International Arbitration Newsletter - March 2021 | Regional Overview: The Americas

CHILE

ICC claim increases tension between US-based miner Albemarle and Chilean government agency

The Chilean Economic Development Agency (Corfo) has filed a request for arbitration before the ICC, with regards a US$15 million claim against the US-based mining company Albemarle for alleged contract breaches regarding the payment of royalties. The mining company exploits lithium deposits located in Atacama’s salt flat, which are Corfo’s property, and in exchange pays quarterly commissions. Corfo claims that since 2020 Albemarle has underpaid these commissions due to a misinterpretation of the contract. The main problem relates to how the commissions should be calculated: while Albemarle asserts the proper fulfillment of its obligations, Corfo argues that Albemarle has altered “arbitrarily and unilaterally” the way the commissions are calculated.

This is not the first time thatAlbemarle has had some issues with Chilean government agencies. Albermarle has had some frictions with Chile’s nuclear Agency (CChEN) over the non-disclosure of information and also with Corfo itself regarding a recently alleged “unfair” discrimination. The latter because the mining company had been denied access to an environmental report over Atacama’s salt flat while it has been granted to its competitor SQM.

PERU

Telefonica files investment arbitration claim against Peru

On March 12, 2021, Telefonica S.A. filed a claim against the Republic of Peru before the International Center for Settlement of Investment Disputes (ICSID). Telefonica's request for arbitration is due to the alleged breach by Peru of the investment agreements signed between both countries, based on the Agreement for the Promotion and Reciprocal Protection of Investments between Spain and Peru (APRI).

Telefonica argues that National Superintendence of Customs and Tax Administration and other state agencies are, arbitrarily and discriminatorily, failing to comply with the obligations established in the APRI. This arbitration would seek respect for the investment agreements signed between both countries.

COLOMBIA

Colombian Public Services Company announces the initiation of arbitration proceedings against Spanish company

EMCALI, a Colombian public utility company, communicated on mid-February its decision to initiate arbitral proceedings against the Spanish company Acciona Agua S.A.U. Colombia for the alleged failure to fulfill its obligations under a contract executed in 2017, related to improvement works of the Cañaveralejo wastewater treatment plant, based in Cali, Colombia.

According to EMCALI, Acciona Agua only performed 57% of the improvement works, leaving the wastewater treatment plant partially inoperable and in a vulnerable condition, posing high environmental risks, which have already led to the imposition of fines and sanctions by the competent environmental authorities.

The value of the claim is estimated in €6 million for breach of contract and €29 million for damages. EMCALI will also file the claim against the Spanish auditing company, IDOM Consulting Engineering, Architecture S.A.U., which was in charge of supervising the works.

MEXICO

Investment arbitration in the face of the reform of the Electricity Industry Law in Mexico

Investors in the electricity sector are considering investment arbitration in the face of the entry into force of the reform to the Electricity Industry Law, which modifies the dispatch rules and puts million-dollar investments by foreign groups at risk.

The reform changes the electricity dispatch criteria to always prioritise generation from legacy and fossil fuel power plants of the Federal Electricity Commission (CFE) over private renewable power plants, in addition to opening the door to the review and, if necessary, cancellation of electricity purchase and sale contracts entered into by the CFE with private parties under the regime prior to the 2014 reform.

It is estimated that investors who resort to international arbitration under the Agreements for the Reciprocal Promotion and Protection of Investments will seek compensation for their investment, which could be more than 80% of their investment (around $70 billion pesos in compensation).