International Arbitration Newsletter - March 2019 | Regional Overview: The Americas

Bolivia

Mining company seeks to enforce UNCITRAL award against Bolivia

A subsidiary of Canada’s TriMetals Mining, Bermuda-registered South American Silver, filed a petition with the US District Court for the District of Columbia, asking for enforcement of a US$18.7 million UNCITRAL investment treaty award dated November 2018 that held Bolivia liable for nationalising a silver mining project targeted by protests from indigenous communities. The arbitral tribunal found that Bolivia had violated the expropriation standard in the UK-Bolivia bilateral investment treaty when it nationalized the Malku Khota silver mine in 2012 without paying compensation. However, the tribunal rejected the bulk of the company’s US$385 million claim, only awarding the investor US$18.7 million to cover the company’s sunk costs in the project, plus compound interest until the award is paid.

Brazil

Brazilian airline VRG Linhas Aéreas sees award enforcement denied by Cayman Island court

The Grand Court of the Cayman Islands has refused to enforce a US$55 million ICC award issued a decade ago in favour of Brazilian airline VRG Linhas Aéreas (VRG) against two distressed-debt investment funds managed by New York-based MatlinPatterson (MP), finding that two private equity funds that were held liable had not consented to the arbitration.

The judge held that the award offended the principle that arbitration “must be consensual”, as it based its jurisdiction on an arbitration agreement to which the funds were not parties; and had held the funds liable under a provision of Brazilian law that had never been pleaded.

The dispute dates back to 2007, when a subsidiary of Brazilian budget airline Gol purchased VRG for US$320 million from a Brazilian company called Volo, in which the MP funds had a minority stake. The deal was pursuant to a sale agreement that provided for ICC arbitration seated in Säo Paulo. The MP funds did not sign the agreement but entered into an addendum with Volo’s Brazilian shareholders in which they agreed to comply with certain non-compete provisions.

VRG, which by this time had merged with the Gol entity and become its successor under the sale agreement, filed for arbitration against Volo later that year.

Canada

NAFTA tribunal dismisses bulk of damages claim against Canada in quarry terminal dispute

A NAFTA tribunal has recently issued an award on damages dismissing the bulk of a US$443 million damages claim against Canada brought by a group of US investors following the blocking by an environmental review panel of a bid by The Clayton family and Delaware company Bilconwhose to build a controversial quarry and marine terminal in the province of Nova Scotia.

The dispute relates to the Claytons’ failed plans to construct a basalt quarry and marine terminal at Whites Point, a fishing village in Nova Scotia next to the Bay of Fundy. Federal and provincial authorities rejected the proposal in 2007 after an environmental assessment by a joint review panel concluded it was contrary to “community core values”. The tribunal found that the claimants had not met their burden of proving they would have obtained environmental approval for the project had the review process been conducted in a manner consistent with NAFTA.

Mexico

Mexico faces three treaty claims relating to hotel properties and oil investments

Mexico is facing three separate treaty claims brought before UNCITRAL tribunals.

On the one hand, Oil services investor Alicia Grace and 26 other US nationals and companies have filed their claim last year under the North American Free Trade Agreement (NAFTA) before an UNCITRAL tribunal administered by ICSID. The dispute relates to investments in a business that leased offshore drilling rigs to Mexico’s state-owned petroleum company Pemex. Claimants allege that they suffered discriminatory treatment and the destruction of their business after refusing to pay bribes to Pemex and Mexican government officials.

On the other hand, Mexico faces two investment treaty disputes relating to the seizure of hotel properties in Tulum, one claimant being Carlos Esteban Sastre, an Argentine-Spanish-Mexican national based in Buenos Aires, who filed his UNCITRAL claim under the Spain-Mexico bilateral investment treaty, seeking US$25 million for the “violent and illegal” seizure of the Tierras del Sol and Hamaca Loca hotels by Mexican government authorities in 2011. The other claim is being brought by seven other investors invoking NAFTA and Mexico’s BITs with Portugal and France. Claimants seek US$70 million for their investments in the Parayso, Uno Astro Lodge, and Behla Tulum hotels, which were seized in June 2016.

Venezuela

Venezuela´s opposition leader requests new stay on appeal of investment treaty claim in Rusoro case

The US Court of Appeals for the District of Columbia Circuit, has received a request to stay an appeal brought by Venezuela against the enforcement of an award in favour of Canadian mining company Rusoro.

Having originally been instructed for the case by the Maduro government, legal counsel said in the filing that it is now acting for Guaidó’s interim government. Counsel requested a stay so the Guaidó government could evaluate its position in this and other cases involving Venezuela pending in the US courts.

Venezuela defeats treaty award in favour of on dual nationals

The French Court of Cassation has overturned a decision to partially annul an investment treaty award in favour of two dual nationals (Serafín García Armas and Karina García Gruber) against Venezuela, following a complaint by the state that the award ought to have been annulled in full.

The dispute relates to a billion-dollar UNCITRAL claim against Venezuela brought under the Spain-Venezuela bilateral investment treaty, seeking compensation for state measures affecting their investments in food import and distribution companies.

The Court de Cassation considered that the Paris Court of Appeal erred two years ago in only partially annulling the jurisdictional award in favour of Serafín García Armas and Karina García Gruber, but did not express a view as to whether the lower court’s criticisms of the award were correct. However, it said the lower court had failed to follow the legal consequences of its own findings, which affected the applicability of the underlying arbitration agreement