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

Chile

Chile defeats last attempt by Víctor Pey and President Allende Foundation in Clarín case 

After 22 years l the longest-running International Centre for Settlement of Investment Disputes (ICSID) arbitration ever finally came to an end last month.. It was the case of Víctor Pey Casado and the President Allende Foundation against the State of Chile.

The arbitration proceedings arose out of the claim filed by the writer and the foundation before ICSID in 1997, requesting compensation of US$ 322,000,000, based on the alleged expropriation of the newspaper "El Clarín" after the coup d'état in Chile in 1973.

After having gone through two sets of ICSID arbitration proceedings  and their respective annulment procedures, the dispute came to an end after the Resubmission Committee dismissed on 8 January  2020 the claimants’ application for annulment of the award rendered in September 2016, which had already refused to award any compensation to the claimants.

Thus, finally, the State of Chile will not have to pay compensation to the claimants, as it was considered that the latter failed to prove any quantifiable damage caused by the breach of the 1994 Bilateral Investment Treaty between Spain and Chile.

Paraguay

Paraguay hit by treaty claim from high-speed bus network contractor

Portuguese construction group Mota-Engil has filed a US$25 million UNCITRAL claim against Paraguay over the state’s failure to deliver land for the construction of a high-speed bus network in its capital Asunción, known locally as Metrobús.

The claim filed against the Paraguayan Ministry of Public Works and Communications derives from the concession agreement signed with Mota-Engil for a US$54 million project to design and build a high-speed transit system in the capital of the country that would connect various cities in the metropolitan area of Asunción.

The dispute arises from the alleged failure of the Ministry to procure 100% of the land necessary for Mota-Engil to complete the construction works, which were completely stalled by the end of 2018. This paralysis forced Mota-Engil to take various measures to ensure that the halted works would not block roads in the capital.

The Portuguese company seeks compensation derived from the failure of the state to procure 60% of the land earmarked for construction, as well as compensation for the fines imposed on the company for not having completed certain works for which, it is alleged, it did not have access to the necessary land.

Peru

Odebrecht files treaty claim against Peru

Luxembourgish subsidiary Odebrecht Latinvest has filed a US$1.2 billion ICSID claim over measures Peru adopted after the construction group admitted to paying hundreds of millions of dollars in bribes to win projects in 12 countries. The claim in brought under Peru’s 2005 bilateral investment treaty with the Belgium-Luxembourg Economic Union.

Odebrecht claims that on 24 January 2017 the Peruvian State "arbitrarily" cancelled the Gasoducto Sur Peruano concession contract and adopted other measures related to the project that "violate" the rights of the Brazilian company's subsidiary, such as the execution of the corresponding letter of guarantee.

In addition, it claims that the State did not extend to it a bankable amendment to the concession contract that it needed in order to be able to sell its rights of participation in the project to a third company, "since there was no legal obligation on the State to proceed according to the claimant's request".

USA

Gas pollution settlement award challenged by German Underwriters

German insurer HDI Global (HDI) has challenged an UNCITRAL award that requires it to cover nearly US$44 million in settlements agreed by Houston-based energy company Philips 66 to resolve lawsuits over pollution caused by a gasoline additive. The dispute arises from an insurance policy issued in 1998 by Gerling, HDI's predecessor, to a company engaged in gasoline refining and the sale of other petroleum products, Tosco, which is Philip 66's predecessor.

Tosco, along with other gasoline manufacturers and distributors, were accused by several U.S. public entities of leaking methyl tertiary butyl ether (MTBE), an artificial substance added to gasoline to reduce carbon monoxide emissions from vehicle exhaust, into local groundwater, making it undrinkable. The multiple claims filed against Tosco and the other defendants were eventually settled.

As a result of this settlement, Tosco and Gering agreed to modify the arbitration agreement contained in the policy, agreeing that disputes relating to MTBE would be resolved by New-York seated arbitration and that awards would not be appealable, except for fraud or manifest error.

The award challenged was the result of the third phase of a multi-phase arbitration started in 2013 regarding a number of claims settled by Tosco. In the majority of these claims, the arbitrators understood that an exclusion of liability provided for in the insurance policy between Gering and Tosco would apply since the pollution did not derive from Tosco's own activity but from third parties who polluted using petrol produced by Tosco.

Against this, HDI maintains that the exclusion of liability clause has not been correctly interpreted by the arbitrators and therefore seeks to set aside the award.

Venezuela

Venezuela threatened by Spanish pharma investor

The Spanish businessman Mr. Raimundo Santamarta has filed a notice of arbitration against the Bolivarian Republic of Venezuela under the Spain-Venezuela bilateral investment treaty over the expropriation of his investments in a family pharmaceuticals business, SM Pharma, a Venezuelan producer and distributor of pharmaceutical products founded by the Santamarta family in the 1970s.

Santamarta is claiming multi-million dollar compensation, no less than US$200 million, from the Venezuelan State as a result of the adoption of various discriminatory measures aimed at hindering its pharmaceutical business, including the illegal confiscation of the assets of SM Pharma's production plant.

The Santamarta family invested in Venezuela in the 1970s and developed a successful pharmaceutical business that expanded throughout the country. However, since 2015 various Venezuelan government authorities and entities have been deploying measures to hinder the Santamarta family's activities, all of which were discriminatory and arbitrary, leading to the takeover of SM Pharma's operations and, eventually, the illegitimate confiscation of the assets of the group's companies, thus completely depriving it of its investment.