Colombia v. Cauca Co.

Background

The Republic of Colombia and a Virginia-incorporated Cauca Company disputed the construction and concession of a railway from Buenaventura toward the interior. The original concession-holder transferred rights to the Cauca Company and a separate construction company did much of the work. When the road was not finished, Colombia claimed a forfeiture and the parties agreed to submit the matter to a three-member commission to decide a fair payment to the company in exchange for surrendering the railroad.

Reasoning

A key issue was whether the commission had authority to include certain items in its award and whether a commissioner’s late resignation invalidated the award. The Court held a majority decision by the commission was valid even after Colombia’s commissioner resigned. On the meaning of the Spanish phrase obras y trabajos (works and labors), the Court took a middle course: the government must pay expenditures that directly contributed to the physical construction and to rolling stock, including some salaries, travel, and New York office expenses, but not remote items like the cash paid to buy the concession or payments for securing the submission. The Court reduced parts of the award and ordered the lower court to confirm the award only up to the allowed sum of $193,204.02.

Real world impact

The ruling narrows what the company can recover to costs directly tied to laying tracks and rolling stock, denies payment for the purchase of the concession and certain negotiated fees, and confirms that an arbitration panel’s majority can bind the parties even when a commissioner resigns near the end. The case returns to the lower court to enter the adjusted award.