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Freeport-McMoRan Inc. v. Republic of Peru (ICSID)

Why it matters

This case is significant as it addresses the scope of investor protections under bilateral investment treaties and investment contracts, particularly regarding tax and royalty disputes in the mining sector. The unanimous dismissal (with one dissenting vote) clarifies the limits of state liability for sovereign fiscal measures and reinforces the principle that investors must comply with local tax laws. It also highlights the importance of contractual stabilization clauses and their interaction with treaty protections.

Summary

Freeport-McMoRan Inc., a US mining company, and its Peruvian subsidiary Sociedad Minera Cerro Verde S.A.A. initiated arbitration against Peru in 2020 under the US-Peru Trade Promotion Agreement (TPA) and a 1998 investment contract (Contrato de Garantías y Medidas de Promoción a la Inversión). The dispute arose from Peru's imposition of royalties and taxes on mineral processing at the Cerro Verde mine for the period 2006-2013. The claimants argued that Peru breached its obligations by demanding payment of these amounts, which they had already paid in full (including capital, interest, and penalties). The tribunal, by majority (with one arbitrator dissenting), dismissed all claims, ruling that Peru did not violate the TPA or the investment contract. The award ordered each party to bear its own costs, and the subsidiary confirmed it owed no additional sums. The case underscores the deference given to host states' sovereign taxing powers and the high bar for investors to prove treaty breaches in fiscal matters.

The detail

Parties: Freeport-McMoRan Inc. v. Republic of Peru

Case number: ICSID Case No. ARB/20/8

Outcome: The tribunal dismissed all claims by Freeport-McMoRan Inc. and Sociedad Minera Cerro Verde S.A.A. against Peru, with each party bearing its own costs.

Applicable law: Contrato de Garantías y Medidas de Promoción a la Inversión (1998) and the US-Peru Trade Promotion Agreement (TPA)

Issues in play: The dispute involved whether Peru breached its obligations under the investment contract and the US-Peru TPA by imposing royalties and taxes on mineral processing at the Cerro Verde mine between 2006 and 2013.

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