News 29 Mar. 2019

Curtis Secures Victory for Client in Federal District Court in Colorado; Decision Confirms Enforcement of US$36 million Bolivian Arbitral Award

A federal district court in Colorado has issued a judgment in favor of Curtis' client Compañía de Inversiones Mercantiles S.A. (“CIMSA”) in an action to confirm a US$36 million arbitral award against Grupo Cementos de Chihuahua, S.A.B. de C.V. and GCC Latinoamérica, S.A. de C.V. (jointly, “GCC”). On March 25, the district court ruled favorably on the merits of the case, granting CIMSA approximately US$45 million, which constitutes US$36million rendered in its favor in 2015 by an arbitral panel seated in La Paz, Bolivia, plus interest and costs.

“We were very pleased with the Court’s decision and look forward to recovering the full damages that were granted by the tribunal,” said Eliot Lauer, co-chair of Curtis’ litigation department, commenting on this comprehensive victory. Curtis’ success in this case, which involves a Bolivian client, a Mexican debtor and a U.S. court, exemplifies the international firm’s ability to handle complex litigations involving multiple jurisdictions and the capabilities of the firm’s market-leading disputes practice.

Curtis represented CIMSA in the underlying arbitration in La Paz, Bolivia.

Case Background

An Arbitral Tribunal Found That GCC Breached the Parties’ Joint Venture Agreement

The dispute arises out of a 2005 joint venture agreement governing GCC and CIMSA’s commercial relationship as the two majority shareholders of SOBOCE, Bolivia’s largest cement company. That agreement afforded CIMSA the right to purchase GCC’s shares in SOBOCE before any third party buyer. However, in 2011, GCC unexpectedly sold its shares to one of CIMSA’s competitors.

CIMSA initiated arbitration pursuant to the parties’ agreement. In 2013, following two years of arbitral proceedings, a tribunal seated in La Paz, Bolivia issued a merits award in which it found that GCC had breached the joint venture agreement by selling its shares to CIMSA’s competitor. Two years later, the arbitral tribunal issued a damages award in which it awarded CIMSA over $36 million in damages and legal fees.

CIMSA promptly brought a claim to enforce the award in a federal court in Colorado, where GCC’s U.S. subsidiary (“GCC America”) operates a large cement manufacturing business that generates a substantial portion of GCC’s profits. In October 2015, the Colorado court issued one order attaching GCC’s assets located in Colorado up to the amount of the award, and another order requiring GCC America to identify any such assets in its possession.

GCC Initiated Litigation in Bolivia in an Attempt to Set Aside the Arbitral Awards

However, GCC initiated a series of challenges in the Bolivian courts in an attempt to set aside the awards. In light of these challenges, CIMSA agreed to temporarily suspend GCC America’s obligation to identify GCC’s assets in Colorado. After two years the challenges were resolved in CIMSA’s favor.

CIMSA Prevails on Its Motion to Confirm

On May 31, 2018, CIMSA, through a Curtis team by Eliot Lauer, Gabriel Hertzberg, and Sylvi Sareva, filed motions in Colorado, including to reinstate GCC’s USA’s obligation to identify GCC’s Colorado assets; and a motion to confirm the arbitral award in its favor.

CIMSA’s motion sought to confirm the award pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The Convention significantly limits defenses to confirmation, in order to encourage the enforcement of arbitration agreements in international contracts. The court agreed with CIMSA that GCC could not establish a defense to confirmation under the Convention. Importantly, the U.S. district court rejected a decision of a Bolivian court (the “Ninth Court”) purporting to set aside the arbitral award against GCC, finding as a matter of Bolivian law that the Ninth Court’s decision was ineffective, and was “suspect” in the manner in which it was rendered. Likewise, the U.S. district court refused to recognize the validity of a “decree” by the then-sitting President of the highest constitutional court in Bolivia—the Plurinational Constitutional Court—which also purported to invalidate the arbitral award. The decision represents a diligent examination by the district court of the workings of the Bolivian constitutional court system in order to reach a conclusion regarding the legal status of the arbitral award under Bolivian law.