Mexico has historically adopted a position in favour of investor–state arbitration, by ratifying the North America Free Trade Agreement in 1994, which shaped much of the modern practice and interpretation of investment–state practice. NAFTA is no longer in place, but Mexico has agreed to continue being part of the United States–Mexico–Canada Agreement (USMCA) and specifically Chapter 14, which provides for investor–state arbitration; by contrast, Canada opted out of this Chapter and the possibility to entertain arbitration under the USMCA.

While the USMCA has a narrower scope of investments subject to treaty protection and grants narrower standards of protection, it is public record that the Trump administration and US Trade Representative Robert Lighthizer consider investor–state dispute settlement (ISDS) entered into during the USMCA negotiations to have an “America first” agenda; Lighthizer even characterised the mechanism as “political risk insurance for outsourcing”. Therefore, while Chapter 14 is part of an agreement to which Mexico is a party, it was not Mexico that favoured the weakening of the investor–state provisions in the treaty.

Mexico has not announced nor taken any action to terminate existing treaties that provide for investor–state arbitration. In fact, since the USMCA entered into force, Mexico has not withdrawn from any of the 35 current bilateral investment treaties or free trade agreements that conform to the foreign investment protection architecture to which Mexico is part, and has also entered into at least one additional BIT.

Mexico is part of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). It also joined the ICSID Convention in 2018 – a meaningful step towards Mexico’s inclusion in the main arbitral instruments after almost two decades actively participating in investor–state arbitration outside of the ICSID Convention and throughout the ICSID Additional Facility Rules. Mexico is also part of the Inter-American Convention on International Commercial Arbitration which, like the New York Convention, provides a favourable regime for the enforceability of arbitration agreements and awards.

Mexico has seen an increase in the use of investor–state arbitration in the past seven years. This was largely triggered by the NAFTA sunset clause, which allowed for a three-year period in which to submit claims under its Chapter 11 after NAFTA was terminated, thereby increasing the number of claims seeking broader protections.

Third-party funding has also played a part in the overall increase in investor–state arbitration, considering that one of the main obstacles in the use of ISDS mechanisms is costs.

Nevertheless, litigation is still the most common dispute resolution mechanism, even if the claimant and the subject matter of the case may qualify as an investor and as a protected investment under an applicable investment protection treaty.

Mexico has seen an increase in the number of arbitrations since 2018 (the first term of the Morena presidential administration under president López Obrador), with certain industries seeing a rising number of cases.

• The mining sector has seen an increase in cases involving investor–state arbitration, spreading from the nationalisation of the lithium industry in 2023 (Bacanora Lithium, Sonora Lithium and Ganfeng International Trading v Mexico) to the termination of mining projects and concessions due to alleged lack of feasibility concerns (Almaden Minerals and Almadex Minerals v Mexico). Some of these cases arose from the López Obrador administration’s campaign against the mining industry, which could explain the increase in claims within this sector.
• Denial of justice claims have seen an increase following the Lion Mexico Consolidated v Mexico case, where Mexico was liable for a claim of this nature for the first time. Since the filing of the Lion case in 2015, at least two additional cases have been brought forward. Mexico was found not to be liable for this alleged conduct in one case (B-Mex v Mexico), but there is at least one other case involving this type of claim that is yet to be decided (Arbor Confections Inc., Mark Alan Ducoesky and Brad Ducorsky v Mexico).
• The mobility sector has had an increase in cases involving claims for the illegal termination of concessions in such industry. From the termination of concessions involving the government-supported app for taxi cabs in Mexico City (L1bre Holding v Mexico) to the termination of parking meter concessions by the Mexico City Mobility Department (Doups Holdings v Mexico), Mexico has seen an unprecedented increase in cases arising from this industry.
• The insurance industry has also been involved in recent ISDS cases against Mexico, in connection with tax measures. In particular, the reimbursement of value added tax (VAT) payments based on the VAT credit mechanism (VAT paid may be credited against VAT collected) provided for in the Mexican VAT law and the Mexican government’s denial of such reimbursements have led to at least two recent cases (Allianz v Mexico and Axa v Mexico).

Two recent investor–state arbitrations are worth highlighting.

Lion Consolidates v Mexico

This case issued the first decision against Mexico on a denial of justice claim. As part of its decision, the arbitral tribunal interpreted Article 1105 of NAFTA by finding, among other things, that the Mexican judiciary never corrected certain flaws of a judicial proceeding, which affected the claimant’s right and opportunity to appear in a proceeding, and eventually cancelled a guarantee in its favour. The award also looked into the disregarding of municipal law as a basis to find a denial of justice.

The Lion decision also shed light on the standard of reasonability needed to exhaust local remedies and allow the judicial system to correct itself before recurring to investor–state arbitration. It also addressed the futility exception regarding the final decision of local courts when it does not seem that local remedies will be effective or that there is a reasonable prospect of an appeal correcting a judicial wrong.

This decision has become a central piece of ISDS case law not only because it was the first to make Mexico liable for denial of justice, but also considering the local judicial conjuncture where Mexico has recently dismissed all of its federal judges who were appointed under a meritocratic system; this election process has raised many questions regarding the preparation of the new judges and the possible politicisation of local justice.

Alicia Grace and Others v Mexico

This award was issued in 2024 and has become a landmark case for Mexico, considering the implications of the decision on claims submitted by dual national investors. The arbitral tribunal interpreted NAFTA Articles 1116 and 1117 to determine when a dual national could bring a NAFTA claim against its own state, particularly through the test of dominant and effective nationality. The award also showed that claimants were required to prove control under NAFTA Article 1117 in order to bring a claim on behalf of a Mexican entity; this was not evidenced from the proceeding in the case at hand.

Alicia Grace and other cases were not only dismissed on jurisdictional grounds, but also further interpreted two different rules of locus standi contained in Articles 1116 and 1117; the first was considered to deal only with direct interference with invertors’ rights, while the other allowed allegations for indirect interference to investors through investments controlled by the investor.

There are no reported cases concerning the enforcement or annulment of arbitral awards rendered against Mexico in its capacity as a sovereign state, whether arising from commercial or investor–state proceedings. However, Mexican courts have addressed several annulment actions involving awards issued against state-owned enterprises such as the Federal Electricity Commission (CFE) and PEMEX. In these cases, challenges brought by governmental entities have faced a notably high threshold, and annulment has remained the exception rather than the rule.

One of the leading precedents is Amparo Directo 71/2014, in which the Supreme Court rejected an annulment action filed by the CFE, holding that the mere fact that an award affects public services or government policy does not constitute a violation of public policy. The Court distinguished between political or administrative objectives and public policy in the strict legal sense, limiting the latter to fundamental legal principles whose breach would undermine the constitutional order. Under this standard, annulment is justified only where an award clearly exceeds the matters entrusted to arbitration or embodies a manifest disregard of fundamental legal principles. Economic impact, dissatisfaction with the result or the involvement of public functions do not meet this burden.

In practice, Mexico has rarely sought annulment, and has succeeded even more rarely. Domestic courts generally enforce awards, including those against public entities, and intervene only in exceptional cases involving clear violations of due process or excess of mandate.

Mexico has ratified a substantial number of bilateral and multilateral treaties, including those covering investment protection and trade liberalisation. Mexico is party to 31 bilateral investment treaties (BITs) currently in force, and has concluded around 14 free trade agreements (FTAs) with 52 countries, including major partners such as the United States, Canada, the European Union, Japan and members of the Pacific Alliance.

On the BIT side, Mexico’s treaty network covers a wide range of counterparties, including older European partners (Germany, Switzerland, Italy, Spain) as well as more recent Asia and Middle East partners (China, Singapore, Kuwait, Turkey). On the trade agreement side, Mexico is party to the USMCA, the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), an FTA with the European Union, and numerous agreements with Latin American countries.

It is plausible that Mexico will pursue additional treaty ratifications or upgrades in the future. Mexico’s trade and investment policy continues to emphasise the diversification of partners, the modernisation of existing frameworks and the inclusion of investment protection chapters in trade agreements. While the net number of new standalone BITs may not increase dramatically, Mexico may negotiate new investment protection agreements or modernise existing ones, and may expand its trade agreement network to emerging partners in Asia, Africa or the Middle East. That said, Mexico’s recent policy under the López Obrador and Sheinbaum administrations emphasises domestic regulatory sovereignty and strategic sectors, meaning that any future treaties are more likely to be modernised or restricted to protect strategic sovereign interests, rather than entering into a large volume of new traditional BITs.

A clear example of these modernisation efforts is the updated EU–Mexico Free Trade Agreement, the negotiations for which were formally concluded in January 2025 and now await ratification by both parties. The modernised agreement replaces traditional ISDS with the EU’s Investment Court System – a permanent, treaty-based tribunal composed of appointed judges, with strict conflict-of-interest rules, full transparency and an appellate mechanism. This shift illustrates the type of structured and institutionally robust investment frameworks that Mexico is likely to adopt in future treaty negotiations.

Mexico does not currently operate under a single, consistently used model bilateral investment treaty; its network of BITs reflects different negotiating periods and counterpart-specific approaches. Earlier treaties from the 1990s and early 2000s follow a traditional, broad protection model, whereas more recent instruments – particularly those embedded in FTAs such as the USMCA, CPTPP and the modernised EU–Mexico Agreement – incorporate substantially updated standards and reflect contemporary regulatory, sustainability considerations and even a narrower scope of available protections. Even so, Mexico’s treaties display a high degree of structural and substantive consistency, and several provisions appear across its treaty practice with notable regularity.

Most of Mexico’s BITs include the core protections traditionally found in international investment agreements, such as:

• fair and equitable treatment (FET);
• full protection and security;
• protection against direct and indirect expropriation;
• national treatment and most-favoured nation treatment; and
• free transfer of capital and returns.

Many treaties define “investment” broadly to cover both tangible and intangible assets, contractual rights and shareholding interests, while “investor” typically covers both natural and legal persons, with some more recent treaties requiring substantial business activities in the home state. Fork-in-the-road provisions are relatively common, and most agreements provide consent to arbitration under ICSID, UNCITRAL or the ICSID Additional Facility.

Approximately one-third of Mexico’s BITs include an umbrella clause, often requiring the state to observe “any obligation in writing” undertaken with respect to an investment; in some treaties, such as the Switzerland BIT, the clause is broader and refers to “any obligation”, regardless of form. Several treaties also include “most-favourable treatment” clauses, ensuring that the more favourable standard prevails where a matter is simultaneously covered by another international agreement or domestic legislation. Many agreements include war loss clauses, general exceptions (eg, for national security) and exclusions from dispute settlement for specific categories of measures.

In summary, although Mexico does not rely on a single model treaty, its practice reveals a coherent trajectory:

• traditional broad protections in older BITs;
• incremental refinements in mid-generation agreements; and
• more recently, sophisticated and institutionally grounded investment chapters designed to balance investor protection with the state’s right to regulate and the protection of certain strategic interests of the state.

This gradual evolution signals the direction Mexico is likely to follow in future treaty negotiations.

Mexico is a party to several major FTAs that contain investment protection and dispute settlement mechanisms, including the USMCA, the CPTPP, the Pacific Alliance and the modernised EU–Mexico Free Trade Agreement, which concluded negotiations in January 2025 and is pending ratification.

USMCA

Under the USMCA, Chapter 14 governs investment. Crucially, Canada opted out of this chapter entirely, meaning there is no ISDS between Mexico and Canada; ISDS remains only between Mexico and the United States, and even then under two distinct regimes. For most investors, Article 14.D.3 restricts claims to breaches of national treatment, most-favoured nation treatment and direct expropriation, and requires prior exhaustion of local remedies for 30 months under Article 14.D.5. Only investors in “covered government contracts” in defined sectors – listed in Annex 14-E (oil and gas, power generation, telecommunications, transportation and certain infrastructure) – retain the broader NAFTA-style protections and may bring claims for indirect expropriation, FET and arbitrary measures. This structure significantly narrows the availability and scope of ISDS under the USMCA compared with NAFTA.

CPTPP

In contrast, the CPTPP retains a comprehensive ISDS mechanism under Section B of Chapter 9, allowing qualifying investors from CPTPP parties to bring claims directly against Mexico. The treaty incorporates modern definitions of investment (Article 9.1), clarifies indirect expropriation through Annex 9-B, and expressly recognises the state’s right to regulate for public welfare objectives in Article 9.16. Procedurally, it provides full consent to arbitration under ICSID, ICSID Additional Facility and UNCITRAL Arbitration Rules (Article 9.19).

EU–Mexico Agreement

The modernised EU–Mexico Agreement represents the most significant institutional development. Its investment chapter replaces traditional ISDS with the EU’s Investment Court System, establishing a permanent first-instance investment tribunal and an appellate tribunal. The system includes randomly assigned adjudicators, strict conflict-of-interest and ethics rules, full transparency of proceedings, and an appellate body with the authority to correct legal and factual errors. This model moves decisively away from ad hoc arbitration toward a court-like structure.

Taken together, these instruments illustrate Mexico’s hybrid approach: ISDS remains available under treaties like the CPTPP and the Pacific Alliance, is significantly circumscribed in the USMCA, and will transition to a permanent adjudicatory model with the EU. The treaty invoked therefore determines the procedural pathway and the scope of substantive protections available to foreign investors.

Mexico does not generally publish formal interpretive commentaries, joint statements or exchanges of notes regarding its investment treaties. Mexico offers limited official interpretive guidance outside the treaty texts themselves, the Diario Oficial de la Federación and Senate ratification materials. In practice, Mexico’s positions on treaty interpretation tend to emerge through its submissions in individual investor–state arbitration proceedings, which are not systematically published as authoritative interpretive aids.

The notable historical exception is the NAFTA Free Trade Commission (FTC). Under NAFTA Article 1131(2), the FTC had authority to issue binding interpretations of NAFTA Chapter 11, and Mexico participated in this process. The most influential of these was the 31 July 2001 FTC Interpretation, which clarified that Article 1105’s “fair and equitable treatment” obligation was limited to the customary international law minimum standard of treatment. These FTC interpretations remain part of the interpretive context for the “legacy” NAFTA claims permitted under USMCA Annex 14-C, but the FTC itself no longer exists and was not carried over into the USMCA institutional framework.

Aside from this NAFTA-specific mechanism, Mexico does not operate a broader system for issuing official interpretive notes or commentaries on its investment treaties. As a result, authoritative interpretive guidance outside arbitration practice is limited.

The Mexican legal regime applicable to foreign investment is set out in a combination of statutes, most importantly the Foreign Investment Law (Ley de Inversión Extranjera) and its regulations, together with sector-specific legislation (energy, hydrocarbons, mining, telecommunications, financial services, etc). The Foreign Investment Law defines the sectors in which foreign participation is freely permitted, subject to caps, or reserved exclusively to the Mexican state, and it establishes the procedures for foreign investment registration, authorisations and corporate structuring. Substantive protections typically found in national investment laws – such as FET, protection against expropriation, or guarantees on transfers – are not granted as standalone investor rights under domestic Mexican legislation.

Mexico’s national laws do not create an independent investor–state dispute settlement mechanism; disputes arising under the Foreign Investment Law or related domestic legislation must be resolved through Mexican courts. Any form of international investor–state arbitration is available only where Mexico has consented through an applicable treaty.

As a result, the protections available under domestic law and those available under investment treaties operate in parallel but separate spheres. Domestic law governs market access and regulatory conditions, while investment treaties provide the substantive standards of protection and the procedural right to bring claims before international tribunals. Where both regimes apply, treaty protections do not replace or override the domestic investment framework, but they may offer investors additional remedies or higher standards of protection than those available under national legislation.

Arbitration clauses in contracts between foreign investors and instrumentalities of the Mexican state or its state-owned entities are common, particularly in sectors such as electricity, hydrocarbons, infrastructure and public procurement. These clauses typically submit contractual disputes to commercial arbitration and are routinely used by entities such as CFE and PEMEX.

However, the protection provided by contractual arbitration is more limited than that offered under investment treaties. Contract-based arbitration covers only disputes arising from the specific contract and provides remedies solely for contractual breaches, usually against the state-owned entity that signed the agreement. It does not extend to sovereign conduct, regulatory measures or administrative acts of the state.

In contrast, investment treaties operate independently of the underlying contract and provide broader substantive protections – such as FET, protection against expropriation and non-discrimination – as well as direct recourse against the state through international arbitration. As a result, while contractual arbitration is a common and effective mechanism for commercial disputes with Mexican public entities, it does not offer the same scope of protection or remedies as treaty-based investor–state arbitration.

Mexico has faced a significant number of investor–state arbitration claims, primarily under NAFTA Chapter 11, but also under bilateral investment treaties and, more recently, under the CPTPP and the legacy regime of the USMCA. The most frequently cited claims include allegations of expropriation (especially indirect), breach of the FET standard and denial of national treatment. While contractual breaches are not actionable per se under many treaties, investors often reframe them as treaty violations when they involve sovereign interference or a failure of legal protection.

Indirect Expropriation

Claims of indirect expropriation have featured prominently in several cases. In Metalclad v Mexico, the tribunal found that local and state authorities’ refusal to grant permits for a hazardous waste facility, despite federal approval, constituted an indirect expropriation under NAFTA. In Gemplus and Talsud v Mexico, the tribunal concluded that Mexico had expropriated the investors’ rights by unilaterally terminating a vehicle registration contract. Similarly, Odyssey Marine Exploration filed a NAFTA claim after Mexico denied environmental permits for a phosphate mining project, arguing that the denial rendered its concession rights valueless.

Fair and Equitable Treatment

FET is the most commonly invoked standard in Mexican ISDS cases. In Tecmed v Mexico, the tribunal held that the denial of a landfill permit renewal, after the investor had operated under valid authorisation, violated the investor’s legitimate expectations and breached FET under the Spain–Mexico BIT. In Waste Management v Mexico (II), the tribunal found that the cumulative conduct of local authorities, including contractual non-performance and lack of legal recourse, amounted to a breach of NAFTA Article 1105. More recently, in Lion Mexico Consolidated v Mexico, a tribunal found that Mexico had committed a denial of justice through the conduct of its judiciary, marking one of the few successful FET claims based on judicial misconduct.

Contractual Disputes

Contractual disputes are often central to ISDS claims against Mexico, even if not directly actionable. In Azinian v Mexico, the tribunal rejected the claim that the annulment of a municipal concession amounted to expropriation or unfair treatment, holding that mere breach of contract, lawfully resolved by domestic courts, did not breach NAFTA. However, in cases such as Gemplus or Waste Management, tribunals found that Mexico’s conduct went beyond a simple contractual dispute, involving arbitrary state action or a lack of effective legal remedies, thus rising to the level of treaty breaches.

National Treatment Claims

National treatment claims have also been successful in a number of cases. In Cargill v Mexico and Corn Products International v Mexico, tribunals held that Mexico’s tax measures on high-fructose corn syrup products favoured the domestic sugar industry and discriminated against US investors, breaching NAFTA Article 1102. Most-favoured nation clauses are frequently pleaded as complementary arguments, including attempts to import more favourable provisions from other treaties, but have rarely been decisive on their own.

Overall, the most consistently successful and frequently cited claims against Mexico continue to be those based on expropriation and fair and equitable treatment.

Mexican law provides broad party autonomy to select arbitrators, in line with the UNCITRAL Model Law. Article 1426 of the Commercial Code allows the parties to freely determine the number of arbitrators and the procedure for their appointment. In the absence of agreement, the default is a three-member tribunal, with each party appointing one arbitrator and the two appointees selecting the third. If any party fails to appoint, or if the co-arbitrators cannot agree, domestic courts may intervene under Article 1427.

There are no nationality or professional restrictions on arbitrators under the Commercial Code, unless the parties agree otherwise. Arbitrators must accept the appointment in writing within 15 days of notification, as required by Article 1433. Mexican courts have shown a deferential approach to party autonomy in arbitrator selection, and intervene only in cases of deadlock or procedural breakdown.

In summary, Mexican arbitration law grants parties wide discretion in choosing arbitrators, subject only to limited procedural safeguards and court assistance when necessary.

Mexican law grants parties broad autonomy in the appointment of arbitrators. Article 1426 of the Commercial Code, which incorporates the UNCITRAL Model Law, allows the parties to freely determine both the number of arbitrators and the procedure for their selection. In the absence of agreement, the default rule is that the arbitral tribunal shall consist of a sole arbitrator.

Where a party fails to appoint an arbitrator or if the parties or co-arbitrators cannot agree, the courts may intervene to make the necessary appointments. Importantly, Article 1427 of the Commercial Code expressly provides that there are no restrictions regarding the nationality of arbitrators, unless the parties have agreed otherwise. This ensures that foreign arbitrators may be appointed both by the parties and, if necessary, by the courts, supporting international neutrality and flexibility.

Beyond nationality, Mexican law does not impose substantive restrictions on arbitrator qualifications, unless otherwise agreed.

Courts in Mexico may intervene in the selection of arbitrators, but only in limited and clearly defined circumstances. Under Article 1426 of the Commercial Code, which incorporates the UNCITRAL Model Law, the parties are free to agree on the number of arbitrators and the procedure for their appointment. In the absence of agreement, the default is a sole arbitrator. If a party fails to appoint an arbitrator, if the parties cannot agree on a sole arbitrator, or if the party-appointed arbitrators cannot agree on the presiding arbitrator, either party may request the intervention of a competent judge.

This judicial support function is governed by Article 1427 (IV) and (V), which empowers the court to make the necessary appointment upon request. The court must respect any criteria agreed by the parties concerning qualifications or appointment procedure. Notably, the same provision states that, unless otherwise agreed by the parties, the judge shall take into consideration the convenience of appointing an arbitrator from a different nationality than that of the parties and of taking necessary measures to ensure that the appointed arbitrator is independent and impartial. The courts’ role is strictly procedural and does not extend to evaluating the merits of the case or overriding the parties’ agreed structure.

Judicial intervention is intended solely to ensure the constitution of the arbitral tribunal and the continuation of the proceedings.

The challenge and removal of arbitrators in Mexico is governed by the Commercial Code, which incorporates the relevant provisions of the UNCITRAL Model Law. The applicable rules are set out primarily in Articles 1428 and 1429.

An arbitrator may be challenged if there are justifiable doubts as to their impartiality or independence, or if they do not possess the qualifications agreed by the parties. These are the same grounds that apply to party-nominated and court-appointed arbitrators. Article 1428 provides that a person approached in connection with a potential appointment must disclose any circumstances likely to give rise to such doubts, and this duty of disclosure continues throughout the arbitration.

The procedure for challenge is set out in Article 1429. Unless otherwise agreed by the parties, the challenge must be submitted within 15 days of becoming aware of the constitution of the tribunal or of the circumstances giving rise to the challenge. The arbitral tribunal itself decides on the challenge in the first instance, unless the challenged arbitrator withdraws or the other party agrees to the removal. If the challenge is unsuccessful, the challenging party may request a court to make a final decision within 30 days of being notified by the arbitral tribunal that its challenge was unsuccessful.

Notably, while a petition is pending before the Mexican courts to decide a challenge against an arbitrator, the arbitral tribunal – including the challenged arbitrator – may continue the proceedings and even issue the final award.

Mexican law requires arbitrators to be independent and impartial, both at the time of their appointment and throughout the proceedings. Under Article 1428 of the Commercial Code, an arbitrator may be challenged if there are justifiable doubts about their impartiality or independence, or if they do not meet the qualifications agreed by the parties. Said article also imposes a continuing duty of disclosure: any person approached for possible appointment must disclose all circumstances likely to give rise to such doubts, and must continue to do so during the proceedings if new issues arise.

Institutional arbitration rules widely applied in Mexico reinforce this standard. The ICC Arbitration Rules require all arbitrators to submit a declaration of independence and impartiality, disclosing any facts or circumstances that could give rise to doubts in the eyes of the parties (Article 11(2) of the ICC Rules, 2021). The Mexican Arbitration Center (CAM) Rules take a similar approach: Article 13 provides that proposed arbitrators must sign a declaration of independence and communicate any circumstances that may cast doubt on their independence, both at the time of appointment and during the arbitration. The General Council of CAM decides on objections, and its decisions are final.

The rules of the National Chamber of Commerce of Mexico City (CANACO) also require disclosure of any facts that may raise concerns as to independence or impartiality, and mandate immediate written notice if such concerns arise after appointment (Article 12).

All three institutions – ICC, CAM and CANACO – establish internal procedures for confirming or rejecting arbitrators and resolving challenges. These mechanisms are typically confidential and final, and do not require judicial intervention unless parties seek court review under national law.

Arbitral tribunals seated in Mexico are permitted to grant preliminary or interim measures. Articles 1433 and 1434 of the Commercial Code, which incorporate Chapter IV of the UNCITRAL Model Law, provide that the tribunal may, at the request of a party, order any interim measure it deems appropriate in relation to the subject matter of the dispute.

Interim measures granted by the tribunal are binding. Under Article 1434, they must be complied with by the parties, and may be enforced by Mexican courts upon request, unless the court finds grounds for refusal consistent with Article 1462 (eg, public policy, lack of notice or due process violations). The tribunal may also require security from the requesting party.

The types of interim relief that may be awarded include measures to:

• preserve assets;
• maintain or restore the status quo;
• prevent harm or prejudice to the arbitral process;
• preserve evidence; or
• secure the performance of obligations.

These powers apply to both domestic and international arbitrations seated in Mexico, and are consistent with international standards. Courts may also issue interim measures in support of arbitration, either before or during the proceedings, under Article 1425 of the Commercial Code.

Arbitral tribunals seated in Mexico are permitted to grant interim measures. Article 1433 of the Commercial Code, which adopts the UNCITRAL Model Law, allows a tribunal to order any interim measure it deems necessary at the request of a party, including orders to preserve assets, maintain or restore the status quo, prevent harm to the arbitral process, preserve evidence, or secure the performance of contractual obligations.

Interim measures issued by the tribunal are binding and may be enforced by domestic courts. Article 1479 establishes that such measures shall be recognised and enforced, unless the court finds one of the limited exceptions set out in Article 1480 (which mirrors most of the grounds for denying the enforcement of an arbitral award, as well as failure to provide a bond and the revocation of the interim measure). The enforcement procedure is governed by Article 1470, which provides that the party seeking enforcement must file a formal petition before the competent court, accompanied by the arbitral decision and a Spanish translation if applicable.

In addition, Article 1425 expressly authorises parties to seek interim relief directly from Mexican courts, whether before or during the arbitration. This procedural route is further developed in Articles 1472 to 1476 of the Commercial Code. The party must demonstrate the urgency and necessity of the requested measure and, where applicable, offer a guarantee. The applicable procedure is governed by Articles 1472 to 1476, which constitute a special regime for interim measures in support of arbitration. Once the petition is admitted, the judge will serve notice on the respondent, granting 15 days to answer under Article 1473. Unless there is evidence that requires special presentation, the parties shall be summoned to a closing arguments (alegatos) hearing, after which the judge shall summon the parties to receive the judgment. The special proceeding provided for the awarding of interim measures in support of arbitration does not allow for ordinary appeal and instead may only be challenged by means of an Amparo (constitutional) claim.

Mexican law allows arbitral tribunals to order security for costs under their general powers to grant interim measures. Article 1433 of the Commercial Code, which adopts the UNCITRAL Model Law, empowers tribunals to grant any interim measure they consider necessary in connection with the dispute. While the Code does not expressly refer to “security for costs”, tribunals may interpret their authority broadly to include such relief, particularly where there is a risk of non-payment by the claimant or a manifest imbalance in procedural risk.

While they do not have express authority under the Commercial Code to order security for costs as such, Mexican courts have confirmed the broad discretion available to judges when granting interim relief in aid of arbitration. In a published decision, a federal court interpreted Articles 1425 and 1472 to 1476 of the Commercial Code as granting judges significant procedural flexibility to adapt the interim relief mechanism to the particularities of each case, which may allow for the granting of security for costs as a form of such interim relief.

In practice, requests for security for costs are uncommon in arbitration seated in Mexico, but they may be granted by the tribunal if justified under the circumstances and supported by the parties’ arbitration agreement or the rules of the administering institution. Mexican law neither prohibits nor limits this power, leaving it to the discretion of the tribunal within the broader framework of interim relief.

Third-party funding is permitted in Mexico, and there is no legislation or regulatory restriction prohibiting it in the context of investor–state arbitration or international arbitration more broadly.

However, third-party funding is still relatively uncommon in Mexico-seated arbitrations, including investor–state claims involving Mexican parties. While foreign investors have occasionally disclosed the existence of funding arrangements in ISDS proceedings against Mexico, there is no systematic public reporting, and the practice remains limited compared to jurisdictions where funding is more established. The absence of a disclosure obligation under Mexican arbitration law has also contributed to the limited visibility of such arrangements.

Nevertheless, parties are not barred from entering into funding agreements, and Mexico does not prohibit or penalise their use. In practice, any issues arising from third-party funding – such as conflicts of interest, confidentiality or security for costs – are addressed through the procedural rules of the applicable arbitral institution or treaty framework, not through domestic regulation.

There is no published domestic case law in Mexico specifically addressing third-party funding in the context of arbitration, whether commercial or investor–state. Mexican courts have not issued rulings interpreting the validity, scope, enforceability or procedural implications of third-party funding agreements in arbitral proceedings.

This absence of case law reflects the relatively limited use and visibility of third-party funding in Mexico, where the practice remains uncommon and unregulated. In the context of investor–state arbitration, references to funding arrangements have occasionally appeared in publicly available pleadings or awards, but these discussions have occurred under international law and arbitral rules, not under Mexican judicial review.

Mexico does not have any domestic rules or judicial practice requiring the disclosure of third-party funding arrangements in arbitration. The Commercial Code, which governs both domestic and international arbitration, is silent on the matter, and there are no official guidelines or jurisprudence mandating disclosure. As a result, the existence and terms of third-party funding typically remain confidential, unless the arbitration is governed by institutional rules or a treaty that expressly requires disclosure.

In investor–state arbitration involving Mexico, pre-arbitration procedural requirements – such as the submission of a Notice of Dispute and the observance of waiting periods – depend on the specific treaty under which the claim is brought.

Under NAFTA Chapter 11, which governed claims until its termination in 2020 (and remains relevant for legacy claims), Article 1119 required the investor to deliver a written Notice of Intent to submit a claim at least 90 days before initiating arbitration. This notice had to include detailed information about the dispute, including the legal basis of the claim and the relief sought. The Notice of Arbitration could only be submitted after this 90-day period and once the six-month cooling-off period required by Article 1120(1) had expired.

The USMCA, which replaced NAFTA, retains a similar structure for limited claims. Under Annexes 14-D and 14-E, which apply to certain covered government contracts and specific sectors, a claimant must also provide written notice and observe a 90-day consultation period, with strict conditions and document disclosure requirements (including a waiver). The requirements are more stringent than under NAFTA and are applicable only to a narrower set of disputes.

Under the CPTPP, Article 9.21 imposes a minimum six-month cooling-off period from the date of the events giving rise to the claim, and requires a written Notice of Intent to arbitrate at least 90 days before the submission of the claim. The notice must specify the legal and factual basis for the claim and identify the measure at issue.

In all cases, failure to comply with these procedural requirements may result in jurisdictional objections or dismissal of the claim. Compliance with notice and waiting periods is therefore a critical step in investor–state arbitration involving Mexico.

Parties to investor–state disputes must increasingly reconcile the traditionally private nature of arbitration with growing demands for transparency, particularly when public funds, regulatory powers or matters of broad societal impact are at stake. The most effective way to achieve this balance is by relying on explicit treaty provisions and modern arbitral rules that embed transparency into the framework of proceedings. As a party to treaties such as the CPTPP and the USMCA, Mexico has committed to specific transparency obligations, including public access to hearings and the disclosure of pleadings, procedural orders and final awards.

Key instruments supporting this evolution include the UNCITRAL Rules on Transparency in Treaty-based Investor–State Arbitration. These rules reverse the typical presumption of confidentiality found in commercial arbitration by mandating the disclosure of core documents, allowing public access to hearings, and providing opportunities for third-party (amicus curiae) submissions. Importantly, these mechanisms are not absolute: they include structured exceptions to protect sensitive business information, confidential governmental data and national security concerns. This approach reflects the need to maintain procedural fairness while addressing legitimate public interest concerns.

In practice, parties can operationalise this balance through procedural orders negotiated at the outset of the arbitration. These orders can set parameters for the publication of redacted awards, designate protected categories of information, and establish processes for handling confidentiality objections. This ensures that transparency is exercised in a measured and predictable way, without undermining due process or discouraging legitimate claims. In cases involving regulatory policy, energy infrastructure or environmental measures, tribunals are increasingly receptive to public participation and document disclosure.

Mexico’s modern investment agreements reflect this shift. Under the CPTPP and the USMCA, transparency is not optional but required – tribunals must conduct open hearings and publish relevant documents, unless specific exceptions apply. As more arbitral proceedings follow these frameworks, parties are encouraged to embrace transparency not as a burden, but as a means to enhance the legitimacy and acceptance of investor–state arbitration, particularly in jurisdictions where public accountability and democratic oversight are expected.

There are limits on the types of remedies that an arbitral tribunal seated in Mexico may award, but these are guided primarily by the arbitration agreement and the applicable substantive law, rather than by arbitration law itself. The Commercial Code, which incorporates the UNCITRAL Model Law, does not restrict the nature of remedies that a tribunal may grant, leaving such questions to the parties’ agreement and the underlying legal framework governing the dispute.

Traditionally, Mexican law was understood to prohibit punitive or exemplary damages, favouring compensation limited to actual harm, but this position has evolved. In a series of landmark rulings starting in 2014, the Mexican Supreme Court of Justice recognised the admissibility of punitive damages in Mexico, particularly in civil liability and consumer protection contexts, provided they are proportionate, justified and grounded in applicable legal norms. Accordingly, an arbitral tribunal seated in Mexico may, in principle, award punitive damages if the substantive law governing the dispute permits it – although their enforcement could still be subject to scrutiny under public policy standards.

Tribunals may also award other forms of relief, such as specific performance, restitution or declaratory remedies, as long as these are allowed under the applicable law and do not contravene Mexican public policy. While the enforcement of non-pecuniary awards (such as injunctions or rectification) remains less common before Mexican courts, it is not categorically prohibited. Ultimately, the key limitations arise not from arbitration law but from the boundaries of the applicable legal system and its public policy exceptions.

There is no statutory limitation in Mexican law on the valuation methodologies that may be used to quantify damages in arbitration, whether commercial or investor–state. Arbitral tribunals seated in Mexico have wide discretion to assess the evidence and select the most appropriate method in light of the specific facts, the nature of the investment or contract, and the governing law. Commonly applied approaches include discounted cash flow (DCF), market-based valuations and cost-based (historical investment) methods.

The DCF method is often used in disputes involving going concerns, infrastructure projects or long-term concessions with an established or reasonably predictable revenue stream. Tribunals may accept DCF valuations when supported by reliable financial data and expert analysis. However, consistent with Article 2110 of the Federal Civil Code, tribunals will reject purely speculative models and require that damages reflect losses that are the immediate and direct result of the breach. This approach is further reinforced by Article 2109, which recognises lost profits (perjuicios) as a compensable form of harm when tied to a lawful and reasonably expected gain.

Market-based approaches, such as comparable transactions or trading multiples, are accepted particularly in disputes involving the valuation of shares, corporate assets or concessions. These are typically used when transparent market data or industry benchmarks are available. In some cases, tribunals combine or adjust methods to account for control premiums, minority discounts or sector-specific risks.

Cost-based valuations are frequently used where the project never became operational or where future cash flows are too uncertain. This method is especially common in construction and infrastructure disputes, and aligns with Article 2108 of the Civil Code, which defines damages as the patrimonial loss caused by the breach. Article 1915 also confirms that the harmed party may seek either the restoration of their prior situation or compensation for the damage incurred. Together, these provisions support a flexible, evidence-driven approach to quantifying damages, grounded in the principle of full reparation.

Parties in arbitrations seated in Mexico are generally entitled to recover interest, legal and expert fees, and arbitration-related costs, depending on the applicable substantive law and the arbitral tribunal’s discretion. While the Commercial Code, which incorporates the UNCITRAL Model Law, is silent on interest and cost allocation, Mexican substantive law permits the recovery of damages for late payment, including moratory interest.

Under Articles 2108 to 2110 of the Federal Civil Code, damages resulting from breach of contract may include the loss suffered and the profit foregone. In the case of delayed monetary obligations, Mexican courts and arbitral tribunals typically award default interest as a form of compensatory damages. In addition, Articles 2393 to 2395 recognise both legal and contractual interest: where no interest rate has been agreed, the legal interest rate for civil obligations and contracts (currently set at 9% annually under Article 2395) may apply as a default in determining moratory interest (this interest rate is for commercial obligations and contracts).

Arbitral tribunals have broad discretion to allocate legal and expert fees, and institutional costs. Mexican arbitration law does not impose a fixed rule on cost allocation, but institutional rules such as those of the ICC, CAM and UNCITRAL allow the tribunal to distribute costs based on the outcome of the dispute, the parties’ procedural conduct, and the reasonableness of their claims and defences. While cost-sharing is still common in domestic cases, the “costs follow the event” approach is increasingly applied in international and investor–state arbitrations.

In practice, tribunals seated in Mexico do award legal fees and expert costs when claimed and justified, and routinely include interest on monetary relief. There is no statutory cap on these awards, and tribunals assess proportionality and necessity when deciding cost allocation. Overall, Mexican arbitration practice supports the recovery of moratory interest and costs as part of a full and fair compensation model.

In investor–state arbitration, investors are understood to have a duty to mitigate their losses. While most investment treaties do not contain an express provision requiring mitigation, arbitral tribunals – including in NAFTA cases involving Mexico and other states – have consistently applied this principle as part of customary international law and the general framework governing damages.

Tribunals have treated this duty not as a separate contractual obligation, but as an element of causation and the scope of recoverable loss. For example, in Glamis Gold v United States, the tribunal declined to award damages in part because the investor’s mining project retained value and could have proceeded despite new regulatory requirements. Similarly, in Chemtura v Canada, the tribunal dismissed the claim after finding that the investor was not substantially deprived of its investment, and could adapt its business to regulatory changes. In both cases, tribunals implicitly applied the principle that a claimant cannot recover for losses that could reasonably have been avoided.

This approach reflects the broader rule in international law that compensation is limited to injury actually caused by the state’s conduct and not attributable to the claimant’s own failure to act prudently. The burden typically rests on the respondent state to demonstrate that mitigation was possible and that the investor failed to pursue it. While tribunals may not always label it explicitly as a “duty to mitigate”, they consistently incorporate the principle into their assessment of damages and causation. In practice, failure to mitigate can reduce or eliminate the compensation awarded.

Mexican courts consistently adopt a pro-enforcement approach toward arbitral awards, grounded in the New York Convention and the UNCITRAL Model Law, both of which are incorporated into the Commercial Code. Federal courts are the primary courts handling amparo proceedings related to arbitration, and have repeatedly emphasised that recognition and enforcement should be granted as the default outcome, and that refusal is exceptional. Courts avoid any review of the merits and strictly limit their analysis to the grounds set out in Article 1462 of the Commercial Code, which mirrors Article V of the New York Convention.

Grounds for Refusal

Mexican judges interpret the refusal grounds narrowly, guided by principles of international comity and the need for uniformity in the enforcement of awards. Technical objections or complaints about alleged errors in the arbitral reasoning do not suffice to prevent enforcement. Courts require the resisting party to demonstrate that one of the Convention grounds is met clearly and specifically, and that the alleged violation is serious enough to justify overriding the pro-enforcement obligation.

Public Policy

With respect to public policy, Mexican courts apply a strict international public policy standard, not a domestic or regulatory one. Federal courts distinguish between Mexico’s broad internal public order (which includes mandatory administrative rules and sector-specific regulations) and the narrower concept of international public policy applicable to the enforcement of foreign awards. Only violations of fundamental legal principles or egregious procedural deficiencies qualify. Courts have held that international public policy encompasses a “minimal core” of essential values, such as basic procedural fairness, legality, good faith and the prohibition of acts that would undermine the international legal order.

Because of this narrow conception, public policy objections rarely succeed. Courts have enforced awards even where the underlying contract was disputed under Mexican regulatory frameworks, where a party alleged procedural irregularities that did not amount to a denial of due process, or where domestic statutes imposed mandatory requirements. Only in exceptional circumstances would enforcement be refused on public policy grounds.

Sovereign Immunity

Mexico has no specific statute governing the immunity of foreign states in civil or commercial matters, and there are no binding judicial precedents addressing sovereign immunity in the context of the recognition or enforcement of arbitral awards. Mexican doctrine generally assumes that a state’s agreement to arbitrate constitutes a waiver of jurisdictional immunity, consistent with the approach taken in many Model Law jurisdictions. However, because Mexican courts have not yet confronted a case requiring them to distinguish between immunity from jurisdiction and immunity from execution, the precise contours of these principles remain untested in national jurisprudence.

In the absence of domestic case law, any analysis of sovereign immunity in award enforcement must rely on general principles of public international law and comparative practice. Under these principles, it is generally understood that a state’s consent to arbitration operates as a waiver of jurisdictional immunity, while immunity from execution requires a separate, explicit waiver and typically protects assets used for sovereign or diplomatic purposes. Whether Mexican courts would adopt this distinction in an enforcement scenario remains to be decided, as no reported case has required them to adjudicate the attachment or execution of state assets following an arbitral award.

See 9.1 Enforcement Procedure.

Mexican law does not contain a dedicated statutory framework governing enforcement against foreign state assets, nor do Mexican courts have reported decisions dealing with the execution of arbitral awards against a foreign state. As a result, creditors seeking to enforce investment treaty awards in Mexico must proceed under the general execution rules applicable to commercial matters, as supplemented by constitutional limitations on public property and general principles of public international law relating to state immunity. This makes the identification and pursuit of state assets largely a factual and evidentiary exercise rather than one driven by established precedent.

In practice, parties seeking satisfaction of an investment treaty award must identify assets located in Mexico that may be susceptible to attachment. This typically requires gathering information regarding real estate, commercial receivables, shares, contractual rights or assets held by state-owned enterprises engaged in commercial activities. Mexican courts may order disclosure or compel third parties to provide financial information during the execution stage, but they will not, on their own initiative, trace assets across multiple jurisdictions. Creditors therefore rely on investigative tools, registries, requests of public information, and strategic litigation steps to show that assets belong to the state or a state-controlled entity.

At the same time, the Mexican constitutional regime imposes significant limitations on the types of state property that may be subject to execution. Assets allocated to public use or reserved for sovereign functions are considered inalienable and immune from attachment; this includes diplomatic premises, military equipment, central bank reserves and property held for the performance of governmental functions. Although no Mexican court has expressly addressed immunity from execution in the context of investment treaty awards, these constitutional protections would likely prevent creditors from pursuing assets with a clear sovereign character.

With respect to state-owned enterprises, veil-piercing arguments face a very high threshold. Mexican courts recognise corporate separateness as the default rule and will only disregard that separation in exceptional circumstances – generally where there is evidence of fraud, abuse of legal personality, undercapitalisation or the use of the corporate form to evade obligations. There is no reported case in which a Mexican court has pierced the corporate veil to reach the assets of a state-owned company for the purpose of enforcing an investment treaty award. Any such attempt would require clear and specific evidence that the entity operates as an alter ego of the state in relation to the obligations under the award.