(Bloomberg) — Axis Asset Management sued Citigroup Inc.’s Banamex to collect an arbitration award of more than $53 million tied to the Mexican bank’s alleged failure to pay management fees on a trust backing an oil-services firm that went bankrupt.   

Axis filed a petition Wednesday in New York federal court, alleging nonpayment of the award that was issued by ICC International Court of Arbitration in December.

A Citigroup representative said in a statement that the company had valid legal reasons to challenge the arbitration award and that it had submitted a suit in Mexican federal court. “We will continue to defend the matter vigorously,” the representative said. 

The dispute stems from a trust created by Axis in 2012 to issue private equity certificates, a financial instrument that allows institutional investors to fund Mexican companies and infrastructure. Axis was set up as the administrator and Banamex was trustee on certificates issued in 2013 to raise money from Mexican pension funds controlled by Banamex and Sura Asset Management SA. Those funds helped finance Oro Negro, a Mexican oil-rig operator set up by the chief executive officer of Axis and other partners.

In 2017, Oro Negro filed for bankruptcy protection in Mexico after running into troubles amid oil-price declines. During that year, Banamex stopped paying management fees owed to Axis for its role as administrator of the trust, according to the petition.

Axis made several demands for payment of those fees before the dispute went to arbitration in 2023. The arbitration tribunal concluded that Axis was entitled to those fees — with interest — from August 2017 through December 2022, as well as expenses, according to the petition. The fees totaled at least $53 million, the petition showed, with some unspecified interest charges pushing the tally higher.

Banamex — under the direction of Citigroup — is refusing to pay the award, Axis alleges. 

“After publicly committing to take steps to comply with the award, Banamex and the key trust holders appear to have reneged on these commitments,” lawyers for Axis wrote.

The lawsuits dredge up a painful episode from Banamex’s past just as Citigroup prepares to list the Mexican retail bank. The New York-based bank had initially sought to sell the unit but failed to reach a deal with Mexican mining magnate German Larrea in 2023 amid interference in the sale by then President Andres Manuel Lopez Obrador.

The bank has also been courting wealthy Mexicans to buy a chunk of Banamex that could be built into a controlling stake, Bloomberg News reported last month. Among them is former banker Fernando Chico Pardo, who is seeking to acquire as much as 20% of the unit ahead of the initial public offering.

Citigroup Chief Executive Officer Jane Fraser reiterated in July that the IPO could stretch into 2026 as the bank navigates regulatory approval and market conditions. Wells Fargo & Co. analyst Mike Mayo said this month that the IPO could be delayed until the second half of next year. That would give Citigroup more time for a full-bank sale, which would be a more favorable outcome for Citigroup shareholders, he said.

It’s also a crucial time for Mexico as the country implements a new legal system after replacing the Supreme Court and half of federal judges. When Mexico took steps to overhaul its court system last year, critics warned the move would give the left-leaning Morena party control over the last branch of government that remained independent. 

Companies have turned to relying on stronger arbitration clauses to deal with matters privately as a way to avoid the country’s new judicial system. The Supreme Court is now stacked with justices that have ties to Morena, as is a powerful new judicial discipline court. 

Axis also filed suit in Mexico against Banamex, which has filed a separate suit seeking to annul the arbitration award, according to non-public court documents seen by Bloomberg News. Banamex is represented by the law firm of Javier Quijano Baz, who served on the government’s committee that evaluated judicial candidates. 

A representative of the law firm Quijano, Cortina y de la Torre Abogados didn’t immediately respond to a request for comment. 

The CEO of Axis is Gonzalo Gil White, the son of former finance minister Francisco Gil Diaz. Gonzalo Gil White had also worked at Banamex on its structured-finance desk early in his career, before founding Oro Negro with a nephew of Gil Diaz.

Oro Negro lost a separate arbitration last year. The company sought more than $270 million, claiming that Mexico, via state-owned oil firm Pemex, had renegotiated oil-rig rental contracts without justification, among other things, ultimately contributing to its bankruptcy-protection filing.

More stories like this are available on bloomberg.com