The Special Commission that represents the State in International Investment Disputes (“Special Commission”), which makes up the State Coordination and Response System in International Investment Disputes (“SICRECI”), reported that the General Secretariat of the International Investment Center Settlement of Investment Disputes (ICSID) has notified the Peruvian State, on October 3, 2023, of the Final Award issued within the framework of the arbitration procedure initiated on June 27, 2019 by IC Power Ltd. and Kenon Holdings Ltd. (“Claimants”) against the Republic of Peru (ICSID Case No. ARB/19/19). This conflict originated under the Free Trade Agreement between the Government of the Republic of Peru and the Government of the Republic of Singapore (Peru-Singapore FTA).
The controversy presented by the Claimants focused on the alleged violation of the standards of Fair and Equitable Treatment, as well as Full Protection and Security, according to Article 10.5 (Minimum Standard of Treatment) of the Peru-Singapore FTA. This was due to the adoption by the Peruvian State of two regulatory measures: OSINERGMIN Resolution No. 141-2016-OS/CD dated June 13, 2016 and OSINERGMIN Resolution No. 164-2016-OS/CD dated June 30, 2016, both related to the Peruvian electrical system.
The Arbitration Court dismissed the Claimants’ claim regarding Resolution No. 164, concluding that this regulatory measure was taken in good faith and did not discriminate, which reaffirms the regulatory powers of the States in protecting public interest policies.
Regarding Resolution No. 141, the Court rejected the claim related to the Full Protection and Security standard, but determined that this measure violated the Fair and Equitable Treatment standard of the Peru-Singapore FTA, ordering the Peruvian State to pay compensation of US$110.7 million plus interest for the damages caused.
Additionally, andThe Court underlined the obligation of the State not to frustrate the legitimate expectations of an investor within the framework of Article 10.5 of the FTA. Although no violation was found in this case, the Peruvian State emphasizes that the concept of legitimate expectations is not part of the standard of fair and equitable treatment under customary international law.
The Peruvian State, in collaboration with its external lawyers, will carefully review the Final Award and take measures to safeguard the interpretation of the provisions of the Peru-Singapore FTA in accordance with its express consent. The next steps to follow will be evaluated within the deadlines established in the ICSID Convention, with the objective of protecting national interests and the public treasury.
In accordance with the rules applicable to arbitration, the Final Award will be published and available to the public after completing the procedures established in said rules.
Source: Larepublica
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