Canada is taking legal action against Colombia over the cancellation of a contract with the Ministry of National Defense

A Canadian Crown corporation is considering legal action against Colombia after the country’s Ministry of National Defense canceled a multi-million dollar contract to build its new headquarters.

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

A CCC spokesman said the 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 evaluating its legal and commercial options under the applicable law,” said ministry spokesman Mouktar Abdillahi.

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

Colombian Defense Minister Pedro Sánchez announced in February that he was canceling a contract worth about 1.5 trillion Colombian pesos signed in Aug. 2, 2022. At that time, 1.5 trillion Colombian pesos were worth about $484 million Cdn.

Documents obtained by Colombian news agency Cambio and provided to CBC News say the contract was canceled after Colombia’s Ministry of National Defense ruled CCC’s proposals went over budget and missed the scope of the project following more than a year of back-and-forth between the two parties.

“None of the proposals submitted by the CCC were able to adjust the contractually established budget for the project,” according to the Department of National Defense’s February 13 decision memo.

‘Where is the 195 billion?’

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

“Just think, the minister transferred 195 billion of Colombian people’s money to a Canadian contractor, and a few months later they withdrew from the contract. Where is this 195 billion? Who is responsible for 195 billion?” Valencia said in a statement.

“Why did they transfer 195 billion to the contractors if there is not one brick, one plan or one piece of construction, they must answer us for that money.

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

Colombia’s Ministry of Defense released a statement saying that 195 billion pesos are sitting in a Canadian bank account and have accrued approximately $6.9 million US dollars in interest. The statement did not name the bank or identify the account holder.

The funds came from nearly 569 billion Colombian pesos (about $189 million) that had been transferred to a fund managed by Fiduciaria Scotiabank (now known as Davibank SA) in Colombia for the project, according to a statement from the Ministry of National Defense.

It is not clear from the statement whether the CCC has received funds for the project, which was intended to build a new headquarters in Bogota to house the Department of National Defense and the National Police of Colombia.

The new, futuristic headquarters was designed to resemble a diamond to symbolize “inexhaustible power,” according to a video of the service. It replaces the previous headquarters which was demolished in 2021 due to serious structural issues.

WATCH | The video shows the plans for the new headquarters of the Ministry of National Defense in Bogota:

The Department of National Defense did not respond to a request for comment.

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

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

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

“I [Ministry of National Defence] set up an illegal termination of the agreement … including breach of contract and breach of international obligations assumed by Colombia. ”

However, in its analysis, the The Colombian MThe National Defense Department said it was within its rights to terminate the contract after a “no-win situation” with the CCC over differences in the project’s scope and cost.

The department canceled the deal under the terms of the contract, according to an analysis contained in the decision memo, first obtained by Cambio.

Differences regarding the cost and scope of the project began in late 2024 after ministry officials told the CCC in September that the cost of the project reached 1.499 trillion Colombian pesos.

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

Department officials responded in October 2024, asking for more information on the original proposal and adding CCC’s revised proposal as a submission. The CCC was told in a letter on Feb. 20, 2025, that its second, revised proposal “exceeds the budget allocated for the work.”

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

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

“CCC was legitimately confident … that the deal would be done on its terms, including the tax obligations assumed [Ministry of National Defence],” said part of Rizk’s letter included in the March 13 decision.

CCC is closed $418-million Cdn a government-to-government agreement with Colombia in 2023 to supply the country with 55 light armored vehicles from General Dynamics Land Systems-Canada, based in London, Ont.