Pluspetrol Perú Corporation and others v. Perupetro S.A
ICSID · Investment (ICSID and treaty) · Peru · 21 May 2015
Why it matters
This case is significant for its detailed analysis of royalty calculation in the LNG export context under a state contract. It clarifies that royalties are due based on the final market where the gas is consumed, not intermediate delivery points. The award also addresses the burden of proof for contractual compliance and the allocation of costs in ICSID arbitration, reinforcing that a party failing to prove its claims may bear the opposing party's costs.
Summary
The dispute arose from a License Contract for hydrocarbon exploitation in Block 56, Peru. The Claimants (a consortium of companies) exported LNG to the Gulf of Mexico. They paid royalties based on the price at the first discharge port (the LNG terminal where the gas was delivered). Perupetro argued that royalties should be based on the final consumption market (the regasification terminal where the gas was sold to end users). The Tribunal found that the contract required royalties to be calculated at the point of final consumption, as the gas was destined for sale in that market. The Claimants had underpaid royalties for ten cargoes between August 2010 and March 2011. The Tribunal rejected the Claimants' request for declaratory relief and granted Perupetro's counterclaim for the underpaid amounts plus interest and costs. The award was unanimous.
The detail
Parties: Pluspetrol Perú Corporation and others v. Perupetro S.A
Case number: ICSID Case No. ARB/12/28
Outcome: The Tribunal dismissed the Claimants' claims and upheld Perupetro's counterclaim. The Claimants were ordered to pay Perupetro US$48,823,826 in damages for underpaid royalties, plus interest at 6.25% (US$12,693,603 as of 31 December 2014), and US$3,376,174 in costs.
Quantum: US$48,823,826 (damages) + US$12,693,603 (interest) + US$3,376,174 (costs)
Applicable law: Contract of License for the Exploitation of Hydrocarbons in Block 56 (7 September 2004); Peruvian Hydrocarbons Law (Supreme Decree No. 042-2005-EM); ICSID Convention; ICSID Arbitration Rules; Peruvian domestic law.
Issues in play: The dispute centered on the interpretation of the royalty clause in the License Contract: whether royalties should be calculated based on the final consumption market (where the gas is regasified and sold) or at the first discharge port. The Tribunal applied Peruvian contract law and the principle that contractual obligations must be performed in good faith.
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