Chavimochic S.A.C. v. Regional Government of La Libertad (Peru)
UNCITRAL · Investment (ICSID and treaty) · Peru · 28 Apr 2022
Why it matters
This award is significant for its treatment of corruption in concession contracts: the tribunal held that a false declaration of compliance with an anti-corruption clause (clause 9) constituted a material breach from the date of contract signature, even if no actual bribe was proven. It also addressed the interplay between a state's failure to deliver project land and a concessionaire's inability to achieve financial close, ultimately finding mutual fault and ordering termination with compensation for works performed.
Summary
The dispute arose from a 2014 concession contract for the third stage of the Chavimochic irrigation project in Peru. The concessionaire, Chavimochic S.A.C., was required to achieve financial close within 12 months and the state had to deliver control of the project lands (ECP). The concessionaire failed to obtain financial close by the deadline, partly because the state had not fully delivered the lands. However, the tribunal found that the concessionaire had violated clause 9 of the contract by falsely declaring that it and its shareholders had not engaged in corrupt practices, when in fact its shareholders (including Odebrecht) had admitted to bribery in other projects. The tribunal held that this false declaration was a material breach from the date of contract signature, justifying termination. The state also breached clause 1.46 by failing to deliver the ECP on time. The tribunal ordered termination of the contract with mutual fault. The state was ordered to pay USD 25.3 million for works and assets received, while the concessionaire had to forfeit 70% of its performance bond (USD 25 million) for failing to achieve financial close. The award also addressed the application of Peru's Emergency Decree 003/2017, requiring a 10% retention on payments to the concessionaire. The case illustrates how corruption allegations can undermine a concession and lead to termination even when the state is also in breach.
The detail
Parties: Chavimochic S.A.C. v. Regional Government of La Libertad (Peru)
Case number: italaw/cases/9951
Outcome: The Tribunal found both parties in breach: Claimant violated clauses 9 and 20.3 of the Concession Contract; Respondent violated clause 1.46. The contract was terminated early due to mutual fault. Respondent must pay Claimant USD 25,307,438.70 for works and goods received, and Claimant must pay 70% of the performance bond (USD 25,060,000) for breach of clause 20.3. Each party bears its own costs and 50% of tribunal costs.
Quantum: USD 25,307,438.70 (to Claimant); USD 25,060,000 (to Respondent via bond execution)
Applicable law: Concession Contract for the Design, Construction, Operation and Maintenance of the Chavimochic Project; Peruvian law; UNCITRAL Arbitration Rules (2010); seat Lima, Peru.
Issues in play: The case involved contractual clauses on corruption (clause 9 prohibiting bribery), financial close (clause 20.3), and delivery of project control (clause 1.46). The collision was between the concessionaire's obligation to obtain financing and the state's obligation to deliver land free of encumbrances, complicated by the concessionaire's involvement in the Odebrecht corruption scandal.
Read the full decision at italaw ↗
Locus Standi links to the source decision and publishes its own plain-language summary. It does not reproduce the text of the award.