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

Colombia

Colombia faces treaty domain dispute claim 

US tech company Neustar has announced its intention to bring an ICSID claim against Colombia under the US-Colombia free trade agreement (FTA) over its rights to manage the '.co' domain name.

The dispute relates to a 10-year concession agreement that Neustar’s subsidiary signed in 2009 with Colombia’s Ministry of Information Technologies and Communications to manage the '.co' domain name, which is allegedly used by around 2.25 million websites. The concession is due to expire in February 2020 and the Ministry has opened a tender process for the right to manage the domain name.

Neustar is seeking an extension for its concession  of another 10 years based on the protection granted by the FTA. The Ministry has said that it began organizing an open and transparent bidding process for the domain name but that Neustar, instead of submitting an offer, had decided to demand it be negotiated directly in international arbitration.

Ecuador

Ecuador loses treaty claim in oil block dispute but wins environmental damage counterclaim

Bahamian oil company Perenco has won US$449 million in its ICSID claim against Ecuador over a levy on windfall oil revenues while also being ordered to pay US$54 million towards environmental cleanup. 

The dispute arises from Perenco´s interest  in two Amazonian oil blocks in which it partnered with ConocoPhillips subsidiary Burlington Resources.

In 2006, Ecuador passed Law 42, which imposed a tax on the “extraordinary revenues” of foreign oil companies resulting from a surge in the price of global oil prices. The tax was initially set at 50% but later rose to 99%.

Perenco and Burlington both filed ICSID claims in 2008, invoking Ecuador’s bilateral investment treaties with France and the US respectively and the blocks’ two participation contracts, each seeking US$1.5 billion in damages caused by the windfall levy. The ICSID tribunal held that 99% tax, although not its 50% predecessor, breached the fair and equitable treatment provision of the Ecuador-France BIT, and that Ecuador had expropriated Perenco's interests in the blocks.

On Ecuador’s counterclaim, the tribunal found that Perenco had caused US$94 million in environmental damages through polluted soils, groundwater and mud pits – but reduced this figure by US$39 million to prevent double recovery from the Burlington award.  

Guatemala

Guatemala threatened with treaty claim on hydro project

Guatemala has been threatened with an investment treaty claim over electricity tariffs from Estrella Coöperatief and its subsidiaries Deocsa BV and Deorsa BV, which are all Dutch entities under the Netherlands-Guatemala bilateral investment treaty.

The Dutch entities, which are owned by New York private equity fund I Squared Capital, are investors in a Guatemalan electricity distributor called Energuate.

The dispute relates to consumer tariffs set in June 2019 by Guatemala’s National Electric Power Commission (“CNEE”) for the 2019-2024 period. I Squared Capital acquired its investment in Energuate when it bought the entire Latin American and Caribbean energy portfolio of IC Power for US$1.3 billion in late 2017.

Mexico

Mexico’s Accendo Bank faces anti-suit injunction from Deutsche Bank in support of an M&A arbitration

Deutsche Bank has asked the US District Court for the Southern District of New York for an anti-suit injunction against Mexican bank Accendo in aid of an ICC arbitration over a US$175 million sale that stalled in the wake of money laundering allegations.

Deutsche Bank seeks an order to restrain Mexico’s Accendo Bank from enforcing a Mexican court injunction against them.

The dispute relates to Deutsche Bank´s sale of its Mexican banking operations to Accendo in 2016 but terminated the contract last year, citing Accendo’s failure to consummate the transaction. Accendo commenced an ICC arbitration, having also obtained a Mexican injunction to restrain Deutsche Bank from selling its Mexican business to a third party.

Deutsche Bank says the Mexican order violates a choice of forum clause in their 2016 purchase agreement that provides for the exclusive jurisdiction of the New York courts for pre-arbitral relief.

Peru

Canadian mining company wins arbitration against Peruvian state-owned COFIDE

Canadian mining company Minera IRL (IRL) has won US$34 million in a Lima-seated arbitration against a Peruvian state-owned development bank Corporación Financiera de Desarrollo (COFIDE) over the financing of a gold project.

An arbitration administered by the Center of Arbitration of the Lima Chamber of Commerce was commenced by IRL against COFIDE in a dispute relating to a mandate letter signed in 2015 authorising COFIDE to structure a credit facility worth up to US$240 million to finance the construction of the Ollachea Project.  In 2017, however, IRL claims COFIDE terminated the mandate letter after  the bank changed its strategy to focus on financing small and medium-sized industry.

According to IRL, the tribunal ruled in its favour on five of the seven claims it brought, with one rejected on the merits and another on jurisdiction. The tribunal held that COFIDE had agreed to assist IRL in creating a long-term credit facility that would be used as the source of funds to repay the bridge loan and that the bank had not complied with this obligation. IRL says that the tribunal found that “this failure constituted gross negligence” and that the mining company had suffered damage as a result, and that the termination of the long-term credit mandate by COFIDE was “valid and fully effective”.

US hydro company files ICSID claim against Peru

US energy company Latam Hydro and its Peruvian subsidiary CH Mamacocha (CHM) have filed a request of arbitration before ICSID under the US-Peru trade promotion agreement (TPA) against Peru relating to a frustrated hydropower project.

The dispute relates to a concession agreement signed by CHM with Peru’s Ministry of Energy and Mines (MINEM) to build and operate a 20-megawatt run-of-the-river hydroelectric project and a transmission line adjacent to the Mamacocha Lagoon.

Latam Hydro claims that regional and central government agencies arbitrarily interfered with the permitting and approval processes and that MINEM subsequently accepted responsibility for the interferences, extending deadlines to account for delays caused.

According to LatAm Hydro, in 2017 Arequipa’s regional government commenced litigation in local courts as part of an “aggressive campaign” to stop the project, seeking to revoke two environmental permits its officials had approved two years earlier.

LatAm Hydro seeks declaratory relief and damages as well as an order preventing Peru from collecting on a performance bond. It also wants the tribunal to grant interim measures to prevent Peru from pursuing a Lima-seated arbitration under the concession agreement and to terminate criminal proceedings against one of its lawyers.