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

Argentina

Dutch investor files ICSID pension funds claim against Argentina

Dutch insurer NN Group and its Argentine subsidiary Orígenes AFJP have filed an ICSID claim against Argentina under the Netherlands-Argentina bilateral investment treaty over the state’s decision to nationalize nearly US$30 billion in private pension funds in 2008.

The dispute relates to the decision adopted in 2008 by Argentina’s then president Cristina Fernández de Kirchner that the private pension system would be replaced with a state-managed pay-as-you-go system to protect retirees from falling stock and bond prices during the global financial crisis.

Following the nationalisation, Orígenes was required to hand over the funds it was holding to the government. The Argentine subsidiary entered liquidation following the nationalisation although that process is yet to be completed.

Bolivia

US court confirms award in favour of Bolivian CIMSA against Mexico’s Grupo Cementos de Chihuahua (GCC)

The US District Court for the District of Colorado has confirmed a US$36 million award in favour of a Bolivian politician’s investment company Cimsa – a Bolivian company owned by Samuel Doria Medina, the leader of Bolivia’s centre-right National Unity Front Party – against Grupo Cementos de Chihuahua (GCC), a Mexican cement group.

The dispute relates to Cimsa’s 2005 sale of a 47% stake in Soboce, Bolivia’s largest cement company, to GCC. As part of that deal, the parties executed a shareholders’ agreement providing that each party had a right of first refusal with respect to each other’s shares in Soboce.

In 2009, the Bolivian government expropriated a substantial part of Soboce’s business shortly before Cimsa´s sale of shares in Soboce, leaving Cimsa unable to pay for GCC’s shares.  Arbitration followed before the Inter-American Commercial Arbitration Commission (IACAC). The tribunal found that GCC had breached Cimsa’s right of first refusal under the agreement and violated Bolivian law by not negotiating in good faith.

Colombia

US Real estate investor files treaty claim against Colombia

Angel Samuel Seda and eight other US investors have filed a US$250 million ICSID claim under the US-Colombia free trade agreement (FTA) against Colombia over the seizure of a real estate development in the wake of allegations the site had been used for criminal activities.

The claimants are investors in Meritage, a real estate development project located on a 560,000-square-metre site in Medellín, near a toll road leading to a recently opened airport. The project was intended to consist of suites, residential lots and commercial units. However, the land was seized by state authorities after Colombia’s attorney general instituted proceedings under the country’s asset forfeiture laws, acting on allegations it had been used for drug-related activities.

It is alleged that Colombia has violated the FTA’s provisions on fair and equitable treatment and expropriation and that the confiscation of the property caused “irreparable damage” to the project. The claimant also allege Colombia’s actions have affected Seda’s ability to attract funding for his five other real estate and tourism projects in the country by damaging his reputation.

Ecuador

Dutch Supreme Court confirms awards in favour of Chevron against Ecuador

The Dutch Supreme Court confirmed a lower court’s findings that five earlier UNCITRAL awards that held Ecuador liable for denying justice to Chevron in a dispute over environmental contamination in the Amazon did not violate Dutch public policy or the rights of Ecuadorean citizens who are not parties to the arbitration.

The dispute relates to a 2011 judgment by a court in the Lago Agrio region of Ecuador that ordered Chevron to pay US$9.5 billion to a group of indigenous Ecuadorean plaintiffs in compensation for environmental pollution in the Amazon. Texaco (which Chevron acquired in 2000) had operated in the country in partnership with state-owned entity Petroecuador between 1964 and 1992 but argued it had already conducted a clean-up of the site and that the government had released it from further liability.

In September 2018, the UNCITRAL tribunal unanimously upheld claims by Chevron that the Lago Agrio judgment was procured through fraud. The tribunal found Ecuador had committed a denial of justice under customary international law and the US-Ecuador bilateral investment treaty. It ruled that the Lago Agrio judgment should not be recognised or enforced by the courts of other states, and that Ecuador would have to pay reparation to Chevron should the judgment be enforced anywhere.

Ecuador challenged all five awards in the District Court of The Hague, arguing there was no valid arbitration agreement and that the tribunal had gone beyond its mandate and violated public policy. The court rejected the challenge in 2016, which is now confirmed by the Dutch Supreme Court.

VENEZUELA

Venezuela fails to annul award in airport dispute

An ICSID annulment committee has upheld a US$36 million award that held Venezuela liable for expropriation and denial of justice in a dispute over a Caribbean airport.

The committee refused to annul the award in favour of Swiss airport services company Flughafen Zurich and its Chilean partner, Gestión e Ingenería IDC.

The dispute dates back to 2005, when the government of the Venezuelan state of Nueva Esparta terminated the claimants’ contract to expand and run an airport on the island of Margarita in the Caribbean Sea, later taking control of the facilities. Following conflicting rulings by state and federal courts in Venezuela regarding the validity of the contract, Venezuela’s Supreme Court held in 2009 that the airport should be put in the hands of the federal government until the dispute was resolved.

A year later the claimants brought their ICSID claim under Venezuela’s bilateral investment treaties with Switzerland and Chile.

Dual nationals defeat Venezuela in treaty claim over food distribution business

Two Spanish-Venezuelan nationals, Serafín García Armas and his daughter Karina García Gruber have won US$366 million in a treaty claim brought against Venezuela under the Spain-Venezuela bilateral investment treaty over the expropriation of their food businesses.

The UNCITRAL tribunal administered by the Permanent Court of Arbitration issued an award confirming that Venezuela had expropriated their food distribution businesses with no compensation and imposing currency exchange restrictions that inhibited their ability to pay foreign suppliers. 

The tribunal concluded that Venezuela had breached the BIT by committing an illegal expropriation and violating the fair and equitable treatment obligation and ordered Venezuela to pay US$366 million plus post-award interest, as well as all the legal and administrative costs.