PERU Trends and Developments Contributed by: Renzo Salvatore Monroy Pino, Roberto Shimabukuro Miyasato, Aníbal Urtecho Gómez and Alexander Montenegro, Monroy & Shima Abogados
has effectively paralysed new investments in the sec- tor, with potential investors awaiting clearer signals about future policy direction. International protection mechanisms: the investor’s legal shield Peru maintains one of Latin America’s most exten- sive networks of investment protection treaties, with more than 30 bilateral investment treaties in force and investment chapters in multiple free trade agree- ments. These instruments provide foreign investors with a robust set of substantive protections, including guarantees of fair and equitable treatment, protection against expropriation without compensation, national treatment and most-favoured-nation treatment, and free transfer of capital. The breadth of this treaty net- work means that most foreign investors in Peru have access to international arbitration as a dispute resolu- tion mechanism. The protection standards contained in these trea- ties have gained particular relevance in the current context. The fair and equitable treatment standard, which includes protection of legitimate expectations and the obligation to maintain a stable and predictable regulatory framework, is especially pertinent given the environment of constant political changes. Arbitral tri- bunals have consistently recognised that while states maintain their regulatory right, abrupt and unreasona- ble changes that frustrate investors’ legitimate expec- tations may constitute violations of this standard. Protection against indirect expropriation has also gained prominence, particularly in cases where regu- latory measures or policy changes have had the effect of substantially depriving investors of their investment value. The distinction between legitimate regulation and indirect expropriation has become critical in the Peruvian context, where frequent regulatory changes may accumulate to constitute a de facto deprivation of investor rights. Legal stability agreements: the complementary domestic tool Legal stability agreements represent a unique tool in the protection arsenal available to investors in Peru. These contract laws (constitutionally guaranteed) freeze the legal regime applicable to an investment
for periods of up to ten years, providing regulatory certainty in key areas such as taxation, free availability of foreign exchange, and exchange rate regime. In the current context of instability, these agreements have demonstrated their value as a complement to international protections. The interaction between legal stability agreements and investment treaties creates a multi-layered protection structure. The agreements provide ex ante certainty about the applicable regime, while treaties offer ex post recourse in case of breach. Arbitral tribunals have recognised that the existence of a stability agreement can strengthen an investor’s legitimate expectations, making it more difficult for the State to justify unilateral changes. However, the effectiveness of these agreements has been questioned in the current political context. Leg- islative proposals to retroactively modify or eliminate these agreements have emerged periodically, creat- ing uncertainty about their durability. Although such attempts would likely violate both the Peruvian Con- stitution and international treaties, their mere proposal generates instability and may affect investment deci- sions. Emblematic cases and dispute trends The Bear Creek Mining Corporation v Republic of Peru case, decided in 2017, remains an important reference for understanding the risks of the current Peruvian context. The tribunal found that Peru violated the fair and equitable treatment standard by revoking Bear Creek’s mining rights in response to social protests, without providing adequate due process. This case illustrates how social and political pressure can lead to government decisions that, albeit politically expedi- ent, may result in significant international liability. More recently, the Latam Hydro LLC and CH Mama- cocha SRL v Republic of Peru case (ICSID Case No ARB/19/28), decided in December 2023, exemplifies challenges in the renewable energy sector. The dis- pute arose from difficulties obtaining environmental and water permits for a hydroelectric project, in the context of social opposition and complex administra- tive procedures. The tribunal rejected by majority the claims under the Peru‒USA trade promotion agree-
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