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Mota-Engil v. Paraguay (PCA)

Why it matters

This case illustrates the interplay between contractual obligations and procedural orders in a construction arbitration under the UNCITRAL Rules. The tribunal's decision to award damages for wrongful guarantee execution and to penalize non-compliance with procedural orders underscores the importance of respecting tribunal directives. It also provides guidance on the assessment of damages for delay and defects in large infrastructure projects.

Summary

Mota-Engil, a Portuguese construction company, entered into a contract with Paraguay's Ministry of Public Works (MOPC) to build a bus rapid transit system. Disputes arose over access to the site, permits, design changes, and delays. Mota-Engil initiated arbitration under the UNCITRAL Rules, claiming the MOPC failed to provide access and permits, causing delays and cost overruns. The MOPC counterclaimed for unfinished work and penalties. The tribunal found both parties partially at fault. It ordered the MOPC to pay Mota-Engil for wrongful execution of performance guarantees, retained amounts, and damages for delays caused by the MOPC. Mota-Engil was ordered to pay for defects and late reporting penalties. The tribunal also addressed procedural misconduct by the MOPC for ignoring orders to refrain from executing guarantees, awarding additional costs to Mota-Engil. The award demonstrates the tribunal's balanced approach and the application of FIDIC conditions and Paraguayan law.

The detail

Parties: Mota-Engil v. Paraguay

Case number: PCA Case No. 2020-14

Outcome: Partial win for both parties. Tribunal ordered Respondent to pay Claimant EUR 4,905,260.57 for wrongful guarantee execution, EUR 121,000 for procedural breach, USD 2,650,480.12 for retained amounts and unpaid work, and USD 4,948,257 for damages. Claimant ordered to pay Respondent PYG 625,081,537.30 for defects and PYG 19,500,000 for late report penalties.

Quantum: EUR 5,026,260.57 + USD 7,598,737.12 to Claimant; PYG 644,581,537.30 to Respondent

Applicable law: Contract S.G. Ministro No. 100/2016; UNCITRAL Arbitration Rules 2013; Paraguayan law; FIDIC conditions

Issues in play: Contract interpretation regarding access to site, permits, design approval, and termination; procedural orders on guarantees; allocation of costs.

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