Cardama Begins ICC Arbitration Against Uruguay After OPV Contract Cancellation
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TL;DR
- Spanish shipbuilder Cardama has commenced ICC arbitration against Uruguay.
- The dispute follows Uruguay's termination of a contract for two offshore patrol vessels (OPVs).
- Uruguay claims irregularities in Cardama's guarantees prompted the cancellation.
- The arbitration will be seated in Paris under ICC rules.
Overview
Spanish shipbuilder Cardama has initiated an international arbitration proceeding against the government of Uruguay after the cancellation of a contract for two offshore patrol vessels (OPVs). The case will be heard under the rules of the International Chamber of Commerce (ICC) with the seat in Paris. This dispute centers on Uruguay's claims of irregularities in the guarantees provided by Cardama, which led to the government's decision to rescind the deal.
What Happened
The Uruguayan government, under President Yamandú Orsi, terminated its contract with Cardama for the construction of two OPVs after citing multiple irregularities in the guarantees offered by the Vigo-based company. Uruguay had paid Cardama approximately USD 30 million by the time of cancellation, about a third of the contract value.
On June 11, the Uruguayan government was formally notified that Cardama had filed a request for arbitration with the ICC's International Court of Arbitration. Cardama's filing seeks a declaration that Uruguay's contract termination was improper and contrary to the contract terms, alleging that Uruguay failed to act in good faith and breached its obligations.
The Uruguayan government asserts confidence in its decision, describing Cardama's arbitration request as weak and emphasizing that Cardama did not challenge the termination in Uruguayan courts beforehand.
The arbitration process is based on a dispute resolution clause in the original contract, providing for ICC arbitration in Paris if the parties could not resolve issues nationally or through designated technical experts.
Context
The contract for the two OPVs was initially awarded to Cardama after a failed first tender process in 2021. The agreement was concluded between Cardama and Uruguay's Ministry of Defense in December 2023.
Concerns were raised during the prior administration about the adequacy of due diligence on Cardama's solvency and compliance. The contract's cancellation followed the discovery by the Uruguayan government of what it described as a false performance guarantee from Cardama. A related criminal complaint was also filed by the government.
Why It Matters
- This arbitration highlights potential risks in cross-border government procurement and the importance of thorough due diligence on performance guarantees.
- The outcome will determine whether Uruguay's cancellation of the contract is upheld or whether Cardama is entitled to economic compensation.