PERU Trends and Developments Contributed by: Renzo Salvatore Monroy Pino, Roberto Shimabukuro Miyasato, Aníbal Urtecho Gómez and Alexander Montenegro, Monroy & Shima Abogados
ment ‒ although it declared the RER (renewable energy resources) contract terminated and ordered the return of the USD5 million performance bond. This case illus- trates the complexity of navigating between contrac- tual obligations, regulatory requirements, and social pressures in renewable energy projects. The increase in notices of intent to initiate arbitration is a troubling trend. Although many of these notices do not progress to formal arbitration, their growing frequency suggests deterioration in the relationship between the State and foreign investors. Sectors such as mining, energy, and infrastructure concentrate the majority of these potential disputes, reflecting the par- Analysis of recent and potential disputes reveals sev- eral significant patterns. First, there is an increase in disputes related to social and environmental conflicts, where the State finds itself caught between its interna- tional obligations to investors and domestic pressures to respond to social demands. These cases present unique challenges, as they involve considerations of human rights, prior consultation with indigenous com- munities, and environmental protection. Second, disputes related to changes in the tax regime are increasing. Proposals to modify mining royalties, create new taxes, or change expense deductibility rules have generated significant tensions. Investors with stability agreements are particularly attentive to attempts to erode their benefits through indirect measures or aggressive administrative interpretations. Third, there is a trend towards more complex dis- putes involving multiple government measures over time. Rather than a single clear expropriatory action, investors allege violations based on a series of meas- ures that collectively have destroyed their investment value. These “creeping expropriation” cases are more difficult to prove but reflect the reality of gradual dete- rioration in the investment environment. Mitigation strategies Corporate structuring and legitimate treaty shopping Careful corporate structuring has become essential to maximise protection available under investment trea- ticular challenges in these areas. Emerging patterns in disputes
ties. Investors are evaluating not only which treaties Peru offers with their home countries, but also options for structuring investments through third jurisdictions with more favourable treaties. This practice of “treaty shopping”, when done legitimately and with real eco- nomic substance, is recognised as valid corporate planning. Key considerations include the breadth of investment and investor definitions in different treaties, substan- tive protection standards offered, and procedural rules for arbitration. Some of Peru’s more recent treaties include stricter denial of benefits requirements and more limited definitions of protected investment, mak- ing older treaties potentially more attractive for struc- turing investments. Timing of structuring is critical. Arbitral tribunals have been consistent in rejecting corporate restructurings undertaken after a dispute has crystallised. Therefore, investors must consider their corporate structure as part of initial investment planning, not as a response to emerging problems. This requires prospective assess- ment of political and regulatory risks from the project’s inception. Documentation and evidence preservation Meticulous documentation of interactions with gov- ernment authorities and the bases for investment decisions has become crucial. Investors must main- tain detailed records of representations made by gov- ernment officials, conditions under which investment was made, and any changes in regulatory treatment over time. This documentation is essential for estab- lishing legitimate expectations and demonstrating the impact of government measures. Preserving contemporary evidence is particularly important given the volatile political environment. Government officials change frequently and policies promised by one administration may be denied by the next. Written correspondence, meeting minutes, and formal confirmations of understandings are invalu- able in case of future dispute. Investors should also carefully document economic impacts of regulatory or policy changes, maintaining updated financial mod- els showing how government measures have affected project profitability.
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