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Peru Investment Protections

Brief Summary: ALFREDO BULLARD, BULLARD, FALLA & EZCURRA. This is an excerpt of a chapter in the book Latin American Investment Protections: Comparative Perspectives on Laws, Treaties, and Disputes for Investors, States, and Counsel edited by Jonathan C. Hamilton, Omar E. García-Bolívar, and Hernando Otero and published by Martinus Nijhoff (Brill) in which the author discusses the domestic and international legal framework for foreign investment and investment disputes in Peru.

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1. INTERNATIONAL LAW INVESTMENT PROTECTION FRAMEWORK

Within the context of investment promotion, Peru has adopted as part of its legal system a number of international instruments which provide investors a secure and reliable atmosphere for their investments.

Among the key international instruments, Peru has signed the Charter of the Multilateral Investment Guarantee Agency[1] (“MIGA”), which aims to create a favorable environment for foreign investors so as to contribute to the growth of the free entrepreneurship economy in Peru. Additionally, Peru has concluded a number of bilateral investment agreements that are consistent with international standards aimed at protecting investments. Peru has also established a number of dispute settlement mechanisms that guarantee the effectiveness of the rights granted to investors by ratifying, among others, the Convention on the Settlement of Investment Disputes between States and Nationals of Other States.

Peru signed the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (“ICSID”) on 4 September 1991.[2] This Convention was ratified through Legislative Resolution No. 26210, dated 9 July 1993, published in the Official Gazette “El Peruano” on 10 July 1993 and entered into force on 8 September 1993.[3] Additionally, since 11 October 1996, Peru, by virtue of Article 25 of the ICSID, has empowered the State-owned company Perupetro S.A. to enter into arbitration agreements that allow the company to submit to the ICSID any disputes with nationals of other countries.

Peru has concluded the following treaties[4] on the protection of private investment: [Germany, Argentina, Australia, Bolivia, Canada, Chile, Colombia, Cuba, Denmark, Ecuador, El Salvador, Spain, Finland, France, Italy, Japan, Malaysia, Norway, the Netherlands, Paraguay, Portugal, the United Kingdom, the Czech Republic, the Republic of Korea, the People’s Republic of China, Romania, Singapore, Sweden, Switzerland, Thailand, Belgium-Luxemburg Economic Union, and Venezuela. Peru has also entered into the following seven free trade agreements: Canada, Chile, the People’s Republic of China, Singapore; the Republic of Korea, Switzerland, Norway, Iceland, and Lichtenstein; and the United States.]

. . .

2. INVESTMENT DISPUTES

It is important to distinguish the various mechanisms through which the Peruvian State may be subject to investor-state dispute settlement.

A first mechanism can be through agreements, whether legal stability, privatization, concessions, or any other modality, under which the State agrees to submit certain disputes to arbitration. In these cases, the means to access arbitration is the arbitration clause, usually drafted by the State, which does not necessarily establish that the international system is the mechanism for dispute settlement. Frequently, the dispute is settled through domestic arbitration. It is not surprising to find submissions to ad hoc national arbitrations or to the Arbitration Center of the Lima Chamber of Commerce.[5]

A second mechanism is through treaties, such as BITs or FTAs. In these cases, the State of Peru can be involved in what is known as an arbitration without agreement—investors from a given country resort to a mechanism which the country has agreed to under a treaty, and which allows the initiation of an arbitration proceeding even without the existence of an agreement between the State of Peru and the private investor.[6]

As can be seen, even if these two phenomena share common elements and problems, they also have significant differences. In one case the arbitrability[7] of the disputes stems from an arbitration agreement, usually drafted by the privatizing agency or investment promoter, while in the other case, the arbitrability of the disputes stems from a treaty negotiated between the two States, through the process used for this purpose and with the involvement of the Ministry of Foreign Affairs.

[Examples of Peruvian investment treaty arbitrations include:] eleven arbitration proceedings under ICSID … includ[ing]:

  1. DP World Callao S.R.L., P&O Dover (Holding) Limited, and the Peninsular and Oriental Steam Navigation Company v. Republic of Peru (ICSID Case No. ARB/11/21): Brought under the Peru-U.K. BIT, this proceeding relates to the concession of pier facilities. . .[8]
  2. Renée Rose Levy and Gremcitel S.A. v. Republic of Peru (ICSID Case No. ARB/11/17): Brought under the Peru-France BIT, this case relates to property development. . .[9]
  3. Caravelí Cotaruse Transmisora de Energía S.A.C. v. Republic of Peru (ICSID Case No. ARB/11/9): Brought under concession contracts, this proceeding is related to an electricity transmission line project. . .[10]
  4. Renée Rose Levy de Levi v. Republic of Peru (ICSID Case No. ARB/10/17): Brought under the Peru-France BIT, this proceeding is related to the banking sector. . .[11]
  5. Convial Callao S.A. CCI – Compañía de Concesiones de Infraestructura S.A. v. Republic of Peru (ISCID Case No. ARB/10/2): Brought under the Peru-Argentina BIT, this proceeding is related to an toll road project. . .[12]
  6. Tza Yap Shum v. Republic of Peru (ICSID Csae No. ARB/07/6): Brought, under the Peru-China BIT, this proceeding related to an audit and the application of interim measures on fishmeal production project by the SUNAT. The Tribunal found that the application of interim measures was arbitrary and constituted an indirect expropriation.[13]
  7. Aguaytía Energy, LLC v. Republic of Peru (ICSID Case No. ARB/06/13): This proceeding concerned an electricity generation and transmission project and was resolved through an award dated December 11, 2008. The claimant alleged discriminatory treatment against the Claimant upon classifying the electricity line, considering that this action breached the legal stability agreement signed with the State. The Award was granted in favor of Peru, as the Tribunal considered whether the legal stability agreement was only related to the stabilized norms and whether it protected Aguaytía from discrimination.[14]
  8. Duke Energy International Perú Investments No. 1 Ltd. v. Republic of Peru (ICSID Case No. ARB/03/28): This concerned an electricity generation project and was resolved through an award dated August 18, 2008. Based on the legal stability agreement, the State of Peru, through SUNAT, stopped applying the stabilized tax system. The award ordered the State of Peru to pay compensation for breaching the stabilized system for the tax treatment of the income tax to corporate mergers. However, the award dismissed the claim regarding the application of the special depreciation system to Duke’s assets.[15]
  9. Industria Nacional de Alimentos S.A. and Indalsa Perú S.A. (Lucchetti S.A. and Luchetti Perú S.A.) v. Republic of Peru (ICSID Case No. ARB/03/4): This case was related to a pasta production project and was resolved through an award dated February 7, 2005. The claimant alleged a breach of the Peru—Chile BIT owing to the rescission of its operating license for alleged violations of Peru’s environment laws. The panel found it lacked jurisdiction since the acts in question occurred before the entry into force of the BIT, which did not cover disputes prior to its entry into force.[16]
  10. Compagnie Miniére Internationale Or S.A. v. Republic of Peru (ICSID Case No. ARB/98/6): This case was related to a gold exploitation project and was concluded through an agreement between the parties.[17]
  11. Elecnor S.A. and Isolux Corsán Concesiones S.A. v. Republic of Peru (ICSID Case No. ARB/12/5): This case relates to an electricity transmission concession.[18]

 

 

[1] See MIGA Members, The World Bank, http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/ORGANIZATION/BODEXT/0,,contentMDK:20122866
~menuPK:64020025~pagePK:64020054~piPK:64020408~theSitePK:278036~isCURL:Y,00.html (accessed 26 May 2011).

[2] See International Centre for Settlement of Investment Disputes Convention (4 Dec. 1991) (“ICSID Convention”), available at http://icsid.worldbank.org/ICSID/StaticFiles/basicdoc/CRR_English-final.pdf.

[3] See Law No. 26210, Legislative Resolution (Peru) (9 July 1993), available at http://www.ciac-iacac.org/documentos/2006_10_9_9_26_42_Resolucion%20legislativa%20No%2026210%20de%201993%20(CIADI).pdf.

[4] See Convenios Bilaterales de Inversión [Bilateral Conventions on Investment], PROINVERSIÓN, available at http://www.proinversion.gob.pe/0/0/modulos/JER/PlantillaSectorHijo.aspx?ARE=0&PFL=0&JER=3860 (accessed 10 Mar. 2010).

Peru executed a FTA with the European Union on 19 May 2010 that is subject to the approval of the European Parliament and has not yet entered into force.

[5] See Arbitration Center of the Lima Chamber of Commerce – Ad Hoc Arbitration Advantages http://200.37.9.27/CCL/ccl_arbitraje/es/ccl_ventajas.aspx

[6] A third mechanism, according to Article 47 of Legislative Decree 757, is to use treaties related to non-commercial risk insurance, such as MIGA and OPIC, because Peru has ratified the Constitutive Agreement with the Multilateral Investment Guarantee Agency (“MIGA,” acronyms in English), through Legislative Resolution No. 25312, published in the official newspaper El Peruano on 3 April 1991; and the Financial Agreement on Investment Promotion between the Peruvian Government and the United States of America (“OPIC,” for its acronyms in English), approved through Legislative Resolution No. 26187, published in the official newspaper El Peruano on 22 May 1993. Nevertheless, the article does not analyze this potential mechanism. See CANTUARIAS, Fernando. Los Tratados Bilaterales de Promoción y Protección Recíproca de Inversiones y el Acceso al Arbitraje [Bilateral Treaties for Investments Promotion and Reciprocal Protection and Access to Arbitration] available at http://www.upc.edu.pe/bolson/0/0/3/33/142/FC5.doc.

[7] VÁRADY, Tibor, BARCELÓ, John J. and VON MEHREN, Arthur T., International Commercial Arbitration A Transnational Perspective. Varady, Barceló and Von Mehren state that: “Wheter a dispute should be decided by arbitrators (instead of courts) depends on the existence, validity, and scope of an arbitration agreement (whether such an agreement has come into existence, whether it is valid, and whether the dispute falls within its scope). This is sometimes called the ‘arbitrability’ question –using the word, ‘arbitrability’, in its broadest sense. ‘Arbitrability’ also has a narrower meaning, referring to whether mandatory law in a given jurisdiction disallows arbitration of disputes dealing with a particular subject matter because that subject matter is infused with high-order public policy concerns”

[8] DP World Callao S.R.L., P&O Dover (Holding) Limited, and the Peninsular and Oriental Steam Navigation Company v. Republic of Peru, ICSID Case No. ARB/11/21 (registered 22 Jul. 2011).

[9] Renée Rose Levy and Gremcitel S.A. v. Republic of Peru, ICSID Case No. ARB/11/17 (registered 24 June 2011).

[10] Caravelí Cotaruse Transmisora de Energía S.A.C. v. Republic of Peru, ICSID Case No. ARB/11/9 (registered 15 Apr. 2011).

[11] Renée Rose Levy de Levi v. Republic of Peru, ICSID Case No. ARB/10/17 (registered 20 July 2010).

[12] Convial Callao S.A. y Compañía de Concesiones de Infraestructura S.A. v. Republic of Peru, ICSID Case No. ARB/10/2 (registered 2 Feb. 2010).

[13] See Tza Yap Shum v. Republic of Peru, ICSID Case No. ARB/07/6, Ward (7 Jul. 2009).

[14] See Aguaytia Energy, LLC v. Republic of Peru, ICSID Case No. ARB/06/13, Award (11 Dec. 2008), available at http://ita.law.uvic.ca/documents/AguaytiaAward_000.pdf.

[15] See Duke Energy International Peru Investments No. 1 Ltd. v. Republic of Peru, ICSID Case No. ARB/03/28, Award (18 Aug. 2008).

[16] See Industria Nacional de Alimentos, S.A. and Indalsa Perú, S.A, ICSID Case No. ARB/03/4, Award (7 Feb. 2005), available at http://icsid.worldbank.org/ICSID/FrontServlet?requestType=CasesRH&actionVal=showDoc&docId=DC686_En&caseId=C225.

[17] See Compagnie Minière Internationale Or S.A. v. Republic of Peru, ICSID Case No. ARB/98/6, Settled (23 Feb. 2001).

[18] Elecnor S.A. and Isolux Corsán Concesiones S.A. v. Republic of Peru, ICSID Case No. ARB/12/5, registered Feb. 12, 2012. In addition, Peru has been involved in The Renco Group, Inc. v. Republic of Peru, a case relating to the La Oroya metallurgical complex in Peru. See The Renco Group, Inc. v. Republic of Peru, Notice of Intent to Commence Arbitration dated 29 Dec. 2010, available at http://italaw.com/documents/RencoGroupVPeru_NOI.pdf.

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