NOTICE OF ARBITRATION
August 16, 2022
TABLE OF CONTENTS
CAST OF CHARACTERS
A. Amorrortu's leadership in the Talara Basin since 1976
B. Amorrortu becomes a citizen of The United States
C. Amorrortu commences Direct Negotiation for Blocks III and IV
D. PeruPetro terminates its negotiations with Amorrortu to benefit Graña y Montero
E. The truth is revealed: Graña y Montero paid millions of dollars in bribes to President Humala
F. Amorrortu's attempts to resolve this matter through consultation
A. Baspetrol constitutes an Investment under the USPTPA
B. Amorrortu qualifies as an Investor under the USPTPA
C. The Investment was in existence as of the day of entry into force of the USPTPA
V. PERU BREACHED ITS OBLIGATIONS UNDER THE USPTPA
A. Peru violated protections afforded to Amorrortu's Investment under Article 10.5 of the USPTPA
1. Peru deprived Amorrortu of his reasonable expectations under the USPTPA
A. Customary international law requires full reparation for damages resulting from the breach of an international obligation
B. Amorrortu's initial assessment of damages
C. Amorrortu is entitled to arbitration costs and expenses
VII. AGREEMENT TO ARBITRATE
VIII. CONSTITUTION OF THE ARBITRAL TRIBUNAL, PLACE, APPLICABLE ARBITRATION RULES, AND LANGUAGE OF THE ARBITRATION
A. Constitution of the Arbitral Tribunal
B. Applicable Arbitration Rules
C. Place and Language of the Arbitration, Administering Authority
IX. THE CLAIMANT'S REQUEST FOR RELIEF
1. Bacilio Amorrortu (Amorrortu or Claimant), a citizen of the United States of America, requests the institution of arbitration proceedings against the Republic of Peru (Peru or Respondent) according to Article 3 of the 2021 Arbitration Rules of the United Nations Commission on International Trade Law as amended (2021 UNCITRAL Arbitration Rules).
2. This notice of arbitration (NOA) is submitted according to Chapter 10 of the United States-Peru Trade Promotion Agreement (USPTPA), which entered into force on February 1, 2009.1
3. The USPTPA seeks "to promote transparency and prevent and combat corruption, including bribery, in international trade and investment."2 However, Amorrortu's investments and legitimate expectations were frustrated precisely by a corrupt scheme designed to benefit a local company that bribed Peru to obtain a government contract that Amorrortu was negotiating through a process of direct negotiation.
4. This case arises out of Amorrortu's investment in Peru with the expectation of obtaining a contract to resume the oil drilling and extraction operations in two oil blocks located in the Talara Basin in the Province of Talara, Piura Region, Peru. The Talara Basin is one Peru's most important crude oil reserves, having produced more than 1.68 billion barrels of oil.3
5. Since 1976, Amorrortu has been involved in drilling and extraction operations in the Talara Basin. Indeed, Block III of the Talara Basin is popularly known in the industry as the "Amorrortu oil block" because it has been successfully serviced and operated by the Amorrortu family company for more than twelve years.
6. In 1995, Amorrortu had to surrender the contractual rights to operate Block III due to the fierce political persecution launched by the dictatorial government of President Alberto Fujimori (President Fujimori). This political persecution led Amorrortu to seek asylum in the United States, which he obtained from the United States Department of Justice on April 26, 2000.4
7. Amorrortu continued his involvement in the oil industry in the United States with his wife - a high executive in the industry - and, in 2010, he became a citizen of the United States. Amorrortu has since officially renounced his Peruvian citizenship and is not a citizen of any other country.
8. In 2012, after the return of democracy in Peru, Amorrortu formed Baspetrol S.A.C. (Baspetrol) with the expectation to seek - and indeed recover - the contractual rights to operate Block III of the Talara Basin. To this end, Amorrortu approached PeruPetro, S.A. (PeruPetro)-- the Peruvian governmental entity responsible for the operation of the oil blocks--to negotiate an agreement to operate Block III. After various presentations to PeruPetro about his successful history operating Block III, his persecution leading to his asylum, and his proposal to benefit the community of Talara through the investment of foreign capital, Amorrortu was invited to submit a direct negotiation proposal for Block III and for the adjacent Block IV, which he did on May 28, 2014.
9. Under Peruvian law, the presentation of a direct negotiation proposal commences a direct negotiation process unless the proposal is formally rejected within ten days.5 When a direct negotiation proposal is presented by invitation, the ten-day period is a formality that officially confirms the commencement of the direct negotiation phase. In any event, it is undisputed that the ten-day period expired, giving Amorrortu the right and the legitimate expectation of completing the direct negotiation of the agreement, consistent with Amorrortu's conversations with the President of PeruPetro. At this point, Amorrortu was willing, ready, and able to complete the direct negotiation process with PeruPetro.
10. Notwithstanding, in violation of Amorrortu's acquired right to direct negotiation and his legitimate expectations, PeruPetro initiated a public bidding process for the license to operate Blocks III and IV. This public bidding process was clearly designed to benefit the local company Graña y Montero, S.A.A. (Graña y Montero), as the request for proposal issued by PeruPetro included a series of arbitrary requirements that only Graña y Montero could satisfy.
11. For years, Amorrortu has been claiming that PeruPetro had violated Peruvian law and that the public bidding process was unfairly designed and rigged to benefit Graña y Montero.
However, as of March 2017, Peru and Graña y Montero denied their participation in any corruption scheme, and Amorrortu did not have any information corroborating his claims.
12. The evidence of corruption began to surface in June 2019 when Graña y Montero admitted that the company had, in fact, bribed the government of Peru to obtain several government projects. Based on this admission of Graña y Montero, after years of denial, Amorrortu launched an investigation to elicit more information. Whistleblowers who were reluctant to talk about the corruption were willing to provide more information after Graña y Montero's admission. Today, there is undisputed evidence that in 2011, during Peru's Presidential campaign, Graña y Montero, together with Odebrecht, paid US$ 3,000,000.00 to President Ollanta Humala (President Humala) and his wife Nadine Heredia (First Lady Heredia). Then, during President Humala's presidency (2011-2016), Graña y Montero paid in over US$ 3,700,000.00 in bribes to members of President Humala's government to be adjudicated government contacts. Because of these payments and other payments of bribes currently under investigation, Graña y Montero was favored with numerous contracts by President Humala's government, including contracts for the operation of oil Blocks III and IV granted in 2014-2015.
13. It is by now well established that a host State breached its fair and equitable treatment obligations under a bilateral treaty when it corruptly exercises its discretion to assign government contracts in which foreign investors have acquired interests.6 That is exactly what happened in this dispute. Peru breached its obligations under the USPTPA by aborting the direct negotiation process with Baspetrol to favor Graña y Montero.
14. There are usually two significant challenges in these types of cases: (1) proving that the bidding process was, in fact, influenced by corruption and (2) establishing that in the absence of corruption, the investor would have been awarded the contract.
15. This case, however, is unique in that the Claimant can easily overcome both challenges.
a. First, the evidence of corruption is overwhelming at this point. Indeed, this is one of several cases in which the office of President Humala handpicked Graña y Montero to receive a government contract in exchange for illegitimate payments. The notes from the First Lady about her meetings with Graña y Montero confirm it.7
b. Second, Peru cannot seriously dispute that Baspetrol had commenced the direct negotiation process. This process, in practice, guarantees the contract to Baspetrol if it could satisfy the good faith requirements for the drilling and extraction project. The President of PeruPetro had confirmed that Baspetrol's offer met these conditions. Indeed, Baspetrol was the only company with more than twenty years of successful experience servicing the Blocks.
c. Third, there is no dispute that Amorrortu's direct negotiation with PeruPetro was aborted by the corrupt relationship between Graña y Montero and the government of Peru. Therefore, in the absence of corruption, Peru would have given the contract to conduct the oil drilling and extraction operations in Blocks III and IV to Baspetrol.
16. In this NOA, Amorrortu will establish the jurisdictional and substantive bases of his treaty claim. Specially, Amorrortu will show that:
a. Peru breached its obligations under the USPTPA by aborting the direct negotiation process with Amorrortu with the corrupt intent to benefit Graña y Montero, a local company that had a corrupt relationship with Peru (Section V);
b. Amorrortu is an investor of the United States with investments in Peru protected by the USPTPA (Section IV); and
c. Amorrortu has the right to initiate this arbitration because both Peru and Amorrortu have consented to UNCITRAL arbitration and all the conditions precedent to bringing this arbitration have been performed or have occurred (Section VII).
IX. THE CLAIMANT'S REQUEST FOR RELIEF
111. Based on the foregoing and reserving his right under the 2021 UNCITRAL
Arbitration Rules as to modify his prayer for relief at any time in the course of the proceedings if the circumstances of the case so require, Amorrortu respectfully requests that the Arbitral Tribunal:
a. DECLARE that Peru breached its obligations under the USPTPA;
b. ORDER Peru to pay Amorrortu compensation for damages caused to him;
c. ORDER Peru to pay interest on all amounts awarded, at a commercially reasonable rate or such other rate determined by applicable law, from the date of the award until full payment of the award;
d. ORDER Peru to pay Amorrortu's arbitration costs, including the costs of the PCA, the Arbitral Tribunal, and the legal and other costs incurred by Amorrortu in an amount to be determined by the Tribunal; and
e. AWARD such other and further relief as the Tribunal may deem appropriate.