ASIL Insights: The Indian Ocean Tsunami and... -
[Cached Version]
Published on: 2/1/2005
Last Visited: 10/28/2005
On January 11, 2005, the Ontario Court of Appeal issued a judgment in the case involving the United Mexican States (Mexico) and Marvin Feldman Karpa (Feldman).[1]Justice Robert Armstrong of the Ontario Court of Appeal upheld Justice Dan Chilcott,s decision of the Ontario Superior Court of Justice.[2] Justice Armstrong accepted Justice Chilcott,s finding that the NAFTA Tribunal,s US$1.6 million ruling against Mexico[3] should be given a high degree of deference and that Mexico had not shown any basis upon which to interfere with the arbitration award.
...
The original NAFTA arbitration concerned Mexico,s taxation of the business activities of US citizen Marvin Feldman, the sole owner of the Mexican-incorporated Corporación de Exportaciones Mexicanas S.A. de C.V. (CEMSA).
...
This requirement made it impossible for CEMSA to take advantage of the tax rebate while other domestic companies, according to Feldman, continued to get the same rebates without being required to separate the tax and purchase price on their invoices.
In 1996, under pressure from the United States, Mexican authorities allowed CEMSA to separate the tax itself, permitting it to take advantage of the tax rebate once more.However, in 1997, the authorities again denied CEMSA,s rebate applications and the legislation was changed yet again, eliminating the rebate for exporters.Feldman claimed unfair discrimination.
The NAFTA Chapter 11 Arbitration
Feldman sought US$50 million in damages, alleging that through these actions, Mexico had violated three key provisions of NAFTA Chapter 11:
...
During the arbitral proceedings, Mexico refused to produce tax records of Mexican competitors requested by Feldman, citing domestic privacy legislation.Mexico admitted, however, that five cigarette marketing companies had applied for the tax rebates and three had been granted them.
...
As a remedy for the discrimination, they awarded Feldman approximately US$1.6 million in damages for the lost tax rebates.
In dissent, arbitrator Bravo found no discrimination on Mexico,s part and would have awarded Feldman no damages.[4]
...
, The Tribunal drew impermissible inferences from Mexico,s compliance with its own taxation and privacy laws (i.e. the fact that Mexico did not produce the tax information of Feldman,s competitors should not have given rise to an inference of discrimination);
, The arbitral procedure employed by the Tribunal when it drew a negative inference from Mexico,s refusal to produce tax records violated the agreement between the parties, procedural rules under NAFTA and in particular NAFTA Article 2105, which allows signatories to withhold information that impedes law enforcement or violates privacy laws; [5] and
, Because the Tribunal accepted that Feldman was not legally entitled to the tax rebates, the award of damages was contrary to public policy.
...
Applying these criteria, as well as Feldman,s argument that the entire purpose of NAFTA Chapter 11 is to remove dispute settlement from domestic courts to neutral international tribunals, Justice Armstrong concluded that the standard of review was one of high judicial deference.
...
The Feldman case was the second NAFTA Chapter 11 award to completely survive the scrutiny of judicial review in Canada. As in the S.D. Myers case, the reviewing court found no reason to interfere with any aspect of the Tribunal,s award.[8] However, Feldman is the only case to reach an appellate level court.The Ontario Court of Appeal is considered Canada,s second-most influential judicial body after the Supreme Court of Canada.
4 online sources [ view sources ]
Profile is not claimed [ claim profile ]
