Sociedad Aeroportuaria Kuntur Wasi S.A. and Corporación América S.A. v. Republic of Peru
ICSID · Investment (ICSID and treaty) · Peru · 9 May 2024
Why it matters
This award is significant for its detailed application of the Chorzów Factory standard to calculate treaty damages using a cost approach plus entrepreneurial profit. It also clarifies the relationship between contractual and treaty claims, holding that a termination without public interest grounds can violate FET even if not amounting to bad faith under domestic law. The decision on tax gross-up and interest methodology provides guidance for future awards.
Summary
The case arose from Peru's termination of a concession contract for the Chinchero International Airport project. The claimants, Kuntur Wasi and its parent Corporación América, argued that Peru's termination was unlawful and violated both the concession contract and the Argentina-Peru Bilateral Investment Treaty (BIT). The tribunal found that Peru breached the contract by terminating without a well-founded public interest reason, but did not act with dolo (bad faith) or culpa inexcusable (gross negligence) under Peruvian law. However, the termination violated the fair and equitable treatment (FET) standard under Article 2(3) of the BIT. For damages, the tribunal applied the Chorzów Factory standard of full reparation, using a cost approach that valued the investment at US$42.5 million plus entrepreneurial profit calculated as the average of two methodologies (WACC and DCF comparison), yielding US$10,066,793. The performance bond of US$8,687,826 was treated as consequential damages. Interest was set at the average US dollar lending rate in Peru, compounded annually. The tribunal ordered a tax gross-up of 29.5% on taxable portions. The total award to Kuntur Wasi was US$91,205,056 as of 28 February 2024, with ongoing interest. Each party bore its own costs.
The detail
Parties: Sociedad Aeroportuaria Kuntur Wasi S.A. and Corporación América S.A. v. Republic of Peru
Case number: ICSID Case No. ARB/18/27
Outcome: Peru breached the fair and equitable treatment standard under the Argentina-Peru BIT. Claimants awarded US$91,205,056 in damages (including interest to 28 Feb 2024) plus further interest. Each party bears its own costs.
Quantum: US$91,205,056
Applicable law: Argentina-Peru BIT (1994), ICSID Convention, Peruvian law, Concession Contract
Issues in play: The case involved the interaction between Peruvian contract law (dolo/culpa inexcusable) and the international law standard of fair and equitable treatment under the BIT. The tribunal distinguished between contractual breaches not reaching gross negligence and treaty violations for unjustified termination.
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