Canada mulls legal action against Colombia over cancelled contract with national defence ministry

Canada mulls legal action against Colombia over cancelled contract with national defence ministry

Contract became political fodder during Colombia presidential campaign

A Canadian Crown corporation is considering legal action against Colombia after that country’s Ministry of National Defence cancelled a contract worth hundreds of millions of dollars to construct its new ministry headquarters.

The Canadian Commercial Corporation (CCC), a Crown corporation that reports to International Trade Minister Maninder Sidhu, confirmed Colombian’s Ministry of National Defence had "terminated" the contract.

A CCC spokesperson said the federal agency was “limited in what it could disclose” because it was “bound by confidentiality obligations” under the failed “government-to-government” agreement.

“The CCC is currently assessing its legal and commercial options under applicable law,” spokesperson Mouktar Abdillahi said.

The CCC is Canada’s contracting agency for government-to-government deals.

Colombian Defence Minister Pedro Sánchez's ministry announced in February that it was cancelling the contract valued at about 1.5 trillion Colombian pesos that had been signed on Aug. 2, 2022. At that time, 1.5 trillion Colombian pesos was worth around $484 million Cdn.

#ComunicaciónOficial | El Ministerio de Defensa Nacional se permite informar que, en el marco del Proyecto Fortaleza, decidió la terminación unilateral del Acuerdo G2G No. 009 de 2022 suscrito con la Canadian Commercial Corporation, ante la imposibilidad de avanzar en su… pic.twitter.com/wzdZ3ylhwj

Documents first obtained by Colombian news agency Cambio and provided to CBC News say the contract was cancelled after the Colombian Ministry of National Defence concluded CCC’s proposals overshot the budget and missed the project’s scope following more than a year of back and forth between the two sides.

“No proposal presented by CCC managed to adjust to the budget contractually established for the execution of the project,” according to a Ministry of National Defence decision memo dated Feb. 13.

The issue became political fodder during Colombia’s ongoing presidential campaign after candidate Paloma Valencia raised questions over the status of about 195 billion pesos ($64 million Cdn) that had been allegedly transferred to CCC by the current administration of President Gustavo Petro.

"Just imagine, the minister transferred 195 billion of the Colombian people's money to a contractor in Canada, and a few months later they backed out of the contract. Where is the 195 billion? Who answers for the 195 billion?" Valencia said in a statement.

"Why did they transfer 195 billion to the contractor if there isn't a single brick, a single blueprint or a single shred of the construction? They need to answer to us for that money.

The first round of voting in Colombia’s presidential election is set for Sunday.

The Colombian Ministry of Defence issued a statement saying that the 195 billion pesos are sitting in a Canadian bank account and had accrued about $6.9 million US in interest. The statement did not name the bank or identify who controlled the account.

The funds came from about 569 billion Colombian pesos (about $189 million Cdn) that had been forwarded into a trust fund held by Fiduciaria Scotiabank (now known as Davibank S.A) in Colombia for the project, according to the Ministry of National Defence statement.

It’s unclear from the statement whether CCC ever received any funds for the project, which aimed to build new Bogota headquarters to house the Ministry of National Defence and the Colombian National Police.

The new, futuristic headquarters was designed to resemble diamonds to symbolize "indestructable strength," according to a ministry video. It replaces the previous headquarters that were demolished in 2021 because of serious structural issues.

The Ministry of National Defence did not respond to a request for comment.

The CCC says the Canada-Colombia Free Trade Agreement (FTA), which was signed in 2008 and came into force in 2011, is one of the international frameworks that governs the contract.

Antony Rizk, CCC’s director of business development, wrote Colombia’s Ministry of National Defence on Feb. 27, saying that the agreement was signed “under the investment protection standards provided in the FTA,” according to an excerpt contained in a March 13 ministry decision memo provided to CBC News.

“The [Ministry of National Defence] is disregarding Colombia’s international obligations, not only those derived from the FTA, but also general principles of international law such as good faith,” said the excerpt from the letter contained in the memo.

"The [Ministry of National Defence] configured an unlawful termination of the agreement ... constituting a breach of contract and a violation of the international obligations assumed by Colombia. "

However, in its own analysis, the Colombian Ministry of National Defence said it was well within its rights to terminate the contract after it hit a “scenario of no return” with the CCC over differences in the scope and cost of the project.

The ministry cancelled the deal under terms outlined in the contract, according to the analysis contained in the decision memo, first obtained by Cambio.

The differences over the cost and scope of the project began in late 2024 after ministry officials told the CCC in September to cap the cost of the project at 1.499 trillion Colombian pesos.

The CCC responded with an initial proposal costing 1.531 trillion pesos that would have left six of 17 floors unfinished and only 5,000 of the planned 9,000 workspaces completed, according to the Feb. 13 decision memo.

Ministry officials responded in October 2024, requesting more details of the initial proposal and then panned CCC’s updated proposal as inadequate. The CCC was told in a Feb. 20, 2025, letter that its second, updated proposal “exceeds the budget allocated to the project.”

A meeting on June 20, 2025, between the Colombian Ministry of National Defence and CCC officials at the Canadian Embassy in Bogota, where it was decided to create working groups to sort through the “technical, legal, financial and tax viability” of the contract, failed to lead to a resolution, according to the Feb. 13 decision memo.

The main sticking point, from the CCC’s perspective, according to Rizk’s letter, appeared to stem from the ministry’s “surprise” decision that “it would not assume the tax burdens” of the Canadian Crown corporation as part of the deal.

“The CCC legitimately trusted … that the agreement would be executed according to its terms, including the tax obligations assumed by the [Ministry of National Defence],” said the excerpt of Rizk’s letter included in the March 13 decision memo.

The CCC sealed a $418-million Cdn government-to-government deal with Colombia in 2023 to supply the country with 55 light armoured vehicles from General Dynamics Land Systems-Canada, based in London, Ont.

Jorge Barrera is a Caracas-born journalist currently based in Mexico City for CBC News. He previously worked with CBC's Investigative Unit and CBC's Indigenous Unit. Follow him on X @JorgeBarrera or email him jorge.barrera@cbc.ca.