Latam Hydro LLC and CH Mamacocha S.R.L. v. Republic of Peru
ICSID · Investment (ICSID and treaty) · Peru · 20 Dec 2023
Why it matters
This case is significant for its detailed analysis of the interaction between investment treaty claims and contractual disputes, particularly in the renewable energy sector. The Tribunal's decision on jurisdiction, including the application of the 'fork-in-the-road' clause and the interpretation of 'investment' under the ICSID Convention, provides important guidance. The dissenting opinion highlights disagreements on the interpretation of contractual extension clauses and the state's duty of consistency.
Summary
The dispute arose from a hydroelectric project in Peru. Claimants, US-based investors, entered into a RER Concession Contract with Peru to develop a 20 MW run-of-the-river plant. The project faced delays due to permitting issues and local opposition. Peru granted several extensions via addenda but later denied a third extension request, leading to automatic termination of the contract. Claimants initiated ICSID arbitration under the US-Peru TPA, alleging breaches of fair and equitable treatment, indirect expropriation, and the contract. The Tribunal found it had jurisdiction over the treaty claims but dismissed them on the merits. It held that Peru's actions were not arbitrary or disproportionate, and that the contract termination was in accordance with its terms. The Tribunal also rejected contractual claims, finding no breach of good faith or other obligations. The dissenting arbitrator argued that Peru's conduct was arbitrary and violated the contract and treaty.
The detail
Parties: Latam Hydro LLC and CH Mamacocha S.R.L. v. Republic of Peru
Case number: ICSID Case No. ARB/19/28
Outcome: The Tribunal dismissed all claims. The RER Contract was declared automatically terminated due to failure to achieve Commercial Operation Start-up by the deadline, and no compensation was awarded to Claimants.
Applicable law: Treaty: United States-Peru Trade Promotion Agreement (TPA); Contract: RER Concession Contract governed by Peruvian law; ICSID Convention; ICSID Arbitration Rules
Issues in play: The case involved the interplay between contractual obligations under the RER Contract and treaty protections under the TPA, particularly regarding fair and equitable treatment and indirect expropriation. The Tribunal had to determine whether Peru's denial of an extension request and initiation of domestic arbitration constituted a breach of the TPA or the contract.
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