Metro de Santiago and China Railway Construction in Arbitration Over Line 7 Contract Termination
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TL;DR
- Metro de Santiago terminated a US$239 million tunnel contract with a China-linked company for Line 7.
- Both parties filed claims before the Santiago Chamber of Commerce Arbitration and Mediation Center.
- The dispute involves allegations of contract breaches, project delays, and guarantees totaling about US$69 million.
- The contract termination followed operational failures of a Chinese-made tunnel boring machine (TBM).
Overview
Metro de Santiago and a consortium linked to China Railway Construction Corporation (CRCC) are engaged in an arbitration proceeding after the early termination of a major civil works contract for Line 7 of the Santiago Metro. The contract, initially valued at approximately US$239 million, involved the use of a Chinese tunnel boring machine (TBM) that underperformed, leading to a dispute over project execution, delays, and financial guarantees.
What Happened
The consortium TBM y Túnel SpA, connected to CRCC, was awarded the contract for the first section of Line 7's tunnel construction in 2021. The key feature was a tunnel boring machine manufactured in China, purported to be 15 times faster than traditional methods.
Technical issues plagued the TBM, which managed to drill only 1.6 kilometers out of a planned 6.6 kilometers. This led Metro de Santiago to terminate the contract early on January 13, 2026.
After termination, Metro de Santiago enforced contractual guarantees totaling about US$69 million. Both sides then accused each other of breaches and filed claims with the Centro de Arbitraje y Mediación at the Santiago Chamber of Commerce.
TBM y Túnel contests the contract termination and the guarantee enforcement, alleging damages caused by Metro's actions, while Metro asserts that the contractor committed multiple severe breaches and prolonged work stoppages.
Context
At termination, only about 25% of the physical work and about a third of the financial value of the contract had been completed. Metro reassigned tunnel work to other contractors and switched to the traditional NATM method for tunnel excavation.
The Line 7 project, originally slated for completion in 2026, has been delayed, with the new estimated operational date pushed back to the end of 2028. Metro reports it is working to minimize further delays and additional costs.
Why It Matters
- This arbitration addresses the financial and contractual fallout from the premature ending of a major infrastructure project featuring international contractors.
- The outcome may affect the project timeline, contractual risk allocation in future public works, and reliance on advanced tunnel technologies sourced internationally.