Fired Spanish contractor seeks $101m from Caan

- Post Report, Kathmandu

Apr 25, 2018-

The Spanish contractor who was fired from the Tribhuvan International Airport (TIA) improvement project has filed an arbitration claim against the Civil Aviation Authority of Nepal (Caan) with the Singapore International Arbitration Centre, demanding return of its guarantee money and compensation for losses resulting from the termination of the contract.

People familiar with the matter said that Constructora Sanjose had filed a claim for a staggering $101 million. The largest claim so far is $24 million made by Italian contractor Impregilo SpA against the Nepal Electricity Authority with regard to the realization of the Kali Gandaki hydropower plant in July 2004.

“We received the notice of arbitration on March 16, and submitted our reply within the 14 days given,” said the Caan source who declined to be identified. As part of the case, the counterparty needs to propose a counterclaim. “We are preparing the counterclaim and waiting for details about the claims filed by the Spanish company.”

The Caan board has approved the management’s proposal to hire an arbitrator on behalf of the project.

Constructora Sanjose and Caan signed a contract for the TIA Modernisation Project, now known as the Air Transport Capacity Enhancement Project, in December 2012 with the completion deadline set for March 2016. Caan was forced to say adios to the Spanish company by officially issuing a ‘notice of termination’ on December 9, 2016 for delays. The termination of the contract became effective on December 27, 2016.

In the four years since the project was launched, the company had recorded a meagre 17 percent physical progress. Caan seized the advance payment guarantee and the performance bond after the contractor failed to perform its obligations under the contract. Both bonds are commonly used in the construction industry as a means of insuring a client against the risk of a contractor failing to fulfill contractual obligations.

Constructora Sanjose then filed a petition seeking prohibitory orders after Caan decided to seize the advance payment guarantee of Rs1.05 billion and a performance bond of Rs600 million after cancelling the contract citing nonperformance. Subsequently, the Patan High Court ruled that Constructora Sanjose had no legal right to prevent Caan from seizing its security deposit.

In July 2017, the Public Procurement Monitoring Office blacklisted the ousted Spanish contractor for failure to complete government projects within the deadline, non-cooperation with authorities and failure to furnish a satisfactory explanation why the project was not completed on time. The blacklisting will bar the contractor, Constructora Sanjose, from competing for any contract in Nepal for a period of two years.

Caan made another call for bids in June 2017 to get the stalled project moving. It also broke up the project undertaken by the Spanish company into four different packages. After the completion of the project, TIA will be able to handle more than 5.85 million passengers annually and accommodate bigger aircraft.



Published: 25-04-2018 09:22

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