{"id":8317,"date":"2021-03-23T08:46:05","date_gmt":"2021-03-23T13:46:05","guid":{"rendered":"https:\/\/cf.iisd.net\/itn\/?p=8317"},"modified":"2024-08-09T18:31:39","modified_gmt":"2024-08-09T16:31:39","slug":"french-consortium-kicks-off-an-icsid-claim-against-chile-after-usd-37-million-loss-due-to-covid-19-pandemic","status":"publish","type":"post","link":"https:\/\/www.iisd.org\/itn\/2021\/03\/23\/french-consortium-kicks-off-an-icsid-claim-against-chile-after-usd-37-million-loss-due-to-covid-19-pandemic\/","title":{"rendered":"French consortium kicks off an ICSID claim against Chile after USD 37 million loss due to COVID-19 Pandemic"},"content":{"rendered":"

On January 19, 2021, the main shareholders of a consortium controlling the billion-dollar concession for Santiago’s Arturo Merino Ben\u00edtez international airport informed Chilean President Sebasti\u00e1n Pi\u00f1era of their intention to initiate an ICSID<\/span> claim. The investors claimed they had suffered losses as a consequence of measures taken in response to the COVID-19 pandemic.<\/p>\n

France’s Groupe ADP and Vinci Airports have 45% and 40% stakes respectively in the Nuevo Pudahuel consortium, which won a 20-year concession for Santiago’s airport in 2015, with the Italian company Astaldi holding the remaining 15%.<\/p>\n

The French concessionaires’ claim under the 1992 Chile\u2013France BIT<\/span><\/a> demands compensation for net losses of USD 37 million in 2020, along with a contract renegotiation to prevent the expropriation of their investment. The consortium operators report that profits had fallen 90% in 2020, as Chile has lost 19 routes and 630 weekly frequencies since the pandemic broke out, which meant a drop of around 70% in passenger numbers.<\/p>\n

The conflict escalated after the Chilean Ministry of Public Works refused the consortium\u2019s request for financial aid and an extension to the concession to restore its economic viability and recover the investment made in the new terminal currently under construction.\u00a0 Nuevo Pudahuel argued that the airport’s revenue would be affected by the pandemic for at least the five-year period expected to return to previous passenger traffic levels.<\/p>\n

According to the website Pauta Bloomberg<\/em><\/a>, <\/em>Minister of Public Works Alfredo Moreno alleged the state itself had also suffered considerable losses via the revenue-sharing mechanism that stipulates that 77% of the airport’s profits should be handed over to the Chilean state. \u201cFor every peso that the concessionaire has lost, the state has lost three times as much,” he added. Furthermore, it was argued that renegotiation is not permitted by law and would require a new public tender.<\/p>\n

In the notice of dispute<\/a>, the French operators mention Chilean\u00a0government policy requiring additional sanitary measures to protect against the spread of COVID-19 at the airport, as well as the state’s repeated refusal to renegotiate the contract. They also refer to the BIT’s provisions on FET<\/span>, national treatment, and protection against expropriation.<\/p>\n

Speaking to Pulso<\/a>, Groupe ADP CEO Fernando Echegaray pointed out that the refusal of the consortium’s request posed serious risks to the concession, which would no longer be viable, as the contract does not assign the threat of pandemics to the consortium.<\/p>\n

“The effects of the pandemic and the State’s refusal to restore the economic\u2013financial balance of the concession, however, have caused unexpected damage that not only will not allow greater investments but also put the airport’s operation at risk. It is our opinion that Chile has not complied with its obligations to protect foreign investment under the agreement between the Government of the Republic of Chile and the Government of the Republic of France on the reciprocal promotion and protection of investments,” said Echegaray<\/a>.<\/p>\n

Conversely, Minister Moreno noted that the airport is not at risk since the concessionaire can be replaced if Nuevo Pudahuel is unable to continue. “The companies have to comply with what has been asked of them, and they cannot expect to use other mechanisms to receive what does not apply\u2026 what they are looking for is to extend the contract, which means billions,” he said.<\/p>\n

Looking at the ISDS<\/span> claim under the Chile\u2013France BIT, Rodrigo Y\u00e1\u00f1ez, Chilean Undersecretary for International Economic Relations, emphasized that the divergence between the consortium and the Ministry of Public Works within the framework of the concession contract does not mean that the Chilean State is breaching its international obligations in the Chile\u2013France investment protection agreement. “An eventual trial before the ICSID has the latter as its object and the recent award that put an end to the claim of the shareholders of Alsacia and Express<\/a> against the State is very clear in distinguishing the actions of the State of a contractual nature and those carried out by the State in its sovereign capacity,” explained Y\u00e1\u00f1ez<\/u> to La Tercera<\/a>.<\/p>\n

Before facing off with the Chilean State before the ICSID, the French controllers of Santiago’s airport have begun a six-month amicable negotiation period imposed by Chile\u2013France BIT.<\/p>\n