International Arbitration Newsletter - December 2020 | Regional Overview: The Americas

Brazil

Clash of claimants in Petrobras arbitration

A São Paulo-seated tribunal is hearing a dispute between two Petrobas shareholders who are both seeking compensation in a claim worth US$ 35 billion from Brazil as a result of the alleged corruption and criminal acts of the former Petrobras administrators appointed by the state in the scandal know as Lava Jato. Argentine businessman Alejandro Stratiotis, is contesting the right of not-profit foundation called Fundação Movimento Universitário de Desenvolvimento Economico e Social (MUDES).

The relationship between the shareholders began to deteriorate after MUDES objected to consolidate both shareholders´ claims into a single arbitration alleging that Stratiotis was barred from filing a later claim under the principle of lis pendens and even demanding proof from Stratiotis to show he was indeed a shareholder, which he refused to provide. After a decision by the arbitral tribunal that decided to consolidate the claims, both shareholders were again at loggerheads when they were ordered to pay jointly up to US$ 6.4 million by way of security for costs.

The disagreement between the shareholders is now over who will be entitled to the premium that exists under Brazilian corporate law if the tribunal finally decides to awards damages. MUDES says that it should be the only party entitled to the premium because it launched its arbitration first whereas Stratiotis argues that both have the same standing and consequently have the same potential rights in the proceedings.

CHILE

Chilean government announces it will take disputes with Albermale to international arbitration

The director of Corporación para el Fomento de la Producción (CORFO), a Chilean government agency, has said he intends to take the current dispute with US company Albermale, the world’s largest lithium producer, to international arbitration.

The two parties concluded an agreement in which Albermale was granted the right to extract lithium from Salar de Atacama, a salt flat in northern Chile, and with respect to which disputes have arisen over its interpretation and enforcement, particularly concerning the rules on the base for calculating royalty payments. It is on this matter that the Chilean government intends to bring an international arbitration proceeding, and it has said that Albermale owes it a sum close to USD 11 million.

Colombia

Colombia fails to present convincing preliminary objections in treaty claim

In an award on jurisdiction, an ICSID tribunal has rejected the Government of Colombia’s objections in an arbitration brought by Canadian mining company, Gran Colombia Gold (GCG).

GCG filed a claim in 2018 against Colombia, alleging that the State had failed to comply with its obligations under the FTA signed between Colombia and Canada, after failing to prevent the activity of illegal miners in GCG’s gold and silver mining sites, resulting in an indirect expropriation of its investments.

For its part, Colombia argued that the tribunal lacked jurisdiction, claiming that GCG could not benefit from the FTA because it had not proven its substantial business activities in Canada, nor its Canadian ownership.

The arbitral tribunal rejected Colombia’s objections, concluding that GCG had proven a “genuine and meaningful connection to Canada”. According to the tribunal’s findings, GCG had shown sufficient evidence to prove that it had core corporate functions, financial, advisory and legal services and activities, several bank accounts, office space and employees in Toronto and had raised more than US$ 500 million over the last 10 years in Canadian markets to fund its mining activities.

PERU

Peruvian public bank and Canadian company reach a settlement

The Peruvian state-owned development bank COFIDE and Minera IRL, a mining company listed in Canada, have reached an agreement that will put an end to the present Lima arbitration proceedings and avoid any further disputes.

Both parties agree that COFIDE will pay Minera IRL US$ 34 million as per the arbitration award. In addition, Minera IRL has agreed to pay COFIDE US$ 70 million and US$ 32 million in interest as a repayment of a loan that existed between the parties.

The arbitration proceedings started over a mandate letter signed in 2015 authorising COFIDE to structure a credit facility of around US$ 240 million to finance the construction of the Ollachea project. In 2017, however, Minera IRL claim COFIDE terminated the mandate letter as part of the bank’s new strategy to focus on financing small and medium-sized industry.

The Canadian company brought a claim against COFIDE before a Lima Chamber of Commerce tribunal who found COFIDE liable for breaching its obligations under the loan, but accepted the validity of the termination.  

Venezuela

PDVSA agrees to pay Conoco’s ICC award

PDVSA, the Venezuelan state-owned oil company, has agreed to pay ConocoPhillips (Conoco) US$ 48 million, after Conoco threatened to enforce an ICC award over the alleged expropriation of an offshore oil project.

The dispute commenced in 2016, when Conoco, seeking contractual compensation after the nationalisation of its offshore oil project, filed an ICC arbitration against PDVSA and its subsidiary Corporación Venezolana de Petróleo. 

In 2019, the New York seated ICC tribunal dismissed the claim. However, it ordered PDVSA to repay Conoco (US$ 33.7 million plus US$ 2.7 million in interest and costs) for an outstanding loan in order to finance the purchase of its stakes in the oil project.

PDVSA did not oppose the enforcement requested by Conoco before a New York District Court. However, PDVSA alleged that Conoco had “grossly inflated” the award by US$ 8 million arguing that compound interest was also owed. After remanding the interest issue to the tribunal for clarification, the New York court, following the parties’ agreement, ruled that the value of the award should be set in US$ 48 million.

Finally, the parties have agreed to waive any possible objections against the award’s recognition but PDVSA has reserved its rights in relation to the enforcement. In addition, Conoco has agreed to stay the enforcement for 18 months unless it is authorised to do otherwise by the US Office of Foreign Assets Control, which has issued sanctions against Venezuelan assets within the US.