Argentina-Peru Dispute Over Toll Road
The Republic of Peru won again at the International Centre for Settlement of Investment Disputes (ICSID). A Tribunal ruled that a Peruvian municipality had the right to terminate a contract it had granted to Convial Callao, a subsidiary of Argentina's Compañía de Concesiones de Infraestructura, to build and operate an expressway between Lima and Jorge Chávez International Airport. The case examined the relationship between claims arising under contracts and under treaties. This victory is one of several international disputes that Peru has won in recent years advised by White & Case.
"Peru has achieved positive results in investment cases," says White & Case partner and head of Latin American arbitration Jonathan Hamilton, lead counsel to the Republic of Peru. "The results underscore that Peru has maintained a positive environment for foreign investment."
The US$125 million toll-road dispute before ICSID at the World Bank broke new ground on the critical issue of the relationship between claims arising under contracts and treaties. The case related to a 2001 concession contract to build an expressway to the Lima airport, but the toll road was never completed, and the concession was terminated in 2007. Claimants alleged that the municipality's termination of the concession constituted a violation by Peru of the Argentina-Peru bilateral investment treaty. Claimants argued that the merits of the case were evident and correspondingly insisted that it was only a case about damages.
In an Award issued on May 21, 2013, the Tribunal found for Peru, rejected all claims and never reached the issue of damages, instead ordering Claimants to make a payment toward Peru’s costs related to the arbitration. Some key elements of the ruling include:
Contracts and Treaties: The award casts important insights on the relationship between contract and treaty claims in investment arbitration. Notably there was no "umbrella clause" in the relevant treaty, and the claimants' claims were thus examined and dismissed exclusively under the treaty. The Tribunal rejected, among other things, claims for expropriation, lack of fair and equitable treatment, lack of full protection and security, discriminatory measures and less favorable treatment.
South-South Investment: The case highlighted the growing importance of disputes in Latin America involving investments spanning Latin American jurisdictions.
Transportation Sector: Infrastructure projects are often a focal point of development and foreign investment is a common tool for meeting a growing economy’s needs, as reflected in the case’s focus on a toll road to a major international airport.
Provisional Measures: The concessionaire requested provisional measures, asking the Tribunal to order Peru to abstain from proceedings against present or past Convial representatives in connection with the project, including criminal proceedings. The ICSID Tribunal unanimously rejected the Request for Provisional Measures as submitted by Claimants, and agreed with Peru, noting that "Peru has the sovereign right to undertake criminal proceedings arising from supposed infractions committed in its territory".
Spanish language: The case was briefed and argued entirely in Spanish. White & Case drew on the strengths of a multi-office team out of Washington, DC and Mexico City.
Award of Costs: The Tribunal granted a significant award of costs to White & Case's client in light of its success.
The case was styled as Convial Callao S.A. and CCI - Compañia de Concesiones de lnfraestructura S.A. v. Republic of Peru (ICSID Case No. ARB/10/2), and the Tribunal consisted of two French arbitrators and one Colombian arbitrator.
The win followed a White & Case victory for Peru just weeks earlier in a $100 million concession dispute in the energy sector, and prior success advising Peru on the successful return of Machu Picchu artifacts from Yale University and in a $150 million energy sector dispute.
The White & Case Latin America arbitration team was led by Hamilton in Washington, DC, together with Partner Rafael Llano Oddone in Mexico City and associate Francisco Jijon in Washington, DC.