ANCAP signed separate distribution contracts with PUDSA and Axion whereby the two companies became two of the three distributors of fuel in Uruguay. In late 2016, ANCAP decided not to renovate the distribution agreement with PUDSA and Axion but continued to provide fuel to both companies for distribution. According to PUDSA and Axion, ANCAP breached the distribution agreements, reducing the companies’ profit margins.
PUDSA and Axion sent letters to ANCAP notifying the initiation of an ad hoc arbitration pursuant to the arbitration clause in the distribution agreements and requesting ANCAP to appoint an arbitration. ANCAP rejected the admissibility of arbitrations on grounds that the distribution agreements were no longer in force.