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

BOLIVIA

Tribunal refuses Bolivia’s COVID-19 related application

A Permanent Court of Arbitration tribunal has refused to extend Bolivia’s deadline to submit its statement of defence in an investment arbitration following the government’s request to postpone the deadline as the COVID-19 global pandemic constituted a force majeure event that had made it “virtually impossible” to prepare the written brief.

This decision was issued in the context of a US-Bolivia BIT treaty claim brought by the estate of US national J.M. Orlandini Agreda, who died last year, and Compañía Minera Orlandini over different mining concessions held by Claimants in western Bolivia.

Bolivia had argued that the measures taken by the U.S. government and themselves had severely limited their ability to prepare the defence brief as its Washington DC-based counsel had been forced to close and it had been impossible to contact experts and witnesses in Bolivia due to the lockdown.

Claimants opposed Bolivia’s request by arguing that the COVID-19 pandemic was foreseeable, at least, since January 2020 when governments all over the world had become aware of the threat. Claimants also argued that the global crisis did not amount to an irresistible force that would make it impossible for the state to file a written statement of defence. In addition, Claimants also pointed out that accepting Bolivia’s request could set a dangerous precedent that could “affect the entire international arbitration system”.

Finally, in response to Bolivia’s submission, the arbitral tribunal concluded that the undoubted effects the pandemic had had on the parties did not make it impossible to file a written statement of defence. The panel noted that, unlike the Bolivian government, parties in other proceedings had shown “willingness to adjust to the new reality”.

BRAZIL

Brazilian plane maker brings claim against Boeing  

Brazil’s Embraer SA has started arbitration proceedings against Boeing Co, after the American aerospace giant suddenly called off a US $ 4.2 billion deal which had taken several years to develop.When news of the deal breaking down reached the market, the reactions were generally negative, making Boeing’s shares drop to an eight-year low. However, some were less pessimitic. In fact, the Brazilian government, Embraer’s largest military client, has suggested that a new venture with China could become an “inevitable marriage”.

Boeing has declined to give any explanations for the abrupt decision to cancel the deal, although some sources have linked it with the company’s rough patch in the wake of the global COVID-19 pandemic, which has hit the travel sector specially. 

Embraer has not given any details regarding the arbitration process or its merits, nor has the Brazilian plane maker confirmed whether the arbitration will be followed by a claim brought before American or Brazilian courts.

PARAGUAY

Paraguay ordered not to call on a guarantee

An UNCITRAL panel dealing with a claim brought by the Portuguese construction group Mota-Engil (M-E) against Paraguay over a high-speed bus network has ordered the state to refrain from calling on US $13 million in guarantees. In addition, the arbitral tribunal has ordered M-E to replace two of these guarantees with a single one for the purpose of the arbitration.

The Paraguayan attorney general explained that the order was “impossible to comply with” as Paraguay had already begun executing said guarantees and announced that the government has requested further clarification from the tribunal.

At the present moment, the parties have not reached an agreement over the arbitral seat and M-E has announced that it will now file a second claim against the state for its other violations of the Portugal-Paraguay BIT.

VENEZUELA

Venezuela will appeal an enforcement award before a U.S. Federal Court

The Venezuelan Ministry of Defence has assured that it will appeal before the U.S. Federal Court of Appeals for the Fifth Circuit a decision by Mississippi district court that orders the enforcement of a US $129 million award in favour of a American shipbuilder, Huntington Ingalls Industries (HII) in a 20-year long dispute over the upgrade of two navy frigates.

This appeal is the latest issue in a series of disputes arising over a 1997 contract awarded to a predecessor of HII for the repair and upgrade of two Venezuelan navy vessels. After various proceedings, an arbitral tribunal issued in 2018 an award worth US $129 million in HII’s favour. HII sought enforcement of the award before the US District Court of the District of Columbia, but the court rejected the request on the grounds that HII had previously asked the Mississippi court to retain jurisdiction.

In the subsequent enforcement proceedings, this time before the Mississippi court, Venezuela opposed enforcement on the grounds that the arbitration had taken place in Rio de Janeiro, which was not the arbitral seat that the parties had agreed to in the contract. HII answered that, under the governing law (Venezuelan law) a court may determine the place of arbitration if the agreement between the parties fails.

In its recent ruling, the Mississippi district court agreed with HII and concluded that, given the lack of agreement between the parties on the seat of arbitration, the court said that it was permissible under Venezuelan law for the tribunal to move the case to Rio de Janeiro.