Motion to Confirm Bolivian Arbitral Award Asks Federal District Court in Colorado To Examine Judicial Misconduct in Bolivia

On May 31, 2018, Compañía de Inversiones Mercantiles S.A. (“CIMSA”) asked a Colorado federal court to confirm a $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”), which was rendered in its favor in 2015 by an arbitral panel seated in La Paz, Bolivia. CIMSA’s principal is Samuel Doria Medina, an outspoken critic and a leader of the opposition in Bolivia.

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. In the renewed Colorado proceedings, described below, CIMSA demonstrates that a large portion of the Bolivian proceedings points to judicial misconduct and bias against CIMSA and Doria Medina. CIMSA further demonstrates that Doria Medina is “uniquely susceptible to bias” in the Bolivian judicial system dominated by Bolivian president Evo Morales. CIMSA presented to the Court the Expert Report of Dr. Rebecca Bill Chavez, former Deputy Assistant Secretary of Defense for Western Hemisphere Affairs, United States Department of Defense, who states that President Morales “has demonstrated particularly pointed hostility towards Mr. Doria Medina and is incentivized to weaken Mr. Doria Medina politically and financially.”

CIMSA’s Recent Motions Seek to Restart the Confirmation Proceedings

On May 31, 2018, CIMSA filed motions in Colorado, including to reinstate GCC America’s obligation to identify GCC’s Colorado assets; and a motion to confirm the arbitral award in its favor.

The motion to reinstate GCC America’s obligation to identify GCC’s assets in the district will permit CIMSA to freeze assets such as intercompany payables and royalties owing from GCC America to GCC in order to execute the award.

Finally, the motion to confirm seeks 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. As CIMSA sets forth in its motion to confirm, GCC cannot establish a defense to confirmation under the Convention.