Contractual Disputes Between The Colombian State And Foreign Companies
Contributor
Recent arbitral awards resulting from contractual disputes between the Colombian State or its governmental entities, on the one side, and foreign companies, on the other, have been the subject matter of public debate both in the Colombian press and in Congress.
The debate has resulted mainly from the considerable amounts that the Colombian government will have to pay in accordance with the relevant awards.
Enquiries have been carried out in order to determine whether the relevant governmental officers involved and the legal advisors that represented the entities performed their duties in a proper manner. This has even lead to prosecutions and administrative investigations aimed at determining whether or not some of these cases involved corruption.
Notwithstanding the above, the awards recently rendered have also ratified that foreign companies engaged in business transactions in Colombia may resolve their contractual disputes in an impartial, safe and time-efficient manner by submitting them to national or international arbitral tribunals.
The awards that have been the subject matter of debate during the last days are related with the following contractual disputes between the Colombian State and foreign companies. Two of the awards were rendered by the Chamber of Commerce of Bogotá and one of them by an independent arbitral tribunal authorized by the International Chamber of Commerce.
- Telecom (Colombian State telecommunications company) and Nortel (Canadian Company) over the real value of the compensation owed to Nortel for the differences in the results of a joint venture in which Nortel had to install over 308,000 phone lines in this country;
- The Colombian State and Sithe Energies (North American Company) over the revocation by the Government of the contract by means of which Termorio, a company owed by Sithe Energies, had to buy and sell energy to Electranta, a State owned company; and
- Bogotá Capital District and ICA (Mexican Company) over the former's breach of the contract by means of which the Mexican company had to recover and maintain Bogotá's road network.
All tribunal awards were rendered against the Colombian State and ordered payments in favour of the foreign companies involved (i.e. 73 million US dollars in favour of Nortel, 61 million US dollars in favour of Sithe Energies and 24,000 million pesos in favour of ICA.
In addition to the above, the Colombian State is also currently a party in an international arbitration related with Medellín's Metro, which involves amounts considerably higher than those of the above-mentioned cases.
Some of the main advantages for settling disputes through arbitration in Colombia are related with the fact that (i) arbitration takes substantially less time than normal court proceedings, (ii) the parties to a contract can guarantee the level of expertise they require or expect, (iii) arbitral awards are not of public domain (i.e. the parties may decide to handle the dispute in a confidential manner), and in the specific case of international arbitration (iv) the parties' choice of substantive law must be upheld (law 315 of 1996).
This last feature of international arbitration is of the utmost importance taking into account the lack of a comprehensive system of conflict of laws in Colombia.
In addition to the Colombian legislation that regulates local and international arbitration, Colombia has also ratified the following international treaties on this matter:.
- The Convention on the Recognition and Enforcement of Foreign Arbitral Awards done at New York on 10 June 1958, entered into force on June 7, 1959 and ratified by Colombia on September 25, 1979.
- The Inter - American Convention on International Commercial Arbitration , done at Panama on January 30, 1975, entered into force on June 16, 1976 and ratified by Colombia on November 18, 1986.
- The Inter - American Convention on Extraterritorial Validity of Foreign Judgments and Arbitral Awards done at Montevideo on May 8, 1979, entered into force on June 14, 1980 and ratified by Colombia on June 24, 1981.
- Convention on the Settlement of Investment Disputes between States and Nationals of Other States which came into force on October 14, 1966 and was ratified by Colombia on July 15, 1997. (ICSID)
In this manner we can conclude that Colombian Law allows, recognizes, and enables the use of local and international arbitral tribunals as a convenient mechanism for the settlement of disputes and, regardless of the adverse exposure related with the last cases subject to debate, the trend towards using arbitration will most likely increase .
This report was prepared and is copyrighted in 2001 by PARRA, RODRÍGUEZ & CAVELIER, a law firm with offices in Bogotá, Colombia. The general information herein contained does not constitute legal advice. Transcriptions and quotes are permitted citing the source.