Clarion Partners, a $35.8 billion real-estate fund, is seeking $200 million from the Mexican government, saying “serious irregularities” in the country’s courts have made it impossible to collect on bad loans.
The New York-based fund said Monday that it filed an arbitration claim to recover the money under the North American Free Trade Agreement. The dispute would be heard if a resolution can’t be reached in 90 days.
According to the filing, an affiliate of Clarion lent $32.8 million in 2007 to a Guadalajara-based businessman to develop properties in western Mexico, with the land acting as collateral. When the borrower missed payments in February 2012, Clarion sought to seize the collateral.
Instead, Clarion says, its efforts to collect were stymied by delays and irregularities in Mexico’s court system. Several months into the process, the firm learned that a judge in the state of Jalisco had canceled its claims on the collateral. That ruling was based on a forged document, and efforts to get Mexico’s judicial system to investigate the matter proved futile, according to the filing.
The real-estate fund says it now intends to seek a ruling under NAFTA, which guarantees investors in the U.S. a fair hearing in Mexican courts. The amount sought has ballooned to more than $200 million because of $168.6 million in unpaid interest on the original loans, according to the filing.
“We are forced to initiate this proceeding as a last resort,” Onay Payne, director in charge of Mexico investments at Clarion, said in a statement. “Our repeated attempts to seek due process through civil and criminal actions in the Mexican courts have been futile and plagued with serious irregularities.”