Before the Honorable Arbitration Tribunal Established Pursuant to Chapter Eleven of the North American Free Trade Agreement
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The Spanish version is the original and shall prevail over this courtesy translation in case of discrepancy. BEFORE THE HONORABLE ARBITRATION TRIBUNAL ESTABLISHED PURSUANT TO CHAPTER ELEVEN OF THE NORTH AMERICAN FREE TRADE AGREEMENT B-MEX ET AL (CLAIMANTS) V. THE UNITED MEXICAN STATES (RESPONDENT) CIADI CASE NO. ARB (AF)/16/3 COUNTER-MEMORIAL ON THE MERITS By the United Mexican States: Orlando Perez Garate Assisted by: Department of the Economy Aristeo Lopez Sanchez Geovanni Hernandez Salvador Rosalinda Toxqui Tlaxcalteca Alicia Monserrat Islas Martinez Alberto Sandoval Felix Tereposky & DeRose LLP Cam Mowatt Jennifer Radford Vincent DeRose Ximena Iturriaga Kun Hui Alejandro Barragan December 4, 2020 The Spanish version is the original and shall prevail over this courtesy translation in case of discrepancy. Table of Contents I. Introduction ..........................................................................................................................1 II. Facts .....................................................................................................................................6 A. Ley Federal de Juegos y Sorteos [Federal Games and Sweepstakes Law] .............6 B. Regulations to the Federal Games and Sweepstakes Law [Reglamento de la Ley Federal de Juegos y Sorteos] ...................................................................................6 1. Gambling permits.........................................................................................8 2. The “operator” of a permitholder ...............................................................10 3. Remote gambling centers ...........................................................................12 4. Constitutional challenge 97/2004 ..............................................................12 C. Commencement of Claimants’ Casino Operations ................................................13 1. First steps ...................................................................................................13 2. The Monterrey Resolution .........................................................................14 3. Joint venture agreements with JEV Monterrey ..........................................16 D. The Claimants’ operational transition to a formal permit ......................................16 1. The transaction with Eventos Festivos ......................................................16 2. The Claimants’ decision to transfer operations to the E-Mex Permit .........................................................................................................17 E. Agreements between E-Mex and the Claimants ....................................................23 1. Transaction Agreement ..............................................................................24 2. Operating Agreement .................................................................................25 3. Oficio dated December 9, 2008 - DGAJS/SCEV/00619/2008........................................................................27 4. Oficio dated February 13, 2009 - DGAJS/SCEV/0059/2009 ....................28 F. E-Mex Commercial Action (“juicio mercantil”) ...................................................28 The Spanish version is the original and shall prevail over this courtesy translation in case of discrepancy. G. The Claimants plan a way to exploit the E-Mex Permit independently from and without E-Mex’s knowledge, which was eventually declared unlawful by the Mexican Courts ......................................................................................................29 1. The “Safeguards” planned by the Claimants had a high risk of being challenged by the permitholder, E-Mex ......................................29 H. The Dispute between E-Games and E-Mex for royalty payments ........................32 I. E-Games receives its own permit and continues to operate its Casinos under the same terms as the E-Mex Permit ...........................................................................35 1. The E-Games Permit ..................................................................................39 2. The E-Games Permit was related to the 2009-BIS Oficio, which in turn originated form the E-Mex Permit.......................................41 3. E-Games even argued in at least two legal proceedings that there was a nexus between the 2009-BIS Oficio and the permit it received in 2012 ..........................................................................46 J. The alleged systematic, unlawful, and discriminatory interference by the Respondent in E-Games’ Casinos from 2011-2013 is baseless, and the Claimants have deliberately omitted context ..........................................................................48 K. The accusations made by the Claimants concerning the alleged political motives against E-Games are baseless ................................................................................50 1. On the interview held in January 2013 and meetings with SEGOB ......................................................................................................51 1. The updated information on the E-Games Permit found on the DGJS website .......................................................................................53 2. The alleged political motives behind an internal communication from the Secretariat of the Economy and the alleged personal incentive of Mrs. Gonzalez Salas to harm E-Games .....................................................................................................53 L. E-Mex finally learns of the 2009-BIS Oficio and challenges it through Amparo 1668/2011 ..............................................................................................................54 1. The decisions made by the Sixteenth Court and the Seventh Collegiate Court regarding the admission of E-Mex's amended complaint were correct ...............................................................56 2. The ruling declaring the unconstitutionality of the 2009-BIS Oficio in the Amparo 1668/2011 and the revocation of its consequences were legally correct .............................................................65 The Spanish version is the original and shall prevail over this courtesy translation in case of discrepancy. 3. The motion for reconsideration was correctly decided by the Supreme Court and the Seventh Collegiate Court .....................................75 4. The rulings in Amparo 1151/2012 were not binding on the Amparo 1668/2011 ....................................................................................78 M. The inspections and suspension of operations of the Casinos were consistent with the LFJS .................................................................................................................80 1. The SEGOB has the authority to conduct inspections in order to monitor the Casinos’ operations ...................................................80 2. The Inspections of the E-Games Casinos were ordered and executed in accordance with the LFJS and its Regulations .......................81 3. The SEGOB was not precluded from exercising its verification powers.....................................................................................84 N. E-Games had access to a legal defense to defend itself and be heard on the closure of its Casinos ..........................................................................................................88 1. The administrative Reconsideration filed by E-Games against the provisional closure was dismissed and E-Games did not appeal this decision ........................................................................88 2. In the Administrative Disciplinary Proceedings, E-Games had the opportunity to defend itself and its procedural rights were not violated ........................................................................................89 3. The case files of the closure proceedings were made available to E-Games .................................................................................93 O. Seal removal and delivery of legal possession of the properties where E-Games operated its casinos ................................................................................................94 1. Naucalpan Casino ......................................................................................95 2. San Jeronimo Casino..................................................................................96 3. Cuernavaca Casino.....................................................................................97 4. Villahermosa Casino ..................................................................................98 5. Puebla Casino.............................................................................................99 P. The permits that E-Games applied for in 2014 were denied because of several deficiencies and not because SEGOB required the establishments to be open and operational............................................................................................................100 The Spanish version is the original and shall prevail over this courtesy translation in case of discrepancy. 1. Deficiencies in the applications for new permits .....................................100 2. The Megasport case contrasts significantly to the E-Games case ...........................................................................................................103 Q. Attempts to sell the Casinos failed due to causes attributable to the