Source: https://jusmundi.com/en/document/decision/en-international-thunderbird-gaming-corporation-v-the-united-mexican-states-memorandum-opinion-on-the-petition-to-set-aside-the-award-u-s-district-court-for-the-district-of-columbia-wednesday-14th-february-2007
Timestamp: 2020-06-04 07:06:28
Document Index: 769100613

Matched Legal Cases: ['§ 1', '§ 201', '§ 3301', 'art. 1120', '§ 1605', '§ 1330', '§ 9']

Thunderbird v. Mexico, Memorandum Opinion (on the petition to set aside the award), U.S. District Court for the District of Columbia, 14 Feb 2007
Memorandum Opinion (on the petition to set aside the award), U.S. District Court for the District of Columbia
Thunderbird, seeking to undertake investment activities in Mexico, sought via a solicitation ("Solicitud") to government officials an opinion ("Opinion") regarding the legality of certain types of entertainment machines. Petition, Ex. C (Menendez-Tlacatelpa Ltr. to Director General de Gobierno de la Secretaria de Gobernacion, Aug. 3, 2000), Ex. D (Aceves Ltr. to Menendez-Tlacatelpa, 15 Aug. 2000). As described in the Solicitud, the machines were standalone "skill machines" that tested their users' abilities, without the involvement of luck or betting. Solicitud ¶ 7. In the responsive Opinion, the government opined that so long as the machines functioned as they were described in the Solicitud (that is, without the intervention of luck or gambling), they would be permissible for commercial use and would fall outside the regulatory jurisdiction of the Mexican gaming authority, the Secretariat de Gobernacion. Opinion at 1-2.
Thunderbird responded by filing a request for an arbitration pursuant to the North American Free Trade Agreement ("NAFTA"), which provides protections to foreign investors against discrimination and expropriation without fair compensation.1 The arbitration hearings were held in Washington, D.C., and the tribunal issued an award in favor of Mexico, with costs and partial fees also assessed in Mexico's favor. Petition, Ex. A ("Award"). The total award amounted to $1,252,862. With this action, Thunderbird petitions the court to vacate the award, arguing that the tribunal acted in manifest disregard of the law. Mexico moves, in turn, for confirmation, recognition, and enforcement of the award pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (2006), and Article VI of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention"). See 9 U.S.C. § 201 (incorporating the Convention into United States law).2
NAFTA establishes a mechanism by which private foreign parties may initiate an arbitration against a party government for violations of the treaty's investment-related nondiscrimination requirements. NAFTA, U.S.-Mex.-Can., Chapter 11, Section B, 32 I.L.M. 605, 639 (1993); see also NAFTA Implementation Act, Pub. L. No. 103-182, 107 Stat. 2057 (1993), codified at 19 U.S.C. §§ 3301-3473. In addition to imposing certain procedural requirements, the agreement mandates that, depending on the nationality of the private party and the nation alleged to have violated its obligations, certain rules must apply to NAFTA arbitrations. In this case, NAFTA required that the Thunderbird arbitration be conducted pursuant to the rules of the United Nations Commission on International Trade Law ("UNCITRAL"). NAFTA art. 1120; see also UNCITRAL Arbitration Rules, http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1976Arbitration_rules.html
This court has subject matter jurisdiction over this action pursuant to the Foreign Sovereign Immunities Act. 28 U.S.C. § 1605(a)(1),(6). Specific personal jurisdiction exists due to the effectuation of service on Mexico. Id. § 1330; see also Practical Concepts, Inc. v. Republic of Bolivia, 811 F.2d 1543, 1548 n.11 (D.C. Cir. 1987) ("[U]nder the FSIA, subject matter jurisdiction plus service of process equals personal jurisdiction.")
Courts have long recognized that judicial review of an arbitration award is extremely limited. United Paperworkers Int’l Union v. Misco, Inc., 484 U.S. 29, 37-38 (1987); Kanuth v. Prescott, Ball & Turben, Inc., 949 F.2d 1175, 1178 (D.C. Cir. 1991). A court may vacate an award only if there is a showing that one of the limited circumstances enumerated in the Federal Arbitration Act ("FAA") is present, or if the arbitrator acted in manifest disregard of the law. LaPrade v. Kidder, Peabody & Co., 246 F.3d 702, 706 (D.C. Cir. 2001). Thunderbird bears the heavy burden of establishing that vacatur of the arbitration award is appropriate. Al-Harbi v. Citibank, N.A., 85 F.3d 680, 683 (D.C. Cir. 1996); see also LaPrade, 246 F.3d at 706. Furthermore, in the absence of a legal basis to vacate, this court has no discretion but to confirm the award. 9 U.S.C. § 9; Bryson v. Gere, 268 F. Supp. 2d 46, 54 (D.D.C. 2003).
This argument rests, of course, on the assumption that Thunderbird satisfied its burden to prove a prima facie case. Though nowhere in the award does the tribunal articulate in any detail what, precisely, would be required for such a showing to be made, it appears that the tribunal concluded that Thunderbird had not met its initial burden. Thunderbird's claim was essentially one of detrimental reliance: it sought confirmation from officials that it could operate its gaming machines, but was discriminated against when the government, notwithstanding the Opinion providing that confirmation, closed the facilities established in reliance upon the Opinion. Looking only to the Solicitud and Opinion (which were both put into evidence by Thunderbird), along with evidence regarding Thunderbird's investment activities and the nature of the machines at Thunderbird's facilities, the tribunal determined that there was no detrimental reliance. According to the award, the Secretariat did not discriminate when it opined that the machines described in the Solicitud would be legal in Mexico, nor did it discriminate when it closed facilities whose machines materially differed from the Solicitud's descriptions.3 Nor did Thunderbird reasonably rely to its detriment on the Opinion, since that document dealt only with machines that did not involve luck or gambling, and Thunderbird's actual machines did involve luck. Moreover, Thunderbird's investment activities showed that Thunderbird engaged in its plans to use those machines prior to and regardless of the issuance of the Opinion. Because Thunderbird's own evidence failed to show a violation of international law, additional rebuttal evidence was therefore unnecessary. In any event, for this court to disturb the award, it would have to be plainly manifest that the tribunal both (1) determined that Thunderbird had met its prima facie burden and (2) refused to require Mexico to overcome the resulting presumption of a violation of international law. Otherwise, this court would be asked to improperly assess the factual question of whether that prima facie burden had been met in the first instance. See Teamsters Local Union No. 61 v. United Parcel Serv., Inc., 272 F.3d 600, 604 (D.C. Cir. 2001) (courts do not review "claims of factual or legal error" by arbitrators). Neither of these actions is apparent from the award, and vacatur is therefore unwarranted.
It appears that evidence regarding the nature of Thunderbird's machines was submitted by Mexico. To the extent this is true, it demonstrates that even if Thunderbird met its prima facie burden, that showing was, in fact, rebutted by evidence submitted by Mexico. Because the tribunal relied on that evidence in reaching its conclusion, it follows that the tribunal did not entirely disregard the burdens of proof
Second, Thunderbird alleges that the tribunal exceeded its authority by determining that Thunderbird's machines were illegal under Mexican law. The tribunal made no such determination. Indeed, it was careful to make this point clear. Award ¶¶ 125-27. Its conclusion was that because Thunderbird's machines differed from those described in the Solicitud (and, by extension, the Opinion), a showing of detrimental reliance had not been made. Ibid. Third, Thunderbird takes issue with a purported "finding" that Thunderbird had engaged in bribery. Here again, there was no such finding. Indeed, the panel only discussed Thunderbird's "success fee" arrangement in explaining that the tribunal was not relying on that evidence in reaching its decision. Id. ¶ 150.