Summary

Reproduced from www.worldbank.org/icsid with permission of ICSID.

NOTICE OF INTENT TO SUBMIT A CLAIM TO ARBITRATION

Under Article 10.16 of the United States-Peru Trade Promotion Agreement, signed on April 12, 2006 and entered into force on February 1, 2009 (the "Treaty"), the Concession Agreement for the Supply of Renewable Energy to the National Interconnected Electric System, dated February 18, 2014 (the "RER Contract"), and the International Centre for Settlement of Investment Disputes ("ICSID") Rules of Arbitration, and with a view toward resolving this dispute amicably, Claimants Latam Hydro LLC ("Latam Hydro") and CH Mamacocha S.R.L. ("CH Mamacocha") respectfully serve this Notice of Intent to Submit a Claim to Arbitration ("Notice") on Respondent, the Republic of Peru ("Peru"), by and through its undersigned counsel, Baker & Hostetler LLP, for claims arising out of Peru's pervasive and ongoing interference with development and completion of a hydroelectric plant and transmission line project near the Mamacocha Lagoon in the Arequipa region of Peru (the "Mamacocha Project" or "Project").

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II. THE TREATY AND THE RER CONTRACT

4. The Treaty is a bilateral free trade agreement that strives to "[s]trengthen the special bonds of friendship and cooperation between [the U.S. and Peru] and promote regional economic integration[,]" and "[e]nsure a predictable legal and commercial framework for business and investment."[1]

5. Under Section A of Article 10, Peru must provide substantive protections to U.S. investors and investments, including:

a. Peru shall accord covered investments treatment "in accordance with customary international law, including fair and equitable treatment and full protection and security" as provided in Article 10.5;[2]

b. Peru may not "expropriate or nationalize a covered investment either directly or indirectly through measures equivalent to expropriation or nationalization" except in limited cases where the measures were "for a public purpose," undertaken "in a non-discriminatory manner[,]" upon "payment of prompt, adequate, and effective compensation[,]" and "in accordance with due process of law and Article 10.5[,]" as provided in Article 10.7;[3] and

c. Peru must treat U.S. investors and investments no less favorably than it treats investors and investments from countries other than the United States "with respect to the establishment, acquisition, expansion, management, conduct, operations, and sale or other disposition of investments" in Peru, as provided in Article 10.4.[4]

6. Section B of Article 10 authorizes an investor, "on its own behalf," to submit to arbitration "a claim that the respondent has breached an obligation under Section A" of Article 10.[5] Section B of Article 10 also authorizes an investor, "on behalf of an enterprise of the respondent that is a juridical person that the [investor] owns or controls directly or indirectly" to submit to arbitration "a claim that the respondent has breached . . . an investment agreement."[6]

7. Latam Hydro is an "investor," as defined in Article 10.28, because it is a U.S. enterprise "that attempts through concrete action to make, is making, or has made an investment in [Peru]."[7]

8. CH Mamacocha is a Peruvian "enterprise" and juridical person that Latam Hydro directly owns and controls and, at times in the past, indirectly owned and controlled. Latam Hydro has always been, directly or indirectly, the 100 percent owner and in control of CH Mamacocha.

9. Latam Hydro has made the following "investments," as defined in Article 10.28, that involve "the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk."[8]

a. Investments in "an enterprise," including investments in CH Mamacocha;

b. Investments in "shares, stock, and other forms of equity participation in an enterprise," including the acquisition of CH Mamacocha's shares;

c. Investments in "bonds, debentures, other debt instruments, and loans," including loans to CH Mamacocha;

d. Investments in "turnkey, construction, management, production, concession, revenue-sharing, and other similar contracts," including those concerning the RER Contract or, more generally, the Mamacocha Project;

e. Investments in "intellectual property rights," including those concerning the development and construction of the hydroelectric plant and transmission line contemplated in the Mamacocha Project;

f. Investments in "licenses, authorizations, permits, and similar rights conferred pursuant to domestic law," including those obtained by CH Mamacocha in furtherance of the Mamacocha Project; and

g. Investments in "other tangible, or intangible, movable or immovable property, and related property rights, such as leases, mortgages, liens, and pledges," including investments in equipment, vehicles, and other property rights obtained in the execution of the Mamacocha Project.

10. The RER Contract is an electricity generation, supply and guaranteed income agreement between Peru, acting through the Ministry of Energy and Mines ("MINEM"), and CH Mamacocha in which Peru, among other things, guaranteed CH Mamacocha a price of US $62 per megawatt hour for up to 130,000 megawatt hours per year for a 20-year period (referred to hereinafter as the "Guaranteed Income" as defined in the RER Contract).[9]

11. The RER Contract is an "investment agreement," as defined in Article 10.28 because it is a "written agreement between a national authority of [Peru] and a covered investment (i.e., CH Mamacocha) . . . on which the covered . . . investor (i.e., Latam Hydro) relies in establishing or acquiring a covered investment (i.e., the Mamacocha Project and CH (i.e., CH Mamacocha) . . . to supply services to the public on behalf of [Peru], such as power generation or distribution, water treatment or distribution, or telecommunications."[10]

12. The RER Contract provides that "[d]isputes whose amount is greater than Twenty Million Dollars (US $20,000,000) or its equivalent in national currency, will be resolved by legal international arbitration through a procedure processed in accordance with the Rules of Conciliation and Arbitration of [ICSID] established in the Convention on the Settlement of Investment Disputes between States and Nationals of other States, approved in Peru by Legislative Resolution No. 26210, to which regulations the Parties submit unconditionally."[11]

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[1] Exhibit C-001, Preamble.

[2] Id., Art. 10.5(1).

[3] Id., Art. 10.7(1).

[4] Id., Art. 10.4.

[5] Id., Art. 10.16(1)(a)(i)(A).

[6] Id., Art. 10 .16(1)(b)(i)(C).

[7] Id., Art. 10.28.

[8] Id.

[9] Exhibit C-002, Clause 1.4.26.

[10] Exhibit C-001, Art. 10.28.

[11] Exhibit C-002, Clause 11.3(a).