The Civil Aviation Authority of Nepal has lodged a counter claim for Rs13 billion in loss of income at the Singapore International Arbitration Centre against Constructora Sanjose, the ousted Spanish contractor of the Tribhuvan International Airport improvement project.

The counter-claim was filed last Thursday and arbitration proceedings are expected to commence in November, two high-level sources privy to the matter told the Post.

According to them, Rs10 billion has been claimed for revenue losses from 2016 [contract termination period] to 2022 [extended deadline of the project due to contract termination]. Similarly, Rs3 billion has been claimed as price escalation or inflation costs.

Spanish contractor Constructora Sanjose and the Civil Aviation Authority of Nepal had signed a contract for the Tribhuvan International Airport Modernisation Project, now known as the Air Transport Capacity Enhancement Project, in December 2012 with the completion deadline set for March 2016.

The authority 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.

The country’s civil aviation body had received the notice of arbitration on March 16 last year. At that time, the Spanish company had filed a claim for a staggering Rs10 billion against Nepal’s civil aviation body demanding return of its guarantee money and compensation for losses resulting from the termination of the contract. The company later revised its claim to Rs3 billion.

The sources said that the civil aviation regulator has been given a May deadline for the second counter-claim submission and it may or may not revise the amount.

According to the civil aviation regulator, a panel of three arbitrators will be selected to hear the dispute. Both parties are required to attend the arbitration hearing called by the arbitration panel. The panel tries to help parties resolve their dispute by agreement during an informal voluntary conciliation.

If no settlement can be reached during the conciliation, then the panel proceeds to formal mandatory arbitration. Arbitrators hear arguments and review evidence to decide on the merits of a case by issuing a decision. Usually, the arbitrator’s decision comes within 45 days after the closing of proceedings.

In the four years since the project was launched in 2012, the Spanish company had recorded a meagre 17 percent physical progress.

The civil aviation body had seized the advance payment guarantee and the performance bond after the contractor failed to perform its obligations under the contract.

In December 2016, Constructora Sanjose had filed a petition seeking prohibitory orders after Nepal’s civil aviation regulator decided to seize the advance payment guarantee of Rs1.05 billion and a performance bond of Rs600 million following the cancellation of the contract. 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 a period of two years due to its 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 civil aviation body invited fresh bids for the project from June 2017 to get the stalled project moving.

It also broke up the project undertaken by the Spanish company into four different packages.

The tender notice for package 4 component that consists of soil filling works and building international parking bays and extending the parallel taxiway towards the northern end of the runway is expected to be issued in the first week of March.

This is the most important component of the Tribhuvan International Airport Air Transport Capacity Enhancement Project in terms of duration and cost.