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

COLOMBIA

Tech company sues Colombia over domain name (.co)  

U.S. Tech company Neustar has filed a US$350 million ICSID claim against Colombia under the 2012 free trade agreement entered by the Republic of Colombia and the United States of America (the FTA), in connection with Neustar’s rights to use and operate the .co domain name.

The dispute relates to a 10-year concession agreement one of Neustar’s subsidiaries, CO Internet, signed in 2009 with Colombia’s Ministry of Information Technologies and Communications to manage the .co domain name, which Neustar claims is used by over two million websites.

As the concession was due to expire last month, the Ministry decided to start a new tender process for the right to manage the domain name. However, Neustar alleges that the existing concession agreement mandates another 10-year term if certain conditions are met. Neustar claims that these conditions have indeed been met and seeks US$350 million in damages relating to its alleged rights under the concession for the second term from 2020 to 2030.

ECUADOR

 ICSID award enforcement against Ecuador may be stayed

An ICSID committee has said it will stay enforcement of Perenco’s award against Ecuador, but only if Ecuador provides written confirmation that it will commit to pay that award within sixty (60) days “unconditionally, voluntarily and in full” if its annulment application is unsuccessful.

Perenco was awarded US$449 million in damages, US$17 million in costs and pre-award interest while being ordered to pay US$54 million regarding the environmental impact of two Amazonian oil blocks operated by Perenco, amongst others.

These enforcement and annulment procedures have their common origin in a series of awards (on a variety of issues ranging from jurisdiction to liability), the last of which was issued in September 2019 and puts an end to an arbitration proceeding that has lasted for 11 years.

The dispute arose when Ecuador imposed a tax on the “extraordinary profits” of foreign oil companies in the wake of an unexpected surge in oil prices.In 2006, Ecuador initially imposed a 50% tax, but later decided to increase it to 99%. These measures adopted by the Ecuadorian government have led to several other treaty awards against the state.

In this case, Perenco and another filed ICSID claims in 2008 over the 99% levy, invoking Ecuador’s bilateral investment treaties with France and the US respectively and the participation contracts for the oil blocks. Each party requested more than US$ 1 billion and Ecuador filed US$2.5 billion counterclaims in both cases for environmental damage caused to the Amazon rainforest.

PERU

Peruvian state defeats Spanish investor over vehicle inspection concession

Peru has defeated Spanish company Lidercón´s US$123 million ICSID claim over alleged exclusive rights to operate a vehicle inspection service in the Lima metropolitan area. The arbitration tribunal rejected the claim on the basis that Lidercón had not proven that Peru’s actions were in breach of the Spain-Peru bilateral investment treaty (the BIT).

The dispute relates to a 2004 concession contract signed with the local authorities to operate the motor vehicle inspection centres in the city’s larger metropolitan area, which contains nearly a third of Peru’s entire population. Since the signing of this agreement, the parties had not been on amicable terms and they decided to initiate multiple arbitration proceedings in relation to this concession contract before the Lima Chamber of Commerce (LCC).

At the ICSID case, Lidercón filed its claim in December 2016 arguing that Peru had breached the BIT’s fair and equitable treatment clause by (i) denying Lidercón due process in the Peruvian courts and (ii) by imposing unjustified and discriminatory measures. In addition, Lidercón held that Peru had breached the terms of the concession contract.  

In the latest award, the arbitration tribunal upheld jurisdiction over the claim after it rejected Peru’s arguments that Lidercón was seeking to convert a contractual claim into an investment one. On the merits of the case, the arbitral tribunal first explained that the dispute had origin in the “uneasy overlapping of competencies” between the Peruvian government and the Lima municipality and questioned whether Peru’s actions over this clash of competencies had extinguished Lidercón’s exclusivity rights to such an extent as to be deemed as a breach of the BIT.

USA

US court decides it has no jurisdiction to enforce a Stockholm Chamber of Commerce award 

The US District Court for the Southern District of Texas  has ruled that First National Petroleum (the FNP) had failed to demonstrate that a Rosneft subsidiary, Tyumenneftegaz  had “minimum contacts” with the state of Texas.

A Stockholm Chamber of Commerce (SCC) arbitral tribunal issued the award FNP now wishes to enforce in 2018 in FNP’s favour and concluded that Tyumenneftegaz had forged signatures in order to liquidate the parties’ joint venture for the development of an oilfield in Siberia. This award ordered Tyumenneftegaz to pay US$70 million but some sources say that the award could now be worth over US$200 million.

The Federal Antitrust Division wins historic merger arbitration dispute   

The Department of Justice Antitrust Division (DoJAD) has prevailed in a recent landmark case resolving a civil antitrust lawsuit challenging the merger between Novelis and Aleris Corp. The arbitral tribunal  held that in order to maintain free competition in the aluminum auto body sheet (ABS) sector, Novelis had to divest from this particular business within Aleris in the whole of North America. Moreover, pursuant to the arbitration agreement signed by the DoJAD and the merging companies, the DoJAD also won the award on costs.

The DoJAD had reached an arbitration agreement with the companies by which the parties would submit to binding arbitration proceedings in the event that the U.S. antitrust concerns were settled within a certain time-frame. Although discovery was done under the supervision of the U.S. District Court for the Northern District of Ohio , after the discovery phase, the dispute was transferred to a sole arbitrator in order for him to resolve the issue of product market definition.

The DoJAD has announced that it will file a proposal for a final judgment with the Federal Court requiring Novelis to divest Aleris’s entire aluminum ABS operations in North America.