Empresas Lucchetti, S.A. and Lucchetti Peru, S.A. v. The Republic of Peru
ICSID · Investment (ICSID and treaty) · Peru · 7 Feb 2005
Why it matters
This case is a landmark on the temporal scope of BITs, establishing that a dispute that crystallized before the treaty's entry into force cannot be brought under it, even if later measures relate to the same subject matter. It clarifies the 'same dispute' analysis and the effect of res judicata in international investment law.
Summary
Empresas Lucchetti, a Chilean company, invested over $150 million in a pasta factory in Lima, Peru. After obtaining permits, the Municipality of Lima annulled them in 1997-1998 citing environmental concerns. Lucchetti successfully challenged these annulments in Peruvian courts, obtaining final judgments in its favor. However, in August 2001, the municipality issued new decrees revoking Lucchetti's operating license and ordering closure, again on environmental grounds. The Chile-Peru BIT entered into force on August 3, 2001. Lucchetti initiated ICSID arbitration under the BIT, alleging expropriation and unfair treatment. Peru objected to jurisdiction, arguing that the dispute arose before the BIT entered into force, as the environmental conflict dated back to 1997-1998. The Tribunal agreed, finding that the dispute had crystallized prior to the BIT's entry into force and that the 2001 decrees were a continuation of the same dispute, not a new one. The Tribunal emphasized that the res judicata status of the earlier judgments did not end the dispute, as the municipality continued to pursue its environmental regulatory scheme. Consequently, the Tribunal declined jurisdiction, dismissing the claim without addressing the merits.
The detail
Parties: Empresas Lucchetti, S.A. and Lucchetti Peru, S.A. v. The Republic of Peru
Case number: ICSID Case No. ARB/03/4
Outcome: The Tribunal upheld Peru's objection to jurisdiction ratione temporis and dismissed the claim for lack of jurisdiction.
Applicable law: Chile-Peru Bilateral Investment Treaty (BIT), ICSID Convention
Issues in play: The dispute arose from environmental regulations affecting a pasta factory. The key issue was whether the dispute arose before or after the BIT entered into force, determining the tribunal's temporal jurisdiction.
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