HKA expert testimony is the foundation of Tribunal’s damages findings in $1.7 billion ICSID claim against Mexico

In an award issued in Legacy Vulcan, LLC v. United Mexican States (ICSID Case No. ARB/19/1), an international arbitral tribunal constituted under the North American Free Trade Agreement (NAFTA) largely rejected the claimant’s $1.7 billion damages claim, adopting the quantum framework and valuation methodologies submitted by damages experts Tim Hart and Rebecca Vélez, Partners at HKA.

The arbitration arose out of Mexican regulatory actions affecting Vulcan’s quarrying and aggregate port operations in Quintana Roo, Mexico, encompassing the La Adelita and El Corchalito project sites. The claimant sought over $1.7 billion in compensation, relying on an integrated cross-border valuation of its US and Mexican distribution network.
Retained on behalf of the respondent, the United Mexican States, Mr. Hart and Ms. Vélez submitted detailed quantum and valuation counter-reports and provided extensive oral testimony. In its final decision, the tribunal sided with the respondent’s experts on nearly every valuation parameter and concluded that the respondent’s model provided the most reliable basis for quantifying damages.

• Isolation of Standalone Investment: The tribunal rejected the claimant’s approach of valuing CALICA as part of an integrated international network, holding that compensable damages were strictly limited to the local investment entity within Mexican territory.
• Adoption of Pricing Methodology: The panel rejected the claimant’s US netback pricing model in its entirety, adopting the respondent’s valuation model grounded in the transfer prices at which aggregates were sold at the Mexican port.
• Disciplined Price Growth & Capex Assumptions: The tribunal adopted the respondent’s approach restricting aggregate sales price growth to inflation and endorsed its standalone capital expenditure projections.
• Cost of Capital & Benchmark Comparables: The tribunal favored the respondent’s comparable companies analysis and adopted its discount rate framework, subject only to the removal of the size risk premium.
• Zero Recovery on Primary Assets: Although finding a breach of NAFTA Article 1105, the tribunal awarded zero compensation with respect to La Adelita, having determined the required rezoning would not have been obtained, and awarded less than 10% of the amounts claimed for the El Corchalito portion of the operation.

The final monetary award resulted in Mexico being ordered to pay approximately $15 million—less than 1% of the original $1.7 billion claim.

“This outcome underscores the critical importance of disciplined financial analysis and proper jurisdictional isolation of assets in treaty arbitration,” said Tim Hart. Rebecca Vélez added, “The tribunal conducted a meticulous review of the economic evidence and concluded that damages should be grounded in the economic realities of the investment at issue rather than in broader claims that extended beyond the scope of the proven loss. The decision reinforces the importance of establishing a clear connection between liability findings and the damages being claimed, while applying valuation methodologies that are consistent with the facts and evidence before the tribunal.”

Mr. Hart and Ms. Vélez were supported by a team of forensic accountants and valuation specialists at HKA.

The tribunal’s award and related case materials including the award are available through the International Centre for Settlement of Investment Disputes (ICSID) case database: Legacy Vulcan, LLC v. United Mexican States (ICSID Case No. ARB/19/1)