Introduction

1. Claimant’s waiver under Article 1121 of the North American Free Trade Agreement (“NAFTA”) is valid and sufficient for three independently sufficient reasons. Policy and equitable considerations also support Claimant’s position.

2. First, Claimant has waived its right to initiate or continue any and all proceedings with respect to the measures Claimant contends are breaches of NAFTA. NAFTA Article 1121 requires that KBR, Inc. and its fully-owned subsidiary COMMISA “waive their right to initiate or continue […] proceedings with respect to the measure of the disputing party that is alleged to be a breach” of NAFTA. KBR’s claim here is that Mexico breached NAFTA by transforming COMMISA’s hard-fought arbitral win (now worth almost half a billion dollars) into a US$106 million loss. Mexico achieved this through:

(a) the annulment (the “Annulment Decision”) of a valid ICC award favorable to COMMISA (the “ICC Award”); and

(b)the improper enforcement of PEP’s claim for US$106 million under the performance bonds posted by COMMISA, even though the only fact finder considered Mexico’s state-owned company, PEMEX Exploración y Producción (“PEP”), to be the guilty party.

3. Claimant has waived its right to initiate or continue proceedings with respect to the Annulment Decision and the improper enforcement of PEP’s claim for US$106 million under the performance bonds. Accordingly, Claimant’s waiver is valid.