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

Mexico

The Mexican state electricity utility liable for stalled hydroelectric project

A consortium including Sinohydro Costa Rica, a subsidiary of Chinese state-owned energy company Sinohydro and three other Mexican companies, Omega Construcciones, Desarrollos & Construcciones Urbanas and CAABSA Infraestructura has won a US$ 220 million LCIA award against the Mexican state electricity utility over a project disrupted by local protests.

In 2015 the consortium won a US$ 390 million contract to build a 240MW plant on Mexico’s Grijalva river that would provide power to half a million homes in Chiapas, Mexico. Construction was to be completed by 2018; however, access to the site was blocked more than 20 times by strikers.

The state-owned Federal Electricity Commission (CFE) sought to terminate the contract due to an alleged breach of contract by the Consortium. However, the tribunal has now ordered the termination of the contract due to CFE´s breach of substantial obligations since it must have guaranteed the consortium access to the project site.

On this basis, the CFE has been ordered to pay more than US$ 220 million for the works performed, delay and disruption damages and lost profits.

CFE is preparing an appeal against the award.

Mexican regulator defeats telecom investor claim

An UNCITRAL panel dealing with a claim brought by a US citizen, Joshua Nelson, against the Mexican telecoms regulator, the Federal Institute of Telecommunications (IFT), has dismissed the US$ 472 million claim over interconnection rights.

The claimant alleged that IFT had destroyed his telecommunications business by first granting him in 2014 a series of interconnection rights, which it then expropriated for concluding that the original interconnection contract was void because one of the parties (Telmex) had not signed it.

Since it was undisputed that Telmex had never signed the draft interconnection agreement, the tribunal considered that the interconnection rights alleged to have been expropriated had never existed under Mexican law because the interconnection agreement never came into life.

Peru

Peru facing oil’s investor claim over alleged bribery in bidding process

Peru has been sued before the Permanent Arbitration Court (PCA) by a former citizen, Bacilio Amorrortu, who claims to have lost a bidding process in two oil blocks because of bribes paid to Ollanta Humala, former president of Peru.

The two oil blocks correspond to blocks three and four of the Talara Basin, on the Pacific coast of Peru. Amorrortu claims that in 1993 he signed a contract to operate the oil wells for 20 years but that in 1995 he was forced to hand over the contract to a Canadian company after the government pressured him into bankruptcy. Finally, Amorrortu fled to the US and was granted asylum in 2000.

In 2012, Amorrortu created a new company called Baspetrol and was invited to bid to operate blocks number three and four. However, Amorrortu says the negotiations were aborted because another company was “handpicked”.

Therefore, after considering that there is indisputable evidence of bribery, he is now filing a claim for US$ 90 million dollars under the U.S.-Peru Bilateral Investment Treaty (the U.S.-Peru BIT).

Peru maintains that Amorrortu has not demonstrated the alleged actions that led to the loss of the contract, nor, therefore, evidenced the compensation claimed. Furthermore, Peru contends that the tribunal lacks jurisdiction since the claim does not fall within the scope of the U.S.-Peru BIT.

USA

The US Supreme Court to rule again on arbitrability

The US Supreme Court will again rule on a critical issue in arbitration: whether  arbitrators can decide on the question of arbitrability.

The case involves a US medical equipment distributor, Harry Schein, who has been accused of conspiring with other dental medical equipment distributors to fix prices.

In January 2019 the court sided with Schein, and decided that the courts are not entitled under the Federal Arbitration Act to decide questions of arbitrability if the parties have already clearly delegated this function to an arbitrator.

However, after the case was remanded to the Fifth Circuit of Appeal, this court considered that in this case there was no “clear and unmistakable” agreement of the parties’ willingness to submit the disputed issues to arbitration as it contained a carve-out for claims that sought and injunctive relief.

Schein filed an appeal against the ruling of the Fifth Circuit of appeal and the US Supreme Court has agreed to hear himfor a second time.