THE AUTHOR<\/strong>: Latin American Arbitration Practitioners EU<\/strong>\u00a0(LATAP EU<\/a>) is an association aimed at building a network of practitioners focused on international arbitration and with strong ties to, or experience in, Latin America and based in Europe. On September 2024, LATAP EU organized its second Annual Conference in Paris,\u00a0France, hosted by\u00a0Freshfields.<\/a><\/p>\n\n\n\n On 25 September 2023, the Latin American Arbitration Practitioners EU (\u201cLATAP EU\u201d) organized its second Annual Conference in Paris, France, hosted by Freshfields Bruckhaus Deringer<\/a>.<\/p>\n\n\n\n The third panel, composed by Emmanuel Kaufman<\/strong><\/a> Argentinean counsel at Wolf Theiss<\/a>, Jos\u00e9 Miguel J\u00fadice<\/strong><\/a>, Independent Portuguese Arbitrator based in Lisbon, Jose Alzate<\/strong><\/a>, Colombian Managing Director for FTI Consulting<\/a>, and Isabela Lacreta<\/strong><\/a> Brazilian Counsel at Mayer Brown<\/a> Paris, discussed existing trends and challenges in arbitration in infrastructure projects in LATAM. Yuri Mantilla<\/strong><\/a>, Senior Associate at Freshfields<\/a>, moderated the panel.<\/p>\n\n\n\n Mr Mantilla<\/strong><\/a> introduced the speakers and shared interesting statistics. According to Global Data report<\/a>, Latin American infrastructure and construction market size for 2023 was worth US$ 230 billion and seems to be rising. He also pointed out the relevance of the South American region in the ICSID 2023 Caseload Statistics<\/a>, and for commercial cases that for 2023 in ICC<\/a> the Latin American region represented the second place by origin of the parties; the third as the selected seat; and second as the law applicable to the merits of the case.<\/p>\n\n\n\n Having set the tone of the panel, Mr Mantilla<\/strong> inquired the panellist on types of construction disputes.<\/p>\n\n\n\n Ms Lacreta<\/strong> mentioned that 49% of infrastructure projects in Brazil<\/a> are related to road construction, which is explained by the dimension of the country and the last 15-year policy which focused on road transportation. Accordingly, disputes usually relate to airports (following the concessions privatisation), dams, wind projects, and biomass power plants.<\/p>\n\n\n\n Mr Alzate<\/strong> agreed with Ms Lacreta, pointing to similarities between disputes observed in Brazil and Colombia. He stated that, in Colombia<\/a>, there is a large number of toll road concessions, and common issues leading to disputes are delays, cost overruns, and in general issues with governmental decisions not to update tariffs or the ways in which Covid-19-related effects are being compensated, as well as environmental or social issues. Mr Alzate<\/strong> pointed out that, although the scene is set for more disputes to come, there is currently a relative quietness.<\/p>\n\n\n\n Mr J\u00fadice<\/strong> also mentioned private partnership projects, in coal and gas and generally energy related disputes. He introduced that among the region\u2019s distinctive features are allegations of corruption and public policy rules, complex issues which need to be addressed by the parties.<\/p>\n\n\n\n Mr Kaufman<\/strong> said that the general characteristics and number of construction disputes do not vary a lot from region to region, but that disputes will follow from energy transition projects. He added that in Argentina<\/a>, cases come from the building up of infrastructure and foresaw that disputes will likely arise from benefits offered by the new government for new investments in infrastructure, in particular, in connection with \u00a0gas pipelines, plants projects and overall projects associated with energy transition.<\/p>\n\n\n\n Following a question by Mr Mantilla<\/strong>, Mr J\u00fadice<\/strong> emphasised that the involvement of State-Owned Entities (\u201cSOE<\/strong>\u201d) is unavoidable in construction contracts, even when the state is not directly involved, as licensing, zoning and other administrative law issues are supervised by State entities. Accordingly, complex issues of arbitrability, criminal investigations, administrative law and constitutional law may arise. He noted particular challenges for common law-trained lawyers, as opposed to civil law trained, who may not be used to the impact administrative law has in a dispute, irrespectively of whether it entails a private or public contract.<\/p>\n\n\n\n Mr Mantilla<\/strong> inquired Ms Lacreta<\/strong> on Brazil\u2019s perspective of SOE\u2019s acceptance of arbitration agreements, and she mentioned a favourable attitude, especially found in its public procurement law, law-statute of regulatory agencies, and laws on ports and airports. She clarified that arbitration is not mandatory but available for claimants. The reasons for a positive attitude towards arbitration lay in the courts being slow and investment-financed funds push for arbitration or Dispute Boards (\u201cDB<\/strong>\u201d). She pointed out that in Brazil<\/a>, 11% of disputes are against the public administration. Those arbitrations apply Brazil\u2019s laws, are seated there, and the Portuguese is the language of the proceedings.<\/p>\n\n\n\n Afterwards, the panelists discussed existing common trends. Mr Alzate<\/strong> pointed out that a common factor in the disputes he has observed in Latin America are social and environmental issues which in turn lead to rejections or revocations of permits or changes in regulations. He cited the example of the lifting of road tolls to respond to social manifestations, which affected the returns of investors.<\/p>\n\n\n\n Mr J\u00fadice<\/strong> also referred to some key issues he noted in construction cases in the region, including:<\/p>\n\n\n\n Mr Kaufman<\/strong> touched upon cultural shocks and mentioned that in Argentina<\/a>, as probably in other countries of the region, parties tend to be fiercer, while in Austria, where he practices, parties are more prone to settlement. On that point, he is seeing broader discussions about procedural orders that foresee settlement facilitation techniques and a shift towards DB in construction contracts. He shared positive feedback on DB, as it provides fast solutions facilitating the completion of construction projects. He sees that in Argentina<\/a> (as opposed to Peru<\/a>, Chile<\/a> and Brazil<\/a>), the shift towards alternative solutions is slower. Nonetheless, he mentioned that public administrations are implementing FIDIC model contracts<\/a>.<\/p>\n\n\n\n Mr Mantilla<\/strong> then asked Mr J\u00fadice<\/strong> about cultural reasons for the choice of applicable law, arbitrators, and seat of arbitration. Mr J\u00fadice<\/strong> highlighted the importance of the language of the arbitration. Although the contract may be translated from Portuguese to Spanish or English, he stated that this usually creates problems. He also reminded the audience about confidentiality, as requirements of transparency may apply when public entities are involved.<\/p>\n\n\n\n Ms Lacreta<\/strong> then focused on trends from Brazil and agreed with Mr Kaufman<\/strong> in seeing a shift towards dispute avoidance, mostly towards DB. However, in her experience, the quality is usually very low, due to an imbalance between the engineering and legal aspects of the dispute. She also picked up on Mr Alzate<\/strong>\u2019s point on the impact of social and environmental issues. Interestingly, she emphasised the impact that climate change may have in projects where climate-related assumptions are needed (i.e.<\/em>, availability of wind, sunlight, rain). She further opined that, although there are many dispute avoidance techniques, proper contract drafting is key.<\/p>\n\n\n\n With respect to the use of FIDIC<\/a>, Mr Kaufman<\/strong> agreed with Ms Lacreta<\/strong> that good contract drafting significantly reduces risks. He added that adapting FIDIC model contracts may be challenging as some clauses are inapplicable, and concluded that good planning is key.<\/p>\n\n\n\n On best practices, Ms Lacreta<\/strong> added that the key was to be very short and follow the standard practice, which is recognised across cultures, while Mr J\u00fadice<\/strong> agreed with her previous point on contract drafting and risk allocation. Mr J\u00fadice<\/strong> mentioned that from his experience in Portugal, a party loses if they have a weak technical analysis. He also mentioned that we will have to live with extensive document production in construction cases, which is also adopted in Latin America, and accordingly, a good organisation of the file is key. Mr Kaufman<\/strong> picked up on the document production topic and said that in his experience, a way to avoid excessive document production is for the arbitrators to require the requesting party to show that it bears the burden of proof on the allegations underlying the specific document production request. Adding to the theme of efficiency, from the expert\u2019s point of view, Mr Alzate<\/strong> commented that a great deal of the difference between the experts\u2019 assessments is sometimes explained by differences in the parties\u2019 legal positions and assumed fact patterns which the experts are instructed to assume, and said that the jury is still out on whether tools such as joint expert reports or hot tubbing are the most efficient or effective tools for narrowing those differences.<\/p>\n\n\n\n The panel ended with a brief comment on challenges in enforcing awards. Mr Kaufman<\/strong> and Ms Lacreta <\/strong>agreed that \u2018public policy\u2019 exception<\/a> remains the main hurdle. However, both mentioned that, with minor exceptions, courts in Argentina<\/a> and Brazil<\/a> (the latter with a slightly more formalistic approach) tend to go towards the right direction.<\/p>\n\n\n\n
Laura D. Jaroslavsky Consoli<\/strong>, Deputy Counsel at the International Chamber of Commerce<\/strong><\/a><\/p>\n\n\n\n
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Introducing the Panel<\/strong><\/h2>\n\n\n\n
Construction Disputes in Latin America<\/strong><\/h2>\n\n\n\n
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