PERU Law and Practice Contributed by: Renzo Salvatore Monroy Pino, Roberto Shimabukuro Miyasato, Aníbal Urtecho Gómez and Alexander Montenegro, Monroy & Shima Abogados
3. Substantive Protections and Breaches
The interaction creates a comprehensive protection regime where domestic law provides immediate, prac- tical guarantees while international treaties offer ulti- mate recourse and enhanced substantive standards. 2.6 Arbitration Clauses in Investor–State Contracts Direct arbitration clauses in contracts between inves- tors and the Peruvian State are common practice, particularly in infrastructure and energy conces- sions. These contracts typically establish a two-tier dispute resolution system based on claim amount: disputes exceeding USD20 million proceed to ICSID arbitration, whereas smaller disputes are resolved through domestic arbitration in Lima. This structure is frequently observed in renewable energy contracts where private companies enter into long-term power purchase agreements with governmental entities. The protection afforded by contractual arbitration clauses differs substantially from treaty-based inves- tor protection. Contract-based dispute resolution lim- its parties to rights and obligations expressly stipulat- ed in the specific agreement, with the State treated as a contracting party rather than in its sovereign capac- ity. Investment treaties provide broader substantive protections, including FET and comprehensive safe- guards against expropriation. A significant distinction concerns umbrella clauses. Peru’s agreement with the USA does not contain umbrella clause provisions, meaning contractual breaches do not automatically constitute treaty vio- lations. Although some of Peru’s earlier BITs include umbrella clauses, tribunals have required claimants to demonstrate that the State acted in its sovereign capacity rather than merely as a commercial coun- terparty before elevating contract breaches to treaty- level claims. In practice, investors frequently pursue parallel strat- egies, simultaneously advancing contract-based claims while arguing separately that Peru violated international law standards established in investment treaties. This dual-track approach allows investors to maximise their procedural options and legal theories of recovery.
3.1 Common Complaints Full Protection and Security
The most significant recent development in FPS claims involves state responsibility for actions or omissions related to conflicts with rural communities. In the Lupa- ka Gold case, the tribunal found that Peru breached its FPS obligation both through actions attributable to a rural community (direct harm) and through the central government’s inadequate response to third-party vio- lence (failure to exercise due diligence). The case established that: • a state cannot delegate FPS obligations to inves- tors through “social licence” requirements; • exclusive reliance on dialogue, without effective law enforcement back-up, may violate FPS when third parties physically seize investments; and • rural communities exercising governmental author- ity under domestic law are state organs for pur- poses of FPS obligations. FET Violations of the FET standard constitute the most frequent claim in arbitrations against Peru. Common allegations include the following. • Breach of legitimate expectations ‒ investors typi- cally claim the State violated expectations cre- ated through specific representations, stabilisation agreements, or regulatory frameworks. In Lupaka Gold , the tribunal found Peru violated expecta- tions that investors could access and operate their legally authorised projects free from violent interfer- ence. • Arbitrary or discriminatory conduct ‒ claims fre- quently arise from unequal application of laws, selective enforcement, or seemingly irrational decision-making. The Lupaka Gold tribunal found Peru’s treatment of the investor was “grossly unfair and unjust”. • Denial of justice ‒ allegations include excessive delays in judicial proceedings, refusal to enforce judgments, or failure to prosecute criminal con- duct. In Lupaka Gold , criminal complaints filed
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