Latam Hydro LLC and CH Mamacocha SRL v Republic of Peru - ICSID Case No. ARB/19/28 - Award and Dissenting Opinion Professor Guido Santiago Tawil - English - 20 December 2023
Country
Year
2023
Summary
Source: icsid.worldbank.org
AWARD
Members of the Tribunal
Prof. Dr. Guido Santiago TAWIL
Prof. Raúl E. VINUESA
Prof. Dr. Albert Jan VAN DEN BERG (President)
TABLE OF CONTENTS
INTRODUCTION
THE PARTIES
Claimants
Respondent
PROCEDURAL HISTORY
FACTUAL BACKGROUND
Founders of First Claimant
TPA
RER Law and Regulations
First and Second RER Public Auctions
The Mamacocha Project
Third RER Public Auction
The RER Contract
Permits
Addendum 1
Public Roundtables
Regional Investigative Commission of the RGA Council
Amparo Action
Addendum 2
The RGA Lawsuit
Initiation of Criminal Investigation
Civil Works Authorisation
Request for Suspension
First Notice of Intent; Addendum 3
Confidentiality Agreement
Withdrawal of the RGA Lawsuit
Criminal Proceedings
Extensions of Trato Directo; Addendum 4; Third Extension Request; Second Notice
of Intent
Echecopar Reports
Ongoing Discussions; Addendum 6
Draft Supreme Decree
The Lima Arbitration
Denial of Third Extension Request and Commencement of ICSID Arbitration
Consequences for the RER Contract
Other Arbitration Proceedings
Electro Zaña
Santa Lorenza
Egecolca
Sur Medio
SUMMARY OF THE PARTIES' POSITIONS AND RELIEF SOUGHT
Claimants' Position and Relief Sought
Respondent's Position and Relief Sought
INTRODUCTION TO THE TRIBUNAL'S ANALYSIS
Overview of This Award
Request for Adverse Inferences
The Legal Standard
Analysis of Claimants' Requests
JURISDICTION AND ADMISSIBILITY
Relevant Provisions
The TPA
The ICSID Convention
The RER Contract
Parties' Positions
Respondent's Position
Claimants' Position
NDP Submission
The U.S. NDP Submission
Claimants' Comments on the U.S. NDP Submission
Respondent's Comments on the U.S. NDP Submission
Tribunal's Analysis
Guiding Principles for the Determination of Jurisdiction
TPA and ICSID Convention: Jurisdiction Ratione Personae
TPA Jurisdiction Ratione Voluntatis
TPA Jurisdiction Ratione Materiae
Jurisdiction Ratione Temporis
Jurisdiction under the RER Contract
Conclusion on Jurisdiction
ALLEGED BREACHES OF THE RER CONTRACT AND PERUVIAN LAW
Law Applicable to the RER Contract and its Interpretation
Application of the Peruvian Civil Code
Principles of Contractual Interpretation
Character of the RER Contract
Parties to the RER Contract
The Parties' Positions
The RER Contract
Tribunal's Analysis
Alleged Failure to Provide Assistance regarding Permits
Meaning of Coadyuvar
Requirements to Activate Clause 4.3
Alleged Breaches of Clause 4.3
Conclusion
Alleged Breaches regarding the Rejection of the Third Extension Request
Guaranteed Revenue under the RER Contract
Whether Second Claimant Was Entitled to an Extension
Alleged Breach of Addenda 3 to 6
Alleged Breach of Clause 2.2.1 for Disavowal of Addenda 1-2
Alleged Breach for Commencing the Lima Arbitration
Alleged Breach of Good Faith Obligation
Applicability
The Relevant Test
Alleged Breaches of Good Faith
The Rejection of the Third Extension Request
The Initiation of the Lima Arbitration
Conclusion on Good Faith
Alleged Breach of the Actos Propios Doctrine
Applicability
The Relevant Test
Alleged Breaches of Actos Propios
Alleged Breach of the Principle of Confianza Legítima
Applicability
Alleged Breach of the Timeliness Obligations
Applicability
Alleged Impossibility of Performance due to Respondent's Conduct
Applicability
The Relevant Test
Application of Article 1432
Alleged Termination for Failure to Achieve Actual COS and Execution of
Performance Bond
Conclusion on Liability under the RER Contract
ALLEGED BREACHES OF THE TPA
Relevant Provisions
Alleged Breach of Fair and Equitable Treatment under TPA Article 10.5
Applicable Standard
NDP Submission
Alleged Breaches of FET
Conclusion on FET
Alleged Indirect Expropriation under TPA Article 10.7
Applicable Standard
NDP Submission
Interference with Reasonable Expectations
Character of the Government Action
Other Aspects of Indirect Expropriation
Conclusion on Expropriation
Alleged Breach of MFN Clause under TPA Article 10.4
NDP Submission
Parties' Positions
Tribunal's Analysis
Conclusion on Liability for Breaches of the TPA
ALLEGED TERMINATION OF THE CONFIDENTIALITY AGREEMENT
Relevant Provisions
Parties' Positions
Claimants' Position
Respondent's Position
Tribunal's Analysis
COSTS
Relevant Provisions
The Parties' Positions
Claimants' Position
Respondent's Position
The Tribunal's Decision on Costs
Costs Under the RER Contract
Costs Under the TPA and the ICSID Convention
Overall Conclusion on the Allocation of Costs
Quantification of Costs
CONCLUSIONS
Claimants
Respondent
AWARD
INTRODUCTION
1. This case concerns a dispute submitted to the International Centre for Settlement of Investment Disputes ("ICSID" or the "Centre") on the basis of (i) the United States - Peru Trade Promotion Agreement, which was signed on 12 April 2006 and entered into force on 1 February 2009 ("TPA" or the "Treaty"); (ii) a Concession Contract for the Supply of Renewable Energy to the National Interconnected Electric System, dated 18 February 2014 ("RER Contract"); and (iii) the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which entered into force on 14 October 1966 ("ICSID Convention"). This proceeding is conducted in accordance with the ICSID Rules of Procedure for Arbitration Proceedings in force as of 10 April 2006 (the "ICSID Arbitration Rules") except to the extent modified by the TPA.
2. This dispute relates to measures implemented by Respondent which allegedly negatively impacted Claimants' investment in the development, construction, and operation of a run- of-the-river 20-megawatt hydroelectric plant and transmission line project near the Mamacocha Lagoon in the Arequipa Region of Peru ("Mamacocha Project").
3. The Award is divided into the following sections. Section II sets out the Parties. Section III sets out the procedural background of the case. Section IV sets out the factual background to the dispute between the Parties. A summary of the Parties' claims and reliefs sought is set out in Section V. Section VI contains an introduction to the Tribunal's analysis. Section VII addresses the jurisdictional objections raised by Respondent. Section VIII addresses the merits of Second Claimant's claims for breach of the RER Contract and Peruvian law. Section IX addresses Claimants' claims for breach of the TPA. Section X addresses Claimants' claim in respect of the Confidentiality Agreement. Section XI addresses the Parties' submissions on costs. The Tribunal's conclusions are set out in Section XII. The dispositive is contained in Section XIII.
...
XIII. AWARD
1412. FOR THE FOREGOING REASONS, the Tribunal renders the following decisions:
(A) DECLARES that it has jurisdiction over First Claimant's claims under the TPA on its own behalf and on behalf of Second Claimant, with the exception that it has no jurisdiction ratione materiae over First Claimant's claims with respect to the Upstream Projects;
(B) DECLARES that it has jurisdiction over Second Claimant's claims under the RER Contract;
(C) DECLARES that the RER Contract is terminated;
(D) ORDERS that the USD 5 million Performance Bond under the RER Contract is to be returned to Second Claimant;
(E) ORDERS that Respondent may not call or collect the USD 5 million Performance Bond under the RER Contract;
(F) REJECTS, by majority, Second Claimant's claims under the RER Contract, subject to the declarations in Recitals (C), (D) and (E) above;
(G) REJECTS, by majority, First Claimant's claims under the TPA on its own behalf and on behalf of Second Claimant;
(H) ORDERS, by majority, that Claimants shall jointly bear the Arbitration Costs in an amount of USD 1,508,304.41, and accordingly shall reimburse Respondent USD 754,152.21 in respect of such costs;
(I) ORDERS, by majority, that post-award interest shall accrue on the amount awarded to Respondent, calculated at 3% per annum, compounded annually, until the date of full payment;
(J) DECLARES that each side shall bear its Legal and Other Costs;
(K) REJECTS all other claims and requests.
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Dissenting Opinion of Professor Guido Santiago Tawil
1. I concur, in general, with the reasoning and decisions on jurisdiction and admissibility as reflected in the Award.
2. On the contrary, I respectfully dissent from the decisions proposed by my colleagues as to the merits of the claim. In this case, my discrepancy is eminently conceptual.
3. The Concession Contract for the Supply of Renewable Energy to the National Interconnected Electric System ("the RER-Contract or the Contract") is a collaborative administrative contract whereby - through the assumption of relevant commitments by both parties - the private contracting party (in this case, Hidroeléctrica Laguna Azul S.R.L.; now, CH Mamacocha S.R.L. or CHM) undertook significant investment obligations in order to supply the awarded energy in exchange for certain commitments, basic but crucial, for the Contract to succeed. Just as the Contract could not succeed absent CHM's investments and fulfillment of its obligations, such result would not be possible absent the State contracting party's due compliance with the obligations undertaken by it.
4. Due compliance with such obligations gives rise to the so-called financial-economic balance or equation of the contract under administrative contract law, and failure to discharge such obligations may (depending on the magnitude of the non-compliance) lead to the impossibility to perform and the virtual death of the contract.
...
10. Respondent's actions in dispute entail, in my view, a clear breach of Clauses 1.4.26, 1.4.37 and 6.3 of the RER-Contract,13 as well as arbitrary conduct on the part of Respondent in violation of the duty to accord fair and equitable treatment to Claimants' investments assumed by the Republic of Peru under Article 10.5 of the Treaty.
11. Given the terms in which the majority of the Tribunal has ruled, no decision is to be adopted regarding the damages claimed.
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Footnotes omitted