On 19 February 2018, an ad hoc arbitral tribunal, set in Rio de Janeiro and administratively supported by the ICC, issued a final award in the case between an US shipbuilder Hungtington Ingall’s and the Ministry of Defense of the Bolivarian Republic of Venezuela. The proceeding was governed by the UNCITRAL Rules and the Venezuelan Arbitration Act.
The dispute arose 15 years ago, when the Claimant’s predecessor, winner of a bid in 1992, faced difficulties executing a contract on reparation and overhaul of two State’s frigates concluded with the Ministry of Defense. A non-reviewable lump sum price payable by the Ministry of Finance was fixed by the parties. Only out-of-scope work ‘absolutely necessary to the fulfillment of the contract’ was subject to additional payment. The Claimant alleged that, contrary to the contract, both frigates arrived contaminated with human and food waste, insects and vermin, as well as contained asbestos. As result, the Claimant performed supplementary works, bearing additional costs. It claimed that such extra-works were subject to additional remuneration and requested delay damages. The Respondent objected that such a deterioration of frigates was unforeseeable. It also submitted a counterclaim, arguing that the Claimant failed to return the frigates in time, to perform certain works, maintain the contract’s insurances and fulfil warranty obligations. In its turn, the Claimant raised multiple objections, namely because of the Ministry’s default to pay all costs of hearings.
The arbitral tribunal upholds certain of the shipbuilder’s claims and counterclaims of the Ministry. With respect to the claim, it decides that the Ministry has to reimburse many types of costs for extra-works and it partially admits the claim for delay damages. Thus, the Claimant is awarded over 151 million dollars, including pre-award interest from 2002 and costs. With regard to the counterclaim, the arbitral tribunal recalls the right to access to justice and the principle of equal treatment of the parties. It upholds its jurisdiction over the counterclaim and limits it to the issue of delay, dismissing other Ministry’s claims. Since it considers that both parties are responsible for the delay occurred, the parity allocation applies. Thus, the arbitral tribunal reduces the penalty clause by 50%. In total, the Ministry is awarded 22.3 million dollars including pre-award interest from 2011. As result of the set-off, the latter is ordered to pay the remaining 129 million dollars.