Interconexión Eléctrica S.A. E.S.P. v. Republic of Chile

At a glance

Parties

Interconexión Eléctrica S.A. E.S.P. (ISA, Colombia), on its own behalf and on behalf of Interchile S.A. and ISA Inversiones Chile S.p.A., v. Republic of Chile

Case no.

ICSID Case No. ARB/21/27

Forum and rules

ICSID Convention arbitration; ICSID Arbitration Rules in force from 10 April 2006; seat Washington D.C.; language Spanish

Treaty

Chile–Colombia Free Trade Agreement of 27 November 2006, Chapter 9 (Investment)

Tribunal

Carmen Núñez-Lagos (President), Philippe Pinsolle, Luis González García (partial dissent)

Sector

Electricity transmission; high-voltage lines (Cardones-Polpaico project)

Outcome

Jurisdiction upheld; by majority, Chile breached the minimum standard of treatment (Article 9.4) only by refusing to treat the vandalism at La Dormida and the sabotage of Tower No. 786 as force majeure; all other claims dismissed unanimously (award dispatched 13 December 2024).

Amount

Claimed: USD 223,474,475 as of 31 January 2023, excluding interest. Awarded: USD 16,094,120.00 to Interchile S.A., with simple interest at TIP + 2% from 18 February 2020, free of Chilean taxes. Costs: ISA bears its own costs and pays 80% of Chile's defence costs (USD 2,267,471.97 and CLP 92,977,640.80) and 80% of the arbitration costs. This last sum was rectified on 11 March 2025 from USD 912,277.6 to USD 342,104.1.

The dispute

ISA won Chile's international tender for the Cardones-Polpaico project: three 2x500 kV transmission lines (Tramos 1–3) to be built and put into operation within 60 months of the award. The award was made by Decree No. 109 of 6 November 2012, and the rights were later transferred to its subsidiary Interchile. Environmental permitting, forestry permits (PAS Mixtos), easements, court actions, municipal work stoppages and violent opposition at La Dormida delayed Tramos 2 and 3. Interchile asked the Ministry of Energy to extend the committed in-service date on grounds of force majeure. The Ministry granted only part of the extensions, by Supreme Decree No. 19 of 27 February 2019 (Tramo 2) and Exempt Resolution No. 1 of 7 February 2020 (Tramo 3), then imposed delay fines and enforced performance guarantees. ISA claimed breaches of fair and equitable treatment and full protection and security under Article 9.4. Chile argued that the tender rules placed all risks on ISA and that the standard protects only against manifestly arbitrary conduct. It also objected that claims known before 12 January 2018 were time-barred under the 39-month limit of Article 9.18.1, and that ISA had not complied with the waiver required by Article 9.18.2(b).

Key holdings

1. Chile's objections to jurisdiction, based on the limitation period and the waiver requirement, are denied. Award ¶ 1528(a)
2. By majority, Exempt Resolution No. 1 breached Article 9.4. In refusing to treat the vandalism at La Dormida and the sabotage of Tower No. 786 as force majeure, the Ministry gave reasons that were manifestly deficient, unreasonable and contradictory, which amounts to arbitrary treatment. All other alleged breaches are rejected, including those based on the conduct of the environmental agency (SEA), the forestry agency (CONAF), the municipalities, the courts and the police (Carabineros). Award ¶¶ 1287–1288, 1445
3. Full protection and security under the treaty is a due-diligence obligation at the customary-law level and is breached only by a serious lack of diligence. Regional authorities and Carabineros acted with reasonable diligence at La Dormida: they coordinated security, enforced the protection orders and detained offenders. The Tribunal also found it reasonable that police did not use force in a social conflict. Award ¶¶ 1275, 1278–1286
4. Only the delay fines and guarantees are caused by the breach. Had force majeure been recognised, Interchile would have obtained an extension and relief from fines. It would not have obtained prolongation costs, the payments to EDEMSA and Siemens, or lost profits, so those heads of damage are rejected. Award ¶¶ 1449–1453
5. The La Dormida events were the sole critical cause of delay from 20 January 2019 to 21 April 2019 (92 days); the Tower 786 sabotage added 4 days. Reducing the 394 fined days to 298 at USD 190,400 per day gives USD 56,739,200. Chile must therefore refund USD 16,094,120.00 of the USD 72,833,320.00 fine paid on 18 February 2020. Guarantee No. 29117 (USD 5,606,370) is not refunded, because any remaining delay triggered it in full. Award ¶¶ 1463–1471
6. The compensation and interest are payable to Interchile free of Chilean taxes. Interest is simple, at TIP + 2% (LIBOR has ceased to exist), with the same rate before and after the award. Compound interest is refused as not specifically justified. Award ¶¶ 1472–1479, 1506–1512
7. Costs: ISA won on jurisdiction but prevailed only on a minor part of the merits. It bears its own costs and 80% of Chile's costs and of the arbitration costs; no interest runs on costs. Luis González García dissented on the arbitrariness finding and therefore on damages: in his view the Ministry's foreseeability and default reasoning was a tenable reading of Chilean law, not arbitrary. Award ¶¶ 1522–1527; Partial Dissent ¶¶ 1–6

Procedural history

1. 12 April 2021Request for Arbitration filed; ICSID registered it on 17 May 2021.
2. 29 November 2021Tribunal constituted. The President was appointed by the Chairman of the ICSID Administrative Council on 22 November 2021.
3. 4 February 2022Procedural Order No. 1: procedural rules, seat in Washington D.C., Spanish as the language, and the timetable.
4. 30 October 2022Procedural Order No. 2: ISA's request to strike Chile's general comments from its Redfern schedule is rejected.
5. 9 November 2022Procedural Order No. 3: decisions on the parties' document production requests.
6. 17 December 2022Procedural Order No. 4: Chile's deliberative privilege is rejected for a decision already taken, but legal privilege is upheld for state lawyers' advice; ISA is ordered to produce the Siemens claim letters.
7. 11 April 2023Procedural Order No. 5: Chile's requests for further orders on ISA's document production are rejected.
8. 19–24 June 2023Hearing at ICSID in Washington D.C., organised under Procedural Order No. 6 of 29 May 2023.
9. 13 December 2024Award: ISA recovers USD 16,094,120.00 and bears 80% of costs; Luis González García files a partial dissent.
10. 11 March 2025Decision on Rectification: at ISA's request, not opposed by Chile, the arbitration-costs reimbursement is corrected to USD 342,104.1 to account for advances already paid.

Tribunal, counsel and experts

Decided by

• Carmen Núñez-Lagos President — appointed by the institution
• Philippe Pinsolle Co-arbitrator — appointed by the claimant
• Luis González García Co-arbitrator — appointed by the respondent (dissented in part on liability and damages)

For the claimant

Wordstone Dispute Resolution AARPI · Dechert LLP · Gutiérrez, Waugh, Jimeno & Asenjo Abogados · Interchile S.A. / ISA (in-house)

For the respondent

Three Crowns LLP · Ministerio de Relaciones Exteriores de Chile · Ministerio de Energía de Chile, División Jurídica · Ministerio de Hacienda de Chile

Experts

Scott Gray (claimant) · Israel Almodóvar (claimant) · Luis Cordero Vega (claimant) · María Josefina Court Spikin (claimant) · Blanca Perea (respondent) · Brandon Chaney (respondent)

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Keywords

• Chile–Colombia FTA
• minimum standard of treatment
• fair and equitable treatment
• arbitrariness
• full protection and security
• force majeure
• electricity transmission
• Cardones-Polpaico
• La Dormida
• delay penalties
• performance guarantees
• limitation period
• composite act
• delay analysis
• tax-free award
• simple interest
• deliberative privilege
• rectification

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