Ana María Arrarte, María del Carmen Tovar, Javier Ferrero and Angela Cámara.
A. LEGISLATION AND RULES
International arbitration in Peru continues to be governed by the Legislative Decree No. 1071 of 2008, based on the UNCITRAL Model Law (the 1985 Model Law with its amendments in 2006), the Urgency Decree No. 020-2020 which modified some articles of the Legislative Decree No. 1071 related to arbitrations where the Republic of Peru (“State“) is a party, and the New York Convention.
Regarding the Urgency Decree No. 020-2020 adopted on 24 January 2020, it established the following modifications: (i) when the State participates as party, the arbitration shall be institutional, and it may only be ad hoc when the amount under dispute is not higher than ten Tax Units (each Tax Unit is equivalent to approximately USD 1,208); (ii) when a provisional measure is requested against the State party, the party requesting it shall have a financial guarantee in favor of the State entity, with an amount no less than the amount of the contractual guarantee for the execution of the contract; (iii) if there is no action that shows a continuance of the arbitral proceeding during four months, the abandonment of the proceeding shall be declared ex officio or by request of a party. In the case of institutional arbitration, the abandonment declaration will be done by the General Secretariat of the arbitral institution, and in the case of an ad hoc arbitration, the abandonment declaration will be done by the sole arbitrator or the chair of the Arbitral Tribunal. This abandonment declaration impedes to initiate another arbitration with the same claims during a period of six months, and if there is a second abandonment declaration in a new arbitral proceeding between the same parties and regarding the same claims, the right will be extinguished; (iv) all the arbitral proceedings and the arbitral awards shall be public once the arbitration has ended, but taking into consideration the confidentiality exceptions under the regulations on transparency and access to public information; and (v) the Ministry of Justice and Human Rights is in charge of a National Registry of Arbitrators and Arbitral Institutions, containing the list of arbitrators and arbitral institutions with relevant information related to their performance, as well as the registry of the affidavits of interests of the arbitrators that are involved in arbitral proceedings where the State is a party.
The criticism of these amendments have led to: (i) several arbitral tribunals to review the constitutionality of the request of a financial guarantee for provisionals measures against a State party and disapply it, and (ii) a preliminary opinion by the Commission of Justice of the Peruvian Congress recommending the derogatory of certain unconstitutional dispositions (i.e., the request of a financial guarantee for provisional measures against a State party and the abandonment declaration).
Although the constitutionality of the Urgent Decree is still under debate, a Ministerial Resolution issued on 30 June 2020 approved the guidelines regulating the National Registry of Arbitrators and Arbitration Centers according to the dispositions of the Urgency Decree.
On the other hand, regarding Dispute Resolution Boards, the Supreme Decree No. 250-2020-EF modified article 243 of the regulation of the Public Procurement Law. The Supreme Decree established the following: (i) if not agreed in the original contract, the parties may agree to include in the dispute resolution clause that a Dispute Resolution Board shall be in charge of the settlement of disputes taking binding decisions. This agreement is optional in works contracts with an amount less than or equal to PEN 20 million (USD 5.4 million), but mandatory if the amount is higher; and (ii) that the Dispute Resolution Board may be composed of one or three members, as agreed by the parties. In the absence of agreement between the parties or in case of doubt, the Dispute Resolution Board is composed of one member if the amount of the works contract is less than PEN 40 million (USD 10.8 million). If the amount is equal to or greater than such amount, the panel shall be formed by three members. These modifications are applicable for selection procedures called from 2020 onwards.
A.2 Institutions, rules and infrastructure
Since last year´s Yearbook, there have been developments in the most relevant arbitration institutions in Peru consisting of measures to totally adapt the proceedings to virtual means due to the state of emergency amid the COVID-19 pandemic. These changes also pursue more efficient proceedings, aligning with the practice of the majority of arbitration centers worldwide which are introducing changes with this objective.
While these institutions already had provisions to manage the proceeding remotely, the state of emergency obliged most of them to suspend the proceedings under their administration during the first weeks of the state of emergency, unless the tribunals decided otherwise. It also motivated the publication of practical notes and changes in their rules to make proceedings more efficient in a context in which they had to be conducted almost entirely remotely, and the Peruvian State, which is a recurrent party in domestic arbitrations, was not well prepared at the beginning of the state of emergency to work by virtual means (e.g., most of the Peruvian entities did not have electronic files).
A.2.1 The Arbitration Center of the Lima Chamber of Commerce
Proceedings are regulated under rules in force since 1 January 2017. In 2020, since the beginning of the state of emergency, the arbitration center issued three practical notes:
- The Practice Note No. 1/2020 published on 25 April 2020 set forth the guidelines to be applied by the Arbitral Tribunals to use virtual media, unless they affected the defense of the parties, were unfeasible or there were good reasons not to apply them in a specific case. These measures include a virtual platform for the parties, the electronic notification of all arbitration proceedings to the parties and arbitrators, the payment of fees through the CCL’s virtual platform and specifically during the COVID-19 pandemic and until the Council so decides, hearings, conferences and meetings between the parties and the arbitral tribunal will be virtual. The Superior Council invited the parties and arbitrators to adapt the specific rules of the ongoing proceeding to this disposition.
- The Practice Note No. 2/2020 published on 2 September 2020 addressed rules that aim for more celerity and efficiency in the arbitrations under the Center’s administration. These measures included the implementation of a procedural calendar and reduction of the fees of the Arbitral Tribunals in case of delay in the issuance of the final award which should be rendered in a term that exceeds 50 business days since the closing of the proceeding.
- The Practice Note No. 3/2020 published on 1 October 2020 substituted the Practice Note No. 2/2020. This Practice Note replicates the rules introduced by Practice Note 2 with some clarifications and amendments and it is applicable to cases in which the constitution of the Arbitral Tribunals occurs after its publication.
Furthermore, the arbitration center presented its new Dispute Resolution Boards administration service on 24 November 2020 with a set of rules and a list of adjudicators. According to the rules, Dispute Resolution Boards are made up of a panel composed of one or three adjudicators who accompany the execution of works and act as a third party with a consultative-preventive function in the event of possible disagreements. In case of conflict, the adjudicators may take decisions. This mechanism requires the celebration of a tripartite contract between the parties and each of the adjudicators.
A.2.2 The Arbitration Center of the American Chamber of Commerce
Proceedings are regulated under rules in force since 2013 and modifications introduced on May of 2020. In 2020, since the beginning of the state of emergency, the arbitration center issued the following:
- A “virtual arbitration guide” was published on 24 April 2020 which provided for the modification and adaptation of various articles of its arbitration rules to facilitate virtual arbitration proceedings. This guide is not bound to arbitrators, who shall not have to justify their decision not to adopt it.
- Changes to various articles of its arbitration rules to facilitate arbitration proceedings by virtual means throughout the entire proceeding. These modifications are mandatory for arbitrations started after 1 May 2020. According to the Institution, these rules may help arbitration proceedings under these rules to not take more than ten months after the issuance of the schedule of procedural acts.
Additionally, the arbitration center has created an interdisciplinary Special Commission with the purpose of establishing procedures and rules for a Dispute Boards mechanism, which should be operational soon.
A.2.3 The Arbitration Center of CARC-PUCP
Proceedings are regulated under rules in force since 2017 and special provisions for emergency arbitrators processing published in January 2019. In 2020, since the beginning of the state of emergency, the arbitration center published a “Protocol for services in the context of the COVID-19 emergency situation” and an actualization regarding the implementation of a virtual platform for the parties’ requests, electronic notifications and virtual conduction of hearings.
Additionally, as of 1 January 2021, the new CARC-PUCP Dispute Board Regulations become effective. In the context of the pandemic, some provisions were introduced regarding the possibility of electronic submissions of documents and exchange of communications, virtual hearings and meetings, and even virtual visits to the site of the execution of the project.
During the last 12 months, there have not been any significant international arbitral awards.
However, between 2020 and the beginning of 2021, seven additional ICSID cases have been filed against the Republic of Peru: (i) Odebrecht Latinvest Sàrl v. Republic of Peru (ICSID Case No. ARB/20/4) under the BIT Peru – Belgium-Luxembourg 2005; (ii) Freeport-McMoRan Inc. v. Republic of Peru (ICSID Case No. ARB/20/8) under the United States of America – Peru Trade Promotion Agreement (TPA), related to mining concessions; (iii) SMM Cerro Verde Netherlands BV v. Republic of Peru (ICSID Case No. ARB/20/14), related to mining concessions; (iv) Desarrollo Vial de los Andes S.A.C. v. Republic of Peru (ICSID Case No. ARB/20/18) related to a highway construction project; (v) Lupaka Gold Corp. v. Republic of Peru (ICSID Case No. ARB/20/46) under the FTA Canada – Peru 2009, related to mining concessions; (vi) Worth Capital Holdings 27 LLC v. Republic of Peru (ICSID Case No. ARB/20/51) under the TPA, related to an oil and gas enterprise; and (vii) Quanta Services Netherlands BV v. Republic of Peru (ICSID Case No. ARB/21/1) under BIT Netherlands – Peru 1994, related to the telecommunications enterprise.
As of the date of writing, Peru has 15 pending and 16 concluded arbitrations before ICSID. The large amount of ICSID cases against Peru is the result of many years of large amounts of foreign investment entering into the country, which is illustrated by the broad range of issues involved in these investment arbitrations, and not because of a State policy known for expropriation and anti-investment measures, like some other countries in South America.
Furthermore, between 2019 and the beginning of 2021, four additional cases before the PCA have been filed against the Republic of Peru: (i) [2019-46] The Renco Group, Inc. v. The Republic of Peru, related to an investment in the mining industry; (ii) [2019-47] The Renco Group, Inc. & Doe Run Resources, Corp. v. La República del Perú & Activos Mineros SAC, related to an investment in the mining industry; (iii) [2019-26] Panamericana Television SA et al v. The Republic of Peru related to the telecommunications industry; and (iv) [2020-11] Bacilio Amorrortu (USA) v. The Republic of Peru, related to an oil and gas enterprise.
 PEN 4,400