BEFORE the INTERNATIONAL CENTRE for the SETTLEMENT of INVESTMENT DISPUTES ADDITIONAL FACILITY BETWEEN: Gordon G. Burr
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BEFORE THE INTERNATIONAL CENTRE FOR THE SETTLEMENT OF INVESTMENT DISPUTES ADDITIONAL FACILITY BETWEEN: Gordon G. Burr; Erin J. Burr; John Conley; Neil Ayervais; Deana Anthone; Douglas Black; Howard Burns; Mark Burr; David Figueiredo; Louis Fohn; Deborah Lombardi; P. Scott Lowery; Thomas Malley; Ralph Pittman; Daniel Rudden; Marjorie “Peg” Rudden; Robert E. Sawdon; Randall Taylor; James H. Watson, Jr.; B-Mex, LLC; B-Mex II, LLC; Oaxaca Investments, LLC; Palmas South, LLC; B-Cabo, LLC; Colorado Cancun, LLC; Santa Fe Mexico Investments, LLC; Caddis Capital, LLC; Diamond Financial Group, Inc.; Family Vacation Spending, LLC; Financial Visions, Inc.; J. Johnson Consulting, LLC; J. Paul Consulting; Las KDL, LLC; Mathis Family Partners, Ltd.; Palmas Holdings, Inc.; Trude Fund II, LLC; Trude Fund III, LLC; Victory Fund, LLC Claimants and United Mexican States Respondent ____________________________ MEMORIAL ON THE MERITS ____________________________ 21 April 2020 QUINN EMANUEL URQUHART & SULLIVAN LLP 1300 I STREET, N.W., 9TH FLOOR, WASHINGTON, D.C. 20005 TABLE OF CONTENTS I. Introduction ........................................................................................................ 1 II. The Parties ......................................................................................................... 5 A. The Claimants ........................................................................................ 5 B. The Respondent ..................................................................................... 6 III. Overview of Submission .................................................................................... 7 A. Overview of this Memorial .................................................................... 7 IV. Factual Background ........................................................................................... 8 A. Claimants’ Decision to Invest in Mexico ............................................... 8 B. The Casinos – Initial Operations and Growth...................................... 15 C. Casino Locations .................................................................................. 20 D. Key Casino Features ............................................................................ 22 E. Casino Renovations ............................................................................. 27 F. Expansion Projects in Cabo and Cancun ............................................. 30 G. Online Gaming ..................................................................................... 36 H. Claimants’ Efforts to Purchase a Permit and Eventually Obtain an Independent Permit .............................................................................. 38 I. E-Games Becomes an Operator Under E-Mex’s Permit ..................... 45 J. Claimants Decide to Move Away from E-Mex’s Permit..................... 47 K. E-Games is Allowed to Operate Independently from E-Mex’s Permit and to Report Directly to SEGOB on its Casino Operations ............... 50 L. SEGOB grants E-Games the status of independent operator ............... 51 1. E-Games’ status as an independent operator is based on SEGOB precedent .................................................................... 56 E-Games’ request relied on the Petolof S.A. de C.V. case ............................................................................... 56 Petolof’s status today proves that Mexico is applying different standards under similar circumstances .......... 59 M. E-Games’ Efforts to Become an Independent Permit Holder .............. 60 i N. E-Games Applies for its Own Independent Permit .............................. 61 O. E-Games obtains its own Independent Permit ..................................... 65 1. The November 16, 2012 Resolution complied with all requirements under Mexican law ............................................. 66 2. E-Games’ Permit was valid until at least 2037 and more likely until at least 2052 ..................................................................... 70 Producciones Móviles’ Resolution is identical to E- Games’ ......................................................................... 71 P. There Is No Procedural or Legal Correlation Between E-Games’ Independent Operator Permit and E-Games’ Independent Permit ...... 73 1. There is no logical sequence or procedural correlation between E-Games’ independent operator status and E-Games’ independent permit................................................................... 74 There is a correlation between SEGOB’s May 27, 2009 Resolution and SEGOB’s August 15, 2012 Resolution .................................................................... 74 There is no correlation between SEGOB’s August 15, 2012 Resolution and SEGOB’s November 16, 2012 Resolution .................................................................... 75 There is no correlation between SEGOB’s May 27, 2009 Resolution and SEGOB’s November 16, 2012 Resolution .................................................................... 78 2. E-Games’ independent operator status and E-Games’ independent permit had substantially different legal effects ... 79 Q. Mexico’s Various Interferences with Claimants’ Operations .............. 81 R. Closure of Mexico City Casino on June 19, 2013 ............................... 83 S. The New PRI Administration, Guided by its Political Aims, Mounts a Campaign Against Claimants’ Casinos ............................................... 85 T. Mexico prepares an internal memo confirming its pre-ordained desire to put claimants out of business ........................................................... 91 U. Politics and Gaming in Mexico ............................................................ 93 V. Black Cube ........................................................................................... 96 1. Black Cube’s Findings ............................................................. 98 ii 2. A former senior SEGOB official confirmed that E-Games obtained its permit legally ........................................................ 99 3. E-Games’ Permit was revoked for political reasons .............. 103 The PRI’s misguided belief that B-Mex was affiliated with the Calderón administration and the PAN and Its Desire to Remove Claimants Because They Could Not Be “Controlled” ......................................................... 103 The Mexican government revoked E-Games’ permit to benefit Grupo Caliente and its owners, the Hank Rhon family ......................................................................... 105 4. SEGOB interfered with the Supreme Court Proceedings so that it would decline jurisdiction and remand the case to the appellate court ........................................................................ 109 5. SEGOB blocked Claimants’ efforts to sell the Casinos......... 111 6. The Mexican government has a consistent pattern of corruption and of favoritism towards local gaming companies .............. 112 W. E-Mex Files an Amparo Lawsuit Against the SEGOB Resolution that Allowed E-Games to Operate the Casinos Independently ................. 115 X. Judicial Irregularities, Unlawful Executive Intromissions and an Arbitrary and Discriminatory Reversal of SEGOB’s Legal Stance Result in the Illegal Taking of Claimants’ Investments ..................... 119 1. Judicial Irregularities in the Amparo 1668/2011 Proceedings Before the Sixteenth District Judge and the Collegiate Tribunal .................................................................................. 120 The Sixteenth District Judge and the Collegiate Tribunal Improperly Admitted E-Mex’s Third Amendment Despite That It Was Filed Late ............. 122 i. The Sixteenth District Judge Improperly Accepted the Third Amendment And Was Bound to Dismiss It ....................................... 122 ii. The Collegiate Tribunal Improperly Declared SEGOB’s Appeal of the Sixteenth District Judge’s Acceptance of E-Mex’s Third Amendment Unsubstantiated ......................... 129 The Sixteenth District Judge and the Collegiate Tribunal Should Have Concluded that the Third Amendment Was Inadmissible and Dismissed the Amparo with Respect to SEGOB’s May 27, 2009 Resolution .................................................................. 134 iii i. The Sixteenth District Judge Incorrectly Failed to Dismiss the Amparo with Respect to SEGOB’s May 27, 2009 Resolution .............. 136 ii. The Collegiate Tribunal Also Incorrectly Failed to Dismiss the Amparo with Respect to SEGOB’s May 27, 2009 Resolution .............. 140 The Sixteenth District Judge Failed to Notify E-Games of SEGOB’s July 19, 2013 Resolution, Thereby Effectively Depriving E-Games of the Opportunity to be Heard ..................................................................... 145 SEGOB’S Astonishing Volte Face, Further Due Process Violations by the Sixteenth District Judge and The Collegiate Tribunal’s Determination to Revoke SEGOB’s November 16, 2012 Resolution Were Contrary to Mexican Law and Constituted an Excess in the Fulfillment of the Sixteenth District Judge’s January 31, 2013 Order ........................................................... 146 i. The January 31, 2013 Order Was Clear and Precise, and Therefore, the Collegiate Tribunal Should Not Have Required Compliance Deviating from its Terms, as This Constituted an Excess in the Fulfilment of the Order ............ 154 ii. The Collegiate Tribunal Deprived E-Games of the Rights Conferred to It in the November 16, 2012 Resolution Without Affording E-Games the Right