Update: US$2.85 Billion Hidroituango ‘Conciliation’ Fails, EPM Asks for Medellin Administrative Court to Assume Lawsuit Proceeding

Medellin-based electric power giant EPM announced this morning (January 13) that it has petitioned an Antioquia Administrative Court in Medellin to assume jurisdiction over its COP$9.9 trillion (US$2.85 billion) lawsuit against Hidroituango construction contractors.

The petition to the Court follows the failure last week of a “conciliation” procedure that had been supervised by Colombia’s Solicitor-General.

EPM now simultaneously asks the Medellin Chamber of Commerce to assume arbitration of its related COP$5.5 trillion (US$1.58 billion) claim against insurer Mapfre for its supposed coverage of losses arising from a diversion-tunnel collapse at the Hidroituango hydroelectric project in 2018.

The petition to move the main damages claim against Hidroituango contractors to an Antioquia Administrative Court now faces a venue fight, as the contractors have instead petitioned for an international tribunal to settle the dispute. Rationale: One of the three main construction contractors isn’t Colombian, but is instead Brazil-based Camargo Correa Infra. The other two are Colombian companies Conconcreto and Coninsa-Ramón H.

EPM asserts that it initially moved to bring a “conciliation” suit against the contractors last year because of a supposed two-year legal deadline to bring claims following the April 28, 2018 diversion-tunnel collapse.

This EPM argument is disputed by former Colombia Supreme Court Justice Javier Tamayo Jaramillo, now head of the Medellin law firm of Tamayo Jaramillo & Associates.

In a legal analysis submitted by Tamayo to the “Todos Por Medellin” civic group last month, Tamayo explains that the actual legal deadline for filing such a damages claim instead would come within two years following the expiration of the construction contract, not the two years following the tunnel collapse incident.

“There is almost absolute doctrinal and jurisprudential unanimity in that the expiration date of this type of actions is counted from the settlement of the respective contract, which, to date, has not occurred,” Tamayo states in his legal opinion.

“What was the desire to file a lawsuit against so many defendants without having sufficient proof of their responsibility or even knowing the intensity of the damages or the value of them? Was it a matter of causing a media impact to create the feeling that the previous [EPM] administration was going to let EPM’s actions against those responsible for [the tunnel collapse] expire?”

The new EPM lawsuit claims that the construction contractors as well as insurers Suramericana, Chubb Seguros and Mapfre now must answer its claims in court or else in arbitration.

While Mapfre “has recognized the coverage of the [tunnel-collapse] event and has ratified it in the framework of the conciliation hearings, we are still working on the determination of the compensable amounts in the insurance [policy] conditions, based on the fact that this claim is the largest worldwide in terms of All Risks Construction and Assemblies, and is therefore subject to study and review throughout the insurance market,” according to EPM.

“It is for this reason, and no other, that it was not possible to arrive at a figure that would allow us to satisfactorily terminate the preliminary ruling conciliation process. Mapfre confirmed that its main interest is to cover all compensable losses, in accordance with the insurance conditions.

“Based on the foregoing, the EPM Group ratifies its commitment to advance in the technical adjustment process until compensation for losses is achieved within the framework of the insurance contract signed with the Mapfre company.”

Meanwhile, “in both judicial scenarios, conciliation exercises are contemplated, which offer us a new opportunity to seek a comprehensive solution to the differences derived from the contingency,” according to EPM.

Contractors Dispute Claims

According to the “CCC Ituango Consortium” of Hidroituango construction contractors, they now seek international arbitration and will file counter-claims against EPM.

“The consortium reiterates its interest in demonstrating that in the execution of the civil works under its charge, it has not only acted in good faith but diligently and in accordance with good engineering practices, complying with the designs and instructions provided by Empresas Publicas de Medellin (EPM),” according to CCC Ituango’s official press bulletin, reacting to the “conciliation” failure.

“Having extended the contract at the end of December [2020] by EPM, the consortium will continue executing the work in the same way as it has always done: complying with its contractual obligations, maintaining adequate quality standards and meeting technical requirements. and designs supplied by EPM itself.

“The consortium remains firm in its commitment to take Hidroituango forward, understanding that this requires collaborative work with the other contractors of the project, but above all, having the adequate coordination of EPM so that the objectives of the project are met.

“The CCC Ituango Consortium is led by Camargo Correa Infra and as a [Brazilian] foreign partner we will submit the [lawsuit demand] differences to an international court, where technical and legal arguments prevail to make clear the actions of the consortium in the [diversion-tunnel collapse] contingency of April 2018.

“At the same time, we are forced to seek to compensate the reputational and economic impact that this unique claim has been causing for the Consortium,” the bulletin concludes.

EPM Trade Union Slams Lawsuit Decision

Meanwhile, Sinpro – EPM’s biggest employee trade union – likewise slammed EPM’s failure to settle the claims under friendly “conciliation” terms.

“We have indicated since September [2020] that EPM’s claim of COP$9.9 trillion from the contractors represents great risks for the company’s finances and for the development of Medellin and Antioquia, as there could be a possible counterclaim from the contractors with possible consequences in the qualifications of [Wall Street bond-rating] risk qualifiers and the possible loss of part of the [Mapfre] insurance coverage, without taking into account what it implies for the contractors.

“These are the risks that the Mayor of Medellin, the [recently installed] Board of Directors of EPM and the [recently named] general manager of EPM are now bringing upon the company in a new display of folly where it is evident that personal and political interests prevail over legal interests and of the community,” Sinpro warned.

The Sinpro charge alludes to Medellin Mayor Daniel Quintero’s bypassing of the prior EPM Board of Directors last year in bringing a lawsuit against Hidroituango contractors that potentially could cost EPM billions of dollars in counter-claims.

If successful, counter-claims could wreck city-owned EPM’s finances for years or even decades to come – all triggered by politically self-interested, sweepingly populist claims that portray Mayor Quintero as standing-up to Medellin’s “corrupt” business sector.

However, this claim is publicly and sharply disputed by dozens of commercial and industrial trade associations, several trade unions and many civic groups, some of whom are calling for Mayor Quintero to be removed from office via a recall petition.