Metro. Mun.ity of Lima v. Rutas De Lima S.A.C.

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METROPOLITAN MUNICIPALITY OF LIMA, Petitioner, v. RUTAS DE LIMA S.A.C., Respondent.

METROPOLITAN MUNICIPALITY OF LIMA, Petitioner, v. RUTAS DE LIMA S.A.C., Respondent.

Nos. 1:20-cv-02155 (ACR), 1:23-cv-00680 (ACR)

United States District Court, District of Columbia

March 12, 2024

MEMORANDUM OPINION

ANA C. REYES UNITED STATES DISTRICT JUDGE

In January 2013, the Metropolitan Municipality of Lima, Peru signed a Concession Contract for Rutas de Lima S.A.C to build, improve, and maintain urban highways. To pay for this infrastructure, Lima agreed that Rutas would receive revenues from existing and new toll booths. Rutas performed its obligations, and in late 2016 it opened the New Chillon Toll Unit (NCTU) in a major thoroughfare. What happened next caught Lima's officials off guard. Residents vehemently protested the new costs; some even rioted. Public officials quickly truckled to this political backlash. Lima shuttered the NCTU and later nixed contractual rate increases at existing toll booths. And it refused to compensate Rutas for its costs or lost revenues.

The litigation equivalent of Groundhog Day^[1]ensued. Rutas initiated an international arbitration claiming Lima had breached the Concession Contract. Lima responded that Rutas through its parent company, had bribed officials to obtain the Contract. The tribunal heard and rejected this defense, held Lima in breach, and awarded damages. Undeterred, Lima doubled down. It barred Rutas from collecting tolls at the NCTU and implementing an agreed-upon rate increase at existing toll booths. Rutas brought a second arbitration, also related to the Contract, and Lima again argued corruption. A second tribunal also heard and rejected this defense, also held Lima in breach, and also awarded damages. With interest and continuing damages accruing daily, the two arbitration awards now total more than $196 million.

Undeterred, Lima tripled down. It threatened to terminate the Concession Contract altogether. Rutas brought yet another arbitration. And yet another tribunal ruled against Lima, this time issuing an interim decision enjoining Lima from terminating the Contract. Lima responded by challenging the tribunal's three arbitrators on bias grounds before the Permanent Court of Arbitration (PCA). That gambit failed. Lima also filed a criminal complaint against all three arbitrators. The charge? That each arbitrator committed corrupt acts by invoicing their standard fees.^[2]Lima's appointed arbitrator resigned as a result, and Lima appointed a replacement arbitrator. Lima then challenged its replacement arbitrator for bias,^[3]and he resigned. As of December 2023, the criminal investigation into the original three arbitrators was ongoing.

Lima petitions to vacate the first two awards under the Federal Arbitration Act (FAA), 9 U.S.C. § 10(a)(1), (3). As to the First Award, Lima primarily argues that because Rutas had bribed officials, Rutas's denial of bribery before the tribunal was fraudulent, and the Court should therefore vacate the tribunal's ruling that Rutas had not bribed officials. As to the Second Award, Lima argues that the tribunal committed misconduct in admitting some of-but not the annexes to-a 3,876-page prosecutorial indictment it introduced well after the close of evidence. At bottom, Lima asks the Court to chuck out two arbitral awards that Rutas won fair and square.

The Court declines Lima's improvident invitation. It will not upend well-settled law by rehearing a claim two tribunals have independently rejected. It will not hold that Rutas's lawyers committed fraud by defending their client. And it will not second-guess a well-founded procedural ruling. Instead, the Court DENIES Lima's petitions to vacate the First and Second Awards and GRANTS Rutas's cross-motions to confirm them.

I. BACKGROUND

A. Factual Background

1. Bidding on the Concession Contract

In April 2010, two Brazilian subsidiaries of Odebrecht S.A., a global construction conglomerate, created the Lmeas Viales de Lima Consortium (the Consortium) in Lima, Peru.

Second Award ¶ 81.^[4] The Consortium submitted a proposal to Lima, called the Vias Nuevas de Lima Private-Sector Initiative, for the design, construction, improvement, and operation of new and existing roads in Lima. Id. ¶ 82. The Consortium then engaged with Lima to revise its proposal, ultimately producing a fifth and final version (the Proposal). Id. ¶¶ 83-90, 391. At Lima's request, the fifth version was sent to a law firm, which, on April 3, 2012, “concluded that the [Proposal] satisfied [Lima's] legal requirements.” Id. ¶¶ 90, 365, 391.

In May 2012, Lima issued its Declaration of Interest regarding the Proposal and invited third parties to submit proposals for the same, or an alternative, road construction and improvement project. Id. ¶¶ 92-93. Lima took numerous steps to attract bidders, including creating and publicizing virtual and physical data rooms and promoting the project at various events. Id. ¶ 94. No one bid. Id. ¶ 95. On September 18, 2012, Lima awarded the Vias Nuevas de Lima project to the Consortium. Id. ¶ 96. On January 9, 2013, the Consortium, at this point known as Rutas de Lima S.A.C.,^[5]and Lima signed the Concession Contract, which established a rate system for the roads. Id. ¶ 98.

In June 2016, a Toronto-based investment fund manager acquired 57 percent of Rutas's shares from Odebrecht. Second Award ¶ 343; Lima II, Dkt. 41-4 (Interim Measures Decision) ¶ 39. Odebrecht, as the Strategic Partner of the Concession Contract, retained twenty-five percent of Rutas's shares. Lima II, Dkt. 41-4 ¶ 40. Even though Lima accuses Odebrecht of corruption, Lima has repeatedly refused to allow Rutas to replace Odebrecht as its Strategic Partner. Id. ¶¶ 40-43.

2. Mayor Villaran's Anti-Recall Campaign

Susana Villaran was Lima's Mayor while the parties negotiated and signed the Concession Contract. First Award ¶¶ 418, 420-21. On April 4, 2012, the day after a law firm, at Lima's request, had reviewed the Consortium's fifth and final Proposal, “the Citizen Initiative Committee submitted 406,000 signatures to set in motion the recall process against [Mayor Villaran].” Second Award ¶ 391. On October 26, 2012, after Lima had awarded the Concession Contract to Rutas (on September 18, 2012), the “National Elections Office submitted the request for the recall of [Mayor Villaran] to the National Elections Tribunal.” Id. ¶ 373. Five days later, on October 31, 2012, the Elections Tribunal “called for a referendum” on her recall on March 17, 2023, and Mayor Villaran ran an Anti-Recall Campaign. Id. ¶¶ 374, 591. Mayor Villaran survived the recall, but she then lost her 2014 re-election campaign. Id. ¶¶ 326-27 (referencing recall and re-election campaigns).

3. Terms of the Concession Contract

Under the thirty-year Concession Contract, Rutas agreed to finance construction, improvement, and maintenance projects for sections of highway known as Panamericana Norte, Panamericana Sur, and Ramiro Priale. Lima II, Dkt. 26-3 (Contract) ¶¶ 1.13, 2.2, 7.1; First Award ¶ 95. Rutas was entitled to collect toll revenue to recover its investment, operation, and maintenance costs. Contract ¶ 11.1. The Contract further required Lima, at its own expense, to perform certain “routine regular maintenance activities,” known as “Prior Activities,” to ensure that Rutas could begin its construction on the relevant highway sections. Id. ¶ 1.13. That same provision provided that Rutas could instead perform the Prior Activities at Lima's expense. Id.; see also ¶ 5.33; First Award ¶ 98(xi)-(xii).

4. Bankability Addendum and Memoranda of Agreement

In February 2014, Lima and Rutas modified the Concession Contract in a document called the Bankability Addendum. Second Award ¶ 117. The Bankability Addendum provided that Rutas-not Lima-would perform some of the Prior Activities. Id. Rutas then undertook some of the Prior Activities, which included improving and maintaining certain sections of highway. Second Award ¶¶ 138-41, 153.

In December 2015, Lima and Rutas entered into a Memorandum of Agreement, under which Lima would pay Rutas for some of the Prior Activities by implementing toll rate increases. Id. ¶¶ 135-37. In June 2016, Lima and Rutas entered into another Memorandum of Agreement to increase the applicable toll rates. Id. ¶¶ 148-49.

5. Odebrecht Plea Agreement

In December 2016, Odebrecht S.A. entered into a plea agreement with the United States Department of Justice, and “Odebrecht's corrupt activities in Latin America and multiple countries around the world, including Peru, became public knowledge.” Second Award ¶ 176 & n.109; see also Lima II, Dkt. 1-2 (Plea Agreement). This led Peruvian officials to “launch[] multiple investigations into Odebrecht's corrupt activities in Peru.” Second Award ¶ 349. As part of the plea, Odebrecht agreed that between about 2005 and 2014, it “made and caused to be made approximately $29 million in corrupt payments to government officials in Peru in order to secure public works contracts,” and that it “realized benefits of more than $143 million as a result of these corrupt payments.” Plea Agreement, Statement of Facts ¶ 65. The agreement set out two examples of Odebrecht's corruption scheme in Peru, occurring in about 2005 and 2008 respectively. Id. ¶¶ 66-67. Neither example mentioned Rutas, the Concession Contract, or the Anti-Recall Campaign. Id.

6. Social Protests Following New Tolls

The Concession Contract required Lima to transfer existing toll booths and their proceeds to Rutas, which Lima did in February 2013. First Award ¶ 102. It also required Rutas to build and collect tolls at the NCTU, which it did in December 2016. Id. ¶¶ 100-01, 118; Second Award ¶¶ 151-52. But a few days later, in ...