Background & Context — in simple words

What was planned? Paraguay wanted a fast bus system (“Metrobus”) in the capital area. In 2016, the Ministry of Public Works (MOPC) hired Mota-Engil (the Paraguay branch of a large contractor) to build parts of the bus corridor.

What went wrong? The contractor could not reach key work areas. Land had not been fully expropriated and some city permits were missing. Without land access and permits, work slowed and then stopped.

How did we reach arbitration? After two 2019 Memoranda of Understanding (MoUs) failed to fix the problems, MOPC terminated the contract in February 2020. Mota-Engil had already filed for arbitration in December 2019 under the contract’s clause. The Permanent Court of Arbitration (PCA) acted as registry; the case followed the UNCITRAL 2013 Rules, with the legal “seat” in Asunción (so Paraguayan law mattered a lot).

Core Issues & Outcomes — explained simply

• Access to the site & expropriation (Employer risk): The State (through MOPC) had the duty to progressively give possession of the areas so the contractor could work. If land titles or “domain strips” were not ready, the State was better placed to fix that. Example: If a 500-m stretch still needs expropriation, the Employer must sort it or adjust the sequence so work can continue elsewhere.
• Permits for permanent works (Employer duty): The tribunal read the contract as making MOPC responsible for the permits for the permanent works. Some permits were blocked because the design clashed with municipal sewer standards. That still pointed back to MOPC (project owner/designer responsibility). Example: If a drainage design conflicts with the city system, the Employer must update design and obtain the permit.
• Multi-tier clause & the 2nd MoU (Admissibility): Although the contract had steps before arbitration (like forming a dispute board), the parties later agreed in a 2019 MoU that disputes could go straight to arbitration. The tribunal applied Paraguayan law and the “favor contractus” principle (keep agreements effective) to accept this. Plain take: If both sides signed an MoU that changes the path, the tribunal can honor that change.
• Termination (failure to renew the Performance Security): MOPC’s termination was valid in principle because renewing the bond/guarantee on time is a fundamental contractor duty under FIDIC-style wording. But the tribunal still controlled how the Employer could use the guarantees while the arbitration was ongoing (see next point).
• Provisional measures (don’t call the bonds): To avoid making the dispute worse, the tribunal ordered MOPC not to draw the performance or advance-payment guarantees, and told the contractor to post arbitration guarantees instead. Because the State did not fully comply, the tribunal imposed a cost sanction (extra share of legal costs against the State).

Mini-Checklist (FIDIC clauses with tiny examples)

Damages & Interest — what the award basically did

• Pay for work done: Sums for certified works and release of retention where due.
• Guarantee/bond adjustments: Refunds where the performance bond was drawn beyond what the tribunal allowed during the case.
• Direct costs (daño emergente): Certain costs linked to the delays split across time windows; the State bore a meaningful portion because it controlled access/permits.
• No lost profits: Lost profits were excluded by the contract’s liability limits (typical FIDIC-style cap/exclusion).
• Interest: Applied by currency using reference rates plus a spread (so USD/EUR amounts did not all use the same rate).

Practical tip: Keep a live Security & Guarantees Register (Performance, Advance, Retention) with reminders. If provisional measures are issued, swap to “arbitration guarantees” promptly and record the timelines.

Learn More (internal links)

Watch (from our playlist)

1) Site Access & Expropriation — who had to open the work fronts?

In simple terms: The contractor said, “We could not work because the State did not hand over all areas on time.” The State replied, “The tender warned about land problems; you accepted the risk.”

• What mattered Whether the Employer (MOPC) had the duty to progressively give possession of each stretch, and to finish expropriations/rights‑of‑way so the crews could enter.
• Practical example If 1 km is ready and 0.5 km is pending expropriation, the Employer should sequence access so work continues on the available 1 km while it fixes the remaining 0.5 km.
• Risk pointer If the tender said “data may be outdated; more expropriation may be needed,” the tribunal had to decide whether that warning moved the site access risk to the contractor or still left it with the Employer.

2) Permits & Design — who fixes clashes with city utilities?

In simple terms: Some municipalities refused permits because the project design clashed with existing drainage/sewer rules. The question was: Who must solve such clashes and obtain the permits?

• What mattered If MOPC controlled the reference design and was responsible for permanent‑works permits, then permit refusals tied to design conflicts tended to be an Employer problem to solve.
• Practical example If a bus‑lane drainage detail doesn’t fit the city’s main sewer, the Employer updates the design or coordinates with the utility so the permit can be issued.

3) Contractual Risk Allocation — what risks did each side sign up for?

In simple terms: The tribunal read the contract and tender together to see who carried which risks (ground conditions, expropriation delays, permit refusals).

• Paraguay’s view The bidding documents warned about old land data and extra expropriations; therefore, the contractor accepted the risk of barriers to access.
• Mota‑Engil’s view Core responsibilities (site possession and permits) stayed with the Employer as project owner; warnings did not transfer those core duties.
• Takeaway Clear drafting about who handles access and permits avoids disputes. If warnings exist, tie them to specific price/time mechanisms (e.g., EOT or price adjustment).

4) Multi‑Tier Dispute Clause — did the parties waive the “steps”?

In simple terms: The contract had steps before arbitration (e.g., a board or amicable phase). The State said the contractor skipped steps; the contractor said later agreements (MoUs) let them go straight to arbitration.

• What mattered If the 2019 agreements meant “go direct to arbitration,” the tribunal could treat the pre‑steps as waived. Many tribunals apply good‑faith and “favor contractus” — keep party agreements effective.
• Tip If you deviate from the multi‑tier ladder, record that in a signed MoU or addendum so admissibility fights don’t derail the case.

5) Termination & Bonds — renewal duties and interim protection

In simple terms: MOPC terminated saying the contractor failed to renew the performance and advance‑payment guarantees. The contractor said the project was stalled by the State’s own breaches. During the case, the tribunal ordered the State not to cash the bonds and to use special “arbitration guarantees” instead.

• What mattered Under FIDIC‑style contracts, timely bond renewal is a fundamental contractor duty. But tribunals can use interim measures to stop unfair cashing while the dispute is decided.
• Non‑compliance If a party ignores provisional orders (e.g., drawing on bonds anyway), tribunals can impose cost/other sanctions.
• Site tip Keep a live Guarantees Register (Performance, Advance, Retention) with renewal alarms and replacement instruments ready.

Mota‑Engil’s Claims (in simple words)

Paraguay (MOPC)’s Defence (in simple words)