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 Trade
Law ("UNCITRAL") and Articles 1116, 1117 and 1120 of the North American
Free Trade Agreement ("NAFTA"), the Claimant initiates recourse to arbitration
under the UNCITRAL Rules of Arbitration (Resolution 31/98 Adopted by the General
Assembly 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 that
the dispute between it and the Respondent be referred to arbitration under the
UNCITRAL 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 THAT
IS INVOKED


The Claimant invokes Section B of Chapter 11 of the NAFTA, and specifically
Articles 1116, 1117, 1120 and 1122 of the NAFTA, as authority for the
arbitration.  Section B of Chapter 11 of the NAFTA sets out the provisions
concerning the settlement of disputes between a Party and an investor of another
Party.              


 


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 OF
THE 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 are
in San Diego, California.  Thunderbird was involved in Indian gaming in
California in the early 1990's. In the mid-1990's, Thunderbird shifted it
activities to Latin America. Since that time, it has been exclusively involved
in gaming and entertainment operations in Latin America. Thunderbird owns (in
whole or in part) and operates gaming facilities in Panama, Venezuela,
Guatemala, and Nicaragua.  

2.                 
In early 2000, Thunderbird began a dialogue with GOBERNACION (the Mexican
Dept of the Interior that by law has jurisdiction over all gaming activity and
enforcement) to determine the legality of "skill machines."   Skill
machines are commonly understood in the gaming industry to differ from slot
machines in that the skill machine player is able to start and stop the
activity of the play, to make decisions about which games and which symbols to
hold, 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 simply
waits 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 operate
and an opinion upon  whether current law permitted or prohibited the
operation of skill machines in Mexico. This request for permission and an
opinion, known as "solicitud," is required under Mexican law to be formally
answered by GOBERNACION. The answer is considered under Mexican law to be
legally binding. In it's solicitud, Thunderbird not only made the request for
clarification as to the legality. It also specifically identified the make and
model of the skill machines it intended  to import and operate if the
opinion was favorable.

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

5.                 
In reliance on this favorable and binding opinion, Thunderbird obtained
over 6.5 million dollars in financing from U.S. and Canadian investors and
commenced its investment activities in Mexico. Thunderbird  intended to
eventually operate between 8 and 10 facilities in various locations throughout
the country.  Between August 1, 2000 and August 1, 2001, Thunderbird opened
facilities in Matamoros, Nuevo Laredo and Reynosa. 

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

7.                 
Thunderbird spent an additional 2.0 million dollars of its own funds and
investor's funds on development of other sites.  Local permits from the
state and municipal authorities were required as per the legal "permit" of
GOBERNACION. Permits were obtained at  great  expense and effort. 
Development efforts included nearly every state in the Mexican republic. Permits
were 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 director
of gaming, Jose Guadalupe Vargas Barrera, was appointed in 2001. Thereafter,
GOBERNACION began to provide markedly different, and inappropriate, treatment to
the Thunderbird and its investments.

9.                 
Two weeks after it opened, and on February 9, 2001 Mr. Barrera ordered
the Nuevo facility to be closed after conducting a personal "visual inspection"
of the facility.  It was reopened three weeks later with an acknowledgement
by 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 that
the skill machines being used in its facilities were in fact "skill machines"
and therefore were not being operated in violation of Mexican law. Officials
openly admitted to possessing no familiarity with the distinction between "skill
machines" and games of chance, and indicated a willingness to work with the
Investor to resolve any questions that Mr. Barrera and the new administration
might have. Thunderbird assured GOBERNACION that it would comply with this
request 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 had
collected certifications from the machine manufacturers that the machines in use
were skill machines.  It had obtained affidavits from two witnesses
recognized worldwide as experts on the issues relating to the differences
between skill and slot machines. Thunderbird also produced an expert witness at
the hearing to answer any questions and provide a live demonstration of the
machines in use.  In addition, Thunderbird provided an affidavit of an
expert witness obtained by the Mexican attorney general's office. That affidavit
certified the machines in question as skill machines.

12.             
 At the administrative proceeding,  Mr. Barrera showed no interest
in even reviewing the evidence presented by Thunderbird, much less in providing
Thunderbird with a fair and impartial hearing.  Mr. Barrera advised
Thunderbird that the previous "permit" issued by  GOBERNACION upon which
Thunderbird had relied was nothing more than a "thesis."  Mr. Barrera
continually 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 skill
machines. Mr. Barrera's agenda at the hearing was quite transparent: despite
GOBERNACION's previous approval of Thunderbird's activities and the promise of a
fair hearing, Mr. Barrera arbitrarily sought to demonstrate that there was some
element 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 Reynosa
facility was under development by Thunderbird and due to be opened in August,
2001. After the hearing with Mr. Barrera, Thunderbird was concerned about the
possibility of further arbitrary interference with its investments. Accordingly,
Thunderbird representatives were in frequent contact with Mr. Barrera's
GOBERNACION superiors in an effort to insure there would be no adverse actions
taken with respect to Thunderbird investments. During this time, Thunderbird was
repeatedly assured by the under-secretary of GOBERNACION,  Humberto Aguilar
Coronado, that Thunderbird's staff and executives were the "good guys," that
Thunderbird had fully complied with all administrative requirements, and that
there was no cause for concern.

14.             
On October 11th, 2001, an attorney from GOBERNACION appeared
at the office of Thunderbird's attorneys and served a 20-page document entitled
"Administrative Findings and Order".  The document stated the machines used
by Thunderbird violated Mexican law because they were "tragadolares," and
ordered 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 the
time of the administrative process initiation.

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

16.             
Injunctive relief was granted by Juzgado de Distrito in the State of
Tamaulipas on  October 29, 2001. The Reynosa facility was re-opened shortly
thereafter.  Thereafter, Reynosa was shut down again by order of an
appellate court.  Since then, Thunderbird has been prevented from operating
any of its facilities, including those in the planning stages before the others
were closed.

17.             
Since arbitrarily closing Thunderbird's facilities, GOBERNACION has
continued to act in a highly duplicitous manner towards the Investor. Officials
such as the Director of the Legal Department and the Secretary of GOBERNACION
assured Thunderbird representatives that the matter can be resolved through
conciliation while other GOBERNACION legal officials have made strenuous efforts
to keep Thunderbird's facilities closed.  In fact, the Reynosa facility was
closed at the very time the Claimant's Washington D. C. representative was
receiving assurances from the Mexican Ambassador that the Government of Mexico
was working  to resolve the problems.

18.             
Further, while Thunderbird has been subjected to arbitrary and unfair
treatment and has had its facilities have closed by GOBERNACION officials,
competitors operating in the same economic sectors as Thunderbird have continued
to operate similar facilities and, in many cases, have done so employing
equipment which is functionally identical to that which was being used in the
Thunderbird facilities. These competitors include, but were not limited to, the
following firms: Club 21 operated by Sr. Guardia and Reflejo's operated by Don
Bradley



Applicable Law


19.             
The Claimant alleges that Mexico has breached its obligations under
Chapter 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 treatment
to investors from other NAFTA Parties, and investments by such investors in
their territory, that is no less favorable than the treatment that they provide
to their own investors and investments.  NAFTA Article 1103 requires the
same level of treatment Vis a Vis other foreign investors and
investments.

 

21.             
It is well established in international law that "treatment no less
favorable" means the best treatment that is provided - in form or in result -
that is provided to any other comparable investor or investment.  The
standard of comparison is objective and focused upon ensuring that an effective
equality of competitive opportunity is provided to all protected investors and
their investments.

 

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

 

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

 

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

 

25.             
NAFTA Article 1110 permits Mexico to impose measures which are tantamount
to the expropriation of an "investment" in its territory, so long as such
measures are imposed for a valid public purpose, are non-discriminatory, are in
accordance 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 investor
in accordance with the terms set out in the remainder of Article 1110. 
Regulatory treatment rises to the level of an expropriation when it
substantially interferes with the ability of an investor to operate, or
otherwise enjoy the benefits of, its investment.

 


Law Applied to the Facts


26.             
Under Articles 1102, 1103 and 1104, Mexico is required to provide
Thunderbird and its investments in Mexico with treatment no less favorable than
the 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's
competitors is the ability to continue their operations unmolested by
GOBERNACION officials.  

 

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

 

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

 

29.             
The arbitrary and non-transparent manner in which Thunderbird and its
investments have been treated by Mexico, through GOBERNACION, violates the
standard of treatment required under NAFTA Article 1105, because it is neither
fair nor equitable.  By permitting GOBERNACION officials to treat
Thunderbird and its investments in a discriminatory and arbitrary fashion also
constitutes 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 of
fairness and equity, as well as the international law principle of good faith,
by first assuring the investor that its investments would be permitted to
operate in Mexico and then later reneging on those assurances, without
sufficient cause, notice or due process - resulting in the permanent closure of
the Investor's facilities, despite assurances to the contrary.

 

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

 

32.             
The level of interference displayed by Mexico in its treatment of
Thunderbird's investments is nothing short of total deprivation.  The
facilities are closed, and therefore useless to the investor.  It makes no
difference whether GOBERNACION officials officially transferred title to these
investments into another's hands or merely rendered them inutile.  The
effect 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's
investments was not in accordance with due process or Article 1105.  In
fact, the taking was neither for a public purpose nor was it imposed in a
non-discriminatory manner.  Finally, Mexico has failed to compensate
Thunderbird 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 fees
and 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 this
Tribunal may deem appropriate.

 


G.            
APPOINTMENT OF ARBITRATORS


Pursuant to Article 1123 of the NAFTA, the Investor and the Party have agreed
on the number of arbitrators, which shall be three, and on the procedure for
appointment.  One arbitrator is to be appointed by each of the disputing
parties and the third, which is the presiding arbitrator, is appointed by
agreement of the disputing parties.



DATE OF ISSUE: 26 June 2003

                       


 


_________________________

Lead Counsel for the Investor


 /s/ James D. Crosby

 


James D. Crosby

Attorney at Law

13025 Danielson Street, Suite 107

Poway, Ca. 92064



Phone: (858) 486-0085


Fax: (858) 486-2838