Introduction

1. KBR is in receipt of the submissions of both the United States and Canada pursuant to NAFTA Article 1128. Neither submission contests that KBR’s and COMMISA’s respective waivers under Article 1121(b) of the North American Free Trade Agreement (“NAFTA”) are each valid and sufficient; rather, each submission merely asserts that the issue of the validity of a waiver is one that goes to the jurisdiction of a NAFTA tribunal.

2. The United States’ and Canada’s Article 1128 submissions are therefore only relevant to the extent this Tribunal finds that KBR’s and COMMISA’s Article 1121 waivers were deficient. However, the Tribunal need not reach the issue of the consequence of an insufficient waiver because KBR’s and COMMISA’s waivers are valid and sufficient. KBR’s and COMMISA expressly waived their right to initiate or continue any and all proceedings with respect to the measures KBR contends are breaches of NAFTA, measures which do not make up the factual predicate for either of the award confirmation proceedings pending in New York and Luxembourg. Furthermore, neither of these proceedings is subject to the waiver requirements set forth in NAFTA Article 1121(b) because neither “involv[es] the payment of damages.” Finally, neither KBR nor COMMISA is in a position to “waive” the New York or Luxembourg proceedings, as both such proceedings are currently on appeal by PEP and are within the exclusive control of PEP and/or Mexico.

3. Although the inapplicability of Article 1121’s requirements to the New York and Luxembourg proceedings renders moot the issue opined upon by the United States and Canada, KBR reiterates its view that the validity of its waiver is an issue of admissibility, not jurisdiction. Therefore, should the Tribunal find a defect in KBR or COMMISA’s waiver, KBR and COMMISA should be permitted to cure that defect. As set forth in KBR’s Reply on Preliminary Question of Waiver (“KBR’s First Waiver Submission”), the waiver requirement must be construed as an issue affecting when an arbitration may be commenced, not whether the parties have agreed to arbitrate at all.1 Importantly, at least one prior NAFTA tribunal’s decision demonstrates that a failure to meet the requirements of Article 1121 may be cured.2