Title

AGREEMENT BETWEEN THE GOVERNMENT OF THE KINGDOM OF BAHRAIN AND THE GOVERNMENT OF THE UNITED MEXICAN STATES ON THE PROMOTION AND RECIPROCAL PROTECTION OF INVESTMENTS

Preamble

The Government of the Kingdom of Bahrain and the Government of the United Mexican States, hereinafter referred to as "the Contracting Parties";

DESIRING to intensify the economic cooperation for their mutual benefit;

INTENDING to create and maintain favourable conditions for investments by investors of one Contracting Party in the territory of the other Contracting Party, and

RECOGNIZING the need to promote and protect foreign investments with the aim of fostering the flow of productive capital and economic prosperity,

Have agreed as follows:

Body

Chapter I. General Provisions

Article 1. Definitions

For the purposes of this Agreement, the term:

1. "enterprise" means any entity constituted or organized under the applicable law of a Contracting Party, whether or not for profit, and whether privately or governmentally owned, including any corporation, trust, partnership, sole proprietorship, joint venture or other association;

2. "ICSID" means the International Centre for Settlement of Investment Disputes;

3. "ICSID Additional Facility Rules" means the Rules Governing the Additional Facility for the Administration of Proceedings by the Secretariat of the ICSID, as may be amended;

4. "ICSID Convention" means the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, adopted in Washington on March 18, 1965, as may be amended:

5. "investment" means the following assets owned or controlled by investors of one Contracting Party and established or acquired in accordance with the law's and regulations of the other Contracting Party in whose territory the investment is made:

(a) an enterprise;

(b) shares, stocks and other forms of equity participation in an enterprise;

(c) a debt security of an enterprise:

(i) where the enterprise is an affiliate of the investor, or

(ii) where the original maturity of the debt security is at least eighteen (18) months,

But does not include a debt security, regardless of original maturity, of a Contracting Party or of a State enterprise;

(d) a loan to an enterprise:

(i) where the enterprise is an affiliate of the investor, or

(ii) where the original maturity of the loan is at least eighteen (18) months,

But does not include a loan, regardless of original maturity, to a Contracting Party or to a State enterprise;

(e) real estate or other property, tangible or intangible, acquired in the expectation or used for the purpose of economic benefit or other business purposes;

(f) interests arising from the commitment of capital or other resources in the territory of a Contracting Party to economic activity in such territory, such as under:

(i) contracts involving the presence of an investor's property in the territory of the other Contracting Party, including turnkey or construction contracts, or concessions, or

(ii) contracts where remuneration depends substantially on the production, revenues or profits of an enterprise; and

(g) claims to money involving the kind of interests set out in sub-paragraphs (a) to (f) above, but no claims to money that arise solely from:

(i) commercial contracts for the sale of goods or sendees by a national or enterprise in the territory of a Contracting Party to an enterprise in the territory of the other Contracting Party, or

(ii) the extension of credit in connection with a commercial transaction, such as trade financing, other than a loan covered by subparagraph (d) above;

6. "investor of a Contracting Party" means:

(a) a natural person having the nationality of a Contracting Party in accordance with its applicable laws, or

(b) an enterprise which is either constituted or otherwise organized under the law of a Contracting Party, and is engaged in substantive business operations in the territory of that Contracting Party:

having made an investment in the territory of the other Contracting Party;

7. "New York Convention" means the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, adopted at the United Nations in New York on June 10, 1958, as may be amended;

8. "UNCITRAL Arbitration Rules" means the Arbitration Rules of the United Nations Commission on International Trade Law, approved by the United Nations General Assembly on December 15, 1976, as may be amended;

9. "State enterprise" means an enterprise that is owned, or controlled through ownership interests, by a Contracting Party; and

10. "Territory" means:

(a) With respect to the Kingdom of Bahrain, the territory of the Kingdom of Bahrain as well as the maritime areas, seabed and subsoil over which Bahrain exercises, in accordance with international law, sovereign rights and jurisdiction, and

(b) With respect to the United Mexican States, the United Mexican States, when used in a geographical sense it includes the territory of the United Mexican States, as well as the integrated parts of the Federation, the islands, including the reefs and cays in the adjacent waters, the islands of Guadalupe and Revillagigedo, the continental shelf and the seabed and sub-soil of the islands, cays and reefs, the waters of the territorial seas and the inland waters and beyond them the areas over which, in accordance with the international law, the United Mexican States may exercise its sovereign rights of exploration and exploitation of the natural resources of the seabed, sub-soil and the supra-jacent waters, and the air space of the national territory to the extent and under conditions established by international law.

Article 2. Admission of Investment

Each Contracting Party shall admit the entry of investments made by investors of the other Contracting Party pursuant to its applicable laws and regulations.

Chapter II. Protection of Investment

Article 3. National Treatment and Most Favoured Nation Treatment

1. Each Contracting Party shall accord to investors of the other Contracting Party and their investments, treatment no less favourable than that it accords, in like circumstances, to its own investors and to investments of its own investors with respect to the management, maintenance, use. enjoyment or disposition of investments.

2. Each Contracting Part}' shall accord to investors of the other Contracting Party and their investments treatment no less favourable than that it accords, in like circumstances, to investors and to investments of investors of any third State with respect to the management, maintenance, use, enjoyment or disposition of investments.

3. This Article shall not be construed so as to oblige one Contracting Party to extend to the investors of the other Contracting Party and their investments the benefits of any treatment, preference or privilege which may be granted by such Contracting Party by virtue of:

(a) any existing or future regional economic integration organization, free trade area, customs union, monetary union or any other similar integration arrangement, of which one of the Contracting Parties is or may become a party;

(b) any rights or obligations of a Contracting Party resulting from an international agreement or arrangement relating wholly or mainly to taxation. In the event of any inconsistency between this Agreement and any tax-related international agreement or arrangement, the latter shall prevail.

Article 4. Minimum Standard of Treatment

1. Each Contracting Party shall accord to investments of investors of the other Contracting Party treatment in accordance with customary international law, including fair and equitable treatment and lull protection and security.

2. For greater certainty:

(a) the concepts of "fair and equitable treatment and full protection and security do not require treatment in addition to or beyond that which is required by the customary international law minimum standard of treatment of aliens; and

(b) a determination that there has been a breach of another provision of this Agreement, or of a separate international agreement, does not establish that there has been a breach of this Article.

Article 5. Compensation for Losses

Investors of a Contracting Party whose investments in the territory of the other Contracting Party suffer losses owing to war. armed conflict, a state of national emergency, insurrection, riot or any other similar event, shall be accorded, as regards the restitution, indemnification, compensation or other settlements, treatment no less favourable than the treatment the other Contracting Party accords to its own investors or investors of any third State.

Article 6. Expropriation and Compensation

1. Neither Contracting Party may expropriate or nationalize an investment either directly or indirectly through measures tantamount to expropriation or nationalization ("expropriation'), except:

(a) for a public purpose;

(b) on a non-discriminator} basis;

(c) in accordance with due process of law. and

(d) on payment of compensation in accordance with paragraph 2 below.

2. Compensation shall:

(a) be equivalent to the fair market value of the expropriated investment immediately before the expropriation occurred. The fair market value shall not reflect any change in value because the intended expropriation had become publicly known earlier. Valuation criteria shall include the going concern value, asset value, including declared tax value of tangible property, and other criteria, as appropriate, to determine the fair market value;

(b) be paid without delay;

(c) include a daily rate of compensation at a commercially reasonable rate for that currency, from the date of expropriation until the date of actual payment, and

(d) be fully realisable and freely transferable.

Article 7. Transfers

1. Each Contracting Party shall permit all transfers related to an investment of an investor of the other Contracting Party be made freely and without delay. Transfers shall be made in a freely usable currency at the market rate of exchange prevailing on the date of transfer. Such transfers shall include:

(a) profits, dividends, income from debt-claims, capital gains, royalty payments, management fees, technical assistance and other fees and amounts derived from the investment:

(b) proceeds from the sale of all or any part of the investment, or from the partial or complete liquidation of the investment;

(c) payments made under a contract entered into by the investor or its investment, including payments made pursuant to a loan agreement;

(d) payments arising from the compensation for losses or expropriation, and

(e) payments pursuant to Chapter III, Section One.

2. Notwithstanding paragraph 1 above, a Contracting Party may prevent a transfer through the equitable, non-discriminaiory and good faith application of its laws in the following cases:

(a) bankruptcy, insolvency or the protection of the rights of creditors;

(b) issuing, trading, or dealing in securities;

(c) criminal or administrative violations;

(d) reports of transfers of currency or other monetary' instruments, or

(e) ensuring the satisfaction of judgments in adjudicatory proceedings.

Provided that such measures and their application shall not be used as a means of avoiding the Contracting Parties' commitments or obligations under this Agreement.

3. In case of a serious balance of payments difficulty or of a threat thereof, a Contracting Party may temporarily restrict transfers provided that such a Contracting Party implements measures or a programme in accordance with the Articles of Agreement of the International Monetary Fund and that do not exceed those necessary to deal with the circumstances described in this paragraph. These restrictions should be imposed on an equitable, non-discriminatory and in a good faith basis, and be notified to the other Contracting Party.

Article 8. Subrogation

1. If a Contracting Party or its designated agency has granted a financial guarantee against non-commercial risks with respect to an investment made by one of its investors in the territory of the other Contracting Party, and makes a payment under such guarantee, or exercises its rights as subrogee, the latter Contracting Party shall recognize the subrogation of any right, title, claim, privilege or actions. The Contracting Party or its designated agency shall not assert greater rights than those of the person or entity from whom such rights were received.

2. In case a dispute arises, the Contracting Party wriich has been subrogated in the rights of the investor may not initiate or participate in proceedings before a national tribunal, nor submit the case to international arbitration in accordance with the provisions of Chapter III.

Chapter III. Dispute Settlement

Section One. Settlement of Disputes between a Contracting Party and an Investor of the other Contracting Party

Article 9. Purpose

This Section shall apply to disputes between a Contracting Party and an investor of the other Contracting Party arising from an alleged breach of an obligation set forth in Chapter 11 entailing loss or damage.

Article 10. Notice of Intent and Consultation

1. The disputing parties should first attempt to settle a claim through consultation or negotiation.

2. With a view 1 to settling the claim amicably, the disputing investor shall deliver to the disputing Contracting Party written notice of its intention to submit a claim to arbitration at least six (6) months before the claim is submitted under Article 11. Such notice shall specify:

(a) the name and address of the disputing investor and, w'here a claim is made by an investor on behalf of an enterprise according to Article 11 paragraph 2, the name and address of the enterprise;

(b) the provisions of Chapter II alleged to have been breached;

(c) the factual and legal basis of the claim;

(d) the kind of investment involved pursuant to the definition set out in Article 1, and

(e) the relief sought and the approximate amount of damages claimed.

Article 11. Submission of a Claim

1. An investor of a Contracting Party may submit to arbitration a claim that the other Contracting Party has breached an obligation set forth in Chapter II, and that the investor has incurred loss or damage by reason of, or arising out of, that breach.

2. An investor of a Contracting Party, on behalf of an enterprise legally constituted pursuant to the laws of the other Contracting Party, that is a legal person such investor owns or controls, may submit to arbitration a claim that the other Contracting Party has breached an obligation set forth in Chapter II, and that the enterprise has incurred loss or damage by reason of, or arising out of that breach.

3. A disputing investor may submit the claim to arbitration under:

(a) the ICSID Convention, provided that both the disputing Contracting Party and the Contracting Party of the investor are parties to the ICSID Convention;

(b) the ICSID Additional Facility Rules, provided that either the disputing Contracting Party or the Contracting Party of the investor, but not both, is a party to the ICSID Convention;

(c) the UNCITRAL Arbitration Rules, or

(d) any other arbitration rules, if the disputing parties so agree.

4. A disputing investor may submit a claim to arbitration only if:

(a) the investor consents to arbitration in accordance with the procedures set forth in this Section, and

(b) the investor and, where the claim is for loss or damage to an interest of an enterprise of the other Contracting Party that is a legal person that the investor owns or controls, the enterprise waives its right to initiate or continue before any administrative tribunal or court under the law of a Contracting Party, or other dispute settlement procedures, any proceedings with respect to the measure of the disputing Contracting Party that is alleged to be a breach of Chapter II, except for proceedings for injunctive, declaratory, or other extraordinary relief, not involving the payment of damages, before an administrative tribunal or court under the law of the disputing Contracting Party.

5. A disputing investor may submit a claim to arbitration on behalf of an enterprise of the other Contracting Party that is a legal person that the investor owns or controls, only if both the investor and the enterprise:

(a) consent to arbitration in accordance with the procedures set forth in this Section, and

(b) waive their right to initiate or continue before any administrative tribunal or court under the law of a Contracting Party, or other dispute settlement procedures, any proceedings with respect to the measure of the disputing Contracting Party that is alleged to be a breach under Chapter II, except for proceedings for injunctive, declaratory or other extraordinary relief, not involving the payment of damages, before an administrative tribunal or court under the law of the disputing Contracting Party.

6. The consent and waiver referred to in this Article shall be in writing, delivered to the disputing Contracting Party and included in the submission of a claim to arbitration.

7. The applicable arbitration rules shall govern the arbitration except to the extent modified by this Section.

8. A dispute may be submitted to arbitration provided that the investor has delivered to the disputing Contracting Party its notice of intent referred to in Article 10 no later than three (3) years from the date that either the investor or the enterprise of the other Contracting Party that is a legal person that the investor owns or controls, first acquired or should have first acquired knowledge of the events which gave rise to the dispute.

9. If the investor, or an enterprise that an investor owns or controls, submits the dispute referred to in paragraphs 1 or 2 above to the Contracting Party's competent judicial or administrative courts, the same dispute may not be submitted to arbitration as provided in this Section.

Article 12. Contracting Party Consent

1. Each Contracting Party hereby gives its unconditional consent to the submission of a dispute to international arbitration in accordance with this Section.

2. The consent and the submission of a claim to arbitration by the disputing investor shall satisfy the requirements of:

(a) Chapter II of the ICSID Convention (Jurisdiction of the Centre) and the ICSID Additional Facility Rules for written consent of the parties to the dispute, and

(b) Article II of the New York Convention for an agreement in writing.

Article 13. Constitution of the Arbitral Tribunal

1. Unless the disputing parties otherwise agree, the arbitral tribunal shall be composed by three arbitrators. Each disputing party shall appoint one arbitrator and the disputing parties shall agree upon a third arbitrator, who shall be the chairman of the arbitral tribunal.

2. If an arbitral tribunal has not been established within ninety (90) days from the date on which the claim was submitted to arbitration, either because a disputing party failed to appoint an arbitrator or because the disputing parties failed to agree upon the chairman, the Secretary-General of ICSID, upon request of any of the disputing parties, shall be asked to appoint, at his own discretion, the arbitrator or arbitrators not yet appointed. Nevertheless, the Secretary-General of ICSID, when appointing the chairman, shall assure that he or she is a national of neither of the Contracting Parties.

Article 14. Consolidation

1. The disputing party shall request to the Secretary General of ICSID to establish a consolidation tribunal under the UNCITRAL Arbitration Rules, which shall conduct its proceedings in accordance with such rules, except as modified by this Section.

2. In the interest of a fair and efficient resolution, and unless the interests of any disputing party are seriously harmed, a tribunal established under this Article may consolidate the proceedings when:

(a) two or more investors in relation with the same investment submit a claim to arbitration under this Section, or

(b) two or more claims arising from common legal or factual issues are submitted to arbitration.

3. Upon request of a disputing party, a tribunal established under Article 11. awaiting the determination of the consolidation tribunal in accordance with paragraph 4 below, may stay the proceedings that it had initiated. -

4. A tribunal established under this Article, after hearing the disputing parties, may determine:

(a) assume jurisdiction over, and hear and determine together, all or part of the claims, or

(b) assume jurisdiction over, and hear and determine one or more of the claims, provided that in doing so it would contribute to the settlement of the other claims.

5. A tribunal established under Article 11 shall lack jurisdiction to hear and determine a claim, or a part thereof, over which a consolidation tribunal has assumed jurisdiction.

6. A disputing party that intends consolidation of a claim under this Article may request to the Secretary-General of ICSID the establishment of a tribunal, and shall specify in its request:

(a) the name of the disputing Contracting Party or the disputing investors to be included in the consolidation process;

(b) the nature of the order sought, and

(c) the grounds on which the order is sought.

7. A disputing party shall deliver a copy of its request to the disputing Contracting Party or to any disputing investor to the proceedings sought to be consolidated.

8. Within sixty (60) days of receipt of the request, the Secretary-General of ICSID may establish a tribunal comprised of three arbitrators. One shall be a national of the disputing Contracting Party, and one shall be a national of the Contracting Party of the disputing investors; the third, the presiding arbitrator, shall be a national of a nonContracting Party. Nothing in this paragraph shall prevent the disputing investors and the disputing Contracting Party from appointing the members of the tribunal by a special agreement.

9. Where a disputing investor has submitted a claim to arbitration under Article 11 and has not been named in a request made under paragraph 6 above, a disputing investor or the disputing Contracting Party, as appropriate, may make a written request to the tribunal that the first disputing investor be included in an order made under paragraph 4 above, and shall specify in the request:

(a) the name and address of the disputing investor;

(b) the nature of the order sought, and

(c) the grounds on which the order is sought.

10. A disputing investor referred to in paragraph 9 above shall deliver a copy of its request to the disputing parties named in a request under paragraph 6 above.

Article 15. Place of Arbitration

Upon request of any disputing party, an arbitration under this Section shall be held in a State that is party to the New York Convention and with whom a disputing Contracting Party enjoys diplomatic relations. Only for the purposes of Article 1 of the New York Convention, claims submitted to arbitration under this Section shall be considered to have arisen out of a commercial relationship or transaction.