HOUSTON--(BUSINESS WIRE)--A triangular business arrangement involving an equipment supplier, service provider and Petróleos Mexicanos (Pemex) has stumbled into the federal civil courts in a dispute over the disbursement of funds.
The business arrangement for the gas compression platform that was put into service for Pemex in August of 2016 involved a Mexico City-based financial institution, CIBanco, a consortium of Pemex service contractors, and two parties based in Singapore, Coastal Energy Solutions Pte, a fabricator of vessels and platforms, and its lender, United Overseas Bank (UOB).
A dispute over the disbursement of funds led to a complaint filed in District 7 on December 16, 2016 (File #666/2016) by Mexico City-based TRESE (its acronym), a member of the consortium, and its creditors, among whom are ERKAL (Turkey), ZPMC (China), Oceaneering (USA) and BUMI (Malaysia).
The complaint has resulted in a series of court cases that illustrate how the administration of justice operates to address alleged corruption by private parties in relation to funds paid by government agencies for invoiced services.
In a complex arrangement by which a gas compression platform would be built, rented to and operated by a Mexican consortium, CIBanco was named as the fiduciary agent to administer the funds from Pemex for invoices to be submitted by the consortium. Funds would be subsequently disbursed to the platform fabricator and the members of the consortium on an agreed-upon schedule. This arrangement did not work out as planned.
In response to the cited complaint, a federal district court in civil matters in Mexico City ruled that CIBanco had acted improperly by withholding funds to which the consortium was entitled. On October 30, 2017, this court rejected the defense by CIBanco that it had acted in good faith by following the request of Coastal to withhold the disbursement of upwards of US$50 million on account of debts owed to it by the consortium.
Two other federal courts (Districts 5 and 14), however, ruled differently, allowing CIBanco to continue sending funds to Coastal during the period 2017-19. The matter was referred to the Fourth Federal Appellate Tribunal, which, in a ruling on June 26, 2019 (file #170/2019), affirmed the findings of District 7, characterizing CIBanco’s actions as illegal. (On August 15, 2019, District 7 issued notice (in the same file 666/2016) that, failing compliance with its order to make an initial payment, its chairman would be subject to arrest.)
“The case shows how such triangular arrangements can go awry. It further shows how inter-jurisdictional disagreements in Mexico and the possibility of claims in jurisdictions outside Mexico can delay the resolution of disputes and disrupt commercial relationships among Pemex, its contractors and subcontractors,” observes Houston-based George Baker, an oil industry newsletter publisher of Mexico Energy Intelligence™ (MEI) and longtime Pemex watcher. “It is unusual in that the alleged financial misconduct in the execution of a Pemex contract does not involve present or former Pemex officials.”