-Austrian company threatens arbitration after served with termination notices
Two of the government’s major hospital projects have ground to a halt after termination notices were served to the Austrian contractor which yesterday threatened arbitration.
VAMED Engineering GmbH has announced that it is commencing international arbitration proceedings against the Government of Guyana over the two projects, alleging that the government failed to honour tens of millions of euros in certified payments, allowed key financing arrangements to lapse and wrongfully issued notices to terminate the contracts.
The government in a statement has responded to the announcement saying that at every stage, it has acted in good faith and honoured its contractual obligations while consistently engaging VAMED to address “significant delays, performance deficiencies, and contractual non-compliance” based upon reports received from the two projects’ supervising engineers.
The Austrian healthcare infrastructure company, through its attorneys Hughes, Fields & Stoby, made the announcement during a press conference yesterday, saying the arbitration will relate to the €149 million Guyana Paediatric and Maternal Hospital at Goedverwagting, East Coast Demerara, and the €150 million New Amsterdam Hospital Campus in Region Six.
Addressing reporters at the Marriott Hotel in Kingston, Attorney-at-Law Nigel Hughes said VAMED had not taken the decision lightly and that legal proceedings had become unavoidable after months of unsuccessful attempts to resolve the dispute.
“These projects are important projects. They were intended to deliver critical healthcare infrastructure for the people of Guyana… VAMED remains fully conscious of its public importance,” Hughes said. However, he said that substantial works had been completed and certified by the government’s own engineer but remained unpaid.
According to VAMED, its contractual claims amount to €45.53 million, including at least €19.15 million in certified payments, while the Government’s own engineer has separately estimated the State’s indebtedness at approximately €37.94 million. The company said these claims arise from contractual payment certificates and are not speculative. It further stated that it has gone almost a year without receiving payment, with the last payment allegedly made in May 2025.
A central feature of VAMED’s case concerns the financing arrangements for the Georgetown hospital.
The project was funded through an export credit facility backed by United Kingdom Export Finance (UKEF) and financed by UniCredit Bank Austria AG, with the Government of Guyana acting as borrower. According to VAMED, the underlying loan agreement expired in November 2025, and the associated export credit guarantee expired simultaneously because the government failed to renew the facility despite repeated reminders from the financing institutions. The government made no disclosure about the expiry of the funding arrangement.
Hughes questioned why the government would allow financing supporting a critical national healthcare project to expire, arguing that the lapse removed a key payment security mechanism relied upon by the contractor.
The company also said that the government issued Notices of Intention to Terminate both contracts on June 2, 2026, despite owing substantial certified sums. VAMED holds that any slowdown in construction resulted directly from the government’s failure to pay and maintains that the attempted termination breached the contracts.
As part of the arbitration before the International Chamber of Commerce (ICC), VAMED said it will seek payment of outstanding certified sums, additional contractual entitlements, interest on overdue payments, protection against calls on performance bonds and guarantees, and damages arising from what it describes as an unlawful termination.
During a question-and-answer session, VAMED rejected suggestions that project delays prompted the dispute.
The company maintained that construction slowed only because certified payments were not made and insisted that the termination was driven by financial issues rather than performance. “The termination of this contract has nothing to do with delays,” Hughes said. “It has everything to do with, one, non-payment, and two, the loss of the export credit guarantee.”
The company also rejected suggestions that there were quality concerns with its work, saying no formal contractual complaints had been raised by the government regarding construction standards. It disclosed that dozens of containers carrying project equipment remain at the port, incurring storage and demurrage charges because of unresolved tax exemption issues.
Reciprocal obligations
Contrary to VAMED’s assertions, the government said that the issues affecting these projects cannot be reduced simply to a question of payments. “The contracts impose reciprocal obligations on both parties, significantly like any other contract: payments are commensurate with measured works completed and approved, and the procurement of construction material and equipment,” the statement said.
The Government, it continued, has repeatedly documented concerns regarding delays in execution, failure to meet agreed milestones, inadequate mobilisation of resources, and the contractor’s inability to maintain the pace necessary for timely completion. These matters formed the basis of extensive contractual correspondence over many months, the government noted.
“The Ministry of Health exercised its contractual rights only after providing VAMED with numerous opportunities to remedy these deficiencies. The Notices of Intention to Terminate were issued pursuant to the contractual provisions after careful consideration of the contractor’s performance and in accordance with the dispute resolution mechanisms established under the contracts.”
The Government said it also rejects the suggestion that certified payment certificates automatically establish an undisputed indebtedness. “The amounts referenced by VAMED remain subject to the contractual valuation process, applicable contractual provisions, rights of set-off, certification procedures, and the resolution of multiple outstanding contractual issues. It is therefore inaccurate to characterise these figures as uncontested liabilities.”
Similarly, it said allegations concerning export credit financing fail to acknowledge the contractual realities surrounding project implementation. “Financing arrangements are intrinsically linked to the progress and performance of the projects. Any attempt to portray the financing issues in isolation from the contractor’s performance presents an incomplete and misleading account of the circumstances.”
The statement informed that the Ministry of Health has consistently sought an amicable resolution throughout this process and has participated in discussions aimed at avoiding resort to termination and/or arbitration, with the hope that the projects would be completed to provide the intended valuable services to the people of Guyana, while protecting the interests of the people of Guyana and ensuring the prudent use of public funds.
Should VAMED commence arbitration proceedings, the Government said it will vigorously defend its position before the appropriate tribunal. “The Government is confident that the complete factual record, including the extensive documentary evidence regarding the contractor’s performance, contractual compliance, and the actions taken by both parties, will demonstrate that its decisions were lawful, justified, and made in accordance with the contracts.”
The Paediatric and Maternal Hospital project was announced during the presentation of the 2022 National Budget as a flagship healthcare investment. Financed through UK Export Finance at a cost of €149 million, the 256-bed specialist hospital is expected to become Guyana’s first level-five national referral centre for maternal and paediatric care. In November 2024, President Irfaan Ali publicly criticised the pace of construction, describing it as “slothful” and warning that liquidated damages would be imposed if progress did not improve.
On February 13 this year, Health Minister Dr Frank Anthony attributed delays in the construction of the Paediatric and Maternal Hospital to ownership changes involving VAMED, telling the National Assembly that the government was now negotiating with the new management to ensure completion within a realistic timeframe.
Anthony said then that government engineers and representatives of VAMED were finalising updated plans and timelines for both the Paediatric and Maternal Hospital and works related to the New Amsterdam Hospital, after which the public would be informed of revised completion schedules.
The delays in the completion of the project had also attracted criticism from Opposition Leader and We Invest in Nationhood (WIN) leader Azruddin Mohamed, who described the unfinished structure as a stalled project and questioned its management.
“Behind me should have been a finished paediatric and maternal hospital. Instead, it is an empty shell,” Mohamed said in a social media address, alleging mismanagement and warning that additional funds may be required, he stated.
President Ali turned the sod for the €149 million ($32 billion) project on July 31, 2022, describing it as a landmark investment intended to deliver world-class healthcare for women and children. The turn-key facility, being constructed on Plots 7 and 8 at Plantation Goedverwagting, East Coast Demerara, is designed as a level-five national referral centre with 256 beds.
The hospital is expected to provide specialised paediatric and maternal care, neonatal intensive care services, obstetrics and gynaecology, advanced imaging including MRI and CT scanning, and sub-specialty services not currently available at the Georgetown Public Hospital Corporation.
If the arbitration proceeds it will the second major dispute in recent years between the government and a contractor. Arbitration was also floated by the joint venture in the massive gas to energy project.
Discussion