[UPDATED] Judge sets aside $850m award to OAS over highway extension

A HIGH COURT judge has set aside the over $850 million arbitration award to Brazilian construction firm Construtora OAS SA over the Solomon Hochoy Highway extension project.

On Wednesday, Justice Frank Seepersad ruled in favour of an application of the National Infrastructure Development Company Ltd (Nidco).

“Having reviewed the evidence which was before the tribunal, this court is resolute in its view that no reasonable arbitrator cognisant of the law and seized of the evidence adduced could have arrived at the position reflected in the award.

“In the circumstances, this court, without fear or hesitation, must exercise its inherent jurisdiction and discharge its obligation to defend the rule of law and to protect the public interest.

“Consequently, the commercial decision reflected in the contract to have disputes determined by the arbitrator has to be overridden and the court must set aside the award as same was premised upon findings which were unsupportable on the evidence, inconsistent with the law and are decisions which no reasonable arbitrator could have arrived at,” he said in his decision.

It was the company’s contention that the award by the three arbitrators from the London Court of International Arbitration in April should be set aside as the panel made numerous errors when assessing the case and failed to provide reasons for ignoring evidence that supported Nidco’s contention.

In its challenge of the arbitration award, Nidco had asked the court to find, among other things, that its contract with the Brazilian construction firm was validly terminated.

It also asked the court to send back the partial final arbitral award to the tribunal for reconsideration.

On March 11, 2011, Nidco contracted OAS, under the former People’s Partnership administration, to build 43.5 kilometres of dual highway from San Fernando to Point Fortin for $5.3 billion.

On July 6, 2016, the contract was terminated. Nidco was able to recover $670 million in 2016 in letters of credit and bonds from a number of banks that had provided guarantees for OAS in previous litigation.

The partial award to OAS was made on April 16 and the tribunal ruled that Nidco must pay OAS a total of US$126 million ($857 million) and this could have increased by an additional $100 million in legal, professional, and other fees.

On May 24, the Prime Minister told a PNM meeting that three days before the 2015 general election, an addendum had been added to the OAS contract which led to the country's losing millions.

"We had a contract with a clause that said if the company went bankrupt, the government could use the bonds put up by the contractor to complete the work.

"We went to court and argued that that behaviour on the part of the government did not make good sense and we were awarded the bonds.

"However, the contractor took the matter to arbitration and because that clause was removed, we now owe the contractor $852 million,” Dr Rowley said.

Rowley said the contract had clauses that would have protected the country, but there was one clause, (15 (2) (e)), that said if the contractor was insolvent or went bankrupt, the bonds would go to the State.

On this contentious clause, Nidco, in its application, claimed OAS, compounding with its creditors in 2016, gave rise to a new and independent right to terminate the contract, and it was entitled to do so.

Nidco also claimed it was not in default of any payment and it was OAS that faulted the contract by failing to remain mobilised on site.

On these two contention issues – on the failure by OAS to remain mobilised on the site and the right to terminate – Seepersad said the tribunal made no finding in relation to the mobilisation clause nor did it resolve Nidco’s complaint that the clause did not entitle OAS to abandon the works entirely.

He also said the tribunal failed to consider the purpose and effect of the clause or adequately evaluate Nidco’s evidence in support of its contention that OAS did not remain mobilised on the site as it failed to maintain sufficient resources to resume normal working once paid.

On the termination clause, Seepersad said OAS becoming compounded with its creditors could have been an event that could trigger termination.

“The tribunal ought to have clearly and comprehensively explained why it rejected Nidco’s evidence on the right to terminate.”

In his ruling, Seepersad said as an arbiter of fact, the tribunal ought to have clearly and comprehensively explained why it rejected Nidco’s evidence and submissions that the compounding of OAS’s creditors was a circumstance that gave to Nidco a right to terminate.

This obligation was evidently more heightened given that the tribunal’s findings appear to contradict the evidence.

In his order setting aside the arbitration award, Seepersad referred back to the tribunal all the issues initially referred to it for their reconsideration.

In its defence, OAS argued that Nidco’s application was a “transparent attempt to appeal the award which is not legally permitted.”

This was denied by Nidco at the trial of the issues before Seepersad in November.

OAS further asserted that the case had already been determined by the tribunal’s award, except for those issues still to be decided.

It also contended that Nidco’s case should not be entertained as it was based on a clause in the contract between the parties, which stated that they would resolve their disputes solely through the arbitration process.

Also representing NIDCO are attorneys Marcelle Ferdinand and Jason Mootoo while attorneys Gregory Pantin and Miguel Vasquez appear for OAS.

After years of being inactive, the project restarted with local contractors and in August 2021, Nidco said the project was three-quarters complete.

Several months later, a segment of the highway at Mosquito Creek collapsed.

In July 2019, Cabinet announced a Commission of Enquiry to investigate aspects of the project including whether a ministerial oversight committee under the former People’s Partnership government had fulfilled its mandate. The commission is yet to commence its work. It will be chaired by retired judge Sebastian Ventour, with attorney Gregory Delzin serving as commissioner.

Nidco was represented by King’s Counsel Annelise Day, Jason Mootoo, Marcelle Ferdinand and Hugh Saunders. OAS was represented by Rolston Nelson,SC, Ria Mohammed-Davidson, Gregory Pantin and Miguel Vasquez.

London Court of International Arbitration's decision

In its decision on April 16, arbitrators John Fellas, Adam Constable, KC, and Andrew White, KC, upheld OAS’s arbitration claim against Nidco and ordered US$126.3 million in compensation.

In the 223-page ruling, the arbitration panel ruled that Nidco was wrong to have terminated the contract on the basis of the two main grounds it claimed.

In the arbitration proceedings, Nidco claimed Construtora OAS effectively abandoned the project in late 2015 after it slowed down work, dismissed most of its staff and became insolvent by letting debt accumulate to suppliers and contractors.

The company denied any wrongdoing, as it claimed that the issues raised by Nidco were due to the fact that Nidco failed to make a major interim payment under the contract.

It claimed that at the time of the termination, it had injected a further US$ 31 million into the project and had renewed its performance and retention bonds.

In upholding OAS’ case, the arbitration tribunal ordered that it should be paid US$127,072,326 in damages, minus the US$706,426.70 offset granted to Nidco. The damages represented the company’s claims for performance and retention securities, a series of unpaid interim payment certificates (IPCs), materials in stock, temporary works and contracting equipment.

This story has been adjusted to include additional details. See original post below.

A HIGH COURT judge has set aside the $850-million-plus arbitration award to Brazilian construction firm Construtora OAS SA over the Solomon Hochoy Highway extension project.

On Wednesday, Justice Frank Seepersad ruled in favour of an application of the National Infrastructure Development Company Ltd (Nidco).

“Having reviewed the evidence which was before the tribunal, this court is resolute in its view that no reasonable arbitrator cognisant of the law and seized of the evidence adduced could have arrived at the position reflected in the award.

“In the circumstances, this court, without fear or hesitation, must exercise its inherent jurisdiction and discharge its obligation to defend the rule of law and to protect the public interest.

“Consequently, the commercial decision reflected in the contract to have disputes determined by the arbitrator has to be overridden and the court must set aside the award as same was premised upon findings which were unsupportable on the evidence, inconsistent with the law and are decisions which no reasonable arbitrator could have arrived at,” he said in his decision.

The state-owned company contended that the award by the three arbitrators from the London Court of International Arbitration in April should be set aside, as the panel made numerous errors in assessing the case.

NIDCO’s lead counsel, Annalise Day, KC, had submitted that the panel failed to provide reasons why it ignored evidence which supported Nidco’s contentions.

OAS’s lawyer Rolston Nelson, SC, argued the court should not entertain the case owing to a clause in the contract between the parties which said they would resolve their disputes solely through the arbitration process.

NIDCO made it clear it was not seeking to appeal the award, but wanted it set aside and remitted to the tribunal.

In early 2011, OAS was awarded the contract for the project, which was then estimated to cost approximately $5.3 billion. After the contract was terminated, the project was put on hold before it eventually restarted.

In August last year, Nidco announced that the project was three-quarters complete. But several months later a segment of the highway at Mosquito Creek collapsed.

Delivering a decision on a partial final award on April 16, arbitrators John Fellas, Adam Constable, KC, and Andrew White, KC, upheld OAS’s arbitration claim against Nidco and ordered US$126.3 million in compensation.

In the 223-page ruling, the arbitration panel ruled that Nidco was wrong to have terminated the contract on the basis of the two main grounds it claimed.

In the arbitration proceedings, Nidco claimed Construtora OAS effectively abandoned the project in late 2015 after it slowed down work, dismissed most of its staff and became insolvent by letting debt accumulate to suppliers and contractors.

The company denied any wrongdoing, as it claimed that the issues raised by Nidco were due to the fact that Nidco failed to make a major interim payment under the contract.

It claimed that at the time of the termination, it had injected a further US$31million into the project and had renewed its performance and retention bonds.

In upholding OAS’ case, the arbitration tribunal ordered that it should be paid US$127,072,326 in damages, minus the US$706,426.70 offset granted to Nidco. The damages represented the company’s claims for performance and retention securities, a series of unpaid interim payment certificates (IPCs), materials in stock, temporary works and contracting equipment.

In July 2019, Cabinet announced a commission of enquiry to investigate aspects of the project, including whether a ministerial oversight committee under the former People’s Partnership government had fulfilled its mandate.

The commission, which is yet to start its work, is to be chaired by retired judge Sebastian Ventour, with attorney Gregory Delzin serving as commissioner.

Nidco was also represented by Jason Mootoo.