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A. LEGISLATION AND RULES

A.1       Legislation

International arbitration in Peru continues to be governed by Legislative Decree No. 1071 of 2008, based on the UNCITRAL Model Law (the 1985 Model Law with its amendments in 2006), the Urgency Decree No. 020-2020 which modified some articles of the Legislative Decree No. 1071 related to arbitrations where the Republic of Peru (“State“) is a party, and the New York Convention.

Regarding the Urgency Decree No. 020-2020 adopted on 24 January 2020, it established, among others, the following modifications:

  • When the State participates as a party, the arbitration shall be institutional, and it may only be ad hoc when the amount under dispute is not higher than ten Tax Units (each Tax Unit is equivalent to approximately USD 1,227).[1]
  • When a provisional measure is requested against the State party, the party requesting it shall have a financial guarantee in favor of the State entity, with an amount no less than the amount of the contractual guarantee for the execution of the contract.

The Urgency Decree has been widely criticized and, to this date, many arbitral tribunals have reviewed the constitutionality of the request for a financial guarantee for provisional measures against a State party, and disapply it. There was a preliminary opinion by the Commission of Justice of the Congress recommending the derogatory of certain unconstitutional dispositions of the Urgency Decree (e.g., the request of financial guarantee), but to date it has not been approved.

A.2       Institutions, rules and infrastructure

Since last year´s Yearbook, there have not been many developments in the most relevant arbitration institutions in Peru:

A.2.1 Proceedings of the Arbitration Center of the Lima Chamber of Commerce (CCL) are still regulated under rules in force since January 2017. In 2020, during the State of Emergency because of the COVID-19 pandemic, the Center issued practical notes on how to use virtual media and increase celerity and efficiency. They are still in force:

  • The Practice Note No. 1/2020 published in April 2020 set forth the guidelines to be applied by the arbitral tribunals to use virtual media, unless they affected the defense of the parties, were unfeasible or there were good reasons not to apply them in a specific case. These measures include a virtual platform for the parties, the electronic notification of all arbitration proceedings to the parties and arbitrators, the payment of fees through the CCL’s virtual platform and, specifically during the COVID-19 pandemic and until the Council so decides, hearings, conferences and meetings between the parties and the arbitral tribunal will be virtual. The Superior Council invited the parties and arbitrators to adapt the specific rules of the ongoing proceeding to this disposition.
  • The Practice Note No. 2/2020 published in September 2020 addressed rules that aim for more celerity and efficiency in the arbitrations under the Center’s administration. These measures included the implementation of a procedural calendar and reduction of the fees of the arbitral tribunals in case of delay in the issuance of the final award, which should be rendered in a term that does not exceed 50 business days since the closing of the proceeding.
  • The Practice Note No. 3/2020 published on 1 October 2020 substituted the Practice Note No. 2/2020. This Practice Note replicates the rules introduced by Practice Note 2 with some clarifications and amendments, and it applies to cases in which the constitution of the arbitral tribunals occurs after its publication.

Additionally, in December 2021, the Center announced that as of January 2022, the Council of Arbitration would initiate disciplinary proceedings against the parties’ representatives or attorneys who make manifestly malicious or dilatory challenges to the appointment of arbitrators.

Moreover, the Center presented its new rules for dispute boards. These rules became effective as of January 1, 2022.

A.2.2 Proceedings of the Arbitration Center of the American Chamber of Commerce are regulated by its new Arbitration Rules adopted on 1 July 2021. In addition, because of the COVID-19 pandemic, the Arbitration Center issued a “virtual arbitration guide” that was published on 24 April 2020.

Moreover, the Arbitration Center has created an interdisciplinary Special Commission with the purpose of establishing procedures and rules for a Dispute Board mechanism.

A.2.3 Proceedings of the Arbitration Center of CARC-PUCP are still regulated under rules in force since 2017, and the special provisions for emergency arbitrators were published in January 2019. In 2020, the Center issued a Protocol for services in the context of COVID-19, and an actualization regarding the implementation of a virtual platform for the parties’ requests, electronic notifications and virtual conduction of hearings.

Additionally, as of 1 January 2021, the new CARC-PUCP Dispute Board Regulations became effective.

B. CASES

Pursuant to the latest edition of the ICSID’s Caseload Statistics, the Republic of Peru was the state with the most ICSID cases filed in 2021 with a total of nine cases, which are the following:

  • Quanta Services Netherlands B.V. v. Republic of Peru (ICSID Case No. ARB/21/1) under the Netherlands – Peru BIT 1994.
  • Telefónica S.A. v. Republic of Peru (ICSID Case No. ARB/21/10) under the Spain – Peru BIT 1994.
  • APM Terminals Callao S.A. v. Republic of Peru (ICSID Case No. ARB/21/28) under a port Concession Contract.
  • Kaloti Metals & Logistics, LLC v. Republic of Peru (ICSID Case No. ARB/21/29) under the United States – Peru Free Trade Agreement.
  • Metro de Lima Línea 2, S.A. v. Republic of Peru (ICSID Case No. ARB/21/41) under a transportation Concession Contract.
  • Concesionaria Peruana de Vías – COVINCA, S.A. v. Republic of Peru (ICSID Case No. ARB/21/45) under a highway Concession Contract.
  • Metro de Lima Línea 2, S.A. v. Republic of Peru (ICSID Case No. ARB/21/57) under a transportation Concession Contract.
  • VINCI Highways SAS and VINCI Concessions SAS v. Republic of Peru (ICSID Case No. ARB/21/60) under a highway concession contract.
  • Enagás Internacional S.L.U. v. Republic of Peru (ICSID Case No. ARB/21/65) under a gas Concession Contract.

As of the date of writing, Peru has 22 pending and 17 concluded arbitrations before ICSID. The large number of ICSID cases against Peru is the result of many years of large amounts of foreign investment entering the country, which is illustrated by the broad range of issues involved in these investment arbitrations, and not because of a state policy known for expropriation and anti-investment measures, like some other countries in South America. However, during the past years, certain political government decisions have generated new cases. Also, some of these cases are based on ICSID arbitration clauses under Concession Contracts, and not under a BIT or FTA.

In 2021, there were ICSID Awards in two cases against the Republic of Peru:

  • Metro de Línea 2 S.A. v. Republic of Peru (ICSID Case No. ARB/17/3) – Arbitral Award on jurisdiction and liability of 6 July 2021 in favor of Claimant investor
  • Hydrika 1 S.A.C. and others v. Republic of Peru (ICSID Case No. ARB/18/48 – Arbitral Award of 17 August 2021 in favor of Respondent.

B.1       Metro de Lima Línea 2 S.A. (“Claimant”) v. Republic of Peru (ICSID Case No. ARB/17/3) 

The Claimant, a Spanish-Italian Consortium, was granted a concession contract in 2014 to build a 35 km metro railway in Lima. This is the most important project in the country and one of the most important in Latin America since it involves the construction of a fully automated subway line that will connect 10 districts of Lima and will bring together destinations of more than 660 thousand passengers per day, benefiting 2.5 million people. In addition, it will be the first subway mass transit system in Peru.

The Claimant initiated an ICSID arbitration against Peru in 2017 alleging the failure of the State to comply with its obligations related to the delivery of areas for the execution of works, the late approval of the Definitive Engineering Studies of the Project, the lack of timely and complete delivery of the information and documentation necessary for the design and development of the software of the Passenger Control System, and the denial of the request for suspension of obligations due to force majeure.

In July 2021, an award on jurisdiction and liability was rendered by the tribunal, which concluded that Peru was liable for the delays of the project, failures in the supervision and approval of the Definitive Engineering Studies and the delivery of land for the execution of works, and determined that the State must pay damages to the Claimant. The tribunal also rejected Peru´s counterclaim of USD 713 million for alleged socioeconomic and environmental damages. An award on quantum is currently pending to determine the amount of damages to be paid by the State.

B.2         Hydrika 1 S.A.C. and others (“Claimants”) v. Republic of Peru (ICSID Case No. ARB/18/48)  Línea

The Claimants, subsidiaries of Spanish company IBT, owned by Spanish construction group Eurofinsa entered into six contracts to build six small hydroelectric power plants in Peru in 2014. They were scheduled to begin operating by 2019, but the projects generated concerns that they would cause water shortages.

The Claimants initiated arbitration in 2019 under ICSID arbitration clauses in their respective contracts requesting a total of USD 24 million in damages, alleging that the Peruvian State unreasonably delayed the necessary permits for the execution of works, so it was impossible for the investors to comply with the timeframe under the contracts. In addition, the Claimants requested the amendment of the work schedule, which was denied by the State.

Peru filed jurisdictional objections arguing that the Claimants were trying to avoid the requirement in each of the contracts that disputes had to be worth at least USD 20 million to be able to file an arbitration before ICSID, otherwise, the arbitration had to be heard before the Lima Chamber of Commerce.

In August 2021, the tribunal rendered its Award rejecting jurisdiction indicating that the disputes in each of the contracts were less than USD 20 million, and it was not possible to consolidate their claims to meet the jurisdictional requirements in each of their contracts. The tribunal also ordered the Claimants to pay Peru all of its legal fees and administrative costs, which were USD 3 million.

 

The authors are especially grateful to Daichi Yano Tsuha for his collaboration in the preparation of this Yearbook.

[1] 4,600 PEN

Author

Ana María Arrarte is a partner in Baker McKenzie's Lima office. She leads the dispute resolution practice of the Lima office and is considered one of the most experienced lawyers in arbitration in Peru.

Author

María del Carmen Tovar Gil is a partner in Baker McKenzie's Lima office. She leads the international arbitration practice group of the Lima office, specializing in national arbitration and international investment and commercial arbitration involving different industries. She is considered one of the most experienced lawyers in international arbitration in Peru.

Author

Javier Ferero Díaz is a senior associate in Baker McKenzie's Lima office. He has significant experience in international commercial and investment arbitration, as well as national arbitration involving different industries. Javier Ferrero can be reached at [email protected] and +51 1 618 8500.

Author

Angela Camara is a senior associate in Baker McKenzie’s Lima office. She has a solid background in civil law, civil procedures and arbitration. She has advised companies, state entities and individuals in judicial procedures and arbitration, especially in administrative litigious procedures, annulment of arbitration awards, as well as arbitration regarding civil law and contracts with the state. She has also experience in the provision of legal opinions related to her practice areas. Angela can be reached at [email protected] and + 51 1 618 8407.