Global law firm White & Case LLP represented a consortium of investors from Canada, Brazil and the United States in the successful resolution of one of the most intractable infrastructure project restructurings in recent Latin American history.
The Quito International Airport Project in Ecuador involves the provision of world class airport services at the existing Mariscal Sucre International Airport and the financing, construction and future operation of the New Quito International Airport that will serve Quito, Ecuador. The financing for the approximately US$660 million project is sourced with equity, debt and airport tariffs.
In July 2009, with the construction of the new airport two-thirds complete, the Constitutional Court of Ecuador ruled that the private airport tariffs that are central to the Project's financing structure were State property, triggering defaults, suspension of the project's financing and paralysis of the new airport construction. Concurrently, Ecuador denounced the Convention on the Settlement of Investment Disputes Between States and National of Other States, which gave access to arbitration of investment claims against Ecuador before the International Centre for Settlement of Investment Disputes (ICSID).
After 18 months of intense negotiations, the parties successfully reached agreement on legal, commercial and financial terms for the Project. White & Case represented concessionaire Corporación Quiport, SA, and sponsors and investors, including Aecon Group Inc. (Canada), Andrade Gutierrez SA (Brazil), Airport Development Corporation (Canada) and HAS Development Corporation, an affiliate of the Houston Airport System (US).
The renegotiation featured several innovations:
(1) Negotiation Process - The renegotiation process entailed more than 25 rounds of negotiations involving counsel and/or principal parties in Quito, Ecuador, and Washington, DC, and other locations and involved diverse parties including the multinational investors, myriad Ecuadorian government officials and a lender group comprising the Inter-American Development Bank, Export Development Canada, the U.S. Export-Import Bank and the Overseas Private Investment Corporation.
(2) Legal & Contractual Framework - The parties agreed on an innovative strategic alliance to carry out the renegotiation, together with myriad ancillary concession, construction, financing, implementation and trust-related agreements.
Investment Protections - The investors issued dispute notices and commenced arbitration before ICSID pursuant to an investment stability agreement with Ecuador, then suspended the proceeding during ongoing renegotiations. The Ecuadorian government subsequently affirmed investment protections and access to ICSID and international arbitration as part of the renegotiation package.
(3) Economic Development Impact - Due to the successful renegotiation, construction of the new airport has resumed, bringing at least 2,500 jobs for contractors, subcontractors and skilled workers. The Project has a positive impact on Ecuador's local and national economy and holds important ramifications for foreign investment in Ecuador and bilateral relations between Ecuador and each of Canada, Brazil and the United States.
White & Case Partner Jonathan C. Hamilton, who led the legal negotiations for the investor consortium, commented: "The investors achieved the renegotiation of one of the most intractable and complex project disputes in recent Latin American history, through tireless efforts involving Ecuadorian officials and international lenders, while simultaneously affirming investment protections and access to international arbitration. Contractors and workers are remobilizing to achieve a 2012 opening date for this important new airport for Ecuador."
In August 2010, during a ceremony with Ecuadorian President Rafael Correa, the Mayor of Quito and a range of other high-level officials, the parties executed the strategic alliance agreement, an amendment to the concession contract and an affirmation of the investment protection agreement, which set forth the renegotiated terms of the concession for the Project.
The parties signed final documentation implementing the terms of the agreement in Washington, DC, and in Quito and Guayaquil, Ecuador, in January and February 2011 and correspondingly resolved the case before the ICSID, leading to a resumption of funding and construction of the Quito International Airport.
White & Case represented the investor group at the time of the original closing for the Project, which was named "2005 Latin American Airport Finance Deal of the Year" by Airfinance Journal and "2006 Latin American Transport Deal of the Year" by Project Finance magazine.
The White & Case team was led by partner Jonathan C. Hamilton in Washington, DC, together with Hank Amon, Sylvia Fung Chin and associate L. Jeannine Acevedo in New York; associates Mairée Uran-Bidegain, Francisco X. Jijón, Petr Polasek and Sara Sargeantson, and assistants Juan Carlos Olivares and Marcela Escobar in Washington, DC.
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