Ocensa Pipeline Group Litigation, Re

Preliminary

Large-scale civil engineering and infrastructure projects routinely give rise to public benefit and private detriment, whether they be in the Cotswolds or the Andes. This case involves the consequences of laying a pipeline in Colombia in the mid-1990s, which ran from the oil-fields of Cusiana and Cupiagua in the South to the sea at Coveñas in the North. Construction work commenced in about December 1995 and continued until August 1997 {J24/82T/1}. The pipeline is known as the Ocensa pipeline for reasons that will appear. It passed through regions characterised by difficult terrain, fragile soils, tropical rainfall, and a lawless lack of security; and in doing so it passed through many and varied private land-holdings. For all of these reasons it was a challenging undertaking.

The benefits of such a pipeline to the Colombian economy and public need hardly be stated. At the same time, the potential detriments to private landowners whose properties were affected by the creation of and works on a Right of Way [“the ROW”] that was seldom (if ever) less than 25 metres wide and in which the pipeline was laid are easy to imagine. In particular, it was well known at all material times that the stripping of the land, storage of quantities of soil, working with heavy machinery, and crossing of watercourses gave rise to a risk of erosion of materials from the ROW, especially if disturbed or newly reinstated soil was subject to heavy rainfall. To obviate that risk, temporary and permanent works were undertaken that were intended to minimise or prevent erosion.

There was nothing new in the recognition of the risks inherent in the laying of the Ocensa pipeline, though the protective techniques were subject to development with time. One of the features of the Ocensa project was that for much of its course it followed the path of another pipeline [“the ODC pipeline”] so that much of the work for the Ocensa pipeline took place on or adjacent to what had been the ROW for the ODC pipeline when it had been laid in about 1990-1992.

This litigation is brought by 109 claimants in respect of 73 farms, each of whom claims that the Ocensa pipeline caused damage for which he or she should be compensated. It is brought in England because the Defendant was at the relevant time an English subsidiary of BP and was involved in the Ocensa project. The substantive claims are subject to the Colombian law of torts and contract. The State of Colombia formally recognises the public benefit attaching to oil pipeline projects and has established a regulatory legal framework that reflects the tension between public benefit and private detriment to which I have already referred. Whether and to what extent that framework creates, limits or excludes private law rights is only one of the elements of Colombian law affecting the outcome of this litigation.

The existence of 74 claims led the parties and the Court initially to choose 10 and to treat them as “lead cases” in the hope that decisions of the Court on those 10 would lead to resolution of all or most of the others. This approach was proportionate, sensible and inevitable given that each claim is fact specific and, although financially significant for the individual claimants, the claims are not enormous in absolute terms. In the event, as the accumulated evidence for the lead cases expanded, the parties agreed that it was only feasible to try four cases in the period allotted by the Court for

Because I have been unable to make the judgment shorter, I should issue two health warnings for anyone tempted to read it. First, while the trial and its outcome are of intense interest to those directly involved, I doubt whether my attempts to determine how the Supreme Court of Colombia would apply Colombian law to the facts of these cases will interest or influence either English or Colombian lawyers who are not obliged to read them. Second, I think it unlikely that the detailed facts underlying the individual claims will be of general interest. Also, it should be understood that, although I have considered and taken into account the entirety of the closing submissions on both sides (including following every hyperlinked reference in those submissions) when preparing and writing the judgment I have not attempted to set out every argument or to refer to every piece of evidence in the judgment. To follow the traditional format of setting out both sides’ arguments and all of the evidence relied upon would probably have doubled the length of the judgment and the time taken to produce it. I have therefore attempted to synthesise the positions adopted and the main arguments advanced by the parties, without necessarily setting out everything on which the parties have relied, and have referred to evidence to the extent necessary for coherence. In particular, I have generally given the page reference for the evidence on which I have relied for my findings rather than setting out all relevant evidence either by reference or in full.

In briefest outline, I have concluded that all four of the Lead Claims that are the direct subject of this action fail. Very largely they fail on the facts; but I have in each case also considered the legal basis on which the Claims were brought and the application of relevant principles of Colombian Law to each claim. The purpose of this judgment is to decide the four Trial Lead Claims and to provide a basis for the resolution of the claims regarding the 69 farms that were not considered in detail at the trial. To that end I have, as requested, made extensive findings about Colomibian Law irrespective of their direct applicability to the four Trial Lead Cases. I have also considered the entire body of expert evidence in considerable detail, outlining what appear to an English Court to be the strengths and weaknesses of the expert evidence that was led and tested at trial. That has been made necessary partly in order to reach necessary findings in the Trial Lead Cases and partly so that the parties may appreciate their general position on the expert evidence when considering the merits of the cases that were not tried.

Index

The Legal Framework. 8. Section Index

With one exception, it is common ground that Colombian Law applies to all issues of liability, causation and heads of loss. The exception is that the Defendant contends that issues of extra-contractual liability arising out of acts and omissions occurring before 1 May 1996 are not actionable unless they satisfy the dual actionability principle set out in Boys v Chaplin [1971] AC 356. The Claimants submit that Colombian Law applies to issues of extra-contractual liability arising out of acts and omissions both before and after 1 May 1996, relying primarily upon the exception which is summarised in Clause 2 of Rule 203 in Dicey & Morris 12^th Edn in the following terms:

“(1)

As a general rule, an act done in a foreign country is a tort and actionable as such in England, only if it is both

a)

actionable as a tort according to English law, or in other words is an act which, if done in England, would be a tort; and

b)

actionable according to the law of the foreign country where it was done.

(2)

But a particular issue between the parties may be governed by the law of the country which, with respect to that issue, has the most significant relationship with the occurrence and the parties.”

The general rule has with good reason been described as “parochial” and as “[begging] the question as it presupposes that it is inherently just for the rules of the English domestic law of tort to be indiscriminately applied regardless of the foreign character of the circumstances and the parties.”: see Law Commission Report No 193 of 1990, Private International Law: Choice of Law in Tort and Delict at [2.7].

The Defendant relies upon Red Sea Insurance Co v Bougues SA [1995] AC 190 at

In Red Sea Insurance Co at 206G-H the Privy Council expressed the view that the exception can in principle be applied in an appropriate case to enable a Claimant to rely exclusively on the lex loci delicti and, at 207A-B, that the exception may apply not merely to specific isolated issues but may apply to a whole claim “for example where all or virtually all of the significant factors are in favour of the lex loci delicti”. I respectfully agree. The Privy Council identified features of that case which made the arguments in favour of the lex loci delicti “overwhelming”. They were:

“Thus the policy of insurance was subject to Saudi Arabian law, the project was to be carried out in Saudi Arabia and the property was owned by the government. The main contract, the supply contract and the … service contract are all subject to the law of Saudi Arabia and were to be performed there. The breaches and the alleged damage occurred in Saudi Arabia. The defence of repairing alleged damage occurred in Saudi Arabia. The defendant, though incorporated in Hong Kong, had its head office in Saudi Arabia.”

In identifying the relevant factors as it did, the Privy Council was at least implicitly endorsing the approach of Mason CJ as set out in [11] above. Whether or not that is so, I would respectfully endorse the approach of Mason CJ in attempting to see whether the policy of the law of Colombia and the interests of the parties show that Colombian law has a connection with the facts of this litigation of sufficient strength as to provide clear and satisfying grounds for departing from the general requirement of dual actionability; and in doing so I look to features that are similar to those identified on the facts of the Red Sea Insurance Co case.

In favour of dual actionability are that the Defendant is a British registered subsidiary of BP and that the Claimants exercised their jurisdictional right to bring these proceedings in the United Kingdom. Of those called to give evidence for the Defendant, Mr Spence and Mr Jones are now resident in England and gave the impression of being from the United Kingdom. To the contrary, however, Mr Allison is resident in South Australia and gives the impression of being Australian. The other witnesses give the impression (by name, language and current address) of being South American and, in general, it cannot be said that the nationality of those employed by the Defendant provides a substantial connection between the Defendant in its dealings with the Claimants and the United Kingdom. The project was carried out in Colombia. The day-to-day management of the administration of the contract had some connection with Houston but was overwhelmingly in Colombia. The Claimants are Colombian and their land (the subject of this litigation) is in Colombia. To the extent that any contracts were entered into between the Defendant, Ocensa or Saipem and the Claimants, it is common ground that they were governed by Colombian Law. Any breaches of contract and any breaches of non-contractual obligations happened in Colombia. The alleged damage was suffered in Colombia. The Defendant, though incorporated in England, had a branch legally established in Colombia by means of registered public deed and was dedicated (in name and in practice) to working in Colombia. The works were carried out subject to the regulatory regime in force in Colombia, upon which the Defendant relies as excluding any liability it might otherwise have to the Claimants: see [24] ff below. On the Defendant’s case, therefore, Colombian law is integral to the issue of non-contractual liability before 1 May 1996 just as it is to the equivalent issue after that date.

I am sure that the Claimants never considered access to Courts before or during the laying of the pipeline, so that it would be quite unreal to suggest that they assumed that the Courts would apply a certain rule. But if they had been asked, I am equally sure that they would have expected that their rights would be determined by the law of Colombia, particularly in circumstances where the Defendant went to considerable lengths to present its involvement as being Ocensa’s thereby removing any real perception of United Kingdom involvement: see [386] below. If uninfluenced by the pressures of potential litigation I strongly suspect that the Defendant would have had the same expectation: if it didn’t, in my judgment, it should have done.

To my mind, weighing these factors brings the scales down firmly in favour of applying the exception and concluding that the issue of extra-contractual liability in respect of acts or omissions occurring before 1 May 1996 is governed by Colombian Law. This means that it is not necessary to attempt to disentangle pre- and post-1 May 1996 acts and omissions with a view to judging them by different systems of law; but that is a consequence of my conclusion rather than a reason for it.

Professors Castro and Vallejo are both distinguished Colombian lawyers who fully justify being called Experts. As will be seen below, there was eventually a large measure of agreement between them and, where they disagreed, on some occasions I prefer the evidence of Professor Castro and on others the evidence of Professor Vallejo. Each party attempted fundamentally to undermine the approach and evidence of the other side’s expert and, in my judgment, neither party succeeded. There were, however, distinct differences in the characteristics and approach of each expert. Professor Vallejo grounded himself more closely and more rigorously on the provisions of the various norms of Colombian law (as explained below). His original report was also more thorough in identifying relevant legal provisions than was Professor Castro’s. His approach was criticised by the Claimants as being too narrow and doctrinaire. Had he been giving evidence about English law (or another common law system) this might have had more force; but I am persuaded that his approach is and was appropriate when giving evidence about Colombian law, rooted as it is in written laws of various well defined hierarchical status with less emphasis being placed on the organic development of law by the Courts than appears under common law systems. Contrary to the Claimants’ submissions, I generally preferred Professor Vallejo’s levels of rigour to those of Professor Castro, who on occasions frankly accepted that her view of what the law should be differed from a strict (and, in my view, correct) interpretation of what it is. That said, I do not accept that her objectivity was seriously compromised: the two examples cited by the Defendants in their closing submissions {C4/4.6/37} seemed to me at the time and still seem to be examples of comments that might come naturally to an academic foreign lawyer who

More serious are the criticisms that the Defendant makes of her failure to give proper attention to the Colombian regulatory background pertaining to the oil industry. She did not give adequate consideration to the regulatory framework, even when it should have been apparent from Professor Vallejo’s first report that it was an important area where the Court would be assisted by thorough expert evidence. And (as I detail later at [82]ff below) her use of citations was not always reliable. While these are valid criticisms, they fall far short of persuading me that I should always prefer the evidence of Professor Vallejo without further thought. Therefore, while recording that there were valid criticisms to be made of her evidence, I have reviewed all areas of material dispute between her and Professor Vallejo in an attempt to identify where each expert was or was not correct on given points; and I do not think it would be useful to add yet further to this judgment by discussing each of the criticisms made of her, any more than it would be profitable to discuss each criticism made by the Claimants of Professor Vallejo.

Because of the extensive final agreement between the experts, I am able to set out their agreed position on various topics either verbatim or nearly so. Where I have done so, I find that their agreement as I have set it out is a correct statement or summary of the law of Colombia except on a few occasions where (I hope) I make my qualifications clear.

Colombian private law (civil and commercial) is rooted in the continental law system. It consists mainly of written statutory laws contained in Codes, following the French tradition of the Napoleonic Codes. The Courts are bound by Article 230 of the Constitution to observe this codified law, with fairness, jurisprudence, and the general principles of law and scholarly authorities being “auxiliary criteria of judicial proceedings.” What this means is that the judge’s primary obligation is to comply with and apply the law; but the judge may turn to the auxiliary criteria if she or he needs them in order to interpret and apply the law {Day22/21:14}.

The established hierarchy has at its head the Constitution, Article 4 of which provides that “the Constitution is the supreme law. In all cases of incompatibility between the Constitution and the law or any other legislation or regulation, the constitutional provisions will apply.” The Constitution must be taken into consideration for the proper understanding of other laws, all of which are subordinated to the Constitution {H15/1/35} at [196]. The next level is that of the laws enacted by Congress or laws in a strict sense. Laws have their own hierarchy, with the Constitution differentiating between (a) “Frame Laws” which set out governmental objectives in regard to public income and debt, foreign trade and customs, financial stock and insurance activity, salaries, pensions and education (Article 150-19), (b) “Organic laws” which relate to legislative activity, national budget, Colombia’s general development plan and the jurisdiction of the territorial provinces (Article 151), (c) “Statutory laws” which relate to fundamental rights, administration of justice, political parties and participation of the community (Articles 152-153), and (d) “Ordinary laws” which include the laws approving Codes. The Civil Code and the Commercial Code have the status of Ordinary laws (Article 150). Below the Laws come Supranational Norms, which do

There was a dispute between Professor Castro and Professor Vallejo on the status of arbitral awards. I prefer the view of Professor Vallejo that, in the absence of any legal provision to the contrary and because of the essentially private nature of arbitration, arbitral awards are neither law nor auxiliary criteria for the interpretation and application of the law, though they may command respect by virtue of their contents {Day23/173:5} {I2/12.1/539.2}. His view is endorsed by Article 230 of the Constitution which states that “fairness, judicial precedents, the general principles of law and the scholarly authorities are auxiliary criteria of the judicial function”: arbitral awards are not included.

The Civil Code contains rules for the interpretation of the law which are applicable to both civil and commercial matters. Professor Vallejo provided a list of rules at [200][210] of his original report, which were not controversial. In particular, it is common ground that:

By Article 332 of the Colombian Constitution, the Colombian state is the owner of all natural non-renewable resources and the subsoil, including oil. The oil industry has a special status in Colombian law. In 1953 a Petroleum Code was established, Article 4 of which declared that “the oil industry in its different branches of exploration, production, refining, transportation and distribution” is of public benefit.

The potential relevance of the State’s ownership of oil and its recognition that the oil industry is of public benefit is two-fold. First, Article 58 of the Constitution provides that “When, in the application of a law passed on account of public necessity or social interest and recognized as essential, a conflict should occur about the rights of individuals, the private interest will yield to the public or social interest." Second, it has led to the creation of a regulatory structure which seeks to strike the balance between private and public interests. The regulatory structure provides the context for the laying of the Ocensa pipeline and therefore needs to be considered in some detail.

In Colombian Law, there has at all material times been a close connection between the law relating to mining generally and the law relating to the exploitation of hydrocarbons in particular. Law 38 of 1887 laid down Colombia’s first Code of Mining [“the 1887 Mining Code”]. It included at Chapter XII provisions for the creation of necessary easements over servient land and at Chapter XIII provisions for the periodic assessment and payment of compensation to landowners for the damage caused.

A new Mining Code was introduced by Decree 805 of 1947 [“the 1947 Mining Code”], which amended parts of the 1887 Mining Code. Articles 109 to 118 of the 1947 Mining Code amended the provisions for assessing and payment of compensation for damage caused by exploration and exploitation. Specifically, Article 112 of the 1947 Mining Code provided that exploration of mines could be carried out freely in all the territory of the Republic, but that where land was settled or privately owned it was necessary to notify the owner or occupier in advance. The owner or occupier could not oppose the carrying out of the works but was entitled to demand from the miner the value of the damages caused to him. Article 115 provided that, when dealing with prospection or exploration, the mining company “will” guarantee with a sufficient bond, granted before the Mayoralty of the Municipality where the mine is located, the payment of the value of the damage which is caused to the owner of the lands or crops. If the parties were not in agreement on the amount of the security, it was to be fixed by the Mayor, at the request of any of the parties, and based on an expert assessment of the possible damage. There was nothing in Article 115 or elsewhere to suggest that an expert assessment of the possible damage under Article 115 is provisional. Article 116 was specific to exploitation works and provided that:

“In the case of damages caused by the exploitation works in properties or improvements, its owner of either may demand advance payment of the amount of the compensations every six months according to the damage assessment of the respective period. If the parties fail to reach an agreement on the amount of the compensation, it shall be fixed by the Mayor of the Municipality in which jurisdiction the land or improvements are located, with the previous provisional and non-appealable appraisal of the damages suffered. Payment of such compensation shall be made immediately in accordance with the valuation.

The parties may request a revision of the valuation within one month from the date of the official decision ordering the payment; but if it is the entrepreneur who uses this recourse, he must deposit previously with the Mayor’s Office the total amount of the compensation that is fixed in the official decision which revision is requested, under the penalty of his petition being dismissed.”

It is to be noted that Article 116 contemplates that compensation may be demanded to be paid in advance; but in the absence of such a demand, there is nothing in the terms of Article 116 or elsewhere to displace the natural possibility that compensation may be demanded to be paid after the works have been completed. Where the owner has demanded payment in advance at intervals of six months, Article 116 does not expressly provide for a final and retrospective revaluation of the damage; nor does it expressly exclude it. It merely states that the six monthly payments shall be “according to the damage assessment of the respective period”, which does not specify when that damage assessment will have been carried out but implies that it will have been carried out before the payment of the periodic compensation. The expert evidence does not resolve when and how the compensation will be fixed under Article 116 where periodic payments are not requested.

The Colombian Petroleum Code was introduced in 1953 with additional regulations in 1954. It will be convenient to introduce the code and regulation after tracing the further revisions to the Mining Code.

A new Mining Code was established by Decree 2655 of 1988 [“the 1988 Mining Code”], which substantially replaced the 1947 Mining Code.

Article 167 of the 1988 Mining Code requires the owner or occupier to be notified, either directly or through the Mayor, before exploration work is begun on private land or settled waste lands. The owners or occupiers may not object, but may require the explorer to provide a prior security bond to guarantee payment for any damages caused during exploration. Payment for occupation of the land should be paid quarterly in advance, and restoration work should be carried out immediately (Footnote: ¹).

Article 165 of the 1988 Mining Code confers a right to all easements needed to conduct the exploration and exploitation of mines technically and economically. The easement right authorises the carrying out of the mining works and involves the obligation upon the beneficiary to grant a surety bond and to pay the owner or holder of the affected properties the respective compensation: the easement may not be exercised (“carried out”) without this requirement being satisfied. Easements so conferred are transferable to third parties for the same purposes as those for which they were set up. They are exercisable on previous formal notice to the owner or occupier of the servient land who can be notified directly or through the Mayor:

Article 180 entitles the owner or occupier to request the Mayor to order the miner provide a security bond in order to guarantee the payment of the damages that he may suffer due to the easements. A procedure is laid down for the Mayor to consult with an appraiser or an expert from a list held by the court to assist him in designating the appropriate security. The parties can apply to the court for a review of the security bond or the assessment of compensation for undertaking the easements. The assessment and provision of the security bond (if requested by the owner) are a prerequisite to the carrying out of the work, which may not start or will have to be suspended while the security bond is set up.

Article 181 of the 1988 Mining Code sets out the criteria to be applied when designating the amount of the security bond as well as the damages caused in the course of the easement. Those criteria include that the exercise shall be dealt with in an objective manner, taking into account the current market value of the use of the goods affected or damaged by the exercise of the easement.

Under Article 182 of the 1988 Mining Code, the Mayor fixes the compensation to be paid to the owner or occupier, and his ruling cannot be appealed against. However, if one or other party does not agree on the amount of compensation or payment form designated by the Mayor, they can request its final determination by the Court. It appears that the Article 182 procedure does not necessarily or probably take place before the works happen, at least in the case of permanent occupancy. Another point of potential interest in the light of the terms of the 1954 Regulations, is that the 1988 Mining Code distinguishes between temporary and permanent occupation by the works and makes different provisions for payment of compensation from those that applied under the 1947 Mining Code. Under Article 181:

Under the 1988 Mining Code, public officials are closely involved in many aspects of the process (as had also been the case under the 1947 Mining Code). Thus, for example, the determination of the surety bond in relation to exploration shall be done by the Mayor with the previous opinion of an expert appraiser; and the Mayor’s decision may be appealed before the Governor, Provincial Governor or

The exploitation of oil in Colombia can be traced back to the end of the 19^th Century. From early in the 20^th century until 1974 the Colombian State operated a concession system for the exploitation of oil. The concession system was superseded by the association contract system, which was introduced by Decree 2310 of 1974, and which from then on was the system by which the Colombian state regulated the exploration and production of hydrocarbons in its territory. Association Contracts cover exploration and exploitation activities in a given area. I refer to the association contract system in further detail at [44] below.

The Petroleum Code was established by Decree 1056 of 1953 [“the 1953 Petroleum Code”] (Footnote: ²). Article 9 made “Chapters XII, XIII and XIV of the Code of Mines on mine easements and compensations that the miners are obliged to pay” applicable to the oil industry in the absence of special regulations. This was a reference to the 1887 Code Code as amended by the 1947 Mining Code. The route and the location of all pipelines are subject to Government approval after submission of plans and detailed budgets for the construction and the relevant specifications for Government approval: Article 54. Article 4 provided that, as a result of its being of public benefit, interested parties may be ordered by the relevant government ministry to carry out necessary expropriations for the exercise and development of the oil industry. In order to take advantage of the statement of public utility in this way, interested parties are required to submit to the Ministry of Mines and Petroleum a documented application which, amongst other things, explains why the expropriations are necessary together with a list of the names of owners of affected properties and a “list of the steps that have been taken to get what is required through a contract freely entered into with [them]”: Article 84.

Articles 93 and 94 of the 1953 Petroleum Code refer back to the 1947 Mining Code and provide for involvement by the Mayor. Article 93 provides that, where it was not possible to give notice to a landowner because their whereabouts are hidden or unknown, the Mayor may appoint a guardian ad litem. Article 94 provides that once the valuation provided in Articles 115 and 116 of the 1947 Mining Code is done, if the oil or pipeline entrepreneur pays directly to the owner, or posts a guarantee, or deposits the amount of the compensation, whichever be the case, the Mayor will authorise within two days the commencing of the works in which the entrepreneur has interest. This provision applies where the entrepreneur is using the mechanisms under Articles 115 or 116 of the 1947 Mining Code to obtain consent to the starting of his works of exploration or exploitation as the case may be.

In 1954 regulations [“the 1954 Regulations”] were issued as temporary legislation in times of public disturbances; but due to their importance they were subsequently given permanent character by Law 10 of 1961. They therefore have the force of a law within the hierarchy of norms since they were passed by the Government (Footnote: ³). They laid down special regulations referring to the petroleum industry. Articles 1, 2, 3, 4, 5, 6 and 7 are important and justify being set out at length here:

“Article 1: The provisions of articles 109 to 118, both included, of [the 1947 Mining Code], will apply to the petroleum industry with the amendments set forth in this Decree.

Article 2: When an Expert valuation is to be made of damages caused by the exploration or exploitation works, as referred to in article 116 of [the 1947 Mining Code], the respective procedure will comply with the following rules:

The valuation will be made before the Municipal Judge in whose jurisdiction the land or improvements are located, following a request by the oil explorer or exploiter, or by the owner or occupant of the land or improvements, with the intervention of two Experts: one designated by the oil explorer or exploiter and the other by the owner or occupant of the land.

If the Experts are not in agreement in their valuation, they must immediately designate a third Expert.

Article 3: When the principal Experts do not reach agreement in appointing a third Expert, it will be designated, at the request of either of the parties, by the Collector of the National Treasury in the relevant Circuit, drawing lots from the list of Experts for successions and donations corresponding to the Municipality in whose jurisdiction the properties are located.

Article 4: Any of the parties can request before the Judge of the Circuit of the jurisdiction in which the property subject to the procedure is located, the revision of the valuation and of the amount of compensation fixed on the basis of the valuation, within one month of the date of the valuation process.

If the oil explorer or exploiter uses this recourse, it shall first make a deposit in cash in the Agency or branch of the “Caja Colombiana de Ahorros”, if it exists, or in the relevant collector of the National Treasury of the Municipality, 50% of the value of the compensation fixed by the Experts. Without this requirement, revision of the request made by the oil explorer or exploiter will not be taken into account.

The expenses arising from the revision shall be paid by the party that requests it.

Article 5: In the case of works or activities that implicate the permanent occupation (of land), the compensation shall only be accrued and paid once and shall cover all the time that the oil explorer or exploiter occupies the land, and will comprise all damages.

Permanent works shall be understood as the construction of roads, of oil pipelines, of camps and office buildings, the installation of drilling equipment and other analogous works.

Regarding works and activities entailing a temporary occupation, the compensation will cover periods up to six months.

Temporary occupation shall be understood as the execution of surface exploration works with geophysical equipment, plotting layouts of oil pipelines, of roads, etc., that entail the destruction of fences, the opening of penetrative paths or trails, surface digging and other analogous works.

Article 6: Once the revision has been performed, if the explorer or exploiter of petroleum refuses to pay the amount of the compensation to the owner or occupant of the land, the Judge of the relevant Circuit, at the request of the interested party, shall order the agent of the agency or branch of the “Caja Colombiana de Ahorros”, or the collector of the National Treasury of the Municipality, to make the payment from the amount deposited by the explorer or exploiter of petroleum in accordance with article 4 of this Decree.

If the amount deposited is insufficient to cover the compensation, the petroleum industrialist shall pay the balance to the owner or occupant of the land. Otherwise, the latter is entitled to request of the Mayor the suspension of the permit to execute or continue the works, as referred to under article 7 of this Decree.

Article 7: Once the valuation proceedings referred to in this Decree have been performed, and once the corresponding amount has been deposited or the compensation to the affected party has been paid, as the case may be, the explorer or exploiter of petroleum is entitled to initiate the works immediately, and the execution of those works cannot be prevented even if the valuation is called to review. The municipal Mayor will assist the petroleum industrialist as far as necessary in order for him to pursue his works without impediments of any kind.

…”

Significant differences are immediately apparent between the provisions of the 1947 Mining Code and the 1954 Regulations:

Taken as a whole, it is apparent that the 1954 Regulations contemplate that the compensation to which it refers (whether for permanent or temporary occupation) will be paid in advance, either in an agreed amount or in an amount fixed by the specified valuation and revision procedure: see in particular Articles 6 and 7. To this extent the approach differs from that under the 1947 Mining Code, which does not exclude retrospective payment of damages if periodic payments in advance have not been demanded by the owner. I will consider the consequences of these similarities and differences below. The most important issue, also to be considered below at [206], is whether the effect of Article 5 of the 1954 Regulations means that, once a payment has been made in respect of the permanent works, no further compensation is payable irrespective of the extent and severity of the damage that may be caused by the permanent works.

Law 93 of 1993 was a new environmental statute which required an environmental licence for the construction of an oil pipeline, as an integral part of the regulatory process. The environmental licence for the Ocensa pipeline was issued pursuant to that law.

The Colombian state oil company (Ecopetrol) was given a central role in the association contract system of which three aspects are relevant to these proceedings. First, Ecopetrol was given the right to carry out the exploration and exploitation activities, directly or indirectly, or through contracts entered into with national or international individuals or companies other than the parties to concession contracts. Second, Article 1 of Decree 2310 of 1974 and its regulatory Decree 743 of 1975 vested in the Board of Directors of Ecopetrol the power to design various contracting schemes and the terms of model contracts. Ecopetrol’s decisions on such matters were subject to the approval of the Ministry of Mines and Energy. Third, Ecopetrol could participate in any projects by declaring the commerciality of a given Association Contract. If it did so, it would then acquire a 50% interest under that contract.

Two Association Contracts are directly relevant to the present case. They were contained in Public Deeds dated 11 June 1982 (Santiago de las Atalayas) and 5 May 1988 (Tauremena). The Santiago de las Atalayas Association Contract may be taken as illustrative. The parties were Ecopetrol and Triton Colombia Inc (“Triton”). By

Clause 18 of the Association Contract provided for a Board of Directors to be formed within 30 days of the acceptance of a commercial field. Each party had to nominate a representative, whose vote would be a commitment of the party. The Board of Directors was to hold regular meetings in which the Operator’s exploitation programme, annual programme of operations and expenditure and investment budgets were to be reviewed. Amongst other roles established by Clause 19, the Board of Directors could authorise the Operator to conclude contracts on behalf of the joint operation and the value of which was in excess of US$10,000.

Triton was entitled to transfer all or part of its interests, rights and obligations in the Association Contract, with the prior written approval of Ecopetrol: Clause 27.1. By Clause 35, the Association Contract was governed in all its parts by Colombian Law. By subsequent amendments the Defendant and Total Exploratie en Produktie MIJ BV (“Total”) were added as parties to the Association Contracts, reflecting their role as joint venturers in the overall project.

The major legal issues in the case included (a) whether and to what extent the Claimants entered into legally binding agreements before the works were carried out, and (b) whether and to what extent the Claimants entered into legally binding settlements after the works had been completed. It is therefore necessary to review various fundamental aspects of the law of contract under Colombian Law. The Experts agree that Articles 1500, 1501 and 1502 of the Colombian Civil Code set out the necessary elements for the formation of a contract. Those Articles provide as follows:

“1500.

A contract is real [in rem] when its formation requires the transfer of the object referred to in the contract. A contract is solemn when it needs to comply with certain special formalities, in such a way that without them no civil effect is produced. And a contract is consensual when it is formed by the mere consent of the parties.

1501.

In every contract it is necessary to distinguish the essential elements, the natural elements and the accidental elements of the contract. Essential elements are those required for the contract to produce legal effects or whose absence would turn the contract into a different contract. Natural elements are those which are not essential to the contract but are deemed incorporated into the contract without the need of a special clause. Accidental elements are those that do not belong essentially or naturally to the contract and are added to the contract by contracting parties.

1502.

In order for one person to assume an obligation towards another person, by an act [which includes a contract] or declaration of will, it is necessary: 1) that he is legally capable, 2) that he consents to the respective act or declaration, and his consent is non-vitiated, 3) that the subject matter is a lawful object, and 4) that the purpose (causa) is lawful.”

Accordingly it is common ground that, in order for one person to assume an obligation to another person by an act [which includes a contract] or declaration of will, it is necessary:

The experts are agreed that for any particular contract to exist, its essential elements must be met, and mutual consent must cover those elements. For example a sale purchase contract requires the agreement on the object sold and on the price. Special formalities are required by law in certain circumstances. For present purposes the relevant circumstance is the constitution of an oil easement, where it is a legal requirement that the contract is executed by means of a public deed before a Notary public and is duly registered.

At the start of the trial the Claimants were relying upon alleged oral agreements as giving rise to enforceable claims for breach of contract. By the time of closing submissions, those claims were no longer pursued. It is therefore sufficient to record that the legal requirements for an oral agreement to be valid and binding were agreed by the experts {H23.2/7/435} and included agreement on the essential elements of the purported contract and an intention on the part of both parties to enter into a binding legal contract.

It is common ground that any contracts which may be held to exist in the present case are commercial in nature and therefore subject to the provisions of the Colombian Commercial Code as well as those of the Civil Code. The Commercial Code provides for ‘inexistence’, absolute nullity and relative nullity. In the present case relative nullity is the only one of these three concepts to be potentially relevant. It is common ground that consent is established where consensus is expressed without one or more vitiating vices being present and affecting the will of a party expressing that consent {H23.2/7/437}. Article 900 of the Commercial Code identifies the vices that may vitiate consent by providing that:

“A transaction is avoidable when executed by a relatively incapable person, and when consented by error, duress or dolo according to the civil code.”

For a contract (or a specific term of a contract) to be avoided relying upon the Article 900 vitiating vices, it is necessary for an action to rescind to be brought by those persons with an interest in the contract according to the law, their heirs or assignees {H23.2/7/432}. If such an action were to have been brought, the annulment of the contract (or contract term) would have retroactive effect in that it world have no binding effect as of the date of its execution. However, if effects produced by the contract (or contract term) cannot be undone retrospectively, the contract (or contract term) is terminated for the future as of the date of the Judicial decision (Civil Code, Article 1746) {H23.2/7/437}. The limitation period for an action to set aside a contract or term to which the Commercial Code applies is two years from the date of execution of the contract: {H23.2/7/562} at Item 57.

No action to set aside any relevant contract or contract term has been brought in Colombia by the Claimants, their heirs or assignees; and the claim in this litigation to set aside contracts is no longer pursued: {C4/3.4/89} at [267]. It is therefore possible deal with the concepts of error and dolo as vitiating vices more shortly than would otherwise have been the case; but they remain potentially relevant as part of the framework of Colombian law that was available to the Claimants had they decided to use it.

Although the Claimants rely upon an inequality of bargaining power for other purposes, it has not been suggested that any relevant contract would have been avoidable for duress, and the experts are agreed that duress is not a relevant issue in the case. It need only be said that duress may render a contract voidable in Colombian law if it has the effect of vitiating consent. That leaves error and dolo as the possibly relevant vices in the case.

Error as a vice that vitiates consent is covered by Articles 1509-1512 of the Civil Code. Error of law cannot vitiate consent because knowledge of the law is presumed (Articles 9 and 1509 of the Civil Code). Error in point of fact may in limited circumstances vitiate the will of a party. The types of error that may vitiate consent

The test to be applied is that the error must be determinative of the will to become obliged, meaning that the error was the principal motive of one of the parties to enter into the contract and that motive was known to the other party (Articles 1511, 1512 and 1524 of the Civil Code). It must not result from the deliberate actions of one of the parties: if it does, the remedy lies in dolo not error. And the error must be excusable, which means that the person in error must not be at fault. In this regard it is material that all persons with capacity, whether literate or not, should take reasonable steps having regard to their position to understand a contract and its implications before entering into it {Day21/38:14} ff. “Having regard to their position” is not simply a reference to their own abilities in isolation: it takes into account the resources that are available to enable them to understand a contract and its implications. I have already outlined the close involvement of public officials under the mining and petroleum codes and the requirement that petroleum easements must be contained in public deeds: see [50] above. This requirement gives contracting parties access to notaries (whose role is discussed at [117] below). In addition people in Colombian municipalities have access to an Ombudsman’s office which takes an active interest in the processes and effect of laying pipelines, as evidenced by their involvement in the public meetings that preceded the laying of the Ocensa pipeline: see [338, 339] below.

Dolo as a vitiating vice has a well established meaning in Colombian Law. It consists in the positive intention to harm another person or its property (Article 63 of the Civil Code). It only vitiates consent when it is the deed of one of the parties and when additionally it appears clear that without it the other party would not have entered into the contract (Article 1515 of the Civil Code). The Supreme Court of Colombia has said (11 April 2000) that “Dolo implies a machination, a wilful assault against the rights and interests of the fellow man … it consists of a cunning, a deceitful conduct whose purpose is to take by surprise the consent of the victim, that is vitiated accordingly.” In summary, (a) there must be a sort of artifice used by one party to deceive the other party, either by acts or omissions; and (b) the dolo must be determinant of the consent of the other party, meaning that the party consented to the act or contract under a mistaken belief induced by dolo. In the absence of these two conditions, dolo does not vitiate the will and the contract remains valid, though the fact of the dolo may give rise to an action for damages for the damage it has caused {H23.2/7/442}ff.

There is no free-standing doctrine of misrepresentation in Colombian law. Issues which in English law might be categorised under the heading of misrepresentation fall in Colombian Law to be dealt with under the doctrines of error and dolo (see above) and good faith (see below).

Professor Castro argued that, in addition to the requirement that a person’s consent be non-vitiated, the requirement that there be consent carried the additional requirement that the consent be “genuine, free and spontaneous, with clear understanding of the meaning and effects of the legal act that is being consented.” {H14/1/14/} at [24], {H23.2/7/432}. Although this assertion generated quite considerable crossexamination of the experts on either side, by the time of Closing Submissions, it was the Claimants’ case that Professor Castro’s use of the phrase “genuine, free and spontaneous” was merely intended to give the court an understanding of what the vices of consent mean in practice in Colombian Law. In case there remains any ambiguity in the Claimants’ position it is necessary to state that I reject the suggestion that there is any additional requirement as originally formulated by Professor Castro. Neither Article 1502 of the Civil Code nor Article 900 of the Commercial Code imposes any such additional requirement and the use of the word genuine seems entirely superfluous since, if consent is not genuine, it is not consent. Professor Vallejo’s objection to the use of the word “genuine” was based on the concern that it might be used to introduce a subjective element into the notion of consent rather than looking for the external expression adopted by the party, which is not justified. His objection is sound. Similarly, if “free” is intended to mean something other than “not subject to the vitiating vice of duress” it is not clear what, if anything, it adds to the Article 1502 requirement that there be non-vitiated consent. Professor Castro did not explain what she meant by “spontaneous” except to say that “the proof that consent must be genuine, free and spontaneous is on [sic] the provisions regarding vices of consent.” {Day20/186:10}. I do not accept that the use of the word “spontaneous” is a legal requirement additional to the requirement that consent must not be vitiated by the vices referred to in Article 900 of the Commercial Code and Article 1502 of the Civil Code.

I also reject as an unjustified additional gloss or requirement the suggestion that, if the person giving consent does not have a clear understanding of the meaning and effects of the legal act that is being consented, the consent is not contractually effective. The Experts agree that a lack of understanding (or even being unable to read or write) is not an issue of legal capacity or incapacity under Colombian Law and that illiteracy does not equate to legal incapacity. Instead, the issue of lack of understanding can be properly addressed under the provisions governing error and dolo {H23.2/7/453}. This is not merely theoretical. Professor Castro accepted that many normal people do not read or understand the contracts they enter into, it being implicit in her answer that they may remain bound by the contracts {Day21/33:19}. I address the consequences of lack of equality in bargaining power and abuse of rights at [79]ff and [105]ff below; but lack of understanding is not without more a ground for avoiding contractual obligations either on the grounds of incapacity or as if it were a vice that vitiates consent.

The requirement that the contract should have a “determinable object” led to disagreement between the experts, particularly by reference to what the Claimants call the preliminary contracts and I call the First Letter, the terms of which are set out at [368] below. The starting point is Article 1518 of the Civil Code, which is the legal norm describing the object or subject matter of the contract and its requirements. Article 1518 provides:

“Not only things that exist, but also those that are expected to exist, can be the object of a declaration of free will. But it is necessary that both are commercial, and that they are determined, at least in their nature. The amount may be uncertain as long as the act or contract provides rules or includes information which makes it possible to determine it. If the object is a fact, it must be physically and morally possible. Facts are physically impossible when they are contrary to nature, and morally impossible when forbidden by law, or contrary to good customs or public order.” [Emphasis added]

In his first report, Professor Vallejo expressed the opinion that an agreement between parties to pay “full compensation” is insufficiently certain to create a binding obligation under Colombian Law {H15/1/141} at [625]. By way of comparison he said that an agreement between parties to buy an object for a “reasonable price” or to pay “full value” would not create a binding contract under Colombian Law, relying upon Article 1518.

Professor Castro did not address this point in her reports. In her joint statement with Professor Vallejo she referred to the requirement under Article 1518 that the amount must be determined or determinable and said “If the obligation is to pay compensation, the law or the subsequent agreement of the parties can establish the specific amount, under the circumstances.” {H23.2/7/466}. Later in the joint statement, she gave as her opinion that “the specific amount payable” [under the preliminary contracts] “is determinable, as permitted by article 1518 of the Civil Code” {H23.2/7/468}. This amounts to saying that an agreement to pay “full and equitable compensation” satisfies the requirement that the specific amount payable is determinable.

In cross-examination, Professor Vallejo’s opinion was tested by reference to three separate forms of agreement, namely insurance, guarantees and agreements relating to pharmaceutical trials {Day22/87:21} ff. To my mind, only the last of these three forms of agreement is informative. Adopting normal English understanding of insurance policies, a policy may be a valued policy or a policy providing for payment subject to an overall limit of indemnity. If it is a valued policy, the sum payable upon the occurrence of a contingency is determined. If it is an unvalued policy, the basis of indemnification will (as a matter of normal practice) be defined: for example, by reference to the replacement cost of a chattel, new for old (or not), diminution in value, loss of profits (which typically includes a formula to be applied in calculation), a person’s liability to a third party, and so on depending on the type of policy concerned. If an insurance policy were to be so deficient that it did not enable the sum payable in the event of the occurrence of an insured risk to be determined with certainty, it is not obvious why Colombian Law should regard that policy as compliant with Article 1518. That was Professor Vallejo’s view too because “the amount, the amount of the loss, the scope, the size of the loss, is a condition, obviously a condition that would have to be defined by the insurer.” {Day22/88:4}.

The position of an agreement to compensate for adverse results suffered by the subject of a drug trial is less straightforward. The Claimants submit that it is “highly infeasible that a Colombian court would provide no redress to the victim of a drug trial simply because the contract did not provide a precise mechanism as to how compensation would be calculated.” To an English lawyer that seems intuitively attractive and there are various tools or devices that might be used to ensure that compensation was paid. However, on closer examination, problems become apparent. First, an obvious mechanism that a lawyer would use under English law where the terms of the contract are deficient would be the use of an implied term. But what would be the precise scope of the implied term? A number of alternatives present themselves of which two suffice to illustrate the problem: compensation equivalent to that which would be awarded by a Court awarding damages for losses caused by established negligence; or compensation amounting to an indemnity against all losses caused by involvement in the trial, whether foreseeable or unforeseeable. Second, English law does not have Article 1518, which on its face requires the contract itself to ensure that the sum payable is determined or determinable and appears to me to be relevant to the question whether the Colombian Court would resort to the use of an implied term to remedy the deficiency to which Article 1518 is directed. Third, as a matter of fact pharmaceutical trials in the United Kingdom are closely regulated, one imposed requirement typically being the putting in place of an insurance policy (with a determined limit of indemnity) as protection for the subject in the event of an adverse outcome. The existence and terms of that regulation may affect the intuitive reaction about what redress a Court should award (if any) to the victim against the manufacturer. Transposing this by analogy to Colombia, the State has imposed a detailed regulatory system upon those involved in laying pipelines, which will be considered in some detail later in this judgment. As will be seen, part of the regulatory process in this case was the imposition of a requirement under the Environmental Licence that the licensee should “establish a system for the evaluation of the damage caused during the construction works and the adoption of immediate mitigation, recovery and compensation measures”: see [341] below. Little is known about the Licensee’s compliance with this requirement or how, if at all, it was monitored or approved by the Ministry; but it is to my mind not self-evident that the words “full and equitable compensation” would in these circumstances be regarded as giving rise to an obligation to pay more than provided for under a system imposed as part of the regulatory structure that seeks to balance private and public interests.

These considerations demand a re-examination of the initial, intuitive, willingness to accept that the Colombian Court would accept that an agreement to provide “full compensation” or “full and equitable compensation” satisfied the requirement that the sum payable should be determined or determinable. Professor Vallejo’s opinion is that it would not, for the reasons outlined in his report, the joint statement and in cross-examination. Professor Castro suggested in cross-examination that it would be sufficient to leave determination of the sum to be paid “to the process of the law” {Day 21/5:6}. I would be prepared to accept that parties could frame an agreement by reference to provisions of the law which would make clear how the sum payable should be determined, but that is not the issue that has arisen in this case since no such formula was adopted. The issue that falls to be decided in this case is whether a

The Supreme Court of Colombia has given guidance in its decision dated 8 July 1997 at pp 174-175. Having said that in the case of a promise the price should be determined it said that it is:

“sufficient that the contract contains the elements that allow [one] to know for certain its amount at the moment the obligation becomes enforceable. … It is necessary to state that the elements of reference fixed in the contract may not be influenced by the intervention of the parties after the execution of the agreement and must be absolutely independent from the future will of the contracting parties. … The promise is effective when the price has not been determined but is determinable with the basis provided in the contract to know the amount with certainty…” [Emphasis added]

This is a powerful endorsement of Professor Vallejo’s opinion on the application of Article 1518. The last words from the citation emphasise that, if the sum payable is not actually determined, it must be determinable “with the basis provided in the contract” to know the amount with certainty. For the reasons I have outlined above, a mere statement that compensation, or full compensation or full and equitable compensation will be paid does not of itself provide the basis to know the amount with certainty and therefore fails to satisfy the requirements of Article 1518. A contract may define what is meant by compensation elsewhere so as to satisfy Article 1518; or the parties may enter into a subsequent agreement which enables the sum payable to be determined with certainty – in which case it will be the subsequent agreement that is operative. But on the basic issue I prefer the evidence of Professor Vallejo for the reasons he gave and for the reasons I have set out above. In the light of the decision of the Supreme Court of Colombia to which I have referred, the criticism that his view is a “narrow” one is misplaced and I reject it.

I shall consider the proper interpretation of the preliminary contracts separately later, at which point it will be appropriate to keep in mind Articles 13 and 230 of the Constitution, which state general principles about how the Court should act in relation to those who are in a position of inequality: see [79]ff and [105] below.

The Civil Code sets out the primary rules of construction at Articles 1618-1634:

“1618: The clear known intention of the contracting parties prevails over the literal words used by the parties.

1619: Irrespective of the generality of the contractual term, they will only apply to the subject matter which has been agreed in the contract.

1620: The sense, in which a contractual provision may produce legal effect, is preferred to that which is not capable of producing any effect.

1621: In those cases where no intention to the contrary appears, the interpretation that best fits the nature of the contract should prevail. Common usage clauses are implied even if not expressed.

1622: The clauses of the contract shall be interpreted by reference to each other, giving to each of them the sense that best suits the contract as a whole.

They may be also interpreted resorting to another contract executed between the same parties and on the same subject matter.

Or by the practical application of those clauses by both parties, or by one of the parties with the approval of the other party.

1623: When in the contract a case is expressed to explain the obligation, it shall not be considered that the intention [of the parties] was to restrict the agreement to that case, excluding other cases.

1624: If the previous interpretation rules cannot be applied, the ambiguous clauses shall be interpreted in favour of the debtor/obligor.

However, ambiguous clauses drafted or dictated by one of the parties, either the creditor/oblige or the debtor/obligor, will be interpreted against the drafting party, provided that the ambiguity results from a lack of explanation which said party should have provided. ”

The Judge’s temptation to rewrite contracts is apparently not confined to common law jurisdictions. In a landmark decision given on 29 August 1980 the Supreme Court of Colombia issued a salutary warning:

“Judges have an ample power to interpret obscure contracts, but may not forget that this function does not authorise them, under the pretext of interpretation, to distort or denaturalise agreements which meaning is clear and forthright, and far less deprive or reduce its legal effects, even when some of its clauses appear before them rigorous or unfavourable to one of the parties.”

Two points may be highlighted from the codified provisions set out at [71] above. First, Article 1622 permits the Court to interpret the terms of a contract by reference to other terms of the same contract as well as by reference to the terms of another contract executed between the same parties and on the same subject matter. This permission is of particular value when the Court is interpreting a series of related contracts, whether they are formally linked or not. Second, Article 1624 provides for ambiguous clauses to be interpreted against the drafting party, but only if the previous rules of interpretation cannot be applied so as to resolve the ambiguity.

Article 1603 of the Civil Code provides that:

“Contracts must be performed in good faith, and consequently they bind not only with respect to the stipulations therein contained, but also in respect to all matters resulting precisely from the nature of the obligation or pertaining to it, as a matter of law.”

The Articles of the Commercial Code that are of prime relevance are Articles 822, 863 and 871 which provide as follows:

“822: The principles governing the formation of acts and contracts and the civil law obligations, its effects, interpretation, manner of becoming extinguished, avoided or rescinded shall be applicable to the commercial obligations and transactions, unless otherwise provided in the law […].

863: The parties shall proceed in good faith exempt of fault in the pre-contractual stage, under the penalty of compensating the damages caused.

871: Contracts must be executed and performed in good faith, and consequently they bind the parties not only by their terms, but also by everything that pertains to their nature, according to written and customary law, as well as fairness.”

There is a substantial measure of agreement between the experts about the role of good faith in the various stages of pre-contractual and contractual dealings {H23.2/7/448}:

“Both experts agree that there is a duty of good faith at the precontractual stage, at the moment the contract is executed, and at the performance stage.

Bad faith does not constitute a free-standing cause of action. If bad faith is relied on it must be framed within a legally recognized cause of action. Departure from the standard of good faith in contractual relations has the following consequences:

(1)

At the pre-contractual stage: if the Defendant intentionally revokes an offer communicated to the Claimant and frustrates the contract, he may become liable for any damages that are caused.

(2)

At the stage the contract is being formed, the relevance of bad faith is that it may give a right to avoid the contract if the bad faith amounts to dolo (Civil Code Article 1502-02, 1508 and 1509).

(3)

At the performance stage, the relevance of bad faith is that if the conduct amounts to dolo (approximating to the English concept of “fraud”), the Claimant is entitled to be compensated for all damages (whether foreseeable or not) that were the immediate or direct consequence of the breach (Civil Code Article 1616).”

I accept this statement of agreed opinion as being accurate. It became apparent during the experts’ evidence that there were differences of opinion lying behind these clear statements of agreement. Some were, to my mind, matters of semantics; but others require resolution.

The first issue to have exercised the parties is whether the duty of good faith imposes additional duties beyond those expressly provided in a contract. The answer to this is to be found in the terms of Article 1603 of the Civil Code and Articles 863 and 871 of the Commercial Code, which say that (whether or not this is expressly provided in a contract) “the parties shall proceed in good faith in the pre-contractual stage” (Article 863) and that “contracts must be executed and performed in good faith” (Article 871 and see Article 1603). Therefore, to the extent that the duty of good faith has substance which is not expressly provided for in the contract, there will be additional duties imposed on the parties, which supplement the strictly contractual obligations by establishing how those obligations should be performed. Whether these additional duties are described as autonomous or supplemental seems to me to be a matter of semantics rather than substance.

A more contentious issue concerns the substance of the duty of good faith both as a matter of principle and as it is worked out in particular circumstances. As a matter of principle, there is very little between the experts. They agree (and I accept) that the duty of good faith imposes an objective standard of conduct, namely the conduct that is required/expected from a competent and dutiful professional in the relevant industry placed in the same external factual circumstances of the contracting party – in this case the Defendant {H23.2/7/449} {Day21/66:24}. It goes without saying and the experts agreed that a competent and dutiful professional deals honestly with other contracting or potentially contracting parties. Both in his report {H15/1/10} at [26] and in evidence {Day22/136:20} ff Professor Vallejo accepted that every person is obliged to exercise his rights and perform his duty with diligence and in a fair way, which I accept as providing further understanding of the scope of the duty of good faith.

Real differences emerged between the experts when considering what would be required or expected of such a professional in practice. Professor Castro maintained

Professor Castro did not develop this opinion in her first report, merely opining that “it is a duty of good faith at the time of negotiation and execution of the contract, that the parties provide sufficient information to each other, especially when one of them is unable to read or understand and the other is a professional, experienced party” {H14/1/22}; and (specifically in relation to adhesion contracts) “Adhesion contracts are binding but when the parties do not have the same level of knowledge and expertise there is a burden of information and a qualified duty of good faith imposed on the professional party to explain to the other the meaning and legal scope of the agreement” {H14/1/45}. She did not provide any further explanation in her Supplemental Report or her second supplemental report. Since Colombian law requires agreement on the essential elements of a contract in order for it to be binding, it is not self-evident that an obligation to explain as stated in the first of these passages is an obligation to explain more than the essential elements of the contract into which the parties may enter, particularly where Colombian law recognises an obligation upon even the uneducated to take reasonable steps having regard to their position to understand a contract and its implications before entering into it: see [50] and [57] above.

Professor Castro’s opinion is not supported by the learned texts to which she originally referred {I2/2T/35}, {I2/13T/550}. They are concerned with the existence of a duty of good faith in the pre-contractual stage and do not mention a positive obligation of disclosure. At the Court’s invitation, she submitted a short paper after the conclusion of her evidence, listing material which she said supported her views {I2/12/533}. The list included extracts from one Supreme Court decision, two arbitral awards and three learned texts.

The Defendant did not have the opportunity to cross-examine Professor Castro on these materials, but Professor Vallejo provided a note responding to her citations {I2/12.1/539.1}. His note primarily addressed the question whether breach of the duty of good faith at the pre-contract stage could give rise to a claim for damages if a contract was concluded, which I address below at [99]. However, he also touched on the present issue. I review the passages cited by Professor Castro in turn.

Professor Vallejo’s note asserts (and, having read the decision in full, I accept) that Professor Castro’s citation from the Supreme Court decision of 5 August 2014 is inappropriate because it comes from a passage where the Court is reviewing the historical development of the doctrine in other jurisdictions (referring specifically to

The First Arbitral Award on which Professor Castro relies (15 March 2001) supports some but not all aspects of her position. It maintains that, in the pre-contractual stage, the due fulfilment of the duty of information includes providing information about “those characteristics which avoid the assumption, on the part of either contracting party, of risks which are excessive, unforeseen, hidden or abnormal contingencies such that all the risks assumed by the parties are duly compensated.” {I2/12/535}. It does not, however, suggest that the obligation extends to all of “the true implications and risks of the contract.” Professor Vallejo disputes that the supportive elements of the decision are a correct statement of Colombian Law, pointing to the absence of any Supreme Court decision that supports them. In his view the duty to inform should cover only known risks (i.e. those that are likely to occur in the absence of any breach of contract) because good faith is also presumed – as a matter of law – at all stages so that it would be wrong to anticipate a future breach of contract. In addition, it is entirely unclear why or how a party should be expected as part of a duty of good faith to explain “hidden or abnormal contingencies”, still less unforeseen ones. Although this award provides some support for Professor Castro’s opinion, arbitration awards are neither law nor auxiliary criteria, though they may command respect by virtue of their contents: see [22] above.

I have read the second Arbitral Award on which Professor Castro relies (29 November 2006 {I2/14T/600}) in full as requested although the Claimants made no detailed submissions on it. It concerned the sale of shares by a contract made between people who had been business partners (albeit with a degree of informality based upon mutual trust) for over three decades, which (the tribunal found) imposed a requirement of “the utmost loyalty and honesty in behaviour” towards each other. The central allegation was that some of the shares were grossly undervalued to the Claimants’ disadvantage. The undervalue stemmed from a report (“the Zitzmann report”) which had been commissioned by the Defendants and which made various adjustments for which there was no apparent justification. Much of the award is taken up with matters that are not directly relevant, including an interesting discursion on the need for agreement on the essentials of the contract at p. 621ff. Professor Castro’s note said that the award included the statement: “the duty of information is granted in favour of whomsoever could legitimately rely on the counterparty, by reason of the nature of the contract or the parties … each of the parties has to inform the other regarding all points that could be of interest to the other” {I2/12/536}. The Claimants have provided a full translation of the award. The equivalent passage appears in significantly different terms at {I2/14T/636} as follows:

“The duty of information applies to those who legitimately trust their counter party, particularly because of the nature of the contract and the quality of the parties to it. But in addition, “It could be said, in conclusion, that when there is a relationship of trust between the parties, the reciprocal duty of information should be automatic. That is, that each party has to inform the other of all points which could be of interest to the other. As such, the relationship of trust excludes, for both parties, any responsibility to investigate or get informed.” It is added that this doesn’t entirely exclude this responsibility (negligence cannot be encouraged) but it does diminish it, as a result of the mutual trust and bonds of friendship of many years between contracting parties.”

The passage continues:

“Article 871 of the Commercial Code sets the rules under which contracts must be signed (and implemented) in good faith. That is, prohibiting reproachable attitudes that could affect either of the contracting parties in the process, not just in the implementation of the contract, but also in its drafting. The commercial relationship between [the defendant] and [the claimants] involved, as we have seen, a special level of trust between the two parties. As a result, good faith, in the objective sense imposed a special duty of loyalty and correctness, which was not met for [the claimant] in [the defendant’s] reference to a questionable study of the true reality of the firms within the agreement.

The above equates to failure to comply with a legal duty (which forms part of the content of the deal) and means as a result, that the contract was broken, because at the moment of its signing the duty of correctness was not adhered to, which constitutes this litis, to satisfy the duty to inform on the basic aspects of the agreed contract. An untrue report influenced the contract drafting and, of course its signing, as [the defendant] transferred some stocks and shares at an intrinsic value far in excess of the value of shares he received from [the claimant] the latter violated, without a shadow of doubt, the good faith requirement which should be evident in all legal dealings. That breach of duty to act in good faith, which ultimately caused damage to [the claimant], in negotiating shares at a much lower price than their intrinsic value is what shall be compensated in the manner detailed below.”

When seen in context, it is apparent both that the citation advanced by Professor Castro did not fully set out the sense of the award and that the award was not seeking to lay down a general principle that the duty of good faith always imposes an obligation upon a party to the extent contended for by Professor Castro in the Experts’ Joint Statement. The apparently broad statement of principle derived from the particular relationship of trust (not simply inequality), which gave rise to an obligation to inform of all points of interest. The specificity of the circumstances to which the citation relates is clear from the (qualified) indication that the relationship of trust excludes any responsibility upon the parties to investigate or to get informed. Understood in this way, the passage has obvious logic and coherence; but I do not accept that it provides material support for the very broad statements of principle advanced by Professor Castro. It is also material to note that the arbitral tribunal did not regard the breach of trust as giving rise to pre-contractual liability. This is clear from the reference to the contract being broken “because at the moment of its signing

These passages form the high-point of support for Professor Castro’s argument in suggesting that, as a general proposition, good faith imposes on the debtor an obligation to avoid any behaviour that may cause damage to the other party. It is said that these principles derive from Article 1603 of the Civil Code and Article 871 of the Commercial Code; but Article 1603 concerns performance of contracts and not their execution or any stage before that; and Article 871, while imposing an obligation on

I remind myself that I am required to apply Colombian Law as it would be applied by the Supreme Court of Colombia, which is notably silent on the existence of a right to claim compensation as a general consequence of a breach of good faith in the precontractual period and at the moment of execution. While I accept that the terms of the Arbitral Award of 29 November 2006 support the broad proposition for which Professor Castro contends, the reasoning goes well beyond what is required by the terms of the Civil and Commercial Codes, and is not supported by any judicial decision of the higher courts of Colombia that has been cited to me. On the materials that I have, I find the Arbitral Award of 29 November 2006 to be unjustifiably expansive and not corroborated by Colombian Law or Auxiliary Criteria for the Interpretation of the Law.

Professor Castro cited one passage from her first learned text (on the Formation of Contracts, by Professor Pedro Munar Cadena, which Professor Castro edited and to which both experts referred in the course of their evidence); but the Claimants requested that I read the chapter from which it came, and I have done so {I2/15T/661}. The context for Professor Castro’s citation is provided by the preceding paragraph, in which the author states (at p. 666) that the old principle of caveat emptor:

“…has a fairly relative scope, in that there are many hypotheses in which, both in the pre-contractual and the contractual sphere, those involved are obliged to provide true and complete information to the other party, particularly, but not exclusively, when concerning consumer relationships or when one of the parties is a professional in the matter and the other is not.

That being the case, as has been highlighted by the Supreme Court of Justice, deceitful indications or, where applicable, the reticence of the contracting parties in the preliminary phase of the negotiations are not indifferent to legislation, given that within the duties of correctness and loyalty which are demanded from all persons involved in business deals, is the duty concerning information or declarations which they are called to provide, where applicable, as regards to the object, circumstances or distinctive features of the agreement on track for completion and whose importance, although variable, is substantial for the purposes of freeing the consent of the counter party from artifices or defects which may affect it.”

Later in the chapter (at p.667) the learned author summarises the scope of the obligation as follows:

“As regards the object and content of information which subjects must provide, it is important to highlight, firstly, that its aim is to make the other aware of the “scope, extent or magnitude of the obligations which are to be addressed”, which entails giving notice of the different risks which may arise from the consolidation of the deal. In that vein, the information must be provided:

a)

Objectively, in that any additional reflection that stands to influence the decision of the counter party must be taken as advice;

b)

It must be given completely, properly and truly;

c)

It must [be] limited to what the informant knows;

d)

It must refer to questions of importance, that is, those that influence the counter parties consent, as tends to occur with questions relating to the negotiable object, the cause and effect.”

Implicit in this statement is that the obligation to provide information does not extend to information which is or should be known to the other party. This is made explicit at (p.669) where the learned author says:

“Limits of the obligations to inform and give advice.

It must be stated that these two obligations are truly relevant in situations where one of the parties is a professional and the other a lay person. If both parties know or should know by virtue of their work, the scope of the contract which they aspire to execute, the obligation to inform or to offer advice disappears or is at least attenuated.”

Both parties referred in closing submissions to a passage at {I2/15T/671} where, after referring to the well-recognised liability that may arise if a party breaks off negotiations in bad faith, the learned author refers to “other hypotheses of precontractual liability.” What is suggested is that where there is an action for nullity (on the basis of error or dolo) there may be scope for compensatory damages. The passage is not straightforward and, as a result of a reference to “foreign doctrine” is not obviously making a clear statement of current Colombian law as opposed to a hypothesis of what Colombian law might be where the right to nullity is established.

Professor Castro’s second academic text is an Article by Chinchilla (2011). It provides a general description of the duty to inform with loyalty and diligence in order that the contract serves the purposes of both parties and that the parties are required to cooperate for its performance, under objective good faith, a proposition with which Professor Vallejo agrees. Echoing a passage from Professor Cadena’s chapter, where he uses the example of the obligation upon a surgeon possessed of special skill and knowledge of risks to provide sufficient information to enable the patient to decide whether to go ahead with an operation, Chinchilla says:

“The duty of information is an obligation upon the parties, for the purposes of fulfilment of the postulate of good faith. In addition, we can establish that the duty of information finds its reason for being in two assumptions: first, in an imbalance of knowledge between the contacting parties, which allows the informed counterparty to be required to communicate regarding the full content of the contract to be agreed. Secondly, in the clarity that must sustain consent, a clarity which includes not only understanding the contractual operation to be entered into, but also the full understanding of the extent of the rights and obligations which are thereby acquired, including an evaluation of the risks involved in the contract.

…

In that regard, the qualities of the contracting parties will determine the scope of the fulfilment of the duty of information, such that its specialised role or its privileged position with respect to the other increases the duty of information and makes it more rigorous at the time it is required, in which case the duty of advice arises to complement this duty.”

Taken together, these passages make the important points that the scope of the obligation to give information is a function of the respective positions of the parties; and that the reason for the existence of a duty of information lies in the need to sustain consent. These points support the agreed position as expressed by the experts that breach of the duty at the stage the contract is being formed may give a right to avoid the contract. They do not support the proposition that there will be a free-standing right to claim damages even if the contract is not set aside on the grounds that consent has been vitiated.

Professor Castro’s final citation does not appear to comment on Colombian laws or precedents. I am unable to attach any weight to it.

Pulling these strands together, I conclude that:

I will review whether the Defendant acted in breach of its obligation of good faith towards the Claimants with whom it contracted on a case by case basis. A number of features will be relevant when considering the scope of the duty of information in any given case:

Allied to the dispute about the scope of the duty of good faith was a dispute between the experts about what remedies were available in the event that the duty was breached. The experts agreed that the remedy for pre-contractual breaches of the duty of good faith if no contract is concluded as a result is compensatory damages: see [76] above.

It is also agreed that if a contract has been concluded as a result of a breach of the duty of good faith, it is open to the offended party to apply to set aside the contract on the grounds of dolo. Embedded in Professor Castro’s disagreement about the scope of the duty, as shown by the citations she subsequently provided, was the proposition that in such circumstances the offended party could maintain an action for damages even if the contract was not set aside.

In his note in reply to Professor Castro’s list of materials, Professor Vallejo provided two further citations at {I2/12.1/539.3}:

The citation from Bianca is consistent with passages from the Decision of the Supreme Court dated 23 May 2005 which support the existence of an entitlement to compensation where contract negotiations are frustrated to place the affected party in the same economic situation as if the frustrated negotiations had not taken place. This is the well-established doctrine identified by the experts in their agreed statement. The relevant passage continues “…however, such compensation may not be claimed under the same conditions to those that would originate due to failure to perform an obligation, as if the purported contract had been concluded.”: see {I2/12.1/539.2}. This emphasises that the agreed doctrine is dependent upon no contract having been concluded. Although the passage does not expressly say that no other remedy may flow as a result of pre-contractual bad faith, there is no suggestion that it may do so. Specifically, there is no support for Professor Castro’s contention that pre-contractual bad faith may give rise to a free-standing claim for damages where a contract has been concluded.

Professor Castro has not referred to any article of the Civil or Commercial Codes that supports the existence of such a free-standing remedy; nor has she referred to any judicial authority establishing or supporting its existence. Professor Vallejo’s evidence is that he is not aware of a single reported case in which damages have been awarded for breach of the duty of good faith, in circumstances where the parties have subsequently entered into a contract. In his opinion, to do so would be clearly a contravention of Colombian Law. His position is supported by his two additional citations, which include a decision of the Supreme Court that is in point. The existence of such a remedy would also be inconsistent with the agreed statement of the experts that “Bad faith does not constitute a free-standing cause of action. If bad faith is relied on it must be framed within a legally recognised cause of action.” To my mind, the system of remedies agreed between the experts as set out at [76] above provides a coherent structure: Colombian law provides a compensatory remedy in the event that the Defendant frustrates the formation of a contract; if, however, a contract

For these reasons I prefer the evidence of Professor Vallejo and conclude that, where parties enter into a contract, it has not been shown that Colombian law recognises a free standing action for damages for loss suffered as a result of breach of the duty of good faith in the period up to and including its execution.

It is common ground that the contracts in issue in this litigation are contracts of mutual benefit of the parties {Day21/69:3} ff. Under such contracts the debtor/obligor must perform his obligations with due care and diligence and will be liable for breach resulting from medium or ordinary fault pursuant to the provisions of Articles 1604 and 63 of the Civil Code {H23.2/7/451}. The relevant standard of care is that of the dutiful merchant placed in the same external circumstances of the merchant {H23.2/7/451}. The exercise of contractual rights is governed by the doctrine of abuse of rights, which is connected but different {Day21/60:3} ff. The Claimants submit that it is implausible that the victim of a negligent exercise of rights under a contract would have no remedy under Colombian law. Professor Vallejo disagreed, and so do I. The submission takes no account of the clear separation that Colombian law recognises between claims in contract and in tort, and attempts to elide tortious principles with those that apply in contract. Where a contract confers rights upon a party, they must be exercised in good faith; and an abuse of those rights can give rise to a remedy as set out below. In addition, if a party’s conduct amounts to a breach of contract, Colombian law provides remedies. There is, to my mind, no compelling reason why conduct in good faith which falls within the terms of the agreement between the parties should give rise to a quasi-tortious remedy in contract.

The experts agreed the following {H23.2/7/455}:

“Principle: There is no legal definition of abuse of rights. A person may not abuse his legal or contractual rights and cause damage to another person. Such abuse is the exercise of rights to prejudice another person or to obtain an improper advantage at the expense of that person.

Scope: Abuse of rights may occur in contract or in tort.

Legal effect: The abuser is liable to compensate the damages caused to the other person.

Test for abuse of rights in contact: In order for a Court of

Justice to be satisfied that a party to a contract abused its rights,

it is necessary in our opinion to demonstrate all of the following:

•

The existence of a contract between the Claimant and Defendant.

•

Identification of the nature and scope of the contract according to the law governing the contract.

•

Either (i) the inclusion of an abusive contractual stipulation, in the sense of a provision which significantly departs from the standard permissible terms governing the respective contract or activity, and in a manner contrary to the normal practices of the trade; or (ii) exercising a right in an improper way and which distorts its genuine purpose. And,

•

That the abusive contractual stipulation or abusive behaviour causes an unfair economic loss to the Claimant.

Test for abuse of rights in tort: The abuse of rights may give rise to a non-contractual liability. In order for a Court to be satisfied that an abuse of rights exists, it is necessary for the Claimant to prove:

•

That the Defendant possesses a right, which must be defined precisely in its nature and legal scope.

•

That the Defendant acted or took particular steps on the assumption that it was exercising its right.

•

A contradiction between the scope of the right (as previously defined) and the scope of the conduct performed by the Defendant; in the sense that the Defendant’s conduct deviated from the purpose of the right by exceeding its normal boundaries.

•

Damages resulting to the Claimant as a consequence of the conduct of the Defendant exceeding the legitimate exercise of the right or deviating from it.”

Two areas of disagreement emerged which were:

Both experts relied upon passages from the decision of the Supreme Court on 19 October 1994. The case concerned a loan obtained by a building entrepreneur from a

The passages relied upon from the judgment are as follows:

“According to the jurisprudence doctrine accepted by the Court, there is abuse of rights when the owner of the right exercises it with malice or negligence, that is, when in the exercise of a right harm is caused to another, either with the intention to cause harm or without the diligence and care that men ordinarily employ in their actions and business. Fault in the exercise of the right, the absence of legitimate interest or deviation from the purpose for which the rights have been granted are used by the judge as an orientating criterion in the application of the above mentioned theory. It may be present at the formation stage of the contact, during its performance, and even in the post-contractual period.

(…) regarding the autonomy of private will and the set of faculties that persons have by virtue of the same, which are condensed into the power to enter into, or not enter into a contract, to decide with whom to execute the contact and to agree on the provisions that will govern such relationship, abusive conducts may arise which, if causing harm to interests not protected otherwise, entitle the aggrieved party, even whilst bound by the agreement, and [because of its binding consequences], to demand the corresponding compensation.

And a persuasive example of this type of irregular behaviour can be found in the exercise of ‘bargaining power’ by a party who is in fact or by law in a dominant position in the trading of capital, goods and services, and has not only determined from the outset the conditions in which the contract is executed, but in the formation and performance phases has the control of such conditions, giving rise to clear abuse – bearing in mind the particular circumstances of the case - advantage is taken of the dominant position, by action or omission, with detriment to the financial balance of the agreement” (Italics added)

Professor Castro relies upon Article 333 of the Constitution which provides that the Colombian State shall avoid or control any abuse of dominant positions in the domestic market by persons or companies. Professor Vallejo responds that dominant position is defined for the purposes of Article 333 as being able to determine directly or indirectly the conditions of a market, and that Article 333 is concerned with conduct in relation to competitors and the protection of the relevant market {H23.2/7/456}. It is neither possible nor necessary to resolve this sub-issue, because it is clear from the facts of the Supreme Court decision on 19 October 1994 that the existence of a dominant position as between individual contracting parties (in that case the bank and the borrower) is relevant when investigating the issue of abuse of rights. It is virtually self-evident that an imbalance in power may enable the dominant party to impose “a provision which significantly departs from the standard permissible terms governing the respective contract or activity, and in a manner contrary to the normal practices of the trade” or to “[exercise] a right in an improper way and which distorts its genuine purpose” but does not justify an assumption that it will have done so. To that extent, I prefer the evidence of Professor Castro that what she calls an asymmetry of information or power may be relevant to the question whether there has been an abuse of rights.

The italicised extracts from the judgment of 19 October 1994, if taken on their own, support the proposition that negligence in the exercise of contractual rights may of itself justify a finding of abuse of rights. If that were correct, it would give an extended meaning to the term “abuse”; but it is not. As set out above, the experts are agreed that an element of abuse of rights is that the right should be exercised in a way which “distorts its proper purpose” or, in the case of imposition of terms, “significantly departs from the standard permissible terms governing the respective contract or activity, and in a manner contrary to the normal practices of the trade.” Professor Castro expressed this requirement in different terms in her original report as follows:

“The conditions that have been established as to create the abuse of rights are: i) a behaviour permitted by law; ii) the use of the right, contrary to the clear purposes of the law; iii) intention or negligence by the author of the abusive behaviour.” (Italics added) {H14/1/24} at [50].

The need for the additional element of deviation from the proper purposes of the right is also clear from the judgment of 19 October 1994 in the statement that “the absence of legitimate interest or deviation from the purpose for which the rights have been granted are used by the judge as an orientating criterion in the application of the above mentioned theory”.

I therefore reject the submission that the negligent exercise of rights, without more, may give rise to a finding of abuse of rights. There is no conceptual limit to the circumstances in which abuse of rights may occur either in the process of contract formation or during contract performance, but the test to be applied will be that agreed by the experts, including all of the elements identified by Professor Castro in her original report. The mere fact that a contract term is onerous may raise a question; but it does not demonstrate or necessarily evidence abuse of rights. In this regard I accept the evidence of Professor Vallejo (at {Day23/63:19}) that, while a contract term providing for compensation of damage which was not a genuine preestimate of the damage could be the result of an abuse of rights, it is necessary to apply the agreed test to determine whether it is so. Amongst the factors to be taken into account in determining whether there has been an abuse of rights would be the existence of a statutory regulatory scheme and whether the contract as a whole (or the particular provision) fits in or is compatible with that scheme, the approach adopted in

The Claimants submitted that in addressing the issue of abuse of rights, the Court should pay special attention to the fact that the landowners “must accept the establishment of the ROW on their properties, or else they face potential expropriation by the State.” I accept that this is a feature to be borne in mind, and I will do so. At the same time, it should not be forgotten that the backdrop of potential expropriation is part of the balance between private and public interests established by the Colombian State and that the articles establishing that balance treat expropriation as a last resort, which only comes into play once the entrepreneur makes an application and provides a list of “the steps that have been taken to get what is required through a contract freely entered into with [the landowners]”: see [38] above. It is therefore clear that the Colombian legal framework does not treat the possibility of expropriation as automatically depriving the landowner of freedom of contract. That does not, of course, determine whether there has or has not been an abuse of rights in a given case.

The experts agreed the following {H23.2/7/458}:

“(i)

The parties may contractually stipulate that an existing agreement is superseded or extinguished by a later agreement. But this does not mean that a specific contractual provision is required in order that one obligation replaces the other.

(ii)

There are contracts that are preliminary and temporary by their own nature, such as promissory agreements, which are entered to prepare the execution of a future and definitive contract. When the promised (future) contract is executed, the preparatory contract is superseded and no longer produces effects. …

(iii)

A third hypothesis is ruled by the law: an obligation is superseded and extinguished by a later obligation, even without an express agreement, when it appears undoubtedly that the intention of the parties was to replace or substitute an existing obligation for a new obligation (animus novandi). It is for the Court to decide whether in the absence of an express contractual provision, as already explained, the parties had the intention that the previous agreement (and its obligations) is superseded by a new agreement amongst them.

(iv)

If no intention to novate appears, the two obligations shall be regarded as coexistent and the old obligation will produce effects in what is not contrary to the new obligation, and the privileges and guarantees of the

former shall subsist to that extent.”

In response to questions from the Court, Professor Vallejo said that even if the inconsistency between the first contract and the second contract does not cover the whole of the first contract, the Court may be driven to the conclusion that the inconsistencies between the two contracts, though not complete, was so great that the second contract superseded the first as a whole {Day22/114:15} ff. I accept that evidence, the question in any given case being whether the extent of the inconsistencies between the contracts demonstrates an intention on the part of the contracting parties that the first contract is to be superseded as a whole.

Framework agreements are not defined as such in Colombian law but the expression is used and well understood by lawyers in Colombia. The experts are agreed on a working definition: a framework agreement is a transaction whereby the parties set forth general parameters to subject future or eventual contracts amongst them but without assuming specific obligations. The framework agreement provides rules that must be taken into consideration in future agreements between the same parties. This agreement does not impose any formal requirements and no such requirements are imposed by Colombian law.

By then end of the trial any suggestion that there existed unilateral agreements on the facts of this case had fallen away: {Day20/187:10} ff.

The role of notaries in the Colombian legal system is governed by Decree 960 of 1970, among other regulations. The articles that are of particular interest in the present case are:

The experts reached agreement as follows {H23.2/7/475}:

“Both experts agree that the constitution of the oil easement requires the formality of a public deed with the intervention of a Notary, according to Colombian law.

The Notary shall provide legal advice to the interested parties, if his assistance is requested.”

They disagreed about the extent of the Notary’s duty to provide legal advice.

Article 7 refers to the provision of advice and counselling to all the parties having first established that “the Notary is at the service of the law and not of the parties.” Taken together with the public function of notarising documents that are to become public deeds capable of affecting legal rights and obligations of non-parties, this implies both that the primary function of the Notary is to ensure that the notarised document is valid and reliable for its public purpose and that it is not the function of the Notary to advise either or both of the parties as to the merits of the proposed transaction for that party. Those implications are strengthened by Article 9, which places on the Notary

Articles 14, 17 and 35 establish the procedure to be adopted when the parties present themselves before a Notary with a view to executing a public deed. Pursuant to Article 14, the first two stages of the process overseen by the Notary (“reception” and “extension”) involve the reduction to writing of the declarations of the parties. Article 17 requires the Notary to review the parties’ declarations and to verify that the presented draft is consistent with the purpose of the attendants. If and to the extent that it is not, he may suggest amendments that are necessary in order to achieve consistency. To that extent he is clearly entitled to give legal advice about the content of the document, but that advice goes to its consistency with the parties’ declared purpose of the transaction: it does not go to whether the transaction is in the interests of the parties (or either of them). Article 35 then requires the deed to be read in its entirety either by the Notary or by the interested parties or by the person appointed by them, who may modify the deed as they consider appropriate before expressing their acceptance. This would naturally be an opportunity for a prospective party to try to modify the deed to his advantage, but it does not follow that it is the Notary’s function to address or advise on that question. Rather, it would be consistent with his previously stated obligations for the Notary’s interest at this stage to be to ensure that the necessary formalities are all in place and that the document is consistent with the parties’ declarations and purpose.

Professor Castro did not mention Article 7 in her report. She gave as her opinion that the main function of the Notary is to give authenticity to the acts executed with his/her intervention. Her opinion was that “a Notary does not ensure that the parties understand the content or that the contents are true. … [The] Notary does not have a function or obligation to give legal advice to the parties as to the contents of a particular deed that is to be signed”; and that “for contracts where a public deed executed before a Notary Public is required by law, notarization amounts to compliance with [the] formal requirement[s].” {H14/1/46} at [113], [116]. At one point in her evidence, she said that the Notary does not review the contents of the document {Day21/77:18}, but it was not clear whether she meant this as an absolute statement or as meaning that the Notary would not review the contents of the document with a view to giving partial legal advice to one side or the other. If she meant the former, she would have been wrong since it would be directly contrary to the express terms of Article 17. If she meant the latter, the position is more complicated.

Professor Vallejo gave more detailed consideration to the role of the Notary in his report at {H15/1/157}, [700] ff. Relying upon Articles 14, 17 and 35 he stated as his opinion that “the Notary has a duty to ensure that both parties enter into the transaction freely and that the transaction reflects the will of both parties”; and that

“the Notary … will review the document to ensure that it complies with those requirements and formalities. The Notary has an obligation to review the declarations proposed by the parties to verify their conformity with the purpose that the parties want to achieve through the transaction and verify that a clear language has been used in the document.” Professor Castro agreed with both of these statements, subject to her over-riding qualification that the function of the Notary was formal and did not include giving advice on what she described as the “substance” of the agreement. The furthest that she would go was to accept that, if a party came before a Notary and said he or she did not understand the proposed agreement, the Notary would provide a general explanation of the nature of the agreement (for example, that it is a contract for the sale of property) but not of specific provisions (such as waivers or settlement clauses). And she accepted that if an illiterate campesino farmer were to ask the Notary for advice on material or substantial aspects it might be given, though that is not the role of the Notary {Day21/80:20}.

In his original report Professor Vallejo had not stated as his opinion that the Notary was under an obligation to provide legal advice on the merits or substance of the agreement. He appeared to go further in his supplemental report when saying, in reliance on Article 7, that “Notary public offices in Colombia have the duty to advise and counsel the parties requesting their assistance; especially in the case of contracts that are executed with their intervention as a matter of law (for example an easement deed affecting real property). Under the good faith principle, a party may not sign a contract without understanding its terms, without seeking explanations from the other party and without requesting clarifications from the Notary (a third independent expert), and later plead avoidance of the contract/further compensation with the argument of illiteracy.” {H15/2/254} at [111]. By Professor Vallejo’s normal high standards of precision, this passage is surprisingly vague in two respects. First, he did not identify the scope of the duty to advise, leaving it unclear whether his reference to the parties “requesting [the Notary’s] assistance” was a reference to seeking the overall assistance outlined in the Articles or to seeking specific assistance on a matter of legal substance. Second, his reference to a party’s failure to request “clarifications” from the Notary gave no indication of the nature of the clarifications that he had in mind. He provided no further precision or elaboration in the joint statement, merely saying that “the Notary has a duty to ensure that both parties enter into the transaction freely and that the transaction reflects the will of both parties”; and “the law does not limit the counselling function of the Notary to the verification of the compliance of the legal formalities required for a public deed. As per the quoted norms, this function of the Notary is much wider, and covers all the issues raised by the parties executing the contract related to the content of the agreement, including doubts, misunderstandings or lack of knowledge of the parties requesting the notarial advice.” {H23.2/7/474}. He did not state that the function of the Notary included advising on the merits for the particular party of the proposed transaction.

Professor Vallejo was extensively cross-examined on the role of the Notary at {Day22/115:21} ff. I accept that Professor Vallejo has direct experience of the workings of Notaries in very small municipalities {Day22/116:21}. He gave a general account of how a Notary in a small municipality would approach his obligations {Day22/120:4}. In summary, the Notary would ensure that the parties understood the transaction they were about to enter. If it became apparent that a party did not understand, the Notary would give an opportunity for discussion and explanation,

By the end of this evidence, it appeared that there was virtually no difference between the opinions of the two experts. The Claimants, however, submit that Professor Vallejo changed his evidence on the role of the Notary and that “the implausibility of Dr Vallejo’s original evidence on the role of the Notary is perhaps symptomatic of the credibility of his evidence generally.” I disagree on both counts. As summarised above and set out in greater detail in his original report, Professor Vallejo did not assert that the Notary was under a general duty to give legal advice on the desirability or otherwise of undertaking the obligations in the proposed agreement or to advise on how the relative position of a party to the proposed agreement might be improved; nor did he advocate such a general duty in his Supplemental Report. The nearest he came to it was in the passages in the Joint Statement that I have set out above, particularly the phrase “all the issues raised by the parties executing the contract…”. However, he had (typically) made clear in his report that his opinion was closely based upon the terms of the relevant Articles, including Article 7 with its reference to the Notary being at the service of the law and not the parties. His additional words in the Joint Statement “including doubts, misunderstandings or lack of knowledge of the parties requesting the notarial advice” as examples of issues on which the Notary would advise was consistent with the overall thrust of his evidence, namely that it was the Notary’s function to ensure that the parties understand the agreement they are proposing to execute; and he did not include any examples that necessarily went outside those limits.

Each expert said in cross-examination that a Notary might give a general explanation of a transaction if requested. I do not see that as inconsistent with the Notary’s responsibility under Article 17 to review the declarations presented by the parties and to establish that they are consistent with the purpose of the attendants. Nor is the giving of a general explanation inconsistent with the Article 7 obligation to be at the service of the law and not of the parties: the giving of a general explanation may be an essential step in ensuring that the legal norm established by Article 17 is properly served.

In case there be any residual doubt about the scope of the Notary’s duty, I would summarise it as being based upon the terms of the Articles to which I have referred. The Notary is required to ensure that the formal requirements of the proposed transaction are complied with. He is also required to ensure that the written transaction complies with the purposes and will of the parties as declared to him. He will provide explanations (which may involve giving his legal opinion) about matters raised with him concerning the content of the proposed agreement so far as they concern establishing that the proposed transaction complies with the purposes and will of the parties as declared to him. He will not, as a general rule, give partial legal advice to one or more of the parties on the desirability of entering into the transaction as a whole or on how to improve their relative positions by amending the proposed draft and is under no formal duty to do so. Whether the parties make enquiries of him

I do not consider that either expert’s general credibility is adversely affected by their evidence on the topic of Notaries.

Under Colombian law it is generally possible to assign either part or all of a party’s contractual rights and contractual obligations. Unless prohibited by law or by prior agreement of the parties to the contract, the assignment can be effected without the consent of the other party to the contract {H14/1/52} at [132], [133]. The parties affected by an assignment are described as the assignor, the assignee and the assigned. In the context of this litigation, where the Defendant claims that it has assigned its obligations under the contracts it had entered into with the Claimants, the Defendant would be the assignor and the Claimants the assigned. An assignment takes effect between the assignor and assignee on execution of the agreement to assign, but to make the assignment binding (oponible) on the assigned, a notice of the assignment must be served so that the assigned is bound to satisfy any obligations towards or demand any rights from the assignee from that moment forward; or the assigned must demonstrate acceptance of the assignment {H14/1/53} at [134], {H23.2/7/487}.

The most relevant articles of the commercial code are:

“Article 888: The substitution can be effected in writing or orally, depending on whether the contract is in writing or not. (888-1)

If the contract is contained in a public deed, the assignment may be effected by means of a private written document, with the previous authentication of the assignor’s signature, if it is not authentic or is not presumed to be authentic; but it shall not produce effects with respect to third parties until it has been recorded in the corresponding registry. (888-2)

If the contract is contained in a registered document which, although it is not a negotiable instrument, is granted or includes the clause “to the order of” or another equivalent clause, the endorsement of the document shall be sufficient for the endorsee to substitute the endorser in the relations derived from the contract.” (888-3)

Article 893: “If the assigned party makes reservation of not releasing the assignor, at the moment of authorising or accepting the assignment, or when its notified to him, in the case that he had not previously given his consent to it, the assigned party may demand from the assignor the performance of the obligations resulting from the contact, in case the assignee fails to perform such obligations, in which case the assigned party must inform the assignor of the default of the assignee within the following 10 days.”

Article 894: “The assignment of a contact produces legal effects between both the assignor and the assignee from the date of its execution; but with respect to the assigned party and third parties, it shall only produce effects from the [date of] notification or acceptance, except as provided under paragraph three of Article 888.”

Two issues divided the experts. The first was whether the assigned is deemed to be notified of an assignment contained in a deed on registration of the deed. The second is whether and when there may be tacit acceptance of an assignment.

The dispute between the experts centres on Articles 888-2 and 894 of the Commercial Code. It is accepted on all sides that Article 888-3 is not applicable. The Defendant contends that the effect of Article 888-2 is that if a contract of assignment is contained in a public deed, it binds the assigned whether or not the assigned is otherwise given notice of the assignment. The Claimants respond that the purpose of Article 888-2 is to lay down the formalities that must be complied with for a public deed to become effective as against third parties and is not to give notice of an assignment to the assignor’s counterparty to the original agreement. The Claimants submit that Article 894 is applicable and requires actual notice to be given to the assigned counterparty to the original agreement. The dispute is important because the Defendant says that it has effectively assigned both its rights and its obligations under the various ROW agreements it had entered into with the Claimants by Public Deed 4317 of 9 October 1995 {J13/51T/1} and that notice of that assignment was given by registration of the deed in the real property registry on and from 21 November 1996.

The high point for the Defendant’s argument is the general principle of Colombian law that once a deed has been registered it creates a presumption that everyone is informed of the transaction. Application of that principle would lead to the conclusion that everyone (including the Claimants) was informed of the assignment on and from 21 November 1996. That said, I accept the evidence of Professor Castro that the public registration of transactions over real estate has a special, public interest function: to record the legal status of the property for different purposes, in order to disclose the legal standing of the property for potential buyers or lenders, inheritance taxes and the like. Property and other legal rights existing over real estate must appear in the public registry, such as usufruct, easements, mortgages, as well as liens

I also accept the evidence of Professor Castro that the provisions of the Commercial Code establish a self-contained (sui generis) system for the assignment of commercial contracts {H23.2/7/490}. Viewed in isolation, the main thrust of Article 888 goes to formalities for executing assignments. Thus Article 888-1 lays down the general rule that the formalities for effecting an assignment are dependent upon whether the original contract was oral or in writing. Seen in this light, Article 888-2 is primarily concerned with how to execute the assignment of a contract that is contained in a public deed. That does not, however, determine the meaning to be attributed to the second clause of Article 888-2.

The language of the second clause (“… but it shall not produce effects with respect to third parties …”) bears comparison with the language of Article 894, which is agreed to establish the general requirement of notification or acceptance. First, the language of Article 894 (“… it shall only produce effects from the [date of] notification or acceptance …”) is very similar to that of the second clause of Article 888-2, set out above. Second, Article 888-2 refers only to “third parties” while Article 894 refers to “the assigned party and third parties” (in Spanish “contratante cedido y de terceros”). There is no reason to think that this distinction is accidental. It supports the conclusion that the second clause of 888-2 neither refers nor applies to the assigned party. On this interpretation the combined effect of Articles 888-2 and 894 would be that an assignment by public deed only produces effects as against the assigned party on actual notification or acceptance (Article 894) but, as against third parties, recording the public deed in the corresponding registry is the formal prerequisite to the producing of effects. That is coherent and intelligible since it combines the public purpose of registration (namely informing those who would not otherwise have access or entitlement to the information) while preserving the right of the assigned (because of its much closer connection with the transaction) to be notified. It is not without difficulty because it requires “third parties” in Article 888-2 to be taken as meaning “third parties to the original contract” rather than “third parties to the assignment”. However, that is not an insuperable objection given that third parties to the original contract will also be third parties to the assignment unless they happen to be the assignee, in which case their position is express and clear. Interpreting “third parties” in Article 888-2 in this way enables consistency to be achieved with Article 894 and seems to me to be logical and correct.

I would therefore reject the Defendant’s submission purely as a matter of the correct interpretation of Article 888 in the light of Article 894. If, however, that interpretation were not correct and there is a conflict between Articles 888 and 894, the terms of Article 894 should prevail pursuant to Article 10 of the Civil Code: see [23] above.

This conclusion has the desirable side-effect of avoiding what Professor Castro rightly described as “extremely unfair consequences” that could and probably would follow from the Defendant’s interpretation {H14/3/265} at [27]. Article 893 (set out above) provides valuable protection for an assigned contracting party, which is irrelevant to strangers to the contract: he has 10 days following notification to demand performance of the obligation from the assignor. That protection would be lost unless the Claimant happened to inspect the property register (which would carry a cost) within 10 days of registration. The arbitrary nature of that state of affairs is demonstrated by the fact that the public deed in question, though dated 9 October 1995, was not registered until 21 November 1996. No reason has been advanced why any of the Claimants should have inspected the register in the 10 days after 21 November 1996 and none is readily conceivable. The Defendant’s interpretation would have the bizarre consequence that the provisions for public registration, which are intended to provide information and protection for third parties, would have precisely the opposite effect on the assigned, who would lose the right to actual notice and, with it, his protection.

On this issue I prefer the evidence of Professor Castro and reject that of Professor Vallejo.

The Experts were agreed that:

“… the acceptance of the assignment of a contractual position can be effected either expressly or tacitly by the assigned party. It is understood that tacit acceptance takes place when there is an unequivocal behaviour of the assigned party amounting to performance or continuance [sic] performance towards the assignee.” {H23.2/7/492}

Professor Castro’s view is that there cannot be tacit acceptance unless the accepting party has a clear understanding that an assignment has occurred:

“It is true that the law does not forbid tacit acceptance to take place. It may happen when there is an unequivocal behaviour of the “contratante cedido” accepting the assignee instead of the assignor as a new contracting party, but it requires a clear understanding by the other contracting party that an assignment has been effected.” {H23.2/7/493}

Professor Vallejo relies upon Article 894 (see above), which provides that an assignment shall produce effects against the assigned “from the [date of] notification or acceptance”: this shows that acceptance can take place without notification. He also relies upon his agreement with Professor Castro that tacit acceptance occurs where there is unequivocal conduct on the part of the assigned “amounting to performance or [continued] performance towards the assignee”; and upon the general principle of Colombian law that takes account of intentions that are externalised and not those that remain hidden in the mind of the party. These principles, in his opinion, show that Colombian law will look to unequivocal externalised conduct to determine whether a party has accepted an assignment in a case where notice has not been given. He added that:

“Tacit acceptance consists of any conduct which would be consistent with his acceptance of the assignee as the new party to the contract. Tacit acceptance would include, for example, any of the following: entering into negotiations related to the same contract with the assignee, receiving payment from the assignee, demanding compliance from the assignee and not from the assignor, accepting compliance of obligations by the assignee and not the assignor.” {H23.2/7/493}

In cross-examination, Professor Castro appeared to accept that unequivocal behaviour would be sufficient but was at pains to point out that behaviour that appears to be merely consistent with acceptance is not sufficient: she gave the example of an assigned who pays the assignee in circumstances that would be consistent with acceptance of an assignment but which would also be consistent with paying the assignee in the belief that the assignee is in fact acting as the assignor’s mandated agent: see, for example, {Day21/114:12}. Having emphasised that point, she accepted that it is necessary to assess the conduct of the parties objectively in order to ascertain whether there has been an unequivocal tacit acceptance {Day21/121:6} ff. Later she appeared to revert to a requirement of actual understanding (as opposed to unequivocal externalised behaviour) when asserting that dealing with another person (i.e. the assignee) without any reservation “does not necessarily imply a tacit acceptance if there is absence of at least some knowledge … that there has been an assignment of contract …” {Day21/126:15} ff.

If and to the extent that Professor Castro’s final position was that the assigned must have actual subjective knowledge of an assignment before he can tacitly accept it, I reject that evidence. I prefer and accept Professor Vallejo’s evidence about the approach that Colombian law will take to objectively unequivocal acts and the distinction drawn by Article 894 between notification and acceptance. In consequence, what is required for tacit acceptance is (as the experts agreed) “unequivocal behaviour of the assigned party amounting to performance or [continued] performance towards the assignee.” That said, acceptance of Professor Vallejo’s reasoning leads me also to conclude that he went too far in saying that tacit acceptance “consists of any conduct which would be consistent with his acceptance of the assignee as the new party to the contract.” Mere consistency with acceptance is not enough: for conduct to be objectively unequivocal it must also be inconsistent with any other interpretation.

It may well be that a payment to the assignee that is made by an assigned without understanding even in general terms that there has been an assignment (or, in normal language and understanding, a change) will be seen to be equivocal when all the circumstances are considered; but subjective understanding is not the touchstone to be applied. Thus, for example, to let a third-party engineering contractor onto one’s land to carry out works pursuant to an agreement with someone else may well be equivocal because, without more, it may be consistent with the engineering contractor carrying out works on behalf of that other person; but entering into a formal settlement agreement with the engineering contractor in respect of the damage he is alleged to have caused may carry other implications.

I consider the application of these principles to the facts of the present cases later in Section 3 and when reviewing the individual Lead Cases.

The conditions that must be satisfied to establish civil contractual liability and for a claimant to be entitled to an award of compensation for damages are agreed {H23.2/7/495}:

“a)

An existent valid and binding contract between the

Claimant and the Defendant;

b)

The Defendant has not fulfilled his contractual obligation;

c)

There is fault or dolo on the side of the Defendant. The Defendant is liable when his conduct falls below the legal or contractual standard which is applicable depending on the kind of contract.

Fault is presumed against the Defendant when he has assumed a specific result obligation towards the Claimant and the result is not achieved (obligaciones de resultado). When the obligation is of “best efforts” (obligaciones de medio), the negligence of the Defendant is not presumed if the desired result is not achieved, and the Claimant has the burden to prove the negligence of the Defendant.

Regarding the above classification of contractual obligations, Colombian Professor Alvaro Perez Vives has observed: In the obligation to achieve a specific result, the obligator/debtor undertakes to produce a specific, precise and determined outcome. Relevant examples of this type of obligations are: to transfer the property of the goods sold to the buyer, to refrain from certain conduct, and the transportation of persons or goods. Failure to obtain the promised result makes the obligor/debtor contractually liable. In order to escape liability, the obligor/debtor must demonstrate an extraneous cause (i.e. force majeure, acts of God, the exclusive negligence of the obligee/creditor, and the exclusive conduct of a third party).

Differently, in obligations of best efforts the obligor/debtor does not undertake to achieve a precise and determinate result in favour of the obligee/creditor; but instead to act with due diligence and care. In this type of contractual obligations, the obligor/debtor only commits himself to use the means which are ordinarily adequate to obtain the required result, without the obligation to achieve it. When the desired result is not obtained, in spite of the diligence employed, there is no fault from the debtor/obligor and no liability attaches to him. Such are the obligations assumed by certain professionals, as for example, doctors. In other words, in best efforts obligations the obligator/debtor may escape liability by proving due diligence and care in the circumstances of the case.

d)

Damage has been caused to the Claimant by the Defendant. To be recoverable, all damages must be both certain and direct.

e)

A direct causal link exists between the malicious or negligent act or omission of the Defendant and the alleged damage suffered by the Claimant.”

In the absence of dolo, the Claimant is only entitled to recover for direct damage which was foreseen or could have been foreseen at the time the contract was executed {H23.2/7/497}. In order to prove dolo, the Claimant must prove that the Defendant deliberately breached the contract with the intention to cause harm to the Claimant; or entered into the contract knowing in advance that it could not perform its contractual obligations towards the Claimant {H23.2/7/499}. If dolo is proved, the Claimant is entitled to recover unforeseeable as well as foreseeable and foreseen damages {H23.2/7/498}. For these purposes, gross negligence is equated with dolo as a matter of law. Thus demonstration of reckless behaviour on the side of the Defendant would entitle a Claimant to rely on Article 1616 of the Civil Code and to recover as if dolo had been proved {H23.2/7/499}.

The experts recorded agreement was in the following terms:

“Contract liability and tort liability are different under Colombian law. Each type of liability is governed by a different set of rules in the Civil Code. There are exceptional cases in which liability in tort may arise even if there is a contract between the Claimant and the Defendant. There is no statute under Colombian law dealing with this particular issue.

The reason why concurrent liability claims – for breach of contract and tort – are prohibited is the avoidance of collecting the same damages twice, because this could lead to the unjust enrichment of the Claimant.

A Claimant must select the type of action intended properly, so as to channel his claim against the Defendant either under the contractual rules or under the tort rules, which are different.

The decision as to whether to bring the claim in tort or in contract is not a matter of choice for the Claimant: if the alleged damages result from the breach of a contractual obligation, the Claimant must pursue his claim under the contract liability regime.

Test on concurrent liability claims:

(a)

If the parties entered into a contract which governed the activities which are the subject matter of the alleged claim, they cannot pursue damages in tort. If, on the other hand, the alleged wrong and the acts or omissions relied on by the Claimant are extraneous to the contract, he would prima facie be entitled to pursue a claim in tort.

(b)

In order to determine whether the alleged wrong and the act or omissions are extraneous to the contract, it is necessary to identify the nature and scope of the obligations of the parties arising under the contract.” {H23.2/7/500}

This agreement gave rise to some debate which focussed on the distinction between (a) the right to pursue a claim simultaneously in tort and contract (in the sense of presenting both claims within one set of proceedings) and (b) the right to recover in both tort and contract where the parties’ relations are relevantly governed by a contract.

In its decision of 11 September 2002 the Supreme Court said:

“Although it was not unusual for this Court to handle a case in which the facts can constitute a breach of contract and at the same time give rise to non-contractual responsibilities between the two parties, its jurisprudence has always taken care not to confuse one type of responsibility with another, because it is not indifferent under law or the nature of the action, not [?] the consequences of one or the other, or the evidence in the assignation of blame or the terms of prescription. This is why it has affirmed that it is legally inadmissible to accumulate them simultaneously, nor the exercise of a “hybrid action, as it says, because the juxtaposition or accumulation of these types of responsibility is impossible, because contractual responsibility excludes that which is generated by misdemeanours”. Therefore, the Court adds in its sentence, it is sometimes necessary to distinguish with precision where the source of contractual or non-contractual responsibility lies, such as “When the consequences of the injury whose redress is sought have been expressly foreseen and regulated in the contract”, [since in those cases the Claimant may not leave the agreement aside and turn to the provisions of the culpa aquiliana (a name given to non-contractual liability) without incurring an inadmissible accumulation of forms of liability that could lead to] (Footnote: ⁴) the protection of injuries that fall outside the agreement, or to abandon the rules of contract with regard to the regulations of compensation”. However, there are cases … where the source of responsibility is indifferent, “This occurs … in cases where the same obligation to compensate arises without a contract when there is a clear violation of one’s rights by another by acting with malice or negligence”. In these circumstances, it continues, “there is not accumulation of responsibilities, but only the determination to assign the blame that stands out the most. If there is culpability; but it is not clear that this has breached any specific contractual clause, but has caused injury, the consequences as regards compensation do not need to specify where the fault lies” {I1/2.1T/41.46}

This passage is not entirely easy to understand in translation, even edited as above, but the general principle is clear: Colombian law is not indifferent to the difference between tort and contract because a contract may regulate the parties’ obligations and the potential remedies that may be available. Where that is so, Colombian law looks to the contract and does not permit an accumulation of forms of action that could lead to levels of protection and recovery which are excluded by the contract. On the other hand, there may be circumstances where it is not necessary to identify the cause of action as being tort or contract, because either cause of action may lead to recovery and the contract does not preclude recovering the greatest relief (whether that is provided by contract or tort).

This distinction between contract and tort, and the acceptance that the parties may by contract regulate their mutual obligations and the consequences of conduct that breaches their agreed obligations is also reflected in decisions of the Supreme Court dated 19 April 1993 and 24 June 1942: {H15/1/96} at [434], [435]. Specifically, the reference in the decision of 11 September 2002 to determining the source of the liability involved when the consequences of the damage have been regulated by contract is shown to be a facet of a wider principle that obligations and remedies may be regulated by contract and that, where they are so regulated, the claim must be pursued in contract, not tort. This is particularly relevant in circumstances where, as here, one party is engaged in what would be regarded by the law of tort as dangerous activities. Thus, in its decision of 19 April 1993, the Supreme Court said:

“It is worth reiterating that since both liabilities are different and having been treated in a different manner, the contractual fault and the tort fault, the liability that each of them produce may not be claimed jointly, as it is an aspect that determines that when the first one is invoked and the lack of performance originated in the exercise of that dangerous activity, it is not possible to resort to the presumption of fault stated by Article 2356 of the Civil Code, because, as this norm regulates tort liability it has no acceptance in front of undertakings governed by the previous agreements of the parties. If the obligation is necessary to prove the fault of the debtor or author of the damage, while if the obligation is of result fault then it is presumed in accordance with Article 1604 of the Civil Code. Therefore, if there is a contractual liability that simultaneously implies the exercising of a dangerous activity, the exoneration of the burden to prove fault does not depend on the presumption stated under Article 2356 of the Civil Code but rather on the obligation assumed to it being a result obligation, under Article 1604 ibidem, which is the appropriate specific norm for contracts. … Neither law nor doctrine authorise the exercising of a hybrid action, an expression used by the commentators, because the juxtaposition or accumulation of these two differentiated types of liability is impossible, because the contractual, by its own nature, excludes liability generated by tort liability.” {H15/1/96} [Emphasis added]

This passage supports the view of Professor Jaramillo (quoted by Professor Vallejo at {H15/1/97}) that:

“When the damage caused by a dangerous activity is the consequence of a breach of a contractual obligation, the victim may not rely on the dangerous activities regime, even if the victim themselves or the contractual debtor carried out the activity which caused the damage and which was being performed pursuant to the contract.”

To the same effect, the Supreme Court in its decision dated 24 June 1942 had said:

“The Court considers to quote the relevant parts of the ruling of December 1 of 1938 G.J. No. 1943, where the Court made the distinction between contractual fraud and non contractual fraud, and stated that such liabilities could not be involved under the same juridical relationship. Neither law nor doctrine, stated the Court in that ruling, authorises this hybrid action, [an] expression used by the commentators, because the juxtaposition or accumulation of these two differentiated species of liability is impossible, because the contractual one, by its own nature, excludes liability generated by the tort.” [Emphasis added]

It will immediately be noted that the italicised words were reproduced verbatim by the Court in its decision of 19 April 1993, as set out above. But the Court in 1942 had continued by saying:

“What may happen is that there are facts that in addition to being culpable with relation to a determined contract, for its own juridical nature, independently of any contractual connection, may also constitute a source of liability in tort, with the possibility of two actions that may be independently exercised, but may not be accumulated because the result would be an unfair and unlawful duality in the compensation of the damage.”

Returning to the two questions at issue, as set out at [149] above, I accept that (whether it is characterised as an issue of substantive or of procedural law) it is open to a Claimant to include claims in contract and in tort in the alternative in the same proceedings. This does not offend against the requirement that the legal doctrines of contract and tort are and should be kept separate and distinct; but it guards against the unfairness of a wrongdoer escaping all liability simply because the Claimant has chosen the wrong cause of action when issuing proceedings. As in English procedure, the Claimant may keep claims in tort and contract open simultaneously right up to judgment, it being a matter ultimately for the Court in the light of all evidence and submissions to determine whether and to what extent the parties’ mutual rights and obligations are governed by contract {H15/1/98} at [441].

Turning to the second question, in accordance with the guidance from the Supreme Court that I have set out above, to the extent that the parties’ rights and obligations are governed by contract, a claim in tort is excluded. Ultimately, Professor Castro appeared to agree that this is so because, in relation to a personal injury claim arising out of contractual carriage of passengers, she agreed that an extra-contractual claim was dismissed because “if the contract is breached, the tort claim should be dismissed.” {Day21/139:5} ff. But, as made clear in the last citation from the decision of 24 June 1942, even where there is a contract, the facts of the claim may be such that some of them are not within the ambit of the parties’ agreement. If that happens, it is open to the Claimant to look to the law of tort to see whether those facts that are not regulated by contract may give rise separately to a claim over and above that which he has in contract. In this way, the guiding principle that there should not be double recovery is preserved.

It is important to bear in mind that what is required is that the parties’ rights should be relevantly governed by a contract so as to exclude a concurrent remedy in tort. It does not follow (and none of the citations set out above suggest) that tortious remedies are restricted or excluded whenever there is a contract between the parties, whatever its content. This is important in the present case because the contracts between claimants and the Defendant (or, in some cases, Ocensa) did not seek to regulate the manner in which the pipeline works were to be carried out; nor were they contracts for the carrying out of the pipeline works as such. The First letter, if it was a contract (as to which see later), merely requested and provided authorisation to carry out works on the landowner’s land, without which the works would (without more) be an illegal trespass: see [368] below. It did not oblige the Defendant to undertake the works, nor did it impose any terms about how the works were to be carried out. It was not in any sense a contract to achieve an object or imposing a “result obligation”. The passage relied upon by the Claimants as a contractual guarantee of “fair and equitable compensation” does not (assuming it has contractual force) affect the manner in which the pipeline works are to be carried out. At most it could be said to affect the level of compensation that would be due to the landowner in the event of damage to his property.

The documents that are agreed to have contractual force are the ROW agreements and the subsequent Public Deeds: see [369] and [371]. They were concerned with the creation of easements across the landowner’s land; they did not impose any obligation upon the Defendant to carry out the works or to carry them out in a particular way. Although it may be said that the contemplation of the pipeline works “implies the exercising of a dangerous activity”, that is not of itself sufficient to exclude the dangerous activities doctrine. As the passage from the decision of 19 April 1993 that I have highlighted makes clear, what is being contemplated and required is a contract which is relevant to the tortious doctrine of dangerous activities because it imposes a “result obligation” (i.e. to bring the works to a satisfactory conclusion) and therefore relevantly regulates the relations between the parties so as to exclude the need to prove fault as a matter of contract. No such contract has been identified in the present litigation.

For a Claimant to succeed in tort the general rule is that he must show (a) that he has suffered direct and certain damage, (b) fault or dolo of the Defendant, and (c) an adequate causal connection between the damage and the negligent or malicious conduct attributed to the Defendant {H23.2/7/502}. Fault (culpa) is broadly equivalent to negligence in English law {H14/1/70}.

Colombian law applies special rules when considering liability in tort for “dangerous activities”. The essence of dangerous activities is that they are those activities that are intrinsically dangerous, objectively considered, so that their exercise is potentially harmful to others, even if carried out with utmost care and diligence. It is common ground that the construction of a pipeline is a dangerous activity, though some related activities (e.g. the accounts function or drawing of plans) would not be included {H14/3/269}. In its decision of 30 April 1976 the Supreme Court propounded a test that does not readily lend itself to achieving greater precision in defining the limits of dangerous activities. There is dangerous activity:

“… when a person, in order to perform a task, adds an extraneous force which increases his own strength, and by doing so disrupts the existing balance with respect to third parties, which are, therefore, placed in imminent danger of being injured, even if the task is performed with all the due diligence required.”

I return to the nature of the pipeline project as a dangerous activity at [166] below.

The experts agreed the prerequisites to liability for dangerous activities as follows:

“… in order for the Claimant to succeed in a claim for damages brought under the dangerous activity doctrine, the following requirements must be met:

(i)

That he has suffered a damage (to his property or person) that is real, direct and certain.

(ii)

That there is an adequate causal connection between the damage and the dangerous activity exercised by the Defendant.

(iii)

That the Defendant was the guardian of that dangerous activity.

(iv)

The Claimant is not required to demonstrate fault on the side of the Defendant.

Compliance with the above requisites triggers a fault presumption against the Defendant, who may not escape liability just by proving due diligence and care.

The Defendant may only then escape liability by proving an extraneous cause, which is either:

(i)

Force majeure or fortuitous case, which are equated notions under the Civil Code,

(ii)

The victim’s exclusive fault (for example fault of the Claimant), or

(iii)

The intervention of a third party.

In these three cases, the Defendant would break the causal link between the dangerous activity attributed to the Defendant and the damages claimed.

This is without prejudice to ordinary defences in any civil action, such as inexistence of the damage claimed and time limitation.” {H23.2/7/513}

Liability in tort under the dangerous activities doctrine is imposed on anyone who satisfies the test of guardianship. The experts agreed (at {H23.2/7/510} that “in order to qualify a person as a guardian of a dangerous activity, he must exercise an independent power to manage, direct or control the activity.” This agreed test was restated at {H23.2/7/511}: “… the guardian to be held liable is the person … which at the time of the occurrence had exercised an effective and independent power of direction, governance or control over the instrument or the activity which generates the harm, whether or not he is the owner”; and that “relevance is given to the de facto power over the thing or activity… .” The experts cite numerous decisions of the Supreme Court including that delivered on 18 May 1972 where the Court said:

“The liable party for the acts of inanimate objects is their guardian, that is, whoever has the independent power to manage, direct and control them.

And it is not true that the condition of the owner necessarily and inevitably implies that of the guardian, but the latter is presumed as a simple attribute of ownership, as long as there is no proof to the contrary.

Therefore, if it is proven that a given person is the owner or entrepreneur [i.e. exploiter] of the object with which the damage was caused in the course of a dangerous activity, the said person is covered by the presumption of being the guardian of the said object – which of course admits evidence to the contrary – because even though guardianship is not inherent to ownership, it is presumed in the case of the owner. In other words, the liability of the owner for the acts of inanimate objects derives from his capacity as guardian thereof, which he is presumed to have.

And the presumption of being the guardian can be dispelled by the owner if he can prove that he transferred the possession of the object to another person by virtue of a legal act, such as a lease, a gratuitous loan, etc., or that he was deprived of the object without any fault on his part, as in the case it was stolen.”

This last citation diverges from the test agreed by the experts in concentrating on having the independent power to manage rather than actually exercising that power. This divergence was not explored or resolved with the experts. Reconciliation can be achieved by holding that a person who exercises an independent power to direct, govern or control is liable as guardian; and also holding that the failure to exercise a power to manage that is vested in a person should not, without more, relieve them of liability. There may be more than one co-guardian, often with different angles of responsibility and interest, each of whom will be jointly and severally liable for damage falling within the scope of the doctrine: see the citation from the decisions of the Supreme Court of 22 April 1997 and 19 December 2011 at {H23.2/7/507}. There is no reason in principle why an employer and an independent contractor engaged by that employer should not be co-guardians of a dangerous activity (Professor Castro at {H23.2/7/516}).

Professor Castro suggested that, in addition to the “dangerous activities” doctrine there were separate principles relating to “risk-benefit” and “created risk” theories. This appeared to be the basis for the Claimants’ formulation of their pleaded case at, for example, {B1.3/5/483} and {B1.3/5/485}. In their closing submissions the Claimants invited the Court to consider the case law she cited, which I have done. To my mind, what the authorities show is that the Supreme Court (as is the way of higher courts in many jurisdictions) has considered the extent to which the theories might be said to underpin the dangerous activities doctrine, without coming to any clear or unanimous conclusion. They do not show that the theories are a proxy or substitute for the dangerous activities doctrine; nor do they generate additional rights or obligations over and above those clearly understood as falling within the dangerous activities doctrine. Nothing in the cited authorities suggests that, on the facts of this litigation, Claimants who would otherwise fail on any material issue would or might succeed if separate consideration were given to the risk theories. It is therefore not necessary to say more about them.

Another point of principle that divides the parties is whether a person who becomes guardian of a dangerous activity automatically becomes liable under the doctrine for all adverse consequences of the dangerous activity. The Claimants submit that he does; the Defendant submits that there must be a causal link between the damage and the specific conduct of the guardian. This point was raised but not fully developed during the trial and closing submissions. On the material that is available to the Court, I consider that the root of this division is a concentration by the parties and the experts upon “laying the pipeline” as a single “dangerous activity.” Without going behind the agreement that I have already rehearsed, this all-embracing description obscures the reality of a huge engineering project, which is that “laying the pipeline” involves many different activities, with many different people having responsibilities for different aspects of the project. So, for example, a person might have complete control over the early stripping works but have gone off site and been relieved of all responsibility by the time that the trench for the pipe was dug, the trench was laid, and any restorative works were carried out. It is not obvious in principle why such a person, though he might satisfy the definition of guardianship for the stripping works, should have any responsibility for damage caused in those later operations to which he made no contribution and with which he had no involvement. This suggests that, in principle, Professor Vallejo should be right in asserting that there must be at least some causal link between the activities of the person said to be the guardian and the damage that occurs. This is not a difficult concept if (in the illustration) the stripping works and the subsequent works are treated as separate dangerous activities, even though they all contribute to the aggregated project of laying the pipeline which, viewed overall, is also regarded as a dangerous activity.

This approach also seems consistent with the agreed statement of the experts that the person held liable is the person who “at the time of the occurrence had exercised an effective and independent power of direction, governance or control over the instrument or the activity which generates the harm”: see [163] above.

I therefore find that under Colombian law it is too simple merely to treat an aggregation of dangerous activities as if they were one and indivisible; and that liability under the dangerous activities doctrine will be imposed upon a person in respect of damage caused by a dangerous activity (or element of a dangerous activity) falling within his area of responsibility. Once it is established that the cause of damage fell within his area of responsibility, he will be liable and, if he has coguardians responsible in respect of the same area of activity, he will be jointly and severally liable with those on whom equivalent liability is imposed. In this way the object of the dangerous activities doctrine will be satisfied by joint and several liability being imposed on any and all of those responsible for exercising independent powers of control or management over the activity that causes the damage; but it does not arbitrarily impose liability on those who may have nothing at all to do with the cause of damage. Whether sub-dividing the activities and responsibilities in this way has any relevance for a party having overall control of the project will be a question of fact. In the absence of submissions directly on the point, I would hold that, where there is evidence that would otherwise lead to the conclusion that a party had overall control of a project as a whole, it would be for such a party to demonstrate that he was not involved in or responsible for the particular area of interest, and not for a claimant to demonstrate separately that he was. This seems to me to be consistent with the Supreme Court’s treatment of owners in the passage I have cited above.

I note in passing that, in its opening submissions relating to LC74, the Defendant said that it would rely upon the adverse security situation as being an “extraneous cause” capable of relieving it of any liability it would otherwise have had under the dangerous activities doctrine. That submission was not pursued at the end of the trial. It is therefore not necessary to investigate or decide the interesting question whether, despite the generality of the security situation being well known, specific factual circumstances could amount to an extraneous cause.

An employer is directly liable for the acts or omissions of his employees acting within the scope of their employment. An employer can also be held directly responsible for damages caused by their employees acting to fulfil the duties of the employer or

In their Joint Statement there was apparent disagreement between the experts on the scope of liability for the acts or omissions of independent contractors. The potentially relevant Articles of the Civil Code are:

“Article 2341: A person who commits a crime or fault, which causes damage to another is bound to compensate, without prejudice to the principal penalty that the law imposes for the crime or fault committed.

Article 2347: Every person is liable not only for its own actions to the effect of compensating the damage, but also for the acts of others under his custody.

Article 2349: The masters (employers) are liable [for] the damage caused by their servants (employees) ….”

Professor Vallejo relied upon Articles 2347 and 2349 of the Civil Code in support of his opinion that a person is not liable for the acts or omissions of an independent contractor whom he has retained unless he exercises a sufficient degree of control over the activities of the independent contractor in such a way that his conduct is covered by Article 2347. If he does exercise a sufficient degree of control over his independent contractor, he would be liable for any direct damage caused by that independent contractor when carrying out the activity, unless he proves that he could not have avoided the damage despite the exercise of all due diligence and care in the course of controlling the independent contractor {H23.2/7/517}.

Professor Castro maintained in her Supplementary Report that the two articles referred to by Professor Vallejo were inapplicable. In her opinion, the relevant Article is Article 2341 of the Civil Code. However, she acknowledged in her Supplementary Report that, even where the principal is a legal person, indirect liability may arise in some cases “because some degree of subordination was found between parties” {H14/3/274-275}. In cross examination she confirmed that, in general, independent contractors are not subordinates or dependants of the principal so that, as against third parties in tort, people who engage independent contractors are, without more, not liable for the negligent acts or omissions of the independent contractors; but the principal may be liable for those acts or omissions (without reference to the dangerous activities doctrine) if he exercises a sufficient control over the contractor. And she described Professor Vallejo’s position as “one possible solution” to the juridical basis for this result {Day21/158:13}.

In the light of this passage of evidence I accept Professor Vallejo’s evidence about the test to be applied when considering the question of liability for independent subcontractors, including the qualification set out at [172] above. If and to the extent that there remains any residual difference between the experts, I prefer the evidence of Professor Vallejo, based as it is upon the two articles he cited and the concept of control (or subordination) which runs as a consistent thread through the Colombian law relating to liability for the acts or omissions of others (whether that liability is characterised as direct or indirect). I leave to later the question whether and to what extent the facts of the present cases make the Defendant liable for the acts of third parties.

Article 1625 of the Civil Code lists the means by which obligations may be extinguished, as follows:

“Article 1625: All obligations can be extinguished by means of an agreement in which the parties, being able to dispose of their rights in a free manner, consent in considering it null.

Obligations also become extinct, totally or partially:

By effective payment.

By novation.

By settlement.

[…]”

The relevant provisions of the Civil Code are:

“Article 1522: An agreement whereby a party stipulates to refrain from further claims related to an approved account is invalid in regard to the dolo contained therein, except if expressly waived. Forgiveness of future dolo is not valid.

Article 1619: Irrespective of the generality of the contractual terms, they will only apply to the subject matter which has been agreed in the contract.

Article 2469: Settlement is a contract whereby the parties conclude a pending dispute out of court, or prevent an eventual lawsuit between them. The sole renunciation of a non-disputed right is not settlement.

Article 2484: A settlement agreement will only be effective between the contracting parties. If there are many principals interested in the transaction which is subject to settlement, the settlement consented to by one of them does not harm or benefit the others; except, nevertheless, for the effects of novation in the case of joint and several liability.

Article 2485: If a settlement agreement relates to one or more specific objects, general surrender over any right, action or claim shall be understood to refer only to the rights, actions and claims related to the object or objects over which the settlement is being undertaken.”

On the basis of these provisions, the experts agreed that:

“A binding settlement requires, aside from the conditions for its legal existence … three essential elements:

(1)

The existence of a present or an eventual dispute of a patrimonial content amongst the parties.

(2)

A declaration/expression by the parties of their intention to terminate their differences in a direct and amicable way.

(3)

Mutual sacrifices and concessions by the parties in order to reach the settlement agreement.

…

The experts agree that the settled matters may consist of actual or future disputes. The Experts disagree on the meaning of the legal expression “eventual lawsuit”, included in article 2469 of the Civil Code.” {H23.2/7/518-519}

The major disagreement between the experts was about what will satisfy the requirement of Article 2469 that there be “an eventual lawsuit.” Professor Castro’s opinion is that “the controversy between the parties must be actual or imminent, not just probable or hypothetical” {H23.2/7/519}. She relies upon Article 1522 as establishing that an agreement to forgive future dolo cannot be valid. She then states her opinion that a settlement cannot be used as a means to avoid the duty to act with care in the future “as it is intended to finish or prevent litigation between the parties as long as the settled matter is identified as dubious and litigious at the time of the agreement, excluding future misconducts” {H23.2/7/520}. She then relies upon Articles 1619 and 2485 of the Civil Code in support of her opinion that settlement agreements must be restrictively construed and “limited to the matters on which the parties did agree upon. In other words, in this case, the alleged settlement can only refer to damages that were foreseen by the Claimants at the time of its execution” (ibid).

In her report {H14/1/29}, Professor Castro relied upon a citation from the decision of the Supreme Court on 6 June 1939 (to which Professor Vallejo also referred in his report {H15/1/185}) in support of her opinion that “it is necessary that the parties have identified an actual controversy so that mere awareness that a conflict may hypothetically arise or is probable in the future is not enough as a condition for the settlement.” This is similar to what she said in the Joint Statement, as set out above, namely that a settlement can only be effective in relation to damages that were foreseen at the time the settlement is executed. The passage from the Supreme Court to which the experts referred is:

“In settlement contracts the parties resolve by themselves their own differences… What really defines this legal concept is that it terminates litigation or prevents litigation, by means of a reciprocal sacrifice of the parties, which does not mean that its sacrifice should be commutative or equivalent, but that each party voluntarily renounces a part of what they believe they are entitled to. In this way, in order for a settlement to exist, three requisites must be present: 1. The existence of a litigious difference, not necessarily before a Court; 2. The will to settle such differences or to prevent them out of Court, and 3. Reciprocal concession of the parties for that purpose.”

A number of points arise. First, the fact that it is not possible to agree to forgive future dolo (i.e. dolo that has not yet occurred) and that a settlement cannot be used as a means to avoid the duty to act with care in the future (on which I accept Professor Castro’s evidence) does not of itself answer the question whether it is possible to settle disputes arising out of past dolo or past breach of the duty to act with care, whether they be known or unknown. Second, in her Supplemental Report {H14/3/279}, Professor Castro referred to Professor Vallejo’s opinion that “a settlement agreement may compromise a claim in respect to future loss and may compromise a potential claim for damage of which the party is unaware at the time the settlement agreement is executed”, responding that “this general statement may be accepted under Colombian law, provided there is a litigious difference between the parties who execute the settlement agreement. The parties can make mutual concessions aimed at preventing or ending a claim that must be actual or imminent. Mere waiver of future, undetermined undisputed rights is not deemed as a settlement, as provided in Article 2469 [of the Civil Code].” Seen in this context, her description of a claim as “imminent” means “about to happen (or become actual)” as distinct from “actual”. In other words, claims of which a person is unaware and which have therefore not been brought into existence by being formulated may be “imminent” and susceptible to settlement. Third, the passage just cited accepts as a general principle that a potential claim for damage of which the party is unaware at the time the settlement is agreed may be effectively compromised. Fourth, the word “eventual” in Article 2469 does not mean or imply that the dispute which may eventuate in a lawsuit must be either formulated or known at the time that a settlement is concluded. To the contrary, Article 2469 differentiates between concluding a pending dispute (which, by definition, must be formulated and advanced) and preventing an eventual lawsuit (which, as a matter of language and context, need be neither). Fifth, during her oral evidence Professor Castro accepted that an agreement that purported to settle not only matters that had been the subject of discussion or claim but also any disputes which may subsequently arise could in principle be valid if the subject matter is well identified {Day21/179:1} ff. This evidence, which is consistent with the terms of Article 2485, I accept. Sixth, Professor Castro accepted the analysis of Professor Jaramillo at {I2/4T/240} - {I2/4T/242} including the following passage, which supports the possibility of settling of disputes that have not yet been identified:

“In the doctrine field, amongst other authors, MESSINEO explains that such cases “… are essentially as follows: a) an existing litigation already between the parties (called “settlements”), or the possibility of a litigation arising between them; b) a lack of certainty (res dubia), or a res litigiosa; c) reciprocal concessions, through which the parties put an end to the litigation started, or anticipate a litigation which could arise; d) also, as this is not expressly decided by the legislator, the issue is discussed about whether the out-of-court settlement is constitutive, or declarative…

It is inherent to the out-of-court settlement that there is a res litigiosa et dubia between those who will in the future sign the out-of-court settlement, given that failing an object - right, power, prerogative, duty or obligation – in relation to which there is doubt, hesitation or uncertainty – res dubia – or whose real purpose or scope is not, at present or potentially, object of judicial debate – res litigiosa -, there will be no interest in making reciprocal sacrifices in order to obtain, under conditions of certainty, the definition of a certain legal situation.

In other words: failing uncertainty and dispute there cannot be an out-of-court settlement, which is a state of lack of knowledge, hesitation or doubt surrounding the development if a pending claim or the possibility of future litigation arising, which move[s] or induces the parties, in the interests of certainty or security, to sign the respective out-of-court settlement contract. That uncertainty, source of dispute or litigation, is precisely what drives the subjects to foresee any unfavourable result or even the claim itself through the out-ofcourt agreement.”

In the light of these considerations, I conclude that neither party has accurately characterised the true effect of Professor Castro’s evidence that a dispute must be “actual or imminent”. Her use of the word “imminent”, when properly understood as set out above, is not (as was submitted by the Defendant) “an inaccurate gloss” applied to the words of Article 2469. Although it took time to identify precisely what her opinion is in this area, my impression at the time and my finding now is that this was due to nuances of language rather than any significant lack of objectivity. On the other hand (contrary to what was submitted by the Claimants) it is possible to settle future controversies that are not foreseen or not specifically identified at the time of the agreement if appropriate wording is used, since that is what Article 2469 contemplates when referring to the prevention of eventual lawsuits. The prerequisites for a valid settlement are those set out at [177] and the principle underlying those pre-requisites is, as explained by Jaramillo, the freedom of the parties to resolve uncertainty by agreement. Normal principles of construction apply to the interpretation of settlement agreements. Article 1624 of the Civil Code applies in case of ambiguity: see [71]. There is otherwise no specific rule requiring a restrictive or partial interpretation of settlements; but Article 2485 emphasises the need for

Extinguishment by “effective payment” is listed in Article 1625 of the Civil Code as separate and distinct from extinguishment by settlement: see [175] above. Effective payment is defined by Article 1626 as “performance of the obligation that the debtor/obligor assumed towards the creditor/obligee.” On their face, these articles are capable of referring to original obligations (which might themselves have been extinguished by settlement), or to an obligation to pay damages, or to obligations arising under a settlement and the experts did not suggest otherwise. In the light of the relevant Articles they agreed:

“1.

Due performance of the obligation is not limited to the payment of money, for it includes many other types of payment, depending on the nature of the obligation. For example, in relation to the obligation to transfer property, payment consists in the delivery of the particular object or the amount of the general specie agreed. […] In relation to an obligation that consists in refraining from doing something, the debtor/obligor pays while it refrains from the prohibited conduct.

2.

Payment must be effected in accordance with the terms of the obligation. However, in some specific cases the law allows payment to be made otherwise than in accordance with the terms of the obligation.

3.

Payment made in full discharges the obligation.” {H23.2/7/523}

It is almost self-evident that the parties can agree on the nature and scope of their obligations to each other and, therefore, what payment is required to constitute effective payment {Day21/188:20}. It is not necessary to investigate here whether and when such an agreement would amount to a settlement agreement: whether such an agreement is regarded as ancillary or preparatory to an effective payment extinguishing the obligation in question or is regarded as a settlement agreement compromising pre-existing obligations will be fact-sensitive and, on either interpretation, obligations will be extinguished on the agreed payment being made.

The Civil Code provides:

“Article 1687: Novation is the substitution of a new obligation for a previous one, which is therefore extinguished.

Article 1690: Novation may be effected in three ways:

1)

Substitution of an existing obligation by a new obligation, without the intervention of a new debtor/obligor or creditor/obligee.

2)

By the debtor/obligor assuming a new obligation towards a third party and obtaining, accordingly, the release of the original creditor/obligee.

3)

By a new debtor/obligor substituting the previous debtor/ obligor who, accordingly, is released.

The third kind of novation may be done without the consent of the first debtor/obligor. When effected with his consent, the second debtor/obligor is a delegate of the first debtor / obligor.

Article 1693: In order for novation to take place the parties must so declare, or that it appears undoubtedly that their intention has been to novate because the new obligation involves the extinguishment of the old obligation.”

Based on these Articles, the experts agreed that:

“1)

Novation is an agreement whereby the parties (debtor/obligor and creditor/obligee) substitute one obligation for another obligation, and as a result the former obligation is extinguished. Novation requires a change of one of the structural elements of the obligation. Minor changes do not constitute novation (for example, a change in the place where the obligation must be discharged, or the granting of an additional term to perform the obligation, do not constitute novation).

2.

There are three modes in which novation can take place:

i)

Novation by the substitution of the old obligation by a new obligation, without the intervention of a new creditor / obligee or a new debtor / obligor. This type of novation is called objective and may take place either (a) by the change in the object of the obligation, or (b) by the change in the cause (source) of the obligation: An example of novation by change in the object is: “I owe $1,000 and I agree with my creditor that instead of said amount I will give him a horse…”. An example of novation by change in the cause is: “I owe you $1,000 as the price of a thing that I have purchased and I agree with my creditor / obligee that I will withhold the money as a loan.”

The other types of novation are called subjective, because one of the parties is substituted for another:

ii)

Novation due to the change of the creditor / obligee; iii) Novation due to the change of the debtor / obligor.

3.

Animus novandi: this is a material [and] (Footnote: ⁵) essential requirement of novation and consists of the intention of both parties to replace an existing obligation for a new obligation.

4.

The intention to novate may be expressly declared or result tacitly. In this respect, Chilean professor Claro Solar has observed:

“[…] Therefore, the intention to novate, the animus novandi, may be expressly declared or result tacitly as a necessary and inescapable impossibility that the two obligations coexist.”” {H23.2/7/525}

Point 4 of the experts’ agreement and the citation from Professor Claro Solar establish that the intention to novate does not need to be expressed. Consistently with the general approach of Colombian law, which is to consider only those intentions that are externalised and not those intentions that remain hidden in the mind of the party, an intention to novate may be identified whether or not the party is consciously thinking in terms of novation. I accept Professor Vallejo’s statement, founded on Article 1693 of the Civil Code, that “tacit acceptance results from external unequivocal conduct of the party irrespective of his undisclosed intentions” {H23.2/7/528}.

The dispute between the parties on novation concerns whether the settlement agreements and Paz y Salvos entered into by the Claimants with Ocensa and Saipem constituted novations. The Defendant’s case is that the agreements amounted to a novation because (as between the Claimants and Ocensa/Saipem) they substituted an obligation in contract which was incompatible with the continued existence of their prior obligation in tort. In her written evidence, Professor Castro gave as her opinion that, for the agreements between the Claimants and Ocensa/Saipem to affect the position of the Defendant, there had to be an unequivocal intention not merely to enter into a novation as between themselves but also to affect the position of the Defendant {H23.2/7/527}. She did so on the basis that Ocensa/Saipem’s new obligation was not incompatible with the more general obligation of the Defendant to compensate all damages caused by its fault or dolo. However, in her oral evidence her position changed. She accepted that if a settlement agreement did amount to a novation as between the Claimants and Ocensa/Saipem, the settlement would be effected not only between the parties to the agreements but also between the Claimant and those originally having joint and several liability with Ocensa or Saipem {Day21/207:14} (Footnote: ⁶).

This acceptance by Professor Castro (and the Claimants in closing submissions) was correct in the light of the terms of Article 2484, which means that if a settlement agreement amounts to a novation, it can and will affect other interested parties who have joint and several liability for the transaction which is subject to the settlement. The clear implication of Article 2484 is that the settlement can affect them by discharging their liability to the extent covered by the settlement agreement.

I shall deal with the question whether the settlements amounted to novations when dealing with the facts.

Renunciation is generally a unilateral act, which is to be distinguished from the sacrificing of rights in the context of a mutual consensual settlement agreement, though Professor Castro accepted that a renunciation can be included in a settlement agreement {Day21/197:1} ff. Article 15 of the Civil Code provides that “Rights conferred by the law can be renounced / waived, provided that the only interest affected by the renunciation/waiver is the interest of the person who resigns and that such renunciation/waiver is not prohibited.” The experts agree that a party may renounce a right by a clear expression that he no longer wants to pursue the right or bring actions with regard to the right. Professor Castro added that a waiver of rights must be “clear, unequivocal and precise.” It is not obvious that the words “unequivocal and precise” add anything to the agreed formulation, which I accept. She also added that the waiving party must be aware of the scope of its relinquishment, which must never be global or unspecified, so to benefit another party without limitation in the future. Once again, it is not obvious what this adds to the agreed formulation: if the party renounces a right by a clear expression that he no longer wishes to pursue a right or to bring actions with regard to the right, Colombian law will take that externalised expression as showing that the party is aware of the scope of the relinquishment that has been so clearly expressed. Although it is common ground that a person cannot renounce the right to bring claims for damages arising from (future) malicious breach of contract or a malicious tort {Day21/197:9} ff, I am not satisfied that there is any other conceptual limit on what rights may be renounced provided that the agreed test is satisfied.

Article 16 of Law 446 of 1998 provides that “In all claims made before the Courts, the valuation of damage caused to persons and property, will follow the principles of full compensation and equity and shall comply with actuarial technical criteria.”

There is a very substantial degree of agreement between the experts, as follows:

“i)

Principle of full compensation: In principle, damages must be compensated in full. This means that the amount of direct damages caused exclusively by the Defendant and proven in the proceedings by the Claimant is the amount to be awarded, but only to the extent to reasonably compensate the actual loss and to place the Claimant in a position as similar as possible as the Claimant had proven to have had before the damage. As a result, indemnification must be complete without turning it into unjust enrichment of the Claimant.

Compensation can be awarded by replacing or repairing the damaged object, but a Court would also award monetary compensation when it is impossible or impractical to place the victim in the same position it had prior to the wrong. This is so, because money is a pecuniary equivalent that allows the acquisition of one or more similar objects as those being affected by the damaging action, in which case it should be preferred by the Court.

This principle of full compensation has important exceptions. There are cases in which the law itself fixes certain limits to compensation rights. The parties may also agree that the Defendant in breach of contract is released by paying a limited compensation, provided that such limitation is not prohibited by law, does not contradict public policy, nor eliminates the essential obligations assumed by the Defendant.

ii)

Certainty of damage: Damages must be certain in order to be recoverable. Both the existence and the extent (or amount) of the damages must also be proven by the Claimant. In order to determine whether damage exists, the Judge asks himself whether the Claimant would be in a better position if the Defendant had not committed the wrong. When the answer is affirmative, there is damage and the next issue is to estimate the amount of the damage, for which the Court normally relies on Expert evidence.

iii)

Burden of proof: [The burden of proof is on] the Claimant.

iv)

Types of recoverable damages: Pecuniary damage and non-economic damages are recoverable.

Pecuniary damages: There are two types of pecuniary damage: Patrimonial damage (daño emergente), consisting of the financial loss suffered by the Claimant, and loss of profit (lucro cesante), which is the loss of economic benefit from which the Claimant has been deprived as a result of an unfulfilled obligation or an imperfectly performed obligation or an obligation in which performance was delayed. These two types of monetary damages are applicable to compensation under both contractual and non-contractual liability rules.

Under Colombian law, compensation must be paid for harm that has already occurred (past and present damages) and/or future damages, which are continuous and ongoing. Future damages are recoverable provided they are not contingent, hypothetical or speculative. Instead, they must be certain; in the sense that they are the necessary consequence and foreseeable outcome of the wrong and are the prolongation in time of the current state of things created by the wrong. In addition, there must be a reasonabl[y] high probability of such damages occurring in the ordinary course of events, and according to the rules of experience.”

Non-economic: [Moral damages and loss of amenities will be covered later: see [194] below.]

Test for the award of damages:

[The court must be satisfied that:]

1.

The Claimant has suffered damage.

2.

The damage suffered by the Claimant is certain, direct and fully demonstrated, in both its existence and amount.

3.

The damage has not been already compensated to the Claimant.

4.

There is a causal connection between the damage and the conduct of the Defendant.

5.

The action to claim the damage is not time barred

6.

For contractual claims, the Defendant is only liable for direct and foreseeable damages, except when the breach is caused by the dolo (to which gross negligence is equated).

…

Causality is the link between the fault or dolo of the Defendant and the damage claimed. In order for the contractual and noncontractual claims to be successful, Colombian Law requires the damages to be the direct consequence of the Defendant’s breach or tort, as the case may be. Remote, hypothetical, speculative or indirect damages are not recoverable. The causal connection must be legally relevant and adequate to produce the damage.

… [T]he Supreme Court … has formulated the test known as casualidad adecuada (adequate causation).

In regard to tort liability, the Supreme Court in a decision dated 21 February 2002, delivered by Justice Jose Fernando Ramirez, observed:

“5.

As has been upheld by the doctrine and the case law of the Supreme Court, one of the configurative elements of patrimonial non-contractual liability, as in this present case, is defined by the appropriate causation link between the damage and the conduct of the agent from whom compensation is sought, or has been stated by this Court, it is necessary that “a legally relevant causal relationship exists between the damaging event that harms whomever claims compensation, and that as a result and origin of that damaging event, there is a factor of legal allocation of liability to the agent from whom such compensation is sought”. … Likewise, it has also been declared that such a link is broken when it is demonstrated that between the activity and the damage, an extraneous element not attributable to the one who appears to be the perpetrator of the damage has intervened, which may be the activity of the victim or force majeure or the intervention of a third party.”

In a decision dated 30 March 1993, delivered by Justice Alberto Ospina Botero, the Supreme Court held on this subject:

“According to the adequate causality criteria, the effects of a cause are only those which according to the rules of common sense and experience are normally its consequence. Therefore, the criteria to be followed, is that of the laws of nature. It is not sufficient to establish the participation of different occurrences or elements in the damages that have been caused. It is necessary to determine the aptitude of the fault or the risk, according to the particular cases, in normally producing the damage. Once the circumstances that produced the damage have been assessed in abstract, it must be determined, in the particular case, which of those circumstances, according to the normal course of events, was the efficient cause of the damage, rejecting those causes that only favoured the occurrence of the result or eliminated an obstacle for its occurrence”. These same concepts were reiterated by the Supreme Court in a decision dated 24 April 2009, delivered by Justice Cesar Julio Valencia Copete.

The theory of adequate causality is the test used by the Supreme Court when there are various possible causes intervening in the production of the damage and it becomes necessary to establish, amongst them, which was the efficient cause of the damage. This theory is presently applied by the Supreme Court. It should be noted that the theory is applicable both in contractual and non-contractual liability claims for damages.

…

Both experts agree that for contractual and non-contractual claims, Colombian law requires the damages to be real, certain, not contingent or hypothetical/speculative, and also to be a direct consequence of the Defendant’s breach or tort, in order to be recovered.

i)

In contract liability, a damage is direct when it is the natural or immediate consequence of the failure of the Defendant to perform the contractual obligation, or performing it defectively, or delaying performance.

According to the Supreme Court of Justice, a breach of contract imposes on the non-performing party the duty to compensate the innocent party for the direct damages caused by the breach. The Civil Chamber has defined direct damages as those “which constitute a natural or immediate consequence of nonperformance of the contract, to the point that said damages should be regarded as the necessary and logical effect of failing to perform the obligation. Direct damages are classified, and our law is concerned about it, [as] foreseen and unforeseen damages. The former are those that were foreseen or could have been foreseen at the time the contract was executed, and the latter, those damages which the parties did not contemplate or could not contemplate at such moment. The debtor is only liable to compensate foreseen/foreseeable damages when they breach the contract without dolo. The debtor is liable for foreseeable and unforeseeable damages when he breached the contract with dolo” (Decision dated October 29, 1945, delivered by Justice Pedro Castillo).

ii)

Under tort liability, both for the general type or for the special regime of dangerous activities, the Defendant must compensate the Claimant for all direct damages, foreseen and unforeseen. Direct damages are those which the victim suffers as a certain and necessary consequence of the wrong committed by the Defendant, and are to be differentiated from indirect / remote damages.

…

In summary: direct damages are those which are the natural consequence of the breach or tort; and indirect/remote damages are not recoverable, neither in contract nor in tort. The notion of direct and indirect damages is associated with the test of causality already explained.

…

Both Experts agree that according to the Civil Code (applicable to commercial contracts), if the breach of the contractual obligation is not caused by dolo, the debtor / obligor is only liable for the damages that were foreseen or foreseeable at the time the contract was executed. However if the breach is the result of dolo, the debtor/obligor becomes liable for all the damages that were the immediate or direct consequence of having failed to perform the obligation or delayed the performance of the obligation (Article 1616), whether foreseeable or not.

… Dolo is equated to gross negligence (Article 63 of the Civil Code) neither of which is presumed.” {H23.2/7/538}ff

There are no material differences of view between the experts that need resolution by the Court. It is agreed between the parties that, when determining what was or was not foreseeable, the Court should adopt an objective test. Professor Castro says that the objective test that should be applied is what was or could have been foreseen by a professional party at the time of contracting; Professor Vallejo’s formulation of the test is what was “reasonably contemplated by a diligent debtor” at the time of contracting as the probable consequence for the other party of the debtor not performing the contract or performing it defectively. I am not persuaded that these alternative formulations will make any difference on the facts of the present cases.

Moral damages are a type of non-economic damage that a Claimant can recover in special circumstances. They relate to the pain experienced in the Claimant’s internal subjective sphere (feelings and affections). They are commonly awarded in cases of death or personal injury. They must be demonstrated but their valuation is solely for the Court {H23.2/7/549}. In a decision dated 27 September 1974 the Supreme Court said:

“Since the subjective moral damage influences the orbit of affections, the world of the most intimate feelings, and consists of the grief that the victim suffers, who is the only one capable to measure its intensity … it is clear that such damage may not be assessed by Experts. … It is for the Courts that must in each particular case determine the so-called price of the pain. …”

When it was put to Professor Castro that the cases where moral damages have been awarded for breach of contract are all personal injury or fatal cases arising out of clinical negligence where the claimant had a contract with the hospital or doctor or in transport-related contracts where a person has been injured or killed, she agreed with the qualification “There could be others but I think those are the main cases.” She did not know of any case of moral damages being claimed or awarded when land is expropriated {Day21/211:9} ff (where she used the phrase “not to my knowledge” in the same way as at {Day21/96:13}). Professor Vallejo had broader experience, including knowledge of moral damages being awarded in relation to conduct which affects rights such as freedom, honour and reputation. He was not aware of moral damages being awarded in the case of harm caused to real estate property, though he

The most recent award of which the experts were aware was also the largest, being COP 55,000,000 awarded in August 2013 to claimants who were close relatives of a deceased person. At current conversion rates, COP 55,000,000 is in the region of £13,000-14,000.

Drawing the strands of this evidence together I find that there is no reason in principle why moral damages should not be granted in a case arising out of damage to land. That said, I accept that the Colombian Court is conservative both in the circumstances in which such awards will be made and in the amounts awarded. No award of moral damages has, to the knowledge of the experts, ever been made in a case arising out of damage to land although very many such cases of varying degrees of severity must have come before the Courts over time. This is not surprising, even if such damages are theoretically available, when one considers the basis and justification for an award of moral damages. The language of the Supreme Court, cited above, speaks of “the most intimate feelings” and “the grief that the victim suffers, who is the only one capable to measure its intensity.” This suggests that there is a high threshold, which is more likely to be achieved in a claim where a Claimant has suffered loss of their own bodily autonomy or functions, or where a Claimant is bereaved by the death of a close relative, than in a claim where land is damaged. An attack on a person’s honour, freedom and reputation is also, in universal experience, liable to stir intense and intimate feelings that may be as destructive as grief. Without in any way underestimating the strength of feelings that can be generated by damage to a person’s land or the deleterious effect that may have on their general quality of life, those feelings are not readily equated with the grief and pain suffered on the loss of a child, partner or parent except, perhaps, in extreme and unusual cases. Nor does it seem appropriate to create a linear scale from COP55,000,000 down to zero to cater for all feelings of upset that may be experienced. On the evidence that is available to this Court, moral damages are not appropriate until a person’s most intimate feelings are affected to a high degree.

The experts agreed that damages for loss of amenities of life are non-economic damages that are to compensate for an impact on the external (social) sphere of the victim. The Supreme Court in its decision of 13 May 2008 said that such damages are concerned with the “… decrease in the quality of life of the victim, in the loss or difficulty in making contact to or to relate to persons or things, in order to enjoy a normal existence, as well as depriving the affected person from the possibility of performing the more elementary actions that characterise the reality of their everyday life.” The Court defined the loss of amenities as the deterioration of the quality of life of the victim due to an accident, and held that this type of damage produces the loss of or difficulty of enjoying an ordinary life, and the victim is compelled to live his life under far more complicated or demanding circumstances than other people insofar as

The Supreme Court’s decision made clear that damages for loss of amenities could be awarded for “an encumbrance that could originate from a physical or corporeal injury, as it could also, for example, originate from a slanderous or harmful accusation, from the discussion of the right to use a name or the use of it by someone else, from very intense suffering or, even, from a loss of an asset or economic loss” {I1/4.1T/111.129}. Thus, although neither expert is aware of any reported case where damages for loss of amenities have been awarded in a case based on damage to property, Professor Vallejo was right to accept that it is conceptually possible that they could be. Professor Castro, however, accepted that it would require exceptional circumstances where a person’s entire way of life was seriously affected by damage to his property to justify such an award {Day21/212:5} ff. Her next answer indicated that to award damages in the circumstances of this case would be regarded as novel but something she regarded as possible.

I accept that it is conceptually possible for damages for loss of amenities to be granted in a case based upon damage to property; and I do not regard the fact that damages for loss of amenities have not been awarded by the Courts of Colombia in such a case as this as a bar to an award in the present case. But it is pertinent to ask why there has been, to the knowledge of the experts, no award in similar circumstances before and why Professor Castro regarded the award in circumstances such as this as being a possible application of existing principle rather than being one which she could be confident that the Colombian Court would adopt. It seems most likely that the answer lies in the Supreme Court’s description of what the damages are for, as summarised by the experts and set out above. The picture that emerges is of an impediment, the core characteristic of which is that it prevents the Claimant from enjoying the normal amenities of life because even the normal tasks and activities of everyday life become difficult. This picture is more readily applicable to someone who is struggling with a physical disability after an accident than to someone whose land suffers a loss of productivity by reason of damage and deterioration. I would therefore accept Professor Castro’s evidence that what is required is something exceptional so that the Court may be tempted to take an incremental step by analogy with established cases rather than simply adopting a conceptual possibility.

Both in relation to moral damages and damages for loss of amenities Professor Castro said that the principle of equity (fairness) can assist the Court in determining the quantum of damages. I accept that any award should be fair. That does not obviate the burden upon the Claimant to show that an award should be made and to put before the Court the materials on the basis of which the Court can make an informed assessment of what quantum of these damages (which would be regarded as nonpecuniary and unliquidated in English legal parlance) is fair. While assessment will necessarily be imprecise, I would not accept (if that is what Professor Castro was implying) that the Court can resort to principles of fairness or equity as a substitute for evidence that enables the Court to make a rational assessment of what falls to be compensated.

As an incident of the principle of good faith, there is a duty to mitigate damages in both contract and tort. Mitigation is the duty of the Claimant to minimise the damage by taking reasonable, opportune and appropriate actions. What is reasonable will be affected by the level of resources available to the Claimant {H23.2/7/553}.

Damages may be reduced by the court to take account of contributory fault, in both contract and tort. If damage is caused partly by the Claimant’s own imprudent conduct the Defendant is not thereby exonerated, whatever the degree of the Claimant’s contributory negligence, but the Defendant is not required to compensate the Claimant for that part of the damage caused by the Claimant’s own fault. The onus is on the Defendant to adduce evidence of contributory fault. The appropriate reduction is that proportion of the damage which in considering the evidence the Court assesses as the relative causative importance of the Claimant’s conduct when compared with that of the Defendant {H23.2/7/554}.

The Courts have the power to award interest. The Defendant did not put in any evidence about rates of interest. I accept Professor Castro’s evidence which may be summarised as follows:

Professor Castro’s opinion that “a 6% discount rate must be applied to bring the sum to its present value” is an accurate statement of the practice adopted by the Colombian courts, further evidence on this point was given by the Economics and Pricing experts, which leads me to adopt the different discount rate of 3.5%, for the reasons set out at [911] below.

I have set out the relevant paragraphs of the 1954 Regulations at [40] above. For convenience I reproduce Article 5 here, while not forgetting that it must be read in the context of its surrounding Articles:

“Article 5: In the case of works or activities that implicate the permanent occupation (of land), the compensation shall only be accrued and paid once and shall cover all the time that the oil explorer or exploiter occupies the land, and will comprise all damages.

Permanent works shall be understood as the construction of roads, of oil pipelines, of camps and office buildings, the installation of drilling equipment and other analogous works.

Regarding works and activities entailing a temporary occupation, the compensation will cover periods up to six months.

Temporary occupation shall be understood as the execution of surface exploration works with geophysical equipment, plotting layouts of oil pipelines, of roads, etc., that entail the destruction of fences, the opening of penetrative paths or trails, surface digging and other analogous works.”

The Defendant submits that Article 5 of 1954 Regulations, where applicable, has the effect of extinguishing all claims not founded upon dolo or gross negligence {C4/4.6/63}. The Claimants submit that a payment made pursuant to Article 5 is to be seen as compensation for the use and occupation of the ROW, including compensation for such damage as is necessarily caused by the normal disruption which is to be anticipated from the construction works {C4/3.4/68}. They submit that Article 5 does not prevent a landowner from recovering damages in respect of damage that is not within the contemplation of the parties when the Article 5 payment is assessed or for damage caused by culpa, or for damage that is not “normal”.

The Experts and parties agree that Article 5 forms part of a special decree relating to the establishing of pipeline easements, the laying of pipelines and compensation payable to the owners of private property affected. Article 5 applies in the case of the constitution of an oil easement affecting private property; and it distinguishes between permanent and temporary occupation of the private property. It is also common ground that:

On the clear wording of Article 5, the compensation that is to be accrued and paid once in the case of works or activities that implicate the permanent occupation of land (such as the laying of a pipeline) has two defining features. First, it shall cover all the time that the oil explorer or exploiter occupies the land. Second, it will comprise “all damages”. The phrase “all damages” is not qualified in any way in the Article. The agreed translation clearly implies and means that the compensation which is to be accrued and paid once will comprise “all damages” referable to all the time that the oil explorer or exploiter occupies the land. This would cover the entire period from when the oil explorer or exploiter came onto the land and commenced his works of exploration or exploitation.

There is, however, a third feature of equal importance on the clear wording of Article 5: it does not define the scope of what is to be included in “all damages”. It does not (for example) say “all damages which may in the event be caused by the entrepreneur’s activities, whether contemplated and included in the compensation as assessed or not”; nor does it say “all damages within the scope or contemplation of the assessment of damages that has been carried out”. This absence of definition permits the parties to adopt their opposing positions. I bear in mind at all times that the agreed rules for the interpretation of the law include that (a) when the meaning of the law is clear, its terms should not be disregarded on the pretext that it is necessary to consult the spirit of the law, and (b) the court should not have regard to arguments that a law is too harsh or too generous when interpreting the law. However, it has not been suggested that the Court is not to have regard to the implications of one possible interpretation when chosing between two or more interpretations of a law whose meaning is not clear. And I am not satisfied that the terms of Article 5 itself, or of the 1954 Regulations when read as a whole, clearly define what is meant by “all damages”. As is apparent from the rest of this judgment and from the basic nature of the Defendant’s case, it is not to be assumed in advance that the laying of a pipeline will cause damage outside the ROW even though there is a well-recognised risk that such damage could be caused and that it could be very severe (sometimes for reasons outside the entrepreneur’s control). There is no satisfactory evidence which enables me to make findings about how the experts, the Mayor or the Court would approach their tasks and, in particular, whether the experts, the Mayor or the Court would assume that damage would be confined to the ROW (or, more generally, the area of the mining or petroleum easement). On the available evidence it is entirely possible that practices and assumptions may vary from case to case or area to area where the machinery of the 1947 Mining Code or the 1954 Regulations is adopted. However, it seems safe to assume that where the machinery is adopted, the opinion of the experts and the decision of the Mayor or the Court would state the assumptions upon which they have reached their conclusions and decisions. It also seems likely that they would and should assume that good faith and reasonable skill would be used in exercising the easement. If that is right, it is not clear why they should or would assume damage outside the area affected by the ROW or easement as the case may be. These considerations contribute to my assessment that the meaning of “all damages”

I therefore turn to the various submissions and to the expert evidence that has been advanced in support of the parties’ contrasting positions.

Under Article 5, the single accrual and payment of compensation for works and activities that implicate the permanent occupation of land is to be contrasted with the regime governing works and activities entailing a temporary occupation, where the compensation will cover periods up to six months. The significance of this distinction appears once the 1954 Regulations in general and Article 5 in particular are read in the context of Articles 109 to 118 of the 1947 Mining Code, with which the 1954 Regulations co-exist and which they amend.

I have summarised the relevant effect of Articles 109 to 118 of the 1947 and 1988 Mining Codes and immediately noticeable differences between their approach and the approach under the 1954 Regulations to determining and paying compensation at [26] ff. The Claimants, while accepting that the relevant machinery for oil pipeline works are to be found in Articles 2, 3 and 4 of the 1954 Regulations, point to the fact that the mechanism under the 1947 Mining Code includes the periodic fixing of compensation in advance, leading to payment of compensation every six months for the damage so calculated (in advance) for the respective period. The experts agree that “[the 1954 Regulations] together with Article 116 of [the 1947 Mining Code] sets out the procedure for the valuation with the intervention of Experts before the municipal Court of the local jurisdiction” {H23.2/7/532}. The Claimants rely upon the fact that, under Article 116, the compensation amount is fixed by the Mayor “with prior provisional expert assessment of the damages suffered, which cannot be appealed.” Relying upon Article 116, the Claimants then submit that Article 5 of the 1954 Regulations is an amendment of the 6-monthly payment arrangement provided for by Article 116 of the 1947 Mining Code but that “nothing in Article 5 derogates from the principle in Article 116 of the 1947 Decree that the assessment of the compensation is to be a “prior provisional assessment” {C4/3.4/70} at [214]. The Claimants rely upon answers given by Professor Vallejo at {Day23/116:9} as Professor Vallejo “effectively accept[ing]” that this was the correct interpretation and a passage of discussion with the Court at {Day23/127:22} as the Court accepting that this was the effect of his evidence.

Whatever the view of the Court in the course of Professor Vallejo’s crossexamination, I have now concluded that the Claimants’ submission that an assessment of compensation in accordance with Article 5 is merely a “prior provisional assessment” is wrong and should be rejected, for a number of reasons. First, the phrase “prior provisional assessment” does not appear in Articles 2, 3 or 4 of the 1954 Regulations. Second, the notion of a “prior provisional assessment” (which, under Article 116, cannot be appealed) is inconsistent with (and cannot survive) an amendment to the mechanism by Articles 2-4 pursuant to which the expert’s determination leads to a ruling by the Court on the proper level of compensation that is to be accrued and paid once. It can only have meaning in relation to periodic payments, which may permit a subsequent revision of a previous periodic assessment.

Third, the passage of Professor Vallejo’s evidence upon which the Claimants rely does not provide the support for which they contend, because the critical question was ambiguously formulated and the true meaning of the answer is not clear. At {Day23/116:8} Professor Vallejo agreed with the proposition that Article 5 was obviously intended as an amendment to Article 116 of the 1947 Mining Code “that the landowner has the option to ask for the value of the compensation to be paid every six months.” The next question was:

Having reviewed this passage again, it seems to me more probable that Professor Vallejo was assenting to the difference being that the compensation was fixed by the judge rather than the mayor and not that he was assenting to that proposition and that Article 116 remained as part of the 1954 Regulations machinery so that the expert opinions upon the basis of which the Judge would make his decision were to be regarded as provisional even when the decision by the Judge was in respect of a single payment for permanent occupation. I reach that conclusion because (assuming that was what was intended to be put) I consider that the question was unclear and that if Professor Vallejo had been assenting to the wider proposition that I have set out above it would be inconsistent with the rest of his evidence, which was that the single accrual, assessment and payment of compensation for permanent occupation and damages is not susceptible to subsequent revision. If I am wrong in that assessment of Professor Vallejo’s answer, I consider his answer to be inconsistent with the rest of his evidence and the other considerations that I set out in this section and I reject it as incorrect.

Professor Vallejo’s opinion as summarised in the Joint Statement is clear {H23.2/7/534}:

“Under Article 5 special treatment is given to compensation of damages resulting to property due to the construction of an oil pipeline, in the following sense: (1) The compensation – whether agreed or alternatively fixed by the authorities – shall be paid only once, which means only one payment by way of compensation. (2) The compensation covers the entirety of the period during which the property is occupied by the entrepreneur in accordance with the oil easement. (3) The compensation covers all damages resulting from the construction works performed in the property. (4) The right of the oil entrepreneur to affect the occupied area (thus causing damage to the property) is justified by special laws enacted for the benefit of the oil industry, based in public policy considerations.

Therefore for public policy reasons, Article 5 is a special rule which limits a landowner’s right to compensation for damage caused to his land by the occupation and construction of an oil pipeline. The intention of Article 5 is to prevent a landowner from obtaining compensation in respect of the damage caused by the construction and occupation of an oil pipeline more than once and therefore to preclude further claims whether in tort or contract.

… Article 5 does not make a distinction on the type of damages covered by the legal provision, nor does it contain an exclusion limiting compensation to certain type of damages.

Furthermore, the principle behind Article 5 is to determine the amount of compensation at that stage (pre-construction), and by doing so avoid, prevent or preclude future disputes that would give rise to endless claims and litigation, taking into consideration that the oil industry is for the public benefit as a matter of law.

Whenever there is a valid agreement for the determined amount to be paid as compensation in relation to the permanent occupation of private-owned land by an oil entrepreneur for the purpose of building an oil pipeline and constituting an oil easement, such agreement is to be considered as a definitive binding agreement as to the amount of the compensation and for all the damages caused by the construction of the oil pipeline. In other words, such agreement prevents additional claims for damages resulting from the occupation of the property and from the construction of the oil pipeline.

As long as the damage is not caused by dolo or gross negligence, all damages are covered under Article 5 of [the 1954 Regulations], which is the applicable legal provision to the subject of damages caused by the constitution of an oil easement affecting private property. This norm must be interpreted in a way that produces a legal effect. So, this norm may not be interpreted to avoid its special effect by pretending that it only covers foreseeable damages and without prejudice to additional damages because that would deprive Article 5 of any meaning or utility. Article 5 is a special applicable rule which prevails over the general compensation rules of the Civil Code. …

However, the limitation benefit of Article 5 would be disregarded by a Colombian Court in the case of damages caused to the property due to dolo or gross negligence, in which case the landowner is entitled to file administrative or judicial actions to obtain additional compensation for the damages resulting from such wrongs, and to be successful he must prove the three elements of tort liability against the Defendant: his dolo or gross negligence, the damage to his property and the causal connection between the first two elements.

The effect of Article 5 of [the 1954 Regulations] includes limited compensation for damages due to medium negligence. … It is [Professor Vallejo’s] opinion that only in the case of dolo or gross negligence can the landowner ask the Court to disregard the effects of Article 5 in limiting compensation.”

I will return to this statement of Professor Vallejo’s opinion later. At this stage I merely note two points. First, in his first paragraph Professor Vallejo states at (3) his opinion, which supports the Defendant’s case, that the compensation covers all damages resulting from the construction works performed in the property. I take this to be an opinion on the legal effect of the payment of compensation pursuant to a valuation and determination in accordance with the Article 5 machinery. As I have already pointed out, it is impossible to assert with any confidence what assumptions will be made by the experts, the Mayor or the Court about what damage will be caused when the works are carried out; in particular, it is impossible to assert with any confidence whether they will assume that any damage will be caused outside the area of the easement or the ROW as the case may be. Second, in his second paragraph he states that “the intention of Article 5 is to prevent a landowner from obtaining compensation in respect of the damage caused by the construction and occupation of an oil pipeline more than once and therefore to preclude further claims whether in tort

Professor Castro’s opinion appeared to shift with time. In her first report she wrote {H14/1/49}:

“119.

Article 5 cannot be interpreted or applied as an isolated rule. Its context must be studied as well in order to understand its true meaning and purpose. Decree 1886 of 1954 modified certain provisions of Law 805 of 1947, articles 112-118 included, the latter referring to compensation of all damages caused by oil companies, payable to the owners of land and to farmers. Pursuant to Law 805, such damages should be calculated by the Mayor of the town or city with the support of experts.

120.

Later on, Decree 1886 established specific rules of compensation for damages caused during oil exploration or exploitation, which must be appraised by two experts, before a municipal judge (Article 2). If the experts disagree, a third shall be appointed (Article 3). The parties are entitled to file for review of the appraisal, with the circuit judge (Article 4). And then, Article 5 states that if the land is occupied on a permanent basis, the compensation for damages, calculated under the previously explained rules, must be paid.

121.

It is clear that the compensation referred to in Article 5 is paid once and for good, provided that there has been an objective and independent appraisal of all damages, with the possibility of judicial review in case of disagreement.

122.

Article 5 should be applied in this case because it concerns works performed by an oil company which require permanent occupation of the land. However, it is my opinion that the rule about one-time all-included compensation can only be applied if the procedure set forth by Articles 2-4 is followed completely.

123.

If Article 5 is applied in full compliance with the above mentioned procedure, then the compensation paid should be final and no further assessment would be possible. On

the contrary, if the procedure is not followed, there are, in my opinion, legal grounds to deny conclusive effect to the damages otherwise fixed. In my view, this method of assessing damages was not intended to exclude future, long term losses that were not within the contemplation of the parties at the time the initial assessment was made. That would be clearly unfair and contrary to general principles of Colombian law regarding full compensation for damages.”

At that stage Professor Castro was maintaining that the only way that Article 5 could be brought into play was by operating the mechanism under Articles 2-4. This was wrong and Professor Castro later agreed that it can be brought into play by agreement between the parties that obviates the need to operate the Article 2-4 mechanism; but it explains and provides the context for Professor Castro’s opinion. On that basis, Professor Castro’s opinion was that “the compensation referred to in Article 5 is paid once and for good” because the Article 2-4 mechanism provided “an objective and independent appraisal of all damages, with the possibility of judicial review in case of disagreement”: see [121]. She used similar language in [122] when she said that “the rule about one-time all-included compensation can only be applied if the procedure set forth by Articles 2-4 is followed completely”; and again in [123]: “If Article 5 is applied in full compliance with the above mentioned procedure, then the compensation paid should be final and no further assessment would be possible.” However, the apparent clarity of these statements was qualified by the last two sentences of [123]. The first sentence was an assertion that damages which were “long term losses that were not within the contemplation of the parties” were not included in the ambit of Article 5 where “this method of assessing damages” was followed. What is clear is that Professor Castro did not seek to make an exception based on whether or not the damage was caused by culpa. But her opinion was that damage that was not addressed in the course of the Article 5 machinery was therefore “not within the contemplation of the parties” and was therefore not covered by the blanket exclusion which otherwise she recognised.

In her first report, Professor Castro made no reference to the Petroleum Code, or to the fact that the 1954 Regulations are a special norm (which therefore take precedence over general norms), or to the leading cases on this point (to which I refer below) where the Supreme Court had stressed that the 1954 Regulations are special instruments which take precedence over general rights. These were surprising omissions given the importance of the normative context for Article 5 and the suggestion being made by Professor Castro that general rights of recovery survived or superseded the effect of Article 5. They suggest a lack of familiarity with the subject in hand, but do not demonstrate that her opinion is necessarily wrong.

In her supplementary report, Professor Castro summarised her position differently {H14/3/285}:

“76.

In summary, article 5 applies to general situations where compensation for a ROW is paid at the outset. No further damages may be collected. However, if subsequent damages occur due to malice or negligence of the beneficiary of the easement, general rules of civil liability may apply. To conclude otherwise would be to authorize the oil companies to pay a small amount to get a permission to pollute, destroy and harm others without any legal remedy available. This is clearly in conflict with the fairness principle (equidad) of our Constitution, explained below.”

The substance of this paragraph of Professor Castro’s supplementary report lies in its reference to malice or negligence. Here there is a measure of agreement between the experts because it is common ground that damage caused by dolo or gross negligence (which would include damage caused by malice) is an exception to the Article 5 bar on future action or recovery. The point of conflict between Professor Castro and Professor Vallejo is therefore in regard to damage caused by simple culpa, or what Professor Vallejo described in the Joint Statement as medium negligence.

Professor Castro’s opinion as expressed in the Joint Statement was different again {H23.2/7/532}:

“[T]he purpose of the procedure set forth in Articles 2-4 of [the 1954 Regulations] is to assure that there is a fair and complete assessment of damages payable to landowners when permanent works will be effected by an oil company. Only if such procedure is complete and objective, Article 5 applies.

It is true that an agreement regarding compensation of damages can be reached between the oil company and the landowner. In this event, the procedure of Articles 2-4 would not be necessary. However, in order to determine if an agreement was reached, it would be necessary to establish whether the amount of compensation was the result of a genuine agreement based on complete information and objective parameters, or whether it was unilaterally imposed by the oil company.

An additional consideration would be whether compensation was fixed by the oil company in abuse of its rights, in circumstances where the land could be expropriated by the Colombian State for the establishment of the oil easement in the event that the occupants did not voluntarily agree to the granting of a right of way. In the absence of a genuine agreement between the parties, in the Expert’s opinion, the procedure for fixing damages by Experts would be applicable.

Assuming that there is an agreement and that it is valid, the amount paid was intended to cover the normal, anticipated damages that arise from the occupation of the land and from the construction works. This is what is meant by “all damages” in article 5, which is not to be taken as an isolated provision but to be construed in the context of a legal system that provides for “full compensation” when damages have been caused with malice (dolo) or negligence (culpa). …”

In this passage Professor Castro:

Taking these points in turn, I agree and accept that a contract made between the entrepreneur and the landowner must comply with the requirements of a legally binding contract, as set out elsewhere in this judgment. The fact that there is the residual possibility of expropriation does not of itself either evidence or suggest that the entrepreneur has acted in abuse of its rights, as is clear from the terms of Article 84 of the 1953 Petroleum Code. Assuming that the parties have entered into a legally binding agreement, Professor Castro’s third point begs the essential question, namely what are the terms of the agreement that have been reached. For present purposes I simply note that it would be contrary to the principles of contractual construction that I have summarised elsewhere in this judgment to impose a blanket meaning on any agreement for compensation, whatever its terms.

In the course of her oral evidence, Professor Castro made a number of significant statements and concessions:

Earlier in her oral evidence Professor Castro had attempted to articulate the defining characteristics of her opinion at {Day20/117:10} ff by distinguishing “normal disruption” from the situation where there is negligence, including at one point “I

The Defendant raises a number of objections to the opinions expressed by Professor Castro on this issue. The first is what the Defendant characterises as the clear and unqualified terms of Article 5, which Professor Castro acknowledged to be “a problem.” For the reasons I have set out above, it is not right to import the notion of a “prior provisional expert assessment” in the way suggested by the Claimants. Professor Castro’s acceptance that her construction was problematic in the face of the wording of Article 5 was reasonable, since the wording of Article 5 does not provide express support for her views and it would be possible to interpret the words “all damages” as meaning “all damages which may in the event be caused by the entrepreneur’s activities, whether contemplated and included in the compensation as assessed or not”. However, for the reasons I have given, I do not consider that the terms of Article 5 are clear so as to preclude any other interpretation.

Second, the Defendant submits that interpreting Article 5 as applying only to “normal” damage or damage that was within the contemplation of the parties is a

The Defendant submits, and I accept, that the 1947 Mining Code, as applied to mining operations, is clearly intended to provide a mechanism for the awarding and payment of compensation to landowners throughout the life of the mine, as Professor Castro accepted: see [17.1]. It is also correct that the terms of the 1954 Regulations do not state that the amendments made by those regulations were intended to provide a more limited regime which required or permitted that it be topped up by additional claims for damages through the courts. However, that does not of itself either point to or determine the proper interpretation of Article 5 because, if it is right that the Article 5 assessment does not contemplate or include certain types of damage because they cannot be assessed at that time, the 1954 Regulations are simply silent on how that omission is to be addressed.

I reject the suggestion that the presence or absence of culpa is the criterion which determines whether particular damage is within or outside the ambit of Article 5. The laying of pipelines is a dangerous activity so that culpa is presumed and does not have to be proved. Professor Castro did not directly address this difficulty, but it is real: if cases where culpa is either proved or presumed are outside the ambit of Article 5, the Article would provide no protection to the pipeline layer at all. The Claimants rely upon the experts’ agreement that damage caused by dolo or gross negligence is outside the ambit of Article 5. That is of no assistance to the Claimants because of Article 1522 of the Civil Code, which declares invalid any agreement that forgives future dolo: see [176]. Nor is there any reason to assume that, simply because dolo and gross negligence are not expressly mentioned as founding an exception to Article 5, culpa is to be treated in the same way because (or although) it is not mentioned either.

I also reject Professor Castro’s evidence that Article 1494 of the Civil Code gives the landowner a right of recovery over and above the compensation paid under Article 5. The 1947 Mining Code and 1954 Regulations are special laws which (on any view) restrict the amount of compensation to which a landowner might otherwise be entitled under general provisions of the Civil or Commercial Codes. The issue is simply to determine the extent to which they do so.

The parties have cited two authorities, both of which post-date the introduction of the 1991 Constitution. The factual background for each case was similar. The landowners’ predecessors in title had granted easements to HOCOL in respect of oil drilling sites. HOCOL had erected drilling sites and had made payments to the landowners under Article 5. Subsequently HOCOL’s concession was terminated and its rights were transferred to Ecopetrol, representing the state. The Claimants claimed that they had suffered damage since the original payment of the Article 5 payment and that the damage was not covered by the Article 5 payment. They therefore claimed further damages. Both claims failed.

In “El Recreo” (2008) {I1/4T/103} the Supreme Court confirmed that the relevant decrees, including the 1954 Regulations were special regulations so that it was not possible to apply exclusively the rules contained in the Civil Code for contractual and easement matters {I1/4T/110} at [6]. At {I1/4T/108} the Supreme Court noted the position taken by the Court below in reaching the decision that the Supreme Court upheld:

“… [I]n the case of the permanent occupation of the mentioned property, derived from the creation of an oil easement, article 5 of [the 1954 Regulations] provides for the payment of a onetime compensation, which will cover the entire duration of same, including any and all damages which may be caused and that in the present case there is proof that said compensation was settled in due course, and the claimant did not express any disagreement at the time.”

In “El Cebu” (2010) {I1/5T/152} the Claimants alleged that the original easement had been terminated so that the assignment to Ecopetrol was invalid. On that basis they claimed damages for illegal occupation of their land which, they alleged, prevented them from exploiting it for raising livestock. Once again the Supreme Court upheld the decisions of the Courts below, which were to the effect that the original easement persisted and that the Article 5 payment covered all damage. In the Course of its judgment the Supreme Court underlined (physically) the provision of Article 5 that the compensation paid “shall cover all damages” {I1/5T/162}, referred to and accepted the statement in El Recreo that the contract and easement rules in the Civil Code cannot be applied exclusively in the face of the 1954 Regulations {I1/5T/166}, referred to the central importance of oil to the Colombian state and the welfare of its people, and described how “a new variety of real property right was also configured around [the property of the State in the subsoil] long ago, known as public benefit easements, which are tools created by the lawmaker or by the constituent, placed at the service of the general interest, for the convenience and benefit of the community” {I1/5T/167}.

The Supreme Court also stated that

“the easement regimen is so peculiar that, although of public interest, the hydrocarbon fuel operator, as holder of said sui generis right in rem, is forced, vis-à-vis the owner or holder of the asset, to pay a compensation for his use of the corresponding areas, given that, as known, the constitutional regulation not only authorizes the legislature to impose expropriations or to end ownership outside the framework laid down in articles 34, 58 and 59 of the Constitution, but guarantees private property, given that, as a fundamental right on which all social institutions are based, it is the cornerstone of the economy, the heart of the entire legislation and the core of free enterprise … which gave rise to the current Constitution” {I1/5T/168}

And it concluded its judgement:

“… we must stress again, quoting the fifth article of [the 1954 regulations], in dealing with works that entail an occupation of a permanent nature, “the compensation shall be due and payable all at once and shall cover the entire time that the oil prospector or operator occupies the land, and shall encompass all the damages.”” {I1/5T/169}

The Claimants rightly point out that the primary question in each case was whether the easements had terminated and that it was not alleged that damage had been caused to the land over and above the fact of occupation and use. The statements about the one-off nature of payments under Article 5 were therefore not directed to the issue of damage outside the area of the easement that arises in the present litigation. The Claimants can also take modest comfort from the terms of the judgment in El Cebu set out above which, to some extent at least, suggest that the compensation is for use of the areas occupied by the operator. Viewed overall, I do not consider that either authority determines the issue I have to decide.

The final major strand of the Claimants’ argument rests upon the assertion that Professor Vallejo’s view, if upheld, would be extremely unfair to landowners. The Defendant responds to this submission by pointing to the wider balance of interests including the impact of the regulatory regime. I do not find either submission strongly persuasive, because it was for the Colombian law makers to establish the balance that was to be struck between landowners and oil entrepreneurs. The Court’s task is to identify that balance, not to strike its own. Whether the correct interpretation is the Claimants’ or that of the Defendant, compensation payments made under Article 5 may be insufficient to provide full compensation for damage that is caused to affected land, because the Article 5 assessment may clearly comprehend, but undercompensate, damage that will occur – for example on the ROW or the area of the easement. From the point of view of the landowner that is obviously disadvantageous and regrettable, but it is implicitly accepted even on the Claimants’ interpretation. In some cases the effect of Professor Vallejo’s view would be to increase the discrepancy between the Article 5 payment and the damage that is caused - for example if the Article 5 assessment assumes that there will be no damage off the ROW or the area of the easement. That is, equally obviously, more disadvantageous and more regrettable from the point of view of the landowner. However, the extent of the disadvantage can only be determined by deciding the correct interpretation of Article 5, and not the other way round. And, as the discussion above has already made clear, the landowner retains the right to claim further compensation if he can prove dolo or gross negligence; and the private law rights of the landowner are not to be viewed in isolation, being balanced against the beneficial status of the oil industry.

The balance that has been struck by the Colombian legislature includes the limitations upon the right of compensation imposed by the 1954 Regulations. It also includes the regulatory structure described elsewhere in this judgment. Particular aspects of that structure include the requirement that the oil entrepreneur must obtain approval from the Ministry (including approval of the route to be taken) and must obtain an environmental licence which, as the licence in the present case shows, may impose substantial requirements; and the structure provides for detailed technical standards to be imposed. As Professor Castro agreed, the regulatory structure gives rise to ongoing monitoring to ensure compliance with the Licence {Day20/88:2}. The environmental licence in this case stated that the Ministry would supervise the execution of the works and verify compliance with the licence; and it provided for the Ministry to determine and stipulate corrective measures in the event of unforeseen environmental effects; and the licence itself required the licensee to establish a compensation scheme for damage caused during the construction works: see [341]. There is evidence of continuing monitoring and investigation, including an investigation in 2002 which required Ocensa to take various steps {K60/588/1}. In addition, there are public law remedies that a landowner can invoke, including bringing an “action for compliance” or an “action popular” {H15/1/190}.

These considerations on the balance of fairness do not ultimately determine or indicate what Article 5 means. However, any interpretation of a legal provision which deprives a landowner of any compensation for damage however extensive and whether or not that damage could have been, would have been or was contemplated when the Article 5 compensation was fixed requires careful scrutiny, particularly when it would have been simple and straightforward for the lawmakers to clarify their meaning if that was what was intended.

Before reaching a final conclusion on Article 5 it is necessary to mention the fact that, on the evidence, additional compensation was routinely paid to landowners after the pipeline had been laid, and that the Defendant evidently considered that it was bound to make payments if damage was caused by failures of maintenance and repair in addition to damage caused by the original construction, and that it did so by reference to the terms of the agreements it entered into with landowners {K19/154T3/1}.

There can be no doubt that, in advance of building the pipeline, it was contemplated that damage caused outside the strip of land required for the ROW would be the subject of future agreement and further compensation over and above the initial evaluation for the purposes of the ROW Agreement, which would be of those damages which may be caused to the occupied strip of land {K9/34T/39}: see [359]. This was reflected in the Land Acquisition Manual, which included in the Final Phase of activities that “the Land Negotiator will verify the payment of the damages caused by the Ocensa contractors out of the area negotiated by the Company” {K66/618T/13}; and it was also reflected in the contractual arrangements between Ocensa and Saipem, which made the payment of final sums due under Saipem’s contract dependent upon provision by Saipem of Paz y Salvos from affected landowners {J14/54.1/66}. Mr Allison, of whom more later, was equally in no doubt that the processes that were to be undertaken for negotiating compensation in advance would not preclude the need for later re-evaluation and further compensation. To the contrary, his evidence was that there was very likely to be damage outside the ROW and so there had to be a mechanism for coping with that {Day15/25:18}. It is beyond argument that the oil entrepreneurs in this case considered that there would be additional compensation that had to be paid after the works were completed.

The short answer to their views is that they do not determine the meaning of Article 5, which I am bound to decide as a matter of fact on the basis of the expert evidence I have heard. It remains of interest, however, that someone (evidently a lawyer) said, in a sentence that resonates with Professor Castro’s opinion: “Let’s remember that in our uncouth and sometimes disorganised legislation, there are norms which ought to be studied and analysed as a whole and that no matter how specialised the matter they should not be put to one side. This is the case with the provisions regarding contractual and extra contractual civil responsibility to which we respectfully refer” {K19/154T3/1}.

I have concluded that Professor Vallejo’s statement of opinion as stated in (3) of the first paragraph of the summary of his opinion set out at [217] requires qualification in the light of Professor Castro’s evidence that the Article 5 exclusion of future claims applies when the assessment is “complete and objective”. I have reached this conclusion on the basis of the considerations I have set out at length above, my primary reasons being that I do not regard the terms of Article 5 as being clear and that, even allowing for the acknowledged fact that the Colombian State has deliberately established a regime that is favourable to the oil industry, I can see no good reason for extending the protection given by Article 5 beyond the scope of an assessment or decision that is made when operating its machinery. I do not need or attempt to lay down a comprehensive or prescriptive code to define what will and will not be considered to be within the scope of a particular assessment or decision, for the simple reason that this case does not involve any case where the Article 5 machinery was operated so as to give rise to an assessment of damages by either the Mayor or the Court. However, the mere fact that, in the event, the Article 5 compensation proves to be under-compensation for the damage that is within the scope of the assessment will not be good grounds for claiming further compensation, which has some relevance for what comes later. An interpretation of Article 5 which precludes any further claim in respect of damages that were within the scope of the original assessment but permits claims for damage falling outside the scope of the assessment that has been carried out under the Regulations still provides considerable protection for the oil industry. I would expect that any assessment by the experts, the Mayor or the Court would include within its scope damages that would be regarded as “normal” but what is regarded as “normal” may vary from case to case. However, what was within the scope of the original assessment will be determinable on the facts of the case because the assumptions underlying the assessment should be clear from the operation of the Article 5 machinery by the experts, the Mayor or the Court exercising their respective functions. As I have said, I do not know what basis or scope of assessment is in fact applied by the Colombian courts that are charged with this responsibility. My conclusion is therefore purely one of principle on the meaning of Article 5 without knowing whether it would have any application in real life after an assessment by the Colombian court.

Turning to agreements that invoke Article 5, I have already highlighted Professor Vallejo’s statement of opinion about the interpretation of an agreement for a predetermined amount to be paid as compensation in relation to the permanent occupation of private-owned land by an oil entrepreneur. I can see no justification for

The Lay Witnesses

Both before and during the trial the Claimants submitted that witnesses that they were calling were vulnerable in a number of ways that differed from witness to witness. I have kept those submissions in mind at all times when assessing the quality and reliability of the evidence that each witness has given. It is true that the environment of an English court hearing, whether the witness travelled to London or gave evidence by videolink from Colombia, was alien for all of the lay witnesses called on behalf of the Claimants and, to a lesser extent, for those called on behalf of the Defendant. It is also true that it took some time before some of the Counsel on each side shed some of the bad habits that can creep into the technique of even the most expert examiners and cross-examiners. In general, where questions were liable to confuse a witness, either the witness made clear that the question was not understood or the Court or Counsel intervened to obtain more acceptable formulations. In reviewing the evidence for the purposes of writing this judgment, there have been very few occasions where it has seemed that there was a significant misunderstanding between Counsel and the questioner.

The Claimants’ lawyers consistently voiced the concern that that the witnesses may be overawed or intimidated by the proceedings or be inhibited by an undue sense of deference. All of the witnesses for whom English was not their first language were courteous and some used phrases which might not have been expected of a witness from England. A recurring example was to respond to Counsel who said “thank you” after an answer by saying “you are welcome” or “my pleasure”. But these and other courtesies did not appear to be the product of undue deference. On the contrary, the canny toughness to which I refer elsewhere in the judgment was often in evidence.

The main difficulty with the lay evidence is that a number of witnesses were poor historians. This applied extensively to evidence where chronology was important. As will be seen in the analysis and review of the evidence in the Sections dealing with the four Trial Lead Cases in detail, there are a number of critically important points where I reject the evidence of the lay witnesses about when things happened. The Claimants accepted and submitted in relation to a number of witnesses that they would have difficulty in putting events in chronological order for cultural reasons. I accept and have made due allowance for the fact that this is so. But the problem went deeper than that. Reviewing the lay evidence overall as one of the last parts of writing this judgment, I find myself driven to the conclusion that the Claimants’ inherent difficulties with chronological memory have on occasions been reinforced by the process of litigation. For numerous reasons, including time constraints, this trial and this judgment have not investigated in detail how that came about; but it certainly did. The problem showed itself in ways that were both general and particular. Particular instances include the timing of Snr Sequeda’s (LC39) house move and when Snr Buitrago and Snr Manco (LC50) dug their fish ponds – there are numerous others that are to be found in the Sections dealing with the Lead Cases in detail. More generally, the mantra that the ODC pipeline caused no damage and that all of the Claimants’ troubles started with the Ocensa pipeline pervaded the evidence and was frequently wrong for the reasons that I have detailed elsewhere.

The evidential difficulties were not confined to chronology. This was recognised by the Claimants in oral closing submissions. The Court was referred to text books and authorities reminding that it is always the task of the Court or tribunal to go on looking for a kernel of truth even if a witness is in some respects unreliable {Day54/15:18} ff. That is a reminder that I have kept well in mind throughout the process of writing this judgment.

I accept wholeheartedly and have attempted always to apply the wise advice of the High Court of Australia that exaggeration or even fabrication of parts of a witness’ testimony does not exclude the possibility that there is a hard core of acceptable evidence within the body of the testimony and, since that possibility exists, care must be taken that an over-stringent approach does not result in an unjust exclusion from the consideration of the totality of some evidence where a portion of it could reasonably be accepted. The mere fact that there are inconsistencies or unreliability in parts of a witness’ evidence is normal in the Court’s experience, which must be taken into account when assessing the evidence as a whole and whether some parts can be accepted as reliable. I also accept wholeheartedly the observation of the Court of Appeal, made in a different context in Re A (a child) [2011] EWCA Civ 12 at [20], that “wading through a mass of evidence, much of it usually uncorroborated and often coming from witnesses who, for whatever reasons, may be neither reliable nor even truthful, the difficulty of discerning where the truth actually lies, what findings he can properly make, is often one of almost excruciating difficulty. Yet as Baroness Hale of Richmond tartly observed … “it is a task which we are paid to perform to the best of our ability”. The task, as she acknowledged, is a difficult one, to be performed without prejudice and preconceived ideas.” Those observations are directly applicable to the task of fact finding in this case. The task has been difficult; and I have not ducked it.

General Narrative 252. Section Index:

At the foot of the Andes, about 100 miles northeast of Bogota, lie the Cusiana and Cupiagua oil fields. The Cusiana field was discovered in about 1988; the Cupiagua field was discovered about four years later. Two pipelines were constructed at an early stage. The Oleoducto Central de los Llanos (or “OCL”) pipeline ran from El Porvenir in the south to Vasconia and the Oleoducto de Colombia (or “ODC”) pipeline ran from Vasconia to Coveñas in the north. The ODC pipeline was laid in 1990-1991 and is important for this litigation and judgment.

Comparatively little is known about the ODC pipeline project. Its installation would have been subject to the regulatory regime then in place. It commenced before the introduction of law 93 of 1993 and no environmental licence is available to the court. It is, however, clear that those responsible for the ODC pipeline engaged with affected landowners in advance of laying the pipeline. As happened later with the Ocensa pipeline, notice was initially given of the intention to carry out the works. Later, agreements were entered into with the landowners pursuant to which a payment would have been made that would have fallen within the terms of Article 5 of the 1954 Regulations.

It is instructive to see the terms of notification of the ODC works, which was given by Ecopetrol, both for the similarities to and the differences from the documents that were subsequently generated in relation to the Ocensa pipeline works. I set out the Ocensa First Letter at [368] below. The notifications of the ODC works were in standard form and were issued on 24 August 1988 by Ecopetrol. The notifications are available for LC39 {M/71.1T/234.2}, LC50 {M/87T/294.1} and LC74 {M/169T/586.2} and for sufficient numbers of the Lead Claimants to justify the finding that they were prepared for all people through whose land the ODC pipeline was to run (Footnote: ⁷). The notifications stated as follows:

“ECP No. [ ]

Agreements pursuant to which a payment would fall to be made are available in respect of LC39 {M/71.2T/234.11}; LC54 {M/118.1/411.1} (a public deed that would probably have been preceded by what the parties have called a ROW Agreement: see [369],[371]); LC74 {M/183T/726.0.13} (an agreement that was subsequently amended, {M/170T/592.1} (another public deed); and other Lead Claimants. Once again, their prevalence in the trial bundle justifies the inference that those carrying out the ODC works would have at least attempted to enter into such agreements with all affected landowners, with the provisions of the Petroleum Code and the 1954 Regulations being in place and the long-stop prospect of expropriation in the event that the landowner chose not to enter into a contract. The terms of one of LC74’s agreements {M/183T/726.0.13} may be taken as typical and included the following provisions:

“…

The undersigned, Rogelio Velez Montoya, …, who acts on his own behalf and that hereinafter shall be referred to as THE BENEFICIARY, on the one hand, and on the other Hernando Montes C. … who acts on behalf and representation of OLEODUCTO DE COLOMBIA S.A., …, which hereinafter shall be referred to as THE COMPANY, have entered into an

PERMANENT PROMISE OF EASEMENT ESTABLISHMENT OF PIPELINE AND TRANSIT agreement governed by the following clauses:

ONE: THE BENEFICIARY currently occupies and owns a property called La Nieve, located in the Township of Paraje de la Cooperativa, jurisdiction of the municipality of Remedios, Department of Antioquia, with a surface area of 47 ½ Ha, ….

TWO: …

THREE: Within the property, the works necessary for the construction of the VASCONIA - COVEÑAS Pipeline with buried pipes of 24” (Inches), affecting a section of the land of Twenty Meters (20 mts) in width by 424 Meters in length for a total of 8,480 Square Meters, area comprised within the following special boundaries: …

FOUR: In the aforementioned property, and in particular but not exclusively in the land area set out in the previous clause,

THE OWNER grants THE COMPANY rights of use and occupancy established by the Law in favor of the oil industry, pursuant to which THE COMPANY or individual or legal entity to whom it transfers its rights, may perform the works necessary (cuts and/or embankments) according to the technique required, to repair the Pipeline, and to perform the works required for maintenance and repairs, as well as free passage for workers, equipment and machinery used during the work, …

FIVE: It is understood that, when due to technical reasons, it is necessary for repair and maintenance work to occupy an area greater than that negotiated, THE BENEFICIARY empowers THE COMPANY or whomever is acting as such, to perform the above, taking into account that the damage that is effectively caused shall be compensated after the final cleanup phase. ….

SIX: As compensation for the easement right and the Damages and injuries caused, THE COMPANY shall pay THE OWNER, the sum of $798,000 (Footnote: ⁹) as follows: 1) 70% of the total sum, that is, the sum of $558,600 by way of damages and injuries once this document is executed and before the subscription of the corresponding Public Deed. 2) The remaining 30%, that is, the sum of $239,400 by way of easement to the granting of the respective Public Deed.

PARAGRAPH: The total value of this compensation, from which the tax percentage stated by the Law shall be deducted, contains, pursuant to Article5 of Decree No. 1886/1954 not only the rights of transit, occupancy and use of the area described in Clause Three, but also the injuries or damages caused during the construction performed in the property and particularly, those related to the attached list, containing an inventory of goods that will be affected during the works, in accordance with the estimates made by the parties.

SEVEN:…

EIGHT: In any case, THE OWNER recognizes as of now and in favor of THE COMPANY, full rights of use, occupancy and legal easement of pipeline and transit of the property identified above. Also, it declares that it expressly authorizes the immediate commencement of all works required for the construction of the Pipeline, and ensures that there will be no suspensions or disturbances during its performance, during the installation of items or during the operation of machinery, until the construction works for the Pipeline have been fully completed.

NINE: Upon conclusion of the construction of the Pipeline, THE OWNER may use the land area determined for the easement undertaking not to perform actions, such as construction of housing and real estates in general or tree planting preventing or hindering the performance of the pipeline, its dependencies or accessories; ….. It also undertakes not to perform actions affecting the works carried out for the stability, conservation or recovery of the land and/or the work, whether inside or outside the area negotiated. As of now, THE OWNER authorizes THE COMPANY to remove trees, objects or plants found, sprouted or placed within the area delimited in Clause Three of this agreement and interfering or hindering the repair or maintenance works of the Pipeline and interfering or hindering the stability and/or the operation of the pipeline or its accessories, without being bound to the payment of any compensation. When required to remove posts, division fences, vegetation or crops not preventing or affecting the enjoyment of easement, the relevant compensation shall be acknowledged. PARAGRAPH: In the event that THE COMPANY determines to build other pipelines …, in the determined area of the easement, or requires performing the necessary works for the conservation, recovery or management of pipes, it shall recognize and will only pay the damages or injuries caused by this type of works. Once the OWNER receives as satisfaction the payment for the Easement promised herein, it waives to any subsequent, judicial or extrajudicial claim by this concept. TEN: THE COMPANY may transfer the rights acquired under this agreement to any other individual or legal entity, for which THE OWNER as of now grants the corresponding authorization….

ELEVEN: The legal easement of the pipeline is subject to the rules of the Civil Code, the Petroleum Code, Decree

1886/1954, and in the pertinent, to the Mining Code.

TWELVE: …”

In addition, there is direct evidence that some landowners claimed damages after the installation of the ODC pipeline. Snr Velez (LC74) is a case in point. In August 1993 he entered into a damages agreement with ODC {M/183T/726.0.8} pursuant to

There is evidence that LC39 entered a Paz y Salvo with ODC (or, more strictly, ODC’s contractors) acknowledging full payment of compensation for damage caused by the ODC works {M/72.6T/237.15}. There is no evidence that LC50, LC54 or LC74 entered into such a document with ODC or its contractors. It is probable that ODC would have attempted to enter into Paz y Salvos with landowners, at least where there had been a claim for damages over and above the damage contemplated by the original ROW agreements, but the evidence does not permit a finding that it did so in every case or in every case where there had been a claim for additional damages. The fact that the LC39 Paz y Salvo relates to damage caused outside the area covered by the original easement and was concluded with ODC’s contractor suggests that ODC operated a system like that subsequently operated by Ocensa, under which ODC took responsibility for additional damage on the ROW while its contractors took responsibility for damage off it. However, not enough is known about the ODC approach to settling cases and obtaining Paz y Salvos to make specific findings on this point.

After the discovery of the Cupiagua field, decisions were taken to undertake two major infrastructure projects that came to be known as Phases I and II. Work on Phase I started in 1993 and was designed to increase production levels from about 12,000 barrels per day (“bpd”) to about 185,000 bpd. Above 185,000 bpd production was constrained by the lack of pipeline transportation infrastructure. Accordingly Phase II had two components. The first was to increase field production up to about 500,000 bpd by about 1998. The second was to construct an 800km pipeline and related infrastructure from the oilfields to Coveñas in the North, which would expand average pipeline transportation capacity to 560,000 bpd.

The proposed Phase II pipeline project included laying approximately 315 kms of pipeline from the oil fields to Vasconia (which became known as “Pipeline South”), laying a further 480 kms of pipeline from Vasconia to Coveñas (which became known as “Pipeline North”), and carrying out works to improve the export terminal at Coveñas. The new pipeline as a whole came to be known as the Ocensa pipeline.

On 29 June 1993 Ecopetrol declared the commerciality of the Santiago de las Atalayas and Tauremena Association Contracts and thereby acquired a 50% interest under those contracts. After the declaration the undivided interests of the parties to the Association Contracts were Ecopetrol – 50%; the Defendant – 19%; Total – 19%; and Triton – 12%.

The Defendant, Total and Triton entered into a series of agreements to govern their respective rights and obligations, as set out below.

A series of Joint Operating Agreements (“JOAs”) culminated in “the 1994 JOA” {J3/11/1}, which came into effect from 29 March 1994. The 1994 JOA was governed by New York law. Article 3 provided that all real and personal joint property was to be held in undivided interests in proportions that reflected the parties’ interests in the Association Contracts (BP and Total 38% each, Triton 24%). By Article 4.1, the Defendant was appointed “Operator” (defined as “the Party appointed from time to time to conduct Joint Operations … when acting in its capacity as Operator.”). Article 4.7 provided that “in accordance with a Work Program and Budget and subject to whatever instructions may be given from time to time by the Operating Committee, Operator shall have exclusive charge of and shall conduct all Joint Operations on behalf of the Parties under the Association Contracts and this Agreement.” The Joint Operations to which Article 4.7 referred were defined as “all activities approved by the Operating Committee … for … the construction and/or operation of pipelines …

The remaining provisions of Article 4 demonstrate that the Operator’s obligation to take exclusive charge of and to conduct all Joint Operations required the Operator to carry out all of the operational steps necessary to bring the Joint Operations to a successful conclusion. Thus, for example, the Operator was required to determine the number of employees and their selection, their hours of work and compensation (Article 4.8); it was to acquire and furnish all materials and equipment required in the performance of the JOA and the Association Contracts, making every effort to obtain them on terms and conditions most favourable to all of the Parties to the JOA (Article 4.9(b)); it was to select all contractors to be used in the Joint Operations and award contracts on specified criteria (Article 4.9(e)); it was to secure or cause to be secured all permits, easements and other necessary rights (Article 4.9(f)); it was to perform (or cause to be performed) in a good and workmanlike manner all engineering, design and construction work on the project in accordance with the terms of the JOA (Article 4.9(m)); and it was to carry out each Work Program within the limits of the relevant Budget. In addition it was to discharge various administrative functions such as providing to the Parties designated reports and such other reports as the Operating Committee may determine (Article 4.9(c)), keeping books, accounts and records (Article 4.9(j)), and (when and as directed by the Operating Committee) representing the Parties before Ecopetrol and the Government (Article 4.9(k)).

The Operating Committee was established by Article 5.1, which provided that its function was, subject to the provisions of the JOA, to “exercise overall supervision and control of Joint Operations.” Each party was entitled to a representative on the Operating Committee, which was to have the powers and duties necessary to determine an overall management of Joint Operations. These powers and duties included (by Article 5.4) “(a) the consideration and determination of all matters relating to general policies, procedures and methods of Joint Operations; (b) the consideration, revision and approval or disapproval of all proposed work programs, budgets and [authorisations for expenditure] prepared and submitted to it … ; (e) the consideration and, if so required, the determination of any other matter relating to the Joint Operations which may be referred to it by any party or which is otherwise designated under [the JOA] for reference to it.” Work Programs and Budgets required approval by the Operating Committee and, when given, that approval authorized and obliged the Operator to proceed in accordance with them (Article 6.1). Costs and expenses were to be borne by the Parties in proportion to their participating interests (Article 7.1).

The Defendant submits that the arrangements set out in the 1994 JOA were “essentially the mechanism through which the three contracting parties were to conduct their business …” and that “the Defendant, as the Operator and in its conducting of the Joint Operations, was controlled by the three contracting parties through the Operating Committee.” While it is true that the 1994 JOA set out the Parties’ arrangements for bringing the project to a successful conclusion for their joint and mutual benefit, the suggestion that the Operator was “controlled” by the other parties through the Operating Committee requires qualification and explanation. First, the Operator was to have exclusive charge of the Joint Operations and was the party that was to conduct them. The 1994 JOA did not contemplate that the other parties (or the Defendant except when acting in its capacity as Operator) would become directly involved in the conduct of the Joint Operations: the central purpose of appointing the Operator was to relieve the Joint Venturers (as such) of the need for all to become involved in the direct running of the Joint Operations. Article 5 of the 1994 JOA identifies the degree of control to be exercised by the Operating Committee as being essentially high level and supervisory, so as to give it “overall” management: this is shown by the extracts set out above and is consistent with the authorizing and obliging effect of approval of Work Programmes and Budgets. Thus, while it would be correct to say that the Operating Committee held ultimate residual power, the Operator was charged with conducting the Joint Operations and was expected to direct them. Viewed from outside the joint venturers’ camp, it was the Operator who was going to run the Joint Operations.

It appears that the 1994 JOA was concluded in or about June 1994, though dated 29 March 1994. During the same period, the joint venturers entered into agreements with Ecopetrol to regulate their four-way operations.

The joint venturers and Ecopetrol entered into a Memorandum of Understanding dated 16 March 1994 (“the MOU”) {J1/7T/11}, which was superseded by a Revised Memorandum of Understanding dated 15 July 1994 (“the RMOU”) {J5/18T/1}.

The MOU {J1/7T/11} was governed by Colombian Law. The recitals recorded that the four Parties wished to enter into it “to govern operations inter se relating to the Initial and the Construction Stages from the effective date of the agreement”. To that end, the Parties’ objective was to “commit to carrying out technical and economic analysis, to perform the studies and designs, to determine the technical specifications related to the Project and to commence activities to incorporate a stock company … (all together referred to as the “Preliminary Activities”), and if they find the Project feasible and agree to proceed with the Project, to order the construction … of the Project, incorporating an SA … to such end” (Clause 1). Clause 2 committed the Parties to conduct various Preliminary Activities including Technical Studies containing but not limited to preliminary engineering as necessary, routing, permits and rights of way, and environmental studies. These studies were to be completed to the satisfaction of all Parties as a prerequisite to forming an SA (Clause 2.4). In order to conduct the Preliminary Activities during the Initial Stage, the Parties agreed to appoint a Steering Committee consisting of one representative of each Party. The Steering Committee was to determine the governing rules for the performance of the Preliminary Activities and was to be superseded by a similarly tasked body set up under the Articles of Incorporation of the SA (Clause 3). During the Initial Stage covered by the MOU, the Defendant was to act as Coordinator in conducting the Preliminary Activities with the mandate of the Parties and under the direction of the Steering Committee; and it was to be authorised to hire the services of third parties for the conduct of the Preliminary Activities (Clause 4).

The RMOU {J5/18T/1} introduced two new parties (collectively known as the Canadian Group) who were intended to operate the Project facilities following construction. The equity participation of the parties was stated to be Ecopetrol – 20%, the Defendant and Total - 15.2% each, Triton - 9.6% and the Canadian Group - 40%. The objective was stated in Clause 2 in similar terms to Clause 1 of the MOU, with the additional objective of ordering material and placing contracts for front end engineering work in connection with certain parts of the Project. Clause 4 provided that, in order to conduct the Preliminary Activities, the Parties would appoint the Steering Committee (on which the Canadian Group would have two representatives but only one vote, with the other Parties having one representative and one vote each). As with the MOU, the Steering Committee was to determine the governing rules for the performance of the Preliminary Activities; and it was to be superseded by a similarly tasked body set up under the Articles of Incorporation and the By-laws of the SA. Annex F showed the budget that had by now been approved by the Steering Committee under the MOU. Once again, the Defendant was appointed to act as the Coordinator in conducting the Preliminary Activities with the mandate of the Parties and under the direction of the Steering Committee; and once again it was to be authorised to hire the services of third parties for the conduct of the Preliminary Activities (Clause 5).

Annex G contained accounting provisions, including that the Coordinator (i.e. the Defendant) should select the contractors to be used in Preliminary Activities. It could let contracts for less than USD 250,000 without informing of getting approval from the Steering Committee: contracts of greater financial value required a competitive bid procedure and the approval of the contracting Parties to the recommended bid. The costs, expenses and benefits accruing or resulting from the Preliminary Activities would be borne by and accrue to the Parties in proportion to their Equity Participation interests.

The RMOU contained more detailed provisions about the proposed SA in Annex A. The SA was to be established to “design, finance, construct, own and operate the Project assets”. It was to be a Sociedad Anonima incorporated under Colombian law. Initially the shares were to be held by Ecopetrol, the Defendant, Total, Triton and the Canadian Group in proportion to their equity participation under the RMOU.

Annex C of the RMOU provided that, following incorporation of the SA, the SA would enter into various contracts with engineering, procurement and construction (“EPC”) contractors. The SA was also to appoint a Project Construction Management Team (“PCMT”) made up of representatives of Ecopetrol, the Defendant, Total, Triton, the Canadian Group and the engineering group in charge of the preliminary engineering (Brown & Root). The PCMT was to supervise the implementation of such contracts. It was currently envisaged that the PCMT would be led by Ed Truett (a BP employee) who would also lead a team charged with the project construction management of the Fields. The SA was to enter into a technical services agreement with Brown & Root under which Brown & Root would provide EPC support and expertise including the services of their representative on the PCMT. The SA was also to enter into one or more Manpower Agreements with Ecopetrol, the Defendant, Total, Triton, and the Canadian Group to cover any personnel seconded into the PCMT.

On 14 December 1994 Oleoducto Central S.A. was incorporated as a Sociedad Anonima under Colombian law {K16/128/1}: it is universally referred to as Ocensa. Its corporate purpose was “to design, construct, develop, operate and own public use pipeline system and related facilities including, port facilities running from the Municipality of Tauramena … to the Port of Coveñas … . In furtherance of its corporate purpose, the Company shall conduct the necessary technical-economic feasibility studies, prepare such studies and designs, and determine such technical specifications for the pipeline, its terminal and the pumping and storage stations to carry out its construction and operation.” The Defendant was not itself a shareholder in Ocensa, but its wholly owned subsidiary BP Colombia Pipelines Limited held 15.2% of the shareholding. Ecopetrol held 25%, with the balance being held by the other parties to the RMOU or their affiliates.

The Ocensa Deed of Incorporation also stood as the company’s by-laws: see, for example, Article 5 {K16/128/2}. No specific reference was made to any particular committee or body that was tasked in a manner similar to the Steering Committee. General provision was made for the creation of committees: see, for example Article 42(K) {K16/128/17}. So far as the court is aware, no document establishing the PCMT as such a committee or body is available.

On the same day, 14 December 1994, Ocensa and its shareholders entered into the Oleoducto Central Agreement (“the OCA”), which specified the terms and conditions of the shareholders’ respective investments and participation in Ocensa and the financing and operation of the project {J9/29/1}. It was superseded as set out below, and can therefore be treated shortly. It recorded that the shareholders had incorporated Ocensa “for the sole purpose of acquiring, developing, constructing, financing, completing, owning and operating the [project]” (Section 2.3). Section 3.5 provided that Ocensa would be responsible for construction activities and that, to enable it to carry out such activities it would enter into a technical services and management agreement with the Defendant (not its shareholding subsidiary) pursuant to which the Defendant would “provide the services of Ed Truett or another of its employees to act as manager (the “PCMT Manager”) of the project construction management team of Ocensa responsible for construction activities, together with appropriate technical support.”

On 31 March 1995, the OCA was replaced by the Amended and Restated Oleoducto Central Agreement (“the AROCA”) {J10/32/1}, which was governed by New York law (as had been the OCA). Once again, the parties were Ocensa and its shareholders, and not the Defendant. The AROCA recorded that the RMOU had been terminated on 14 December 1994 (by its parties, including the Defendant). As with the OCA, Section 2.3 of the AROCA recorded that the shareholders had incorporated Ocensa “for the sole purpose of acquiring, developing, constructing, financing, completing, owning and operating the [project].” Section 3.5 provided that Ocensa would be responsible for construction activities and that to enable it to carry out such activities,

The “project construction management team” is not a defined term of art in the AROCA and the phrase does not appear except at Section 3.5. The PCMT Manager is a defined term of art (by reference to Section 3.5) and is mentioned elsewhere: (a) Ocensa was to instruct him to prepare and provide to Ocensa for approval by its Board of Directors an annual construction budget for the next year in the period before all segments of the project had been commissioned (section 3.3(b)); (b) during the same period Ocensa was to instruct him to furnish its Board of Directors with a summary of construction activities relating to each segment of the project during that month (Section 3.3(f)); and (c) not later than 30 days after the end of each fiscal quarter Ocensa was to instruct him to furnish to its Board of Directors and Shareholders a summary of construction or operations during the quarter together with accounts and budget estimates (Section 3.3(g)), which was to be considered by Ocensa’s Financing Committee on a quarterly basis (Section 5(1)(b)). The Financing Committee was a committee established by Ocensa’s Board of Directors which was to be composed of one member representing each shareholder (or affiliate) together with the officer of Ocensa responsible for finance, which reported direct to the Board of Directors of Ocensa (Section 5.1(b)). The AROCA did not say how the PCMT Manager would go about managing the project construction management team or, more generally, how he would go about managing the construction of the project.

The AROCA also recorded that Ocensa and a joint venture vehicle of the Canadian Group (“CITCOL”) acting as Operator had entered into a Technical Services and Management Agreement in connection with the operation of the project after its construction (“the CITCOL TSMA”) {J10/33/1}. That agreement was made on 31 March 1995 between Ocensa and CITCOL. By Section 2.1 CITCOL agreed to provide the necessary expertise, management skills and manpower to perform the technical and management services to Ocensa for the operation of the pipeline, acting as an independent contractor. Article 3.1 provided that CITCOL would assign certain of its employees (described as “the secondees”) to fill the positions of Ocensa’s Chief Operating Officer and various other positions. The secondees were to remain employees of CITCOL (which was to be responsible for their actions and omissions) but were to function within Ocensa’s Operating Division as if they were employees of Ocensa. The Operating Division was to have “the authority and duties set forth in the guidelines and general statements of policy and procedure submitted by the Chief Operating Officer and approved by the Board of Directors from time to time, including … the preparation, as required by the Board of Directors, of operational and maintenance manuals and, following Completion, … ongoing technical support and maintenance of system integrity programs, quality control for field operations, [and] maintenance of design …” (Section 3.3(viii)).

The agreement between the Defendant and Ocensa foreshadowed by the AROCA was dated 17 August 1995 and was the Project Construction Management Agreement (“the PCMA”) {J13/52/32}. The Defendant was referred to as “the Manager” throughout the PCMA. It had retrospective effect from 1 February 1995. It commenced by recording that Ocensa had been established with the purpose of designing, constructing, operating, commercially exploiting and owning the system of oil transportation and that the Manager, as Operator of the Association Contracts, had a managerial organization for the exploration and exploitation of hydrocarbons, as well as for any other related projects, especially those of construction of flow lines and pipelines.

Clause 1 set out the Object of the PCMA in the following terms:

“Taking into account that Ocensa will enter into contracts with third parties for the construction of the Pipeline, Ocensa and the Manager agree that the latter will provide the management of said contracts for Ocensa through the Project Construction Management Team (hereinafter PCMT), within the limitations established under this contract and with total technical financial, administrative and directive autonomy. During the performance of such construction, the Manager shall execute the following activities, hereinafter the services:

i.

To serve as permanent consultor in all aspects related to engineering, procurement and supply of services to OCENSA, for the construction of The Pipeline.

ii.

To provide counsel, supervise all bidding and contracting processes, and to award, under the terms hereby established on Clause Two of this contract on representation, all contracts necessary for the construction of The Pipeline.

iii.

To execute and sign in the name and on behalf of OCENSA any contracts and other legal acts required for the construction of The Pipeline pursuant to the representation provisions contained in Clause Two hereof.

iv.

To manage, supervise and adequately control all contracts executed by OCENSA for the construction of The Pipeline.

v.

The Manager will report to OCENSA following the standards and procedures set forth in the OCENSA Finance and Accounting Principles.”

The status of the PCMT was not defined in the PCMA. Instead, it was referred to both in the body of and in attachments to the PCMA which were stated to be part of the agreement, as follows:

Ocensa was not in a position to manage, supervise and control the contracts into which it entered arose because, as a new company, it had no infrastructure or even staff of its own at that time {E1/3/142} at [3.32]. It therefore needed the Defendant to manage, supervise and control them for it, just as it needed CITCOL to operate the pipeline after it was constructed.

I decide the consequences of this sequence of transactions in detail later: see section 7 below. However, it may be convenient to summarise the position for present purposes as follows:

The route of the Ocensa pipeline is shown on Map 1 {K65/603/1}. For much, though not all, of its length it followed the route and the ROW of the ODC pipeline. In general terms the terrain was mountainous in the South, becoming progressively less so as the pipeline made its way north.

The ten lead cases initially selected for trial are shown on Map 2 {C5/5.7/224}. They are all in the Department of Antioquia and in the sub-regions of Bajo Cauca and North-east Antioquia and are between about 200 and 280 kms north-west of Bogota.

The many photographs taken over time demonstrate that only about 50 years ago, the great majority of the land through which the pipelines were to pass was primary forest. Over the last 50 years or so, extensive deforestation has occurred as land has been cleared for agriculture. It has typically been occupied by campesino farmers who have pursued a subsistence existence achieved by clearing land for pasture and animals, supplemented by other sources of food, income or barter such as pigs, hens and fish. Most of the 74 claimants are campesinos, LC54 (Snr Mesa) being the clear exception amongst the four trial cases.

The soils in the area of interest typically present three or four different layers or “horizons”. Where present, the surface layer will be horizon O, which is formed by the accumulation of undecomposed organic materials (such as leaves, branches or other organic debris). It is most prominent in forested areas because of the organic matter shed by the trees, but even in the forests there is little or no opportunity for significant amounts of organic matter to be added to the soil because of rapid decomposition caused by high temperatures and high biological activity. Horizon O tends to disappear when forest is cleared for agricultural use because the existing organic material decomposes and is not replaced. Accordingly, the first horizon that is typically encountered is a surface layer of topsoil (horizon A). Topsoil is substantially comprised of decomposed organic materials which give it a relatively dark colour; it is the horizon that will be richest in nutrients and other characteristics which mean that most biological activity (e.g. root growth, worms, fungi and bacteria) will occur there. The potential productivity of the soil depends as a whole upon the depth and composition of the horizon A. The next layer (horizon B) is a subsuperficial horizon, which contains less organic material than horizon A, and is therefore lighter in colour. Root growth and other biological process can continue into horizon B but to a progressively decreasing extent with depth. Below horizon B comes horizon C, which is the soil’s parent material, which has been produced by the alteration of the underlying rock (Footnote: ¹⁰). For all practical purposes, horizon C is infertile.

The composition of the soils on the properties through which the Ocensa pipeline ran varied, but some generalisations can be made. First, tropical soils typically have a thin layer of topsoil (<15 cms) because the conditions do not allow for the contribution of much additional organic matter when the forest canopy is removed. Second, deforestation results in a reduction in the soil’s organic content. Third, soils in the region generally have low levels of fertility because of low levels of essential minerals which are exacerbated by water run-off and leaching. Fourth, the soils tend to be very acidic. Fifth, as the depth of soil increases, so the level of organic material will decrease. Sixth, the soils are fragile, both because of the thinness of horizon A, and also because they are susceptible to erosion. The precise susceptibility to erosion will depend upon a number of variables including the composition of the soil, the extent of vegetation cover (or lack of it), the amount and heaviness of rainfall, and the flatness or steepness of the terrain. As a general proposition and rule, deforestation leads to increased rates of surface water runoff and erosion because of the absence of the protective canopy of trees. The extent to which it will do so depends upon the agricultural practices that follow and the extent to which the soil is or remains exposed to direct impact from rain.

The Instituto Geográfico Agustín Codazzi (IGAC) is the entity responsible for producing official maps in Colombia, including soil survey maps. It carried out a soil survey in 1979, which provides a reasonable description of the soils in the area of the four trial properties and which Professor Montenegro, the expert agrologist instructed on behalf of the Defendant, summarised as follows:

Dr Obando, the expert agrologist instructed on behalf of the Claimants, did not challenge these summaries. He relied upon IGAC’s later survey, which was carried out in 2007 and which was to the same effect. He also made the point that IGAC categorised the susceptibility of the soils to erosion as “high” {H3.4/4/670}; and it was his opinion that the IGAC’s regional descriptions were broadly applicable to the four trial properties {H3.4/4} at 931, 986, 1028, 1109. Dr Card and Dr Savigny agreed that “the soils on Lead Claimant properties are an inseparable mixture of silts and clays classified according to the Unified Soil Classification System as (a) silts of low to high plasticity and (b) clays of intermediate to high plasticity. A very small fraction of soil falls outside these two classifications and is non-plastic. … [The soils] exist as a uniformly heterogeneous mixture of varying constituent proportions of clay, silt and sand sized particles.” {H23.3/8/579}. I accept that the regional descriptions and the experts’ summaries (as above) are accurate general descriptions of the soils on the Lead Claimant properties. It is also common ground that once soils are disturbed, they lose cohesion {Day35/33:20}.

The central area of Antioquia has been and remains a wild and lawless place. Leftwing guerrilla groups perpetrated violence, extortion and kidnapping which led to the formation of a right-wing group known as Autodefensas Unidas de Colombia (“AUC”) in 1997. The AUC was made up of drug-traffickers and landowners who were trying to combat rebel kidnappings and extortion by left-wing groups; and it had its roots in paramilitary armies built up by the drug barons in the 1980s. In about 2003 there was a pact but the vacuum has been filled by criminal gangs, or bacrims, who are also involved in drug trafficking and extortion. All of these groups were very violent and conducted turf wars throughout the region. Snr Mesa (LC54) gave evidence, which I readily accept, that during the time of the criminal gangs he did not go to his property, La Fe, very much and that he was always frightened when he did go (though his farm manager continued to live on the property throughout the period): {D6/100/1179} at [68-69] and {Day6/15:5} ff. His wife, Rita Aranga gave evidence to like effect, saying that the situation had been bad since the 1980s, while pointing out that there is also fear in the cities that Colombians have to endure.

It is the Claimants’ case that there is an ever present risk that they may be forcibly evicted from their lands at short notice or no notice at all. This vulnerability is real and is illustrated by the fact that Jorge Mieles, the first claimant in LC38, was killed in 2010; three employees of one of the Claimants (not a Lead Claimant) were killed in

The security situation was notoriously dangerous for those who lived through it and those who worked in the region at all material times. Video footage repeatedly shows soldiers of the Colombian military providing heavily armed protection against attacks on contractors working on the pipeline. Similar footage and photographs taken during evidence gathering for the current litigation illustrates the ever present danger of violence, extortion and death continuing until the present day. It is easy to admire both those who lived their daily lives under such conditions and the people who undertook substantial engineering projects through technically difficult terrain at considerable personal risk to themselves.

The Claimants range from those who can be described as true subsistence farmers, being dependent upon their land for the basic needs of life, to those whose properties generate surpluses of varying size. There is an active barter economy between neighbours both as to goods and in the matter of helping each other on the land. Labour is sometimes purchased, depending on the scale of the enterprise, the willingness of neighbours to help and the availability of labour for monetary hire. Normal sale transactions take place between neighbours and through markets, though access to markets can be difficult. Travelling merchants may purchase large quantities of a crop; but in the absence of that there is an ever-present risk of inability to get produce to an effective market outlet. This can and often does result in wasted production, often accompanied by generosity to neighbours who may get foodstuffs either for free or by barter that would otherwise go to waste.

On the assumption that the four trial cases are typical, a farmer will typically engage in the gradual clearance of his land. Newly cleared land may be cultivated before being turned over to pasture. The land will sustain crops, cattle and relatively modest levels of other livestock. Rotation of crops is practiced, with the minimum period of rotation being about three or four years and longer periods imposing less strain on the fragile and infertile soils. The wooded areas may provide timber either for use on the farm or for selling on: Snr Buitrago (LC50), for example, first fell in with Snr Manco when he proposed that Snr Manco should buy half his farm and set up a joint timber production business {D5/91/1021} at [17].

It is obvious but needs to be remembered that there was a substantial disparity by reference to most criteria between the Defendant, Total, Trident, the Canadian Group, Ecopetrol and Ocensa on the one hand and the Claimants on the other. The farmers were financial minnows, many of whom were illiterate and (though undoubtedly canny in the context of their daily lives) not versed in business: the opposite is true of the oil entrepreneurs, including the Defendant. Although the licensing system made provision for public education about and involvement in the process leading to the laying of the pipeline, with public hearings attended by individuals from local communities as well as public officials who actively intervened in the process (e.g. the Ministry of Environment, the Governor of Antioquia, the Attorney General’s delegates, local Mayors, the Ombudsman’s office and others {K21/197/3}, {E1/5/244} at [9.4], {K21/184T/1}), a disparity in bargaining power inevitably remained. In negotiations between the parties, the entrepreneurs had the added benefit of their industry being declared to be of public benefit and the long-stop prospect of expropriation, as explained at [24], [38] and [112] above.

The Claimants’ properties are in the tropics where the climate is hot and wet. Average monthly temperatures are in the region of 25-27º centigrade throughout the year. Annual rainfall increases as one progresses north towards the Coastal Plains, but even at the southern end of Pipeline North annual rainfall is very high. For the stretch encompassing LCs 74, 50, 39 and 54 annual rainfall ranges from about 2850 mm in the south to about 4100 mm in the north. By way of comparison, average annual rainfall in the South of England is in the region of 840 mm. There are two illdefined rainy periods, the first in May and the second between August and November; however, in the intermediate months of June and July, significant precipitations take place. Furthermore, even in the dry season from late November/early December to March/April there may be heavy rainfall. 1996 was a particularly wet year.

The rainfall data was usefully collected by the parties at {C6/24} and {C6/24.1}. The following table, which sets out data from those summaries, provides some insight into the distribution of rainfall by reference to weather stations that are reasonably local to the Lead Claimant properties:

I accept as a general account of the area the evidence of Professor Monsalve {H8.10/10/2443} that “precipitation is relatively stable in the area between the towns of Remedios and Segovia until just north of Zaragoza …, this decreases near the town of Caucasia … . In general, there is a period of increased rainfall between the months of April and November. During the rest of the year, between December and March, there is a period of less precipitation (the dry season).” While there were variations from year to year and place to place along the stretch of Pipeline North, the general pattern was well known to all: there was a severe risk of frequent and very heavy rainfall during the wet season. The risk was reduced during the dry season, but occasional outbreaks of rain, which could be heavy, were always possible.

The outline stages of the construction process were reflected in the weekly progress reports, which divided the operation into eleven stages {K38/390T/4}: (1) topography, (2) preventative works, (3) opening of the ROW, (4) pipelaying, (5) trenching/excavation, (6) bending, (7) alignment, welding, x-rays, (8) joint casing, (9) lowering and covering, (10) ROW cleaning and reshaping, and (11) ROW restitution works (including long-term geotechnical works). The process is illustrated by the drawing at{K9/33/13} and by numerous photographs and DVDs.

A more detailed description of the process was given by Snr Gasca in his evidence at {E1/1/28}, [12.1]-[12.49], which I accept as a generally accurate account of how things were meant to be done and which forms the basis of the following summary. In addition, I refer to the Specification for Pipeline Construction (“the PCS”) {K24/221/1} and the Reinstatement & Erosion Control Specification (“the RECS”) {K21/189/1}, which provide useful (contractual) information about the steps that were supposed to be taken during construction and reinstatement. As its name suggests, the purpose of the RECS was to ensure that erosion control and other measures “return the ROW to near its original condition within the constraints of pipeline operational requirements.”: [3.1] {K21/189/4}. I will consider the extent to which the system operated successfully when looking at the Lead Cases individually.

There were (broadly) three stages. Stage I began with the pre-construction survey. This survey involved the following steps: identifying and marking out the ROW; identifying and flagging the location of the ODC pipeline; identifying realignments (where necessary to find a way around obstacles); soil management planning (including locating and designating specific areas for the temporary stockpiling of topsoil, where necessary); assessing whether the ROW needed to be widened; identifying terrain constraints; assessing what temporary retention structures and other short-term erosion control measures were required; and ensuring that the natural drainage of the land and other watercourses would not be disrupted.

Following that survey, the ROW was cleared (of vegetation) and graded (i.e. prepared by the removal of surface and lower soils so that it could be trafficked for the purposes of transporting, assembling, welding and laying the pipe), and necessary short-term erosion control measures should be put in place. How much and what soil was removed as part of the grading would depend upon the pre-existing state of the land and site-specific construction requirements. Stage I included geotechnical works to protect topsoil stockpiles. A member of the pre-construction survey team was present on site during clearance; as were members of the project environmental staff. All necessary precautions were meant to be taken by the contractor to maintain the integrity of the existing topsoil during stripping, storage and replacement operations.

Stage II involved the use of heavy equipment to string and weld the pipeline, dig the trench along the ROW, lower the pipeline into the trench, and backfill the trench to cover the pipeline (using the spoil which had been excavated from the trench). The periods between digging the trench, lowering the pipe into the trench and backfilling around it should be kept as short as possible: see PCS [10.1.4] {K24/221/53}; and the Environmental Management Plan (“the EMP”) {K9/35T/144}. The material which had been removed as part of the grading would then be reinstated (so that the land would be “re-formed”). Material that had been excavated from the trench was required to be segregated and preserved in such a manner that it could be put back in the original soil sequence as it was taken out: PCS [4.6.1] {K24/221/30}.

As part of Stage II, further short-term erosion control measures should also be taken as necessary to ensure the stability of the graded and excavated material (see PCS at [10.6.3] {K24/221/59}); and inspections carried out to ensure that the existing measures were performing satisfactorily and to assess whether additional measures were required.

Where considered necessary, trench breakers would be installed in the trench before it was backfilled. These are long-term erosion control measures and are permanent structures built in the trench around the lowered pipeline, extending from the bottom of the trench to ground surface and built of soil-cement sacks or polyurethane foam formed in place and sometimes with structural reinforcing components such as steel or timber. Their purpose is to prevent erosion within the trench itself.

Brown & Root prepared a drawing described as “Right of Way Ideal Condition” {K21/173/1}. It was issued for enquiry in February 1995 and for construction in May 1995. Ocensa’s name did not appear on it: the name of the joint venturers did. It was accepted by Snr Loeber in evidence (and I too accept) that, at least in ideal conditions, it could apply during the period of construction. However, it was clearly an idealised representation and should be treated as such. Subject to that limitation, what it showed was a ROW of 25m width with the ODC pipeline running to the extreme left of the plan. The Ocensa pipeline was to be installed 10m to the right of the ODC pipeline. Topsoil from the ROW was to be stacked at either side of the ROW, with the left hand pile being to the right of the line of the ODC pipeline. The trench spoil was to be deposited to the left of the Ocensa pipeline trench leaving a working width of 15m to the right of the Ocensa pipeline trench for the contractors’ workspace. On the evidence at trial, it is clear that, even where the Ocensa pipeline and ROW followed the course of the ODC pipeline and ROW, there was no universal practice that the ODC pipeline would be at the very edge of the Ocensa ROW although some offset was necessary so as to avoid damaging it in the course of the Ocensa works.

Some of the terrain was so difficult that there would be very little room to offset the line of the Ocensa ROW from that of the ODC ROW. On the photographic evidence it appears that even in less restricting terrain, the Ocensa ROW often followed the ODC ROW with little or no extension beyond it. The Brown & Root “ideal condition” drawing and others in the same series show no substantial stockpiles of soil, although these were a recognised feature of the construction works in places along the ROW, depending upon how much soil had to be removed in the process of grading and where it could be stored – of which more later.

In general terms, I accept that materials excavated from the trench would be placed close to it and conveniently within the reach of a machine, to enable backfilling to be carried out. The dimensions of the trench would mean that the piles of material excavated from them would usually not be large. Much greater quantities of soil might be generated by the stripping and grading works. Sometimes this soil could be accommodated without the use of stockpiles but, particularly in hilly terrain, that might not be possible and stockpiles (which could be very large) might be required at intervals along the ROW. Photographs to which I refer during the course of this judgment show places where there are substantial stockpiles in view and other places

In closing submissions, the Claimants suggested that the ODC pipeline was inherently likely to have caused less environmental disruption because less heavy machinery was used, this submission being based upon the model of bulldozer being used. However, a promotional film about the laying of the ODC pipeline in 1992 {L1/134} shows that, even if the laying of the Ocensa pipeline (as shown on numerous photographs and films) may have included the use of what was described as a “bigger digger”, the ODC pipeline construction process was not materially different. To the contrary, the ODC film gives a good illustration of the size and scope of both undertakings. It shows the destructive effects of guerrilla attacks (at 3.39), with the commentary frequently referring to the fact that slow progress was made and stoppages occurred because of the security situation. As will be seen when the individual lead cases are considered, these stoppages could directly affect the impact of the works upon landowners. The film also shows the use of substantial bulldozers and other heavy machinery (often tracked) for stripping the soil, moving the pipes into position, laying them in the trench, backfilling and regrading the ROW. Extracts showing bulldozers at work stripping and shifting large quantities of soil (e.g. at 5.09-5.18, 6.22-6.33 and 9.28-10.12) demonstrate the inevitability that soil from different horizons will be mixed when the ODC ROW is being stripped. They also show that the fact that the Brown & Root “ideal condition” drawing described at [308] above is an idealised representation that conveys little of the variation in the terrain and the challenges inherent in the project that was being undertaken. Other extracts show the use of the ODC ROW by large machinery of all sorts (e.g. at 7.52-8.00 and 9.10-9.15), the varying width of the scar created by the ROW (e.g. at 4.15, and 23.59-24.20), and clear examples of erosion on the ROW and stockpiles of soil (e.g. at 4.26-5.03). The film appears to have been a promotional or publicity venture; but it gives a clear impression of the scale of the work involved in laying the pipelines and the likely impact of the project on the environment even when geotechnical measures are in place to minimise erosion and damage.

On the basis of all of the evidence about the processes undertaken to lay the two pipelines, and in particular on the basis of comparing the ODC film with the films and photographs of the Ocensa pipeline, and subject to one qualification, I reject the suggestion that the ODC pipeline works were inherently likely to cause less environmental damage than the Ocensa pipeline works. The qualification is that the ODC ROW was typically 20 metres wide while the Ocensa ROW was typically 25 metres wide (in both cases before the addition of sobreanchos). As a result, the area disturbed by the Ocensa ROW was typically larger over a given distance than the ODC ROW. It is the Claimants’ case that no significant damage to their properties was caused by the ODC pipeline and that all of the features of which they complain were attributable to the Ocensa pipeline. That will be examined in detail later. However, at this stage I find that the ODC pipeline works will have caused some erosion and sedimentation from the ROW and the associated works. There is much less direct evidence about where, when, and to what extent such erosion and sedimentation occurred. I will return to that evidence when answering the question

Stage III involved the installation of the other long-term erosion control measures and revegetation of the ROW. Before the Stage III works there should be a postconstruction survey, which would involve someone (typically Snr Gasca during the time of his involvement) together with (typically) an environmental inspector, a civil inspector, land negotiators (if required), and one or more representatives from the relevant geotechnical subcontractors walking the length of the relevant section of the pipeline. On that post-construction survey, the team prepared pro-forma Geotechnical Design Sheets (“GDS”) in order to record the long-term geotechnical measures to be installed. Once the Stage III works had been completed, there was then meant to be a further walk-through to check that those works had been completed satisfactorily, with the preparation of punch-lists of errors or defects.

Special provision was made in respect of watercourses in section 13 of the PCS {K24/221/83}. The contractor was to perform all work necessary for pipeline crossing of rivers, streams and other watercourses including trenching, boring, backfilling, repairing and restoring facilities and waterways: PCS at [13.1.1] {K24/221/81}. Crossing of narrow watercourses such as streams were to be made by open trench cut in the bed of the watercourse: PCS at [13.2.2] {K24/221/83}. Material removed from the banks of watercourses were required to be stockpiled on the ROW or on work space adjacent to the watercourse crossing, from where it could be recovered to restore the banks to their original condition: PCS at [13.6.4] {K24/221/37}. After replacement of materials the contractor was to protect banks from slides and erosion and, as necessary by special stabilisation: PCS at [13.6.5][13.6.6] {K24/221/88}.

Further provision in respect of watercourses was made in the RECS at [3.8] {K21/189/10}. Watercourses disturbed by the construction activities were to be opened across the ROW and trenched for the proper flow of water. At crossings of streams and ditches, the trench backfill was to be solidly compacted to minimise erosion of the backfill. On the banks of rivers, streams, ditches or watercourses the Contractor was to replace all necessary earth and was to reinforce the backfill with earth-filled sacks, gabions rock rip-rap, concrete head walls or other suitable method. Any other precautions deemed necessary were to be exercised to prevent water encroachment during and after backfilling operations.

According to Snr Gasca, during his time the river bed would be protected by the placing of flume pipes and other protective measures {E1/1/76} at [17.20], {Day16/97:10}. I accept his evidence as an accurate description of the procedures that were normally followed. Two qualifications must be borne in mind. First, Snr Gasca was not in a position to say that the procedures he described were always followed; and, second, his evidence was that even when the procedures he described were followed, some sediment would find its way into the watercourse because of the disruption of the river bed by the excavation of the crossing {Day16/105:7}. This was confirmed by Dr Savigny {Day37/21:16} ff. For that reason, he accepted that erosion control matting should be placed into the stream course through the disturbed area {Day37/20:18}; and other works such as revetments may also be necessary. There is evidence that on some occasions, even small water sources were traversed by boring underneath them {D6/100/1190} at [115]. Where that happened, disruption of

Throughout the construction process, there was meant to be continuous monitoring of the work fronts by survey staff, project environmental staff and other members of the PCMT as well as by the main contractor’s own management team. In addition, the intention was to ensure that the trench and wider ROW were left exposed for the shortest time possible.

A march chart was submitted to the Ministry of the Environment as part of the Environmental Impact Statement [“EIS”] which indicated that the period from opening the ROW to either stabilising or revegetating at a given point was to be two months {K9/35T/16}. Mr Allison said that this was essentially a theoretical exercise and that the reality was very different {Day15/77:21}. I accept this observation up to a point, as the EIS was clearly not setting out a final programme for the works and, in the event, the start and subsequent dates of construction of the project changed markedly after submission of the EIS, not least because of the lengthy period before the environmental licence was granted. According to Snr Gasca the length of time between the Stage I work starting and the Stage III Work being completed was, on average, between three and four months. I accept that as a general estimate although there were significant variations. The evidence in relation to the Lead Claimants properties will be considered in detail later.

There is broad agreement between the parties about the risks inherent in laying pipelines in general and the Ocensa pipeline in particular. It could be said that the most pronounced risks of stripping the top of a fragile ecology over a width of 25m or more and a length of 700 hilly kms are almost self-evident, namely erosion of soil from the ROW, sedimentation of land and watercourses and disruption of river beds and banks where they are crossed by the ROW. The various experts agree that the environmental risks to soil were erosion, sedimentation and loss of soil productivity {H23.1/2/99}, erosion of the soils inside the ROW {H23.2/6/363}, risks generated by soil erosion, sedimentation of the lower parts of the farms and the channels due to the movement of personnel, machinery and equipment {H23.1/4/262} and geotechnical and hydrotechnical geohazards of which erosion, bank erosion and channel aggradation, creation of wetlands and avulsion are those that represent the majority of alleged impact on Lead Claimant properties {H23.3/8/568}. I accept that evidence.

It is also common ground that these risks were known to and appreciated by all who were involved in the design and construction of the project and to the Government of Colombia. The regulatory regime applied because the laying of the pipeline fell within the scope of article 49 of Law 99 of 1993, which provided that “…. the performance of any activity that, …, could result in deterioration of the … environment or that is likely to introduce considerable or notorious modifications in the landscape shall require an environmental license.”

Because the Defendant acknowledges that it knew of the risks, it is only necessary to set out a small fraction of the numerous extracts from the published literature and contemporaneous documents which referred to them with great clarity (Footnote: ¹²). The EIS {K9/33} referred repeatedly to the risks of erosion and sedimentation and to the risks to water sources (e.g. {K9/33/38} {K9/33/46} and {K9/33/47}). Referring specifically to the area in which the Lead Claimant properties are found it said:

“Sector Central Cordillera: this sector of the route of the pipeline … presents a considerable increase in precipitation. … The greater humidity makes this area present more abundant vegetation cover than the other sectors, but there is also an increased risk of erosion due to the characteristics of the surface soils.” {K9/34T/61} at [3.4.1.4]

To the same effect, the section of the Saipem contract entitled “Scope of Work” identified the risks in the following terms:

“Between Vasconia and Caucasia the pipeline traverses a hilly terrain. The entire route has seasonally high rainfall. The Contractor can anticipate slope stability problems, consequently particular attention must be given to erosion control during the right-of-way preparation, construction and clean-up. It is important to note that the erosion control requirements will be necessarily more stringent than those encountered in pipeline construction.” {J14/54.1/245}

Not least because of the potential impact of heavy rain the EMP, which formed part of the EIS and which was aimed at applying measures to minimise the environmental effects generated by the construction of the Ocensa pipeline {K9/35T/2}, addressed the impact of rain. It recorded that the work schedule set out in the march chart to which I have referred in [318] above had been prepared in order to manage the pipeline construction in the most rational manner; and that it was prepared considering a number of aspects including making maximum use of summer seasons for construction and avoiding construction in the winter in the rainiest areas (of which the area of the lead cases was one) {K9/35T/13}.

The EIS referred to stream crossings in its description of the project at {K9/34T/41}, stating that “the course of the water current will be accommodated by local channelling, so that the work to dig the trench and place the pipe in it can be carried out. Once the pipe is installed and pressure tested, the banks and stream bed will be reformed, using the protection works required.” The EMP included specifications for stream crossings, divided between Main Stream Crossings (Specification No. B-6-1), Major Stream Crossings (Specification No. B-6-2) and Minor Stream Crossings (Specification No. B-6-3) {K9/35T/156}. The streams on the trial claim properties are not included in the schedule of streams that are said to be considered minor crossings for the purposes of the specification and “Minor Streams” are not defined. Snr Gasca said that the measures set out in the specification were only applied to the streams in the schedule {Day16/89:24}. However, photograph 1819-15 {K9/35T/156} suggests that the specification was (or should have been) relevant to most, if not all, of them. Certainly the environmental impacts which the specification considered (including removal of the riverbed protection vegetation cover and resuspension of riverbed sediments) and the actions specified (including that once the crossing is made, the banks where material has been removed must be reconditioned to leave them in their original condition; and that bank vegetation must be recovered), the need to protect banks with rock fill, soil-cement sacks or concrete sacks and the need to use temporary culverts are all relevant to the well-known risks that would arise where the ROW crosses a stream.

The Environmental Licence (see [341] below) required compliance with the EMP. In due course Saipem undertook to fulfil the requirements of the EMP when carrying out the construction of the pipeline: {J14/54.1/69} at [17.3]; and it was required to take special care “during installation of all river crossings to ensure maximum environmental protection.”: {J14/54.1/254} at [2.9(c)]. The importance attached to river crossings was made clear by the contract requirement that Saipem was to provide pictures to establish conditions before and after of the River or Stream to be crossed. A written agreement was to be prepared by Saipem to be signed by Ocensa and the affected landowner, establishing the existing flow rates and special conditions of the river and adjacent banks of the Rivers or Streams before performing any work related to the crossings. At the completion of the crossing Saipem was again to obtain written confirmation by Ocensa and the affected landowner that the present flow rates and bank conditions were to their satisfaction: {J14/54.1/254} at [2.9(d)]. Snr Loeber was unable to say whether these procedures were followed. It was not suggested to the Lead Claimants or their witnesses that they were followed, and there is no satisfactory evidence (documentary or otherwise) that they were.

Had it been in issue, I would have held on abundant evidence that the risks inherent in laying the pipeline were well known to all concerned with the design and construction of the pipeline, including the Defendant.

The need for protective measures is recognised on all sides; but the measures to be adopted would vary from place to place, depending upon season, topography and risk of damage.

The temporary management of soil that had been stripped or excavated from the ROW primarily involved avoiding mixing different soils and protecting heaps of soil from erosion. I have already found that some mixing of soils was inevitable given the scale of the venture and the machinery that was available to strip and move them: see [311] above; but topsoil was a scarce and precious commodity and needed to be preserved and kept separate as far as possible: see [304] above.

The three key design objectives of protection measures are (a) to intercept runoff before serious erosion occurs; (b) to finesse the channel gradient such that flow velocity of intercepted runoff causes neither erosion nor build-up of sediment; and (c) the installation of protective structures or measures that will remain serviceable until revegetation takes place on the ROW to the same extent as exists on undisturbed adjacent ground: {H2.1/1/42} at lines 980-998. Measures to be used as required for the protection of the ROW in general and the excavated trench in particular were:

The design for the Ocensa pipeline envisaged that ditch diverters and erosion matting would work in combination to prevent erosion and promote rapid revegetation. The design incorporated a wider spacing between ditch diverters and a less robust design of the diverters themselves than had been used on previous projects, which was justified by the introduction of the erosion matting {H23.3/8/618}. The primary design documents were the EMP {K9/35T/182} and the RECS {K14/95}, {K27/262}. Although Dr Card originally criticised the design as there set out, his criticism was misplaced: see [565] below. However, in October 1996 Saipem requested permission (by TQ61) to omit erosion matting on slopes between 10 and 20% on the basis that it would guarantee reseeding between ditch diverters by TQ61. {K66/611/2}. On 27 January 1997 the request was refused by Ocensa for Spreads A and A2, but permitted for Spread B on the stated basis of different soil characteristics {K66/611/3}. The result of this was that for Spread B properties (which would have included LC50 and LC74 {Day16/78:23} ff), matting was omitted from about October 1996 on slopes between 10 and 20%. On Spreads A and A2, though Saipem’s request was refused for the future, Ocensa permitted that “acceptable work performed to date will be left as it is”.

The ultimate and most effective protection against erosion from the ROW is drainage and revegetation. It is common ground that revegetation should be carried out at about the same time as any final drainage work. This is not, however, a hard and fast rule as the sowing of new vegetation should ideally not be carried in the dry season {Day15/105:19}, and see {K40/421T/6}, {K41/425T/6}. The agronomy experts agreed that, with a view to establishing the best coverage in the least amount of time possible, considerations including (i) biophysical conditions (e.g. weather, topography, physical conditions and fertility of the soil), (ii) plant species to be used (adapted to the environment, fast-growing and with a growth pattern that would cover and protect the soil), (iii) future use of the area, and (iv) cultivation methods should be taken into account. Short and long term fertilisation should be taken into account, given the disruption of the soil that will have occurred: and detailed recommendations to that end were provided by the Bateman Ingenieria Revegetation Report {K14/102T/1}.

It might be thought self-evident that newly-sown soil should be protected from cattle and other traffic. The Specification for Pipeline Construction made no reference to fencing off the ROW (as opposed to maintaining existing fences) except in the context of crossing points for traffic passing over an existing pipeline {K24/221/96}

Stream crossings may pose particular challenges because of the conjunction of potential erosion from slopes leading to the stream and the erosive effects of the stream itself on banks that have been disrupted by the works. In addition to the use of matting and the other available geotechnical techniques outlined above, revetment may be carried out in a number of different ways. As with all other measures, the need for revetment will depend upon all of the variables in play at a given location. In some cases, direct drilling under the bed of the stream will prevent or minimise disruption to the stream bed and banks; alternatively, the trench may be excavated from the surface, in which case temporary measures will include diversion of the flow of water using flumes and culverts, after which reinstatement works will inevitably be necessary to restore the bed and banks and to preserve them from future degradation. Many of the streams in the area are peripheral (in the sense that they may be dry for part of the year). What works are necessary at stream crossings is fact sensitive in every case.

The relevant stretch of the Ocensa pipeline project was covered by the Santiago de las Atalayas and Tauremena Association Contracts as outlined at [44] ff above.

In October 1993 the Defendant applied on behalf of the project partners to start the process of Environmental Registration of the pipeline project {K4/16T/1}. After the introduction of law 93 of 1993 the Defendant applied on 11 July 1994 to the Ministry of the Environment for an environmental licence under the new law in order to conduct the construction of the pipeline and terminal facilities {K11/68T/1}. The Defendant described its qualification to make the application as being the appointed Operator under the Association Contracts (paragraph 2).

The Defendant wrote jointly with Ocensa to the Ministry of Environment on 18 April 1995, notifying the Ministry of Ocensa’s incorporation, its shareholders and their respective shareholdings, and requesting as follows:

“taking into account that Ocensa will be the company in charge of building the pipeline for which [the Defendant] requested authorization, we kindly request this Office authorize the assignment of all arrangements and proceedings carried out with that Ministry aimed at obtaining the environmental license legally required, for this license to be granted directly to Ocensa, as if obtained by the same.” {K20/158T/1}

Numerous reports and studies, including the EIS and EMP, were submitted to the Ministry of Environment over the course of about a year at the end of which the Ministry produced a detailed report on the application {K24/240T/1}. The report set out the background and listed the information that had been provided. The scale of the information provided is indicated by the fact that the project file sent by the Legal Office of the Ministry to the Sectoral Environmental Department was accompanied by 26 volumes of environmental studies: {K24/240T/1} at [3]. The report recorded the calling of Public Audiences by the Minster in the affected municipalities and went on to analyse the various routing options, opting for the use of the ODC corridor. It studied the likely impact of the project, concluding that the greatest negative impacts would be generated during the construction phase, that the erosion of slopes would increase as a result of opening the ROW, and that the socioeconomic component would receive the greatest positive impacts as a result of the construction of the Project {K24/240T/19} at [1.5]. While noting that some of the information that had been provided was incomplete, the report concluded with proposed conditions that should be attached to the environmental licence.

The Minister’s call for public audiences led to five public meetings, the closest to the Lead Claimants being held in Zaragoza on 19 May 1995 and Puerto Berrio on 23 June 1995. The meetings were advertised in newspapers and on the radio and were well attended {E1/5/244} at [9.4]. The official minutes of the meeting at Zaragoza {K21/184T/1} (which I take to be accurate) record that the route selection and environmental impact were explained. The Mayor of Zaragoza said that “the old pipeline [i.e. the ODC pipeline] left a bad impression, so they do not want to make the same mistake.” That was taken up later by the Director of the Environmental Affairs Office of the Antioquia Branch of Inderena (which had regulated environmental issues before law 93 of 1993) said that there had been breach of several obligations of the resolution granting the Environmental Licence for the previous (i.e. ODC) pipeline and that “the area of the previous pipeline will be overflown in order to determine the damage and to recover the area and to avoid repeating the same mistakes.” The Attorney-General’s delegate said that the objective of the Attorney General’s office “is to defend the collective interest in the environment and the rights of the communities in attendance.” In terms of the project he said that “according to the fly-by made over the region, natural resources are seriously damaged; deforestation and impact due to mining activity must be addressed by adopting a recovery plan co-ordinated by the Ministry of Environment … .” The representative of the Ombudsman’s Office intervened. Issues of compensation were raised, including the non-payment of money for the ODC pipeline. At the end of the meeting, Ocensa answered a number of the questions that had been asked. It said that it (Ocensa) was the party responsible for the project that would address concerns at Zaragoza, Medellin and offices set up at camps along the way. One hundred and twenty people attended the meeting, which lasted from 9.20 am to 4.45 pm.

The Puerto Berrio meeting took a similar course as recorded in the minutes {K22/204T/1} (which again I take to be accurate). The initial presentation on behalf of Ocensa emphasised the environmental protection work and the construction techniques including various protective measures. The Attorney General’s delegate “reiterated to the Ministry of Environment that this is a region and a project where basins are in a high level of degradation; plans must be drawn for managing and recovering hydric basins; …” The Ombudsman’s delegate emphasised that “Environmental laws must be applied and community must act as an inspector.” One delegate asserted that there had been problems with the old pipeline but that they had been remedied.

Viewed overall, the record of the Zaragoza and Puerto Berrio meetings conveys the clear impression Ecopetrol had got itself a bad name over the ODC pipeline and that the community was concerned that mistakes made and damage caused by the ODC pipeline should not be repeated by the Ocensa pipeline. The meetings were a clear demonstration of democracy in action, but they do not otherwise assist in determining the issues of liability in this case.

On 31 August 1995, the environmental licence was issued by the Ministry {K24/232T/1}. It is central to each party’s case. The most important terms of the licence are set out below. Passages of particular significance are highlighted.

“WHEREAS

In the official letter dated 11 July 1994, the [Defendant], … , submitted an application for an ordinary environmental licence … for the … Vasconia-Coveñas pipeline …;

…

On 14 December 1994, the company Ocensa was formed, whose company object is as follows: "To design, construct, operate, commercially exploit and own a petroleum transport system, including the port installations used by the public, which will begin in the municipality of Tauramena, Department of Casanare and finish in the embarkation port of Coveñas, …".

…

In the official letter of 18 April 1995, [the Defendant], and [Ocensa] requested that the Environment Ministry authorise the transfer of all management and procedures formulated for the purpose of obtaining the Environmental Licence … in such way that this licence would be granted directly to Ocensa.

…

In the edict of … (3) May 1995, the Environment Minister, …, called a public meeting in the municipality of Zaragosa on 23 May 1995, within the scope of processing the Ordinary Environmental Licence for the project. … .

In the edict of 24 May 1995, the Vice-Minister …, called public meetings in the municipalities of:

-

Tauramena (Casanare) on 9 June 1995

-

Tunja (Boyacá) on 16 June 1995

-

Puerto Berrio (Antioquia) on 23 June 1995

-

Tolú (Sucre) on 30 June 1995

…

In the meetings, the common concerns presented were the collaboration of Ocensa in the environmental education of the community, supporting basic primary education, solving existing deficiencies in terms of health care, road maintenance and work opportunities for the community.

…

The project was submitted for the consideration of the communities of Antioquia and Atlántico and no objections regarding the environmental viability of the project were raised.

…

Based on the aforementioned,

THE FOLLOWING RESOLUTION SHALL BE ADOPTED

ARTICLE ONE -Approval shall be given of the transfer of the procedure formulated by [the Defendant] with a view to obtaining the Environmental Licence … to the company Ocensa. The two companies shall, in terms of environmental matters, be jointly and severally liable for the construction of the project.

ARTICLE TWO – [Ocensa] shall be granted an ordinary Environmental License for the construction, operation and exploitation of the Cusiana-La Belleza, Vasconia-Coveñas pipeline.

…

ARTICLE FIVE - Ocensa shall implement a Forest Compensation Scheme in the 800 kilometres affected by the project, on the basis of the following:

1.

For each deforested hectare, Ocensa shall compensate by reforesting 5 hectares. The total reforestation area for the entire corridor shall be 1,760 hectares.

2.

Ocensa shall send the Environment Ministry the Reforestation Programme, indicating the location and distribution of the 1,760 hectares to be reforested, which shall be defined in conjunction with the local authorities. …

3.

The Environment Ministry shall authorise the location and distribution of the 1,760 hectares where the reforestation programmes are to be implemented, …

4.

The reforestation programme shall be financed by Ocensa for a period equivalent to five (5) years.

…

ARTICLE SEVEN - The Environmental Licence granted by this resolution shall, in addition to the stipulations of the

Environmental Impact Study, the Environmental Management Plan and the additional information submitted, be subject to the recipient complying with the following obligations:

1.

The company shall implement the Environmental Education Scheme for the project sufficiently in advance of the start of the project construction works.

…

4.

Ocensa shall hire the environmental supervisor for the project, which shall be independent of the construction contractors and completely independent of the project management.

5.

The supervisor shall submit reports to the Environment Ministry every three months regarding the monitoring of the Management Plan measures.

6.

Ocensa shall notify the Environment Ministry of the work sites where the pipeline construction work will begin fifteen business days prior to the start of the construction work.

…

8.

Ocensa shall keep the population affected by the construction of the pipeline informed and arrange the types of restrictions, monitoring measures and other activities that must take place as a result of the construction of the pipeline.

9.

Ocensa shall establish a system for the evaluation of the damage caused during the construction works and the adoption of immediate mitigation, recovery and compensation measures.

10.

Ocensa shall set up complaints and claims offices at the different work sites.

…

ARTICLE NINE - Prior to the start of the pipeline construction works, Ocensa shall comply with the following obligations:

1.

It shall send the Environment Ministry the final outline (including the objectives, scope, location to the scale: 1:25,000, activities, time schedules, detailed costs for each one of the planned actions, anticipated goals, indicators of success) of the different Environmental Management Plan programmes, namely:

…

-

Soil management,

…

-

Monitoring of the under-river crossings,

…

-

Environmental supervisor,

…

4.

Ocensa shall provide information about the easement negotiation process and the respective property permits for the new project variants.

5.

The environmental workshop cycles shall include the following components:

-Municipal jurisdiction in terms of environmental matters

-Environment policy of Ocensa

-Environmental Management Plan authorised by the Environment Ministry

…

Basic workshop content:

…

-Legal aspects relating to the payment of damages and permits

…

8.

The company shall send the Environment Ministry a videocassette record of the state of the right of way shared with ECOPETROL, and the variant sections, prior to the start of the pipeline works.

9.

In the Vasconia-Coveñas pipeline section, the specification of the protection, prevention, recovery and geo-technical stabilisation works that must be carried out with the other pipeline construction works shall be essential, using the same level of detail as the first section. The respective designs shall be presented to this Ministry for its comments at least one month prior to the start of the construction works.

…

ARTICLE FOURTEEN - The reforestation of 387,320 trees put forward by the company as a compensation measure shall be authorised, which shall not preclude the compensation measure imposed by this Ministry in article five of this resolution. …

ARTICLE FIFTEEN -The Environment Ministry shall supervise the execution of the works and may verify compliance with the provisions of this resolution at any time. Any contravention of the resolution shall give rise to the application of the applicable legal penalties.

ARTICLE SIXTEEN – If unforeseen environmental effects are detected during the execution of the works, the requestor shall suspend the works and immediately notify the ENVIRONMENT MINISTRY in order that the latter may determine and stipulate the adoption of the corrective measures it considers necessary, without prejudice to the measures to be adopted by the Licence recipient to prevent the degradation of the environment. Non-compliance with these measures shall give rise to the application of the penalties referred to in the article above.

…

ARTICLE TWENTY-ONE - It is recommended that the recipient of this Licence give priority to hiring the inhabitants of the area.

…”

The provisions of the licence that provoked most discussion at trial were the statement in Article 1 that “[the Defendant and Ocensa] shall, in terms of environmental matters, be jointly and severally liable for the construction of the project” and the requirement under Article 7(9) that Ocensa “shall establish a system for the evaluation of the damage caused during the construction works and the adoption of immediate mitigation, recovery and compensation measures.” For present purposes it is sufficient to note the following points:

I accept Snr Gasca’s evidence that additional permits were necessary for the carrying out of the works and that around 130 environmental permits were obtained, 32 permit applications were made to cross certain water sources and that permits to cross around 120,000 minor streams and creeks along the 800km pipeline route were obtained {E1/5/248} at [11.1].

In addition, Ocensa entered into a concession contract with the Ministry of Mines and Energy, which was executed on 23 February 1996 and by which the ministry gave Ocensa permission for the construction of the pipeline {K66/643T/1}. The contract required Ocensa to meet identified published standards regarding the construction of the pipeline and recorded that Ocensa was entitled to avail itself to the legally established benefits for works of public interest and to request the Government to order the expropriation of any lands required during its construction. Clause 14 recorded that the Government might appoint any required number of officers “in order to supervise the execution of the works and the performance of this Contract” and that “the Contractor” (presumably Ocensa, though not stated to be so in the contract) undertook to deliver to the government officers any data or information they might require. Clause 17 provided that the Ministry could impose fines as a penalty for nonperformance of the obligations assumed under the contract by the Contractor.

There is ample evidence of close and direct supervision of the Ocensa works by outside agencies and the imposition of sanctions on Ocensa for failures in the course of the works. By way of example, the Ministry of the Environment made a three day visit to the Northern Sector from 22-24 February 1996. The visit report identified numerous failings, including improper geotechnical management of the site where the ROW was being opened. The visit report raised the prospect of fines being levied and criminal sanctions imposed. The Recommendations and Actions to be Taken section included that there should be temporary suspension of work opening the ROW and follow up visits {K30/296T/1}. Snr Vina ordered an immediate temporary suspension of work to open the ROW {E1/5/262}. The consequences of the visit continued. In January 1997 the Ministry issued a writ by order of the Court which

In this section, I deal with the documentary evidence about the arrangements and responsibility. Because the Claimants’ effective case is now limited to failures in the construction process rather than failures of underlying design, arrangements relating to design can be treated more shortly than would otherwise have been the case.

The relevant arrangements up to and including the PCMA have been described at [262] ff above. I recapitulate them briefly:

There was a latent ambiguity in the MOU and the RMOU about the status of the members of the PCMT. It was to be established pursuant to the SA’s by-laws, but was to be made up of representatives of the Defendant, Triton, Total, the Canadian Group and Brown & Root. The fact that it was to supervise the contracts entered into by Ocensa did not resolve the ambiguity. In any event, it was not the MOU or the RMOU which finally enshrined the arrangements and responsibility as between Ocensa and the Defendant for the construction of the pipeline. The AROCA (to which the Defendant was not a party) did not otherwise define the status of the PCMT beyond describing it as “the PCMT of Ocensa”; and it did not address the status of the members of the PCMT. It is therefore the terms of the PCMA that are contractually determinative of the responsibilities of Ocensa and the Defendant. It is not in dispute that the Defendant contracted to manage Ocensa’s contracts; but the Defendant submits that the words “through [the PCMT]” and “within the limitations established under [the PCMA]” mean that it is not to be regarded as a “guardian” of the dangerous activity of pipelaying. There is also a dispute about what is meant by “with total technical financial, administrative and directive autonomy”, which goes to the level of the Defendant’s control. Since actual or potential control is the touchstone when determining the question of guardianship, it is material to record that Mr Spence considered that “the PCMT was the vehicle thorough which [the Defendant] was to perform the services under the PCMA” {Day13/79:10}; and that, in answer to a similar question, Mr Allison agreed that “the [PCMT] was the vehicle thoruhg which [the Defendant] was required to discharge its role as manager” {Day15/43:5}. Elsewhere, the Defendant was referred to routinely as the project manager and as being responsible for ensuring that all contractors complied with the terms and conditions of the licence {K25/242/2}. I will return to the issue of legal responsibility to the Claimants in Section 7 below.

Pursuant to the MOU and the RMOU the Defendant entered into various contracts, including the contract with Brown and Root for the preliminary engineering works {J3/12/1}. By an agreement made on 9 October 1995 (after the granting of the Environmental Licence to Ocensa) but backdated to 1 February 1995, the Defendant agreed to assign those contracts to Ocensa {J13/50T/1}. On 9 October 1995 the Defendant also entered into an agreement with Ocensa to assign the benefit and burden of its agreements with landowners {J13/46T/1}. The effect of this purported assignment is disputed. I will resolve the dispute in Section 7.

In September 1994, before the incorporation of Ocensa, the project partners (i.e. the Defendant, Total, Triton and Ecopetrol) made a joint presentation to potential EPC contractors {K13/83}, which was attended by (amongst others) Mr Allison, Mr Jones, and Mr Truett of the Defendant and the President of Ecopetrol {E3/10/666} at [4.17]. By July 1995, when the selection of Saipem as EPC contractor was recommended, that recommendation was made by the PCMT to the board of Ocensa by a paper signed by Mr Spence and Mr Truett (and one other) on behalf of the PCMT {K13/83}.

The Saipem Contract was concluded between Ocensa and Saipem on 11 October 1995 {J14/54.1/42}. Saipem’s primary obligation as EPC contractor was to carry out the work: Clauses 2 and 5. “Company’s Representative” was defined to mean “the individual(s) appointed by [Ocensa] to supervise the Work on behalf of [Ocensa] and to instruct [Saipem] regarding all matters related to the Work.”: Clause 1.2. Ocensa was to designate a Company’s Representative in writing. The Company’s Representative was to have authority to act for and on behalf of Ocensa on such matters connected with the contract as were notified in writing to Saipem by Ocensa: Clause 3.1. Those matters included giving instructions for variations in the works: (Clause 13) and suspending the works (Clause 27). Mr Allison, the Defendant’s employee, was appointed Company’s Representative and confirmed in evidence that his holding that position was one of the means by which he performed his role as project manager with the job of supervising the Saipem contract {Day15/46:7}, and that he had a right to instruct Saipem regarding all matters related to Saipem’s work {Day15/45:23}. The Company’s Representative was permitted to delegate any of its authorities to one or more individuals as Authorised Representatives (Clause 3.2). Mr Allison delegated authority to various other of the Defendant’s employees, including Snr Loeber and Snr Daza who were the Construction Managers based in the field and who were overseeing the construction work being done on a day-to-day basis {E3/10/668} at [4.20]. The Company’s Representative’s responsibilities included certifying that mechanical completion, reinstatement and reforestation had been achieved, whereupon Saipem would be entitled to receive a provisional acceptance certificate from Ocensa: Clause 10.2. Saipem’s invoices were to be sent to the Defendant (with whom Ocensa had by now entered into an accountancy partnership agreement which required the Defendant, among other duties, to process contractor invoices {J13/45T/1}): this arrangement is not directly relevant to the question of control of the works as such.

When entering into the contracts as set out above, the Defendant was acting as Operator or Coordinator and was acting on behalf of the project partners as a whole. The fact that the joint venturers as a group could have decided to act in a different way or that they had ultimate residual power to control the Defendant acting in its role as Operator or Coordinator does not derogate from the fact that the Defendant was therefore acting in pursuance of its own commercial purposes as well as those of the other joint venturers.

In addition to acting as Coordinator and Operator and entering into the various contracts as set out above, the Defendant’s employees were closely involved in the other steps taken on behalf of the project before construction started.

As foreshadowed in the various agreements setting out the roles of the parties, a number of project structures were established to enable the project to be brought to a successful conclusion:

Day-to-day management of the project before construction started was by the Project Management Team (which was part of what was sometimes referred to as the Integrated Project Management Team) and, after the incorporation of Ocensa, the PCMT. Although Mr Truett was appointed to be the PCMT Manager and a preponderance of the members of the PCMT were from the Defendant or associated

A few months before the letting of the Saipem Contract, Patrick Asfeld (from the Total group) was replaced by John Spence (of the Defendant) as the Project Manager (Transportation), principally because Mr Asfeld’s experience was more suited to the design and procurement phase, while Mr Spence had considerable experience in overseeing the execution of construction on large projects: {E1/3/129} at [3.3]. Thus, the change mirrored the change of emphasis on the project from engineering and procurement to construction. Mr Spence fitted into the managerial hierarchy below Ed Truett, who retained responsibility both for the field facilities works and for the transportation works. Mr Spence was dedicated to the transportation works and thus effectively headed up (below Mr Truett) the PCMT. Below Mr Spence were Mr Allison (an employee of the Defendant or another BP company), who was the construction manager responsible for overseeing the Saipem Contract on Pipeline North and John Skalski (from IPL) who filled the equivalent position on Pipeline South, and various other managers. In turn Mr Allison, on Pipeline North, had various personnel reporting to him. These included the three construction managers, Snr Daza, Snr Loeber and Snr Vasquez, each of whom was an employee of the Defendant. Not all of the managers were employed by the Defendant. Mr Dave Smith, the project engineer, was from Brown & Root, reflecting the fact that they (or, more accurately, another of their group companies) held the contract with Ocensa for the detailed engineering design work {J11/37/1}. Also within the PCMT, performing geotechnical survey work and overseeing certain aspects of the construction work on Spread B (and thus reporting up to Snr Daza) was Snr Gasca, who was employed by Brown & Root’s subcontractor, Tecniavance, at all material times until October 1997: {E1/1/4} at [2.5]-[2.6].

In summary, the PCMT contained (as had the Project Management Team before it) personnel from the different project partners and from Brown & Root and external companies. It was and remained the body through which the Defendant was required to manage Ocensa’s contracts in accordance with the terms of the PCMA.

The Defendant was closely involved in the management of the public meetings, which it saw as part of the project’s communications strategy. It also was responsible for the initial application for the Environmental Licence, which it made on behalf of the project partners: see [335] ff above. In the period before and after the grant of the Environmental Licence the Defendant managed the land acquisition process, with a team of about thirty experienced land negotiators led by Snr Arce, who reported to Mr Allison. Mr Allison’s main involvement was in reviewing and approving the manual for land negotiators {K66/618T/1} produced by Mr Arce (of which more later) and in keeping the project partners up-dated on how the work was progressing: {E3/10/649} at [3.23]ff. The current situation would be included in the Monthly Progress Reports signed off by Mr Truett: see, for example, {K20/160/17}. As set out in more detail below, until the purported assignment to Ocensa in October 1995, easement agreements (known as ROW Agreements and ROW Deeds) with landowners were entered into by the Defendant in its own name.

The Project Description in the EIS stated under the heading “Land Negotiation” {K9/34T/39}:

“The owners and holders of the property to be occupied by the work will be identified in order to begin a direct negotiation process by means of which the easement rights will be acquired for the strip of land or right of way required for the construction of the pipeline.

An evaluation will be made in conjunction with the owner or occupier of any damages that may be caused and of corresponding indemnification. Any damages caused outside of the strip of land required for the construction of the pipeline will be subject to a future agreement.”

On its face, therefore, the EIS contemplated that there would be an evaluation of damages that may be caused on the ROW and of corresponding indemnification and that there would be a separate agreement after construction of the pipeline to cover damages caused outside the ROW.

As set out at [341] above, the grant of the Licence was subject to Ocensa complying with the conditions laid down by Article 7. As one of those conditions, Ocensa was required by Article 7(9) of the Environmental Licence to establish a system for the evaluation of the damage caused during the construction works and the adoption of immediate mitigation, recovery and compensation measures. By closing submissions it was the Defendant’s submission that although Article 5 of the 1954 Regulations applied to both on-ROW and off-ROW damage caused by the works, the terms of the Environmental Licence gave rise to a regulatory obligation to put in place a compensation scheme in accordance with the terms of the licence. The Defendant submits that this regulatory scheme for the provision of compensation is enforceable only at public law and does not give rise to a private law remedy such as the Claimants are attempting to enforce in this litigation. I consider this submission in detail later; but what is relevant here is that the existence of two separate routes to compensation for the same damage (whether on- or off-ROW) is said to be a reason why individual landowners entered into multiple damages/settlement agreements after the ODC works had been carried out – it being said that they are either payments under a public law scheme of compensation or that they must have been essentially exgratia payments to ensure that there would be no come back from landowners alleging dolo: {Day61/35:25}.

The typical sequence of events before construction was that the Defendant’s team of negotiators went armed with set procedures as laid down in the Manual drafted by Snr Arce and approved by Mr Allison and Mr Connolly (who in due course became the Defendant’s representative on the Ocensa board) {K66/618T/1}. The “Philosophy for the Negotiation of Land” was stated to include “Pay all damages and negotiate the easements in order to carry out the [construction and maintenance of the pipeline] at commercial prices within the approved budget”; and “Maintain the equilibrium between the landowners or possessors of a specific area, at the price levels which are

Phase III was described as the “Negotiation Phase” which included that the negotiations were to be made following the plan agreed by the project Manager and the Legal Department, sticking strictly to the table of prices indicated by Ocensa (Clause 2); and that “the philosophy of the Legal Department is that of paying fairly for any damages that are caused, in such a way that the proprietors or possessors feel duly compensated for the damages caused on the properties, without this meaning making excessive payments” (Clause 3); and that, save in exceptional circumstances, 70% of the total amount was to be paid when the public deed was signed, and the remaining 30% within twenty working days of delivery of the public deed by the Office of Records of Public Documents (Clause 5); and that “with the last payment counted, the proprietor or possessor will sign a Clearance Certificate (see Annexe no. 4) in which it will be indicated that they are in this state and therefore will not begin any judicial or extrajudicial claims against Ocensa for these concepts” (Clause 7).

Phases IV, V and VI covered the construction and post-construction phase but may conveniently be summarised here. Phase IV was the construction phase during which the land negotiators were to take all possible steps to prevent stoppages of the works by landowners or possessors. Phase V was the entitlement phase during which Easement Deeds (as set out in Annexe no. 9) were to be drafted. The land negotiator would receive the “Bill of Constitution of Easement” from the solicitors and was to remind the landowner of the date, time and place for signing, providing transport if required. When a cheque was delivered, the land negotiator was to make sure that the proprietor signed the receipt of payment (Annexe No. 6) and the corresponding clearance certificate (Annexe No. 7). The “Final Phase” is phase VI, and the manual provided:

“In this phase the Land Negotiator will verify the payment of the damages caused by the Ocensa contractors out of the area negotiated by the Company and delivered formally by the Legal Department to the contractor or to the Management of the project. Likewise, the proprietor’s Clearance Certificate with respect to the contractor must be located in the Ocensa archives. If the contractor does not present the proprietor’s clearance certificate, the last payment must be withheld.”

This provision is not entirely clear but appears to contemplate that the final payment to the contractor (i.e. payment for carrying out the works) is to be withheld unless the contractor demonstrates by presentation of the proprietor’s clearance certificate that the verified damages caused by the contractors off the ROW have been paid by the contractor to the proprietor.

Table V was a “Table of Prices for the Right of Way” expressed in Colombian Pesos. Although not expressly stated in the document, the prices were per hectare. The highest prices were for the stretches from San Antonio-Puente Boyacá (15,000,000) and from Puente Boyacá to Santa Sofía (10,000,000). For the relevant stretch the prices were:

The notes to the table stated that these prices “include the easement price (30%) and the damages (70%), which are the cost of the harvest, in other words, the consequential damages and the profits lost over three months”; that they were based on studies carried out by the governmental authorities in charge of promoting the agricultural and livestock sector and were collated by Ecopetrol; and that they are “the highest rates on which the negotiator can agree. The negotiator cannot agree on higher prices without prior approval from David Arce or Phil Allison, according to the case.”

The Annexes to the Manual are not available; but the sequence of events indicated in the Manual can be traced quite closely through the documents that are available relating to the Lead Claimants. Before going to them, it should be borne in mind that there was evidence from the Lead Claimants and the witnesses called on their behalf to the effect that the system anodynely outlined in the Manual did not reflect the reality of what happened on the ground, to such an extent that the Court should find that the Claimants did not receive suitable explanations and did not have freedom of choice when executing various documents and that the Defendant acted in bad faith when conducting and concluding its various negotiations. I shall consider this submission further in Section 7 and the evidence relating to each Lead Claimant in the

Typically the first document to come into existence would be what the Claimants call the preliminary contract and the Defendant calls the authorisation letter. I shall call it, for now, the First Letter. There is limited evidence about how the document came to be signed but, in general, it appears that a land negotiator would visit the farm and request the signature (or other mark) of the landowner on the document. In form it was a letter from the Defendant to the land owner and was dated 11 August 1994, being countersigned by different landowners on different dates. The First Letter was in standard form with adjustments to identify the property and landowner concerned. The one for LC74 {M/171T/593.1} stated as follows:

“Mr: Rogelio Velez Montoya

Plot: La Nieve (109)

Municipality: Remedios

Dear Sir,

Later, the Defendant would enter into a “Promissory Agreement for Creation of Oil Pipeline Easement and Right of Way”, which the parties have called the ROW Agreement. Once again, these were in standard form with adjustments as appropriate to the landowner and property concerned. The one for LC74 {M/172T/602.1} provided as follows:

“BP EXPLORATION COMPANY (COLOMBIA) LIMITED

PROMISSORY AGREEMENT FOR CREATION OF OIL PIPELINE

EASEMENT AND RIGHT OF WAY

…

PROPERTY:			LA NIEVE
VEREDA:			LA COOPERATIVA
MUNICIPALITY:			REMEDIOS
DEPARTMENT:			ANTIOQUIA
OWNER:			ROGELIO VELEZ MONTOYA
ADDRESS:			AT THE FARM

The undersigned ROGELIO VELEZ MONTOYA, …, hereinafter called THE OWNER, for one party, and ALEXANDER ROJAS J., … who in his capacity as UNIVERSAL AGENT acts in the name and on behalf of BP EXPLORATION COMPANY(COLOMBIA LIMITED, …, acting in its capacity as operator of the Association Contracts

SANTIAGO DE LAS ATALAYAS and TAURAMENA, entered into with … ECOPETROL, hereinafter THE COMPANY, for the other party, have entered into the PROMISSORY AGREEMENT FOR CREATION OF OIL PIPELINE EASEMENT AND RIGHT OF WAY which shall be governed by the following clauses:

FIRST: THE OWNER states that he is the sole owner and possessor of the rural property called LA NIEVE, … with a surface area of 47.6 Ha., …

SECOND: …

THIRD: THE COMPANY declares that it has executed Association Contracts with … ECOPETROL, called SANTIAGO DE LAS ATALAYAS and TAURAMENA, the purpose of which is the exploration and production of hydrocarbons that might be found in the respective areas, …

FOURTH: In furtherance of the above-mentioned Association Contracts, THE COMPANY must transport crude oils and gases found in the area of the contracts and, for such purpose, THE COMPANY must build the Cusiana-Coveñas pipeline, …

PARAGRAPH.- By virtue of the Petroleum Code, THE COMPANY avails itself of the public utility and easement benefits established for the petroleum industry.

FIFTH: The Pipeline and complementary works will pass through the property described in the first clause of this agreement, in the SOUTH - NORTH direction, in a 25-meter wide by 488-meter long strip of land, for a total of 12,200 square meters, an area comprised within the following special boundaries: …

PARAGRAPH.- The property referred to shall be affected by an oil pipeline easement and right of way in the terms Of Civil Law, the Petroleum Code and the laws and decrees supplementing it.

SIXTH: In said property and in particular in the area of land described in clause FIFTH, THE OWNER promises to· constitute in favor of THE COMPANY, its agents and assigns, the. rights of easement, use, occupation and way established by law in favor of the petroleum industry, by virtue of which THE COMPANY or the individual or legal entity to which it may assign its rights will be able to execute the necessary works (cuts and slopes), as required by the appropriate· technique, for the construction and operation of pipelines, and execute works required for the preservation, replacement and handling of pipe, installation, use, maintenance and repair of telephone, telegraph and power lines; use the right of way for its workers, equipment and machinery as required for construction and maintenance of the pipeline and all types of works related or connected to exploration, production and transport of hydrocarbons, either used directly or by its contractors.

SEVENTH: THE OWNER promises to authorize THE

COMPANY to occupy a larger area than that described in the FIFTH clause and to change its route, whenever technical circumstances so require; the larger area that may be occupied for this reason shall be paid to THE OWNER at a price per square meter equal to that provided in the NINTH clause and after the final cleanup stage. During the period comprised between the date of execution of this document and the date of termination of the pipeline construction works, THE OWNER shall abstain from cultivating in the affected and additional areas, from subletting them for such purpose, as well as from putting up improvements or buildings, which will not be compensated by THE COMPANY. …

EIGHTH: If THE COMPANY, in the future, needs to acquire other lands within the same property identified in the FIRST clause, THE OWNER promises to enter into the respective agreements for compensation of damages and to create an easement for transit, aqueduct or pipeline and a right of way, at the same prices and with the same terms agreed in the NINTH clause, …

NINTH: The price of the easement rights promised hereunder and the damages caused by the construction of the pipeline is THREE HUNDRED PESOS ($300) per square meter, for a total of FOUR MILLION TWO HUNDRED EIGHTY-FIVE THOUSAND PESOS ($4,285,000), which THE COMPANY will pay in two instalments, as follows: 70%, that is, the amount of TWO MILLION NINE HUNDRED NINETY-NINE THOUSAND FIVE HUNDRED PESOS ($2,999,500) within twenty (20) days following execution of this document and 30%, that is, the amount of ONE. MILLION TWO HUNDRED EIGHTY-FIVE THOUSAND PESOS ($1,285,000) within the next twenty (20) days, counted as of the date of delivery of the promised public deed and the land ownership certificate attesting that THE COMPANY is the holder of the easement right, issued by the corresponding Public Instrument Registry Office.

PARAGRAPH: The total price of this negotiation, from which the withholding tax will be deducted as provided by law, comprises in the terms of Article 5 of Decree 1886 of 1954 not only the rights of use, occupation and transit in the area described in the FIFTH clause, but also damages caused during construction on the property and in particular those listed in the attached inventory, as well as damages that may have been caused by the alteration in the normal economic exploitation of the property. For all other purposes, the price of the right of way is equal to 30% of the total price paid by THE COMPANY, as agreed by the parties.

TENTH: In any case and considering the needs of THE COMPANY, THE OWNER recognizes as of this moment the full pipeline easement rights and rights of way, use, and occupation of THE COMPANY on the strip of land described in the FIFTH clause and on additional land, if necessary. Furthermore, he expressly authorizes the immediate commencement of all works required for construction of the pipeline and guarantees that he will not cause, by himself or through a third party, the suspension or disturbance of the works, the installation of elements or the handling of machinery, until full termination of the pipeline construction works, or during their subsequent use. …

ELEVENTH: In those lands where, due to their geological makeup, it is indispensable to plant grass in order to guarantee the pipe stability, THE OWNER promises to authorize THE COMPANY to carry out such task, under the technical conditions required by THE COMPANY, as well as the other geotechnical protection works that may be necessary within or outside the strip of land identified in the FIFTH clause; in the other lands, the value of the grass seed and the day salaries for planting it are deemed included and paid within the price established for damages in the NINTH clause, as agreed by the parties.

…

THIRTEENTH: THE COMPANY may at any time freely assign or convey, totally or partially, to any individual or legal entity, the rights promised hereunder, for which THE OWNER promises to grant his authorization in the promised deed.

…

FIFTEENTH: This agreement and the promised deed shall be subject to the provisions of the Civil Code, the Petroleum Code, Decree 1886 of 1954 and the relevant sections of the Mining Code.

…

SEVENTEENTH: This agreement has settling effects and, thus, prevents any pending or future litigation between the same parties for the constitution of the right of way and rights of easement of the pipeline and the use, occupation and compensation of damages.

EIGHTEENTH: The parties undertake and agree to execute the public deed of creation of the oil pipeline easement and right of way in order to fulfil this promise and in the terms established herein, on the TWENTY-THIRD (23) day of MAY, 1995 at

2.PM, at the SOLE notarial office of REMEDIOS, …

…

In witness whereof, this document is signed on the 23rd day of

March 1995

BP EXPLORATION COMPANY (COLOMBIA) LTD.

THE OWNER

…

ANNEX

It is convenient to note various points at this stage. First, the basic price in LC74’s case per square metre was COP 300, or COP 3,000,000 per hectare. This rate does not match any of the rates set out in the Manual’s Table of Prices: see [365] above. The rate of COP 300 per square metre was applied to the area of the ROW as it passed through LC74’s property (i.e. 488 metres x 25 metres width: 12,200 square metres or 1.2 hectares): Clause 5. Second, the landowner promised to constitute over the property and, in particular, the area of the ROW the rights of easement, use, occupation and way established by law in favour of the petroleum industry to enable the works to be carried out: Clause 6. Third, the landowner promised to enter into a supplemental agreement if the Defendant discovered it needed to occupy more land or a different route, provided that the Defendant made a supplementary payment at the same rate: Clauses 7 and 8. Fourth, the agreement said that it had “settling effects and, thus, prevents any pending or future litigation between the same parties for the constitution of the right of way and rights of easement of the pipeline and the use, occupation and compensation of damages”: Clause 17. I shall resolve later whether the settling effects were effective and, if so, whether they were intended to refer only to the area of the ROW itself. Fifth, the parties agreed to enter into a public deed of creation of the oil pipeline easement and right of way: Clause 18.

As foreshadowed by the ROW Agreement, the parties would then enter into a Public Deed of creation of the oil pipeline easement, which the parties have called the ROW Easement {M/178T/681.1}. The ROW Easements were also in standard form with necessary adjustments and were executed by the Defendant and the landowner. One of the standard features was that the document declared that it was made before a named Notary. Apart from being in the form of a public deed, the ROW Easements were in similar form to the ROW Agreements, including the Defendant availing itself of the public utility and easement benefits established for the petroleum industry (Clause 4), multiple references to the Petroleum Code and Article 5 of the 1954 Regulations, and reference to the settling effects of the agreement (Clause 17). In Clauses 6 and 7 of the ROW Easement, the landowner constituted the easement (Clause 6) and authorised the occupation of a larger area (Clause 7) where in the ROW Agreement he had merely promised to do so. Clause 9 differed from the equivalent clause in the ROW Agreement in referring (in the case of LC74) only to

On 9 October 1995 the Defendant entered into an agreement with Ocensa by which it purported to assign both its rights and its obligations under the various ROW agreements it had entered into with the Claimants by Public Deed 4317 {J13/51T/1}. Its terms included the following:

“In the city of Santafe de Bogota, D.C., Republic of Colombia on [9 October 1995] … was granted the public deed for ASSIGNMENT OF EASEMENTS CONSTITUTED BY BP EXPLORATION COMPANY – COLOMBIA – LIMITED, ASSIGNMENT AGREEMENT BETWEEN [the Defendant] AND [Ocensa]

…

FIRST CLAUSE: … [the Defendant], in exercise of the rights arising from the assignment clauses of the different public deeds for pipeline and transit easements, …, hereby assigns the permanent pipeline and transit easement rights constituted over 597 private and/or public properties for the construction of a public pipeline.

SECOND CLAUSE: … [the Defendant], through this deed, assigns to [Ocensa], all the rights and obligations arising from the constitution of the legal pipeline and transit easement right with permanent oil occupation established by the owners of the properties assigned in favour of [the Defendant].

…

THIRD CLAUSE: This assignment is made as stipulated in the Law and in the capacity reserved for [the Defendant] in the aforementioned easement deeds to assign the pipeline and transit easement rights with no need for authorization from the Owners of the properties where the easement rights have been constituted.

…

NINTH CLAUSE: [the Defendant] … [is] responsible for all claims brought in relation to the agreements assigned and which are based on events or acts occurred before the date of signature of this agreement.”

The deed was registered in the real property registry on and from 21 November 1996. It is not alleged that notice of the assignment was given to the assigned parties unless it was effected by registration in the real property register, which I have held to be ineffective: see [132]ff above.

Some general points may be noted at this stage, looking both forwards and back in this judgment:

The construction of the Pipeline North was divided into two sectors or spreads, called spread A and spread B. As originally planned, Spread A was to be between Coveñas and Rio Nechi while Spread B was to be from Rio Nechi to Vasconia. Spread A was to be constructed by “Construction Team A” and Spread B by “Construction Team B”, with Construction Team A starting at Coveñas and working southwards while Construction Team B started half way up Spread B at the Rio San Bartolomé and worked northwards, leaving until later the southern part of Spread B.

In the event Construction Team B made slower than anticipated progress and so the two-spread-plan was revised into three. Running from North to South they were called Spread A1, Spread B and Spread A2. LCs 9, 10, 38, 39, 54 and 93 are in Spread A1, which ran from Coveñas to Rio Nechi. LCs 50, 61, 74, and 82 are in

Saipem was the main contractor on all three spreads. The geotechnical works on Spreads A1 and A2 were sub-contracted to a company called Dinosaurios; the geotechnical works on Spread B was subcontracted to companies called Bronco and Progeocon. The identity of the sub-contractors has not been shown to be material. One feature of the construction works was the use of local labour. This was identified in the public meetings as being a social benefit to the communities through which the pipeline passed. It was a priority identified in the Environmental Licence at Article 21; and it was included as an obligatory requirement in the EMP {K9/35T/12}. Saipem’s tender identified the use of local resources as being “the only way to actually promote the well-fare (sic) of the inhabitants and the progress of the Country”; it anticipated that Colombian content would represent approximately 50% of the total contract value and included ROW clearing and grading and final restoration and environmental protection amongst the activities to be carried out by local labour {J14/54.1/124}. In October 1996, Ocensa’s project update recorded that over 78% of the total employment for the project had been with “local workers from the communities affected by the construction” {K38/378/3}.

As the pipeline progressed so new groups drawn from local labour sources had to be trained to appropriate standards. It is not clear precisely what activities would or would not be allocated to local workers or whether some may already have had some training and I make no finding on those points. Snr Loeber accepted that some workers, depending on the precise area, were better and more reliable than others. He explained this as meaning that productivity was affected so that it might mean that the time to install temporary geotechnical work might go slower than anticipated, not that it would be forgotten altogether. His solution was that additional local workers would be hired to try to increase the rate of progress {Day18/31:22} ff. I accept his evidence on this point. Although Dr Savigny recognised the possibility that people may have

What matters more is the evidence of Dr Card and Dr Savigny who both observed differences in the apparent quality of the works at different places along the ROW, which were consistent with there being discrepancies in the quality of the workmanship along the ROW with some areas of work being less well performed than others: see {Day27/130:4} ff and {Day37/169:10} ff. In acknowledging the fact of variations, Dr Savigny made the qualification that there was no reason on the four trial case properties to believe that there was “any glaring exception to the standards”. Dr Savigny said in evidence that the variations were particularly apparent from LC74 south to the Rio San Bartolomé (i.e. the area of the early progress on Spread B). Dr Card had not noticed any particular pattern to the variations and had not attempted to analyse them formally any more than had Dr Savigny. On all of the evidence I find that the quality of workmanship along the ROW was not constant. That finding, and the absence of any cogent case of consistent or constant design defects together provide a sufficient explanation for my view that each claim in this litigation is very largely fact specific.

Work started on Spreads A1 and B in or about December 1995, and on Spread A2 in or about August 1996. It therefore started after the execution of the purported assignment of the Defendant’s rights and obligations on 9 October 1995 but before its public registration on 21 November 1996: see [372] above. The work spanned both the dry and the wet seasons: see {E1/2/110} at [5.26]. The violence of the climate was such that there was a risk of protection works such as retaining walls, trinchos or protection barriers being washed away, and this happened on occasions. This was not necessarily or even probably due to design or construction defects. It was not a common occurrence and, when it happened, Saipem were instructed to reinstate the damage: see {E1/1/38} at [12.29], {E2/7/337} at [14.1(d)]. I do not exclude the possibility that there were some delays in effecting reinstatement, whether because of a failure to notice damage or to instruct repairs or otherwise, but this too would be fact specific in every case and the evidence has not been examined in sufficient detail in this trial to make specific findings except in the four trial cases.

There is an ever present danger after spending months in the quiet of an English courtroom to lose touch with the reality of the project that was being undertaken. I have referred to video footage of the ODC and Ocensa works being carried out. The available video relating to the ODC works is a promotional film produced on behalf of ODC {L1/134}. Those showing the carrying out of the Ocensa works include some promotional films produced on behalf of Ocensa, typically recording progress and showing short clips of works being carried out ({L1/209} {L1/210} {L1/210.1} {L1/225}{L1/226} {L1/228} {L1/229}); but they also include ones where the film has been taken, without apparent editing, in the normal course of the works (e.g. {L1/208} {L2/787} -{L2/797} {L2/799} – {L2/801}). No film of works being carried out on a trial claimant’s property has been identified. The evidence from the films is therefore of prime relevance in showing generally what was involved in the project.

The available films and photographs provided material for the technical experts in forming their opinions. They also provide evidence in themselves which needs no expert interpretation. Without usurping the proper function of the experts, the films provide evidence of the following:

Ocensa contracted with Saipem for it to carry out the construction works on the terms of the Saipem Contract {J14/54.1}. In briefest outline, the Defendant agreed to provide the management of the contract for Ocensa through the PCMT, with technical, financial, administrative and directive autonomy subject to the terms of the PCMA. In that role it managed, supervised and controlled Ocensa’s contracts for the construction of the pipeline on a day-to-day basis. Mr Allison and Mr Spence were at all times employees of the Defendant, as were most of the senior management team on the PCMT. Mr Gasca’s employment by Tecniavance was a notable exception but, as a member of the PCMT he came in direct line of management below Mr Allison, Mr Spence and others. Mr Allison was also appointed the Company’s Representative under the terms of the Saipem Contract, which invested him with power to issue contractual instructions with the authority of Ocensa.

The role of the PCMT covered the management, supervision and control of Saipem to ensure that it carried out its work in accordance with its contract obligations, specifications and procedures. By way of example, below its construction managers, the Civil Engineers were responsible for deciding what short term measures would be implemented by the contractor {Day14/44:24} {Day17/82:19} and for signing off, on behalf of the PCMT, those measures that were installed {Day14/67:16}. The Civil Engineers decided what long term measures would be taken in conjunction with Saipem, with the Civil Engineers, such as Snr Gasca, playing the leadership role and others in practice following their view {Day14/71:24} {Day17/83:13}. If serious issues had arisen, they could and would have been referred up to the PCMT, to Mr Allison as Project Manager and Company’s Representative if necessary.

The Defendant’s role was variously described at the time and later. I shall return to the contractual obligation assumed under the PCMA in Section 7. An audit report produced by Total in about September 1997 stated that “the construction is operated by BP under a [PCMA]” {K49/517/2}, which Snr Gasca accepted was a correct description because “BP was the one that had done the contracts, carried out the studies and the construction contracts, and they were the ones that had sent some of those supervisors on the field, and if that means they built the pipeline, well, yes, then” {Day17/47:12}. In a joint review document with Ocensa produced in December 1998, the Defendant said that “the PCMA … was formed in February 1995 in order for [the Defendant] to undertake the total Project Management for the Transportation part of Phase II …” {J26/87/3}. I accept these as reasonably accurate descriptions of the reality of what happened. The day-to-day management was still subject to the residual power to exercise supervisory control and direction of the Ocensa Board although, as was to be expected, the Board was generally concerned with major budgetary, contractual and financial decisions. Thus it was Mr Spence’s evidence that, although the Defendant required approval under the terms of the PCMA to enter into the contract with Saipem because (at US$211 million) it exceeded its financial authority, in terms of the day-to-day management, supervision and control of the contracts, it was up to the Defendant to get on and manage, supervise and control that contract, and the PCMT had total autonomy {Day13/89:24}.

There is no evidence that any of the Defendant’s employees who worked on the PCMT were formally seconded to Ocensa, and Mr Allison accepted that he was not “legally” seconded {Day15/69:24}. Although a number of witnesses asserted that either they or others had been “seconded” to Ocensa, that evidence was either withdrawn or represented no more than that the person was working on behalf of Ocensa {Day13/42:18} {Day17/44:3}. The decision not to second BP employees to Ocensa was evidently a deliberate decision, foreshadowed by a meeting in Houston in May 1995 on the subject of the PCMA which recorded that “The PCMT will continue to reside within [the Defendant] except for [Brown & Root] members. Secondment will not be used. [The Defendant] will employ all non B&R members of the IPMT, will be responsible for their security and will pay their salaries and living allowances” {J10/36/14}. The same document made clear that this was a strategic decision: “For image and operative reasons IPMT members should be able to represent Ocensa and/or act as agents of such. The PCMA shoud include wording … that allows for this. Although IPMT will not be seconded to Ocensa in a strict legal sense, the wording of the PCMA should allow for the IPMT to acts [sic] as if seconded.” It appears that tax efficiency may have played a part in the decision. The decision was consistent with an earlier Communications Strategy which said that the Defendant, when acting as leader of the project management team, would project itself as the instruments of [Ocensa] and will seek to project the image of [Ocensa] and not its own image. It is not [the Defendant] that is building the line, it is [Ocensa] … Given that the desired image can be said to be in conflict with the reality of who owns, is building and will operate the line, further explanation may be needed…..” {K15.1/107.1/1}. The whole thrust of Ocensa’s communications was for Ocensa to distance itself from the Defendant {K28/274/1}. This appears to be the reason why letters were not to be sent out on the Defendant’s own headed paper and why the Defendants’ employees working on the project carried Ocensa business cards.

After Saipem had carried out the works, there were further dealings with landowners. The end result of these dealings were typically that a settlement agreement would be entered into by the landowner with Ocensa. I treat a LC74 document {M/181T/686.1} as typical of a settlement agreement with Ocensa alone:

“DAMAGE APPRAISAL, RECOGNITION AND SETTLEMENT AGREEMENT

In the city of REMEDIOS, department of ANTIOQUIA, on the 15th day of JUNE, 1996, Messrs. ROGELIO VELEZ MESA, …, hereinafter called THE BENEFICIARY, for one party, and for the other ALEXANDER ROJAS, …, acting in his capacity as universal agent for OLEODUCTO CENTRAL S.A., …, hereinafter THE COMPANY, met in order to enter into the appraisal, recognition of damages and settlement agreement which is governed by the clauses set out below, based on the following considerations:

A second standard form of settlement agreement was in common use which was materially different because Saipem was joined as a party. The reason for Saipem’s inclusion was a contractual arrangement between Ocensa and Saipem that damages outside the ROW were the sole responsibility of Saipem although it was agreed that Ocensa and Saipem would negotiate them together. This appears from Clauses 1 to 3 of the typical agreement of this type set out below, which covered payment (again relating to LC74) for sobreanchos and a dump and gabions outside the 25 metre ROW {M/182T/689b}:

“RECOGNITION VALUATION OF DAMAGE AND SETTLEMENT CONTRACT

In the city of Remedios, … on the 16^th day of August, Messrs. ROGELIO VELEZ, … acting in his own name, hereinafter called THE BENEFICIARY, for one party, and for the other ALEXANDER ROJAS, … acting in his capacity as universal agent for [Ocensa], […] hereinafter THE COMPANY, and LEONARDO GRAVINA […] who, in his capacity as

, acts in the name and on behalf of the company [SAIPEM] …, hereinafter THE CONTRACTOR; have decided to enter into this appraisal, recognition of damages and settlement contract, which is governed by the following clauses, based on the following considerations:

FIRST – That [Ocensa] carried out the construction of an oil pipeline, from the village of Tauramena […] to Tolú […].

SECOND – For that purpose, [Ocensa] entered into a construction contract with the company known as [SAIPEM], which constructed the oil-pipeline between Vasconia and Coveñas.

THIRD – In the contract entered into it is stated that the damages caused outside of the right of way (“sobreanchos”) are the sole responsibility of THE CONTRACTOR, however, both THE CONTRACTOR and THE COMPANY will negotiate the same together, in order to agree on the criteria, without prejudice to THE CONTRACTOR’s obligation to bear the cost of the damages.

FOURTH – that THE BENEFICIARY is the Owner of a rural plot known as LA NIEVE, […]

FIFTH – That in the performance of the construction works of the pipeline CUSIANA COVEÑAS, THE CONTRACTOR caused damage on the property described in the previous clause, consisting of

Sobreanchos, 488 meters long by 10 meters wide for a total of 4,880 m² on the right of way and a dump of 2,500 m² at $280 per square meter, and gabions.

Total m² 7,380 m² x 280 m²

=2,066,410.

SIXTH - That THE BENEFICIARY has claimed the sum of from THE CONTRACTOR as payment for the damages caused on the plot identified in the previous clause, because he considers that the same has produced losses such as:

SEVENTH – That THE CONTRACTOR believes that the real value of the damages caused, taking into account the area of land affected, the economic use of the land and … assessed at $ …, which is why the financial claim of THE BENEFICIARY is too high.

EIGHTH – That since THE CONTRACTOR and THE

BENEFICIARY were not able to reach an agreement regarding the real value of the damages caused, and in order to avoid whatever conflict between them, the two parties have decided the following:

SETTLEMENT

FIRST CLAUSE: THE CONTRACTOR will pay THE

BENEFICIARY, within Thirty (30) days following the signing of this document, the amount of two million sixty-six thousand four hundred pesos ($2,066,400), as the full and sole value of the damages caused to the plot identified in the FIRST point of the recitals, which includes not only physical damage but also the losses which may be caused by the alteration of the normal economic exploitation of the plot.

SECOND CLAUSE: THE BENEFICIARY expressly renounces to file against THE CONTRACTOR any type of judicial or non-judicial complaint for the damages caused during the works described in the second point of the recitals.

THIRD CLAUSE: THE BENEFICIARY has no further claim in regard to THE CONTRACTOR, which complied with the acquired obligations, and accepts all the terms of the present settlement.

FOURTH CLAUSE: That THE CONTRACTOR has no outstanding claim with THE BENEFICIARY.

FIFTH CLAUSE: That, subject to the fulfilment of this settlement provisions, the parties hereby mutually declare to be

FULLY AND RECIPROCALLY DISCHARGED FOR EVERY CONCEPT ORIGINATED IN THE DAMAGES DESCRIBED IN THE FIRST POINT OF THE RECITALS.

SIXTH CLAUSE: That for all its effect, the present settlement produces the effect of a final judgment, and for the record it is signed on the 16^th day of August in the city of Remedios.

FOR OCENSA

THE BENEFICIARY

(Sgd.) Rogelio Velez

FOR SAIPEM S.P.A.

Either at the same time as the settlement or later, receipts would be obtained and Paz y Salvos would be entered into with the landowner. The receipts were not all in identical form but those signed by Snr Velez (LC74) are typical. A receipt signed by Snr Velez for a cheque for COP 5,150,000 dated 16 August 1996 {M/189/765} stated “I [Snr Velez] hereby state that I have received from [Ocensa] the amount of $5,150,000 as payment of 100% of the accidental damage over [La Nieve], and that I have been fully paid in all respects”. Two later receipts relating to other settlements also contained the statement that he had been fully paid in respect of the agreement that had been reached {M/189/758} {M/189/755}. Some but not all declared that the payment related to an agreement or contract.

Common to these receipts is the phrase (in Spanish) “Ocensa se halla a Paz y Salvo”, which has here been translated as “I have been fully paid by Ocensa”. This same translation of the words (or very similar) has been adopted for other similar forms of receipt (e.g. {M/179T/682.1}, Snr Velez’ receipt for a payment under his ROW Agreement with Ocensa; {M/127T/458.1}, Snr Mesa’s receipt for the second payment under his ROW Agreement for LC54, which is translated as “I have been fully paid in all respects”). Paz y Salvos were in some respects more formal and, on their terms, went further than the mere receipt of full payment. In addition to recording the fact of payment for damage, they included express reference to formal renunciation or waiver of future claims.

There were two forms of Paz y Salvo in common use, just as there were two forms of settlement agreement. One form of Paz y Salvo would be entered into by the landowner with Saipem. It would state that it had been seen and approved by Ocensa. The Defendant would not be a party to the Paz y Salvo. It specifically referred to and was a clearance certificate against damage caused outside the ROW, reflecting the reference in the second form of settlement agreement to the responsibility of Saipem for all damages caused outside the ROW: see Clause 3 at [388] above. A typical Saipem Paz y Salvo (again from LC74) would be in the following form {M/184T/727.1}:

“SAIPEM S.P.A.

CLEARANCE CERTIFICATE FOR THE PERFORMANCE

OF THE CONSTRUCTION WORKS OF THE OCENSA

PIPELINE CUSIANA-COVEÑAS

OWNER	ROGELIO VELEZ MONTOYA
PLOT	La Nieve
DISTRICT	La Cooperativa
MUNICIPALITY	Remedios
DEPARTMENT	Antioquia

The undersigned Rogelio Velez M., …, acting in his capacity as owner of the rural plot known as La Nieve …

HEREBY DECLARES

That the company SAIPEM S.P.A, in its capacity as contractor of OLEODUCTO CENTRAL S.A. “OCENSA” for the

construction of a 30-inch wide pipeline known as CUSIANACOVEÑAS, affected the above mentioned property over an area of 25 metres long by 488 metres wide, a total of 12,200 square meters.

That the company SAIPEM S.P.A is fully paid up to me in all respects and in relation to the property of which I am the OWNER and all the agricultural, cattle rearing and any other activities, carried out by me on the above mentioned property affected by the construction works of the pipeline, for all damage caused outside of the corridor of the Rights of Way (25 meters), or which were caused as a result of any legal, contractual or non-contractual relationship in the course of the permanent occupation contract of Pipeline and Transit legally constituted in order to carry out the construction works of Oleoducto Central S.A. I consequently RENOUNCE

(WAIVE) the right to bring any reclamation, action or judicial or extrajudicial claim against SAIPEM S.P.A or OLEODUCTO CENTRAL S.A., regarding their obligations, agreements, loss and damage to pastures, crops or property outside the corridor of the right of way [“por fuera del corridor de la linea”] (Footnote: ¹³), or the alteration in the normal economic exploitation of the plot during the construction of the Central Pipeline.

Likewise, I hereby declare that I have received from SAIPEM S.P.A the payment to my full satisfaction of all the loss and damage caused on the above mentioned plot of which I am the

OWNER (√) and/or possessor (x). As a result, the present CLEARANCE CERTIFICATE frees SAIPEM S.P.A. and

OLEODUCTO CENTRAL S.A. from their obligations of reparation (repair), payment or indemnity for the damage, repairs, compensations or any other aspect generated from the construction works of the pipeline and its complementary works. I authorize SAIPEM S.P.A to carry out on the above mentioned plot the maintenance, protection and cleaning works necessary for the stability of the Pipeline.

OWNER SAIPEM S.P.A.

[Signature – ] [Signature – ]

…

Seen and approved by OCENSA [Signature]

Date and place: Puerto Berrio April 4/98”

Ocensa also had a form of Paz y Salvo, which was in materially different terms. The two main points of distinction for present purposes are that Saipem was not a party to the Ocensa Paz y Salvo and that it expressly gave clearance for damage inside the ROW. In these respects it complimented the Ocensa settlement agreement to which I have referred at [387] above. There is no Ocensa Paz y Salvo in the court documentation for LC74. I therefore take an example from LC54 {M/136T/480.1} as typical:

“OLEODUCTO CENTRAL S.A

FINAL AND DEFINITIVE PAZ Y SALVO SIGNED BY THE OWNERS, POSSESSORS ( ) OF THE PROPERTIES AFFECTED BY THE RIGHT OF WAY IN THE DEVELOPMENT OF THE CONSTRUCTION OF THE

PIPELINE CUSIANA COVEÑAS

OWNER		Rodrigo Mesa León
PLOT		La Fe
DISTRICT		El 18

MUNICIPALITY Caucasia

DEPARTMENT Antioquia

The undersigned, Rodrigo Mesa Leon, …, acting in his capacity as OWNER (x) Possessor ( ) of the rural plot known as La Fe …

HEREBY DECLARES

That the company OLEODUCTO CENTRAL S.A, affected my property over an area of 402 metres long by 3.4 metres wide, a total of 1367 square meters, for the construction of the 30-inch Cusiana Coveñas pipeline. That the mentioned Company is fully paid up to me and the property identified above, for all damage, losses or compensation caused or resulting from any legal, contractual or non-contractual relationship in the course of the contract of Easement of pipeline and Transit legally constituted for the purposes of carrying out the construction works of the pipeline in performance of the project or any other place of access to the works. As a consequence and in conformity with the above, I RENOUNCE the right to present any type of reclamation, action or judicial or extrajudicial claim against the company, regarding their obligations, agreements, loss and damage to the pastures, crops or movable [property] inside the corridor of the line [“por dentro del corridor de la linea”] (Footnote: ¹⁴), or the alteration in the economic exploitation of the plot during the construction of the pipeline.

Likewise, I authorize The Company to undertake on the property La Fe the maintenance, protection and cleaning works necessary for the stability of the Pipeline on the property. In this regard, I renounce to present any type of reclamation against The Company. In acceptance of the aforementioned, I sign the present clearance certificate.

[Signature]

OWNER ( ) POSSESSOR ( )

PLACE Caucasia

DATE August 11/97

[Signature] [Signature]

CENTRAL PIPELINE S.A. WITNESS”

The available evidence strongly suggests that Ocensa and Saipem entered into (or attempted to enter into) agreements and Paz y Salvos with all landowners. The trial bundle includes at least one settlement agreement with each of the Lead Claimants except LC82 and at least one Paz y Salvo with each Lead Claimant including LC82 (which indicates that there would have been a prior settlement agreement or agreements in that case too) but excluding LC93. The settlement agreements and Paz y Salvos for the Trial Claimants are considered in detail in Sections 11-14. In summary, the numbers of settlement agreements and Paz y Salvos entered into by each of the other lead claimants were as follows:

I have not had any submissions about the various settlements and Paz y Salvos reached by non-trial Claimants, but it appears from the documents listed above, that the descriptions of the damages settled by Ocensa/Saipem forms of settlement agreement are of damages outside the original 25 metre ROW while the damages settled by the Ocensa form of settlement agreement are consistent with damages occurring within the original width of the ROW. Furthermore, analysis of the cases where there are settlement agreements and Paz y Salvos is also informative. The following points emerge:

The prevalence of settlement agreements for the Lead Claimants supports the inference that landowners generally were aware of the ability to make claims in respect of damage to land, crops and chattels and that they did so, even in respect of relatively minor losses. The settlement agreements in the trial bundles cover what

The prevalence of settlement agreements also supports the inference that no impediment was placed in the way of those who wished to bring claims – though it is clear that some claims were not accepted in full and were reduced before settlement was achieved. The possibility that some of the 74 claimants did not know of the ability to make claims exists and cannot be determined on the evidence at trial; but, given the extent of the public involvement with the project, the likelihood that Ocensa and Saipem would have wanted to close off their potential liabilities where they could, and the prevalence of the settlement agreements for the 10 Lead Claimants, that possibility does not seem likely and would need explanation.

Procedural History 397. Section Index:

In 2004 Messrs Leigh Day were instructed by a group of Colombian Farmers to bring a claim against the Defendant alleging that the Ocensa Pipeline had damaged their land. Those claims were settled without proceedings being issued, following a mediation that took place in Bogota in June 2006. The terms of that settlement are not known to the Court. Leigh Day were subsequently instructed to bring similar claims by a further group of farmers, which forms the effective starting date for the present claims.

The Claimants’ Letter of Claim in these proceedings was sent on behalf of 53 claimants to the Defendant on 22 May 2007 {N/0.1/1}. Leigh Day expressed the hope that the claims could be settled without litigation and said that was the reason why they were “providing [the Defendant] with far more information and evidence than would normally be the case prior to the commencement of proceedings.” The letter said that the pipeline had caused “very significant damage to the lands surrounding the right of way” and included schedules of loss for five of the named Claimants.

The Defendant replied on 28 January 2008 rejecting the claims. The Claimants issued the firstClaim Form in these proceedings the next day, 29 January 2008 {B5/1/1}. In June 2008 the Claimants applied for a GLO, which was granted on 24 September 2008 {C1/3/4}. Amongst the directions that were given by the GLO were that Particulars of Claim should be served for one Claimant and that all Claimants should complete and serve a Schedule of Core Information (“SOCI”) by 26 November 2008. The SOCI was to include details of the damage alleged to have been caused to the Claimant’s property as a result of the construction of the Ocensa Pipeline. It was also to provide details of the use of the property before and since the construction of the Ocensa Pipeline, details of any consequential losses claimed by the Claimant and details of the current state of the property. Leigh Day and the Defendant’s solicitors (Messrs Freshfields) were to liaise with a view to affording the Defendant and its expert advisors reasonable and proportionate access to the properties and with a view to agreeing an appropriate categorisation or grouping or sub-grouping of the claims and identification of appropriate lead cases for trial.

The SOCIs were produced in late 2008. Attached to each SOCI was a Schedule of Loss which set out in considerable detail the sums being claimed by the Claimant. These were, self-evidently, the sums that the Claimant asserted that the Defendant was liable to pay him. Even without a Statement of Truth, they were formal documents produced pursuant to the GLO. There can be no doubt that the intention of

There followed a protracted sequence of events as the Defendant attempted to pin down the Claimants on the precise nature, scope and extent of damage alleged to have been suffered and the formulation of their claims for relief. That sequence is largely covered in the judgments given by the Senior Master {C2/2/39}, refusing the Claimants’ late applications to bring claims for remediation costs, and by me {C2/4/82} refusing permission to the Claimants to bring a claim described as a claim for general damages, which had been formulated even later than the attempted claim for remediation costs.

In its closing submissions the Defendant documented a number of interim skirmishes which it characterises as attempts to obtain proper clarity to enable it to understand and prepare to defend the claims brought against it {C4/4.6/145}ff. Since I am satisfied that, in the end, the Defendant was able to marshal sufficient resources to enable a fair trial to be held, it is not necessary at this stage in the proceedings to review all the matters of which they complained, and I do not do so. However, two issues relating to the formulation of the claims are of real significance for the Court when trying to establish where the truth may lie. It is therefore necessary to refer to them in some detail.

The Original Schedules of Loss were produced in late 2008. This was over a year after the Letter of Claim, which was sent by a team of lawyers and experts who had the advantage of having acted for claimants with similar claims since 2004. They provided considerable detail, sufficient to suggest that they were the product of careful and competent preparation upon which at least some reliance might be placed. When the individual claims were formally pleaded, each Particulars of Claim alleged that:

“By reason of the facts and matters set out above the Claimants have suffered loss and damage and claim accordingly. In this regard, a Schedule of Loss was served on 2 September 2008. Further particulars will be provided in due course. The Claimants claim compensation pursuant to Colombian Law, quantified pursuant to English law or damages.”

The Lead Claimants’ Pleadings were all supported by Statements of Truth in or about March 2010. The reference to “further particulars” being provided meant that further details would be provided of the claim formulated in the Schedules that were now being verified by the Statement of Truth; it did not mean, and would not be understood as meaning, that the current claim was fundamentally unreliable. If anything, it supported the reliability of the Schedules rather than undermining them.

I have indicated what was and is the Court’s view of the purpose of the Original Schedules of Loss. That view was shared by Leigh Day: “the intention was to enable the Defendant to gain an understanding of the potential value of each claim based on best estimates at the time so that the Defendant could consider the possibility of an early resolution of the claims as set out in the Claimants’ Letter Before Action dated 22 May 2007” {C6/33/11}. The importance of the documents for the parties and Court should be apparent to anyone conducting litigation of this sort. For the parties, even in adversarial negotiations, some trust has to be placed in documents that are presented by reputable opponents seeking an early settlement. For the Court, trying to establish where the truth lies, consistency and demonstrable reliability are key features to which the Court will look when assessing a party’s case.

In the event, the Original Schedules of Loss were shown to be quite unreliable and, in many respects, bore little or no relation what had happened or the evidence of the Claimants. The Claimants produced a schedule in the course of oral closing submissions which showed the percentage change (either up or down) between the Original Schedules of Loss and the Schedules that were provided in and after 2010 {C6/43.1/1}. Eight of the ten Lead Claimant Original Schedules of Loss were reduced when Revised Schedules were later produced. The divergence (on the Claimants’ approach) in 7 of the 10 cases was 25% or more (of which 5 required reductions). The most extreme case was LC54, where the Original Schedule of Loss exceeded the Revised Schedule by a factor of 22. In LC39 it exceeded the Revised Schedule by a factor of 1.5; in LC50 it was a factor of 2.3; in LC74 it was a factor of 1.3. The most extreme divergence in the other direction was LC61 where the Revised Schedule exceeded the Original Schedule by a factor of 3.8.

When Snr Mesa (LC54) was asked if he had known that, by his Original Schedule of Loss, he had claimed COP 3.9 billion (roughly equivalent to £1-1.3 million) the look of astonishment on his face was real and unforgettable. His immediate reaction was that perhaps the COP 3.9 billion was “a group loss” and not his loss alone {Day7/25:3}. He was clear in his evidence that he had not known that such sums were being claimed in his name. I accept that evidence. It raises the wider question how the Original Schedules of Loss came to be prepared.

Leigh Day provided an account of how the Original Schedules came to be produced by a letter dated 14 January 2015 {C6/33/11}. I accept that account. In briefest outline, information was gathered during three relatively short trips (April/May 2007, March 2008, February 2009), on each of which a number of potential Claimants were interviewed at locations away from their properties. The information included “some initial information relating to issues of productivity and quantum.” The time with each Claimant was limited to 2-3 hours, which covered liability and quantum issues and took place without the assistance of technical experts. The Schedules were prepared on the basis of that information. Although not expressly stated it is implicit (and I find) that Leigh Day did not go through the Original Schedules with any Claimant before serving them on the Defendant or before incorporating them in the pleaded case. Leigh Day’s letter says that, when incorporating them in the pleadings, it had been the intention to provide further particulars in respect of the losses alleged in the group action. As before, there is a well understood difference between providing further particulars of a pleaded claim and changing the basis of the claim substantially. Leigh Day’s letter says that the information obtained on their visits to Colombia did not change with time.

In the light of the extent to which the case on quantum as set out in the Original Schedules of Loss has been shown to be inaccurate and the ready explanation for such inaccuracies which Leigh Day’s letter provides, I am unable to place any weight upon the Original Schedules of Loss as being an accurate reflection of any losses that the Claimants may have suffered or the causation of those losses, despite the fact of their having been incorporated as part of the Claimants’ pleaded case, backed by a statement of truth. It does not reflect adversely upon the Claimants themselves, since they were not involved in and were not personally responsible for the construct that was placed upon the information they provided or for the fact that the Schedules were put forward as real statements of the Claimants’ factual case and losses.

Each Lead Claimant in the trial cases gave evidence in their witness statement in the following terms (or very similar): “My schedule of losses has been read to me and I confirm that it is an accurate/precise description of my losses.” {D4/71/809} – Snr Sequeda; {D5/88/954} –Snr Manco; {D5/91/1035} Snr Buitrago; {D6/100/1199} – Snr Mesa; {D6/105/1250} – Snra Arango; {D8/125/1518} – Snr Velez. However, in oral evidence, Snr Sequeda said that he had no idea and that his lawyers had not told him what he was claiming {Day11/85:21}. Snr Mesa gave highly equivocal evidence in a way which left me quite unconvinced that he had seen or had read to him his revised schedule of losses {Day6/126:1} ff. Snra Arango had no idea how much she and her husband were claiming {Day7/119:2}. Snr Velez said that someone had read him his Revised Schedule of Loss but that he didn’t really understand it because he cannot read {Day4/37:1} ff.

In the light of this evidence I am not satisfied that the statement in the witness statement is reliable and am not satisfied that any of the Trial Claimants either read (or had read to them so that they understood it) their Revised Schedules of Losses. I am driven to the conclusion that, no doubt with the best intentions, the Revised Schedules of Losses were lawyers’ documents by which they set out what they believed might be the most advantageous formulation of a claim for their clients, rather than rigorously checking with their clients whether what was being put in the schedule was supportable. That process continued even until after the hearing, when the Claimants put in further revisions which are said to reflect the evidence. That may or may not prove to be true, but I cannot rely upon the Schedules themselves to provide support to the Claimants’ cases.

In June 2012 the Claimants served new Schedules of Loss. These raised, for the first time in the proceedings, claims for the cost of reinstating their lands. The potential impact on the litigation is illustrated by the effect that the reinstatement claim would have had upon the claim of Snr Sequeda (LC39). The headline figure for the claim for reinstatement was COP 730,633,559 (c. £271,114). The aggregate total of all other quantified heads of claim was COP 130,649,270 (c.£48,478). The Defendant objected to the late introduction of the reinstatement claim and the Claimants’ application to add them was refused by the Senior Master by his order of 15 February 2013, having provided his judgment to the parties in draft on 11 January 2013.

In January 2013 the Claimants informed the Defendant for the first time that they wished to add a claim for general damages for “damage to land”. On 18 October 2013 I refused permission to the Claimants to bring their proposed now claim in general damages for damage to their land adopting as the measure of loss either general damages at large or damages in accordance with the principles outlined in Wrotham Park Estate Company v Parkside Homes Ltd [1974] 2 All ER 321 and subsequent cases.

The net result of the decisions to refuse the late introduction of these heads of claim means that, in a case which is essentially about alleged damage to land, the Claimants’ cases are not framed by reference to what English law would regard as one of the conventional measures of loss, namely diminution in the value of the Claimants’ land. It has therefore been neither necessary nor possible to investigate whether such a reduction has occurred or whether, viewed objectively, there is any apparent relationship between the value of the land and the claims that are made about the economic losses that the Claimants allege that they have suffered as a result of living and working on their damaged lands.

The trial process was conducted efficiently and combatively on both sides. It demonstrated once again the enormous benefits in speed, efficiency and cost that can be achieved with the use of electronic document management systems in court. All parties recognised and fully appreciated the contribution of those who transcribed evidence, provided simultaneous interpretation in circumstances of considerable difficulty and presented the documentation to the Court with cheerful courtesy. They and the Court staff of the Rolls Building were the unsung heroes and heroines of the trial process.

Legal Responsibility

Section Index

The Claimants frame their claims in contract and in tort. I have reviewed the applicable principles in Section 3 and the basic facts in Section 5. In this section I apply the relevant principles to the facts to provide findings for application to the four Lead Cases that follow and for the parties’ use in relation to the cases of other Claimants that are not before the Court in this trial.

The text of the Defendant’s First Letter is at [368] and the similar text of the ODC First Letter at [255]. The similarities between the two documents strongly suggest that the Defendant’s First Letter was drafted with the ODC First Letter as its model. This sets a pattern which is repeated later in the contractual sequence and which is unsurprising given the fact that the ODC pipeline had been laid recently along the same corridor and that Ecopetrol, which had a substantial interest in both pipelines, would have had access to the ODC documents even if the other joint venturers had not. The most obvious difference between the documents is that the reference to assignment is moved from the main text of the letter in the ODC document to the landowner’s declaration in the Defendant’s document. That change is not material for present purposes.

Although I accept the Claimants’ submission that the Defendant or Ocensa would have relied upon the signing of the declaration by a landowner who subsequently tried to oppose the studies or construction works, I reject the submission that the Defendant’s First Letter gave rise to a contractual right to compensation or damages. Applying the principles that I have set out at [62] ff above, the First Letter lacked a lawful object which was determined or determinable within the meaning of Colombian Law. It therefore lacked an essential element for the formation of the contract for which the Claimants contend.

The Defendant also submits that it has not been shown that the parties intended to enter into a binding contract when sending or signing the First Letter. The letter was capable of performing and did perform the function of being formal notice under Article 179 of the Mining Code as applicable to the oil industry {H23.2/7/468}. That does not mean that it cannot also be a contract. It is also true that no Lead Claimant in this case gave evidence that he regarded the First Letter as a binding contract, and that Snr Sequeda gave evidence in which he said of the First Letter that he “signed a document [that the visitor to his farm] had stated [meant] that I would let them build the pipeline” {D4/71/795}. It would, in my view, have been surprising if the Claimants had given evidence that they did regard the First Letter as a binding contract, as I would find it hard to accept that any of the four from whom I heard evidence had applied their mind to that question at all at the time. In the light of the expert evidence as a whole, I would be more inclined to look at the form of the document as a whole to see whether it conveys an externalised intention to enter into a binding contract: see [141] above. Adopting that approach, the document has the look of something formal that is intended to be relied upon; and the reference to assignment of rights and authorisations “conferred in this document” suggests that it has at least some legal effect in giving rise to assignable rights and authorisations. Thus, though I accept Professor Vallejo’s evidence that there can be an assignment of rights that do not arise out of a contract {H15/1/141}, that seems to me to miss the point that the First Letter is contemplating the assignment of rights and authorisations that do arise out of it. I would therefore not find against the Claimants separately on this second ground.

Of much greater substance is the Defendant’s subsidiary argument that, if the First Letter did give rise to a binding contract to pay fair and equitable compensation, it was superseded by the ROW Agreement that each Lead Claimant entered into later. I refer to the principles of Colombian Law that I have set out at [113]-[114]. In each case that the Court has seen, the First Letter was followed by one or more ROW Agreements. The ROW Agreements made detailed provision for what the Defendant would pay to the landowner (or occupier) for the disruption caused by the works. For the reasons that I set out below, I do not consider that the ROW Agreements made provision for every eventuality. It could therefore be argued that, if the First Letter had the contractual effect for which the Claimants contend, there was a residual area of the First Letter’s contractual obligation to compensate, not covered by the ROW Agreement, which could have survived the execution of the ROW Agreement. The argument would be that, although the ROW Agreement covered damage on the ROW, any other damage would be subject to the First Letter’s contractual obligation to provide fair and equitable compensation for damage to land, crops and other property outside the ROW that might be damaged.

The question is whether it appears undoubtedly that the intention of the parties was to replace the (hypothetical) existing obligation to provide fair and equitable compensation under the First Letter with the obligation to compensate provided by the ROW Agreement. Taking the question in stages, the obligation to compensate provided by the ROW Agreement differs from and is inconsistent with an obligation to provide fair and equitable compensation. Leaving aside the Claimants’ submission that the compensation under the ROW Agreement was abusively inadequate, the provisions of the ROW Agreement are expressed in different terms, have different meaning and specify a rate and aggregate amount of recovery that has no place in the First Letter.

On the Defendant’s wide interpretation of the provisions for compensation under the ROW Agreement, it provided a contractual agreement that regulated and limited the recovery of damages whether in contract or in tort. On a more narrow interpretation of the ROW Agreement, however, the distinction between the specific provision in the ROW Agreement for damage on the ROW and the provision in the First Letter for

“fair and equitable compensation” is so clear as to call into question whether the parties intended anything of the prior arrangement to survive. It is material that the First Letter is not mentioned in the ROW Agreement, which is a more extensive and more formal arrangement and the precursor to the yet more formal ROW Easement. If on its proper construction the provisions for compensation provisions in the ROW Agreement are limited in scope to damage to the ROW itself, there is no need for separate agreement about damage elsewhere. Rather than continuing an imprecise contractual concept of “fair and equitable compensation”, it seems much more likely that the intention of the ROW Agreement was that compensation for damage off the ROW should be subject to the Colombian law of tort, subject to any contractual impact that the ROW Agreement might have.

If, therefore, I was wrong in my conclusion that the First Letter did not give rise to a contractual right to “fair and equitable compensation” I would find myself driven to the conclusion that the inconsistencies between the First Letter and the ROW Agreement, though not complete, were so great that the second contract superseded the first as a whole.

In reaching this conclusion I have left out of account the evidence of Snr Sequeda (LC39) that he was told when he signed the First Letter that “other people would come to negotiate the crossing of the pipeline” {D4/71/795}. That evidence is at least consistent with the vagueness of the reference to compensation in the First Letter when compared with the subsequent ROW Agreements. The fact that other Lead Claimants did not give the same evidence does not mean that similar conversations did not happen: it is equally consistent with loss of memory or not being asked the question in the course of preparation of witness statements or trial. I would expect that such conversations happened frequently, since it would be known to all concerned on the Defendant’s side at the time when the First Letters were signed that there were procedures and prices as set out in the Manual, that the First Letter did not represent the last word on the subject, and that the Defendant would be intending to enter into a ROW Agreement with the landowner, if possible. I am not in a position to make a finding about whether, or in what terms, such conversations happened in the case of Claimants whose cases have not been tried.

Neither Professor Castro nor Professor Vallejo gave as their opinion that the First Letter was a framework agreement. It did not set out general parameters to which future contracts would be subject, nor did it provide rules that must be taken into consideration in future agreements between the same parties. It was not a framework agreement as understood by lawyers in Colombia: see [115] above.

I have set out the terms of a standard form ROW Agreement at [369] above. It provided for the payment of a sum of compensation calculated as set out in the Ninth Clause and the Annex and for the possibility of further payment if the Defendant subsequently required additional land as set out in the Seventh Clause.

Subject to the possibility of a further payment for sobreanchos, the Defendant submits that the compensation specified in the ROW Agreement was the only compensation to which the landowner would ever be entitled as a private law remedy, because of the settling effects of Article 5 of the 1954 Regulations.

The Claimants’ pleaded case on the ROW Agreement includes the following, taking LC74 as typical:

Underpinning the Claimants’ approach to these issues is a submission that goes to the root of the contracting process. It is submitted that the imbalance of bargaining power between the parties meant that (a) the Claimants did not have freedom of contract, and (b) the Defendant abused its position by imposing unfairly low rates of compensation upon them coupled with unfair invoking of Article 5. For the reasons that I set out below, I have come to the conclusion that these arguments need to be borne in mind at all times, including when construing the terms of the ROW Agreements to see whether the Defendant’s construction is correct.

I have previously referred to the imbalance of bargaining power at [297]. The protections provided by Colombian law included the establishment of the regulatory system. That regulatory system was, as stated earlier, intended to strike the balance that was considered right for the State of Colombia between private and public interests: see [24] ff. The 1954 Regulations, including Article 5, are an integral part of the balance that has been struck but there are substantial counterbalances, including the Environmental Licensing system and the close involvement of the state in monitoring and supervising the oil industry in order to protect both the public interest and private interests: see [43] and [240] above. Beyond the ambit of the Environmental Licence there is also the involvement of public officials and the Courts in regulating the conduct of oil entrepreneurs (e.g. in relation to the giving of notice, ordering the provision of bonds, and assessing the proper level of compensation), as described in Section 3 above.

Further regulatory context for both the Defendant and the Claimants’ submissions is provided by the requirement under Article 7(9) of the Environmental Licence that Ocensa should establish a system for the evaluation of damage caused during the construction works and the adoption of compensation measures: see [341] above. The implementation of that requirement may well have been susceptible to the same monitoring and intervention by the regulating Ministry or authorities as other requirements of the Licence, but there is no evidence of Ocensa’s compliance with Article 7(9) being formally submitted, considered or approved. In fact, there is no evidence of a separate system of compensation being established in response to Article 7(9) equivalent to the system of prescribed rates of payment for the ROW Agreement as set out in the Land Acquisition Manual or otherwise.

It is evident that the Supreme Court of Colombia does not regard the balance established by the regulatory and legal regime as being intrinsically unfair to affected landowners, as appears from the citation from El Cebu that I have set out at [237]. Rather, the Supreme Court regards it as noteworthy (“peculiar”) that (a) although of public interest the hydrocarbon fuel operator is “forced” to pay compensation for his use of the corresponding areas and (b) this is part of a balance between the ultimate sanction of expropriation on the one hand and the guaranteeing of private property on the other.

Given this context, the bald submission that either the disparity in bargaining power or the ultimate possibility of expropriation deprived the landowners of freedom of contract is unsustainable: see [112] above. The question remains whether the manner in which the Defendant conducted its dealings with the Claimants or the terms which were concluded should entitle the Claimants to relief.

The Land Acquisition Manual set out how negotiators were to carry out the negotiations: see [362] above. It set out both principles and specifics. Among the principles were the need to maintain “equilibrium” between landowners and the imposition of easements while maintaining good relations with them. A separate document, described as “ROW/ Land Negotiation/ Manuel/ Procedures/ Budget” {K66/606/1} appears to pre-date the Land Acquisition Manual {K66/606/15}. It runs along similar lines to the Land Acquisition Manual, including in it a statement of the Defendant’s philosophy “to maintain equity between owners within a specified are [sic] paid to compensate damages caused to easements acquired” and “to maintain good relations with the owners or tenants of lands affected by the activities which BP is carrying out” {K66/606/8}. Its description of the negotiation phase states that “within the philosophy of the Land and Legal Department is the idea of paying for damages caused with equity, in such a way that the owners or tenants feel they have been duly compensated for damages caused to the lands, without this [in] any way meaning that excessive payments will be made…” {K66/606/8}.

The Claimants rely upon the statement that “in case that there is a land holder that refuse[s] to negotiate” there were four options, namely (a) changing the routing, if possible, (b) imposing the easement in accordance with the 1954 Regulations, (c) expropriation according to the Petroleum Code, and (d) asking Ecopetrol to use a special procedure for Public Entities {K66/606/7}. The mention of these options is accurate and is not sinister. More concerning is an interview with Snr Rojas, one of the land negotiators, in late 1997 in which he said:

“We used various parallel measures alongside direct negotiation which were: first, fear. What was the fear?: “you don’t want to negotiate?” We would visit to negotiate 3 or 4 times and if they still didn’t want to negotiate, we would send them a letter telling them that we were going to start legal proceedings relating to an expropriation process according to article 84 of the oil code, “please can you sign for receipt of this letter.” We sent many, many letters and I’m telling you, 99% of them worked. The people think about it, after we told them that it was a public utility and that even if they didn’t want to negotiate we couldn’t lay the pipeline anywhere else. That was one; it was the start. And for the really stubborn people we started expropriation requests through the Ministry” {L1/230T/4}.

Mr Allison said that “fear” was not the right word but that expropriation was a part of the negotiation {Day15/35:9}.

Since it is part of the structure put in place by the law of Colombia, there is nothing inherently wrong or improper in pointing out to a landowner the rights and routes available to the oil company, including the ability to obtain an easement and to gain lawful entry onto land or to pursue the route of expropriation. Mr Allison was therefore right and entitled to describe the possibility of expropriation as a negotiating tool. I accept that being reminded in negotiations of the prospect of legally enforceable entry onto or expropriation of land could be both worrying and distressing to land owners or occupiers. Bearing in mind the likely disparity in education and bargaining power, I also accept that it would be possible for a land negotiator to apply pressure to the land owner or occupier ranging from the reasonable and perfectly legitimate to the unconscionable. On the evidence at trial, I find that none of the Claimants who gave evidence at trial was subjected to improper practices by negotiators.

A second limb of the Claimants’ case that the landowners did not have any real freedom of choice is the submission that the Defendant sought to impose standard form terms on them at price levels which were unrealistically narrowly based and unilaterally determined by the Defendant {C4/3.4/212}. This submission needs to be considered with an eye to the Colombian law test for abuse of rights in contract, which defines an abusive contractual stipulation as “a provision which significantly departs from the standard permissible terms governing the respective contract or activity, and in a manner contrary to the normal practices of the trade”: see [105] above.

There is no evidence that the adoption of a pricing structure such as that in the Land Acquisition Manual either departed significantly from the standard permissible terms governing such contracts or was contrary to the normal practices of the oil industry in Colombia. The only evidence of what was either standard, normal or permissible

Although the Claimants have frequently asserted that the payments made under the ROW Agreements were inadequate, that seems to me to depend upon what they were meant to represent. Before turning to that question, a comparison with the rates actually paid by ODC per square metre of the ROW (for occupation and damages) is potentially relevant to an assertion that the Defendant paid an unreasonably low amount. For the four trial claimants the comparison is as follows:

On this evidence, all that can be said is that, where comparisons can be made, the Defendant’s rates per square metre were significantly higher than those of ODC. It provides no comparative support for the Claimants’ case that unreasonably low levels of payment were being imposed upon them by the Defendant. For present purposes I attach no weight to the statement in the pricing table in the Land Acquisition Manual that the prices were based on studies carried out by the governmental authorities in charge of promoting the agricultural and livestock sector since, so far as I am aware, no substantiation of that statement or reference to particular studies is in evidence: see [366].

For completeness I add that I do not rely upon a comparison with the prices paid for land in the cases of LC39 and LC50. In the case of LC39 it was not an arm’s length transaction as Snr Sequeda sold Villa Rosa to his son. In LC50 La Alborada was already affected, as I find, by the effects of pipeline works when Snr Buitrago and Snr Manco agreed their price. There is no independent evidence about actual land values that enables a valid assessment to be made of the relationship between the sums payable under the ROW Agreements and the underlying value of the land through which the pipelines were laid.

It was a feature of both the ODC and the Defendant’s ROW Agreements that the rates for occupation and damages were assessed by reference to damage that would be suffered on the area of the ROW. I find that this approach deliberately reflected the intention of the Defendant, which was to agree the compensation payable pursuant to the ROW Agreements by reference to damage to the ROW and not elsewhere. The Defendant contemplated that damage may happen outside the ROW and intended to compensate that damage separately and in addition to the sums payable under the ROW Agreements. That intention was evidenced by the Land Acquisition Manual, the Contract with Saipem and the evidence of Mr Allison: see [243] above. It was also made explicit by the EIS, which provided that “any damages caused outside of the strip of land required for the construction of the pipeline will be subject to a future agreement”: see [359] above. In context this meant that landowners would be compensated separately for damage to their land outside the ROW. The EIS was submitted to the Ministry as part of the application for the Environmental Licence: see [337] above. It therefore formed part of the basis upon which the Environmental Licence was issued. Additional and retrospective compensation of damage caused by the works may be said to be contemplated and endorsed by Article 7(9) of the Environmental Licence: see [341] above.

The intention that damage outside the ROW should be dealt with separately was built into the pricing structure for the ROW Agreements. The damages element of the payment was expressed to be the cost of the harvest, in other words, the consequential damages and the profits lost over three months: see [366] above. There is no evidence that land negotiators ever said to Claimants that the payment under the ROW Agreement would be the only payment that they would ever receive or that they suggested that the pricing structure was other than it was. If they ever discussed what the payment was for, I would assume (and would infer in the absence of evidence to the contrary) that they would have told the landowners the truth viz. that the payment was calculated by reference to the consequential damage to the ROW and three months’ loss of profit.

One further piece of evidence may be introduced at this stage about how negotiations were conducted. Snr Medina was described by Snr Velez (LC74) as being a person who was very correct in his dealings; and at a later stage he was described as one of Ocensa’s Land Negotiation Engineers. At [1199] ff below, I refer to evidence from an interview he gave and to the strand of consistency in the Claimants’ evidence that they were reassured that damage would be made good. I accept that such generally reassuring conversations would have taken place, though I have not accepted a number of the more specific allegations made by the Trial Lead Claimants about what they were told.

The Claimants’ allegation that prices were imposed on them does not permit an easy generic answer. The rates paid to different Claimants varied both from the Table of Prices in the Manual and between Claimants. The reasons for these variations are not known but suggest that in some cases real negotiation may have taken place, including negotiation upwards from the prices set out in the Manual. I accept as genuine the provision in the notes to the Table of Prices that “the negotiator cannot agree on higher prices without prior approval from David Arce or Phil Allison, according to the case” {K66/618T/17}. The implication, which I accept, is that there was scope for negotiation both upwards and downwards from the figures appearing in the Table. Whether and to what extent any negotiation actually happened is fact sensitive to each case. But, viewed overall, the headline allegation that the Defendant imposed (or sought to impose) on the Claimants, “by the exercise of superior bargaining power, a disproportionately low price for the use and occupation of their land and for the normal disruption which would occur in the careful and orderly conduct of the works” is not made out so as to justify a generalised finding to that effect {C4/3.4/215}.

Finally, before turning to the terms of the ROW Agreement itself, it is clear from the General Narrative in Section 5 and the evidence from the four Trial Lead Cases that both ODC and Ocensa entertained and paid additional sums by way of damages when it was shown that damage had occurred off the ROW and when additional damage had occurred on the ROW: see [257] and [387] above and the detailed review of the four Trial Lead Cases.

Turning to the terms of the ROW Agreement, the Defendant’s Article 5 case depends upon the proper construction of the Ninth and Seventeenth Clauses: see [369]. The Annex identifies that the damages are calculated by reference to damage to the area of the ROW. I have not encountered any ROW Agreement which calculates the compensation by reference to damage off the ROW: later sobreanchos agreements adopting the same rate as originally used in the ROW Agreement are not an exception to the general rule because they are provided for by the Eighth Clause and are effectively an extension of the ROW Agreement itself.

There are two possible arguments that could make the Article 5 exclusion act as a complete blanket. The first would be if Article 5 required that to be the case as a matter of law. I have rejected that argument at [206] ff. My rejection of the blanket argument entails the need to look at a contractual agreement such as the ROW Agreement on its terms, to see what is covered and what is not. The Defendant’s second argument is that the terms of the ROW Agreements themselves provide for a blanket exclusion of all future claims, subject only to proof of dolo. Looking at the text of the ROW Agreement, the following points arise:

These points indicate that the Ninth and Seventeenth Clauses are concerned with what happens on the ROW and not elsewhere. The linking of the compensation payable under the ROW Agreement to the area of the ROW only, and the absence of any necessary expansion of the reference to Article 5 to cover any wider area lead me to conclude, simply on the words of the ROW Agreement itself, that the reference to Article 5 invokes it to the extent of contemplated damage on the ROW and no further. I should make clear that “contemplated damage” is not limited to the damage typically specified in the Annex, which provides non-exhaustive particulars of the damage that will naturally occur as a result of the stripping of the ROW and the execution of the pipeline works.

I have adopted the approach and reached my conclusion as set out in the preceding paragraph simply by reference to the terms of the ROW Agreement (as translated) and without specific reference to the principles of contractual construction laid down by the Civil Code. Applying those principles confirms me in the view that the ROW Agreements did not purport to deal with or to exclude future liability for damage off the ROW. The most relevant Articles are:

My starting point is that the literal words of the ROW Agreement have the meaning I have described above. If I am wrong in that analysis, I consider that the words are at least ambiguous and should therefore be interpreted against the Defendant because, on the evidence that I have heard, it did not ever explain to the landowners or occupiers that the wording they were being offered had the draconian effect for which the Defendant now contends: see Article 1624.

I would go further and hold that the intention of the contracting parties was clear and known within the meaning of Article 1618. It was that the ROW Agreements were concerned with damage on the ROW and no other damage. And, viewed overall, that was the nature of the contract which the Court’s interpretation should follow pursuant to Article 1621. I bear fully in mind the policy considerations underlying Article 5, which I have considered in detail in Section 3 above; but I also bear in mind the following factors:

I have summarised the clear evidence that the Defendant appreciated the need to provide additional compensation to landowners if damage was caused outside the ROW, and the Environmental Licence’s endorsement of that appreciation. In the light of that evidence it would to my mind have been regarded as both disreputable and scandalous if the Defendant had turned round immediately after concluding the ROW Agreement and explained to the landowners (which it certainly did not do in advance) that they were now limited to their payment under the ROW Agreement whatever and wherever damage was caused by the pipeline works. There is also no evidence to suggest that ODC (or any other person operating in this area in Colombia at the time) would have adopted such an approach, and the existence of multiple settlements by ODC when damage was caused is evidence that it did not do so. There is no evidence that the Defendant, Ocensa or Saipem made such a suggestion to the landowners at any time before the involvement of the lawyers, much later on. I do not accept that such conduct would have been in accordance “with the normal practices of the trade”. Put differently, the submission now being made on behalf of the Defendant implies that the Defendant would deliberately and as a matter of general policy and conduct have engaged in behaviour that was abusive under Colombian Law.

The Claimants have to a greater or lesser extent attempted to portray the Defendant and Ocensa as people and organisations who were prepared to ride roughshod over the interests of the landowners and set out to do so. On the basis of the evidence I have heard, that is a portrayal that I reject. Just as there were variations in the quality of the works that were carried out, so I can accept that not every negotiator was as correct in his dealings as Snr Medina; and I have no doubt that the senior employees from whom I heard were just as capable of being tough and canny in their walk of life as some of the Claimants are in theirs. What I reject outright is any suggestion that the Defendant set out to conduct its negotiations with the landowners or its treatment of their lands with abusive contempt. Such a finding would be contrary to the documentary records of how the Defendant proposed to set about its work and the testimony of those who gave evidence at trial about their general approach to the operation, which evidence I accept.

The Defendant submits that there would be no unfairness in limiting the landowners to the recovery provided by the ROW Agreements in all circumstances. I disagree. To my mind the potential unfairness of an agreement which, in the circumstances I have outlined, addressed the question of damage by reference to what happens on the ROW but gives the same compensation to a landowner whether or not the damage suffered is confined to the ROW and whatever the severity of the damage he may

For these reasons, and not least because I do not accept that the Defendant set out to con the landowners by persuading them to sign up to a ROW Agreement that was essentially a trap, I reject the interpretation of the ROW Agreements advanced on the Defendant’s behalf at trial. I find that the ROW Agreements had the effect of invoking the Article 5 protection for the damage on the ROW that was within their contemplation. I accept the possibility that in an individual case it would be possible to identify damage that had occurred on the ROW that was not within the contemplation of the ROW Agreement but, for the reasons explained in Section 3, mere underassessment of the financial loss caused by damage that was in contemplation would not be sufficient to escape the impact of Article 5.

In their closing submissions the Claimants allege breach of the duty of good faith on the part of the Defendant in the negotiation and execution of its contracts in:

I refer to Section 3 at [74] ff above and, in particular, at [96] and [103] where I have reached conclusions about the law of Colombia on the issue of good faith. In each case before the Court the Claimants and the Defendant entered into the ROW Agreements (and subsequently the ROW Easements). There is therefore no freestanding action for damages even if the Claimants were to show that there had been a breach of the obligation of good faith in the pre-contractual stage: see [103] above. If the Claimants had been in a position to show bad faith at the stage the contract was being formed, the relevance of the bad faith would have been that it might have given a right to avoid the contracts if the bad faith amounted to dolo: see [76] above. However, a claim to set aside the contracts would have had to be brought within two years of the execution of the contract and would now be statute barred. In any event, the claim to set aside is no longer pursued: see [54] above.

Since no claim is admissible, I shall deal with the factual allegations shortly:

In their closing submissions the Claimants allege that the Defendant broke its duty to respect the Claimants’ rights and not to abuse its own right:

I have reviewed and made findings on the law relating to abuse of rights in Section 3 at [105] ff.

I can state my general findings shortly:

For similar reasons, and applying the principles summarised at [147] above, I reject the generalised allegation that either the Defendant’s contracting process or the execution of the works was characterised by dolo. There is no evidence that the Defendant breached any term of the ROW Agreement with the intention to cause harm to any Claimant or entered into the ROW Agreements knowing in advance that it could not perform its contractual obligations towards the landowners. The Claimants’ case on contractual dolo is extremely vague, and does not identify what contractual obligation arising under the ROW Agreement is alleged to have been broken with dolo. A generalised assertion that something was likely to go wrong, or

The ROW Easement did not materially add to or detract from the terms of the ROW Agreement: see [371] above. It was necessary for the constitution of the oil easement and carried with it the involvement of the Notary: see [118] above. I have explained the role of the Notary at [117] ff above. The main relevance for present purposes is that visiting the Notary was an opportunity for landowners who wanted explanations about the content of the proposed agreement so far as they concerned establishing that the proposed agreement complied with the purposes and will of the parties as declared to him. If the need arose he would afford the needful party an opportunity for further discussion or refer him elsewhere for partial legal advice. If asked, the Notary might give an illiterate (or otherwise needy) campesino farmer some legal advice on the substance of the proposed agreement. Visiting the Notary therefore gave the landowner the opportunity to find out more about the agreement if he was uncertain about it. To that extent it reduced the imbalance between the parties.

When considering questions of assignment I shall refer to the ROW Agreement and the ROW Easement collectively as the ROW Agreement. For the reasons set out at [132] ff above, registration of the contract of assignment of the ROW Agreements did not act as notice to the landowners who were the assigned: see [372] above.

As set out at [139] above, tacit acceptance of an assignment requires unequivocal behaviour of the assigned party amounting to performance or continued performance towards the assignee. There is consistent evidence that, so far as the Claimants were concerned, by the time that the works were carried out and the time for claiming came, they looked to Ocensa and Saipem and not to the Defendant to make good the losses for which they claimed. Thus:

The combination of (a) the consistency with which claims were made to and settled by Ocensa and Saipem, with the clear distinction between Ocensa taking responsibility for damage on the ROW and Saipem being responsible for damage off the ROW and (b) the complete absence of any evidence that the Claimants either contemplated or looked to the Defendant is compelling. On the evidence at trial there is a consistent pattern of Claimants contracting with Ocensa, with specific provision for damage on the ROW, and then going back to obtain further payments not from the person with whom (as they all would have known) they had contracted but from Ocensa and Saipem. The division of roles is also significant. It demonstrated that Ocensa was taking responsibility for the matters that had been directly addressed in the ROW Agreements and that it looked to its contractor, Saipem, to deal with matters elsewhere. There was no room for the Defendant in this arrangement because Ocensa, not the Defendant, was the party taking responsibility for and entering into settlement agreements with and on behalf of Saipem; and Saipem was specified to be Ocensa’s contractor, not the Defendant’s. A settlement with Ocensa and Saipem was therefore distinctly and unequivocally different from a settlement with the Defendant.

For these reasons I make the general finding that if the conduct of the four Trial Lead Claimants is typical, there was a pattern of tacit acceptance of the assignments of the ROW Agreements from the Defendant to Ocensa. If, therefore, there was any valid claim for non-performance in contract to be brought under the ROW Agreements, they should have been brought against Ocensa and not against the Defendant. Equally, however, the Defendant would not be able to rely upon the terms of the ROW Agreements to which it is no longer a party to form the contractual basis of a defence against the assigned landowners.

Because of my conclusions on the interpretation of the ROW Agreements and their assignment, the potential problems under Colombian law of pursuing claims in tort and contract concurrently fall away. I have reviewed and made findings about the relevant principles of Colombian Law at [148] above. If it were to be held in a particular case that there had not been an assignment that was effective as against the assigned landowner, the Defendant would remain entitled to rely upon the contractual invocation of the limited Article 5 exclusion as explained at [449] ff above.

The relevant principles governing a claim under the dangerous activities doctrine are set out at [161] above. The question whether the Defendant was liable as guardian depends upon whether it satisfies the test identified at [163]. I therefore look to see whether the Defendant exercised an independent power to manage, direct or control the laying of the pipeline. I bear in mind and also apply the restated test agreed by the experts that the guardian to be held liable is the person which at the time of the occurrence (in this case the pipeline works from stripping the ROW through to its revegetation) exercised an effective and independent power of direction, governance or control over the instrument or the activity which generates the harm; and that relevance is given to the de facto power over the thing or activity.

The factual background is summarised at [262] ff, [346] ff and [383] ff above. Ocensa was the party that entered into the construction contract with Saipem. That was a large and complex contract which allocated responsibilities to both parties. Fortunately, it is not necessary to examine the terms of the Saipem contract in further detail here. What matters is that Ocensa had no management or technical infrastructure that would enable it to run a major construction contract such as the Saipem contract. It therefore entered into the PCMA with the Defendant. Proper interpretation of the PCMA is the first step in identifying the Defendant’s responsibilities; but it is not necessarily the last, since it will be necessary to look at de facto control and its exercise in the course of the contract as well.

The relevant terms of the PCMA are set out at [280] above. The dispute between the parties on its interpretation was whether the words “through the Project Construction Management Team (hereinafter PCMT)” has the effect that the Defendant itself was not managing the contract. Two things emerge when these words are seen in context. First, the primary thrust of the Clause 1 is that the Manager (i.e. the Defendant) is required to provide the management of the contracts executed by Ocensa and that its services will include those set out at (i) to (v). Second, the words that are in issue describe how the Defendant will manage the contracts executed by Ocensa; they do not say that it is the PCMT and not the Defendant who will manage the contracts.

As well as imposing that contractual obligation, it was the source of the Defendant’s contractual power to manage the contracts as it did. The Defendant set about managing them through the PCMT as summarised earlier. Most of those assigned to work on the PCMT were employees of the Defendant or another BP company, including the senior members such as Mr Spence and Mr Allison: see [282] and the summary of assigned employees at {C4/3.4/229} [615-618]. As a deliberate policy, the Defendant did not second its employees to Ocensa in any other sense than that they were working on the Ocensa project and were at pains to give the impression that the project was Colombian and Ocensa’s: see [386] above. In the absence of any formal secondment it retained the power to hire, fire and determine the work of those of its employees who were working on the Ocensa project. The PCMT did not have any status which, of itself, had the effect of taking the management of the Saipem contract out of the hands of the Defendant rather than being the vehicle established as the vehicle through which the Defendant would manage the project in accordance with the PCMA. There were people on the PCMT who were not BP employees, as with the inclusion of employees of Brown & Root who brought their design expertise. This case, however, is not substantially about design responsibility: it is about the management of the construction project and how the works were done. Even if design were still substantially in issue and included in an assessment of where control lay and by whom it was exercised, the overwhelming preponderance of control was vested in and exercised by employees of the Defendant. While I accept that the work of the PCMT was subject to the overall supervisory control of the Ocensa Board, that did not affect the reality of who was exercising autonomous control in managing the Saipem contract on a day-to-day basis at every level from site up to senior management. If there had been any residual doubt on the basis of evidence about what actually happened on site (which, in my judgment, there is not), it is dispelled by the Defendant’s own assessment of the realities of life: see [385].

On this evidence and the evidence I have summarised elsewhere in this judgment, I conclude and find that the Defendant exercised an independent power to manage, direct or control the laying of the pipeline. Adopting the restated formulation agreed by the experts, the Defendant exercised an effective and independent power of direction, governance or control over the carrying out of the Ocensa pipeline works by Saipem at all times material to these claims. It therefore satisfies the requirement of guardianship for the purposes of the dangerous activities doctrine. In making this

The dangerous activities doctrine carries with it the presumption of fault. The Claimants have independently alleged that the works were carried out negligently. I have considered those allegations in the context of the individual lead claims. At this stage it is sufficient to say (as I repeat elsewhere) that no analysis of the programming of the Ocensa works was undertaken. While I have referred in the course of the judgment to the march chart that formed part of the EIS and have accepted general propositions such as, for example, that revegetation should take place at or about the same time as long-term geotechnical works, I do not accept that the mere fact that it can be shown that works took longer than indicated in a preliminary and high level document such as the march chart, or that there was a gap between various stages in the course of the works is a sufficient basis to found findings of negligence. As should be well known, and as should be recognised by anyone who has contemplated the challenges that the Ocensa works presented, there may be almost any number of possible reasons for an eventual sequence and timing of works. It is possible that some delays may of themselves call for an explanation, but the Court will not readily be persuaded that programming was negligent in the absence of proper analysis of its causes.

For the reasons I have set out above, the ROW Agreements themselves only operated to provide protection pursuant to Article 5 in respect of damage within the ROW and to the extent contemplated. That provides a rational (and, in my view, correct) explanation for why Ocensa was prepared (by way of example) to compensate Snr Mesa (LC54) for the destruction of a bridge on the ROW on the basis that it had not been covered by the ROW Agreement (“paid in the original negotiation”). It also explains why Ocensa and Saipem agreed between themselves that Saipem would compensate landowners for damage off the ROW and subsequently implemented their agreement by the settlements involving Saipem. Snr Mesa again provides an illustration: he entered into a settlement with Saipem because they had affected additional land; but his Paz y Salvo with Saipem recorded that the death of a cow was excluded from its effect. It was alleged to have been killed because of the lack of the bridge, and was therefore referred back to Ocensa as damage suffered on the ROW and not covered by the ROW Agreement. This pattern is repeated many times. The pattern is clear, though I do not suggest that it was necessarily always applied with complete precision.

The applicable principles governing the extinguishment of liabilities are set out at [175]-[190] above. The standard forms of settlement for damage within and outside the ROW and the standard forms of Paz y Salvo for Ocensa and Saipem are set out at [387]-[392]. Typically, but not always, Paz y Salvos were signed on the same day as settlements were concluded. Most if not all of the Trial Lead Claimants knew at least in general terms at the time of settling that the meaning and purpose of “Paz y Salvo”

There are differences in translation of the two forms of settlement agreement but the Spanish originals use materially the same terms for equivalent clauses. In particular, the second clause under the heading Settlement (Transaccion in Spanish) is materially identical in each document:

“CLAUSULA SEGUNDA: EL BENEFICIARIO renuncia expresamente a presentar contra [LA CONTRATISTA/LA COMPAŇIA] cualquier tipo de reclamación judicial o extrajudicial por concepto de los daňos ocasionados durante los trabajos descritos en el punto SEGUNDO de las

consideraciones”

This has been translated in the Ocensa form of settlement as:

“CLAUSE SECOND: THE BENEFICIARY expressly waives his right to file any judicial or extrajudicial claim against THE COMPANY for damages caused during the works described in the SECOND item of the recitals.”

And in the Saipem form of settlement as:

“SECOND CLAUSE: THE BENEFICIARY expressly renounces to file against THE CONTRACTOR any type of judicial or non-judicial complaint for the damages caused during the works described in the second point of the recitals” (Footnote: ¹⁵).

The two translations of the clause must carry the same meaning despite the differences in translation. Thus (a) the words “waives” and “renounces” in the two translations have the same meaning; and (b) there is no difference between the words “for damages” and “for the damages” in the two translations.

Similarly, the fifth clause under the heading Settlement (Transaccion in Spanish) is materially identical in each document:

“CLAUSULA QUINTA; Que cumplidos los términos de la presente transacción las partes se declaran mutua y reciprocamente a paz y salvo por todo concepto originado en los daňos descritos en el punto PRIMERO de los

considerandos.”

This has been translated in the Ocensa form of settlement as:

“CLAUSE FIFTH: Upon compliance with the terms of this settlement, the parties declare one another mutually and reciprocally cleared and released from any claim arising from the damages described in FIRST item of the recitals.”

And in the Saipem form of settlement as:

“FIFTH CLAUSE: That, subject to the fulfilment of this settlement provisions, the parties hereby mutually declare to be

FULLY AND RECIPROCALLY DISCHARGED FOR EVERY CONCEPT ORIGINATED IN THE DAMAGES

DESCRIBED IN THE FIRST POINT OF THE RECITALS.” (Footnote: ¹⁶)

The reference to “el punto Primero” is puzzling, because the first point of the recitals does not describe the damages in either document.

In each settlement the recitals (second and third in the Ocensa settlement, fifth and sixth in the Saipem settlement) set out that the Claimant has claimed in respect of particular damage to which the Claimant attaches a particular value, though in some settlements the sum being claimed by the Claimant is not specified. Two further recitals then record the contractor’s evaluation of the claim (sometimes left blank) and that the parties have not reached agreement on the actual value of the damages caused. The Clauses of the Settlement, however, go wider. The First Clause records the settlement figure. The Second Clause records the Claimant’s express waiver/renunciation of his right to bring any further judicial or extrajudicial claim against Ocensa or Saipem (as the case may be) for damages caused during the Ocensa works. The Third and Fourth Clauses record that neither party has a claim against the other. The Fifth Clause read on its own has the puzzling reference to the first recital; but read in the context that includes the Second Clause is a general statement of mutual and reciprocal release from further liabilities.

The forms of Paz y Salvo for Ocensa and Saipem reflected their different roles, but the wording of the Spanish original in each document is materially identical for the renunciation of the right to bring any future claim; and in each case it is entirely general and comprehensive.

Viewed on their own, the second and fifth clauses of each of the settlement agreements are entirely general in their meaning: the Claimant waives/renounces his right to bring any future claim for damages caused during the Ocensa works and, upon compliance with the terms of the settlement, each party releases the other from any future claim. It is also legitimate to look at the Paz y Salvos when interpreting the settlement agreements as they are related documents which may assist in ascertaining the intention of the parties {Day21/187:12}. Looking at the Paz y Salvos relating to these transactions confirms the view that I have reached, namely that the intention of the settlement agreements was to settle all future claims as well as those presently being dealt with.

At [176] above I discussed the difference between Professors Castro and Vallejo on what is meant by an eventual lawsuit and what future contingencies could validly be settled. Applying the principles as I have found them and as set out at [180], the wording of the forms of settlement agreement either alone or in the light of the Paz y Salvos shows a clear intention to prevent any future claims arising out of the Ocensa works and is technically competent to achieve that aim. There is no suggestion that the settlement agreements may now be set aside. I therefore treat them as remaining in force and valid. On that basis, the effect of a settlement agreement in the standard form for Ocensa alone settles all future claims for damage on the ROW and the effect of the settlement agreement in the standard form involving Saipem settles all future claims for damage off the ROW. Integral to that decision is the fact that each involves an express renunciation of any right to file either a judicial or extra-judicial claim, which is clear, unequivocal and precise. I see no policy reason to strain against this construction or outcome, which is consistent with the balance struck by Colombian law between private interests and public benefit, including the policy decision to provide substantial protection to the oil industry as set out elsewhere in this judgment.

My decision on the wide-ranging effect of the settlement agreements hinges on the terms of the Second and Fifth Clauses, with the Sixth Clause emphasising the final effects of the settlement. If the settlements had been limited to the First Clause with the Second, Fifth and Sixth Clause omitted, it would have been necessary to look at precisely what came within the ambit of the claim that had been made. Although it is not necessary to the decision I have reached, merely settling the claim that had been advanced would not, without more, have had the wide-ranging effect of the settlements that were in fact concluded.

The Defendant was not a party to any of the settlement agreements or Paz y Salvos. It submits that it is entitled to rely upon them as evidence of extinguishment of any liabilities it might have to the Claimant concerned by virtue of novation. The applicable principles are set out at [184] above. It follows from my conclusion that the Ocensa and Saipem settlement agreements settled all existing and future claims inside and outside the ROW respectively that they effected a novation as between the contracting parties by substituting the new contractual rights and obligations under the settlement in place of any existing or future obligation in tort. Complete novation of all tortious obligations is the combined effect of the two forms of settlement agreement. If it were to be shown that a Claimant had entered into one form of settlement agreement but not the other, there would be partial novation of the tortious obligations relating to either inside the ROW or outside the ROW as the case may be.

Any liability that the Defendant might have had towards one or more Claimants would have been joint and several with the liability of Ocensa and Saipem because of their concurrent responsibility for the performance of the Ocensa works. Professor Castro’s acceptance that a novation will operate to affect those having joint or several liability with Ocensa or Saipem means that, where the Claimants have entered into settlement agreements in the standard forms to which I have referred, the Claimants’ rights in tort against the Defendant as a legal person who would have been jointly and severally liable will be affected to the same extent. It follows that, where and to the extent that settlement agreements took place between the Claimants and Ocensa or Saipem, any liability that the Defendant might otherwise have had to the Claimant in respect of the Ocensa works is extinguished by novation.

The Four Trial Claims

The underlying allegation is that the Ocensa works caused damage to the Claimants’ land. The Claimants chose not to claim damages by reference to diminution in the value of their land. The late attempt to introduce claims for the costs of reinstatement and the even later attempt to introduce claims for general damages related to the damage to the land were rejected. As a result, the claims focus on allegations that the economic capacity of the farms concerned has been reduced and that specific losses have been suffered, such as loss of animals caught in the mire.

The details of each claim are set out in the Sections dealing with the Trial Lead Claims. No further issues need to be dealt with here.

The Lay Witnesses 492. See Section 4.

The Expert Evidence

Section Index

The Parties appeared at one point to be agreed that generalised allegations of failures of design or workmanship were of less concern than specific allegations in relation to individual properties. Despite that, very substantial resources were devoted to dealing with generalities rather than specific properties. In the event, my emphasis in this judgment is on the four trial properties; but, not least because it is intended that it should have implications for other claims, it is necessary to deal with some of the generalised allegations as well. It is also necessary to look at some of the broad principles and matters of opinion that divided the experts before coming to address their potential application to the individual claims. I shall not, however, try to match the detail or length of the many reports that were served: to the contrary, I shall try to give my conclusions as briefly as is consistent with explaining the basis for them.

Each side made trenchant criticisms of the other party’s experts. Some of those criticisms were well founded, and I shall refer to those I consider to have been most important. With the exception of Mr Willis (called by the Claimants on the subject of Pipeline Project Management), each expert had something to contribute and I reject the various submissions that I should discount the evidence of the expert entirely.

When considering the criticisms that have been made on either side I have constantly had in mind the obligations of experts providing reports for use in contested litigation and also the extreme pressures that litigation can impose on both experts and lawyers. I have made as much allowance as possible on the basis of the information that has been made available to me about the circumstances in which the various reports were prepared. I accept without hesitation that the experts have had to confront highly unusual, if not unique, difficulties because of the remoteness, climate and security situation affecting the areas where the Claimants live. The climate has meant that visits have had to be scheduled to cover the wet and dry seasons; while the security situation has meant that visits to properties have been delayed and, when they have happened, have had to be shorter than would otherwise have been undertaken.

It is also clear that the conduct of the litigation has been highly combative, with the added pressures inherent in that state of affairs. However, while making all due allowances, it is essential that proper standards of independence and expertise be maintained in combative litigation just as in any other litigation if the integrity of the court process is to be maintained.

On first reading the Claimants’ experts reports, it appeared that there had been considerable co-operation between them, extending to the mutual provision of reports with the intention and effect that one expert’s expression of opinion was either supported or based upon work carried out by another. There were numerous occasions where one expert would refer to specified passages in the reports of another, apparently adopting them as an integral part of their own reasoning and opinion. Thus, for example:

of Geoff Card’s report: “the volume of sediment in the LC50

Each of these passages (which are only a very small proportion of the many examples in multiple reports) was misleading:

This evidence is startling in three quite different respects. First, I am driven to the conclusion that the experts stated in their reports things that were wrong and seriously misleading. I accept the evidence of the experts to whom I have referred above that they had no more than discussions in the field and in some cases by Skype but did not have the reports (or drafts of the reports) to which they referred. If that was true of them, it is probable that it applied to others of the Claimants’ technical field experts, though I accept that Dr Atencio drew on a draft report, which puts him in a different category. Second, I accept that in some cases (of which the examples I have cited

The first effect of this is to cast doubt upon the integrity of the affected reports, since it is not possible to identify what is and is not properly brought into account and relied upon by the receiving expert. More broadly, it casts doubt on the integrity of the expert evidence process as a whole, since it must (on the information I have before me) have involved the Claimants’ legal team at some level as well as the experts. These are very serious drawbacks for a court that is trying to reach a just answer in heavy litigation. It is only because I have had the opportunity to watch each of the experts over many days that I feel confident in drawing the conclusion that it would be wrong simply to jettison the entirety of any expert’s evidence because of this episode. I am convinced that, although there are other criticisms to be made of individual experts to which I will refer later, all of the experts who came to court did so with the intention of expressing opinions of which they were rightly or wrongly convinced.

The involvement of solicitors in the drafting of experts reports is not the sole preserve of the Claimants. The involvement of solicitors may, of course, be a necessary and proper part of organising expert evidence and it is (to my mind) inevitable that Freshfields and Counsel will have been closely involved in the preparation of the expert evidence that was served on behalf of the Defendant. However, the Claimants identified one example, which they say illustrates exactly the same problem as has arisen with their own expert evidence. Professor Montenegro and Dr Avila produced supplementary reports that were dated 21 May 2014 {H4.9/10/1704} and {H21.9/13/1827}. They are presented in identical formats and adopted near-identical structures. The language is so similar that it is quite inconceivable that the two reports have been entirely independently written. The overwhelming probability that the production of the reports involved a process of cutting and pasting is confirmed by the fact that, although Dr Avila’s report is responding to Mr Delgado’s for the Claimant and Professor Montenegro’s report is responding to Dr Obando’s, the terms of [2.4] of each report are identical: “On the individual Lead Claimants, my conclusions remain substantively unchanged by Dr Obando’s report.” {H4.9/10/1710} and {H21.9/13/1834}. To any observer with any experience of contested litigation it is apparent that the lawyers have been co-ordinating the responses (and their physical production) which is why the format and structure is the same for each report. What is not so obvious is whether either expert saw or relied upon the substance of what became the other expert’s report, since the reasons and references in each report are different. So, while I conclude that Dr Avila must have had at least the framework which is common to his and Professor Montenegro’s May 2014 reports, and that framework must have included the reference to Dr Obando in [2.4] (since there is no other reason why Dr Avila would suddenly have referred to him), I am not in a position to conclude that either Dr Avila or Professor Montenegro adopted substantive material that was fed to him by Freshfields without independently verifying and adopting it. I return to this issue at [828] when reviewing Dr Avila’s evidence later in this section {H7.4/4/978}.

Dr Card is an experienced geotechnical engineer. He has had no experience of working on oil pipelines since he was a post-graduate student in 1980, but that does not affect his ability to opine about matters of general geotechnical practice. It emerged that the statement in his CV that he was “currently involved in designing oil pipelines in Colombia and assessment of geo-hazards from land instability” {H1.3/3/622} was in fact a reference to his involvement in the present litigation, which has not involved him designing oil pipelines in Colombia or elsewhere. On issues that were either specific to oil pipelines or specific to what constituted good practice in Colombia in the mid-1990s, he was unable to rely upon his own experience, as he had none.

The Defendant submits that Dr Card lacked objectivity and candour. They are able to point to a number of points in support of their submission, of which the most important are as follows:

As with the other experts, I have reviewed all of Dr Card’s evidence since the conclusion of the trial. That review has reinforced the provisional impression that I had formed during the trial, namely that at some stage in the proceedings, doubtless influenced by the remorseless pressure imposed by the Defendant’s emerging expert evidence and by the demands of participating in large-scale litigation, Dr Card realised that his initial observations and report were inadequate to sustain the conclusions he had reached and that, being convinced that his conclusions had been just, he set about attempting to justify them. In the course of doing so, he made mistakes that are only explicable by reference to falling from the high standards that are expected of expert witnesses in major litigation. These mistakes were of four kinds. First, he became inadequately rigorous in attributing relevance or significance to evidence that he found in the mass of contemporaneous material. This led him to attempt to bolster the Claimants’ case with evidence that was, as he should have realised, not appropriate for the task e.g. his treatment of Images 3.5-3.7 in his third report. Second, he advanced quantitative evidence based upon assumptions which he was later forced to accept were ridiculous and qualitative evidence that was essentially non-expert and at times misleading e.g. in his fourth report. Third, when concessions were required of him they were either slow in coming or not forthcoming at all e.g. his clinging onto the suggestion that the inclusion of Image/2 and Image/3 in the table of notable erosion events on LC50 was simply to provide a fair and balanced record of what he had seen on the ROW. Fourth, and to my mind most serious, he gave an explanation for the production of his fifth report which was so inadequate as to be substantially untrue. I do not go so far as to say that he consciously set out to mislead the Court, since that is not an allegation that was expressly put to him or that he dealt with in the course of his evidence; but I have reached the clear conclusion on the basis of the documents and having seen him giving evidence for days that he had by then, if not before, lost those qualities of objectivity and independence of mind which are essential for an expert in contested litigation and that he had become caught up in the siege-mentality which was painfully obvious on a number of occasions (on both sides) during the trial.

These findings have two consequences, each of which is serious in the context of a case where the central issue for the technical experts is the relative and absolute contributions of the ROW works and other potential sources of erosion and sedimentation on the Claimants’ properties. First, I find it impossible to place any reliance upon Dr Card’s attempted quantifications of soil loss from the ROW consequential upon the Ocensa pipeline works. The destruction of Dr Card’s fourth and fifth reports in cross-examination on this area was complete. The Claimants evidently recognised the damage that had been done as they placed little or no reliance on Dr Card’s figures in closing submissions, being driven instead to advance calculations prepared by counsel, typically on the basis of a draft report by Professor Morgan who, though he has in the past been consulted by the Defendant, was not an expert in the case. Even before then, figures were put to the Defendant’s experts on a number of occasions which differed from and effectively abandoned those in Dr Card’s reports and evidence. Second, I cannot approach Dr Card’s evidence on other matters with the implicit trust that is the privilege of experts whose objectivity and independence have not been successfully impugned.

Dr Card’s geotechnical opposite number was Dr Savigny. The main criticism of him by the Claimants was that he was “implausibly absolutist”. Put in other words, it is said that he had a tendency to blame everything except the Ocensa pipeline for the damage which the Claimants allege that their land has suffered. The second major criticism the Claimants make of Dr Savigny is that he did not attempt any quantitative analysis of the relative contributions of the ROW and other potential sources of erosion. There is substance in each of these criticisms, but they can be overstated; and, in my judgment, there was a pervasive though variable tendency of the experts on both sides to concentrate on the features that they thought of particular significance to the relative exclusion of others. Dr Savigny has long experience in geotechnical works in association with oil pipelines and brought his very considerable expertise and experience to bear in forming his opinions. He carried out invaluable analysis of historical photographs to identify changing patterns of land use and land quality (i.e. levels of soil exposure) which provide an essential context for any assessment of the impact of the Ocensa pipeline. His reports addressed the Claimants’ allegations fairly and squarely and at very considerable length. These same qualities were evident when he gave his oral evidence.

Amongst the main sources for Dr Savigny’s work were the DVD materials. The Claimants emphasise that none of the Lead Claimant properties have been identified on the construction DVDs and that “an illustration showing good practice in one place does not show that bad practice was not followed in another.” I agree; and the opposite is equally true. However, the DVDs are useful in giving a general understanding of the challenges faced in various different terrains and the measures that were (at least on occasions) put in place to meet them. Overall, Dr Savigny’s analysis of the DVDs was thorough and his opinions on what they showed were reliable.

Dr Gundlach was instructed late on to respond to Dr Savigny’s photo-interpretation evidence; he did not criticise Dr Uribe’s reports. He identified weaknesses and points of disagreement, which were maximised when being deployed in the crossexamination of Dr Savigny. However, by the end of his evidence, some of the aspects of dispute appeared somewhat synthetic. I have taken into account the Claimants’ criticisms of Dr Savigny’s methodology and results at {C4/3.5/354}ff. It is not necessary to engage in a detailed examination of those points because neither Dr Gundlach nor the Claimants say that there is no value in the photo-interpretation exercise that Dr Savigny carried out. They caution against attributing spurious accuracy or precision to the resulting land use and land quality maps. That is reasonable, as Dr Savigny accepted. I bear in mind at all times that Dr Savigny had limited photographic evidence with which to work, and that attempting to draw longterm trends from a small number of photographic snap-shots will lack precision. Subject to those qualifications, the photo-interpretation work carried out by Dr Savigny and those working with him was thorough, generally reliable (with a few identified exceptions), and helpful.

Snr de los Rios provided annotated images which purported to show the area of influence (or impact) of the Ocensa works. Cross examination showed that the work that he had produced was the result of various discussions with and instructions from Dr Velez and Dr Tobon and that Snr de los Rios himself had not carried out a topographical study to validate his work. As a result of the manner in which his work had been produced and his limited involvement in the case, it was established that (at least in the case of LC54 and LC74) his mapping exercise was deficient because it had no regard to local topography, included areas uphill from the ROW and excluded areas which, on any view, should have been included. The Claimants described his photo-interpretation evidence on vegetation as “limited” {C4/3.5/266}. I agree.

During the course of the trial very few references were found in the contemporaneous documents that could be related specifically to a Lead Claimant property. Both in their pleaded case, however, and in the evidence that was served in support, the Claimants referred to contemporaneous documents identifying concerns or problems and relied upon them in support of a broad case which asserted generalised failures in the design and construction of the works. The breadth of the allegations can be illustrated by reference to [5]-[18] of the Claimants’ Further Information served in February 2012 {B2.2/32/232}ff. The Further Information alleged that “there were no or no proper measures to prevent and control erosion and/or any measures were not properly designed and/or installed” [5]; “measures to store protect and preserve topsoil, trench spoil and other excavated material were not property designed. ... Further or alternatively, proper measures to store, protect and preserve topsoil, trench spoil and other excavated material were not taken and/or installed or properly installed on the Lead Properties” [10]; and “all excavated material should have been (but was not) stored within silt fences or other secure retaining structures, which should have been covered;...” [11]. These allegations were said to be “generic matters which apply to all Lead Properties unless otherwise stated: {B2.2/32/240} at [1]. It was thus the Claimants’ case not merely that there were individual deficiencies on Lead Claimant properties but that the deficiencies on Lead Claimant properties were themselves examples of generalised deficiencies as were alleged in the Further Information. In support of these generalised allegations, the Claimants relied upon extracts from the contemporaneous documents to which they referred at [14]. If the Court could be persuaded of generalised deficiencies as alleged, it could provide support for a finding of lack of good faith, abuse of rights or dolo on the part of the Defendant in its dealings with the Claimants, though a failure to persuade the Court of generalised deficiencies would not necessarily be fatal to such a finding.

In his first report and his Joint Statement with Dr Savigny, Dr Card identified a selection of documents which he used to support generalised allegations of failure on the part of the Defendant, and gave as his opinion that the documents to which he referred “provide evidence of inadequate or poor management of the geotechnical measures to prevent soil erosion and sediment transport during the ROW construction. These incidents during ROW construction of poor geotechnical management will certainly have contributed to large volumes of soil erosion and sediment being transported into natural water courses causing siltation and adverse flow conditions”{H23.3/8/582} at [2.3.4]. His selection was comprehensively reviewed and responded to by Dr Savigny in his Supplemental Report No 6 {H2.6/8/1708} at [3.2.1]ff (Footnote: ¹⁸). Substantially for the reasons given by Dr Savigny in his review, I agree with his conclusion that the documents selected by Dr Card do not justify drawing any conclusion to the effect that the carrying out of the project was subject to generalised deficiencies. In accepting Dr Savigny’s evidence, I agree that the documents are typical of those that are generated in the course of any typical large-scale civil engineering project. While it is common ground that, if geotechnical protective measures were not taken or were inadequate, erosion and sedimentation could follow, the documents do not justify the conclusion that there was in general poor geotechnical management or that large volumes of soil erosion and sediment were routinely or even commonly transported into the natural water courses. Whether large volumes of soil erosion and sediment were transported into water courses (or elsewhere) is a question of fact which must be decided on the evidence relating to individual properties and places, taking into account all relevant evidence both generic and specific.

After the Joint Statement, and in one of the sections of his fourth report which cannot reasonably be described as being responsive in accordance with the Court’s order, Dr Card carried out a more extensive review of documentation for the first time and identified other documents. All of the documents related to Spread B {H1.6/24/1382}. He subdivided them and allocated them to what he called “the most important issues that repeatedly occur during the Ocensa construction and reinstatement operations”, namely (1) problems with geotechnical works including reinstatement works, (2) problems with transport and deposition of sediments, (3) problems with revegetation works, including impacts by cattle activities, and (4) delays in the progress of works due to rainfall, lack of coordination between work fronts and other factors.

The Defendant made detailed closing submissions on the first two of Dr Card’s four issues at {C4/4.7/273}. In the light of those submissions I can state my conclusions shortly. Some of the documents predate the carrying out of works on any of the Trial Claimant properties (May 1996 for LC74 being the earliest); there is other evidence in the case (of which some is identified by the Defendant in its closing submissions on this point) that identified problems were taken seriously where identified, and were rectified where possible; and the selection taken at its highest does not evidence widespread problems such as would justify Dr Card’s conclusion that there was a failure of management or supervision on a pervasive scale. Turning to the last two of Dr Card’s issues, my conclusions are the same for essentially the same reasons.

I have given my conclusions briefly because it appears that the Claimant had retreated significantly on the issue of pervasive failure by the end of the trial. In Closing Submissions the Claimants submit that they “do not say, and have never said, that the Defendant’s construction practices were always deficient; rather that they varied and on the Claimants’ farms were deficient.” On the evidence of Dr Card and Dr Savigny to which I have already referred, I accept that there is evidence of variability in the quality of work along the ROW. It is necessary therefore to examine specific allegations by reference to specific evidence in the knowledge that things can and often do go wrong on large-scale civil engineering projects but without any predisposition to find either that they have gone wrong or that they have not.

Turning to the experts’ use of DVDs. I have already referred to the available materials and their usefulness and to Dr Savigny’s thorough analysis of them. Both Dr Card and, to a greater extent, Dr Tobon had reviewed the DVD footage for the purposes of their earlier reports, and Dr Savigny had reviewed their evidence on the DVD footage in his Supplemental Reports. Although it is possible to identify Lead Claimant properties on the post-works flypast DVDs, no footage of works being carried out on a Lead Claimant property has been identified.

It was in response to Dr Savigny’s critique of Dr Card’s use of documents and DVDs in the period up to and including their Joint Statement that Dr Card embarked on a new analysis of the DVD footage in his fourth report, specifically to support the Claimants case on the height of and failure to protect stockpiles. I deal with the results of that work when considering stockpiles below at [540]. Though not as serious as the failure to provide a fair presentation of specific images (which I have criticised at [504.iii)] above) Dr Card’s selection of the images of stockpiles without identifying that they were taken in January 1996 on a stretch of the ROW which is not generally representative was in my view an example of lack of rigour on his part in selecting and presenting evidence which appeared to assist the Claimants’ case but which on close inspection provided limited assistance to the Court.

In conclusion, where the evidence of Dr Savigny concerning the significance of contemporaneous documents or the interpretation of DVD evidence conflicts with that of either Dr Card or Dr Tobon, I prefer the evidence of Dr Savigny unless I indicate to the contrary.

I have provided a summary of the soils at [288] above. It is common ground that the soils on the Lead Claimant properties (and, by inference elsewhere along the pipeline) were broadly the same both on and off the ROW. Variations might be found in places on a particular property, but the general similarity of the original soils is what rendered useful the comparative analyses of soil samples taken on and off the ROW after the works had been carried out.

Considerable time was taken at trial on various technical issues, such as whether it was appropriate to refer to a Corrected or Uncorrected Plasticity Index, the nature of clay activity, the applicability of direct shear tests presented by Dr Card, and whether the USDA soil classification charts presented by Dr Savigny were of assistance to the Court. It is not necessary to lengthen this judgement yet further by a detailed review of the counter-arguments (which are fully set out in the closing submissions) because, ultimately, they are of little assistance in determining the relative contributions of erosion from the ROW and from other sources; and because findings on those issues

After Mr Lewis had, by immaculate and persistent cross-examination, destroyed Dr Card’s attempts to quantify soil loss from the ROW Ms Thornton, equally immaculately and with considerable sangfroid, set about attempting to reconstruct a case on soil loss. She did so by reference to the work of Professor Morgan (seldom forgetting the mantra that he had once advised the Defendant) and a calculation known as the Universal Soil Loss Calculation (“the USLE”). Professor Morgan’s work and calculations based upon the USLE and developed by the Claimants’ advisers became an important feature of their case.

Professor Morgan produced a draft paper in September 1997 {K49/520/1}, which was much discussed during the trial and in the Claimants’ closing submissions: see {C4/3.5/388}ff and {C4/3.5/577}ff. Another version of most of the draft paper appears at {H1.6/41/1697}. Both versions were referred to during the trial without any apparent acknowledgement that they were different. Comparison of the two versions suggests that {H1.6/41/1697} preceded {K49/520/1}, though it is not necessary to make a firm finding to that effect. For present purposes I will refer generally to {K49/520/1}; but where it is necessary to differentiate between them, I shall call {H1.6/41/1697} version 1 and {K49/520/1} version 2. I do not know whether there were other versions or how closely version 2 relates to any final version that was produced since no other version is in the trial bundle.

The first stated objective of the draft paper was to demonstrate a procedure which could be used world-wide to assess the rate of erosion under a range of conditions and to evaluate the effects of different control measures. Another was to propose a “target” for an acceptable erosion rate (after construction). A third was to develop design procedures for various erosion control measures and assessing their performance over two and five year periods {K49/520/2} at [1.2]. He identified the USLE as being “an appropriate method [for predicting erosion rates] combining acceptable accuracy with relative simplicity and the ability to use quite basic data”: at [2.2]. He stressed, however, that the USLE “predicts only erosion on hillslopes by raindrop impact, shallow overland flow and rills. It does not predict the effects of gullies, subsurface processes or mass soil failures. Nor can it be used to predict soil loss from catchments (Footnote: ¹⁹)”: ibid.

Professor Morgan’s qualifications were endorsed by Dr Card who explained that the USLE was a “grey-box model” meaning that “there is some understanding of the relationship between the input and output but the model is operated by equations based on statistical relationships” {H1.4/22/837}. Other limitations have been recognised since 1997. In particular, a Handbook of Erosion Modelling (edited by

The USLE takes the form:

The variables in the equation may combine to provide a very wide range of outturns for the value of A. In the introduction to the draft paper, Professor Morgan wrote of “natural conditions” where the landscape comes into a state of dynamic equilibrium over hundreds of years. “In many parts of the world this balance is achieved beneath a vegetation cover which helps to protect the surface from erosion and, through decaying vegetative material, contributes to soil formation. Under these conditions, mean annual erosion rates typically range from virtually zero to 5 t/ha, depending on

The draft paper includes various tables of variable guide values for factors K, C and P, each of which covers a wide range. For example, the suggested K-value for Sand with 4% organic content is 0.002, while that for Silt with >0.5% organic content is 0.060, a relative increase by a factor of 30. Similarly, the average suggested annual C-factor value for bare soil (recently tilled downslope) is 1 whereas that for dense forest with good litter layer is 0.001-0.01. Table 6 in version 1 {H1.6/41/1707} offers C-factor values for ground conditions at construction sites ranging from 1.3 (“compact, smooth, scraped with bulldozer or scraper up and down hill”) to 0.9 (“loose with smooth surface greater than 0.3m depth”) (Footnote: ²⁰). These guide values are neither universally accepted nor of universal application. Different suggested values are suggested by different authors: see {H1.4/22/841}; and each of the variables requires a more or less scientifically precise judgment to be formed. Although when comparing prospective rates of erosion on the ROW and on the land adjacent to it, R, K and S are likely to be similar, if not identical, that cannot be assumed as the ROW was frequently laid so as to minimise the slope across it when compared with the surrounding terrain - this is illustrated by photographs (not all of the Ocensa pipeline) at {K66/615/28}ff. Conversely, Dr Tobon’s measurements of slope downstream, upstream and on the ROW (fiercely criticised by Professor Monsalve) suggest that the gradient will alter in those three areas.

The draft paper recognises another problem with the S-factor, stating that “with present knowledge it is not possible to define mathematically the relationship between erosion and slope steepness on steep slopes.” It is apparent that the normally adopted equation gives unrealistic results for steep slopes because the paper goes on to say that “A somewhat conservative approach is proposed here which will prevent unrealistic assessments of erosion on steep slopes but not simulate the relationship shown in figure 3 [which is not shown but is said to show a relationship between soil loss and steepness after the work of Odemarh]. It is recommended that a maximum value of 8.0 be set for the S-factor” {K49/520/10}. The following page sets out the extreme difficulty in measuring slope length (Factor L).

The fine judgments that may have to be made when applying the USLE are apparent from comparison of the guide K-values tabulated in Professor Morgan’s draft paper at {K49/520/10} and the estimated K-values for the Cusiana-Coveñas area tabulated at {K49/520/33}.

It is apparent that modest differences in the assessment of different factors can lead to dramatic differences in the value of A. This is well illustrated by the differences in the figures calculated by Dr Card for off-ROW erosion for equivalent soils in his second and third reports {H1.4/22/845}, {H1.5/23/1126}. By adjusting the C and P factors he reduced his calculated estimates of off-ROW erosion by a factor of nearly 5, as shown below:

Thus, despite the apparent numerical clarity of the exercise, the USLE is on one level, as the Claimants accept, “magnificently imprecise” ({C4/3.5/388} at [1046]) because, in a site of any size and complexity, it will not be possible to assess and adjust the variables with any degree of precision. The imprecision is compounded if an additional variable, namely a sediment transport factor is applied to reflect the fact that not all eroded soil will be transported over given distances. The extreme variability of the transport factor is shown by the fact that Professor Morgan has expressed the view that it can vary from about 3 to 90 per cent, decreasing with greater basin area and lower average slope {H1.6/40/1692}.

I will consider Professor Monsalve’s use of the USLE when reviewing his evidence later. Remaining with Dr Card, I have already rejected the calculations in his fourth and fifth reports, which were offered as superseding those in his earlier reports. Those in his earlier reports are not useful indicators of erosion or sedimentation, essentially for the reasons set out in Dr Savigny’s Supplemental Report 17 at lines 764-817 {H2.10/13/2562}. Without addressing each of those reasons seriatim, I

The collapse of Dr Card’s evidence on this area left the Claimants without substantive expert evidence on which to rely: hence the reconstruction effort by their advisers. While applauding (and having due regard to) the attempts to reconstitute this area of their case, I must bear in mind at all times that Professor Morgan was not called, the wide range of available values for each factor in the equation is highly fact sensitive, and judgment about what numeric values to adopt for each factor is a matter of high expertise. The skilful extracting of concessions and other points from the Defendant’s experts cannot adequately compensate for the absence of a coherent and reliable body of expert evidence from those called on behalf of the Claimants. The Claimants’ lack of direct expert evidence is therefore a substantial disadvantage when attempting to reconstruct a case on the basis of the USLE.

There is a further aspect to the Claimants’ reconstruction efforts, which arises out of their reference to and reliance upon the worked example in Version 1 to which I have referred in [529] above. It is that the worked example does not appear in Version 2. It had been one of two illustrative examples and had adopted mean annual estimations for the Cusiana-Coveñas section of the pipeline in the eastern piedmont of the Cordillera Oriental using data for the Yopal recording station for which only mean monthly and mean annual information existed{H1.6/41/1708} and was made for the section of the pipeline described as being between K17+00 and K17+240 where the land was steeply sloping (25-50%), the soil was a loamy sand and the land cover was natural grassland {H1.6/41/1712}; and it appeared in the main body of the draft text. In the second version, no equivalent or similar worked example appeared in the main body of the text. Instead, Appendix 1 of the second version included a more detailed exercise for the section of pipeline between K+800 and K10+600 where different slopes and different soils were subject to natural pasture, woody shrub, managed pasture and abandoned cultivation {K49/520/30}. Despite these differences in soil and land use, C-factors for natural pasture (0.003) and after construction (1.3) were retained throughout - thus maintaining as differential factor of 433 as had existed in the version 1 worked example. Other factors were subject to more modest variations so that application of the USLE led to many different results.

The result of the application of these variables was that mean annual erosion rate (t/ha) for original land use varied between 3.5 and (?)38.5, for natural pasture between 2.6 and 10.7, and after construction between 1023 and 4120. The text recorded that “for the section between K2+750 and K2+750 where the slope is 43º, the rate is 4,013 t/ha for the bare compacted soil, which is not unreasonable for a steeply-sloping construction site in tropical rainfall conditions. The estimated rate under natural pasture, which was also the original land cover, is 9.3t/ha. This value is rather high and indicates that achieving a target mean annual soil loss of 2 t/ha will be difficult. The value of 9 t/ha should therefore be used as the “final” erosion target” {K49/520/34}.

The following points emerge:

However, I accept that the widespread use of the USLE over time evidences its ability to provide qualitative, if not precise quantitative, evidence about the relative rates of soil erosion to be expected in different circumstances. To that extent it is a useful tool for the purpose of showing trends and providing a measure of confirmation for other evidence. It needs to be treated with extreme caution when seeking to extrapolate to estimate actual quantities of soil lost in the past, not least because the predicted soil lost is (as USLE recognises) dependent upon assumptions about rainfall which may not be replicated in a particular place at a particular time. This is so even if a given area has on average greater or lesser rainfall that assumed for a USLE calculation. To similar effect, I accept Dr Card’s evidence that “using the USLE to simulate what will happen over a short time period or during a single event will lead to poor results for a system that is characterised by high temporal variability” {H1.4/22/838}. (I note in passing that Professor Morgan’s paper makes plain that to assume that erosivity increases linearly with rain intensity would be wrong: see [2.3.1] at {K49/520/4}.)

The Claimants limit their reliance upon their work based upon the Morgan papers and the USLE as follows:

“The Claimants do not rely on the work to establish numerical accuracy about the position. The Claimants rely on the work to demonstrate a pattern of the ROW causing sediment to enter the streams at a greater rate during/post construction than the rate of sediment from agricultural production and

deforestation.” {C4/3.5/390} at [1054]

For the reasons set out above and elsewhere in this judgment, I have come to the conclusion that even this may be an optimistic ambition. While I accept (and it is common ground) that the USLE is likely to show that the ROW soil was likely to be lost at a greater rate per hectare per year for the period of construction and some time thereafter than was likely to be lost per hectare per year from land under agricultural production or subject to deforestation) extrapolating from those rates of soil loss to identifying the rate at which sediment will enter streams on a given property is likely to be very unreliable. This is because of the uncertainties surrounding the course to be taken by any sediment that leaves the ROW or areas of agricultural production or deforestation. Further expert judgment is required to form any valid assessment of what, if any, proportion of the sediment that is lost from the various sources will make its way to streams, either directly or indirectly. It cannot be assumed that all or a large part of sedimentation from the ROW will end up in streams: to the contrary, it is part of the Claimants’ case that large quantities were found on fields in the course of the inspections and investigations for this litigation.

For these reasons, I approach the Claimants’ use of the USLE calculation with caution, recognising that neither the Claimants’ advisers nor the Court has the necessary expertise to make reliable judgments on the variables that feed the calculation without assistance from others who are suitably qualified.

Stockpiles

The nature of protection that could or should be applied near or round stockpiles depends upon site-specific factors including the size and configuration of the stockpile, its position on or off the ROW, and any slope affecting the ground on which the stockpile is placed or adjacent ground. I accept that there were occasions when large stockpiles were created and retention structures adequate to retain all the soil were not installed. Examples are shown in Dr Card’s Third Report at Figures 4.2 - 4.7 {H1.5/23/1113}. These images were taken in early 1996 on a particularly challenging stretch of the ROW on Spread B near the San Bartolomé River, which is not representative of the ROW as a whole {H2.12/15/2671}. A number of points arise:

It is self evident that the greater the height or the exposed surface area of a stockpile, the greater the prospect of slump, escape or erosion. Snr Gasca gave evidence which suggested that anything over about 4 metres would be “too high” for a stockpile {Day 14/118:14} ff and that he didn’t remember seeing stockpiles higher than that. There are films and photographs showing stockpiles which, though not formally measured, are clearly more than four metres high. There is a clear general relationship between the topography of the terrain through which the ROW passed and the absence, presence and size of stockpiles: the steeper and more difficult the terrain, the greater the likely need to strip and stockpile larger amounts of soil. {L2/794} at c. 8.21-10.00 gives a good representation of the ROW which bears passing resemblance to the Brown & Root ideal ROW drawing: despite undulating terrain and some significant cuts to the side of the ROW, there are no significant stockpiles after opening of the trench: and see {L1/229} at 7.28, {L2/788} and {L2/806.1} (Footnote: ²¹). Having reviewed all of the video evidence I find that {L2/794} and {L2/788} provide a representative picture of the general state of piling of soil on the ROW that could be achieved in the absence of particular difficulties, steep gradients or the need to strip greater than normal quantities of soil. The relationship between the complexity of the terrain and the size of stockpiles as shown on the video footage and photographs is not exact: for example, {L2/790} at about 2.00 and 27.05 shows significant stockpiles that appear to have been created at the edge of one or more camps or storage depots in relatively flat terrain. More typical of the topographical need to accumulate stockpiles, however is {L2/790} at about 38.28-42.52, which shows substantial stockpiling of sub-surface soil at the side of a hilly stretch of the ROW.

While I accept that, as a general principle, the height of stockpiles should be kept at a reasonable level, what will be reasonable in any given circumstance will primarily be determined by the topography, which will determine whether soil requires to be stockpiled in any substantial quantities and, if so, where and how it can best be stockpiled. Accordingly, I would not accept that a stockpile over about 4 metres high was automatically “too high” and contrary to good practice; equally, it would not necessarily follow that a stockpile under 4 metres high was, for that reason alone, not “too high”.

Dr Savigny analysed the historical and contemporaneous photographic and DVD evidence from the outset {H2.1/1/102}ff. In the course of his work, he identified a

I accept that the question whether the management of stockpiles conformed to good practice is a site-specific question that cannot be answered solely by reference to generalities. But the video evidence and Dr Savigny’s analysis of it lends no support to a suggestion that there was wanton or generalised failure to adopt good management practices for stockpiles and windrows.

Silt fences, retention structures and covering exposed soil

It is common ground that silt fences and retention structures were known short-term measures and that the need for them depended upon a number of variables, including the quantity of soil being placed in any particular location or pile, the steepness of the slopes in that location, and the proximity of watercourses.

There is no general criticism of the design of silt fences or retention structures. Rather, the criticism that is levied is that they were not provided where they should have been or, in the case of retention structures, they were not of adequate size or strength for the particular location. Review of the photographic and DVD evidence shows examples of silt fences and retention structures, and other areas where the experts disputed whether they were necessary or, where present, whether they were adequate. What was clear was that the factual evidence called on behalf of the Claimants about practice along the ROW, to the effect that there was no protection of soils or watercourses along the ROW, was unreliable {Day9/10:5} ff. Similarly, the factual evidence of Snr Nelson Clavijo to the effect that great quantities of earth were scattered across fields {D11.2/177/2114} is not borne out by the contemporaneous evidence of DVDs and photographs. His statement describes landslides and “mountains of mud” in times of heavy rain. Even allowing for (what I find to be) an element of hyperbole, this evidence does not go directly to the presence or adequacy of silt fences and retention structures, and is not specific to the Trial Cases or (so far as I am aware) the Lead Claimants’ cases. I do not exclude the possibility of landslides having occurred, but the evidence at trial does not support the conclusion that landslides were a constant or consistent feature along the ROW.

Where there were stockpiles of topsoil or stockpiles of trench (or other) soils, temporary retention structures could be used to retain the soils within a designated

On this evidence, I conclude that it would be wrong to make any generic factual finding about whether or not silt-fences and retention structures were used. The evidence does not justify a finding that, as a matter of general practice, silt fences and retention structures were not provided where required or were inadequately constructed when provided. Conversely the DVD evidence does not establish that there were never occasions when things went wrong.

In 1994 the Defendant had commissioned a report on revegetation from Bateman Ingenieria, which had recommended that “during the period in which the soil removed will remain in place along the trench under construction and while it is used to cover the lowered pipe, it shall be protected from the effects of rain and wind, by covering it with plastic sheeting or [tarpaulins]” {K14/102T/52}. Snr Gasca accepted that the reason for the recommendation was that otherwise the trench spoil could easily be eroded by the effects of the rain and the wind: {Day14/120:22} ff. There is no evidence of soil being covered by sheeting or tarpaulins, and I accept Snr Gasca’s evidence that neither trench spoil nor topsoil was ever covered as recommended by Bateman {Day14/121:1} ff. Although he was being asked specifically about trench soil and topsoil, I infer and find that it was not the practice to cover stockpiles of any size or kind to protect them from the wind or rain.

Despite the contractual requirements that excavated material should be segregated and preserved, and that short term erosion measures should be taken as necessary to ensure the stability of graded and excavated material (see [305] and [306] above), I reject any suggestion that all exposed and disturbed soil should as a matter of general good practice have been covered. Some stockpiles were necessarily very large and it would not have been feasible to have covered such large mounds of earth with tarpaulins, with the implication that the tarpaulins would not merely have to be placed and secured but removed whenever the stockpile was to be added to or soil removed from it. Equally, there is no evidence that justifies the conclusion that, as a matter of general good practice, modest windrows should always be covered. While I do not exclude the possibility that there may have been occasions when some stored piles of soil should have been covered in particular circumstances dictated by topography, climate or particular susceptibility to erosion, I reject as entirely unrealistic any formulaic assertion that stockpiles and other exposed earth should always or usually be covered as a matter of routine good practice.

I have referred to the contractual requirements to keep soils segregated, and also to the impossibility of avoiding some mixing when stripping and grading the ROW. I do not accept that such inevitable mixing would be indicative of poor practice. All of the DVD and photographic evidence confirms that soil stripped from the ROW before trench excavation was kept separate from the trench excavation, which was placed adjacent to the trench for ease of replacement. Where this was done, the stripped topsoil and the excavated trench soil would be kept separate and I have seen no evidence of generalised failure to follow this practice. The question of poor practice in relation to soil segregation is therefore fact sensitive and to be decided on sitespecific evidence.

Stream crossings

Dr Card did not criticise the contractual design methodology for stream crossings, with the exception of revetments, or its implementation {Day24/48:20} ff. I have summarised the contractual provisions at [314] above. Snr Loeber and Snr Gasca gave evidence about the approach to stream crossings which, if followed, would have amounted to good practice. There is ample evidence on the DVDs of crossings being protected by flumes, sediment traps and channels, which appears satisfactory. I also accept Snr Gasca’s evidence that there were special crossing teams dedicated to the crossing of streams that were not dry and that, in general, the waterbed would be reconformed to its original state {Day18/50:7}. However, there is also evidence on the DVDs which points the other way with the ROW apparently running immediately on both sides of the stream without any apparent protection {H7.5/48/1448}; and Snr Gasca’s evidence was clear that sediment traps were not installed on crossings other than those listed in the EMP {Day16/90:5}, which would exclude the streams on the Trial Case properties. Snr Loeber’s evidence was also that flume pipes were not installed across the entire width of the ROW but only across the part that served as a transit road {Day18/84:10}. Whether for that reason or otherwise, there is evidence on the DVDs of sedimentation of the stream bed adjacent to a culvert where there is no obvious protection where the ROW meets the flow of the stream {H7.5/48/1450}; and during the course of 1996 concerns were periodically raised about run-off into watersources {K31/305/20}, {K34/339T/2}, {K38/379.1.1T/2}, {H1.6/24/1384}, {K38/392T/1}.

In the light of this evidence, I find that there were occasions when either steps to minimise the escape of sediment from the ROW into watercourses were not taken or the steps that were take were not effective. The evidence does not justify a finding that there was always a failing in this regard. Accordingly, it is necessary to look at site-specific evidence in each case.

Maintenance of Short Term Measures

Saipem had maintenance crews responsible for maintaining short term measures. On occasion, Ocensa had cause to complain to Saipem about a failure to repair works that had been damaged by the weather. On 15 May 1996 Saipem was given 10 days notice to comply with its responsibilities on Spread B {J25/86/241}; and on 6 December 1996 Ocensa’s environmental supervisor on Spread A wrote to Saipem saying that Saipem “has worked little” over a 16 km stretch and was short staffed {K40/411T/1}.

This evidence falls far short of showing a systemic failure throughout the period and for all of the pipeline. It shows a recognised need for maintenance where short term works were damaged; and it shows that those supervising the works were taking their responsibilities seriously: see [380] above.

Failure of short term measures

The Claimants seek a generalised finding that “in relation to short term measures, soil on the soil piles and the stripped ROW (and over-widths) will not have been [...] contained and, during construction and in the ensuing months, will have fallen or been washed onto adjoining land and into neighbouring water courses, in materially larger quantities than would otherwise have occurred and more than could be accommodated by the environment” {C4/3.5/310}.

I do not make such a finding. While the Claimants can point to evidence that there were failings of short term measures, the evidence falls far short of showing systematic or wanton failure on a large scale. In reaching this conclusion I take into account the evidence cited in Section 10 of the Claimants’ closing submissions, some of which I have mentioned specifically above; and also the detailed evidence about the four Trial Cases, to which I refer in greater detail later. This generalised case on short term erosion measures is largely advanced on the basis of a presentation of contemporaneous documents which, both singly and cumulatively, are unremarkable in the context of a major and complex civil engineering project such as this. With the sole exception of not covering stockpiles (as to which see [549]-[550] above) the contemporaneous documents are, both in content and number, consistent with a project where the systemic intention on all sides was to do a good job. That is also true of the DVD and photographic evidence which (making due allowance for the fact that some of it is promotional material) is also consistent with a project being carried out generally to acceptable standards in conditions that are often extremely challenging.

It appears that the Claimants may have recognised the probability that their generalised case would (or even should) fail since their Closing Submissions included that “it is unclear whether these problems amounted to systemic failures, but there are multiple references to repeated problems with timely completion of geotechnical works in the contemporaneous records. At the least, this shows that the standard of work was variable. Given the emphasis on pressing ahead quickly with the construction of the pipeline, this is no surprise and it can safely be said that that variation meant that the standard sometimes fell below acceptable levels. Dr Savigny’s comment at {H2.7/9/1724} is telling: “... my past experience indicates that a contractor will take steps that enable the fastest possible advance of the construction spread. This approach acknowledges that some problems may develop but they will be dealt with quickly, as required to avoid adverse environmental or safety impacts; or, relegated to reinstatement where short term impacts are not foreseeable.”” {C4/3.5/313}.

With two modest additional comments, I accept this more limited submission and Dr Savigny’s evidence on the point. The first is that attempting to make fast progress was desirable from all points of view. Quite apart from the commercial benefits of a promptly executed contract to those undertaking it, prompt carrying out of the works was to the benefit of the landowners, it being an integral part of the Claimants’ case that the works should be carried out quickly so as to minimise the time that the soils on and from the ROW were exposed to the elements between initial stripping and final reconforming and revegetation: see [561] below. The second is that the contemporaneous documents, DVDs and photographs bear out Dr Savigny’s experience and support his expression of opinion.

It is clear that things sometimes did go wrong and that, when they did, the potential for increased erosion, sedimentation and adverse effects on land and watercourses alike was very real. But that is to be considered on a case by case basis without any predisposition to finding that things went wrong in that particular case or that they did not.

Delays

In their general submissions on the expert evidence, the Claimants point to the contractual requirements that the excavated trench must be open for as short a time as possible and that excavated soils must be backfilled as soon as possible. Having done so they reserve their further submissions on delay to those they make in relation to the four Trial Cases individually [C4/3.5/310}.

It is common ground that undertaking the long-term geotechnical works and the revegetation works more promptly will usually reduce the period during which the ROW is bare soil, thereby reducing the risk of erosion. It is (or should be) also common ground that the risk of erosion is dependent upon many factors including topography and rainfall {C4/4.7/318} at [190]. That said, while the risk or happening of increased erosion may be consequences of the fact of the delay, the fact of delay does not of itself prove fault on the part of those responsible for the project.

In normal circumstances, if a Claimant wished to prove that a major civil engineering contractor on a huge project was guilty of culpable delay, it would be necessary to provide a detailed factual analysis of the circumstances in which the delay occurred followed by the provision of cogent expert evidence on how the project was planned and programmed and an expert analysis and opinion on the operative causes of delay. This is necessary because it cannot be assumed that any one of a number of potential causes was critical or coincidental. Finally, expert evidence would be required on whether the operative causes of delay were the consequence of a lack of reasonable care. The Claimants have not attempted to obtain any of these sorts of evidence. Although Dr Card, as one of the new strands introduced in his fourth report, purported to identify “a systemic failure to ensure the final geotechnical and revegetation works were conducted simultaneously such that the “new design” could properly function to effectively control soil erosion” {H1.6/24/1395} at [4.7.10] he did not carry out a delay analysis and was unable to assist the Court with any reasons for the delay, because there was insufficient information to enable him to form an opinion {Day27/55:24}.

I am no more able than Dr Card to express a generic view on the reasons for delays, which must be addressed on a case by case basis, bearing in mind the deficiencies in the expert evidence to which I have referred.

Ditch diverters, waterbars and erosion matting

The Claimants’ pleaded case was that the design in the RECS for ditch diverters and erosion control matting was inadequate, primarily because the spacing of the diverters in the RECS was to be approximately double that originally provided in the EIS/EMP; and that the ditch diverters were less robust in design than those in the EIS/EMP {B2.2/32/244}. What this allegation failed to take into account was that the EMP design did not include erosion control matting whereas the RECS did. This was a fundamental design shift {Day24/65:9} which Dr Card had not taken into account in his support for the pleaded allegation. In their Joint Statement Dr Card and Dr Savigny agreed that the greater spacing of ditch diverters in the RECS design when compared with the EMP design was justified by the introduction of erosion matting,

As will be seen in more detail later, the Claimants’ evidence on the spacing of ditch diverters varied from Trial property to property, ranging from LC50 where the experts agreed that the spacing was closer than stipulated in the RECS to LC39 where the identified ditch spacings were further apart than stipulated in the RECS. As Dr Card rightly stated, what was found might or might not have been the spacing as laid, since some rows of diverters may have completely eroded and may therefore been missed on inspection. The experts offered possible reasons that may have contributed to such erosion. Dr Card concentrated on the potential contribution of a lack of erosion matting while Dr Savigny drew attention to the potentially destructive effect of cattle. Both are possible contributors, but they may not provide a full explanation for all of the cases where ditch diverters are no longer visible. I am not satisfied that either is a necessary pre-requisite for the total erosion of some ditch diverters over the period between possible installation and litigation inspections: some may have failed over time for other reasons, including the destructive effect of climate, or simply with the passage of time.

Bearing in mind the possibility that ditch diverters may have completely eroded before the inspections for this litigation, the evidence from the Trial Properties does not support the conclusion that ditch diverters were routinely omitted or placed at intervals inconsistent with the RECS. I accept the Claimants’ submission that the diverters installed as part of the original works are likely to have been on the basis of the spacing requirements in the RECS and diverter composition as set out in TQ49 {C4/3.5/322} at [854] and {K34/336/1}. And I conclude that the inability to find a particular ditch diverter on a property where it is evident that other ditch diverters were put in place does not without more justify the conclusion that the “missing” ditch diverter was not installed or (assuming it was installed in the first place) was defectively installed or protected. That will need to be determined in the light of all site-specific evidence.

As outlined at [330] above, the effect of TQ61 was that from October 1996 erosion control matting was omitted on Spread B slopes between 10 and 20%. Where TQ61 was implemented, this departure from the original contract design would have increased the rate and amount of erosion from the ROW when it rained. The contemporaneous correspondence records concerns about the deleterious effect of implementing TQ61 {K66/611/6}, and Snr Gasca in evidence agreed with the concerns expressed at the time that omitting the matting in accordance with TQ61 was “not the most suitable response” {Day16/71:16}.

The expert evidence on the topic was more nuanced. Dr Card’s view, as expressed in the joint statement was that “the wider spacing and type of ditch diverter adopted in the RECS relied upon the placement of erosion mat between the diverters over the whole ROW to effectively reduce the susceptibility of the exposed soil on the ROW to erosion. Without adequate erosion mat the ditch diverters were vulnerable to excessive overloading with surface water and erosion sediment causing choking of the diverter channels and overtopping of the ditch diverter berms leading to failure” {H23.3/8/630}. As a general statement, this is correct; but it does not specifically address the question whether it was negligent to allow the implementation of TQ61 as

This is shown by Dr Card’s first report where, having rehearsed the facts surrounding TQ61, including the limited references to a positive trial on Spread B and a negative trial on Spread A he recognised that “I have not seen any documents that provide details of the periods when the trials were conducted, where they were conducted on the pipeline …, the parameters of the trials, how and who monitored them and the results, and how Ocensa and others evaluated the results of the trial. Without such information I am unable to assess the significance of the trial results and the reasonableness of Ocensa’s decisions issued in relation to Saipem’s TQ or indeed whether the trials affected works on the Lead Claimants’ affected properties” {H1.1/1/87}. That was his opinion on reasonableness although his view was that “removal of the matting on slopes with gradients less than 20% would have increased the vulnerability of the wider spaced ditch diverters to erosion and sediment accumulation leading to their failure”: see [8.3.22].

Dr Savigny’s view was that matting was not called for on slopes less than 10% and was called for on slopes over 20%. For slopes in between, his opinion was that “this could have been a discretionary call on the part of those responsible for ROW reinstatement design layout based on some combination of the following considerations: the extent of ROW disturbance during construction; actual slope gradient (i.e. closer to 10% or closer to 20%); length of ROW slope in one direction along the pipeline centreline (i.e. longidtudinal); uniformity of the ROW gradient both longitudinally and cross slope; off ROW terrain and vegetation conditions; spacing, cross sectional configuration, and standard of water bar construction on Ocensa ROW and the ODC ROW, if adjacent; optimization opportunities through custom fitting; schedule for revegetation; and prevailing season/climate as regards suitability for revegetation” {H2.5/7/1378}.

It can be seen from these extracts that neither expert laid down a hard and fast rule that any failure to apply erosion control matting on a slope exceeding 10% was automatically negligent, though for different reasons. The results of the trials are still not known in any detail; and I accept that each of the factors identified by Dr Savigny could reasonably inform a decision being made on the ground on whether or not to lay erosion control matting in a given location. It follows that I do not find it to have been automatically negligent to have omitted matting on slopes between 10% and 20%; but, given that the RECS design (a) involved an increase in the spacing of ditch diverters and a reduction in the robustness of their construction and (b) was adopted precisely because it was thought to be (and was) appropriate as a general design for a composite approach involving both ditch diverters and erosion control matting, the various criteria identified by Dr Savigny need to be considered with care on a case by case basis to see whether the omission of erosion control matting in a given location was justifiable.

Questions of workmanship are not susceptible to an overall ruling. There is evidence of ditch diverters failing in the face of stormy conditions soon after being installed, and of their being in a state of disrepair when the experts made their inspections. Where such observations were made on Trial Claimant properties, I will hope to deal with them in the relevant section of this judgment. It is not possible to extrapolate

There is limited contemporaneous evidence about where erosion control matting was placed either on the Trial Properties or generally. The position is not helped by the Defendant’s confusion about how erosion control matting would be shown on the GDS, Snr Gasca gave evidence that erosion control matting was used on Spread B during his time. His evidence ultimately was that the positioning of erosion control matting would have been marked on the ground and was not marked on the GDS {Day17/27:17} ff. The Claimants describe this evidence as implausible {C4/3.5/334} and point to the fact that he was not on site for the duration of the contract. The latter point is justified, but I do not regard his evidence as implausible. I accept that erosion control matting was not marked on the GDS on Spread B; but the overall level of competence and supervision that is evident when the evidence is viewed overall makes it highly unlikely that no thought was given and no decision made about where erosion control matting should be placed. Since it does not appear to have been recorded on the GDS or any other document that is now available to the parties, it seems highly likely (and I find) that decisions were made on site and would have been taken in the knowledge of the RECS design and (where applicable) TQ61. It does not follow that the RECS design or TQ61 were always followed and, if they were not (so that erosion control matting was omitted) the risk of erosion was increased. The evidence does not justify the conclusion that the contractual design was routinely ignored or that erosion control matting was routinely omitted. Snr Gasca said that the project’s erosion control measures were good and that erosion levels were well within acceptable limits ({E1/1/87} at [19.7]). That evidence was consistent with his 2001 Paper {K57/548/21} as explained in his witness statement at [19.8]. I accept that it was the genuine view of those involved in the project that the approach to erosion control measures had been “conservative” and in some respects went beyond what was strictly necessary.

Turning to Spread A, Snr Loeber’s evidence (which I accept) was that erosion control matting was denoted by zig zag lines. No Spread-wide analysis has been carried out that would justify overarching conclusions about whether or to what extent markings on the GDS represented a pattern of compliance or non-compliance with the contractual design. In any event, I would not be prepared to make a general finding that erosion control matting was always laid in accordance with markings on the GDS. It seems equally possible that on occasions decisions were taken on the ground either to increase or to decrease the amount of erosion control matting relative to what was shown on the GDS.

The experts’ analysis and the Courts’ viewing of the contemporaneous DVD and photographic evidence do not justify a conclusion that the use of erosion control matting on either Spread always was or always was not in accordance with the contractual design. I bear in mind the contemporaneous documents that refer to erosion occurring during and after the works. However, to the extent that the Claimants continue to seek generic findings about the extent of the application of erosion control matting other than that it would have been generally in accordance with the RECS and (where appropriate) TQ61, the only generic finding that is appropriate to be made in the light of the expert evidence of Dr Savigny and Dr Card is that failure to comply with those contractual requirements would increase the risk of erosion and would require justification on a case by case basis.

While it is accepted at a general level that it is desirable for final revegetation and long-term geotechnical works to be carried out at the same time, there may be a range of reasons why final revegetation may be delayed beyond the date of long-term erosion works, ranging from the sensible to the culpable. Dr Card’s review recognised that contractors were reluctant to plant in the dry season, and expressed no opinion that this was unacceptable, merely pointing to the recommendations in a paper prepared in 2001 where contractors raise this difficulty {H1.6/24/1396}. Further rational support for the desirability of not planting in the dry season comes from Dr Velez who, when arguing for dense application of seeds on sloping ground said that “to support this high population [of seeds], the soil requires correct management ... and an appropriate moisture level, which is possible if planting takes place at the beginning of the rainy season” {H5.7/10/1518}. It would be wrong to make a generic finding that any gap over and above a certain period between stages of the works (including between final geotechnical works and revegetation) either was or was not negligent, and I make no such finding. Having regard to the general desirability of revegetation happening at the same time as long-term erosion works, where there is a substantial gap and there is evidence that the length of the gap has contributed to a significant increase in erosion over and above what would have happened in any event, it may be a proportionate use of resources to look at the reasons underlying the gap in detail.

Longitudinal drains, energy dissipation structures and sediment traps

The Claimants submit that longitudinal drains are required wherever ditch diverters are called for; and that such drains should have embedded in them some form of energy dissipation structure (“EDS”) {C4/3.5/337} at [885]. I reject each limb of that submission.

Dr Card maintained that longitudinal drains were required whenever there were ditch diverters across the ROW. Dr Savigny’s opinion was that “longitudinal drains and off ROW measures are rarely required in terrain such as is present on and adjacent to the Lead Claimant properties. Rather, these structures are used in high relief settings involving steep terrain where runoff flow velocities and volumes are much greater” {H2.1/1/169}; and he expressed the opinion that widespread use of longitudinal drains and energy dissipation structures as Dr Card advocated was contrary to the design and construction practice standards in South America at the time of the Ocensa design and construction {H2.7/9/1755}. The difference of opinion between Dr Card and Dr Savigny was virtually complete.

It is convenient to start by considering whether there was a contractual requirement to place longitudinal drains along the entirety of the ROW:

Neither of these documents supports the Claimant’s position:

I reject the submission and Dr Card’s original evidence that there was a contractual requirement derived from the RECS that Saipem should insert longitudinal drains wherever there were ditch diverters. I also reject Dr Card’s opinion that the drawing of the ROW perpendicular to the slope meant that the ditch diverters were to discharge into natural streams. The effect of that interpretation would be that the spacing of ditch diverters would be determined by proximity to streams, which would immediately subvert the spacing principles established by the RECS.

Dr Card in cross-examination also referred to the EMP as he had done in the Joint Statement {H23.3/8/644}. The pages to which he referred were at {K9/35T/182}ff and do not require longitudinal drains as a matter of course wherever there are diverters.

I therefore turn to consider whether good practice required the insertion of longitudinal drains wherever there were ditch diverters or, given Dr Card’s interpretation that the RECS required ditch diverters to discharge directly into streams, whether that was a requirement of good practice.

The Claimants rely {C4/3.5/339} upon:

The Claimants’ citation from the BPXC Environmental Procedures manual states that “[t]he lateral channel drains into the natural drainage systems at least every 10 cortacorrientes when on a ridge, or every 5 cortacorrientes when on sidehill terrain with a gentle gradient. Where it is not possible to deliver the caught waters directly into a natural drainage point defined in the above recommendation, due to the fact that the length of the required spillways would be too long, the cross-section of the channel must be increased gradually to increase its capacity and thus lower the number of drains needed, until a favourable point is found for the delivery where problems of erosion or gullying are not generated.” This is not altogether easy to follow (at least in translation) but, taken in conjunction with the associated drawings 13.8-13.13 {K41/437/122}ff supports the proposition that where there are ditch diverters there should be longitudinal drains and that, where possible, the drain should discharge into a stream which is draining the relevant area: that this is the meaning of

“natural water channels” in this context appears from [13.2] at {K41/437T/10}.

However, as the topography of the various Trial Cases shows, there are areas where streams are not readily available, as was the case with the ridge on LC50 or on the gentle slopes of LC54, so that the waters would have to be carried long distances before a discharge point can be found. [13.2] of the manual recognises that “good water management, especially of runoff waters, leads to a drop in the supply of sediments to the natural water channels which drain the intervened area.” It follows from this that there may be a balance to be struck between channelling all runoff waters directly into a small number of streams and dissipating some or all of the waters more widely along the land adjacent to the ROW.

The photograph at {K57/548/6} illustrates techniques that can be used, including the linking of ditch diverters to longitudinal channels. It does not suggest that channels must be used whenever ditch diverters are present any more than it suggests that wooden retention fences (which are also shown) must always be used.

The following points emerge from the 2002 Survey:

I find no support in the 2002 Survey for the proposition that longitudinal drains should be provided whenever there were ditch diverters.

Dr Savigny agreed with Dr Card that the topography on LC74 required the use of longitudinal drains and that there is photographic evidence from 1995 that ODC had installed one {L1/181}. Neither that fact nor the fact that ODC had installed a longitudinal drain on La Fe 2 demonstrates either than longitudinal drains were routinely inserted wherever there were ditch diverters or that good practice required them to be inserted.

The Claimants submitted that “the nuanced nature of [Dr Card’s] evidence was not fully appreciated” {C4/3.5/339}. That may be so, but his evidence before crossexamination was clear and neither qualified nor nuanced:

In their Joint Statement both Dr Card and Dr Savigny identified a 1990 Manual of Geotechnical Protection {K2/2T/1} as an appropriate reference for geotechnical construction practices in Colombia prior to the mid-1990s {H23.3/8/644}. That document recommended building “water breakers or transversal drainages” on ridges or mountain tops or on smooth slopes as illustrated in photographs 4.19-4.21 and Figures 4.26-4.29 {K2/2T/50}. It is noticeable that each of photographs 4.19-4.21 show what appear to be longitudinal drains on at least one side of the ROW; and each of figures 4.26-4.29 ({K2/3/54}ff) also show longitudinal drains on at least one side of the ROW. Figure 4.26 (which is an indicative design for a ridge or mountain top) states that the longitudinal drain should channel water to natural watercourses at up to

Dr Savigny’s opinion was that longitudinal drains were required in “high relief settings” and that they were used more widely “in settings where subgrade soils are highly erodible.” In contrast, his opinion was that they were rarely required in terrain such as is present on and adjacent to the Lead Claimant properties {H2.1/1/169}. In the Joint Statement he made the point that installing longitudinal drains may take additional land from the landowner. I accept that could be correct in some circumstances, though that is not obviously the case in the images to which I have referred from the 1990 Manual or the illustrative image at {K57/548/6}.

To my mind, Dr Savigny’s most compelling argument in support of his opinion was that there will be areas off the ROW which are well vegetated, whether they be forest or farmland, and where the vegetation will of itself attenuate and disperse the flow of water off the ROW {Day37/11:3}. In such situations he described the intent of the ditch diverters as “to control water to an undisturbed area adjacent to the [ROW], and at that point it is discharging into terrain that is comparable to the other terrain on either – generally on either side of the [ROW]” {Day37/12:19}.

In the light of all of the evidence relied upon by either party, I am not satisfied that there is or was a hard and fast rule of good practice that required longitudinal drains wherever there are a series of ditch diverters and I reject Dr Card’s evidence to that effect. While I accept that there may be circumstances in which dispersal to the land adjacent to the ROW may be unacceptable because of the longitudinal or cross-slope gradients, the anticipated volume of erosion and sediment that will be carried by the runoff water, or because of the erodibility of the surrounding soil or lack of vegetation (or a combination of all these things) I am persuaded by Dr Savigny’s reasoning that there may be times when it is better to let the water discharged from a ditch diverter dissipate directly onto the surrounding land. I accept that this may have a concentrating effect at the point of discharge from the individual ditch diverter but it is clear from the evidence about the USLE and the need to introduce a sediment transport factor that further movement of the sediment will occur: see [531] above. So the question will be whether it is better to allow runoff across a broad front from a number of ditch diverters or to concentrate the runoff yet further and to discharge it in fewer places. I place no limitation on the list of possibly relevant considerations and accept Snr Loeber’s evidence that the timing of the works and the prevailing weather conditions could be factors to take into account {Day19/73:21}.

I turn to the question of energy dissipation structures and silt fences or traps next, but remain sceptical (for reasons I will develop in greater detail when considering LC50) about the wisdom of channelling water over long distances and steep hills before debouching it into watercourses that, on the Claimants’ case, have only a limited ability to deal with additional sediment.

Equally, I do not accept Dr Savigny’s opinion as expressed in his original report unless it is recognised that, for these purposes, the steepness of gradients and the relative erodibility of the soil (both on and off the ROW) are variables which are

Although Mr Loeber gave an answer in cross-examination {Day18/89:9} ff that suggested that there should be longitudinal drains on both sides of a ROW throughout its length, the general thrust of his evidence was to the contrary {Day18/78:11} ff, {Day18/110:5} ff, {Day19/85:3} ff. There was confusion and contradiction in the Defendant’s factual evidence about how and when longitudinal drains were marked on the GDSs. Despite that confusion and contradiction, I reject the submission that the GDSs indicated a need for longitudinal drains wherever there was a continuous unbroken dual or triple line parallel to the direction of the pipeline installation; and the answer to that effect given by the Defendant in November 2011 was wrong {B3/4/70}. Had it been right it would have meant that for all or virtually all of the length of the ROW for which the GDS is available, Saipem agreed with those on the ground that longitudinal drains were required and then failed to install them; and yet (on the evidence) the omission would have gone without comment either from Saipem or the supervisory staff. On all of the evidence about the manner in which the project was executed, I am not remotely persuaded that could have happened.

The provision of EDSs within longitudinal drains (where they were installed) would equally be a matter of judgment, dependent upon the gradient of the longitudinal drain, the volume of water anticipated and the point where the water was intended to be discharged from the drain. If the intention was to discharge into a stream, sediment traps or silt retention fences may have been called for (because of the limited ability of most of the small watercourses to clear sediment) but I do not feel able to reach any prescriptive design formula. No submissions were made about how, when or by whom sediment traps or silt retention fences were to be maintained in the long term.

Fencing

The Claimants seek findings that:

It is common ground that cattle can cause damage if they get onto the ROW, particularly in the early stages of revegetation. The weekly report on Northern Section Spread B for 30 June 1996 referred to problems emerging with the adherence of the mulch to the soil, due to the transit of livestock shortly after it had been laid and when grass had begun to germinate. The erection of a temporary fence had been proposed but there had been no concrete proposal from Saipem to solve this “serious inconvenience” {K35/345T/9}. In August 1997 Ocensa’s Environmental Affairs Office recorded that “livestock-raising activities in 90% of the land through which the

The EMP stated that “the revegetated areas must be fenced off in common agreement with the property owner, in such a way that the access of cattle or people is restricted, using fences with three lines of barbed wire” {K40/417T/4}, a passage that was repeated in the Defendant’s post-construction Manual on Environmental Management Procedures at {K41/437T/18}.

It is clear from various photographs that the ROW was not routinely fenced off, though it sometimes was. The reasons for this lack of consistency are not clear but are likely to be site-specific in many cases. The August 1997 report leaves open the prospect that in some cases it may have been assessed that there was no appreciable risk against which fencing was required. There are obvious considerations both in favour and against fencing off the line of the ROW, even where there is a potential risk of damage. In favour is that, if there is a risk from people or cattle, fencing it off protects the ROW, which may be particularly necessary in its early stages of revegetation. Against would be that, as in LC54, fencing off the ROW would bisect fields, restrict access to water in some parts of the fields and restrict access across the farm. So an alternative solution is to remove livestock from the affected fields altogether for a time, or to fence them temporarily on one side of the ROW and then move them to the other, if that is practicable from the point of view of stock husbandry, milking and general farm management. Evidence was also given during the trial of fencing off the ROW (not on LC54) but creating a passage across it at a selected point or points. That evidence is consistent with implementation of the EMP statement that the ROW should be fenced off “in agreement with the owner”: the statement allows for no fencing to be provided if there is no or no appreciable risk or if the owner didn’t want it.

In comparison with other issues, the generic evidence and submissions on fencing are short. The risk of damage from cattle or humans will be most obvious to the landowner who will know how he would wish to use his fields. If he wished to keep cattle in fields which spanned the ROW, the terms of the EMP suggest that Ocensa would agree to provide fencing to enable him to keep his cattle off the ROW itself. I do not consider that this gives rise to an unlimited obligation to fence the ROW, for a number of reasons which interlink. First, the land is and remains the property of the landowner subject to the grant of the rights by the ROW Agreement and the easement as set out in the Public Deed. Neither Saipem nor Ocensa nor the Defendant were given the right to fence off the ROW by those documents: see [369] (particularly clauses 6 and 7) and [371]; nor has it been suggested that the provisions of the Mining or Petroleum Codes give the right to fence off the ROW without the agreement of the landowner. As against that, the pipeline works carry a risk of damage, with the result that good practice requires the carrying out of erosion control works as part of the pipeline works. But what else? It seems to me that fencing off the pipeline works raises different and additional questions because (a) the standard ROW Agreement provides limited compensation for the effects of the works on productivity and (b) while it is the landowners’ right to have access to his land at all times provided he does not obstruct the entrepreneurs’ exploitation of their easement, even the entrepreneur’s best efforts to restore and return the land after taking advantage of his easement may be nullified if the landowner takes immediate or premature access for his cattle.

These conflicting considerations are given real substance by the citations I have recorded at [601] above. The transit of livestock on new mulch on Spread B was regarded as “a serious inconvenience” by Ocensa in June 1996. It does not appear whether the decision in August 1997 to enclose the area of Spread B with electric fences at the most critical points was taken with the agreement of the relevant landowners, or whether the matter had been discussed with them, or precisely what nature of economic and farming imperative made the landowners put their cattle in the fields with the recently sown ROW. And the 2002 report that “in some cases the inhabitants of the area remove protective fencing so that cattle enter into the area and destroy the works” suggests that the absence of fences may not always be attributable to lack of willingness on the part of Saipem and others responsible for the works.

With these limited materials a generic finding that the absence of fencing involves negligence on the part of those responsible for carrying out the works is not justified.

Where fences were agreed to be inserted, the question of adequacy is also not entirely straightforward. On the assumption that the intention of the fencing was to protect vegetation on the ROW until it was established, the period during which it would be required might vary considerably from place to place. The EMP specification was for 3 strands of barbed wire, which to European eyes suggests a degree of permanence that would be positively disadvantageous if access to the ROW was going to be required within a period measured in months. There is no material that would justify the generic finding that a fence should last a particular length of time, or even that it should be barbed rather than electric. There is evidence (for example, in the case of LC54) of fences being damaged after installation. I do not accept that the fact that a fence gets damaged means that it was negligently constructed: damage to fences is a fact of farming life the world over and, if it happens, repairs are readily carried out. If a farmer finds that one of the fences on his land is damaged and chooses not to repair it, damage caused thereafter by animal incursion would (to an English tort lawyer) appear to be caused by his decision not to repair the damage to the fence of which he knew.

For these reasons I make no generic findings about responsibility for the maintenance of fences or the consequences of fences failing. But the facts of any individual case must be reviewed in the light of all relevant evidence to see where responsibility lies.

Long term protection of watercourses

The Claimants seek findings that:

I have referred to the contractual requirements of the RECS and the PCS and Snr Gasca’s evidence about how works were carried out at [315]-[317] above. I do not understand it to be seriously disputed that those requirements and the steps described by Snr Gasca, if adhered to, were consistent with and represented good practice. If it is disputed, I reject the grounds of dispute. What is certainly common ground is that “water crossings pose one of the more significant environmental impact risks associated with pipeline construction” {H23.3/8/650} at line 2429. Dr Savigny identified that specific attention was given to reducing the impact of traditional techniques for watercourse crossing in Canada in and from 1992 and that practice in Colombia probably lagged behind that in the United States and Canada

The acceptance by Snr Gasca and Dr Savigny that disruptive techniques for stream crossings will inevitably have caused some sediment to get into watercourses was both correct and significant. Small quantities might not matter, because of the ability of the water flow to clear them with time; but if significantly detrimental sedimentation of a stream took place (whether or not reasonable precautions had taken place), steps could and should have been taken to remove it so as to prevent lasting damage to the watercourse. Snr Loeber effectively recognised this when giving evidence about post-works walkthroughs. The walkthrough would generally be limited to the ROW and adjacent to it, but it was made with the intention of picking up and remedying deficiencies in the works and problems caused by the construction {Day19/43:17} ff, which should have included deficiencies in and near to watercourses that were caused by the works. Damage to watercourses was evidently part of the remit, as evidenced by his recollection of one case where the inspectors were stopped by a farmer who said that his watercourse had been contaminated {Day19/44:7}.

The expert inspections revealed very limited evidence of permanent watercourse protection works {H23.3/8/654} at [14.4.3]. Only one record of walkthroughs identifies removal of sediment from streams as a work to be done {J24/74T/39} and there is no record of removal of sedimentation in the available weekly construction records, though I am not convinced they would necessarily have merited being mentioned there. Factual evidence, apart from evidence of system from Snr Loeber and Snr Gasca, is either entirely or almost entirely absent. Absence of evidence is not necessarily evidence of absence, but in this area there is an almost deafening silence. It remains to be determined on a site by site basis whether there was or would have been sedimentation of particular watercourses that required or justified cleaning out while the initial works were being conducted or later, and whether sedimentation attributable to the ROW works has caused damage. That said, I have the clear impression from the evidence that clearing of sediment from watercourses as a distinct operation (as opposed to being part of or incidental to the works on a crossing as the main works were being carried out) happened rarely.

I consider the need for revetments and other works on a site-specific basis later.

Failure of maintenance and its consequences

The Claimants’ case on maintenance is very lightly sketched and is barely a matter of expert opinion. There is ample evidence of walkthroughs, punchlists and later surveys of the condition of the ROW. There is also evidence that problems, when encountered, were addressed: see [514]. There is no evidence, either factual or geotechnical, that would justify a finding of a systemic failure to carry out appropriate maintenance of the long term erosion works that were installed. Where appropriate it must be dealt with on a case by case basis. I have already rejected the Claimant’s generalised case that there was a systematic failure of the long term erosion works that were installed: see [512] above.

For similar reasons, I make no findings of a generic nature about the consequences of any failures that did in fact occur. Given that the purpose of geotechnical erosion control works was to prevent damaging erosion and sedimentation, it is obvious that a failure to install appropriate geotechnical works either adequately or at all had the potential to cause or permit increased erosion and sedimentation of land and watercourses. Whether it did so and did so to an extent that caused significant adverse consequences for a Claimant can only be decided by reference to site-specific relevant evidence.

I use “cattle” in this heading as a compendious term for the alternative causes of erosion advanced by the Defendant on the basis of Dr Savigny’s evidence. The following short points may be noted:

There are factual disputes about what was found on comparator farms, which require individual resolution. In the most general of terms, I find that the evidence from and around the ROW on the farms alleged to be affected by the Ocensa pipeline is more compelling than comparison with the conditions on comparator farms, though the comparative exercise is in some cases informative, as appears below.

Hydrology and water quality were important elements of the Claimants’ case that they had suffered substantial damage to their streams as a result of sedimentation from the ROW. The case was set out in detail in Appendices 1 and 1A to the 2012 Further Information {B2.3/34/467}, {B2.3/34/467}. In briefest outline, the case being advanced was that sedimentation had led to increases in levels of iron which in turn led to increased colouration and turbidity and made the water offensive to taste and smell. The increase in iron was alleged to give rise to risks to the health of humans and animals. Increased concentrations in other elements were also relied on in the pleaded case.

Dr Tobon and Dr Penuela were the experts who were intended to support this area of the case. Dr Tobon’s academic career shows him to be fully qualified to act as an expert though, in common with most of the other experts in the case, he had not previously acted as such in contested litigation in this jurisdiction. The basic division of responsibilities was that:

The importance to the Claimants’ case both on causation and on damage of the evidence of both experts about water quality was clear and appears from their written opening {C4/3/34}, particularly at [420, 422, 469.3, 470]; and it was underpinned by Dr Tobon’s sampling results. Reflecting the interlinking nature of the two experts’ evidence, Dr Penuela was scheduled to give evidence immediately after Dr Tobon. However, after the end of Dr Tobon’s evidence on Day 29 of the trial (25 November 2014) the Claimants announced that Dr Penuela was not going to be called because, as they put it, they had “considered … whether [they] need[ed] still to rely on the evidence of Dr Penuela” and had concluded that they did not.

A fuller explanation of the decision was given on 2 December 2014 by letter from Leigh Day to Freshfields {N/2/1}. It appears from the letter that Dr Tobon had at some stage informed Leigh Day that, in relation to the Trial Case properties, he did not wish to rely on his water quality sample results. “Professor Penuela relied principally on the sample results of Dr Tobon for the Trial Case properties. During meetings in London immediately prior to his giving evidence, it became apparent that he had limited familiarity with sample locations and conditions on the Trial Case properties such that his evidence was of little assistance in resolving the disputed issues on water quality sampling.” The letter went on to say that “in light of the above, the Claimants do not consider the water quality sample results sufficiently reliable to support allegations of an impact on water quality in relation to the Trial Case farms or to support arguments on causation. For the above reasons, the Claimants do not pursue a case in relation to water quality on the Trial Case farms in reliance of [sic] experts’ water quality sampling results, comprising both laboratory sample results for all parameters tested (including but not limited to iron, manganese,

In the light of these concessions, I am not required to make findings about the water sampling exercise or what it might have shown. But in closing submissions the Defendant has submitted that Dr Tobon’s evidence about his water sampling (though now withdrawn) shows that he lacked objectivity and scientific rigour, that he did not understand his duties to the Court, and that he presented himself as an advocate for the Claimants’ case. They go further, submitting that his analysis of water samples reveals bias and that the Court can have no confidence in Dr Tobon’s reported observations relating to the condition of streams. That, taken in conjunction with his evidence to the Court about whether or not he had Dr Card’s draft report and findings, and his citation from an academic text that is criticised by the Defendant, leads the Defendant to invite the Court to place no reliance whatsoever on Dr Tobon’s evidence. These are very serious allegations to make against a witness of undoubted distinction in his field, and I must address them fully.

The Defendant’s attack on Dr Tobon identifies 11 separate areas of criticism {C4/4.7/336}ff, of which the first six are put at the forefront of the submission. They can be briefly summarised as follows:

Claiming Expertise: In his first report Dr Tobon tabulated the analyses of his water samples and expressed opinions about their implications for water quality and causation. {H7.3/3/683} provides a typical example: against the total iron reading for one sample Dr Tobon gives as his interpretation of the water analysis result that “This value exceeds the values accepted by the WHO. These high concentrations of total iron in this caño are associated with sediments that were deposited on the caño’s bed and that caused the bed’s narrowing.” It is now entirely clear that Dr Tobon is not an expert on issues such as the quality of water for human and animal consumption and that he would not be able to to provide an objective interpretation such as I have just set out (which, for shorthand became known as “the third column”) {Day28/10:10}, {Day28/63:6} {Day28/166:1}.

Three criticisms are made, which are interlinked. First, Dr Tobon should not have included the third column and other interpretations of water quality and fitness for human or animal consumption as it was outside his area of expertise. Second, Dr Tobon should not have signed the expert’s statement of truth asserting that all matters in his first report were within his field of expertise. Third, when coming to give evidence to the Court, Dr Tobon should have made clear his absence of expertise in this area rather than leaving it to be established in cross-examination. Applying the high standards applicable to experts in contested English litigation, I accept all of these criticisms as justified. However, there are very substantial mitigating circumstances. First, Dr Tobon said in evidence that he told Leigh Day he was not an expert in this area {Day28/10:16}. Even if he did not, the obligation on the legal team to ensure that an expert does not give evidence which he is not qualified to give is always present and is particularly important when dealing with experts who are not experienced in the demands and technicalities of contested English litigation. Second, Dr Tobon had referred to his lack of expertise about water quality for animal consumption and about the levels of Manganese that generates toxicity or health problems in answering Part 35 Questions, which will have been done with the assistance of the legal team {H7.5/44.2/1289.29}; and in his joint meeting with the Defendant’s water quality expert he is recorded as having said that he was “not an expert on issues such as quality of water for human or animal consumption” {H23.5/15/1230}. As for the question of clarifying the position when he came to give evidence, I consider that any criticism is more fairly directed at the legal team who by then knew Dr Tobon well. My instinctive reaction (not having heard argument specifically on the point) is that it is a responsibility of those having conduct of the trial to decide (after reviewing all of their evidence) what matters are going to be brought to the attention of the Court by way of correction or otherwise at the start of a witness’ evidence, whether that is done in answer to specific questions in chief or the expert “volunteers” matters. This will involve prior dialogue with the witness, and it may be that the witness’ (privileged) answers will deflect the lawyers. Whether I am right or wrong in my instinctive reaction, I would be slow to criticise someone such as Dr Tobon who is unfamiliar with English procedure and the Court’s expectations and who would hope and expect to be guided by others about how he should assist the Court. I do not think that the fact that he has been provided with the normal information about an experts’ duties alters the position; my attitude would be different if he were an experienced English litigation expert. Finally, when tackled on his lack of expertise in cross-examination, he readily acknowledged it.

For these reasons, while I accept that the criticisms are accurate, they would not on their own justify the wholesale discounting of Dr Tobon’s evidence.

Water sampling locations: The Defendant submits that Dr Tobon’s water sampling locations were chosen irrationally. Specifically, the Defendant criticises the fact that on his first visit Dr Tobon took samples where the ROW intersected streams while on his second visit he set out to take samples 50m above and 50m below the point of intersection {C4/4.7/339} at [51] & [52]. In addition it is said that his first sampling exercise assumed that, if the Ocensa pipeline construction impacted water quality, it would be evident at the ROW crossing and that his explanation of his second sampling method, namely that he was testing the null hypothesis that there are no differences between the concentration of any element upstream or downstream of the ROW if there is no impact from the ROW, is not to be accepted.

I reject both of these criticisms and do not consider that they support the submission that Dr Tobon’s sampling was to try to collect evidence in support of the Claimants’ case rather than to try to test the case objectively:

The second criticism under this head ({C4/4.7/340} at [54]-[58]) relates to the fact that, although he set out to take samples in pre-defined places, in fact he did not do so; and his evidence (to which I have already referred) about taking (or not taking) samples from stagnant water. While it is legitimate to question where and why he took his samples, I reject the suggestion that he set out to obtain samples that would provide results intended to be biased in favour of the Claimants. Similarly, I am not persuaded that his taking of individual “spot samples” on comparator farms without having any a priori method for defining where such samples should be taken as evidence of deliberate bias. It raises questions about whether the samples are representative, but that is another question, to be assessed elsewhere.

Water sampling variables: There are two matters relating to Dr Tobon’s choice of what he sampled for that the Defendant submits show a lack of objectivity on his part:

Dr Tobon was cross-examined on both of these changes. He undoubtedly knew it to be the Claimants’ case that stream water had been rendered unfit for human consumption by the Ocensa pipeline works. He must also have known that E. coli and total coliforms (if found) would (at least as a working assumption) have their origins in faeces and not in the pipeline works; and he knew that their presence would independently render stream water unfit for human consumption in accordance with the WHO guidelines to which he referred {H7.3/3/875}. It is also correct (and he recognised) that the samples tested provided consistent evidence of the widespread presence of each. His evidence was that the decision not to continue testing for E. coli and total coliforms was his and that he had communicated that decision to Leigh Day. His reason for doing so was that he is a hydrologist and he decided to focus on the hydrological factors and everything that was related to hydrology; in other words he decided to analyse the aspects that he thought were relevant in order to be able to identify any level of damage that might have been caused (by the pipeline works) to the streams in the farms {Day29/75:6} ff. He later described his objective as being “to find variables that would … help to show the court as variables that were related to what I was observing in the field. So I went eliminating variables that might give the wrong impression and I focussed on the variables that, at that time, and that I still believe are relevant to the case that I have been asked to analyse” {Day29/77:4}.

This answer is understandable in relation to eliminating testing for E. coli and total coliforms, which are not affected by the mechanism of damage that Dr Tobon thought he had seen. It is less understandable in relation to the elimination of colour, which was asserted as a marker of damage attributable to the pipeline by the Claimants’ pleadings to which I have already referred. However, I had no sense at the time that Dr Tobon’s reference to eliminating variables “that might give the wrong impression” meant or implied that he was eliminating variables that he thought might be adverse to the Claimants’ case; and I am not now persuaded that was his meaning. Review of this section of his evidence (including listening to some of it again as well as reading it) leaves me convinced that his reference to “giving the wrong impression” was an example (not unique in the course of this trial on either side) of intended sense being lost in translation.

I am also conscious of the fact that decisions about testing in litigation such as this, even if initially made by an expert, would be taken in conjunction with and endorsed by the legal team. Any legal team competent to conduct litigation such as this (as the Claimants’ team certainly is) would have appreciated the potential significance of E. coli, total coliforms and colour. Furthermore, there are considerations in litigation such as this of which the Court has either partial or no information or understanding, including funding constraints. While the omission of colour is surprising, the Claimants were not under any obligation to continue testing for the omitted variables:

On the material advanced by the Defendant in support of this criticism, I am not persuaded that the later omissions of E. coli, total coliforms and colour cast doubt on Dr Tobon’s integrity as an expert.

Reliance on WHO Guidelines: The Defendant established to my satisfaction that Dr Tobon had misunderstood and misapplied the WHO guidelines upon which he relied on iron, colour and turbidity and I accept its submissions to that effect {C4/4.7/345} at [66]-[69]. That goes to his (now acknowledged) lack of expertise in the area of water quality. It is a factor to be taken into account in the assessment of Dr Tobon as a witness. It does not of itself demonstrate bias (intentional or unintentional). There is also substance in the criticism that he was not prepared to accept that he was wrong even when it should have been clear to him that he was (e.g in relation to iron at {Day28/91:25} - {Day28/95:23}). This was not an isolated example (see below) and informs my overall view of Dr Tobon as a witness.

Interpretation of Sample Results: The Defendant submits that Dr Tobon “tried to analyse the results in a way that supported the Claimants’ case, and in doing so revealed his inherent bias in the Claimant’s favour” {C4/4.7/346} at [71].

The Defendant first highlights Dr Tobon’s treatment of the results for iron, colour and turbidity on two locations on LC54 and one on CF54, the samples being taken two days apart in November 2011. The material is set in convenient form at {C6/16.2/1}.