbird openedfacilities in Matamoros, Nuevo Laredo and Reynosa. 

6.                 The first facility, known as "La Mina de Oro," was established inMatamoros, Mexico and opened for business in September, 2000. The secondfacility  was opened in Nuevo Laredo in February, 2001.  The thirdfacility opened in Reynosa in August, 2001. All three operations were built,equipped and operated by Thunderbird using Mexican employees.  Fullsecurity systems were implemented at each of the three facilities. All threefacilities  were immediately financially successful.

7.                 Thunderbird spent an additional 2.0 million dollars of its own funds andinvestor's funds on development of other sites.  Local permits from thestate and municipal authorities were required as per the legal "permit" ofGOBERNACION. Permits were obtained at  great  expense and effort. Development efforts included nearly every state in the Mexican republic. Permitswere sought and ratified in at least three additional locations by the end of year 2000.

8.                 Following a change in the federal government leadership, a new directorof gaming, Jose Guadalupe Vargas Barrera, was appointed in 2001. Thereafter,GOBERNACION began to provide markedly different, and inappropriate, treatment tothe Thunderbird and its investments.

9.                 Two weeks after it opened, and on February 9, 2001 Mr. Barrera orderedthe Nuevo facility to be closed after conducting a personal "visual inspection"of the facility.  It was reopened three weeks later with an acknowledgementby GOBERNACION legal officials that the closure order had been unlawful.

10.             At the same time that the Nuevo Laredo facility was allowed to re-open,the new officials of GOBERNACION requested that Thunderbird provide proof thatthe skill machines being used in its facilities were in fact "skill machines"and therefore were not being operated in violation of Mexican law. Officialsopenly admitted to possessing no familiarity with the distinction between "skillmachines" and games of chance, and indicated a willingness to work with theInvestor to resolve any questions that Mr. Barrera and the new administrationmight have. Thunderbird assured GOBERNACION that it would comply with thisrequest and that it was operating in full compliance with Mexican law.

11.             In July 2001, Thunderbird was summoned to Mexico City for an"administrative hearing".  In preparation for that hearing, Thunderbird hadcollected certifications from the machine manufacturers that the machines in usewere skill machines.  It had obtained affidavits from two witnessesrecognized worldwide as experts on the issues relating to the differencesbetween skill and slot machines. Thunderbird also produced an expert witness atthe hearing to answer any questions and provide a live demonstration of themachines in use.  In addition, Thunderbird provided an affidavit of anexpert witness obtained by the Mexican attorney general's office. That affidavitcertified the machines in question as skill machines.

12.              At the administrative proceeding,  Mr. Barrera showed no interestin even reviewing the evidence presented by Thunderbird, much less in providingThunderbird with a fair and impartial hearing.  Mr. Barrera advisedThunderbird that the previous "permit" issued by  GOBERNACION upon whichThunderbird had relied was nothing more than a "thesis."  Mr. Barreracontinually referred to the machines as "tragadolares," or "money sallower",terms that have neither any meaning nor any context within the gaming industry.Mr. Barrera had neither hired, nor consulted with, any gaming industry experts.He appeared to have no familiarity whatsoever with the concept of skillmachines. Mr. Barrera's agenda at the hearing was quite transparent: despiteGOBERNACION's previous approval of Thunderbird's activities and the promise of afair hearing, Mr. Barrera arbitrarily sought to demonstrate that there was someelement of chance in the operation of Thunderbird's equipment and that,therefore, the machines must somehow be prohibited under Mexican law.

13.             At the time of the July, 2001 administrative hearing, the Reynosafacility was under development by Thunderbird and due to be opened in August,2001. After the hearing with Mr. Barrera, Thunderbird was concerned about thepossibility of further arbitrary interference with its investments. Accordingly,Thunderbird representatives were in frequent contact with Mr. Barrera'sGOBERNACION superiors in an effort to insure there would be no adverse actionstaken with respect to Thunderbird investments. During this time, Thunderbird wasrepeatedly assured by the under-secretary of GOBERNACION,  Humberto AguilarCoronado, that Thunderbird's staff and executives were the "good guys," thatThunderbird had fully complied with all administrative requirements, and thatthere was no cause for concern.

14.             On October 11th, 2001, an attorney from GOBERNACION appearedat the office of Thunderbird's attorneys and served a 20-page document entitled"Administrative Findings and Order".  The document stated the machines usedby Thunderbird violated Mexican law because they were "tragadolares," andordered the immediate closure of the two sites in Matamoros and Nuevo Laredo. The report did not address Reynosa because it had not been in operation at thetime of the administrative process initiation.

15.             Within one hour of Thunderbird's receipt of the document, and in acarefully staged show, GOBERNACION officials arrived at  the Nuevo Laredoand Matamoros sites with dozens of Federal police officers. It closed down bothfacilities, threatening arrest, scaring customers and employees alike, andcausing a sensation of negative publicity in the local and national news media.Reynosa was not immediately closed down. But Thunderbird learned that federalpolice were preparing to take similar steps to interfere with the operation ofthis third site. Thunderbird temporarily closed Reynosa and sought injunctiverelief from the Mexican courts.

16.             Injunctive relief was granted by Juzgado de Distrito in the State ofTamaulipas on  October 29, 2001. The Reynosa facility was re-opened shortlythereafter.  Thereafter, Reynosa was shut down again by order of anappellate court.  Since then, Thunderbird has been prevented from operatingany of its facilities, including those in the planning stages before the otherswere closed.

17.             Since arbitrarily closing Thunderbird's facilities, GOBERNACION hascontinued to act in a highly duplicitous manner towards the Investor. Officialssuch as the Director of the Legal Department and the Secretary of GOBERNACIONassured Thunderbird representatives that the matter can be resolved throughconciliation while other GOBERNACION legal officials have made strenuous effortsto keep Thunderbird's facilities closed.  In fact, the Reynosa facility wasclosed at the very time the Claimant's Washington D. C. representative wasreceiving assurances from the Mexican Ambassador that the Government of Mexicowas working  to resolve the problems.

18.             Further, while Thunderbird has been subjected to arbitrary and unfairtreatment and has had its facilities have closed by GOBERNACION officials,competitors operating in the same economic sectors as Thunderbird have continuedto operate similar facilities and, in many cases, have done so employingequipment which is functionally identical to that which was being used in theThunderbird facilities. These competitors include, but were not limited to, thefollowing firms: Club 21 operated by Sr. Guardia and Reflejo's operated by DonBradley**Applicable Law**
19.             The Claimant alleges that Mexico has breached its obligations underChapter 11 of the NAFTA including the following provisions:

(i)                Article 1102 - National Treatment;

(ii)               Article 1103 - Most-Favored Nation Treatment;

(iii)              Article 1105 - Minimum Standard of Treatment; and

(iv)              Article 1110 - Expropriation. 

20.             NAFTA Article 1102 provides that the NAFTA Parties must provide treatmentto investors from other NAFTA Parties, and investments by such investors intheir territory, that is no less favorable than the treatment that they provideto their own investors and investments.  NAFTA Article 1103 requires thesame level of treatment *Vis a Vis* other foreign investors andinvestments. 

21.             It is well established in international law that "treatment no lessfavorable" means the best treatment that is provided - in form or in result -that is provided to any other comparable investor or investment.  Thestandard of comparison is objective and focused upon ensuring that an effectiveequality of competitive opportunity is provided to all protected investors andtheir investments. 

22.             NAFTA Article 1104 requires NAFTA Parties to provide the better ofnational treatment and MFN treatment, meaning that the best treatment beingprovided to any one of Thunderbird's competitors (or other comparable investorsor investments) in Mexico is the same treatment that must be provided toThunderbird. 

23.             NAFTA Article 1105 requires "treatment in accordance with internationallaw, including fair and equitable treatment and full protection and security." Such treatment includes, but is not limited to, the obligation to act in goodfaith in exercise of sovereign regulatory authority; to provide treatment thatis both procedurally and substantively fair; and in no case treatment any lessthan whatever is required under international law.   

24.             In the event that the statement of interpretation issued on July 31, 2001by the NAFTA Free Trade Commission ("FTC") in any way lessens the character orquality of treatment that must be provided to an investment in accordance withNAFTA Article 1105, the investor hereby invokes NAFTA Article 1103 to requireMexico to accord to it treatment no less favorable than that which Mexico hasagreed to provide to investors and their investments under Article 9-06(1) ofthe Chile-Mexico Free Trade Agreement. 

25.             NAFTA Article 1110 permits Mexico to impose measures which are tantamountto the expropriation of an "investment" in its territory, so long as suchmeasures are imposed for a valid public purpose, are non-discriminatory, are inaccordance with due process of law and all other requirements of Article 1105;and so long as full, fair and effective compensation is provided to the investorin accordance with the terms set out in the remainder of Article 1110. Regulatory treatment rises to the level of an expropriation when itsubstantially interferes with the ability of an investor to operate, orotherwise enjoy the benefits of, its investment. 
**Law Applied to the Facts**
26.             Under Articles 1102, 1103 and 1104, Mexico is required to provideThunderbird and its investments in Mexico with treatment no less favorable thanthe best treatment that it is providing to any one of its competitors in Mexico. The best level of treatment being provided to at least some of Thunderbird'scompetitors is the ability to continue their operations unmolested byGOBERNACION officials.   

27.             Moreover, the best level of treatment being provided to other comparableinvestors and their investments by Mexico is that which includes honoringcommitments made by officials such as those contained within the solicitudewhich was obtained, and relied upon, by Thunderbird.   

28.             The lesser quality of treatment which has been provided to Thunderbirdand its investments, in violation of NAFTA Articles 1102, 1103 and 1104, hascaused considerable losses to Thunderbird and its investments. 

29.             The arbitrary and non-transparent manner in which Thunderbird and itsinvestments have been treated by Mexico, through GOBERNACION, violates thestandard of treatment required under NAFTA Article 1105, because it is neitherfair nor equitable.  By permitting GOBERNACION officials to treatThunderbird and its investments in a discriminatory and arbitrary fashion alsoconstitutes a failure to provide the standard of "full protection and security"required under NAFTA Article 1105.  

30.             Mexico has also violated customary international law requirements offairness and equity, as well as the international law principle of good faith,by first assuring the investor that its investments would be permitted tooperate in Mexico and then later reneging on those assurances, withoutsufficient cause, notice or due process - resulting in the permanent closure ofthe Investor's facilities, despite assurances to the contrary. 

31.             Each of these obligations must be honoured by Mexico regardless ofwhether the July 31, 2001 FTC statement is adjudged to have modified thestandard of treatment owed under NAFTA Article 1105.   Because Mexicofailed to meet its obligations under Article 1105, Thunderbird and itsinvestments have suffered considerable losses. 

32.             The level of interference displayed by Mexico in its treatment ofThunderbird's investments is nothing short of total deprivation.  Thefacilities are closed, and therefore useless to the investor.  It makes nodifference whether GOBERNACION officials officially transferred title to theseinvestments into another's hands or merely rendered them inutile.  Theeffect is tantamount to expropriation of Thunderbird's investments in Mexico,contrary to Mexico's obligations under NAFTA Article 1110. 

33.             The manner in which GOBERNACION officials expropriated Thunderbird'sinvestments was not in accordance with due process or Article 1105.  Infact, the taking was neither for a public purpose nor was it imposed in anon-discriminatory manner.  Finally, Mexico has failed to compensateThunderbird in the manner required under Article 1110. 
**F.            RELIEF OR  REMEDY  SOUGHT
1.             The Investor claims damages for the following:

                                                        i.           Damages of not less than USD$100,000,000;

                                                      ii.           Costs associated with these proceedings, including all professional feesand disbursements;

                                                     iii.           Pre-award and post-award interest at a rate to be fixed by the Tribunal;

                                                    iv.           Tax consequences of the award to maintain the integrity of the award; and

                                                      v.           Such other and further relief that counsel may advise and that thisTribunal may deem appropriate. 
**G.            APPOINTMENT OF ARBITRATORS
Pursuant to Article 1123 of the NAFTA, the Investor and the Party have agreedon the number of arbitrators, which shall be three, and on the procedure forappointment.  One arbitrator is to be appointed by each of the disputingparties and the third, which is the presiding arbitrator, is appointed byagreement of the disputing parties.DATE OF ISSUE: 26 June 2003

                       

 
***_________________________*Lead Counsel for the Investor** /s/ James D. Crosby *
James D. CrosbyAttorney at Law13025 Danielson Street, Suite 107Poway, Ca. 92064Phone: (858) 486-0085
*Fax: (858) 486-2838*
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