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International Arbitration Forum

Dunor Energia v. Federal Electricity Commission (CFE) (Mexico)

Case summary

At a glance

Parties
Dunor Energía, S.A.P.I. de C.V. (Mexico) v. Comisión Federal de Electricidad (CFE) (Mexico)
Case no.
LCIA Case No. 204865
Forum and rules
LCIA Arbitration Rules (2014); seat Mexico City; proceedings in Spanish
Treaty
None. Contract claim under Clause 30.3 of Public Works Contract Financed at a Fixed Price No. PIF-039/2015 (23 October 2015), governed by the LOPSRM and Mexican federal law
Tribunal
Juan Pablo Cárdenas Mejía (President), Roberto Hernández García, Guillermo Estrada Adán
Sector
Power generation; construction of the 313 CC Empalme II combined-cycle plant
Outcome
Claims upheld in substantial part (26 September 2022). CFE was ordered to pay US$ 20,764,356.62 plus applicable taxes. The Tribunal declined jurisdiction over CFE's counterclaim.
Amount
Claimed: at least US$ 27,505,045.96 (closing submission). Awarded: US$ 20,764,356.62 plus applicable taxes, with post-award interest at the contractual Financial Expense Rate. Counterclaim of MXN 9,113,673.45 not decided. Each party bears its own legal costs and 50% of the arbitration costs (GBP 274,952.19).

The dispute

Dunor Energía, a Mexican special-purpose company whose shareholders are Duro Felguera, Elecnor and Elecnor México, contracted with CFE to build the 313 CC Empalme II combined-cycle power plant for a fixed price of US$ 396,997,949.52. Three amending agreements extended the scheduled provisional acceptance date, finally to 14 March 2019. Provisional acceptance took place on 14 August 2019. Under Clause 25.5 of the Contract, the parties signed an Agreement on 17 September 2018 to compensate Dunor for reasonable, documented, directly related expenses caused by the delay. Dunor claimed that CFE had not paid these amounts in full or on time. It also claimed that CFE had made improper discounts from the price for spare parts not delivered and for performance-test shortfalls (Dunor argued that turbine degradation curves should have been applied), that CFE had paid the price late, and that it owed further damages. CFE argued that the expenses were unsupported or unreasonable, that the Contract barred degradation curves, and that its discounts were proper. CFE also counterclaimed for unpaid electricity bills under an Energy Purchase Contract signed by Dunor and CFE Generación IV.

Key holdings

  1. Clause 25.5 financial expenses. The interest on Dunor's loans from its related parties (US$ 419,801.68) is recoverable. It was caused by the delay, it is reasonable and it is documented. Clause 25.5 does not require Dunor to show that it had first used up the financing cost budgeted in its bid. The structuring and novation commissions are refused: Dunor bore the burden of proving they were reasonable, and the fact that the banks set them does not prove it. Only legal and notary fees (US$ 37,785.23) and the agency commission (US$ 30,405.41) are added, for a total of US$ 487,992.32. ¶¶ 139–182
  2. Personnel management and field administration expenses are awarded at US$ 7,739,641.51, following the EY expert's figures with two exceptions. Electricity is allowed only at CFE's estimate of US$ 17,981.00. Costs of preparing the claim are excluded because they are not directly related to the Works. Sums that Dunor has not yet paid to third parties become payable once Dunor proves payment. ¶¶ 252–274
  3. Spare parts. CFE was entitled to the discount under paragraph D of Annex 3 and Clause 21.6 (US$ 1,667,781.48), capped by Clause 20.11. Because the Contract regulates the matter, CFE could not add a second discount for unexecuted work under Article 231 of the RLOPSRM. That second discount of US$ 1,393,106.70 must be repaid. ¶¶ 647–659
  4. Degradation curves do not apply. Annex 13 and the contractual definition of "New and Clean Condition" exclude them. The Siemens Annex VIIIA attached to the approved Performance Test Procedure did not amend the Contract, because Clause 31.5 requires a signed written agreement and the amending agreements confirmed the Contract in full. Non-application of the curves is a risk the contractor assumed, not a penalty, and the doctrine against acting contrary to one's own acts does not apply. ¶¶ 816–848
  5. Performance-test discounts. The Tribunal relied on the later LAPEM report K3323-095A-19 of 30 October 2019, although it was submitted late, because it applied all the standards in the Procedure. The discount should have been US$ 348,586.92, and CFE must repay US$ 3,258,966.78 of excess discounts. No financial expenses run from the price due date on that sum, because CFE acted on the information it had at the time. ¶¶ 860–877
  6. Late payment and damages. CFE paid the price on 11 September 2019 instead of 3 September 2019 without justification and owes US$ 227,760 in financial expenses. The contractual financial-expense rate works as an agreed penalty under Article 1840 of the Federal Civil Code. Further damages are therefore excluded, and wilful misconduct (dolo) was not proven. Financial expenses on sums the Tribunal itself determined run only after the payment period following the award. ¶¶ 912–949, 994–1000
  7. No jurisdiction over the counterclaim. The Energy Purchase Contract was signed by Dunor and CFE Generación IV, a subsidiary with its own legal personality, and CFE is not a party to it. The arbitration agreement in Clause 30.3 binds only CFE and Dunor. ¶¶ 1051–1083
  8. Costs. Each party bears its own legal costs. The net arbitration costs of GBP 274,952.19 are shared 50/50 under Article 28.2 of the LCIA Rules. ¶¶ 1086–1093

Procedural history

  1. 25 August 2020Dunor files its Request for Arbitration and appoints Roberto Hernández García.
  2. 22 September 2020CFE files its Response and appoints Guillermo Enrique Estrada Adán.
  3. 19 October 2020The LCIA informs Juan Pablo Cárdenas that the parties have appointed him President. Procedural Order No. 1 follows on 23 November 2020.
  4. 5 February 2021Dunor files its Complaint Memorial. CFE files its Counter-Memorial and Counterclaim on 20 May 2021.
  5. 10–14 January 2022Virtual hearing.
  6. 12 May 2022The parties settle the claims on minor deficiencies and on reduction of the performance guarantee, and exclude them from the award.
  7. 26 September 2022Final Award: CFE is ordered to pay US$ 20,764,356.62, and the Tribunal declines jurisdiction over the counterclaim.
  8. 15 December 2022The published copy of the award bears the stamp of a court filing as an exhibit in Case 1:22-cv-10584. The documents do not show the nature or outcome of that proceeding.

Tribunal, counsel and experts

Decided by
For the claimant
B. Cremades & Asociados · Daniel Acosta Toledo
For the respondent
CFE Attorney General's Office
Experts
Ignacio Cortés Castán (claimant) · Luis Alfonso Moreno Pacheco (claimant) · Víctor Joaquín Larrazabal Gómez (claimant) · Lorenzo José Cámara Anzures (respondent) · Roberto Edgar Gallardo López (respondent)

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Keywords

Summary generated with AI from the published documents — refer to the award for the authoritative text.

Case ID
LCIA Case No. 204865
Documents
Section