Naturgy initiates UNCITRAL arbitration against political risk insurer

The Spanish energy group Naturgy (formerly Gas Natural Fenosa) has reportedly initiated UNCITRAL arbitration proceedings against an unidentified political risk insurer who refused to cover Naturgy’s losses deriving from a failed energy venture in Colombia.

In mid-October 2018, the Spanish media reported that Naturgy intended to claim USD 500 million for the alleged breach of a political risk insurance contract, following the insurer’s refusal to cover the loss of Naturgy’s investment in the Colombian entity Electricaribe. (Naturgy’s dispute with Colombia over the loss of its investment in Electricaribe has given rise to a parallel, still-pending UNCITRAL case, Gas Natural SDG S.A. and Gas Natural Fenosa Electricidad Colombia S.L. v. Colombia.)

The same source states that the political risk insurer alleges that the contractual conditions under which it would pay compensation are not met. According to another news report, Naturgy disagrees with this interpretation, since it believes that its losses were due to Colombia’s ineffective regulatory framework, and it has now formally initiated UNCITRAL arbitration proceedings against the political risk insurer.

As we’ve reported, Naturgy’s parallel UNCITRAL claim against Colombia (in the Gas Natural v. Colombia case) is based on a disagreement regarding the performance of Naturgy’s local subsidiary Electrificadora del Caribe S.A. E.S.P. (Electricaribe), which supplies electricity to 2.6 million customers along Colombia’s north coast. Colombia has blamed a series of blackouts on under-investment and decided to intervene in Electricaribe’s operations, while the investor has complained of widespread non-payment and argued that the regulatory framework allowed for insufficient revenue.

Reportedly, the investor has recently increased the amount claimed under the Colombia-Spain BIT, and is now asking for compensation in the amount of USD 1.6 billion. It appears that the arbitration is now administered by ICSID as Case No. UNCT/18/1. The Gas Natural v. Colombia tribunal is composed of Stephen L. Drymer (chair), Eric Schwartz (claimant’s nominee) and Alexis Mourre (respondent’s nominee). Gas Natural is represented by Three Crowns in London, while Colombia is represented by Sidley Austin in Washington D.C.