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

CHILE

AES wins case against consortium formed by Hochtief and CMC Di Ravenna

AES Andes, a subsidiary of the US based power group AES, obtained a favourable award in an ICC arbitration for US$186 million plus interest against construction consortium Constructora Nueva Maipo (CNM), made up  of German company Hochtief and the Italian company CMC Di Ravenna.

The dispute arose in 2017 concerning the construction of the hydroelectric project Alto Maipo in Chile. CNM, which was in charge of the construction of the tunnels, decided to put on hold their part of the project alleging security issues related to worker safety. Later, AES decided to terminate the contract and call on bank guarantees alleging that CNM had not fulfilled its part of the contract, resulting in delays and increased costs.

Since then both parties have been involved in various judicial procedures, finally leading up to this ICC award, which declared the contract terminated and found the collection of US$ 76 million in guarantees valid. In addition, the Tribunal held the consortium liable for damages up to US$ 110 million plus costs and interest.

Insurers to file investment treaty claims against Chile

Two US based companies, Principal Financial Group and MetLife, have sent letters to Chile’s Ministry of Foreign Affairs activating the dispute resolution mechanism provided in the free trade agreement between US and Chile. This will lead to formal consultation and negotiation procedures, which could lead to ICSID arbitration.

In addition, Principal Financial Group has also activated a similar dispute resolution mechanism provided in the free trade agreement between UK and Chile, which also gives rise to a consultation procedure.

These notices add to the notices that other international insurance companies have filed against Chile regarding a law enacted this year which allows retirees under annuity policies to withdraw 10% of their insurance funds, funds that, at least legally speaking, belong to the insurance companies. So far, US based Ohio and Switzerland based Zurich have also activated dispute resolution mechanisms provided in free trade agreements.

Peru

Enagas open to reaching an amicable solution in arbitration

In its  third quarter results, Enagas’ CEO stated that although the arbitration for the Gasoducto Sur Peruano (GSP) with Peru is progressing according to plan, they are still willing to reach an amicable agreement. The arbitration award is expected by the end of 2022.

In July 2018, Enagás communicated the initiation of ICSID arbitration proceedings against the Peruvian State in relation to the dispute regarding its investment in the GSP, a concession of which it was a party together with Brazil’s Odebrecht and Peruvian Graña y Montero.

Enagas is seeking to recover its investment (approximately 1,800 million euros). The Peruvian State decided to terminate the contract at the beginning of 2017 due to the consortium's alleged inability to obtain funds necessary to finance the construction.