San José, Costa Rica, since 1956

Arbitration Fails to Settle Airport Dispute

OPTIMISTIC that the next 60 dayswill be the final stretch in what hasbecome nearly a two-year battle involvingJuan Santamaría International Airport,representatives of Alterra Partnersannounced this week they believe renovationof the airport – halted in March 2003– will restart early next year.The airport operator’s optimism comesdespite days earlier losing a multi-million-dollararbitration suit against the CostaRican government regarding its contract tomanage and renovate the country’s principleairport.Through the lawsuit, Alterra sought anindemnification of $79.1 million for lossesand damages. The arbitration court deniedthe indemnification, determining the disputeis not a matter of arbitration, rather amatter to be decided in an administrativeappeals court.ALTERRA General Manager AlRomeu said Monday the company willreturn to negotiating directly with the government,particularly with newTransportation and Public Works MinisterRandall Quirós and new Finance MinisterFederico Carrillo, to settle the dispute.Quirós confirmed Tuesday to the dailyLa Nación that the government hopes tosettle the dispute within two months,allowing for the continued financing of theairport’s modernization project.Romeu reiterated what both Alterraand government officials have said in thepast: the contract is a pioneering model inwhat could become a broader strategyallowing private firms to supply the country’sgrowing infrastructure needs.“There is a learning curve,” he said.“Meanwhile, it is very important forAlterra to continue managing the airport,as the high season is beginning.”ONCE a solution is found, he saidbanks will unfreeze $30 million of financingof the airport’s $120 million renovationproject, allowing the project to continue.It will take at least one year to completerenovation of the terminal and boardinggates – only five of nine are finished –and equip the runway with emergencylighting (TT, Aug. 20).In 2001, Alterra, whose major partneris U.S. construction giant Bechtel, wasawarded a 20-year contract with the governmentto operate and renovate the country’smain airport, located northwest ofSan José near Alajuela.Alterra claims a 2001 agreementallows it to collect $18.6 million in developmentand financing expenses. Theyused airport user fees to recuperate thesecosts.IN March 2003, a scathing report by theComptroller General’s Office raised questionsabout many of these fees, particularlythose for developing and financing expenses(TT, March 28, 2003). The Comptroller’sOffice maintained the original contract bidallowed for only $3.4 million and called fora modification of airport fees.Because of the dispute, foreign banksthat have provided financing for the renovationsuspended the last $30 million ofAlterra’s $120 million loan (TT, June 27,2003).Alterra halted construction, citing thelack of financing. Representatives from 10banks that have provided previous financingwere in Costa Rica last week to evaluatethe status of the situation.The company began the arbitrationprocess July 30 against the Commission ofthe Civil Aviation Authority (CETAC) forits supposed incompliance in the contract.Alterra was required by the contract totake such disputes to arbitration, accordingto Romeu.“Like we have always done, we followedthe contract,” he said.THE arbitration court’s ruling Nov. 12said arbitration is limited to issuesbetween the involved parties. Because theComptroller’s Office is not one the partiesnamed in the suit, the court could not ruleon the comptroller’s report or the demandfor reduced fees.The court’s findings did support whatAlterra managers consider certain facts inthe case, according to Alterra ExecutiveDirector Mónica Nágel. These confirmationshave given the company its positiveoutlook about the future of the contract asnegotiations continue, Alterra representativessaid in a press conference this week.The arbitration panel’s report saysAlterra has complied with the contract,particularly in its proposed fee structurefor 2002-2003. It also states that in thecontract there is no fixed price for developmentand financing expenses.Three arbitrators heard the case –Eduardo Sancho, a former justice of theConstitutional Chamber of the SupremeCourt (Sala IV) and selected by Alterra,arbitration specialist Sergio Artavia,selected by the CETAC, and RodrigoMontenegro, former president and justiceof the Supreme Court’s Civil andAdministrative Law Branch (Sala I) whopresided over the hearing and was agreedupon by both parties.“NOW the government has a base touse when it enters negotiations, saidNágel, a former Minister of Justice.It is the state’s best interest to resolvethe situation within the time limit established,“or risk having many more problems,”she said.Finance Minister Carrillo saidTuesday, after a lunch with Nágel, Romeu,President Abel Pacheco and Quirós, thatthe idea is to respect what the comptrollerhas said, as well as the needs of Alterra.

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