Sigma Constructores, S.A. v. Republic of Guatemala (IV), CENAC Case No. 02-2020
CENAC · Investment (ICSID and treaty) · Guatemala · 27 Oct 2021
Why it matters
This case is a notable example of a domestic arbitration in Guatemala where the State was held liable for breach of contract and ordered to pay substantial damages, including interest and costs. It underscores the enforceability of arbitration clauses in public contracts and the application of good faith principles against sovereign entities.
Summary
Sigma Constructores, S.A. (Sigma) entered into a contract with the Republic of Guatemala (the State) on 7 November 2014 for the rehabilitation and expansion of a highway. The State suspended the project in July 2016 due to lack of payment and later unilaterally terminated the contract in November 2017. After a liquidation process, Sigma initiated arbitration under the CENAC Rules, claiming the State owed US$32,827,989.10 for unpaid work, eliminated work items, suspension costs, and interest. The State objected to the arbitration but did not file a defense. The Tribunal, applying Guatemalan law and the contract, found the State in breach and awarded Sigma US$34,587,088.06, including US$4,602,620.04 from the liquidation, US$17,082,971.96 for eliminated work, US$1,730,357.65 for suspension costs, US$546,406.90 for unestimated work, US$253,042.91 for demobilization, US$157,733.45 and US$61,940.89 for amortization adjustments, and US$10,152,014.26 in interest. The Tribunal also ordered the State to pay costs of US$2,594,031.60 and arbitration expenses of US$240,000 plus Q40,000 for the expert. The award was to be paid within 30 days of becoming final.
The detail
Parties: Sigma Constructores, S.A. v. Republic of Guatemala (IV), CENAC Case No. 02-2020
Case number: italaw/cases/14279
Outcome: The Tribunal found the State of Guatemala in breach of contract and ordered it to pay US$34,587,088.06 plus interest and costs to Sigma.
Quantum: US$34,587,088.06
Applicable law: Contract No. 093-2014-DGC-CONSTRUCCION; Guatemalan Arbitration Law (Ley de Arbitraje); CENAC Arbitration Rules; Guatemalan Civil Code; Law of Public Procurement.
Issues in play: The dispute involved the State's unilateral termination of a public works contract and its failure to pay for work performed. The Tribunal applied principles of good faith and the doctrine of actos propios (own acts) to hold the State liable.
Read the full decision at italaw ↗
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