Reproduced from www.worldbank.org/icsid with permission of ICSID.
TABLE OF CONTENTS
II. THE HEARING CONFIRMED THAT PERU BREACHED THE TREATY
A. Gramercy Is Entitled to CPI Updating, From the Date of Issuance, Plus Interest at a Real Rate.
1. Current Value Had a Clear and Objective Meaning
2. Gramercy Invested In Reliance on that Clear Entitlement to Current Value.
B. The 2013 CT Order Was the Product of Improper Influence from the MEF, in Breach of the Treaty.
C. The MEF's Supreme Decrees Breached the Treaty
1. The MEF's Formulas Are Arbitrary and Irrational and Destroy Substantially All of the Land Bonds' Value.
2. The Supreme Decrees Violate Basic Peruvian Law Requirements of Legality and Reasonableness.
3. The Bondholder Process Is Confiscatory, Non-Transparent, and Discriminatory, and Violates Due Process.
D. Peru Took Away Gramercy's Right to Receive Current Value in Court, in Breach of the Treaty.
III. THE HEARING CONFIRMED THAT GRAMERCY IS ENTITLED TO AT LEAST US$841 MILLION
A. Prof. Edwards Correctly Calculated the Gramercy Land Bonds' True Intrinsic Value at US$1.8 Billion as of 2018
1. Gramercy Is Entitled to Inflation Updating Using CPI.
2. Gramercy Is Entitled to Interest at a Real Rate of 7.22%.
B. But For Any of Peru's Breaches, Gramercy Would Have Received, At a Minimum, US$841 Million
1. But For the MEF's Unlawful Interference with the 2013 CT Order, Gramercy Would Have Received US$841 Million.
2. But For Peru's Denial of Court Access, Gramercy Would Likewise Have Received at Least US$841 Million.
3. But For the MEF's Unlawful Implementation of the 2013 CT Order, Gramercy Would Have Received at Least US$845 Million.
4. Reliable Estimates of the Total Outstanding Debt Confirm Both the Accuracy of These Alternative Valuations and That Peru Can Afford to Apply Them
C. The Fair Market Value of Gramercy's Land Bonds Further Confirms Their Valuation of US$841 Million
IV. RELIEF REQUESTED
1. The hearing confirmed that the "Bondholder Process"
Peru established to wipe out its long-overdue agrarian reform debt is irrational, arbitrary, and confiscatory, and hence violates the Treaty.
2. After the hearing, the basic facts are now clear. All the experts and witnesses confirmed that Peru had an undisputed legal obligation to pay bondholders the true value of their Land Bonds under the current value principle (principio valorista). And there was a decade-long consensus about calculating that value using CPI plus interest--including a "uniform jurisprudence" in Peruvian courts on which both parties' Peruvian law experts agreed, and on which Gramercy and its founder, Robert Koenigsberger, had relied when investing.
3. But just as the Constitutional Tribunal ("CT") was poised to reaffirm that consensus in July 2013, through a considered opinion nearly two years in the making, the Ministry of Economy and Finance ("MEF") intervened. At the eleventh hour, in ex parte meetings, the MEF misled the Justices to believe the objectively false conclusion that ordering Peru to pay what it owed would condemn it to economic ruin. Instead of signing the opinion that the CT had prepared, a CT "majority"--through shocking procedural irregularities that have no place in any country's highest court, plus a dubious casting vote-- adopted a hastily cobbled-together order that handed the MEF enormous discretion to undervalue the debt, endorsing a valuation method that the Justices professed not to understand and which hailed from an error- filled, unexamined desk study the MEF itself had peddled.
4. The MEF then seized this opportunity to issue not one but three formulas that effectively wipe out the agrarian reform debt for a tiny fraction of its true value. These formulas are so irrational and arbitrary that not a single one of Peru's fact or expert witnesses was willing even to explain, much less defend, them. Not the former Minister of Economy and Finance Luis Castilla Rubio (who signed the first formula); not the former Vice-Minister of Finance Betty Sotelo Bazán (who has been involved with the Land Bonds debt for over a decade); and not even Peru's quantum experts, who were unfamiliar with even some of the basic economic concepts underlying the formulas, like parity exchange rates. In contrast, Sebastian Edwards--the former Chief Economist for Latin America at the World Bank, a chaired professor of international economics, and a scholar who has written books on these very subjects--described in considerable and convincing detail that the MEF's initial formula was "completely messed up," and that the MEF's multiple attempts to fix and restate it were no less irrational or arbitrary.
5. The fact and expert witnesses also confirmed that the MEF's formulas are not only economically indefensible, but were adopted in violation of Peru's own administrative procedures, apparently without any MEF scrutiny of the formulas themselves, without any analysis of their impact on bondholders or the nation's budget, and without even fulfilling critical elements of the CT's Order. As Peru's own witnesses and experts admitted, the MEF's application of those formulas in the Bondholder Process has been a complete failure: it has attracted only a small fraction of bondholders; the drop-out rate has been strikingly high; the rate at which bondholders' claims are being processed is so slow that it would take a century for the Process to conclude; the sums it is paying are pitiable; and there is no access to any meaningful court review. Even Min. Castilla admitted it was "disappointing." The unchallenged words of one of its bondholder victims--a man who, more than 45 years since Peru expropriated his family farm, and after three-and-a-half years in the Process, was awarded an insulting US$240--more accurately called it "a joke." And by deliberately placing investors like Gramercy last in line for even that risible prospect, all the Process seems to have achieved is to embody then-President Pedro Pablo Kuczynski's conviction: "We don't owe them [Gramercy] anything."
6. Hence, the hearing disproved each of Peru's defenses.
As Peru's leading professor of civil law, Mario Castillo Freyre, explained, in testimony that even Peru's legal expert agreed with on cross-examination, there was no "cloud of legal uncertainty" around the Land Bonds' value. As Min. Castilla and Vice-Min. Sotelo admitted, there was no obstacle to Peru paying that value. And, as Mr. Koenigsberger explained, Prof. Edwards quantified, Prof. Rodrigo Olivares-Caminal contextualized, and Dr. Norbert Wühler could not deny, far from "imparting value," the Supreme Decrees destroyed it--by offering only the faintest glimmer of a tiny fraction of what bondholders had routinely received simply by prosecuting their cases in Peruvian courts.
7. Given these breaches of the Treaty, international law requires that Peru compensate Gramercy for the full intrinsic value of its debt. Prof. Edwards calculated that value to be US$1.8 billion as of May 31, 2018--a calculation whose mathematical accuracy Peru's quantum experts do not seriously contest. In the alternative, Gramercy is entitled, at a minimum, to US$841 million. That sum represents what Gramercy would have received either under the CT's original majority decision before the MEF's unlawful intervention, or if Gramercy had simply been permitted to continue enforcing its rights in Peruvian courts.
8. Furthermore, the hearing revealed that Gramercy is entitled to approximately the same amount even if the CT's 2013 Orders and Resolutions were the product of a legitimate process free of political influence and met the Treaty's standards. If the MEF had used all the parameters it cajoled the CT to adopt--dollarization, converting to dollars at the last-clipped-coupon date, and updating the principal by reference to U.S. Treasury bills--but had just faithfully implemented the CT's directive to balance bondholders' rights to receive current value "plus interest" and the State's ability to pay, then Peru would still owe Gramercy over US$841 million. Because if the MEF had done so in good faith, it would have had to use a valid parity exchange rate (or at least consistently use its invalid one to convert back to nuevos soles at the time of payment), and to abide by the CT's, and later the Supreme Court's, unchallenged directives to add compensatory interest to the updated principal. Merely eliminating those two irrational features of the Supreme Decrees--features that no witness or document has even purported to defend--would produce a value consistent with the CPI- plus-interest approach that had been so widely adopted by Peruvian courts and Congress before Peru's breaches.
9. The Tribunal should accordingly hold that Peru breached the Treaty and award Gramercy the substantial relief it seeks.
II. THE HEARING CONFIRMED THAT PERU BREACHED THE TREATY
A. Gramercy Is Entitled to CPI Updating, From the Date of Issuance, Plus Interest at a Real Rate.
10. The hearing evidence completely disproved Peru's contention that current value was an amorphous and essentially meaningless concept prior to the 2013 CT Order. To the contrary, the hearing demonstrated that current value has always had a clear and well- established meaning with respect to the Land Bonds, requiring (i) updating the unpaid principal using the consumer price index (the "CPI"), (ii) from the Land Bonds' issuance date, (iii) plus compensatory interest. The evidence confirmed that this was not only the uniform practice of Peru's own courts and the shared understanding of other public actors, but also clearly the right result as a conceptual matter--as Prof. Castillo and former CT Justice Delia Revoredo explained, and as even Peru's expert Oswaldo Hundskopf agreed on cross-examination.
1. Current Value Had a Clear and Objective Meaning.
11. The hearing exposed the falsity of Peru's assertions that the application of the current value principle to the Land Bonds was somehow "uncertain" at the time Gramercy invested in them.1 Prof. Castillo explained that the Land Bonds were, by their very nature, unequivocally subject to the current value principle because the obligation to pay fair compensation (justiprecio) for an expropriation is a textbook example of a debt of value.2 Prof. Castillo also explained in unrebutted testimony, consistent with his academic writings, that the current value principle seeks to preserve the value of a debt at the time that it arose, protecting that value against fluctuations due to inflation that might affect purchasing power and thus the original balance of the parties' rights and obligations.3 Contrary to Peru's quantum experts' assertion that the CT had "coined" the term in 2001, the current value principle is in fact a longstanding feature of many civil law systems and was codified in Peru's Civil Code in 1984.4
12. Prof. Castillo is Peru's foremost authority on the law of obligations and the current value principle in particular. Having dedicated his career to the law of obligations, he co-authored the leading treatise with Felipe Osterling Parodi, who presided over the commission that drafted Peru's Civil Code, and has written extensive monographs on the current value principle.5 The Peruvian courts routinely cite Profs.
Osterling and Castillo's work, including on the current value principle.6 And both Justice Revoredo and Dr. Hundskopf relied on Prof. Castillo's academic writings on the meaning of current value.7
13. On cross-examination, Dr. Hundskopf agreed with Prof. Castillo's testimony on virtually all the key issues. To the extent any areas of disagreement remain, Prof. Castillo's opinions are far more authoritative and reliable than those of Dr. Hundskopf. On the stand, Dr. Hundskopf contradicted and even recanted his prior opinions, endorsed confused positions, and admitted that the law of obligations is an area outside of his "specialty" that he first broached in 2019.8
14. For instance, despite having initially claimed that the 2001 CT Decision was based on "equitable," not legal, considerations, on cross-examination Dr. Hundskopf recognized that "clearly" the CT had simply applied Peru's Civil Code and Constitution to the Land Bond debt.9 Similarly, although in his reports he suggested that the CT, the Supreme Court, countless other Peruvian courts, and Prof. Castillo were all mistaken in their uniform view that the Land Bonds were, by their nature, debts of value, on the stand he readily conceded the "necessity"
that the Land Bonds be paid according to the current value principle.10
15. Prof. Castillo's testimony also confirmed that the current value principle has three ineluctable implications for the Land Bonds:
(i) the principal must be updated using CPI to offset inflation; (ii) that inflation-updating must occur from the date of issuance, in order to preserve the true value of the debt; and (iii) the Land Bonds must accrue compensatory interest on the inflation-updated principal at a real rate.
a. CPI Is the Proper Updating Method.
16. The testimony proved that the only conceptually correct method of updating the Land Bonds' principal is CPI, because that is the only index that offsets the effect of inflation on their original value.11 As Prof. Castillo explained, an obligation of value can only have a "single value," not multiple values.12 Accordingly, the current value principle requires the debt to be updated using the index that properly reflects the nature of the underlying obligation.13 If the obligation is to pay compensation for the loss of a certain quantity of gold, for instance, the corresponding measure of value would be the price of gold.14 Where a monetary amount is at stake, however, as Min. Castilla put it, current value "means restoring [that amount's] original purchasing power."15
17. Peru did not rebut that Peruvian CPI is the official measure of purchasing power in Peru.16 Indeed, the Peruvian government itself relies on it to update debts for inflation.17 Peru also did not rebut Prof. Edwards's testimony that the "standard [method] around the world" to restore purchasing power, and the one that 99 out of 100 economists would use, is CPI.18 Dr. Hundskopf conceded that as a general rule Peruvian courts applied CPI for the Land Bonds, and his suggestion that indices other than CPI could be applied assumed an agreement between the parties to this effect--a cláusula valorista under Article 1235 of the Peruvian Civil Code--and hence did not apply to the Land Bonds.19 So, as Prof. Castillo explained, while CPI is not the only way of applying the current value principle in the abstract, it is the only conceptually correct way of applying it to the Land Bonds.20
18. Dr. Hundskopf also retracted his prior opinion that the 2004 CT Decision endorsed dollarization as an appropriate methodology for updating the Land Bonds.21 After finally reading the decision "in depth," he admitted on cross-examination that an "important qualification" of the CT's 2004 holding was that dollarization was constitutional because it was "voluntary"--as Justice Revoredo, who joined in that decision, and Prof. Castillo had said all along.22
19. Peru was unable to adduce a single example of Peruvian courts applying a method other than CPI to the Land Bonds before the 2013 CT Order. Dr. Hundskopf conceded that he was not aware of any such decisions.23 None are in the voluminous record, although, as a party to those proceedings, Peru would necessarily have had them if they existed.24 Peru's counsel conceded that the cases Peru did invoke as evidence of dollarization pre-2013 did not concern the Land Bonds, and Prof. Castillo's unchallenged testimony confirmed that they are inapposite. 25 Peru did not rebut that courts at all levels were in unison, giving rise to what the Peruvian Congress accurately described as a "uniform jurisprudence" applying CPI to update the value of the Land Bonds.26 Peru's attempt to question this unanimity by noting that certain courts applied regional CPIs (for instance, Trujillo CPI) or the Central Bank Automatic Adjustment Index to the Land Bonds only further undermined its case: as Prof. Castillo explained, all of these approaches are still CPI--just measured on a regional basis or with one month's delay, respectively. 27
b. The Bonds' Issuance Date Is the Proper Start Date.
20. Peru also failed to rebut that the only conceptually correct date from which to update the value of the Land Bonds is the date of their issuance, which is when the debt of value arose.28 As Prof. Castillo memorably put it, to update from any other date would be as arbitrary as updating from "the last solar eclipse."29
21. First, because the current value principle indisputably seeks to preserve the original value of the debt--on which Dr. Hundskopf and legal scholars unanimously agree30--it necessarily follows that updating must occur by reference to the value of the debt when the obligation arose, and not some later point in time.31 That would not be true updating, as Prof. Castillo explained.32
22. That the Land Bonds have coupons does not affect this analysis. As Dr. Hundskopf acknowledged, the Land Bonds' principal represents the justiprecio of the expropriated lands at the time of the taking.33 And, as Prof. Castillo explained, because each coupon's principal component represents simply a fraction of the justiprecio, it is only by updating that principal from the Land Bonds' issuance date that the original value of the debt can be preserved.34 Prof. Edwards also showed that updating from any later point in time erodes the original value of the Land Bonds--including any unredeemed portion of them-- and saddles bondholders with the burden of the inflation experienced during the intervening period.35 That value-destroying effect is precisely what the current value principle prevents.
23. Moreover, Prof. Castillo further explained--without any disagreement from Peru or Dr. Hundskopf--that the obligation to pay compensation for an expropriation cannot be compared to long-term obligations with periodic payments, such as under a lease agreement.36 Under Peruvian law, obligations to pay money under a contract--unlike obligations to make full reparation for a loss--are not debts of value.37 Inflation may, over time, erode the real value of the lessee's recurring rent payments, but that is very different from an expropriation. An expropriated landowner is not a contracting party, but the involuntary creditor of a debt of value that arose at a fixed point in the past. At the time of the expropriation, the State should have paid the justiprecio in full, and it should not benefit from the fact that it decided unilaterally to spread payment over time.
24. Second, Peru did not challenge the fact that, with one single and inconsequential exception, every court decision and expert report in the record that expressly addressed the issue before the 2013 CT Order updated from the issuance date.38 The report prepared by the MEF's own commission, created under Supreme Decree No. 148, updated the Land Bonds' principal from the issuance date.39 So, too, did the 2006 and 2011 Agrarian Commission bills.40 At the hearing, Peru chose to seize on the one exception--the Laredo case, in which the court-appointed expert used the date of the last clipped coupon instead.41 But Laredo's unique facts explain why it was an outlier. In that case, 20 out of the 25 bonds at issue were unclipped; only five bonds had been clipped at all; and, in each of those five instances, only one coupon was missing.42 In those circumstances, Peru's quantum experts agreed that the effect of choosing between issuance date and last-clipped-coupon date was virtually nil.43 Peru adduced no evidence that the parties or the court in Laredo devoted any attention at all to the issue, and it did not provide a single additional example of a Peruvian court updating Land Bonds from any date other than the issuance date.
25. Finally, the hearing in fact showed that Peru's approach of updating from the last-clipped-coupon date is arbitrary and value- destroying. Specifically, Peru offered no cogent explanation for why the last-clipped-coupon date, or any other alternative date, makes sense. It does not. Dr. Hundskopf's misconceived justification on the basis that the right of a transferee bondholder "is born with the bonds' acquisition"
did not survive his admission that the value of the Land Bonds, as títulos de valor nominativos, does not change based on their holder.44 And his speculation that other dates "could have. . . [been] possible"45 does not establish that they would have been right. As Prof. Castillo explained, the last-clipped-coupon date--or any date other than issuance--has "nothing to do" with the original obligation to pay justiprecio that must be restored.46
26. Further illustrating the arbitrary and unprincipled nature of updating from the last-clipped-coupon date, Peru's quantum experts confirmed that the MEF's formulas treat otherwise identical coupons attached to clipped and unclipped bonds unequally. They admitted that "the MEF values one Bond's [c]oupons more highly than identical [c]oupons from. . . other Bonds."47 In one example, the updated amount could be 230 times lower for identical coupons if one set of coupons came from clipped bonds and the other set of coupons came from otherwise identical bonds from which no coupons had been clipped.48
27. Peru offered no rational economic justification for treating identical coupons from otherwise identical bonds differently depending on whether other coupons from those bonds are clipped or unclipped. There is none. Peru's quantum experts' suggestion that using the last-clipped-coupon date would be reasonable because "[t]he MEF is solving a problem of unpaid paper"49 is flawed in both premise and conclusion. As Prof. Castillo explained, what triggers the application of the current value principle is not the fact of Peru's non-payment of the debt, but the nature of the underlying obligation itself.50 The Land Bonds have always embodied debts of value subject to updating pursuant to Article 1236 of the Civil Code; that Peru stopped paying them did not affect their nature.51 Indeed, as the 2001 CT Decision emphasized, the current value principle is "inherent" to the expropriated property itself, and payment of anything other than the obligation's current value "was, and continues to be, unconstitutional."52
c. Compensatory Interest Applies on the Updated Principal.
28. Peru also did not rebut that Gramercy is entitled to compensatory interest on the properly-updated value of the Land Bonds' outstanding principal.53
29. First, Peru did not challenge Prof. Castillo's testimony that interest seeks to compensate bondholders' forgone opportunities, and therefore that it is owed in addition to the inflation-updating of the principal.54 For example, as Dr. Hundskopf acknowledged, the 2004 CT Decision allowed bondholders to receive the payment of the updated debt, plus the interest applicable under the law.55 In fact, Dr. Hundskopf agreed that interest on top of inflation-updating "is highly coherent."56
30. Second, Peru also did not challenge Prof. Castillo's testimony that the requirement to pay full reparation for an expropriation under Article 70 of the Constitution, including to pay damages for losses associated with that expropriation, justifies awarding interest at a rate that compensates bondholders for the opportunities they lost.57 Support exists in the historical record for this approach, too. Emergency Decree 88 and the 2006 Agrarian Commission Bill, for instance, provided for compound interest on the inflation-adjusted value, at rates of 7.5% and 6.7%, respectively, which were higher than the coupon rates of the Land Bonds themselves.58 As the report accompanying the 2006 Bill noted, it was necessary to award interest "that reflects [bondholders'] cost of opportunity."59 Prof. Edwards similarly testified that "we have to provide for compensatory interest that takes into account lost opportunity for not having received those monies on time."60 His analysis leads to a rate of 7.22%, reflecting the average historical return on debt in Peru as a conservative proxy for the bondholders' forgone opportunities.61
31. Finally, Peru did not challenge that, at a minimum, Gramercy could expect to receive interest at the coupon rates of four, five or six percent, which its quantum experts accepted was the virtually unanimous practice of Peruvian courts and court-appointed experts.62 Peru's quantum experts conceded that, where courts deviated from the coupon rates, they in fact awarded higher, not lower, interest amounts.63 In the Saavedra case, for instance, the court applied the legal or statutory interest rate (tasa de interés legal), which was as high as 300% during certain periods, resulting in an award of interest more than 20 times greater than the updated principal.64 Thus, even though the Saavedra court awarded simple interest, the total interest awarded was much higher than compound interest at the stated coupon rates or even Prof. Edwards's rate of 7.22%.65 And, in Luna--another of the cases Peru's quantum experts put forward--the court awarded compound interest at a real rate of 3.915% on top of the stated coupon rates.66
2. Gramercy Invested In Reliance on that Clear Entitlement to Current Value.
32. The testimony also proved that CPI-updating from the issuance date, plus interest, was not only what Peruvian law required, but also what Gramercy legitimately expected when investing in the Land Bonds.67 Legitimate expectations are an element of fair and equitable treatment, to which the Treaty expressly refers.68 The ruling of the International Court of Justice ("ICJ") in Obligation to Negotiate Access to the Pacific Ocean (Bolivia v. Chile) does not affect that conclusion, and indeed neither party has invoked it. The ICJ in fact recognized that investment treaty tribunals refer to investors' legitimate expectations when applying investment treaty clauses that provide for fair and equitable treatment, but observed that "it does not follow" from this practice that the legitimate expectations of one State could give rise to general international law obligations for another State. 69 That observation is as uncontroversial as it is inapt to this case: it does not mean that legitimate expectations of an investor are irrelevant either to the minimum standard of treatment of aliens under international law, or to the meaning of "fair and equitable treatment" in investment protection agreements like the Treaty, which exist precisely to encourage investors to invest.
33. Gramercy's expectation that it was entitled to the current value of its Land Bonds and that, if it did not reach a consensual resolution with Peru, it would be able to enforce those rights in Peruvian courts, is both unquestionable and legitimate. First, Peru's attempt to diminish Gramercy's due diligence did not succeed.
Robert Koenigsberger, Gramercy's founder and Chief Investment Officer, described the due diligence that Gramercy conducted on Peru's creditworthiness and on bondholders' legal entitlement to the Land Bonds' CPI-updated principal and interest.70 Peru did not establish any meaningful inaccuracies in the due diligence memorandum itself, and the inconsequential example on which it seized only revealed that Peru was confused about the publication dates of the CT decisions cited.71 Peru also did not challenge Mr. Koenigsberger's testimony that the memorandum accurately reflected Gramercy's contemporaneous expectations.72
34. Second, Peru could not rebut the legitimacy of Gramercy's contemporaneous conclusion that the agrarian reform debt "has to be paid at its real value, adjusted for inflation."73 As noted above, the evidence in this proceeding, including from Peru's own witnesses and the consensus view of the Peruvian legal experts, vindicates that expectation.
35. Peru's attempt to develop a new theory at the hearing about how the Land Bonds gave Gramercy only "expectative rights"
(derechos expectaticios) did not last long.74 Alfredo Bullard explained in unchallenged testimony that this language, plucked from the purchase contracts, serves to allocate collection risk between assignor and assignee, effectively disclaiming any obligation of the selling bondholder to make whole Gramercy, as purchaser, if Gramercy was not able to collect payment from Peru.75 It does not call into question the value of the Land Bonds, or Gramercy's legal entitlement to current value, or Peru's obligation to pay that value.
36. Indeed, contrary to Peru's attempts to depict the Land Bonds as "smelly" and "just paper,"76 Min. Castilla, Vice-Min. Sotelo, and Rodrigo Olivares-Caminal--Professor of Banking and Finance Law and an expert in sovereign debt who has first-hand experience with debt restructurings around the world--all confirmed that the Land Bonds are sovereign obligations and that Peru guaranteed payment on that paper without any reservation whatsoever.77 Continuing on Peru's drumbeat, on direct, Dr. Hundskopf had characterized Gramercy's rights under the Land Bonds as "a gamble" or "an option."78 But when pressed, he "withdrew" that characterization and admitted that "it is no doubt an obligation of the State to pay the Land Bonds. There is no doubt about it."79 Dr. Hundskopf also admitted that, at least after the 2001 CT Decision, any buyer of Land Bonds had a "clear" right for Peru to pay the updated current value of the principal, even if, just like with any other security, the buyer ran a risk of not collecting that payment.80
37. Similarly, Peru's attempt to sow uncertainty about whether Gramercy validly acquired authentic Land Bonds also did not survive the hearing. Peru did not rebut that Gramercy's 2006 memorandum correctly identified the steps required to acquire the Land Bonds.81 Mr. Koenigsberger and Robert Lanava, who was Gramercy's Head of Operations during the 2006-2008 acquisition period and is now Chief Compliance Officer, both confirmed on cross-examination that Gramercy worked with Peruvian counsel to authenticate and validly acquire the Land Bonds.82 Mr. Lanava testified that, after Gramercy's Peruvian counsel physically reviewed them for authenticity, he received each Land Bond package, containing the bond certificates, the title with notarized transfer to Gramercy, sales contracts, testimonies of the sellers, and sentencias judiciales (the judgments declaring the transfer of the underlying land to Peru).83 As both Mr. Koenigsberger and Mr. Lanava testified, Gramercy offered multiple times to provide the Land Bonds to Peru for authentication, but Peru rejected those offers.84
38. Gramercy executed hundreds of notarized assignment agreements with individual bondholders, and Peru did not question Prof. Bullard on his opinion that Gramercy validly acquired the Land Bonds and that no further formalities were necessary.85 Dr. Hundskopf, in turn, backtracked yet again: recanting the speculation in one of his reports that there might have been uncertainty about whether Land Bonds could validly be transferred, on cross-examination he readily acknowledged that registration of securities transfers under Peruvian law are declarative (not constitutive) formalities, and that he now "ha[d] [n]o doubts whatsoever" about the validity of Gramercy's purchase contracts and "agree[s] with Mr. Bullard 100 percent."86
39. Finally, the testimony also proved fatal for Peru's refrain that, until the 2013 CT Order, there was no legal framework for paying the Land Bonds or for negotiating a global resolution of the kind Gramercy repeatedly proposed.87 Both Min. Castilla and Vice-Min.
Sotelo confirmed that individual bondholders had always had the right to have their Land Bonds paid and, until the 2013 CT Resolutions, the right to go to the Peruvian courts to obtain a judgment awarding the properly updated value of their Land Bonds, plus interest.88
40. The only thing that was lacking was an administrative process for resolving the agrarian reform debt as a whole--a process that the MEF itself was responsible for establishing.89 As Vice-Min. Sotelo acknowledged, the MEF "had to abide by" the 2001 CT Decision-- which was binding on all public officials--and it was "the Ministry of Economy and Finance that ha[d] to do the updating[.]"90 Similarly, Min. Castilla recognized that "in 2001 the Constitutional Tribunal Order required the public authorities, including the Executive Branch, to establish a legal framework."91 He admitted that the President or the MEF could have done so by decree, without any further congressional act--as it had done in 2000 with Emergency Decree No. 88, or indeed as it is now doing with the 2014 Supreme Decrees--in Vice-Min. Sotelo's words, "paying [the Land Bonds] according to the legal rules Ministry itself established."92 All the MEF needed to do was to "establish. . . a mechanism that would make it possible to undertake the evaluation. . . and  an administrative mechanism that would make it possible to make the payments once the valuation was done."93 It was precisely because the MEF was responsible for creating this global solution that Gramercy repeatedly wrote to the executive with various proposals for a productive bond swap.94
41. But the MEF ignored both Gramercy and the CT.
Instead of establishing an administrative mechanism for payment consistent with the 2001 CT Decision, the MEF dragged bondholders through protracted court proceedings in which it took untenable positions, including arguing that the Land Bond debt had lapsed or that nominal payment sufficed, despite the 2001 CT Decision having decisively foreclosed any such contention--the kind of argument that in many courts would be not just dismissible but sanctionable.95 In the same vein, the MEF continued to rebuff Gramercy's efforts to find a global solution to the agrarian reform debt, on the same circular and obstinate basis that it lacked the kind of administrative framework that it was duty-bound to create.96 The hearing put a nail in the coffin of that excuse, too: as Vice-Min. Sotelo admitted, "[t]here was no legal bar to the [MEF], in the context of preparing the draft bill. . . from sitting down and discussing with the Bondholders a common solution."97
42. Meanwhile, as Min. Castilla conceded, the various legislative proposals that Peru tried to cite as evidence of some uncertainty about the meaning of current value sought to bridge the administrative gap that the MEF's own obstinacy created98--not to cast doubt on the meaning of the current value principle, or to prejudice bondholders' ability to obtain current value in the courts.
Mr. Koenigsberger testified that recourse to courts is what Gramercy expected, too: besides the legislative attempts to create a "consensual path" to the resolution of the Land Bond debt framework, "there was always another legal framework, which is Bondholders always had the right to go to local courts."99 Indeed, as Vice-Min. Sotelo testified, "this is the right that all bondholders had."100 Min. Castilla further confirmed that individual bondholders had "recourse to [local] courts," and that they had successfully secured "judgments in [their] favor."101 And, given the MEF's intractable refusal to pay without a court order, "[b]ondholders were routinely suing and getting judgments against the Ministry for updated payment of the Land Reform debt," in which courts "updated [the] value of the Land Reform Bonds applying the CPI." 102 Indeed, Gramercy was on the road to doing so for part of its portfolio in the Pomalca case, in which court-appointed experts had updated the value of Gramercy's Land Bonds using CPI plus compound interest, before it discontinued those proceedings in order to commence this arbitration.103
43. Thus, none of Peru's attempts to cast doubt as to the meaning of current value, or to defuse Gramercy's entitlement to receive it, survived the hearing.
B. The 2013 CT Order Was the Product of Improper Influence from the MEF, in Breach of the Treaty.
44. The centerpiece of Peru's defense has always been that the CT's imprimatur somehow shields from scrutiny all of Peru's breaches of the Treaty.104 But the hearing proved that the 2013 CT Order was part of Peru's breach, not an excuse for it. The key facts remain undisputed.105 After nearly two years of deliberation, a majority of the CT was poised to issue a decision affirming the decade-long consensus about the manner in which the agrarian reform debt should be updated.
Yet, five business days later, the CT issued an order reversing the existing legal framework, and--in breach of its own rules and procedures--that majority decision was transformed, with white-out, into a forged dissent.