Executive Summary: Key Legal and Evidentiary Issues

• Bacanora sought to stay litigation concerning the validity of a gross overriding royalty (GORR) pending completion of a related international arbitration against Mexico

• The court analyzed whether the action and the ICSID Arbitration involve substantially the same issues, and whether continuing the action would cause injustice to either party

• Validity of the GORR Agreement signed in 2010 is distinct from the legitimacy of Mexico's 2022 nationalization and expropriation of the lithium properties

• Mootness presents a practical concern since no royalty is payable while Bacanora lacks ownership of the Mexican lithium properties

• Equitable principles, particularly delay defeating equity, weigh against granting a stay after Bacanora litigated for three years post-expropriation

• Pre-trial steps will continue to ensure trial-readiness, with trial scheduling left to the coordinator's discretion given potential mootness concerns

Background on the dispute

Bacanora Minerals Ltd is a mining company that, until 2022, owned lithium mining claims in Mexico. Bacanora's deponent, Osman Cherif, asserted that its Mexican lithium properties comprise one of the largest lithium deposits in the world and stated that Bacanora has invested hundreds of millions of dollars to develop the lithium properties. This action, commenced in 2017, concerns the validity of a gross overriding royalty held by the Estate of Ian Colin Orr-Ewing. The GORR is to be paid by Bacanora to the Estate on production from its lithium properties in Mexico. To date, no royalty has been paid because Bacanora has not realized any revenue from the lithium properties. The only relief that Bacanora seeks in this proceeding is a declaration that the Royalty Agreement that created the GORR is invalid.

Mexico's nationalization of lithium

Mexican President López Obrador announced in April 2022 that the Mexican lithium industry would be nationalized. The nationalization process was implemented through legislative and administrative measures over the following months. Mr. Cherif deposed that as a result of the nationalization of the lithium industry by Mexico, as well as the cancellation of the concessions, Bacanora no longer has any right or entitlement to continue advancing the project or seeking production from the lithium mines. The Estate does not dispute these facts. On May 22, 2024, Bacanora commenced an International Centre for Settlement of Investment Disputes arbitration against Mexico seeking return of the lithium properties or damages. Bacanora expects the ICSID Arbitration to be heard in late 2026 or early 2027.

Bacanora's application for a stay

On June 27, 2025, Justice Marion granted an order providing that this matter shall proceed to a 10-day trial on a date to be scheduled by the trial coordinator. The Estate advised that they have recently asked the trial coordinator to set the trial for January 2027. Schedule A to Justice Marion's order is a litigation plan that provides deadlines for completion of remaining pre-trial steps including further questioning, exchange of expert reports, alternative dispute resolution, and interlocutory applications. Among the interlocutory applications specified in the litigation plan was the present application to stay the proceedings pending completion of the ICSID Arbitration.

Court's analysis of duplication

Both parties agreed that the appropriate legal framework required consideration of whether the issues in the arbitration are substantially the same as the issues in the action, whether the defendant must satisfy the court that the continuance of the action would work an injustice, and whether the stay must not cause an injustice to the plaintiff. The court found that the only similarity between the present case and the ICSID Arbitration is that they concern the same lithium properties in Mexico. This action concerns the validity of a GORR payable on lithium production, whereas the ICSID Arbitration is about the validity of Mexico's expropriation of the lithium properties. The two proceedings present different legal issues that arise out of different factual contexts. The validity of the GORR will turn on facts preceding and surrounding the Royalty Agreement which was signed in 2010. The legitimacy of the expropriation of the lithium properties by Mexico concerns acts of the Mexican government that happened 12 years later. The court concluded that the proceedings are not duplicative, so a stay based on duplication is denied.

The mootness concern

The court identified that the real problem with the present action is not that it is duplicative but that it is moot unless and until Bacanora prevails in the ICSID Arbitration. So long as Bacanora does not own the lithium properties, it cannot mine them and no GORR is payable by Bacanora to the Estate. A judicial opinion on the validity of the GORR serves no purpose unless Bacanora can produce lithium from the properties to which the GORR pertains. The present case is unusual because there is a possibility that Bacanora will win the ICSID Arbitration and determination of the validity of the GORR may have practical value. Both parties have an interest in maintaining the action. Bacanora would prefer that the action be stayed pending the outcome of the ICSID Arbitration whereas the Estate wants to continue with the litigation plan endorsed by Justice Marion.

Application of equitable principles

A stay is an equitable remedy, so the usual principles of equity apply. Bacanora has been content to litigate this action for the last three years while the lithium properties were in the hands of Mexico. Only now, for some unexplained reason, has Bacanora asked the Court to stay the action. The court found that if Bacanora was content to spend its resources to advance this case for three years without owning the lithium properties, there is no reason to stay the action to prevent the parties from taking the final steps to get the case ready for trial. Refusing to stay this action is consistent with the equitable maxim delay defeats equity. Further, if Bacanora succeeds in the ICSID Arbitration, continuing with the litigation plan will ensure that the case will be trial-ready which is an important consideration given the passage of time since the events relevant to this case took place.

Ruling and outcome

The court denied Bacanora's application for a stay. While concerned that with the ICSID Arbitration being heard in late 2026 or early 2027 the result will not be known before this action goes to trial, and that reserving two weeks of trial time for a moot case is not an appropriate use of scarce public resources, the court was not persuaded that a stay is the appropriate remedy as that could require continued judicial involvement and supervision. Instead, the court determined that this is something that can be managed by the trial coordinator through her discretionary power over scheduling. A copy of the Reasons will be provided to the trial coordinator so that she may consider the facts discussed as she exercises her discretion with respect to scheduling or rescheduling the trial of this action. She may wish to consider, for example, whether the trial of this matter should be scheduled later in 2027 when it may reasonably be expected that the result of the ICSID Arbitration is known. The Estate was the successful party. If the parties are unable to agree on costs, they may make written submissions of two pages or less. No specific amount was awarded or ordered.