The case Espíritu Santo Holdings and L1bre Holding v. United Mexican States currently pending at International Centre for Settlement of Investment (ICSID) focuses on a taximeter application, spotlighting an uncommon intersection of technology and IP rights in investor-state arbitration.

Quandary Peak Research, led by Dr. George Edwards, was appointed by Mexico to provide expert software opinions in this groundbreaking case which signifies the importance of this legal clash and underscores the increasing relevance of technological understanding and IP expertise in today’s legal landscape.

The case, initiated in 2020, was triggered by the alleged abrupt termination of a concession for the installation of a digital taximeter system in Mexico City’s taxi fleet. U.S. and Canadian investors argue that Mexico unlawfully expropriated their investments which resulted in significant losses. The case was brought under the recently terminated NAFTA, specifically Chapter 11 which provided for investment protection standards.

Recently published pleadings available at ICSID’s website have enabled an in-depth exploration of the allegations from both parties, bringing the intellectual property and technology-focused disputes into sharp focus. Among other things, the claimants allege that Mexico City appropriated the Claimant’s ideas, intellectual property, and plans, embodied in its taximeter software, L1bre system, and copied its features to launch its own application, Mi Taxi. In response, Mexico maintains that the Mi Taxi application was developed independently, offers limited functionality compared to L1bre, and furthermore, the L1bre application lacks the necessary functionality to operate under the concession.

This case is a rare example of an investor-state arbitration that involves intellectual property and technology-related issues. Investor-state arbitration is a process that allows foreign investors to bring claims directly against the country where they have made investments if they believe their rights under international law have been violated. It arises from treaties designed to encourage and protect foreign investments which typically include protections against wrongful expropriation or discrimination, fair and equitable treatment, and full protection and security. The process provides a neutral forum, often under the rules of bodies like the International Centre for Settlement of Investment Disputes (ICSID).

The rise of tech investor-state arbitration is foreseeable as technology is increasingly at the heart of government policymaking. With advancements in tech driving economic growth and transforming industries, conflicts between tech investors and states are likely to escalate.

The parties have engaged independent software experts to provide opinions on the matters related to L1bre and Mi Taxi applications. The respective expert reports remain confidential. The finalization of the written pleadings stage signifies the progression to a hearing anticipated to take place later this year.

This press release published at PR Newswire.