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

COLOMBIA

Odebrecht corruption award finalized

The Colombian State Council has upheld the award issued by an arbitral tribunal of the Bogota Chamber of Commerce in a dispute between a concessionaire headed by the Brazilian company Odebrecht with the Colombian State in relation to the billion-dollar Ruta del Sol II highway construction project.

The State Council rejected a series of challenges to the award filed by two Odebrecht subsidiaries –Constructora Norberto Odebrecht and Odebrecht Participaçoes e Investimentos S.A.–, its Colombian consortium partners –CSS Constructores S.A. and Estudios y Proyectos del Sol S.A.S.–, and the banks that financed the project. The challenges were based on the arguments that the request to nullify the contract was time-barred, as well as that the tribunal lacked jurisdiction, had ruled on matters beyond its remit, and had decided the case based on equity rather than law.

The award issued in August 2019 declared the absolute nullity of the concession contract entered into by the National Institute of Concessions (INCO) and the consortium called Sociedad Concesionaria Ruta del Sol S.A.S. for the construction, rehabilitation and expansion of  a 510 kilometre section of “Ruta del Sol 2”, Colombia’s most important highway. The contract was annulled on the grounds of corruption as the contract was awarded through a US$6.5 million bribe.

As a consequence of this annulment, the award ordered the Colombian authorities must only pay approximately US$ 55 million –which represents the value of 52% of the works that were actually delivered–, out of the US$ 985 million sought by the consortium against Colombia’s National Infrastructure Agency (ANI) as investment in the project (including cost overruns) and debts incurred. Therefore, Colombia will not have to assume the debt that the concessionary companies had with the banks that had lent money for the execution of the construction project.

CHILE

Chile faces casino claim

Various Canadian and Spanish casino operators (among other nationalities) located in Chile will turn to ICSID arbitration to resolve a dispute against the Superintendence of Casinos and Games, a Chilean government body in charge of supervising compliance with the legal and regulatory provisions that regulate the operation of gaming casinos. The claim will be finally filed in the event the parties do not reach an agreement in the 6-month negotiation period that they have established.

The disagreement involves the interpretation of article 3 of the Chilean Law on gambling casinos, which establishes that “the operating permits granted prior to the modification of this law will be governed by the regulations in force at the time of their granting, except that subsequent regulations imply better conditions for its operation”. In the opinion of the operators, this provision is being breached by the Superintendence.

Peru

Local blockade leads to investment treaty claim against Peru

Canadian company Lupaka Gold (Lupaka) has filed a request for arbitration before the ICSID against Peru under the Canada-Peru free trade agreement, over a blockade on the Invicta gold mining project.

Lupaka seeks compensation for over US$ 100 million, for allegedly losing its entire investment in the project as a consequence of an illegal blockade of access to the gold mine by members of a rural village called Parán that took place in 2018.

The Canadian company states that Peru failed to restore Lupaka’s rights to its investment by dissolving the blockade, despite several requests for assistance to the local police, Peruvian government officers and prosecutors by Lupaka.

UNITED STATES

Amazon provisionally blocks Future Retail’s sale

Indian conglomerate Future Group has been forced to pause the US$ 3.4 billion sale of its retail, wholesale, logistics and warehousing business –Future Retail– to Reliance Retail and Fashion Lifestyle Ltd –a subsidiary of Indian Reliance Industries–, following Amazon’s successful application for emergency relief to seek to block the deal.

An emergency arbitrator at the Singapore International Arbitration Centre (SIAC) has decided to halt this deal and restrain Future Group from approaching any authority concerning the aforementioned, until a SIAC tribunal hears Amazon’s bid to stop the deal.

Amazon owns a 49% stake in Future Coupons, another entity of the Future Group that acts as a promoter for Future Retail. Amazon alleges that it should have been notified before any deal was agreed, since it was granted a call option allowing it to acquire all or part of the promoters’ shareholding in Future Retail, which could be exercised between the third and tenth years in certain circumstances subject to applicable law.

Future contends that it has sold Future Retail’s assets, rather than a stake, so that the contract with Amazon has not been breached.