Odyssey Marine Exploration Reports Win in NAFTA Arbitration Case

Rhea-AI Summary

Odyssey Marine Exploration (NASDAQ: OMEX) has won an arbitration case against Mexico under NAFTA Chapter Eleven. The International Centre for Settlement of Investment Disputes (ICSID) has ordered Mexico to pay $37.1 million plus interest for breaching its NAFTA obligations. This award stems from Mexico's environmental agency SEMARNAT's wrongful denial of an environmental permit for Odyssey's subsidiary, Exploraciones Oceánicas.

The ruling validates Odyssey's position that SEMARNAT's denial was unjustified, as the project had received extensive input from experts and was deemed economically feasible and environmentally responsible. CEO Mark Gordon emphasized the project's strategic significance and commercial viability. Odyssey expects to use most or all of the proceeds to satisfy its litigation financing obligations.

Positive

• Arbitration award of $37.1 million plus interest in favor of Odyssey Marine Exploration
• Validation of Odyssey's position regarding the wrongful denial of environmental permit
• Project remains strategically significant and commercially viable
• Potential for future collaboration with nations on underwater mineral resources exploration

Negative

• Most or all of the arbitration award proceeds expected to be used for satisfying litigation financing obligations
• Ongoing legal challenges with Mexico's environmental agency SEMARNAT

Insights

Financial Analyst

The $37.1 million award from the NAFTA arbitration case represents a significant financial win for Odyssey Marine Exploration (OMEX). This ruling not only provides a substantial cash inflow but also validates the company's position against Mexico's environmental agency SEMARNAT. However, investors should note that most or all of the proceeds are expected to be used to satisfy litigation financing obligations, potentially limiting the direct financial benefit to the company. The additional interest awarded, calculated at Mexico's one-year Treasury bond rate compounded annually since October 2018, will further increase the total payout. This outcome may improve OMEX's financial position and potentially boost investor confidence in the company's ability to navigate regulatory challenges in international waters.

Legal Expert

The NAFTA arbitration award in favor of Odyssey Marine Exploration is a significant legal victory. The ruling that Mexico breached its NAFTA obligations sets a precedent for protecting foreign investments in the region. The tribunal's decision to order Mexico to pay damages, plus interest and costs, without allowing taxation on the award, demonstrates a comprehensive approach to compensation. This outcome may have broader implications for other companies operating in Mexico, particularly in environmentally sensitive sectors. The ongoing challenge before the Tribunal Federal de Justicia Administrativa (TFJA) suggests that Odyssey is pursuing a multi-pronged legal strategy to secure its rights. This legal win could strengthen the company's position in future negotiations with Mexican authorities and other countries where it operates.

Environmental Policy Analyst

The arbitration outcome highlights the tension between economic development and environmental protection in the marine exploration sector. While Odyssey claims its project is "environmentally responsible," the initial permit denial by SEMARNAT raises questions about the potential environmental impacts of deep-sea mineral extraction. The arbitration award doesn't necessarily validate the project's environmental merits but rather focuses on the procedural aspects of the permit denial. This case underscores the need for clear, science-based environmental regulations in emerging industries like deep-sea mining. The outcome may encourage other companies to challenge environmental decisions through international arbitration, potentially affecting how countries balance economic interests with environmental protection. Investors should closely monitor how this decision impacts future environmental permitting processes for similar projects globally.

TAMPA, Fla.--(BUSINESS WIRE)-- Odyssey Marine Exploration, Inc. (NASDAQ: OMEX), an ocean exploration pioneer engaged in the discovery, development and extraction of critical minerals that provide solutions to global challenges, announces an award in its arbitration with the United Mexican States under Chapter Eleven of the North American Free Trade Agreement (NAFTA).

Odyssey Marine Exploration (Odyssey) has received notification from the International Centre for Settlement of Investment Disputes (ICSID) of the arbitral award on the claims involving Odyssey and its subsidiary, Exploraciones Oceánicas S. de R.L. de C.V. (ExO), against Mexico. The award orders Mexico to pay US$37.1 million for breaching its obligations under NAFTA, plus interest at the one-year Mexico Treasury bond rate, compounded annually, from October 12, 2018, until the award is paid in full, plus the arbitrators’ fees and ICSID administrative costs. The amounts awarded are net of Mexican taxes and Mexico may not tax the award. Odyssey expects that most or all of the proceeds of the award will be used to satisfy its litigation financing obligations.

“The ruling today validates our position that Mexico’s environmental agency SEMARNAT wrongfully denied our environmental permit, which received extensive input from external advisors and industry experts to determine an economically feasible and environmentally responsible development plan. The project remains strategically significant and commercially viable,” said Mark Gordon, Odyssey Marine Exploration’s Chief Executive Officer and Chairman of the Board of Directors. "We are poised to continue advancing our projects globally, while also collaborating with nations interested in exploring their underwater mineral resources to meet the escalating demand for critical minerals. Our focus remains on minerals that offer solutions to pressing global challenges, such as mitigating carbon emissions through renewable energy adoption and enhancing fertilizer accessibility to support an ever-growing global population."

ICSID will publish the decision on its website at https://icsid.worldbank.org/ when it is available.

NAFTA Case Background

Odyssey initiated the NAFTA arbitration after the manifestly arbitrary and discriminatory denial by SEMARNAT of an environmental permit for ExO based not on Mexico’s regulations or on scientific support, but on a politician’s directive. Mexico's highest federal administrative court, the Tribunal Federal de Justicia Administrativa (TFJA), unanimously ruled in favor of ExO in 2018 that SEMARNAT had unlawfully rejected the environmental permit in 2016. When SEMARNAT once again denied the permit in contravention of Mexican and public international laws, Odyssey determined it needed to commence the arbitration in order to protect its shareholders’ investment. Today's ruling reflects the tribunal's examination of SEMARNAT's unlawful handling of the permit. ExO is also once again challenging the unlawful decision of SEMARNAT before the TFJA.

About Odyssey Marine Exploration

Odyssey Marine Exploration, Inc. (NASDAQ: OMEX) is a global leader in ocean exploration with over 30 years of experience. The company is committed to the sustainable and responsible discovery, validation, and advancement of seafloor critical mineral projects, including polymetallic nodules for battery metals and subsea phosphate deposits for fertilizers. Offering comprehensive research, marine operations, and regulatory compliance support, Odyssey works with governments and seafloor rights holders worldwide. Odyssey develops its projects in collaboration with a global network of partners, academics, and industry professionals who share its commitment to environmentally sound solutions to obtain minerals that will address present and future global challenges. Learn more at www.odysseymarine.com.

Forward-Looking Information

Odyssey Marine Exploration believes the information set forth in this Press Release may include "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. Certain factors that could cause results to differ materially from those projected in the forward-looking statements are set forth in "Risk Factors" in Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the Securities and Exchange Commission on May 17, 2024. The financial and operating projections as well as estimates of mining assets are based solely on the assumptions developed by Odyssey that it believes are reasonable based upon information available to Odyssey as of the date of this release. All projections and estimates are subject to material uncertainties and should not be viewed as a prediction or an assurance of actual future performance. The validity and accuracy of Odyssey's projections will depend upon unpredictable future events, many of which are beyond Odyssey's control and, accordingly, no assurance can be given that Odyssey's assumptions will prove true or that its projected results will be achieved.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240917082379/en/

Liz Shows

Odyssey Marine Exploration, Inc.

(813) 876-1776

lshows@odysseymarine.com

Source: Odyssey Marine Exploration, Inc.

FAQ

What was the outcome of Odyssey Marine Exploration's NAFTA arbitration case against Mexico?

Odyssey Marine Exploration (OMEX) won the arbitration case, with Mexico ordered to pay $37.1 million plus interest for breaching its NAFTA obligations.

Why did Odyssey Marine Exploration initiate the NAFTA arbitration against Mexico?

Odyssey initiated the arbitration after Mexico's environmental agency SEMARNAT arbitrarily and discriminatorily denied an environmental permit for Odyssey's subsidiary, Exploraciones Oceánicas.

How will Odyssey Marine Exploration (OMEX) use the proceeds from the arbitration award?

Odyssey expects that most or all of the proceeds from the $37.1 million award will be used to satisfy its litigation financing obligations.

What is the significance of the NAFTA arbitration ruling for Odyssey Marine Exploration's project in Mexico?

The ruling validates Odyssey's position that their project is economically feasible and environmentally responsible, and remains strategically significant and commercially viable despite SEMARNAT's permit denial.