White & Case LLP achieved success in a major Spain-Peru energy sector dispute related to global economic conditions for its client, the Republic of Peru. It was one of the most efficient cases ever to be concluded before the International Centre for Settlement of Investment Disputes (ICSID) of the World Bank.
The Spanish-language arbitration before the World Bank arose under two electricity transmission concession contracts awarded by Peru to Caravelí Cotaruse Transmisora de Energía S.A.C., a concessionaire backed by Spanish infrastructure companies. The concessionaire sought relief of up to US$100 million, but the case was dismissed in its entirety with an award of costs in favor of the Republic of Peru.
"This success is a vindication of Peru's conduct and investment framework, which have contributed to investment flows while reasonably expecting investors to follow the rules," said Jonathan C. Hamilton, a partner and head of the Latin American arbitration practice at White & Case. "It was one of the most efficient cases in the history of investment arbitration before the World Bank, conducted fully in Spanish and with a complete award of costs for our client."
The claimant requested varied relief of up to US$100 million through tariff increases, damages and costs, or alternatively, termination of its contracts plus damages and alleged amounts invested. Notably, the concessionaire never completed the electricity transmission lines, even though other electricity sector projects were completed during the same time period and it received an extension of time to complete the works. In an award issued April 15, 2013, the World Bank tribunal ruled in favor of Peru, rejecting all of the claimant's requests for contract modification and monetary claims.
Some of the key elements of the case include:
Economic Cycles: The concessionaire described its case as the first claim before the World Bank to arise out of the global financial crisis. The claim failed. Peru argued that historically, financing costs fluctuate, and the Tribunal agreed that the financing of the project was the claimant's responsibility.
Spanish Investment in Latin America: The case reflected White & Case's involvement in a wave of matters involving Spanish investment in Latin America.
Energy Sector: Investment in the energy sector continues to be a focal point for international disputes. The case involved concessions for the construction and operation of electricity transmission lines in the Cuzco and southern region of Peru.
Spanish Language: The case applied Peruvian law and was briefed and argued entirely in Spanish. White & Case drew on the strengths of a multi-office team, including Washington, DC, Mexico City, Paris and Madrid.
Procedural Efficiency: The case was one of the most efficient ever concluded under the auspices of the World Bank, with briefing and the hearing completed in less than a year and the award issued two years from the date ICSID registered the case.
Award of Costs: Following the loser pays principal, the Tribunal granted a complete award of costs to White & Case's client.
The case, entitled Caravelí Cotaruse Transmisora de Energía S.A.C. v. Republic of Peru (ICSID Case No. ARB/11/9), was decided by a three-member tribunal with Brazilian, French and Argentine members.
White & Case previously achieved success advising Peru in the Aguaytia ICSID case and the recuperation of Machu Picchu artifacts from Yale University.
"This case arose under concession contracts and is one of various international cases that Peru has faced, in part, simply because it agreed to ICSID arbitration clauses in diverse contracts," said partner Rafael Llano Oddone.
The results reflects White & Case's strong experience in Spain-Latin American investment, out of offices in Madrid and the Americas.
"Our Latin arbitration team works on Spain-Latin American investments and disputes every day, collaborating across the Americas and with our Madrid office," Hamilton said.
The White & Case Latin American arbitration team was led by Hamilton in Washington, DC, together with partners Llano Oddone in Mexico City and Christopher R. Seppälä in Paris, and associates Francisco Jijon, Sara Sargeantson and Jacob Stoehr in Washington, DC.
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