PERU Trends and Developments Contributed by: Renzo Salvatore Monroy Pino, Roberto Shimabukuro Miyasato, Aníbal Urtecho Gómez and Alexander Montenegro, Monroy & Shima Abogados
Using local and international legal opinions to confirm understanding of the applicable regulatory framework can also strengthen an investor’s position. These opin- ions can establish what a reasonable investor would have understood about their rights and obligations at the time of making the investment. Political engagement and stakeholder management In the current Peruvian context, proactive engagement with multiple levels of government and social stake- holders is essential. Investors cannot rely solely on relationships with the central government; they must build support among regional and local governments, as well as affected communities. This multi-level engagement can provide some protection against abrupt political changes at the national level. Managing the social licence to operate has become as important as maintaining legal licences. Investors who have invested significantly in community relations and local development have demonstrated greater resil- ience to political pressures. This includes not only corporate social responsibility programmes but also genuine mechanisms for community participation in project benefits. Co-ordination with other investors in the sector can also be valuable. Industry associations and chambers of commerce can provide a stronger collective voice in dialogue with government and can help resist harmful policy changes. Collective action can be particularly effective in responding to legislative or regulatory pro- posals that would negatively affect the sector. The State’s role: balancing sovereignty and international obligations The Peruvian State faces significant challenges in defending investment arbitrations in the current con- text. High official turnover means institutional knowl- edge about ongoing disputes is frequently lost. Legal defence teams must constantly educate new officials about cases and their implications, which can result in inconsistent or contradictory defence strategies. Co-ordination between different government entities is also problematic. Investment disputes typically involve actions by multiple ministries and agencies, but lack of effective co-ordination can result in con-
tradictory positions or conflicting evidence. The State Coordination and Response System in International Investment Controversies ( Sistema de Coordinación y Respuesta del Estado en Controversias Internac- ionales de Inversión , or “SICRECI”) was created to address this problem, but its effectiveness has been limited by constant political changes. Arbitration costs represent a significant burden on the public budget, especially considering the grow- ing number of cases. Legal defence costs, along with potential adverse awards, can reach hundreds of mil- lions of dollars. In a context of limited fiscal resources and urgent social priorities, these costs are increas- ingly difficult to justify politically. Necessary reforms and best practices To reduce the risk of future arbitrations, the Peruvian State needs to implement structural reforms in its approach to foreign investment. This includes devel- oping long-term state policies that transcend govern- ment changes, improving consultation mechanisms with investors before implementing regulatory chang- es, and strengthening institutional capacity to assess investment treaty implications in policy decisions. Implementing regulatory impact assessments that consider international obligations would be an impor- tant step. Before adopting measures that may affect foreign investors, authorities should systematically assess the risk of claims under investment treaties. This requires training public officials in international investment law and better co-ordination between gov- ernment entities. Developing effective dispute prevention mechanisms is also crucial. This could include creating an invest- ment ombudsman with the power to mediate between investors and government entities or establishing ear- ly warning procedures that identify potential disputes before they escalate to international arbitration. Looking forward: scenarios and strategic recommendations The coming years present several possible political scenarios, each with different implications for the investment environment. A scenario of continued cur- rent instability would suggest further policy volatility
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