The ICC tribunal’s final award in Refinería Madero Tamaulipas, S.A.P.I. de C.V. v. Pemex Transformación Industrial is a useful decision for anyone drafting or litigating arbitration clauses in State-linked infrastructure contracts. At its core, the award answers a deceptively simple question: when a public works contract excludes disputes over early termination from arbitration, does that exclusion also bar arbitration over a later, bilateral settlement of amounts due? The tribunal’s majority said no.[1]
The Dispute
Refinería Madero and Pemex Tri entered into a public works contract for engineering, procurement, supply, installation, construction, testing and commissioning works at the Francisco I. Madero refinery in Tamaulipas, Mexico.[2] The contract contained an ICC arbitration clause seated in Mexico City, governed by Mexican federal law, but expressly excluded administrative rescission and early termination from arbitration.[3] Pemex Tri later early-terminated the contract. The termination itself was not challenged. The fight instead concerned a November 2020 settlement in which the parties recorded balances in favor of Refinería Madero of USD 2,510,867.61 and MXN 29,029,458.50, plus VAT.[4] Pemex Tri did not pay, relying heavily on subsequent findings from Pemex’s Internal Audit, which had characterized certain amounts as improper or lacking support.[5]
The Jurisdictional Issue: The Carve-Out Did Not Swallow the Clause
Pemex Tri’s main jurisdictional move was to argue that the settlement derived from early termination and therefore inherited the early termination’s non-arbitrable character. The majority refused to extend the carve-out that far. It drew a sharp distinction between the early termination itself, which was excluded from arbitration, and a consensual settlement that fixed payment obligations between the parties.[6]
That distinction matters. Many public contracts contain carve-outs for administrative acts, termination, rescission, sanctions, or other exercises of public authority. The award’s reasoning suggests that such carve-outs should not be enlarged by implication to cover later contractual or consensual consequences unless the parties or the governing statute clearly say so. For the majority, neither the contract, the LOPSRM, the ACPs, nor the case law examined excluded disputes over a bilateral settlement from arbitration.[7]
The tribunal also found support in the contract’s treatment of unilateral settlement. Clause Seventeen referred to recourse to the “corresponding jurisdictional authority” when Pemex Tri prepared a settlement unilaterally, but the majority viewed that as confirming the opposite proposition for a bilateral settlement: a unilateral administrative act belongs before the administrative courts; a mutual settlement of contractual balances may remain within the arbitration clause.[8]
The Audit Issue: Internal Control Does Not Rewrite the Contract
The second key point is the tribunal’s treatment of Pemex’s Internal Audit. The majority was careful not to claim jurisdiction to annul or validate the audit findings themselves. Instead, it framed its role more narrowly: it could determine the effects of those findings on the parties’ contractual dispute.[9] That is an important boundary. The tribunal did not purport to supervise the public audit function; it assessed whether the audit changed the contractor’s right to payment under the settlement.
On that narrower question, the majority held that the audit findings did not create a pre-arbitration procedural requirement and did not make Refinería Madero’s claims inadmissible.[10] It also held that the Internal Audit lacked authority, as against Refinería Madero, to annul or modify a valid agreement reached by Pemex Tri; its recommendations were directed to Pemex Tri, not the contractor.[11] The contractor’s participation in meetings or document-review efforts did not amount to a modification of the settlement or a waiver of its payment claim.[12]
This is the award’s most commercially significant holding. It prevents an internal public-sector control mechanism from becoming, without clear contractual language, a unilateral route to suspend or reduce payment already recognized in a bilateral close-out agreement.
The Merits: A Liquid, Acknowledged Debt
Once the tribunal found jurisdiction and rejected the audit-based admissibility defense, the merits were straightforward. The settlement recorded a liquid debt. Pemex Tri had acknowledged the balances, and it did not prove payment, a lesser debt, or another valid defense to performance.[13] The majority therefore ordered Pemex Tri to pay the principal sums of USD 2,510,867.61 and MXN 29,029,458.50 before taxes.[14]
The tribunal also ordered interest. It accepted that interest ran from 25 November 2020, the date of the settlement, because that was when the parties defined the amount to be paid.[15] But it did not simply accept Refinería Madero’s expert calculation. The majority agreed with Pemex Tri that the expert had incorrectly accumulated the monthly rate across the entire period and had used a 360-day basis rather than 365 days.[16] Applying its own formula, the tribunal awarded interest through 30 June 2025 of USD 1,357,468.44 and MXN 11,747,829.02, with further interest to accrue until payment.[17]
The Close-Out Order and Costs
The tribunal also ordered the parties, after payment, to take the steps necessary to formalize the act extinguishing their rights and obligations under the contract.[18] On costs, however, the tribunal did not shift legal costs despite Refinería Madero’s success. It considered Pemex Tri’s jurisdictional objection genuine and not frivolous, and ordered each party to bear its own legal costs and the arbitration costs in equal shares.[19]
One procedural detail stands out: the dispositive orders were adopted by majority, except for the costs order, which was unanimous. The award also records that co-arbitrator Michelle Carrillo Torres refused to sign, with the majority consisting of Julieta Ovalle Piedra and Víctor M. Ruiz.[20]
Why the Award Matters
The award is likely to be cited for three propositions.
First, a public-law carve-out must be read with discipline. Excluding early termination from arbitration does not necessarily exclude disputes over payment obligations agreed in a later bilateral settlement.[21]
Second, arbitral tribunals may evaluate the effects of administrative or audit acts without ruling on their validity. That distinction allowed the tribunal to respect the Internal Audit’s public function while still enforcing the contractual bargain between Refinería Madero and Pemex Tri.[22]
Third, State entities that want audit clearance to be a condition to payment must say so clearly. The majority found no modification agreement, condition precedent, or contractual mechanism that allowed Pemex Tri or Pemex’s Internal Audit to rewrite the settlement after the fact.[23]
Drafting Takeaways
For contractors, the award underscores the value of a detailed settlement that identifies the balance due, the invoices or estimates supporting it, and the absence of further claims. For State entities, it is a reminder that internal audit rights, public finance controls, and payment-conditioning mechanisms should be expressly integrated into the contract if they are intended to affect the contractor’s right to collect. For both sides, the decision shows the importance of distinguishing the administrative act of termination from the contractual consequences that follow.
The broader message is simple: an internal audit may matter enormously within the public entity, but unless the contract or the law gives it external effect against the contractor, it will not necessarily defeat an arbitral claim for payment under a bilateral settlement.[24]
[1] Refinería Madero Tamaulipas, S.A.P.I. de C.V. v. Pemex Transformación Industrial, ICC Case No. 26949/PDP, Final Award, 30 June 2025, paras. 97-103, 303-306.
[2] Refinería Madero, para. 76.
[3] Refinería Madero, para. 8.
[4] Refinería Madero, paras. 81-84.
[5] Refinería Madero, paras. 87-91.
[6] Refinería Madero, paras. 98-100, 246-250.
[7] Refinería Madero, para. 306.
[8] Refinería Madero, paras. 303-306.
[9] Refinería Madero, paras. 339-341.
[10] Refinería Madero, paras. 335-338.
[11] Refinería Madero, paras. 379-383.
[12] Refinería Madero, paras. 383-385, 391.
[13] Refinería Madero, paras. 392-399.
[14] Refinería Madero, para. 440(iii).
[15] Refinería Madero, paras. 418-420.
[16] Refinería Madero, paras. 421-425.
[17] Refinería Madero, paras. 425-427, 440(iv).
[18] Refinería Madero, paras. 400-412, 440(v).
[19] Refinería Madero, paras. 436-439, 440(vi).
[20] Refinería Madero, para. 440, fn. 404.
[21] Refinería Madero, paras. 292-306.
[22] Refinería Madero, paras. 339-341, 379-391.
[23] Refinería Madero, paras. 381-391.
[24] Refinería Madero, paras. 379-391, 397-399.
