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How to Prevent and Manage Investor-state Disputes - Lessons from Peru

Working paper by UNCTAD, 2011

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This study examines the case of Peru which designed a dispute prevention policy (DPP) and implemented a dispute prevention mechanism (DPM), which foresees the promotion of alternative dispute resolution (ADR) mechanisms and the implementation of prevention policies. This is an example of a case of good practice in the prevention and management of investor-State disputes.

 


UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT


BEST PRACTICES IN
INVESTMENT FOR


DEVELOPMENT
 


CASE STUDIES IN FDI
 


How to Prevent and Manage Investor-
State Disputes


Lessons from Peru


Advanced unedited un-cleared draft
 


 
UNITED NATIONS


New York and Geneva, 2011




How to Prevent and Manage Investor State Dispute


 
UNCTAD Investment Advisory Series B


ii


NOTE


As the focal point in the United Nations system for investment
within its mandate on trade and development, and building on three and
a half decades of experience in this area, UNCTAD, through the
Division on Investment and Enterprise (DIAE), promotes
understanding of key issues related to foreign direct investment (FDI)
and enterprise development. DIAE also assists developing countries in
enhancing their productive capacities and international competitiveness
through the integrated treatment of investment and enterprise
development.



The term “country” as used in this publication also refers, as


appropriate, to territories or areas. The designations employed and the
presentation of the material do not imply the expression of any opinion
whatsoever on the part of the Secretariat of the United Nations
concerning the legal status of any country, territory, city or area, or of
its authorities, or concerning the delimitation of its frontiers or
boundaries. In addition, the designations of country groups are intended
solely for statistical or analytical convenience and do not necessarily
express a judgment about the stage of development reached by a
particular country or area in the development process.



The following symbols have been used in the tables:
Two dots (..) indicate that data are not available or not separately
reported. Rows in tables have been omitted in those cases where
no data are available for any of the elements in the row.

A dash (-) indicates that the item is equal to zero or its value is
negligible.

A blank in a table indicates that the item is not applicable.







 
UNCTAD Investment Advisory Series B


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A slash (/) between dates representing years – for example,
2004/05, indicates a financial year.

Use of a dash (–) between dates representing years – for example
2004–2005 signifies the full period involved, including the
beginning and end years.

Reference to the “dollars” ($) means United States dollars, unless
otherwise indicated.

Annual rates of growth or change, unless otherwise stated, refer to
annual compound rates.

Details and percentages in tables do not necessarily add to totals
because of rounding.


The material contained in this publication may be freely quoted
or reprinted with appropriate acknowledgement. A copy of the
publication containing the quotation or reprint should be sent by post to
the Chief, Investment Promotion Section, DIAE, UNCTAD, Palais des
Nations, Room E-10086, CH-1211 Geneva, Switzerland; by fax to 41
22 917 0197; or by e-mail to ips@unctad.org. Publications are available
on the UNCTAD website at http://www.unctad.org.




How to Prevent and Manage Investor State Dispute


 
UNCTAD Investment Advisory Series B


iv


PREFACE


The Investment Advisory Series provides practical advice and
case studies of best policy practice for attracting and benefiting from
foreign direct investment (FDI), in line with national development
strategies. The series draws on the experiences gained in, and lessons
learned through, UNCTAD’s capacity-building and institution-building
work in developing countries and countries with economies in
transition.


Series A deals with issues related to investment promotion and
facilitation and to the work of investment promotion agencies (IPAs)
and other institutions that promote FDI and provide information and
services to investors. The publications are intended to be pragmatic,
with a how-to focus, and they include toolkits and handbooks. The
prime target audience for series A is practitioners in the field of
investment promotion and facilitation, mainly in IPAs.


Series B focuses on case studies of best practices in policy and
strategic matters related to FDI and development arising from existing
and emerging challenges. The primary target audience for series B is
policymakers in the field of investment. Other target audiences include
civil society, the private sector and international organizations. Series B
was launched in response to a call at the 2007 Heiligendamm G-8
Summit for UNCTAD and other international organizations to
undertake case studies in making FDI work for development. It
analyses practices adopted in selected countries in which investment
has contributed to development, with the aim of disseminating best
practice experiences to developing countries and countries with
economies in transition. The analysis forms the basis of a new technical
assistance work programme aimed at helping countries to adopt and
adapt best practices in the area of investment policies.








 
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v




For Series B, UNCTAD’s approach is to undertake case studies
of a pair of developed and developing or transitional economies that
exhibit elements of best practices in a selected issue. Country selection
follows a standard methodology, based primarily on the significant
presence of FDI and resulting positive outcomes.


The Investment Advisory Series is prepared by a team of
UNCTAD staff and consultants in the Investment Policies Branch,
under the guidance of James Zhan. This study of the Series B was
prepared and finalized by Silvia Constain. Contributions and comments
were received from Richard Bolwijn, Roberto Echandi, Anna Joubin-
Bret, Jan Knoerich, Elisabeth Tuerk, Cam Vidler and Joerg Weber. The
report has also benefited from interviews with current and former
government officials, the domestic and foreign private sector, and local
stakeholders. Financial support was received from the Government of
Germany.


Geneva, November 2011




How to Prevent and Manage Investor State Dispute


 
UNCTAD Investment Advisory Series B


1. Map and update agreements with ISDS provisions ..........42
2. Identify and monitor sensitive sectors ..................................43
3. Identify obstacles to investment ..............................................44


vi


CONTENTS
ABBREVIATIONS ............................................................ix
I. IN TRODUCTION ...........................................................1



A.   International investment and the IIA system............................. 2





B.   Investor‐State international arbitration....................................... 5
C.   Preventing and managing investor‐State disputes.................10
D.   The case of Peru....................................................................................12


II. FOREIGN DIRECT INVESTMENT AND IIAs IN
PERU.............................................................................15


III.


POLICIES ON DISPUTE PREVENTION IN PERU
9



.......................................................................................1
A.   Shortcomings and limitations identified by Peru ...................19
B.   I



nternational investment disputes State coordination and  



response system...................................................................................21



1. Scope ....................................................................................................23



2. Definition of actors.........................................................................23



3. Objectives ...........................................................................................28



4. Direct negotiation, conciliation and mediation ..................32
5. Budgeting and funding dispute settlement..........................32
6. Confidentiality of information ...................................................33


IV. IMPACT OF THE RESPONSE SYSTEM...............35



A.   Elements already in place .................................................................35
B.   Areas in planning or implementation ..........................................37
C.   Cases of success.....................................................................................38




V. GO
A.   H


OD PRACTICES LESSONS................................41



ow to prevent problems .................................................................42








 
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vii


4. Establish a central investment contact point ......................44



5. Build capacity and awareness of IIA provisions and 


commitments.................................................................................44


6. Make agencies liable for enacting measures contrary to 
B.   H


IIA provisions ................................................................................46


ow to avoid the escalation of problems into disputes .......47


1. Detect problems early on.............................................................48
2. Encourage administrative review of investor problems48


ration of 


3. Designate a lead agency while seeking the coope
other agencies ...............................................................................49



4. Share case‐specific information while ensuring 


confidentiality ...............................................................................50


5. Develop, propose and use alternative dispute resolution 
C.   H


mechanisms ...................................................................................51
3


ow to effectively and efficiently manage ISDS arbitration5
1.   Define and empower lead agency or commission...........53
2.   Ensure funds for defense and specialized advisors and 


legal costs........................................................................................54
VI. CONCLUSIONS .........................................................57
REFERENCES ..................................................................59
ANNEX 1............................................................................61
SELECTED UNCTAD PUBLICATIONS ON
INTERNATIONAL INVESTMENT AGREEMENTS,
TRANSNATIONAL CORPORATIONS AND
FOREIGN DIRECT INVESTMENT..............................65
QUESTIONNAIRE...........................................................75




How to Prevent and Manage Investor State Dispute


 
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FIGURES 


Figure 1: Value of global FDI inflows by economy
grouping, 1995 – 2010.......................................... 3


Figure 2: Trends of BITs and other IIAs, 2000-2010 .......... 4
Figure 3: Known Investment Treaty Arbitrations ................ 5
Figure 4: Distribution of all ICSID cases by economic sector


and by State Party involved .................................. 6
Figure 5: Stages in preventing and managing investor-State


disputes ............................................................... 11
Figure 6: FDI in Peru: stock, home countries and sectors.. 15
Figure 7: Peru’s international investment disputes State


coordination and response system ...................... 24
Figure 8: Reporting investment problems to the Response


System................................................................. 26
 
 
 


TABLE


T
 


able 1: Peru’s ISDS cases ............................................... 17







 
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ABBREVIATIONS


 
ADR alternative dispute resolution
BIT bilateral investment treaty
CICP central investment contact point
DMP dispute prevention mechanism
DPP dispute prevention policies
DTT double taxation treaty
FDI foreign direct investment
FTA free trade agreement
ICC International Chamber of Commerce
ICSID International Centre for the Settlement of


Investment Disputes
IIA international investment agreement
ISDS investor–sate dispute settlement
MEF Ministry of Economy and Finance (Peru specific)
MOFA Ministry of Foreign Affairs
PPA public private associations (Peru specific)
SC Special Commission (Peru specific)
UNCITRAL United Nations Commission on International Trade


Law
UNCTAD United Nations Conference on Trade and


Development




How to Prevent and Manage Investor State Dispute


 
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Peru
 


  
KEY FACTS TABLE




               Peru 
  19 0 81­199 19 00 91­20 20 10 01­20


Population (million)*  21.76  2  5.66 29.54 
Annual GDP growth )* (% ‐.09  4.45  8.9 


GDP per capita ($)*  1354  2078  9.200 
GDP by %)  sector (      


Services  61.9  61.6  55 
Industry 


Agriculture 
60.4 
19.4 


29.9  35 
15.8  10 


FDI inflows (annual 
average) ($ million)   29  3106  5491 


280.4 FDI outflows (annual 
average) ($ million)   11  12 
FDI inflows  P) ( % of GD 19.3  20.16  29.1 
FDI inflows (% gross 
fixed capital formation)  0.7  7.5  22.3 
Exports of goods and 
services (% GDP)  15.76  16.00  28.05 
Imports of goods and 
services (% GDP)  13.83 18.16 20.00
Source: UNCTAD, FDI/TNC database and GlobStat database.
Note: Simple annual average.0*
Data are for 1990, 2000 and 2010 only




 


I. INTRODUCTION


The last decade has seen a considerable increase in the flows of
foreign direct investment (FDI), generally recognized to have
significant potential to contribute to economic growth and
development. As part of efforts to enhance investor protection and
attract more investment countries have concluded an ever-growing
number of international investment agreements (IIAs) which provide
for international arbitration in cases of disputes between investors and
host States. Additionally, many countries include clauses for
international arbitration in contracts they sign directly with individual
foreign investors for specific projects. This has been the background
behind a sharp rise in the number of cases of investor-State arbitration
in the last decade.


The increase in international investment arbitration has
generated concerns including with regard to the ability of governments
to regulate economic activities within their borders, the high costs of
arbitration and of awards rendered, State capacity to appropriately
manage international investment arbitration, the prevention of frivolous
claims and others. In response, some countries have introduced or
strengthened policies to prevent investor-State disputes from emerging
and escalating, and to manage investor–State dispute settlement (ISDS)
proceedings more effectively.


This study examines the case of Peru which designed a dispute
prevention policy (DPP) and implemented a dispute prevention
mechanism (DPM), which foresees the promotion of alternative dispute
resolution (ADR) mechanisms and the implementation of prevention
policies. This is an example of a case of good practice in the prevention
and management of investor-State disputes.





How to Prevent and Manage Investor State Dispute 2


First, the study presents facts on the IIA landscape and
investor-State disputes, as well as general issues for host countries to
consider when designing policies to prevent and manage these disputes.
Second, it looks specifically at the framework implemented by Peru to
prevent and manage investor-State disputes more effectively, as well as
the impact it has had so far. Finally, the study draws conclusions and
lessons from Peru’s experience that may help other countries as they
design and implement policies, systems and measures to prevent and
manage investor-State disputes.




A. International investment and the IIA system


Investment is an important contributor to development, and
foreign investment to domestic economies in particular plays an
important role in growth, including through its contributions the
integration of local markets in global production chains, transfer of
technology and access to new forms of finance. Despite the fact that
global FDI flows are still some 25% below the pre-crisis level, foreign
direct investment surpassed $1.1 billion in 2010 (figure 1), and for the
first time, developing countries and economies in transition accounted
for over half of total FDI.


 
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At the same time, by the end of 2010 there were over 6,000
international investment agreements (IIAs), including bilateral or
regional investment treaties (BITs), double taxation treaties (DTTs) and
free trade agreements (FTAs) with investment chapters (figure 2).
These agreements are signed between States to provide a set the
conditions facing their respective investors when investing in each
other's economies. In addition to IIAs, which are agreements between
States, many countries include similar arbitration clauses in specific
contracts with foreign investors or include umbrella clauses in IIAs that
automatically cover specific contracts.








Developed economies


Developing economies


Transition
economies


0


400


800


1 200


1 600


2 000


1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010*


53%


Figure 1
Value of global FDI inflows by economy grouping, 1995 ‐ 2010


$ billions


Source: UNCTAD


Source: UNCTAD




How to Prevent and Manage Investor State Dispute 4


Figure 2. Trends of BITs, DTTs and other IIAs


0


20


40


60


80


100


120


140


160


180


200


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
0


1000


2000


3000


4000


5000


6000


7000


Annual DTTs Annual BITs Other IIAs Annual All IIAs cumulative  
Source: UNCTAD (www.unctad.org/iia)


One of the elements of investor protection provided by these
agreements is the prior consent given by a host country to allow
investment disputes to be submitted to international arbitration. In other
words, the State agrees that the investor may take an investment dispute
that alleges a breach of the treaty or contract provision to international
investor-State arbitration.


As the number of treaties and the cross-border flow of
investments have increased, so have the number of cases of investor-
State dispute settlement (ISDS) under IIAs.








 
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CHAPTER I


5


B
 


. Investor-State international arbitration


The proliferation of IIAs and other legal instruments allowing
for investor-State arbitration has been accompanied by an exponential
increase in the number of ISDS arbitration cases (figure 3). In fact, 90%
of the known ISDS cases have taken place since 2000. It is difficult to
know the exact number of ISDS cases because the International Centre
for Settlement of Investment Disputes (ICSID) is the only arbitration
institution that keeps track of and publishes the number of cases
involving States in which it is involved. Therefore, although UNCTAD
has identified 390 ISDS cases (UNCTAD, 2011), the total number is
likely to be higher.




Figure 3. Known investment treaty arbitration


0
5


10
15
20
25
30
35
40
45
50


1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010


A
nn


ua
l n


um
be


r
of


c
as


es


0
50
100
150
200


250
300
350
400
450


C
um


ul
at


iv
e


nu
m


be
r o


f c
as


es


ICSID Non-ICSID All cases cumulative  
Source: UNCTAD (www.unctad.org/iia)


 
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At the close of 2010, at least 83 countries had faced ISDS, and
most of the countries facing ISDS have been either developing
countries (51) or economies in transition (15) (UNCTAD, 2011). A
revision of the ICSID caseload shows that ISDS involved all regions
and a wide range of economic sectors (figure 4).


 
Source: ICSID: The ICSID Caseload – Statistics, (Issue 2010-2). Reproduced with
permission of ICSID, original found at
UUhttp://icsid.worldbank.org/ICSID/FrontServlet?requestType=ICSIDDocRH&actionVal=CaseL
oadStatistics




CHAPTER I


7


The rise in ISDS cases has generated concern among many
governments not just because of the implications on a country’s right to
regulate and follow what are perceived to be legitimate public policy
objectives, but also because of the large sums claimed by investors, the
sums that have been awarded to investors and the high cost of the
arbitration process itself. Developing countries in particular find
themselves vulnerable due to limited technical capacity to appropriately
prevent and manage disputes, and the potentially detrimental financial
impact of the costs of the procedures and of the awards on a country’s
budget. Some of these causes of concern are detailed below.


 Sums awarded to investors
Arbitration awards against a host State can amount to hundreds


of millions of dollars. To expedite payment of the awards, funds may
be diverted from important development objectives, such as investment
in infrastructure, education, health or other public goods. For example,
in 2004 a Czech commercial bank brought a dispute against the Slovak
Republic before ICSID. The tribunal awarded approximately $877
million in favor of the Czech bank.1 In Argentina, awards rendered by
ICSID in 2007 alone would require the payment of over $600 million to
investors, while the claims for those cases alone surpassed one billion.


These high sums can be a considerable budgetary burden for
the responding country involved in the dispute, and the quality of the
defense during the arbitral procedures can have a direct effect on the
outcome of the arbitration and decisions rendered.


 Costs of treaty arbitration
Arbitrators have broad discretion to allocate arbitration costs


and legal fees. Additionally, there is no clear pattern on allocation of
expenses and fees.2 Therefore, it is difficult for countries to budget
costs of proceedings or determine final costs, including in cases where
they are confident they can win on the merits. Even if the award is


 
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How to Prevent and Manage Investor State Dispute 8


favorable to the host country, legal costs of the proceedings can reach
very high sums, especially for developing countries that generally
require outside legal expertise.



Examples include:


 In Plama Consortium Limited v. Republic of Bulgaria (ICSID
Case No. ARB/03/24), Bulgaria reported legal costs of $13.2
million and the claimant reported $4.7 million. The claimant
was ordered to bear all fees and expenses of the tribunal and
reimburse respondent $460,000 of the advance in costs and
$7 million in legal fees and costs, leaving the net cost to
Bulgaria at approximately $6 million.


 In ADC Affiliate Limited and ADC & ADMC Management
Limited v. Republic of Hungary (ICSID Case No. ARB/03/16),
Hungary reported costs of $4.4 million and the claimant $7.6
million. Hungary was ordered to pay the claimant’s legal
expenses ($7.6 million), and cover its own costs and expenses.


 In Československá Obchodní Banka A.S. v. Slovak Republic
(ICSID Case No. ARB/97/4), the Slovak republic reported
costs of $14.3 million and the claimant of $16.3 million.
Arbitrators ordered the Slovak Republic to pay $10 million of
the claimant’s reported costs and expenses, and its own costs
and expenses.


 In PSEG Global Inc. v. Republic of Turkey (ICSID Case No.
ARB/02/05), the total costs of the arbitration, including legal
costs and fees, was recognized at $20,851,636.62, of which
Turkey was ordered to pay 65 percent and the claimant 35
percent.




 
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9


Additionally, given the increasing complexity of the issues,
international investor-State arbitration is becoming increasingly
difficult to manage, especially for developing countries. While some
countries may have some local expertise in arbitration, the specificity
of investor-State arbitration generally requires outside expertise which
may be quite expensive.


 Length of ISDS arbitration
An additional element of concern to investors and governments


is the length of ISDS arbitration, which has increased in part because
cases are becoming more complex and the number of annulment
proceedings has increased. While each case is different and unique,
examples of long processes include ICSID’s longest running case,
Víctor Pey Casado and President Allende Foundation v. Republic of
Chile (ICSID Case No. ARB/98/2) that on December 31st, 2010
reached its 4,638 day, and Duke Energy International Peru Investments
No. 1 Ltd. v. Republic of Peru (ICSID Case No. ARB/03/28) which
lasted a total of 2,685 days from start to finish.


While some consider that parties may be interested in
prolonging the length of arbitration to defer payment of an award,
uncertainty with regard to the duration of a process or its outcome
seems problematic and costly for all parties involved. This is especially
relevant for international investment arbitration given that one of the
perceived advantages is the expected shorter time periods when
compared to domestic legal systems.


 Other concerns
Other criticism include the possibility of frivolous claims,


difficulties in managing disputes due to the complex network of IIAs
with great divergence in drafting of core elements and commitments,
and the severance of what often was originally conceived as a long-
term relationship.


 
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How to Prevent and Manage Investor State Dispute 10


These concerns affect not only the host State, but also investors
and civil society (which is increasingly aware and monitoring these
proceedings). Given these and other shortcomings of international
investment arbitration, many countries have set up policies or
programmes to manage and prevent disputes that may lead to treaty-
based dispute settlement, even before they reach the phase of disputes.




C. Preventing and managing investor-State disputes


The concerns referred to above have generated increased
awareness among countries regarding their exposure to investment
treaty arbitration and the possible lack of preparedness to face such
cases. Additionally, countries have identified the lack of institutional
frameworks capable of detecting and solving disagreements with
investors at early stages. As a consequence, countries are proactively
implementing policies aimed at preventing international investor–State
arbitration, where possible.


Investor–State disputes normally begin as problems, which
later evolve into disputes and ultimately arbitration (figure 5). A system
to prevent investor-State disputes should target all stages leading up to
arbitration. In general, the process of preventing and managing
investor-State disputes can be divided into three different stages:




 
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CHAPTER I


11


Prevent problems Prevent escalation Manage a Dispute"Notice
 of Inte


nt"


Figure 5: Stages in preventing and managing investor-state disputes


 
One of the challenges of an investor-State dispute prevention


and management system is the fact that IIA provisions and
commitments apply to all levels of government. Despite this, it is the
central government that is ultimately responsible for representing and
defending the State and for payment of final arbitral award
adjudications. Therefore, it is important that all levels of government
and agencies that interact with foreign investors understand the scope
and consequence of the commitments under IIAs and the practical
implications for their day-to-day activities


While the central government is ultimately responsible for the
commitments undertaken under IIAs, several domestic government
agencies usually interact with foreign investors and investments. Sub-
national entities and agencies involved with foreign investors may
implement measures that can be challenged as inconsistent with treaty
provisions. Thus, their participation in any phase of dispute prevention
and management is critical.




 
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How to Prevent and Manage Investor State Dispute 12


Arbitration procedures are not the first choice of either the
investor or the host State. ISDS comes at a high cost in time and
resources for both parties, and more predictable, timely and cost-
effective alternatives would be worth exploring. Disputes that reach the
stage of arbitration can originate with measures taken by agencies or
entities that at times do not have full understanding or knowledge of the
commitments undertaken by central governments in IIAs. Additionally,
by the time a dispute is submitted to arbitration, relationships between
the parties are often strained and confidence levels are at their lowest.
Therefore, it is useful to identify and resolve problems at the earliest
stage possible.




D. The case of Peru


The case of Peru combines many of the elements driving efforts in
this area:


(1) A large number of IIAs with other countries (33 FTAs and
BITs) as well as investment contracts (53) and legal stability
agreements (769) with individual investors.


(2) High levels of foreign investment (FDI stock reached 20.8
billion in 2010) in different sectors of the economy from
diverse home countries.


(3) An increasing number of international ISDS proceedings (nine
in ICSID alone, four between 2010 and 2011). ISDS has come
with high costs in terms of cost of the process, and in amounts
awarded to investors.






 
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Peru’s assessment, design and implementation of a system to
efficiently prevent and deal with ISDS presents lessons that could be
useful to other countries as they design their own dispute prevention
and management policies and practices. This paper will look at the
specific measures that Peru has put into place as an example of good
practices in this area and identify lessons that may be useful to others.


 


Notes

1 Československa obchodní banka, a.s. v. Slovak, ICSID Case No. ARB/97/4
2 ICSID Review – Foreign Investment Law Journal, The Allocation of Costs and
Attorney’s Fees in Investor-State Arbitration, Noah D. Rubins






 


II. FOREIGN DIRECT INVESTMENT AND IIAs IN
PERU


Peru has pursued an active foreign investment promotion
policy that has rendered fruits. FDI stocks reached $20.8 billion1 in
2010 and has gone to different sectors and come from a wide array of
home countries (figure 6).




Source: ProInversión (July 2010 data), http://www.proinversion.gob.pe/0/0/modulos/JER/PlantillaStandardsinHijos.aspx?ARE=0&PFL=0&JER=1537


FDI stocks in Peru (1997‐2010)


0


5,000


10,000


15,000


20,000


25,000


19
97


199
8


19
99


200
0


20
01


20
02


20
03


20
04


20
05


200
6


20
07


20
08


200
9


20
10


U
S$


 Mi
lli


on
s


Figure 6: FDI in Peru: stock, home countries and sectors


Country
US


Millions
% Sector


US
Millions


%


Spain 4,405 21.2% Mining 4846 23.3%
United Kingdom 4,372 21.0% Communications 3789 18.2%
USA 3,167 15.2% Finance 3093 14.9%
Netherlands 1,354 6.5% Industry 3060 14.7%
Chile 1,323 6.4% Energy 2788 13.4%
Brazil 1,014 4.9% Commerce 787 3.8%
Panama 931 4.5% Services 532 2.6%
Colombia 891 4.3% Housing 528 2.5%
Mexico


465
2.2% Oil and Petroleum


472
2.3%


Singapore 366 1.8% Transportation 317 1.5%
Canada 344 1.7% Construction 296 1.4%
Switzerland 343 1.7% Fishing 163 0.8%
Uruguay 265 1.3% Tourism 64 0.3%
Japan 217 1.0% Agriculture 45 0.2%
France 208 1.0% Forestry 1 0.0%
China 147 0.7% TOTAL 20,781 100%
Others 967 4.7%
TOTAL 20,779 100%


2010 FDI Stock in Peru by
Home Country


2010 FDI Stock in Peru by sector


U
S$


 Mi
lli


on
s









How to Prevent and Manage Investor State Dispute 16


Consistent with its investment promotion policies, Peru signed
the ICSID Convention in September of 1991.2 Additionally, Peru is an
active negotiator of BITs and broader economic agreements such as
free trade agreements with investment chapters.3 Peru also has domestic
mechanisms that provide investors with guarantees, including access to
international arbitration. These include legal stability agreements and
investment contracts, including concessions.


According to ProInversión, since 1993 Peru has signed 33 IIAs
including bilateral investment treaties, and free trade agreements with
Canada, Chile, China, the United States and Singapore (Annex 1), 769
Legal Stability Agreements,4 and 53 investment contracts since 1998.5


Peru has investment protection agreements (BITs or FTAs)
with most of the home countries of its biggest investors including
Spain, the United States, Chile, Switzerland, the United Kingdom,
Canada, Italy, Japan, Norway, France and China. These agreements
have served to improve the climate for foreign investment in Peru, but
have also been the basis for international investment arbitration.


Peru’s first case before ICSID was in 1998, which saw the
parties settling the dispute. It was not until 2003 that Peru confronted
its first full ISDS procedure before ICSID. In all, Peru has been a
respondent in 9 cases in diverse sectors under ICSID (table 1):


 
 








 
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Table I.1. Peru’s ISDS cases
1. 1998: ARB/98/6: gold mining project (Settlement agreed by the parties)


Compagnie Minière Internationale Or S.A. v. Republic of Peru.
2. 2003: ARB/03/4: Pasta factory (concluded - awarded in favor of the


State).
Industria Nacional de Alimentos, S.A. and Indalsa Perú, S.A. (formerly
Empresas Lucchetti, S.A. and Lucchetti Perú, S.A.) v. Republic of
Peru.


3. 2003: ARB/03/28: Power generation (concluded)
Duke Energy International Peru Investments No. 1 Ltd. v. Republic of
Peru


4. 2006: ARB/06/13: Electricity generation and transmission (concluded)
Aguaytia Energy, LLC v. Republic of Peru (concluded – awarded in
favor of the State).


5. 2007: ARB/07/6: Fish flower production (concluded)
Tza Yap Shum v. Republic of Peru.


6. 2010: ARB/10/2: Highway construction (pending)
Convial Callao S.A. and CCI - Compañía de Concesiones de
Infraestructura S.A. v. Republic of Peru.


7. 2010: ARB/10/17: Banking (pending)
Renée Rose Levy de Levi v. Republic of Peru.


8. 2010: UNCITRAL, Metallurgical sector (pending)
Renco Group, Inc. v. Republic of Peru.


9. 2011: ARB/11/9: Electricity transmission agreements (pending)
Caravelí Cotaruse Transmisora de Energía S.A.C. v. Republic of Peru.


10. 2011: ARB/11/17: Property development project (pending)
Renée Rose Levy and Gremcitel S.A. v. Republic of Peru.


11. ARB/11/21: DP World Callao S.R.L., P&O Dover (Holding) Limited,
and The Peninsular and Oriental Steam Navigation Company v.
Republic of Peru (pending).


The increase in investment arbitration involving Peru led the country
to design and implement a system to appropriately prevent and deal with
investor-State disputes.




How to Prevent and Manage Investor State Dispute 18


 
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Notes

1http://www.proinversion.gob.pe/0/0/modulos/JER/PlantillaStandardsinHijos.aspx?AR
E=0&PFL=0&JER=1537
2 ICSID entered into force for Peru in September of 1993.
3 When Peru signed the FTA with the United States in April of 2006 it adopted a new
model with pre-establishment provisions, and broader commitments that those in the
post-establishment model it had used until then.
4 http://www.proinversion.gob.pe/webdoc/convenios/convenios.aspx
5http://www.proinversion.gob.pe/0/0/modulos/JER/PlantillaStandardsinHijos.aspx?AR
E=0&PFL=0&JER=5021




 


III. POLICIES ON DISPUTE PREVENTION IN PERU


The long history of negotiations and the diverse characteristics
of the different legal instruments – BITs, FTAs, legal stability
agreements, investment contracts – have resulted in Peru having a
broad and complex set of obligations in the field of foreign investment.
Additionally, Peru's six international investment arbitration cases since
2000 revealed weak areas which required improvements in order to
ensure the best possible defense of the State.




A. Shortcomings and limitations identified by Peru


Despite having acquired considerable experience in negotiation
of international investment agreements, Peru did not have a structured
system to prevent or respond to international investment arbitration
cases when these first came up. Nevertheless, during the first two cases,
the Ministry of Foreign Affairs (MOFA), with support from hired
outside legal counsel. oversaw general coordination of the defense of
the State and represented Peru in ISDS proceedings with positive
results. Subsequently Ad hoc committees were created for cases 3 and 4
(see table 1) to improve coordination in the defense of the State during
the ISDS process. The ad hoc Committees were chaired by the Ministry
of Economy and Finance (MEF), while the Ministry of Foreign Affairs
(MOFA) continued to represent Peru and was in charge of hiring
outside legal counsel.


Although this new institutional arrangement of Ad hoc
committees led to a more organized participation of the sectors
involved in the controversies with the investors and a more efficient
defense of the State, Peru realized that the institutional framework
required to optimally defend the State in ISDS cases was not in place.
Some of the difficulties identified by Peru were:1




How to Prevent and Manage Investor State Dispute 20


 A rising number of agreements with international dispute
settlement provisions were being signed.


 Lack of domestic understanding of the implications of
international dispute settlement clauses that were being
included in contracts with investors.


 The State could not centralize actions when disputes came
up at different levels of government, or coordinate actions
with the involved agency (agency that adopted the measure
triggering the dispute).


 Lack of an adequate, timely and coordinated management
of disputes by the State.


 Lack of responsibility of involved agencies due to absence
of a mechanism to make them accountable for the
consequences of the actions or measures they took.


 Difficulty by the State to directly and promptly hire
defense attorneys, and pay arbitrators and arbitration
expenses, which jeopardized an optimal defense of the
State.


 High risk of disputes due to poor coordination and at times
discretional actions taken by national, regional or local
government agencies.


In order to correct these shortcomings, in 2006 Peru adopted
Law 28933 and several subsequent regulatory decrees in 2008 and 2009
that created the International Investment Disputes State Coordination
and Response System (the Response System). The following section
describes the main elements and characteristics of this system.




 
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B


 
. International investment disputes State coordination and


response system


In 2006 Peru created the State Coordination and Response
System for International Investment Disputes (Response System). The
legal framework is comprised of:2


 Law Nº 28933 (December, 2006): established the
International Investment Disputes State Coordination and
Response System.


 Supreme Decree 125-2008-EF (October, 2008): set out
regulations for Law No. 28933, such as transparency and
mandatory guidelines with regard to international dispute
settlement clauses.


 Supreme Decree 002-2009-EF (January 2009): set out
specific procedures for hiring legal counsel and law firms
and other advisors to support ISDS cases.


Given the broad and encompassing scope and coverage of the
policy, the Response System required the support and commitment of
the legislative branch that approved the Law and of the highest level of
government that issued and adopted the Supreme Decrees. Peru’s
Response System not only creates and provides certainty with regard to
the institutional structure that defends the State in ISDS proceedings,
but also provides guidelines for future investment agreements’
arbitration provisions, and consolidates all existing commitments for
consultation of relevant agencies. The System expressly requires all
government agencies involved in an investment dispute to cooperate
and provide all relevant information, thereby creating accountability at
all levels of government for IIA inconsistent measures or policies.





How to Prevent and Manage Investor State Dispute 22


Peru redesigned its investor-State dispute prevention and
management institutional framework in a very inclusive manner,
bringing in the different State agencies and actors that create the
international investment legal framework and commitments (IIAs,
investment contracts and stability agreements) and those with specific
knowledge or experience that may contribute to the best representation
in an ISDS context:


 The Ministry of Economy and Finance, agency responsible for
international investment policies in Peru, was named
coordinator and chair of the Special Commission (SC).


 The Ministry of Foreign Affairs was the agency that had up to
that point represented Peru in all investor-State dispute
settlement cases, and brought the experience and history of
managing investment disputes as well as that of international
negotiations of BITs.


 ProInversión is a key member of the Bilateral Investment
Treaty negotiating team and the agency in charge of the
negotiation and adoption of legal stability agreements.


 The Ministry of Justice brings its expertise in the areas of
litigation and legal interpretation and application of laws and
regulations.


 The Ministry of Trade and Tourism provides the Free Trade
Agreements’ negotiating history and experience.


Additionally Peru’s Response System requires continuous
training for all relevant agency officials at all levels of government on
IIA commitments and on the benefits, characteristics and obligation of
the Response System.




 
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The Law and Supreme Decrees specifically set out the
Response System’s scope, definition of actors and objectives. They also
include provisions on direct negotiation, conciliation and mediation,
budgeting and funding dispute settlement, confidentiality of
information, and standardization of investor-State disputes settlement
clauses. These elements are described below.




1. Scope


The law sets out definitions that clearly outline the scope of its
application.


1. The Response System applies to any investment dispute
between the State of Peru and an investor (domestic or
foreign) subject to international ISDS arbitration.


2. The Response System covers any public entity, which includes
any agency at a national, regional or municipal level,
decentralized public entities and enterprises, and companies
where the government has control via voting rights,
autonomous entities, regulatory authorities, supervisory and
collecting authorities, special fund, and “any other entity with
similar nature not explicitly mentioned”.




2. Definition of actors


In order to have a coordinated and effective response team,
Peru identified the different actors and defined specific mandates,
thereby seeking to eliminate conflicts or contradictions.



In general, the Response System (figure 7) is made up by the


Coordinator, the SC and all the agencies at all levels of government that
negotiate agreements or enter into contracts that provide for investor-
State international arbitration in the case of investment disputes.




How to Prevent and Manage Investor State Dispute 24


 
UNCTAD Investment Advisory Series B






The SC is in charge of representing the State in any investment


disagreement, conflict or dispute, and incorporates the agencies that
negotiate the international investment legal framework for Peru as well
as those with knowledge or experience in areas relevant to ISDS. The
SC has four permanent members – Ministry of Economy and Finance
(MEF), Ministry of Foreign Relations, Ministry of Justice and


All the agencies at all levels of government that negotiate 
agreements or enter into contracts that provide for investor‐
state international arbitration in the case of investment 
disputes. 


Coordinator: Ministry of Economy and Finance


Figure 7: Peru’s International Investment Disputes State 
Coordination and Response System




CHAPTER III 25
 


 
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ProInversion, and may be joined by the Ministry of Trade for FTA and
BIT based disputes and the relevant involved agency or agencies for
each specific case. The SC integrates a team with all the expertise,
knowledge and experience from all the State agencies that play a part in
international investment and the defense of the State.

Coordinator



The MEF is the Coordinator of the system. As such, it is in


charge of (1) centralizing all the information and coordinating the
system (2) acknowledging any investment dispute and informing the
Chairman of the SC, (3) receiving notifications of any investment
dispute, and reporting the dispute to the Chairman of the SC and
relevant parties, (4) registering and keeping track of all agreements and
treaties with international ISDS provisions, and making them publicly
available.


Additionally, the Coordinator of the System is in charge of
making sure that the involved agency is informed of all the decisions
taken by the permanent members of the SC.


The MEF, as coordinator, has given the Response System
important prominence on its website, and provides a direct link for
investors to register concerns or investment problems (figure 8).





How to Prevent and Manage Investor State Dispute 26


Figure 8: Reporting investment problems to the Response System


Ministry of Economy and Finance
Investor Relations website


ResponseSystem
Reporting an investment “alert’’


Personal Information: 
- Name, type and number of document, country of nationality, phone and email 
 
Information of represented person (if applicable) 
- Name, type and number of document, country of nationality or represented 


person  
 
Information on the Agreement 
Type of agreement 
- economic complementation agreement, bilateral investment treaty, free trade 


agreement 
o Name of Agreement  


- stock purchase­sale contract, concession contract, investment contract, 
license contract, asset purchase­sale contract, legal stability agreement 
o Type of contracting agency (federal, regional, local) 
o Name of contracting agency 
o Name of agreement 


 
Description of the problem 




 
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S
 


pecial Commission


The SC is assigned to the MEF and represents Peru in any
ISDS or ADR procedure, including arbitration, mediation, conciliation
and direct negotiations with the investor. The SC is also in charge of
analyzing the dispute, assessing the possibility of an amicable
settlement, adopting a strategy, obtaining any technical information
from the involved agency or agencies, selecting outside legal counsel or
other advisory services (subsequently contracted by the MEF),
designating arbitrators, supporting outside legal counsel and approving
funds necessary for the phases of direct negotiation, conciliation or
arbitral proceedings. Additionally, the SC determines the liability of the
involved agency, especially as regards the costs incurred by the State in
resolving or managing the dispute and payment of an award.


Besides the four permanent members, the SC has non-
permanent members that are case-specific, and include the Ministry of
Foreign Trade and Tourism when the dispute is based on an FTA, and
the agency responsible for taking the measure that triggered a dispute
(involved agency). Non-permanent members of the SC must be named
within two days after the Chairman convenes the SC for a specific
dispute. The Chairman of the SC is the final decision-maker in case of a
deadlock or ties.


The law and regulations specifically require the involved
agency and any public entity to provide any information required by the
SC within set time frames and make the head of the agency responsible
for making sure this is done promptly. The involved agency must
cooperate with the SC and ensure that its officials can participate in the
process, if the SC so requires. Additionally, public employees who are
aware of or have participated in actions relevant to the dispute are
obliged to cooperate with the SC, even if the dispute is initiated after
they have left public office.




How to Prevent and Manage Investor State Dispute 28


Finally, the SC can call the involved agency to lead the
negotiations in the case of disputes derived from agreements or
contracts with ISDS provisions signed directly with investors (i.e.
privatization contracts, concessions, legal stability agreements, etc.).
The MEF serves as the technical secretariat for the SC, and prepares
and presents the initial review of the dispute to SC members, prepares
strategy papers and the minutes of the meetings.


Besides the responsibilities with regard to specific disputes
outlined above, the SC should also present proposals for legislative or
regulatory changes that improve the capacity of the SC to adequately
represent the interests of the country in an international ISDS process.



3. Objectives

Law 28933 and its regulatory decrees specifically set out the following
objectives:


 Provide a framework for optimal responses to investment
problems and disputes susceptible to international
arbitration.


 Collect and consolidate information on investment
commitments and ISDS provisions.


 Provide an early alert system for investment controversies
and disputes.


 Provide optimal State coordination.
 Generate accountability and responsibility with regard to


investment commitments.
 Require uniformity of dispute settlement clauses.





 
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Optimal response


The new system is created to ensure an optimal response of the
State to problems with investors, even before they escalate into
disputes, as well as an appropriate institutional organization for the
handling of arbitration of international investment disputes themselves.
This includes creating the SC to deal with investment disputes. The SC
is brought in at an early stage of a problem, thus ensuring timely and
appropriate attention. The SC is empowered to negotiate with investors,
and to seek and propose amicable settlements and recourse to
alternative dispute resolution.

Information on International ISDS commitments



Peru has a diverse set of legal instruments with investment


commitments that can trigger international arbitration.3 The Response
System requires any agency that enters into an agreement that provides
for international ISDS to report the agreement to the Response System
Coordinator, and promptly send a copy of the agreement to be included
in the database.


The MEF sets up an electronic reporting system where
agencies report any agreement covered by the Response System within
30 days after the agreement enters into force or is signed. A sixty-day
period for reporting was provided for the contracts or agreements
already in force when the system was put into place.


This system not only consolidates all investment and ISDS
commitments in a central database, but also allows relevant agencies
and entities to consult all ISDS commitments from a single source. The
MEF reports that the system is up and running, and training and
publicity on its use with relevant agencies will begin in the near future.




How to Prevent and Manage Investor State Dispute 30


Early alert


The law created an early alert mechanism. Every agency at all
levels of government has the obligation to promptly report to the
Response System Coordinator any investment disagreement or dispute
that may become subject to international investor-State arbitration. The
MEF has set up an electronic reporting system where agencies report
disputes within five days after the agency has been notified or has
learned of the intention of the investor to initiate international investor-
State arbitration.


The Response System provides the investor with a direct
gateway (figure 8 above) to the SC and thus gives the State timely
information on investment problems, either from the investor directly
or from the involved agency. This provides an opportunity to be more
responsive to investment disagreements, and therefore allows more
time to resolve a problem, prepare a case, coordinate the relevant
actors, and to ensure that all the necessary information is available.
This may facilitate an amicable settlement, or at least will provide the
State with more time to prepare a strong and complete case for
arbitration.

Coordination


The law sets out specific procedures for optimal coordination
of an ISDS process within government agencies, and assigns the SC
with a central role. It includes provisions that require involved agencies
and public servants to provide all relevant information to the case and
specifically empowers the SC to lead the process. The Response
System applies to all levels of government and any IIA or contract that
provides for international ISDS.



 
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Accountability


The Response System empowers the SC to require the agency
that has triggered the dispute (involved agency) to bear the costs of the
process and of any award against the State. This provision makes
government agencies and bodies accountable for decisions taken that
may be contrary to investment commitments in IIAs.

Uniformity of dispute settlement clauses


One of the difficulties with ISDS in Peru and in other countries
who have actively negotiated IIAs is the existence of different clauses
in diverse agreements. Peru includes international ISDS clauses not
only in State-State agreements such as BITs or FTAs with investment
chapters, but also in agreements and contracts with individual investors.


The new system sets out guidelines for ISDS clauses included
in agreements or contracts (Supreme Decree Nº 125-2008-EF). The
objective is to achieve, as far as possible, a single standard clause or
consistent content in ISDS provisions.


The guidelines require negotiators to include the following
elements in all international dispute settlement provisions:


1. Mandatory minimum six-month period of direct negotiations
before triggering international arbitration.


2. Use of neutral dispute settlement systems.
3. Shared costs in arbitration or conciliation procedures.
4. Mandatory reporting of the dispute by the investor to the


Response System Coordinator. The reporting triggers the six-
month direct negotiation phase described in 1, and is without
prejudice to a possible required notification to the involved
agency.




How to Prevent and Manage Investor State Dispute 32


Article 22 of the Guidelines adopted by Supreme Decree Nº
125-2008-EF defines a neutral dispute settlement system as one where
the applicable law for objection, recognition and or execution of its
decisions is not that of any State, but that established by the mechanism
itself. The decree presents a non-comprehensive list of alternatives,
including ICSID, the Hague Permanent Court of Arbitration, Australian
Centre for International Commercial Arbitration (Melbourne), the
Australian Commercial Disputes Centre (Sydney), Singapore
International Arbitration Centre, Commercial Arbitration Center
(Bahrain), the German Institution of Arbitration, the American
Arbitration Association and the International Chamber of Commerce in
Paris.


4. Direct negotiation, conciliation and mediation


The SC is empowered to negotiate directly with the investor in
order to find a mutually agreeable solution to investment problem or
dispute through channels other than arbitration. The SC also represents
the State in mediation or other alternative processes to arbitration.


Any settlement must be reported to the Council of Ministers
and approved through a Supreme Resolution with the support of the
ministers that are members of the SC, and if appropriate, with that of
the minister of the sector in charge of implementing the agreement,
conciliation or amicable settlement.




5. Budgeting and funding dispute settlement


In the Response System, the funds for international ISDS are
included in the MEF’s budget, which is then spent in accordance with
the decisions made by the SC. Subsequently the SC determines the
financial responsibility of the involved agency, which can be made
liable for the costs derived from the ISDS process and settlement or


 
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award. The involved agency itself is ultimately responsible for the
payment of any settlement, mediation, conciliation or award.


6. Confidentiality of information


Every public entity is required to provide the SC with
information requested in the framework of the defense of the State in an
international ISDS procedure. The information obtained and prepared
by the legal advisors is protected by the lawyer's confidentiality
obligation vis-à-vis their clients; the information generated in the legal
representation of the government of Peru, as well as advice,
recommendations and opinions, are considered confidential by
Peruvian Law.4


The SC is exclusively empowered to manage and access the
information received during an international ISDS process, as well as
the information and documentation generated in it. Information can
only be made public with prior approval from the SC and in
consultation with legal counsel.




 


Notes

1 ProInversión presentation at the APEC Workshop on Dispute Prevention and
Preparedness, Washington, DC, July 26-30, 2010
2http://www.mef.gob.pe/index.php?option=com_content&view=article&id=378&Itemi
d=101182&lang=es
3 BITs, FTAs, investment contracts, legal stability agreements, etc
4 Supreme Decree 125-2008-EF, article 17






 


IV. IMPACT OF THE RESPONSE SYSTEM


The creation of the Response System modified the institutional
structure that responds to international investor-State arbitration in
Peru. The new system provides certainty for investors in creating a
single contact in the government for investment disputes, and
simultaneously endows the SC with the required tools and power to
coordinate and organize the State’s resources, negotiating strategy and
defense.


Peru’s system specifically provides for several elements that
facilitate appropriate representation in ISDS cases, and foresees several
additional steps that the Government of Peru is currently planning or
implementing, and that will complete the full system once concluded.


A. Elements already in place


Peru created the post of “Technical Secretary” to the SC. The
recently created “Technical Secretary” team has the responsibility of
providing the SC with ISDS technical support, undertaking initial
assessment of the cases and supporting procedural requirements in
disputes. Besides these tasks related with defense of the State in
investment disputes, the “Technical Secretary” team also oversees and
coordinates the functioning of the system as such, and design and
implement a strategy to make sure the relevant parties are aware of the
benefits, characteristics and obligations of the system.


The “Technical Secretary” reviews the data available on cases
reported in the early alert system, and those that ultimately are resolved
or go to arbitration, and assesses how the system is functioning.





How to Prevent and Manage Investor State Dispute 36


The creation of a single core team to handle disputes allows
government officials to gain expertise in the area of international ISDS,
thereby creating in-house capabilities that can improve the negotiating
and strategic positions of the country in future dispute settlement
procedures and dispute prevention.


Peru’s Response System includes a set of guidelines that
provide guidance for government officials in the negotiation of IIAs
including with regard to the dispute settlement provisions, and details
operational procedures for the system. Providing specific elements for
investment disputes clauses in law enhances transparency for IIA and
contract negotiations, and ensures a minimum standardization of the
provisions in international dispute settlement clauses in all agreements
covered by the system. While these provisions do not affect the
agreements already in place (which create a wide array of
commitments, on which current dispute settlement cases are based),
they do generate consistency in future IIA obligations undertaken by
Peru.


As was mentioned before, Peru signs investment contracts such
as concessions with individual investors. This is done in accordance
with the Public Private Associations (PPA) law, which requires the
MEF to issue a prior opinion on any such contract. Since the MEF
became Response System Coordinator, it reviews these contracts from
the point of view of IIA consistency as well. Although this is not
specifically in the Response System system, this review is likely to
contribute to preventing IIA inconsistent or vulnerable provisions in
future investment agreements in Peru.








 
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B. Areas in planning or implementation


There are issues that are being reviewed as the system is
implemented. One such issue came up with the conclusion of the ICSID
case ARB/06/13 where Peru won the case, but arbitrators determined
that each party should bear its own costs in the arbitration. Generally,
the SC determines the relevant agency’s liability in a case, and in
general requires it to pay the costs of the proceedings and of the award.
Nonetheless, the SC is reviewing if the relevant agency should be made
liable in a case where the measures taken were not found to be
inconsistent with Peru’s international investment commitments.


The SC has worked on the central database containing all IIAs
mandated in the Law. The MEF reports that the database is fully
completed, and the next step is to make its availability known to all the
relevant actors, and to train them on how it is used. This new tool will
allow all national, regional and local level officials to consult the
different investment related commitments Peru has as they develop
policies, regulations and enters into obligations with investors.


Peru’s negotiation of investment agreements and contracts over
the last decade created a complex and broad set of commitments that
apply to all levels of government: national, regional and local (or
municipal). Therefore, one of the biggest challenges faced by Peru in
implementing the Response System is precisely making its advantages
and characteristics widely known. Making the system and tools known
to investors, the legal community and all relevant government officials
at all levels will require considerable resources, effort and time.


During the first years of the system, training has centered on
the members of the SC and their teams, especially through participation
in seminars and training sessions organized by international
organizations such as UNCTAD. Domestic training and making the
system known to all relevant actors at all levels of government will




How to Prevent and Manage Investor State Dispute 38


require a massive capacity-building effort, as well as a communication
strategy toward investors. MEF reports that this will include all the
agencies at a national, regional and local level endowed with the legal
capacity to conclude investment agreements that bind the State.


The full implementation of the system will take time, and both
investors and government officials at all levels will require training and
practice before it is widely known and used. A reflection of this is that
the MEF reports that the two cases filed before ICSID in 2010 did not
go through the SC, but were registered with ICSID by the investor
directly. Therefore, the SC only entered into these processes after
international arbitration had been triggered. Peru foresees that future
ISDS provisions will require investors to go before the SC before
triggering international arbitration, although several of the existing IIAs
do not require this step.


C. Cases of success


Since its creation, the SC has prevented investment disputes
from reaching the stage of arbitration. The SC spearheaded negotiations
in a case in the energy sector where the Ministry of Energy and Mines,
as competent sector agency, formed part of the SC and was actively
involved in the settlement of the dispute. The outcome did not include
any compensation or payment, but a review of the regulations and
interpretations. The MEF highlighted the positive outcome, which not
only avoided international arbitration, but also allowed the relationship
between the State and the investor to continue.


Another case where the SC was successful in avoiding
international arbitration was in the transportation sector, where a
Spanish investor and a municipality had a disagreement on the
interpretation and implementation of a contract. Company
representatives and counsel highlighted the importance of the SC in


 
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bringing in and engaging the different relevant actors, including the
municipality. The SC for this case also included the Ministry of
Transportation, as competent sector agency. Representatives of the
company involved recognized the importance of having the Ministry of
Economy, Ministry of Foreign Affairs and ProInversión in the
Commission, as well as the Ministry of Transportation who was
especially relevant in the technical discussions. The decision-making
power of the SC was clear in this process, and highlighted as an
important element by investor representatives. There was recognition of
the role of the SC in providing municipality representatives with the
context and specificity of the commitments contained in the Peru-Spain
BIT, and how they applied to the case at hand. Investor representatives
appreciated the certainty with regard to the investment dispute
institutional framework in Peru that the Response System provides,
especially in setting up a single and clear window within the Peruvian
authorities for investment disputes. They also highlighted the objective
and fact-based fashion in which the SC undertakes its work eliminating
political considerations, as well as the high technical and professional
caliber of the officials that form part of the SC. The role of the SC
allowed the contract implementation to continue, and re-established the
relationship in the long-term.


Representatives from the legal community highlighted the
importance of consolidating all IIA commitments at all levels of
government in a single database. They additionally draw attention to
the importance of having a central authority to provide agencies and
government officials at all levels with guidance regarding international
investment commitments entered into by Peru. While these positive
elements are clear, some are of the opinion that there is space for
improvement with regard to transparency and public access to
information on the work undertaken by the SC. Others would welcome
more outreach to the investment community on the characteristics and
benefits of the Response System.




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The public information component of the Response System
website could contribute to this endeavor. Other countries such as
Republic of Korea publish information about the cases resolved such as
grievance summary and action taken,1 while protecting confidential
information.


The SC has been successful in detecting investment
controversies and managing them before they reach international
arbitration, thereby saving time and resources for the State and the
investor, and contributing to a better and more predictable investment
climate. Nevertheless, challenges remain, including with regard to
making the system widely known and information on the Response
System extensively and easily accessible.




 


Note


1 http://www.investkorea.org/InvestKoreaWar/work/ombsman/eng/au/index.jsp?num=3




  
 


V. GOOD PRACTICES LESSONS




Several countries have implemented or are planning investment
prevention and management policies to guarantee understanding of IIA
commitments, early detection of investment disputes, mechanisms for
early management and proper coordination and representation of host
governments in case of international arbitration.


Peru implemented an ambitious system to provide the
government with the tools to prevent investment disputes, manage
disagreements and, if need be, deal with investor-State international
arbitration. Other countries have implemented different approaches,
which are also successful.


As the Peru case shows, the full implementation of all aspects
of a system can be a challenge. To date, Peru has successfully managed
problems to avoid international arbitration and has consolidated the
institutional framework for a well functioning defense of the State.
Nevertheless, the purely preventive aspect will take longer to
implement.


The following sections identify policy measures and
instruments that Peru and other countries have implemented at various
stages:


 Before a problem arises.
 After a problem has come up.
 Once arbitration has been initiated.


As Peru’s example shows, these options can be adopted
individually or several in tandem, depending on each country’s specific
institutional framework, level of development, experience in ISDS, etc.
and some of the options can be used in any of the stages listed above.




  How to Prevent and Manage Investor State Disputes 42


A. How to prevent problems


While countries like Peru have followed investment promotion
strategies, including the conclusion of IIAs, there has not always been
appropriate information sharing among relevant domestic actors of the
scope and broad application of these commitments to ensure proper
implementation and compliance.


Preventing problems or conflicts with foreign investors is the
best way of preventing treaty-based arbitration. In other words, it is
better to anticipate sources of problems and take preventive action,
rather than acting only after an incident arises and damage has been
caused.


The following is a list of some of the policies taken by
countries and that may be useful when designing and structuring a
mechanism and system to prevent and deal with investment disputes.


1. Map and update agreements with ISDS provisions


Although the central government is generally in charge of
negotiating BITs, FTAs, investment provisions and double taxation
treaties, their commitments and discipline are applicable at all levels of
Government. Like Peru, several countries also sign investment specific
contracts such as legal stability contracts, privatization contracts,
concessions, agreements for the exploration and exploitation of natural
resources and all other agreements that provide for international
arbitration in the case of a dispute.


For governments to adequately measure exposure and identify
sectors and areas where liabilities may arise, these should also be
centralized in a single focal-point. Peru created a centralized database
for all these instruments and is a basis not only for identifying
commitments but also for targeting relevant agencies.


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2. Identify and monitor sensitive sectors


More than half of ICSID cases involve oil, gas and mining
(26%), electric power and energy (13%), transportation (11%) and
water, construction (7%) and water, sanitation and flood protection
(7%).1 Although each country is different, some sectors may be more
susceptible to problems given the complexity of the schemes used such
as privatization contracts, build-operate-transfer (BOT), public utilities
or concessions. As was seen above, FDI in Peru has gone to some of
these sectors, including mining and energy, and three of the nine ICSID
cases where Peru is or has been a respondent are in the energy sector.


While the structure of incoming foreign investment is different
for each country, and the mechanisms used to promote private
investment differ, countries may benefit from providing special
attention to operations in certain targeted sectors and specific training
on IIA disciplines to agencies and officials actively involved in those
relevant to each specific economy.


Monitoring these sectors and contracts allows countries to
target agencies that work with foreign investors or issue regulations or
decisions that affect them, and to make sure that they are aware of the
obligations in IIAs in their day-to-day decision making. While this is
not specifically an element of Peru’s Response System, ProInversión
maintains constant contact with current and potential investors, and
maps sectors and country of origin of investors.


The Response System´s SC in Peru identifies investment
contacts within certain relevant agencies and sectors to facilitate
information exchange, update training and promote early detection of
any investment dispute. This practice enhances communication
channels between the different officials involved with foreign investors,
and may be a practice that other countries could find useful.





  How to Prevent and Manage Investor State Disputes 44


3. Identify obstacles to investment


ProInversión in Peru is the agency at the forefront of day-to-
day contact with investors, and as a permanent member of the SC,
provides relevant information on problems faced by investors that the
SC can then refer to in its role of proposing changes or improvements
to laws or regulations.


Permanent channels of communication with foreign investors
are useful, be it through surveys, meetings or other means of interaction
that allows governments to identify investment obstacles and possible
problems. The identification of investment obstacles and permanent
contact with foreign investors can provide countries with useful
information to detect potential investment disputes early on, and take
corrective measures before a problem becomes a dispute. As is the case
in Peru, a country’s investment promotion agency often maintains the
closest and most fluid communication with foreign investors, and it
may therefore play an important role in detecting, preventing and
managing disputes.


4. Establish a central investment contact point


Peru created a SC as central investment contact point (CICP)in
charge of centralizing and disseminating information on IIA provisions,
providing guidance for implementation and compliance of IIA
provisions, and managing the information on ISDS commitments,
among others.


5. Build capacity and awareness of IIA provisions and commitments


IIAs are normally negotiated by central governments. Because
IIA provisions are generally applicable at all levels of government, it is
important that officials at a national, regional and municipal level, and
those that deal with foreign investors on a day-to-day basis understand


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the scope and content of these commitments. A review by UNCTAD
showed that almost half of recent cases relate to decisions taken by
municipal or provincial governments or by State agencies in charge of
specific sectors (UNCTAD, 2010, p. 66), who are not involved in IIA
negotiations.


Peru is currently in the process of designing a communications
strategy to make sure that relevant officials at all levels of government
and investors are aware of the characteristics and advantages of the
Response System and how to access its information and contact points.
Countries frequently organize information sessions about agreements
such as FTAs and economic partnership agreements for private sector
and government officials. More recently, as ISDS proliferates, several
countries have undertaken ambitious training programmes and
workshops with relevant officials at different levels of government and
investors to promote awareness of IIA and ISDS provisions and
commitments specifically.


Efforts such as those described above (mapping sectors and
obstacles) can help a government better target training by identifying
agencies at a national and sub-national level, and entities involved in
sectors with foreign investment that may enact measures that could be
non-compliant with IIA commitments. It is important to ensure the
continuity and regularity and updating of training, especially in
ministries, sub-national entities and agencies where officials change
frequently and information flow may be interrupted.


In tandem, it may be useful to identify investment contact
points in agencies and sub-national entities and other targeted
institutions and maintain follow-up activities with them. This can
generate a network of officials with knowledge on IIA and ISDS issues,
and promote appropriate information flow and dissemination of ISDS
issues.




  How to Prevent and Manage Investor State Disputes 46


Constantly updating investment contact point information at all
levels is useful to ensure, and to promote confidence building between
different agencies and levels of government and the CICP, or the SC in
the case of Peru. These contact points may consult with the CICP on
the compatibility of measures that may be under consideration with IIA
provisions. Additionally, if a dispute does arise, these contact points
can be very useful in obtaining necessary information for defending the
State.


Peru’s Response System foresees capacity building to all
Response System agencies. Since the creation of the system, much of
the effort has been concentrated on consolidating all the relevant
information, designing and implementing necessary software, and
managing new and existing disputes. Besides awareness within
government, it is also important to make investors and the legal
community aware of the system and its characteristics and advantages.
As relayed above, the SC expects to design a communications strategy
to generate public awareness of the characteristics of IIA commitments
and the benefits of the Peru’s Response System in the near future.


6. Make agencies liable for enacting measures contrary to IIA
provisions


Despite the fact that central governments are responsible vis-à-
vis the investor for non-compliance of treaty provisions, Peru’s
legislation allows the SC to make the involved agency ultimately liable
for the cost of the arbitration and/or the award.


Coupled with broad information sharing and training on IIA
provisions, this policy may serve as a deterrent of measures not
compatible with IIAs, and encourage agencies to reach out to the
central investment contact point to consult on measures before they are
taken or when problems do arise, thereby promoting early detection.


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The SC is reviewing the application of this provision in the
specific case where measures taken by involved agencies were found to
be consistent with IIA provisions. Despite the fact that Peru won ICSID
case ARB/06/13, arbitrators determined that each party should bear its
own costs in the arbitration. The SC is examining if the relevant agency
should be made liable for arbitration costs in this case where the
measures taken were not found to be inconsistent with Peru’s
international investment commitments.




B. How to avoid the escalation of problems into disputes


Despite the best of efforts on the side of governments to avoid
problems, difficulties with foreign investors may arise. In these cases, it
is important for governments to put procedures into place that can
determine the viability of an amicable solution of a disagreement with
an investor and help facilitate it.


Peru´s Response System empowers the SC to negotiate with
the disgruntled investor and relevant agencies, and propose amicable
solutions. The SC has succeeded avoiding problems from escalating
into international arbitration. Parties involved have highlighted that the
legal empowerment given to the SC to engage government agencies at
all levels and to negotiate are very important elements that have
contributed to the success of the SC.


The SC serves as a single gateway of entry for foreign
investors with concerns or complaints. Even when foreign investors go
to the agency responsible for taking the measure that triggered a dispute
- the involved agency - the SC can serve as a neutral third party and
facilitate resolution of concerns before they become disputes.




  How to Prevent and Manage Investor State Disputes 48


1. Detect problems early on


The longer a problem remains, the more serious it tends to
become. Therefore, an early detection system can help governments
identify possible disputes and facilitate problem-solving with the
investor before getting to the stage of arbitration.


Peru created a requirement for agencies at all levels of
government and State enterprises to report problems with foreign
investors within a set period of time after they come up. This allows the
SC to come into the process at an early stage, and try to find solutions
to investment controversies and to work with relevant agencies in
problem-solving.


2. Encourage administrative review of investor problems


Before going to international dispute settlement, investors may
be encouraged to initiate domestic administrative review of their
problem. An administrative review of a measure by a higher level or
body in many instances can modify measures that are contrary to
commitments in IIAs, or provide for parallel measures to reduce
adverse impact on the investment.


While not a part of the Response System itself, some of Peru’s
investment agreements and instruments require recourse and exhaustion
of domestic administrative review procedures before submission of a
dispute to arbitration and in some cases limit the length of time of this
review. Requiring investors to exhaust this stage before entering any
international dispute settlement procedure can save time and resources
for the investor and for the government, and provide speedy
administrative resolution to problems, thus avoiding lengthy and costly
arbitration.


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3. Designate a lead agency while seeking the cooperation of other
agencies


Peru created a predictable and stable institutional set-up for
investment disagreements that can trigger international arbitration.
Practitioners expressed the usefulness of a specific contact point – the
SC – for these disputes.


The SC provides the investor with a single central alternative
counterpart that is empowered to promote early detection and amicable
resolution on disagreements with investors. Given its early involvement
and knowledge of the dispute, it is also in a better position to coordinate
the defense of the State if the issue does go to international arbitration.
The multi-agency nature of Peru’s SC with a clear decision-making
process was identified as a strong point in Peru’s model.


While the multi-agency commission approach is very useful in
achieving a comprehensive view of a dispute, consensus building may
however not be conducive to the coherent and structured building of a
case. Therefore, if the multi-agency approach is taken, it is important to
have clear guidelines with regard to decision-making, and to designate
a specific lead agency in charge of overall coordination and follow-up,
with a clear authority structure within the government agencies
involved.


A single government authority and concentrating all ISDS
cases in it creates a knowledge pool in government that will enable
informed and competent management of ISDS cases. Government
officers will accumulate experience and expertise in dealing with
investors and ISDS cases, which will lead to more effective
management of cases and better outcomes for the State.







  How to Prevent and Manage Investor State Disputes 50


4. Share case-specific information while ensuring confidentiality


In seeking amicable resolution or in defending the State, it is
important to have full cooperation of the involved agency and of all
other government agencies that may be relevant to the dispute.
Complete, timely and accurate information derived from all relevant
sources is necessary for the commission or lead agency and legal
counsel to fully understand the dispute and to structure alternative
settlements and packages for any stage of the dispute, including
amicable settlement negotiations, conciliation or other alternative forms
of dispute settlement.


Arguably, information is even more important in the arbitration
itself, and the commission and legal counsel can only build a strong
case based on the information made available to them by the involved
agency and any other relevant sector authority.


Peru’s Response System requires all pertinent cooperation with
the SC from all government agencies involved in an investment
dispute, including access to all information required to defend the State
in an investment dispute. An example of this is Special Decree Nº 170-
2007-EF, which authorizes Peru’s tax authority – SUNAT – to provide
the SC with information relevant to case ARB/07/6, Tza Yap Shum v.
Republic of Peru.


Additionally, given the sensitive nature of the information
managed during ISDS cases (including cost structure, supply chain,
etc.), Peru specifically defined in Supreme Decree 125-2008-EF that
the information managed in ISDS cases is confidential, and allows
publication only if the commission, prior consultation of legal counsel,
lifts its confidentiality.


While agencies may want to cooperate voluntarily, given the
time constraints and complexity of some of the cases as well as that of
building a case, these types of provision in law provide the SC with the


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legal power to require information from all relevant sources within
strict time limits.


5. Develop, propose and use alternative dispute resolution
mechanisms


Alternative dispute resolution (ADR) refers to methods other
than arbitration for settling a dispute. Peru’s system specifically refers
to the SC’s capacity to recommend formulas for “transaction,
conciliation and/or amicable settlements in a given controversy”.2
These alternatives often involve a neutral third-party to assist in the
negotiation of a settlement that is mutually agreeable.


ADR is available to the parties in a dispute even after ISDS
procedures have been initiated, although the earlier ADR begins, the
less the parties will spend on preparing their cases for costly arbitration.
Additionally, direct negotiations and ADR methods provide the parties
with larger flexibility in terms of the process itself, and with a broader
range of options that go beyond the interpretation of a legal framework
and identification of violation or damage that arbitration is limited to.
In direct negotiation and ADR methods, the parties can be more
inclined toward a problem-solving mode that can actually promote
long-term engagement and relationship building with the investor, and
that the violation-damage-compensation scheme of arbitration cannot
provide.


Unlike ISDS where the government has given its prior consent
in an agreement or contract, ADR requires both parties to be involved
throughout the process of negotiation, and in the process of
implementation and payment of a settlement.







  How to Prevent and Manage Investor State Disputes 52


For ADR to work in an investor-State context, the lead agency
or commission needs to be adequately empowered to negotiate with the
investor, propose alternatives, and commit to settlements, such as the
SC is empowered in Peru’s Response System.


Some countries have limitations on the capacity of public
officials to negotiate or ambiguous provisions that expose public
officials to personal liability in cases they settle. Therefore, for early
settlements or ADR to work, governments must have clear negotiating
mandates for the commission or lead agency, with unambiguous
guidelines and rules for settlement. In Peru’s case, any settlement must
be reported to the Council of Ministers and authorized through a
Supreme Resolution by the ministers of the sectors that form part of the
SC, and by the minister of the sector that would implement the
agreement.


Unlike arbitration, where a panel rules a binding decision and
where the role of government representatives is limited to making the
case for the State but the award is crafted by the arbitrators, direct
negotiations and ADR require personal involvement in the settlement,
and constructive, creative and some times assertive thinking on the part
of government representatives. Since they are dealing with official
funds, it is important that the government representatives be adequately
empowered and that guidelines for this type of negotiation be clear.


ISDS arbitration has advantages that direct negotiation and
ADR do not have. The most important is that unlike arbitration, the
settlements in direct negotiations and ADR are not binding to the
parties and may be difficult to enforce. Additionally, not all measures
taken by a government are subject to negotiation, especially those of
general application such as taxes or environmental standards.


International arbitration where a private party challenges a
sovereign State is an exception to international law principles and poses
distinctive challenges. A negotiated solution may be politically costly


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for a government, and there will always be critics who will say that the
outcome of arbitration would have been more beneficial for the State
coffers than the settlement reached with the investor, and subsequent
allegations of corruption may arise. Governments are aware that it is
difficult to remove political realities from investment disputes, and may
therefore be more inclined toward arbitration. Nevertheless, the cost of
arbitration and large sums adjudicated in some ISDS arbitration cases
have generated interest among governments to explore alternative
methods to arbitration.




C. How to effectively and efficiently manage ISDS arbitration


Despite the best efforts on the part of the parties, at times
dispute settlement procedures are initiated and it is important that
countries have the appropriate resources, institutional framework and
operational conditions to adequately manage the process and defend the
country’s interests. Peru’s system provides all these elements, and
creates an in-house expertise that will allow better defense of State
interests if arbitration is triggered.


1. Define and empower lead agency or commission


As in the case of Peru’s SC, given the broad nature of foreign
investment issues, often several agencies as well as the involved agency
that took the measure that triggered the dispute participate in an ISDS
case. Peru’s approach of having permanent members and ad-hoc
members depending on the dispute provides flexibility and sector-
specific participation.





  How to Prevent and Manage Investor State Disputes 54


The designation of the SC as the one and only representative of
the State in international investment arbitration provides certainty to all
involved, and generates in-house ISDS expertise within government.
Additionally, Peruvian law endows the SC with broad powers vis-à-vis
all government agencies in all investor-State conflict management
issues.


Representatives of investors that have dealt with the
Commission praise its multi-agency composition, clear decision-
making capacity, and power to engage other agencies at all levels of
government. While the SC is only a couple of years old, the clear
mandate and empowerment of the SC under the Response System is a
positive characteristic that facilitates dispute management and
settlement.




2. Ensure funds for defense and specialized advisors and legal costs


Investor-State dispute settlement requires parties to cover not
only the costs of the arbitration itself, but awards against a government
can imply considerable expense for the treasury. ISDS processes can be
lengthy and costly. Peru’s budgetary and institutional arrangements
ensure the needed resources for the dispute settlement process as such,
including costs related to the arbitrators, administrative costs, and
possibly outside counsel, as well as eventually for the payment of an
award.


With the Response System, Peru solved the problem faced by
many countries that face difficulty budgeting for a case or cases that
have not materialized. Many countries have rigid budgeting processes
and cycles that create difficulties when disputes arise that have not been
considered from the beginning of the fiscal year. Some systems
penalize unused funds at the end of the fiscal year, which deter
agencies from budgeting funds for disputes that may never happen.


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Unfortunately, these situations create difficulties for countries to secure
funds for the ISDS process if it does arise.


Given the uniqueness of each country’s budgetary cycle,
system, rules, etc., each country has to find its own approach to
onfront the limitations its system may pose, in order to ensure the
rompt and necessary funds if an ISDS process does come up.


c
p


 


Notes

1 ICSID Caseload – Statistics, Issue 2010-2
2 Supreme Decree 125-2008-EF, Article 13






  
 


VI. CONCLUSIONS




There are currently over 3,000 bilateral investment treaties and
FTAs with investment chapters in force, and FDI continues to be a
dynamic force in the international economy. While in general the
interaction between foreign investors and host countries is harmonious,
problems will arise and governments, especially in the developing
world, are strengthening their institutional capacity to prevent and
manage international investor-Sate dispute settlement proceedings.


This paper looks at several tools that Peru has implemented to
prevent international ISDS, and to be better prepared to manage ISDS
cases when they do arise. Peru’s response system constitutes a good
example of how a country can begin to prevent problems even before
they arise and deal with them if they do. Although prevention policies
are recent and evolving, several lessons can be learned from reviewing
the options that have been identified so far.


Given the broad scope of IIA commitments, a well-functioning
ISDS prevention and management system will likely require high-level
government commitment to promote appropriate legislation and to
implement the system. In some countries, useful elements of an ISDS
system may only be possible through law. Examples of elements
adopted by Peru include mandatory and timely information sharing by
the involved agency and relevant sector ministries, empowerment of the
lead agency or commission to negotiate with investors and lead State
defense and necessary budgetary arrangements to guarantee the
required funds for the arbitral proceedings and payment of awards.


The teams that negotiate IIA commitments are generally not
the same as those who deal with investors on a daily basis, or those
who defend investors in ISDS cases. Agencies or sectors may adopt
measures that are inconsistent with IIA provisions. Therefore, a broad




  How to Prevent and Manage Investor State Disputes


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58


and continued information sharing and workshop programme to
promote IIA awareness in government officials is a strong ISDS
prevention tool. Accurate mapping of sectors with high levels of
investment and of investment obstacles can facilitate strategic targeting
of sectors and agencies. As can be seen in the case of Peru, complete
implementation of a system can take several years, especially as
regards consolidation of all information, and generating awareness of
the characteristics, advantages and obligations a the system.


While early detection is a useful tool to prevent arbitration,
governments must set up the system to secure it, and inform all actors
in the system of their responsibilities in terms of information sharing
with the lead investment agency, mandatory assignment of investment
contact points and prompt reporting if investment disputes or
disagreements arise.


The creation by Peru of a single government body to manage
disputes generates expertise within government, and provides investors
and relevant agencies with predictability and certainty regarding the
investment institutional framework for preventing and dealing with
investment disputes.


Each country is different and can choose the policy instruments
that best fit its needs. In general investors are rent-seekers and not
litigators, and therefore share the interest of the government of arriving
at a speedy and mutually beneficial settlement of a dispute, when
possible. Therefore, a transparent, well-defined and well-structured
ISDS prevention system can positively contribute to an improved
investment climate.




  
 




REFERENCES




UNCTAD (2011a). “Investor-State Disputes: Prevention and
Alternatives to Arbitration II”. UNCTAD/WEB/DIAE/IA/2010/8.
United Nations Publication. New York and Geneva.




UNCTAD (2011b). “Latest Developments in Investor–State Dispute
Settlement”. IIA Issues Note No. 1, March, 2011. Available at
http://www.unctad.org/en/docs//webdiaeia20113_en.pdf.




UNCTAD (2010). “Investor-State Disputes: Prevention and
Alternatives to Arbitration”. UNCTAD/DIAE/IA/2009/11, United
Nations Publication. New York and Geneva.






  
 


ANNEX 1


BILATERAL INVESTMENT TREATIES AND FREE TRADE
AGREEMENTS SIGNED BY PERU SINCE 1993




Country Entry into Force


Argentina 24-Oct-1996


Australia 2-Feb-1997
Belgium–Luxembourg
Economic Union 11-Sep-2008


Bolivia 19-Mar-1995


Canada1 1-Aug-2009


Chile2 1-Mar-2009


China3 1-Mar-2010


Colombia4 21-Mar-2004


Cuba 25-Nov-2001


Czech Republic 6-Mar-1995


Denmark 17-Feb-1995


Ecuador 9-Dec-1999


El Salvador 15-Dec-1996


Finland 14-Jun-1996


France 30-May-1996




  How to Prevent and Manage Investor State Disputes 62


Germany 1-May-1997


Italy 18-Oct-1995


Japan 10-Dec-2009


Malaysia 25-Dec-1995


Netherlands 1-Feb-1996


Norway 5-May-1995


Paraguay 18-Dec-1994


Portugal 18-Oct-1995


Republic of Korea 20-Apr-1994


Rumania 1-Jan-1995


Singapore5 1-Aug-2009


Spain 17-Feb-1996


Sweden 1-Aug-1994


Switzerland 23-Nov-1993


Thailand 15-Nov-1993


United Kingdom 21-Apr-1994


United States6 1-Feb-2009


Venezuela 18-Sep-1997




UNCTAD Investment Advisory Series B 
 




SELECTED UNCTAD PUBLICATIONS ON IIAs, TNCs and FDI  63 

 


UNCTAD Investment Advisory Series B 
 


                                                       


Source:
http://www.proinversion.gob.pe/0/0/modulos/JER/PlantillaSectorHijo.aspx
?ARE=0&PFL=0&JER=3860




 


Notes

1 Investment Chapter is part of FTA. A BIT had been signed in 2006.
2 Investment Chapter is part of FTA. A BIT had been signed in 2000.
3 Investment Chapter is part of FTA. A BIT had been signed in 1994.
4 Peru and Colombia signed a BIT that enhances the commitments on investment
already in place.
5 Investment Chapter is part of FTA. A BIT had been signed in 2003.
6 Investment Chapter is part of FTA.






  
 


SELECTED UNCTAD PUBLICATIONS ON
INTERNATIONAL INVESTMENT AGREEMENTS,


TRANSNATIONAL CORPORATIONS AND
FOREIGN DIRECT INVESTMENT


(For more information, please visit www.unctad.org/en/pub) 
 
 


World Investment Reports
(For more information visit www.unctad.org/wir)



World Investment Report 2011. Non-Equity Modes of International
Production and Development. Sales No. E.11.II.D.2. $95.
http://www.unctad.org/en/docs//wir2010_en.pdf.

World Investment Report 2010. Investing in a Low-Carbon Economy.
Sales No. E.10.II.D.1. $80.
http://www.unctad.org/en/docs//wir2010_en.pdf.

World Investment Report 2009. Transnational Corporations,
Agricultural Production and Development. Sales No. E.09.II.D.15. $80.
http://www.unctad.org/en/docs/wir2009_en.pdf.

World Investment Report 2008. Transnational Corporations and the
Infrastructure Challenge. Sales No. E.08.II.D.23. $80.
http://www.unctad.org/en/docs//wir2008_en.pdf.

World Investment Report 2007. Transnational Corporations, Extractive
Industries and Development. Sales No. E.07.II.D.9. $75. http://www.unctad.org/
en/docs//wir2007_en.pdf.

World Investment Report 2006. FDI from Developing and Transition
Economies: Implications for Development. Sales No. E.06.II.D.11. $75.
http://www.unctad.org/ en/docs//wir2006_en.pdf.

World Investment Report 2005. Transnational Corporations and the
Internationalization of R&D. Sales No. E.05.II.D.10. $75.
http://www.unctad.org/ en/docs//wir2005_en.pdf.




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World Investment Report 2004. The Shift Towards Services. Sales No.
E.04.II.D.36. $75. http://www.unctad.org/en/docs//wir2004_en.pdf.

World Investment Report 2003. FDI Policies for Development: National and
International Perspectives. Sales No. E.03.II.D.8. $49. http://www.unctad.org/
en/docs//wir2003_en.pdf.

World Investment Report 2002: Transnational Corporations and Export
Competitiveness. 352 p. Sales No. E.02.II.D.4. $49. http://www.unctad.org/
en/docs//wir2002_en.pdf.

World Investment Report 2001: Promoting Linkages. 356 p. Sales No.
E.01.II.D.12 $49. http://www.unctad.org/wir/contents/wir01content.en.htm.

World Investment Report 2000: Cross-border Mergers and Acquisitions and
Development. 368 p. Sales No. E.99.II.D.20. $49. http://www.unctad.org/wir/
contents/wir00content.en.htm.

Ten Years of World Investment Reports: The Challenges Ahead. Proceedings
of an UNCTAD special event on future challenges in the area of FDI.
UNCTAD/ITE/Misc.45. http://www.unctad.org/wir.



Best Practices in Investment for Development


How to Utilize FDI to Improve Transport Infrastructure – Ports: Lessons
from Nigeria 74p.

How to Attract and Benefit from FDI in Mining: Lessons from Canada
and Chile 136p.

How to Integrate FDI and Skill Development: Lessons from Canada and
Singapore 70 p.

How to Create and Benefit from FDI-SME Linkages: Lessons from
Malaysia and Singapore 92 p.

How to Attract and Benefit from FDI in Small Countries: Lessons from
Estonia and Jamaica, 100 p.




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How Post-Conflict Countries can Attract and Benefit from FDI: Lessons
from Croatia and Mozambique, 125 p. Sales No. E.10.II.D.18.

How to utilize FDI to Improve Transport Infrastructure – Roads Lessons
from Australia and Peru, 113 p. Sales No. E.09.II.D.14.

How to Utilize FDI to Improve Infrastructure –Eelectricity Lessons from
Chile and New Zealand, 95 p. Sales No. E.09.II.D.13.



International Investment Policies for Development
(For more information visit http://www.unctad.org/iia)



Investor-State Disputes: Prevention and Alternatives to Arbitration, 129
p. Sales No. E.10.II.D.11. $20.

The Role of International Investment Agreements in Attracting Foreign
Direct Investment to Developing Countries. 161 p. Sales No. E.09.II.D.20.
$22.

The Protection of National Security in IIAs. 170 p. Sales No.
E.09.II.D.12. $15.

Identifying Core Elements in Investment Agreements in the APEC Regions.
134 p. Sales No. E.08.II.D.27. $15.

International Investment Rule-Making: Stocktaking, Challenges and the Way
Forward. 124 p. Sales No. E.08.II.D.1. $15.

Investment Promotion Provisions in International Investment Agreements.
103 p. Sales No. E.08.II.D.5. $15.

Investor-State Dispute Settlement and Impact on Investment
Rulemaking. 110 p. Sales No. E.07.II.D.10. $30.

Bilateral Investment Treaties 1995—2006: Trends in Investment Rulemaking.
172 p. Sales No. E.06.II.D.16. $30.




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Investment Provisions in Economic Integration Agreements. 174 p.
UNCTAD/ITE/IIT/2005/10.

Preserving Flexibility in IIAs: The Use of Reservations. 104 p. Sales No.
E.06.II.D.14. $15.

International Investment Arrangements: Trends and Emerging Issues. 110 p.
Sales No. E.06.II.D.03. $15.

Investor-State Disputes Arising from Investment Treaties: A Review. 106 p.
Sales No. E.06.II.D.1 $15.

South-South Cooperation in Investment Arrangements. 108 p. Sales No.
E.05.II.D.26 $15.

International Investment Agreements in Services. 119 p. Sales No.
E.05.II.D.15. $15.

The REIO Exception in MFN Treatment Clauses. 92 p. Sales No. E.05.II.D.1.
$15.



Issues in International Investment Agreements
(For more information visit http://www.unctad.org/iia)



Scope and Definition: A Sequel 149 p Sales No. E.11.II.D.9. $25.

Most-Favoured-Nation Treatment: A Sequel. 141 p. Sales No.
E.10.II.D.19. $25.

International Investment Agreements: Key Issues, Volumes I, II and III. Sales
no.: E.05.II.D.6. $65.

State Contracts. 84 p. Sales No. E.05.II.D.5. $15.

Competition. 112 p. Sales No. E.04.II.D.44. $ 15.

Key Terms and Concepts in IIAs: a Glossary. 232 p. Sales No. E.04.II.D.31.
$15.




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Incentives. 108 p. Sales No. E.04.II.D.6. $15.

Transparency. 118 p. Sales No. E.04.II.D.7. $15.

Dispute Settlement: State-State. 101 p. Sales No. E.03.II.D.6. $15.

Dispute Settlement: Investor-State. 125 p. Sales No. E.03.II.D.5. $15.

Transfer of Technology. 138 p. Sales No. E.01.II.D.33. $18.

Illicit Payments. 108 p. Sales No. E.01.II.D.20. $13.

Home Country Measures. 96 p. Sales No.E.01.II.D.19. $12.

Host Country Operational Measures. 109 p. Sales No E.01.II.D.18. $15.

Social Responsibility. 91 p. Sales No. E.01.II.D.4. $15.

Environment. 105 p. Sales No. E.01.II.D.3. $15.

Transfer of Funds. 68 p. Sales No. E.00.II.D.27. $12.

Flexibility for Development. 185 p. Sales No. E.00.II.D.6. $15.

Employment. 69 p. Sales No. E.00.II.D.15. $12.

Taxation. 111 p. Sales No. E.00.II.D.5. $12.

Taking of Property. 83 p. Sales No. E.00.II.D.4. $12.

National Treatment.. 94 p. Sales No. E.99.II.D.16. $12.

Admission and Establishment.. 69 p. Sales No. E.99.II.D.10. $12.

Trends in International Investment Agreements: An Overview. 133 p. Sales
No. E.99.II.D.23. $12.

Lessons from the MAI. 52 p. Sales No. E.99.II.D.26. $10.




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Fair and Equitable Treatment.. 85 p. Sales No. E.99.II.D.15. $12.

Transfer Pricing.. 71 p. Sales No. E.99.II.D.8. $12.

Scope and Definition. 93 p. Sales No. E.99.II.D.9. $12.

Most-Favoured Nation Treatment.. 57 p. Sales No. E.99.II.D.11. $12.

Investment-Related Trade Measures. 57 p. Sales No. E.99.II.D.12. $12.

Foreign Direct Investment and Development.. 74 p. Sales No. E.98.II.D.15.
$12.


Investment Policy Monitors

Investment Policy Monitor. A Periodic Report by the UNCTAD Secretariat.
No. 6, 11 October 2011.
http://www.unctad.org/en/docs/webdiaeia2011d12_en.pdf

Investment Policy Monitor. A Periodic Report by the UNCTAD Secretariat.
No. 5, 5 May 2011.
http://www.unctad.org/en/docs/webdiaeia20115_en.pdf

Investment Policy Monitor. A Periodic Report by the UNCTAD Secretariat.
No. 4, 28 January 2011.
http://www.unctad.org/en/docs/webdiaeia20112_en.pdf

Investment Policy Monitor. A Periodic Report by the UNCTAD
Secretariat. No. 3, 7 October 2010.
http://www.unctad.org/en/docs/webdiaeia20105_en.pdf.

Investment Policy Monitor. A Periodic Report by the UNCTAD
Secretariat. No. 2, 20 April 2010.
http://www.unctad.org/en/docs/webdiaeia20102_en.pdf.

Investment Policy Monitor. A Periodic Report by the UNCTAD
Secretariat. No. 1, 4 December 2009.
http://www.unctad.org/en/docs/webdiaeia200911_en.pdf.





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IIA Monitors and Issues Notes

IIA Issues Note No. 2 (2011): Sovereign Debt Restructuring and
International Investment Agreements.
http://www.unctad.org/en/docs/webdiaepcb2011d3_en.pdf

IIA Issues Note No. 1 (2010): Latest Developments in Investor–State
Dispute Settlement.
http://www.unctad.org/en/docs/webdiaeia20103_en.pdf.

IIA Monitor No. 3 (2009): Recent developments in international
investment agreements (2008–June 2009).
http://www.unctad.org/en/docs/webdiaeia20098_en.pdf.

IIA Monitor No. 2 (2009): Selected Recent Developments in IIA
Arbitration and Human Rights.
http://www.unctad.org/en/docs/webdiaeia20097_en.pdf.

IIA Monitor No. 1 (2009): Latest Developments in Investor-State Dispute
Settlement.
http://www.unctad.org/en/docs/webdiaeia20096_en.pdf.

IIA Monitor No. 2 (2008): Recent developments in international
investment agreements (2007–June 2008).
http://www.unctad.org/en/docs/webdiaeia20081_en.pdf.

IIA Monitor No. 1 (2008): Latest Developments in Investor– State
Dispute Settlement.
http://www.unctad.org/en/docs/iteiia20083_en.pdf.

IIA Monitor No. 3 (2007): Recent developments in international
investment agreements (2006 – June 2007).
http://www.unctad.org/en/docs/webiteiia20076_en.pdf.

IIA Monitor No. 2 (2007): Development implications of international
investment agreements.
http://www.unctad.org/en/docs/webiteiia20072_en.pdf.




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IIA Monitor No. 1 (2007): Intellectual Property Provisions in
International Investment Arrangements.
http://www.unctad.org/en/docs/webiteiia20071_en.pdf.

IIA Monitor No. 4 (2006): Latest Developments in Investor-State Dispute
Settlement.
http://www.unctad.org/sections/dite_pcbb/docs/webiteiia200611_en.pdf.

IIA Monitor No. 3 (2006): The Entry into Force of Bilateral Investment
Treaties (BITs).
http://www.unctad.org/en/docs/webiteiia20069_en.pdf.

IIA Monitor No. 2 (2006): Developments in international investment
agreements in 2005.
http://www.unctad.org/en/docs/webiteiia20067_en.pdf.

IIA Monitor No. 1 (2006): Systemic Issues in International Investment
Agreements (IIAs).
http://www.unctad.org/en/docs/webiteiia20062_en.pdf.

IIA Monitor No. 4 (2005): Latest Developments in Investor-State Dispute
Settlement.
http://www.unctad.org/en/docs/webiteiit20052_en.pdf.

IIA Monitor No. 2 (2005): Recent Developments in International
Investment Agreements.
http://www.unctad.org/en/docs/webiteiit20051_en.pdf.

IIA Monitor No. 1 (2005): South-South Investment Agreements
Proliferating.
http://www.unctad.org/en/docs/webiteiit20061_en.pdf.










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QUESTIONNAIRE


Best Practices in Investment for Development
Case Studies in FDI: How to Prevent and Manage Investor-State


Disputes
Lessons from Peru


Sales No. E.10.II.D……
 
  In order to improve the quality and relevance of the work of the
UNCTAD Division on Investment, Technology and Enterprise Development,
it would be useful to receive the views of readers on this publication. It would
therefore be greatly appreciated if you could complete the following
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