Odebrecht, Aval Lose Colombia Arbitration Case for Highway Works

(Bloomberg) -- A Colombian arbitration court on Tuesday awarded Odebrecht SA , the scandal-plagued Brazilian conglomerate, and its Colombian banking partner, Grupo Aval SA, a fraction of what they were seeking from the government for building half a highway halted amid corruption charges.

The companies’ government contract to build Ruta del Sol 2, Colombia’s biggest highway, was obtained through what Odebrecht has acknowledged was bribery. A special three-judge panel at the Center of Arbitration and Conciliation, CAC, declared the 2010 contract null and void, according to the 699-page ruling obtained by Bloomberg News.

The court ordered the National Infrastructure Agency, known as ANI, to pay a total of 211 billion pesos or $61 million to the partnership, known as Concesionaria Ruta del Sol II SAS. The panel will reconvene on August 16 to respond to any questions from the parties.

Nullifying the contract due to “illicit causes, due to corruption, it’s a very important decision,” said opposition Senator Jorge Enrique Robledo, one of the strongest advocates for investigating the highway deal. “Odebrecht and Aval were trying to avoid this conclusion. If this stays in place, it’s a defeat for corruption in Colombia,” he said via email.

Odebrecht and its partners were trying to recover hundreds of millions of dollars invested in the highway -- Semana magazine put the figure at 2.7 trillion Colombian pesos ($787 million). Prior to the ruling, ANI paid 1.4 trillion pesos to Bancolombia SA, Banco Davivienda SA, Itau CorpBanca Colombia SA, Banco de Bogota SA, Banco de Occidente SA, Banco Popular SA and Banco AV Villas SA, for providing financing to built the road.

The government said July 22 it was willing to pay an additional 1.2 trillion pesos to the seven banks as they were “third parties acting in good faith,” as long as they renounced any interest payments. The offer was rejected by the banks.

Colombia´s government formally terminated the contract in 2017 after Odebrecht admitted paying bribes. Late last month, the nation’s Transportation Superintendency also ordered the legal dissolution of the partnership that built the road.

Odebrecht partnered in early 2010 with Episol SAS, a unit of Corficolombiana, a subsidiary of Grupo Aval, to build a section of a 1,000-km (621-mile) road connecting the Bogota region with the Caribbean coast. Grupo Aval, Colombia’s biggest banking group is controlled by Luis Carlos Sarmiento Angulo. A family-held construction company called Solarte Group also took a minority stake in the partnership.

In late 2016, Odebrecht agreed to pay at least $3.5 billion in penalties to resolve charges with authorities in the U.S., Brazil and Switzerland for bribes to officials around the world in one of the largest foreign corruption cases in history. In Colombia, Odebrecht made more than $11 million in corrupt payments to secure public works contracts, according to the agreement with the U.S. Odebrecht “realized benefits of more than $50 million as a result of these corrupt payments,” the agreement says.

To contact the reporters on this story: Jose Enrique Arrioja in New York at jarrioja@bloomberg.net;Oscar Medina in Bogota at omedinacruz@bloomberg.net

To contact the editor responsible for this story: Ethan Bronner at ebronner@bloomberg.net

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