PERU Law and Practice Contributed by: Renzo Salvatore Monroy Pino, Roberto Shimabukuro Miyasato, Aníbal Urtecho Gómez and Alexander Montenegro, Monroy & Shima Abogados
Significance The Lupaka Gold case establishes important prece- dents regarding state responsibility for sub-state enti- ties, the scope of the “social licence” concept under investment treaties, and the limits of dialogue-based conflict resolution policies when investment treaty obligations are at stake. 1.6 Reaction to Awards Made Against the State Peru’s attitude toward enforcement of arbitral awards has been mixed. Although in some cases the State has voluntarily complied with adverse awards and actively negotiated settlements, in others it has shown significant resistance, including failure to respond to enforcement proceedings. Kuntur Wasi Case – Procedural Default (2025) The most recent and concerning case is Kuntur Wasi , where Peru was declared “in default” by the Bankrupt- cy Court of the District of Columbia in April 2025. The State failed to appear to defend itself in the enforce- ment action for the USD91 million ICSID award within the legal period of 60 days, which enabled the con- sortium to request attachments on Peruvian assets in US territory. This situation represents a concerning precedent in Peruvian arbitral history, sending negative signals about the country’s institutionality and its commitment to fulfilling international obligations. Gramercy Case ‒ Negotiated Compliance (2024) In contrast to Kuntur Wasi , the Peruvian State dem - onstrated a proactive attitude in the Gramercy v Peru case. In December 2024, the Ministry of Economy and Finance ( Ministerio de Economía y Finanzas , or MEF) negotiated a settlement agreement that reduced the debt arising from the arbitral award by more than USD25 million. The agreement established payment in three instalments and provided for the return of the cancelled agrarian reform bonds to MEF custody. This case demonstrates that, when political will and active management by the MEF Public Prosecutor’s Office exist, the Peruvian State can fulfil its internation- al obligations efficiently while simultaneously protect- ing the country’s fiscal interests through post-award
tor, Peruvian authorities declined to intervene beyond encouraging dialogue, citing policy concerns about using force against rural communities. The investor lost its investment to loan foreclosure in August 2019. Legal Principles Debated The tribunal debated the following key legal principles. • Attribution of conduct ‒ the tribunal extensively analysed whether actions of Peru’s autonomous rural communities ( comunidades campesinas ) could be attributed to the State under Articles 4 and 5 of the International Law Commission Arti- cles on State Responsibility. Peru argued that rural communities are autonomous entities with special status under international law, rather than state organs. • Full protection and security (FPS) ‒ the tribunal examined whether Peru’s policy of relying exclu- sively on dialogue (rather than law enforcement) to resolve conflicts between investors and communi- ties satisfied the FPS standard under customary international law. • Fair and equitable treatment (FET) ‒ the tribunal analysed whether the State’s failure to respond effectively to the blockade and seizure of the mine constituted arbitrary and unjust conduct violating the FET standard. • Expropriation ‒ the tribunal considered both direct expropriation (through the community’s physi- cal seizure of the mine) and indirect expropria- tion (through state omissions), including whether compensation calculations should include planned expansion capacity. Outcome The tribunal unanimously found that: • rural communities in Peru exercise governmental authority and their conduct is attributable to the State; • Peru breached its obligations to provide FPS and FET; and • Peru directly expropriated the investment. The tribunal awarded compensation of USD40.4 mil- lion plus compound interest from August 2019.
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