Item 1. Legal Proceedings
ITEM 1. LEGAL PROCEEDINGS
Mexico Project litigation
a) EWG request of precautionary measures
In January 2018, EWG Water LLC (“EWG”) initiated an ordinary mercantile claim against, among others, N.S.C. Agua, S.A. de C.V. (“NSC”) and Consolidated Water Cooperatief, U.A. (“CW-Cooperatief”) (with Aguas de Rosarito S.A.P.I. de C.V. (“AdR”) being named as a third party to be called to trial) before the Tenth Civil Judge in Tijuana, Baja California for Mercantile Matters (the “Tenth Civil Judge”).
In such claim, EWG challenged, among other things, the transactions contemplated under a certain option agreement (entered into in 2012), and therefore, the capital investment transactions occurring in May 2013 that increased the ownership interest of CW-Cooperatief in NSC to 99.99%. On October 1, 2020, and following an order from a Federal Judge obtained by NSC, the Tenth Civil Judge resolved to (i) move the claim of EWG to arbitration, and (ii) suspend the corresponding ordinary mercantile procedure. Within the above-mentioned claim, the Tenth Civil Judge granted EWG certain preliminary measures against NSC, which were later overturned by an Upper Court.
In July 2023, EWG filed a motion before a local court in Playas de Rosarito, Baja California (the “Rosarito Court”) to obtain precautionary measures consisting of the securing of assets owned by NSC (particularly real estate), as a procedure prior to the commencement of an arbitration that allegedly would be initiated by EWG against NSC to claim the payment of an indemnification for damages derived from a so-called simulation of legal acts. In the opinion of the Rosarito Court, such motion did not require notification to NSC or the presentation of counterarguments by NSC to the motion prior to securing the assets of NSC.
On July 28, 2023, the Rosarito Court issued a resolution in which it: (i) granted the precautionary measures requested by EWG, subject to the posting of a bond in the amount of MXN$1,500,000 (One Million Five Hundred Thousand Mexican Pesos), and (ii) ordered that once the precautionary measures were executed, NSC would be summoned to that procedure and EWG would have three business days to prove that it initiated the arbitration.
To our knowledge, EWG has not posted the bond set by the Rosarito Court. Therefore: (i) the precautionary measures have not been enforced, (ii) no securing or attachment has been registered against the real estate of NSC; and (iii) NSC has not been formally summoned to this procedure.
Furthermore, NSC is unaware of any arbitration commenced by EWG regarding this matter.
b) NSC amparo lawsuit
On August 16, 2023, NSC filed an amparo suit (i.e. application for constitutional relief) before the Eleventh Federal District Court in Tijuana (“Eleventh Federal Court”) against the precautionary measures granted to EWG by the Rosarito Court.
In its amparo suit, NSC also requested the Eleventh Federal Court to grant an order to put on hold said precautionary measures. A preliminary order to stay was granted by the Eleventh Federal Court, followed by a definitive injunction, subject to the posting of a guarantee. NSC has submitted the guarantee to the court.
We cannot presently determine what impact the resolution of this matter may have on our consolidated financial statements.
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