The Canal loses a million-dollar contract in Santo Domingo for “injuring” state interests | Madrid

Canal de Isabel II control facility.
Canal de Isabel II control facility.M. ANGEL GOMEZ / CANAL DE ISABEL II (Europa Press)

Isabel Díaz Ayuso decided on Wednesday that AAA Dominicana, a company controlled by Canal de Isabel II in the Dominican Republic, can submit to an arbitration process to obtain compensation for “the early termination” of the public contract it had in the country for the water management of Santo Domingo. The American authorities justify the end of the agreement in its “damage to the State”. For the Spanish company, which is still negotiating a friendly solution, it is a broken one: although the Channel does not reveal the current amount of the agreement, its first addendum, from 2001, included the figure of 23 million dollars, according to documentation accessed by EL COUNTRY. One more setback in the American adventure of the Madrid public company, whose Colombian government has just expropriated another subsidiary in application of an anti-drug law.

In August 2020, Luis Abinader becomes president of the Dominican Republic. And something changes in the country. “It has been revealed, by the incoming executive, his intention to internalize certain services, among which is the one provided by AAA Dominicana,” reads a Channel report from April 2021.

With the contract theoretically in force until the end of February 2022, it is time to end a stage of almost a quarter of a century described in a literary spirit in a report by the Santo Domingo Aqueduct and Sewer Corporation (CAASD), the Dominican public company that has an agreement with the Spanish investee.

“Since 1996, our country entered into an amazing process of privatization, what many called the neoliberal current, privatizing basic public services, such as electricity, and later, the drinking water service,” it reads.

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And to make the decision, the American authorities have a strong argument: a September 2020 opinion from the Ministry of Finance of the Dominican Republic in which it is concluded that there have been “irregularities” in the last three renewals of the contract, since no the principle of competition was respected, which caused damage to the general interest.

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It is the seed of international business conflict. The CAASD management decides to terminate the contract, and in April 2021 justifies the operation with two arguments. First: that a technical-legal analysis highlights “the harmfulness of the contract for the Dominican State.” And second: that in the opinion of the Administration, there is fraudulent invoicing by AAA Dominicana, according to what the director of the CAASD, Felipe Suberví, affirms in public.

Thus, while hundreds of employees remain in limbo for weeks, claiming their salaries before the offices and lamenting their sorrows in the press, the clash of interests is also served: the Spanish participation company is going to be left without 87% of its income, according to the last audit made public by Canal de Isabel II, corresponding to 2020, and which details that the Dominican government, through the CAASD, had not made the planned payments since August of that year. AAA Dominicana’s only other client, Coraapplata, has since announced that he also wants to terminate his contract.

All this information reaches the Government Council of Díaz Ayuso on Wednesday, February 2. There it is stated that negotiations are underway to achieve compensation in a friendly manner. But it is also argued in favor of preparing for any contingency, including having to submit to arbitration by the Chamber of Commerce and Production of Santo Domingo. An option that is given the green light.

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“The services (of the contract) have been performed satisfactorily over the last 20 years,” says a spokesperson for Canal de Isabel II. “In September 2020, a general review of the contracts (that the Dominican public companies) have signed with different entities began, and in early 2021 we were asked to terminate them in advance,” he adds. “We are in a dialogue process with CAASD, but in the event that we do not reach an agreement, our contract establishes that we must submit to an arbitration procedure.”

The account of the company’s auditors, in an April 2021 report, is even more detailed: “The Group’s Management has been working together with the new CAASD Management on an agreement that satisfies the claims of both parties, which, in relation to AAA Dominicana, it is summarized in the recovery of all the concepts owed for the services provided until the moment of cancellation of the service, the transfer of the assets associated with the concession and the receipt by the CAASD of an amount as compensation , all the amounts have already been reconciled and agreed by both parties”.

The Canal controls AAA Dominicana through its parent company Inassa, which has been judicially investigated in the Lezo case, the umbrella company under which it organizes all its investments in America. Among them is, for example, that of the AAA in Colombia, which the local government has just expropriated in application of a law designed against paramilitaries and drug traffickers. The local Prosecutor’s Office considers that Inassa charged Triple A more than 60 million for technical advice that did not occur.

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Now the problems also reach Santo Domingo, where the Canal is preparing for the possibility of resorting to an arbitration process that is always complex. Twenty years later, the American adventure that was going to cover the public company with gold is a source of legal and business problems.

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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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