Peru has traditionally maintained a favourable position towards investor–state arbitration as a dispute resolution mechanism for investment disputes. This policy is reflected in its active participation in international investment treaties and its commitment to international arbitration as a tool to attract foreign investment.

The 1993 Political Constitution establishes fundamental guarantees for foreign investment, including the principle of equal treatment between domestic and foreign investors. The Peruvian legal framework expressly recognises the validity of international arbitration in both commercial and investment matters.

Peru has been a contracting state to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the “ICSID Convention”) since 1993. This accession has enabled numerous investment disputes to be resolved under the institutional framework of ICSID.

Peru ratified the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”) in 1988. This convention is fundamental for the recognition and enforcement of foreign arbitral awards in Peruvian territory.

Investor–state arbitration is a widely used mechanism by foreign investors in Peru, particularly in strategic sectors such as mining, energy, and infrastructure. Peru has been a party to multiple ICSID arbitrations and ad hoc proceedings under the UNCITRAL Arbitration Rules.

Foreign investors generally prefer international arbitration over Peruvian domestic jurisdiction for several reasons. Arbitration offers neutrality, technical specialisation of arbitrators, and the possibility of enforcing awards internationally under conventions such as the ICSID Convention and the New York Convention. The perception of greater predictability and lower risk of political interference also influences this preference.

Mining Sector

Mining is the sector with the most investor–state arbitration activity in Peru. As one of the world’s leading producers of minerals such as copper, silver, zinc and gold, Peru has attracted significant foreign investment in this sector. Disputes frequently arise from regulatory changes, revocation of concessions, socio-environmental conflicts, and tax disputes.

Energy and Hydrocarbons

The energy sector, including hydrocarbons, electricity generation, and renewable energy, has also generated significant arbitrations. Disputes typically involve changes in concession regimes, tariff modifications, and regulatory aspects.

Infrastructure and Concessions

The infrastructure sector, particularly airport, highway and port concessions, has generated significant arbitral disputes. The emblematic case is Kuntur Wasi v Peru (2024), concerning the concession of the Chinchero International Airport in Cusco. This sector is vulnerable to arbitrations owing to changes in government policy, unilateral contract terminations, and political pressures following questions from the Comptroller General or Congress.

The recent case of Lupaka Gold Corp v Republic of Peru (ICSID Case No ARB/20/46, Award of 30 June 2025) (“Lupaka Gold”) represents one of the most legally significant arbitrations against Peru, addressing fundamental questions about state responsibility for the actions of rural communities and the scope of investor protection obligations.

Key Facts

Canadian investor Lupaka Gold acquired mining concessions in Peru’s Huaura Province in 2012. Despite obtaining necessary permits and reaching agreements with two rural communities (Lacsanga and Santo Domingo), the company faced escalating opposition from a third community, Parán. In October 2018, Parán community members blockaded the access road to the mine. In March 2019, they physically seized control of the mine site and began exploiting it themselves. Despite repeated appeals from the investor, Peruvian authorities declined to intervene beyond encouraging dialogue, citing policy concerns about using force against rural communities. The investor lost its investment to loan foreclosure in August 2019.

Legal Principles Debated

The tribunal debated the following key legal principles.

• Attribution of conduct ‒ the tribunal extensively analysed whether actions of Peru’s autonomous rural communities (comunidades campesinas) could be attributed to the State under Articles 4 and 5 of the International Law Commission Articles on State Responsibility. Peru argued that rural communities are autonomous entities with special status under international law, rather than state organs.
• Full protection and security (FPS) ‒ the tribunal examined whether Peru’s policy of relying exclusively on dialogue (rather than law enforcement) to resolve conflicts between investors and communities satisfied the FPS standard under customary international law.
• Fair and equitable treatment (FET) ‒ the tribunal analysed whether the State’s failure to respond effectively to the blockade and seizure of the mine constituted arbitrary and unjust conduct violating the FET standard.
• Expropriation ‒ the tribunal considered both direct expropriation (through the community’s physical seizure of the mine) and indirect expropriation (through state omissions), including whether compensation calculations should include planned expansion capacity.

Outcome

The tribunal unanimously found that:

• rural communities in Peru exercise governmental authority and their conduct is attributable to the State;
• Peru breached its obligations to provide FPS and FET; and
• Peru directly expropriated the investment.

The tribunal awarded compensation of USD40.4 million plus compound interest from August 2019.

Significance

The Lupaka Gold case establishes important precedents regarding state responsibility for sub-state entities, the scope of the “social licence” concept under investment treaties, and the limits of dialogue-based conflict resolution policies when investment treaty obligations are at stake.

Peru’s attitude toward enforcement of arbitral awards has been mixed. Although in some cases the State has voluntarily complied with adverse awards and actively negotiated settlements, in others it has shown significant resistance, including failure to respond to enforcement proceedings.

Kuntur Wasi Case – Procedural Default (2025)

The most recent and concerning case is Kuntur Wasi, where Peru was declared “in default” by the Bankruptcy Court of the District of Columbia in April 2025. The State failed to appear to defend itself in the enforcement action for the USD91 million ICSID award within the legal period of 60 days, which enabled the consortium to request attachments on Peruvian assets in US territory.

This situation represents a concerning precedent in Peruvian arbitral history, sending negative signals about the country’s institutionality and its commitment to fulfilling international obligations.

Gramercy Case ‒ Negotiated Compliance (2024)

In contrast to Kuntur Wasi, the Peruvian State demonstrated a proactive attitude in the Gramercy v Peru case. In December 2024, the Ministry of Economy and Finance (Ministerio de Economía y Finanzas, or MEF) negotiated a settlement agreement that reduced the debt arising from the arbitral award by more than USD25 million. The agreement established payment in three instalments and provided for the return of the cancelled agrarian reform bonds to MEF custody.

This case demonstrates that, when political will and active management by the MEF Public Prosecutor’s Office exist, the Peruvian State can fulfil its international obligations efficiently while simultaneously protecting the country’s fiscal interests through post-award negotiations. The settlement was presented by the government as both a defence of national economic interests and a reaffirmation of Peru’s commitment to investors and international trading partners.

Use of Annulment Proceedings

Peru has exercised its right to request annulment of ICSID awards in certain cases when it considered there were sufficient procedural or legal grounds. Grounds typically invoked include excess of powers by the tribunal, serious departure from fundamental rules of procedure, and lack of reasoning in the award.

Consequences of Default

The declaration of default in the Kuntur Wasi case has multiple consequences:

• authorisation of forced execution on state assets in the USA;
• damage to Peru’s reputation before the international investment community;
• increased financing costs for future projects;
• risk of deterring foreign capital inflows; and
• direct payment on attached assets without going through the national budget system.

Assessment

Peru’s enforcement record reveals institutional capacity to manage awards effectively when there is proper co-ordination and political commitment, as evidenced by Gramercy. However, the Kuntur Wasi default demonstrates ongoing challenges in ensuring consistent, timely responses to enforcement proceedings across all cases.

Peru has ratified approximately 31 bilateral investment treaties (BITs) with various countries. Additionally, Peru has incorporated investment protection chapters into numerous free trade agreements (FTAs), which provide comparable or even more comprehensive protection than traditional BITs. These include trade agreements with the USA, Canada, China, the EU, EFTA (European Free Trade Association) member states, and fellow members of the Pacific Alliance (Chile, Colombia and Mexico). Peru is also a party to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a multilateral trade agreement that includes robust investment protection provisions. In total, Peru has more than 50 bilateral and multilateral instruments containing investment protection mechanisms.

Main Trading Partners

Peru’s BITs include treaties with countries from different regions:

• Asian countries ‒ Australia, China, South Korea, Malaysia, Singapore, Thailand, and Japan;
• Americas ‒ Canada, the USA, Cuba, El Salvador, Argentina, Bolivia, Chile, Colombia, Ecuador, Paraguay, and Venezuela; and
• European countries ‒ Germany, Belgium-Luxembourg, Denmark, Spain, Finland, France, the Netherlands, Italy, Norway, Portugal, the UK, Czech Republic, Romania, Sweden, and Switzerland.

Beyond BITs, Peru’s FTAs with investment chapters cover major trading partners, including the USA (through the USA‒Peru Trade Promotion Agreement), the EU, China, Canada, South Korea, and CPTPP member states (eg, Australia, Japan, New Zealand, Singapore, and Vietnam).

Future Treaty Activity

Peru continues to actively pursue investment protection agreements. The country maintains ongoing negotiations and exploratory discussions with several partners, including potential agreements with India, Turkey, and Central American countries. Peru’s strategy has evolved from standalone BITs towards incorporating investment protection within comprehensive trade agreements, reflecting modern trends in international investment law that balance investor protection with state regulatory sovereignty.

Peru has adopted a flexible approach to investment treaty negotiations rather than applying a single standardised model. The country’s treaty practice has evolved according to negotiating era and treaty partner. Peru’s BITs from the 1990s and early 2000s generally incorporated standard protections – FET, most-favoured-nation clauses, and protections against expropriation ‒ although each treaty contained distinct variations reflecting the specific bilateral relationship.

Peru’s treaty practice evolved considerably with its modern trade agreements containing investment chapters. The agreements with the USA, Canada and particularly the CPTPP demonstrate a more calibrated methodology, reflecting the evolution of international investment law. These modern instruments provide greater specificity regarding the content of FET by explicitly tying it to customary international law rather than leaving the standard open to broad interpretation. They also incorporate more comprehensive carve-outs for legitimate regulatory measures and enhanced transparency requirements.

The USA–Peru Trade Promotion Agreement exemplifies this evolution. Compared to Peru’s earlier BITs, which generally provided investors with broader and less circumscribed protections, the agreement with the USA imposes notably more restrictive conditions on investor–state disputes and articulates clearer parameters for preserving regulatory space while maintaining meaningful investment protection.

Peru is a signatory to multiple free trade agreements that include investor protection provisions. Current FTAs in force include those with China, Singapore, the USA, Canada, Chile, and MERCOSUR member states.

Investor Protection and Dispute Settlement Implications

Peru’s FTAs typically contain comprehensive investment chapters that provide substantive protections parallel to those found in BITs, including:

• national treatment ‒ requiring host states to treat foreign investors no less favourably than domestic investors in like circumstances;
• most-favoured-nation treatment ‒ extending to investors treatment no less favourable than that accorded to investors from any third country;
• fair and equitable treatment ‒ protecting investors against arbitrary, discriminatory or abusive conduct;
• expropriation protections ‒ permitting expropriation only when conducted for public purpose, in a non-discriminatory manner, with due process, and upon payment of prompt, adequate and effective compensation; and

• investor‒state dispute settlement (ISDS) ‒providing investors direct access to international arbitration against the host state.

The USA‒Peru Trade Promotion Agreement (signed 2006, in force 2009) contains particularly detailed investment provisions in Chapter 10, which has served as a model for subsequent agreements. Similarly, the Peru‒China FTA and other agreements provide robust ISDS mechanisms, typically offering investors the choice between ICSID, ICSID Additional Facility, UNCITRAL, or other institutional rules.

Additional Treaties

Beyond investment-specific treaties, Peru has signed double taxation treaties with Brazil, Chile and Canada, which complement investment protections by addressing tax treatment of cross-border investment returns.

Limited Publication of Interpretive Materials

Peru does not systematically publish official commentaries, model clauses, or comprehensive interpretive guides regarding its investment treaties. Unlike some jurisdictions that release detailed interpretive statements or exchanges of notes, Peru’s approach to treaty interpretation relies primarily on the following.

Parliamentary records

When investment treaties are submitted to Congress for ratification, the executive branch provides explanatory memoranda (exposiciones de motivos) that describe the treaty’s main features and objectives. These documents are part of the legislative record but are not detailed interpretive guides.

Ministry of Foreign Affairs and MEF practice

The Ministry of Foreign Affairs (Ministerio de Relaciones Exteriores) and the MEF maintain internal positions on treaty interpretation for purposes of defending the State in arbitrations. However, these are generally not published as public interpretive aids.

Absence of joint interpretive notes

Peru has not typically engaged in the practice of issuing joint interpretive notes or declarations with treaty partners after treaties enter into force – although occasional diplomatic exchanges may occur during disputes. Such exchanges, when they exist, are not systematically published.

Reliance on Vienna Convention principles

In arbitration proceedings, Peru relies on standard principles of treaty interpretation codified in the Vienna Convention on the Law of Treaties (Articles 31 to 33), including:

• ordinary meaning of terms in context;
• object and purpose of the treaty;
• subsequent practice and agreements between parties; and
• preparatory work when necessary.

Limited Transparency in Negotiation Records

Peru does not publish travaux préparatoires (negotiating history) for its investment treaties, making it difficult for investors, practitioners, or tribunals to access evidence of the parties’ intent during negotiations.

Contrast With Other Jurisdictions

This stands in contrast to countries such as the USA and Canada, which have published model BITs, joint interpretive declarations (eg, the 2001 NAFTA Free Trade Commission Note on FET), and detailed side letters clarifying specific provisions.

Implications for Arbitration

The absence of published interpretive aids means that:

• tribunals adjudicating disputes involving Peru must rely primarily on textual analysis and general principles of international law;
• arguments about parties’ intent often depend on expert testimony rather than official published positions;
• there is less ex ante clarity for investors about how Peru interprets ambiguous treaty provisions; and
• interpretive issues are typically resolved through the arbitration process itself rather than through preventive clarification.

Recent Developments

There has been no significant shift towards greater transparency in treaty interpretation. Nevertheless, Peru’s increasing experience as a respondent in investor‒state arbitrations may eventually lead to more systematic publication of interpretive positions.

National Investment Framework

Peru has a comprehensive national investment framework established primarily through Legislative Decree No 662 (1991), which grants legal stability to foreign investments through recognition of specific guarantees. This decree remains the cornerstone of Peru’s domestic investment protection regime.

Constitutional Foundation

The 1993 Political Constitution provides fundamental investment protections referenced in 1.1 National Position, as follows.

• Equal Treatment (Article 63) ‒ foreign and domestic investors receive equal treatment.
• Contractual Freedom (Article 62) ‒ private initiative and freedom of contract are guaranteed.
• Property Rights (Article 70) ‒ property is inviolable; expropriation requires public necessity and prior compensation.

Key Substantive Provisions of Decree 662

Scope and definition of foreign investment (Article 1)

The decree broadly defines foreign investment to include:

• capital contributions in convertible currency or physical goods (machinery, equipment, and raw materials);
• investments in domestic currency with remittance rights;
• debt-to-equity conversions;
• reinvestments;
• tangible property physically located in Peru;
• intangible technology contributions (patents, trade marks, and technical know-how);
• securities and financial instruments;
• joint venture arrangements with production-sharing; and
• any other investment modality contributing to national development.

Non-discrimination and equal treatment (Article 2)

Foreign investors and companies with foreign participation enjoy identical rights and obligations as domestic investors, with no legal discrimination based on nationality of capital. This constitutional guarantee is operationalised through the decree.

Automatic authorisation and registration (Article 3)

Foreign investments are automatically authorised upon execution and require only subsequent registration with the national competent authority, which is the National Commission on Foreign Investment and Technology (Comisión Nacional de Inversiones y Tecnología Extranjera, or CONITE).

Property rights (Article 4)

Foreign investors’ property rights are subject only to constitutional limitations, providing broad ownership protections.

Substantive guarantees (Articles 6 to 9)

The decree guarantees:

• freedom of commerce and industry ‒ no restrictions on business activities;
• free transferability ‒ unrestricted right to remit abroad (in freely convertible currency, without prior authorisation):
1. capital and proceeds from sale of shares, capital reductions, or liquidations;
2. dividends and net profits; and
3. royalties and technology transfer payments;
• acquisition rights ‒ right to acquire shares or ownership interests from domestic investor; and
• exchange rate protection ‒ right to use the most favourable exchange rate for currency conversions.

Legal stability agreements (Articles 10 to 18)

Peru offers contractual legal stability agreements (convenios de estabilidad jurídica) that freeze regulatory conditions for qualifying investors.

Per Article 11, the eligibilty requirements are:

• minimum investment of USD2 million; or
• minimum investment of USD500,000 if generating 20+ permanent jobs or USD2 million in exports within three years.

Per Article 10, stabilised rights are:

• tax regime stability ‒ income tax rates applicable to the company and dividends/profits attributable to the foreign investor are frozen;
• currency regime stability ‒ rights to foreign exchange access and remittances under Articles 7 and 9 are guaranteed; and
• non-discrimination ‒ equal treatment rights under Article 2 are preserved.

Per Article 12, additional stabilised rights for companies are:

• labour contracting regimes; and
• export-oriented special regimes (temporary admission, free trade zones, etc).

Articles 14 and 15 prescribe the following in terms of duration and protection:

• ten-year term from execution;
• state cannot unilaterally modify agreements; and
• breaches constitute contractual violations.

Dispute Resolution Provisions

Domestic options (Article 2)

Foreign investors enjoy equal access to Peruvian courts and domestic arbitration mechanisms available to national investors.

International arbitration (Article 16)

The State may submit disputes arising from legal stability agreements to arbitral tribunals constituted under international treaties to which Peru is party. This provision enables:

• ICSID arbitration (Peru is a signatory since 1993);
• other institutional or ad hoc arbitration under applicable treaties; and
• no requirement to exhaust domestic remedies before accessing international arbitration.

Interaction With Investment Treaties

The protections in Decree 662 interact with investment treaties in the following complementary ways.

Baseline protection

Decree 662 establishes minimum protections available to all foreign investors regardless of nationality. Meanwhile, BITs and FTAs provide enhanced protections for investors from specific treaty partners.

Hierarchy of norms

Under Peru’s constitutional framework (Fourth Final and Transitory Provision), ratified international treaties form part of domestic law and generally prevail over conflicting ordinary legislation. Investment treaties thus provide a superior normative layer.

Legal stability agreements as protected investments

Legal stability agreements themselves constitute “investments” under most BITs, creating dual-layer protection as follows:

• contractual rights under domestic law (Decree 662); and
• treaty-based protection of the agreement itself as an investment.

This was demonstrated in arbitrations where investors successfully claimed treaty violations when Peru modified or failed to respect legal stability agreement terms.

Legitimate expectations

Commitments made through legal stability agreements and other regulatory representations under domestic law create legitimate expectations that form the basis for FET claims under investment treaties. The Lupaka Gold case (2025) illustrates how domestic legal frameworks interact with treaty standards; investors’ expectations that they could access legally authorised projects were protected under treaty FET obligations.

Forum choice and complementarity

Domestic law provides access to Peruvian courts or domestic arbitration for contractual disputes.

Investment treaties provide direct treaty-based standing for international arbitration without exhausting domestic remedies.

In terms of cumulative protection, investors may potentially pursue parallel claims – although some treaties contain fork-in-the-road clauses limiting this option.

Substantive standards

Although Decree 662 guarantees non-discrimination, property rights, and remittance freedoms, investment treaties typically provide broader substantive protections, including:

• FET (not explicitly in Decree 662);
• FPS;
• indirect expropriation protections;
• most-favoured-nation treatment; and
• umbrella clauses protecting contractual commitments.

Technology transfer regime (Article 21)

Decree 662’s automatic registration of technology transfer contracts complements treaty protections for IP-related investments, ensuring both domestic legal validity and international investment protection.

Practical Significance

This dual-layer framework means sophisticated foreign investors in Peru typically:

• negotiate legal stability agreements under Decree 662 for tax and regulatory certainty;
• rely on investment treaties for broader substantive protections and neutral dispute resolution;
• benefit from constitutional equal treatment guarantees as operationalised through Decree 662; and
• can invoke domestic protections in Peruvian courts while preserving treaty-based international arbitration rights.

The interaction creates a comprehensive protection regime where domestic law provides immediate, practical guarantees while international treaties offer ultimate recourse and enhanced substantive standards.

Direct arbitration clauses in contracts between investors and the Peruvian State are common practice, particularly in infrastructure and energy concessions. These contracts typically establish a two-tier dispute resolution system based on claim amount: disputes exceeding USD20 million proceed to ICSID arbitration, whereas smaller disputes are resolved through domestic arbitration in Lima. This structure is frequently observed in renewable energy contracts where private companies enter into long-term power purchase agreements with governmental entities.

The protection afforded by contractual arbitration clauses differs substantially from treaty-based investor protection. Contract-based dispute resolution limits parties to rights and obligations expressly stipulated in the specific agreement, with the State treated as a contracting party rather than in its sovereign capacity. Investment treaties provide broader substantive protections, including FET and comprehensive safeguards against expropriation.

A significant distinction concerns umbrella clauses. Peru’s agreement with the USA does not contain umbrella clause provisions, meaning contractual breaches do not automatically constitute treaty violations. Although some of Peru’s earlier BITs include umbrella clauses, tribunals have required claimants to demonstrate that the State acted in its sovereign capacity rather than merely as a commercial counterparty before elevating contract breaches to treaty-level claims.

In practice, investors frequently pursue parallel strategies, simultaneously advancing contract-based claims while arguing separately that Peru violated international law standards established in investment treaties. This dual-track approach allows investors to maximise their procedural options and legal theories of recovery.

Full Protection and Security

The most significant recent development in FPS claims involves state responsibility for actions or omissions related to conflicts with rural communities. In the Lupaka Gold case, the tribunal found that Peru breached its FPS obligation both through actions attributable to a rural community (direct harm) and through the central government’s inadequate response to third-party violence (failure to exercise due diligence).

The case established that:

• a state cannot delegate FPS obligations to investors through “social licence” requirements;
• exclusive reliance on dialogue, without effective law enforcement back-up, may violate FPS when third parties physically seize investments; and
• rural communities exercising governmental authority under domestic law are state organs for purposes of FPS obligations.

FET

Violations of the FET standard constitute the most frequent claim in arbitrations against Peru. Common allegations include the following.

• Breach of legitimate expectations ‒ investors typically claim the State violated expectations created through specific representations, stabilisation agreements, or regulatory frameworks. In Lupaka Gold, the tribunal found Peru violated expectations that investors could access and operate their legally authorised projects free from violent interference.
• Arbitrary or discriminatory conduct ‒ claims frequently arise from unequal application of laws, selective enforcement, or seemingly irrational decision-making. The Lupaka Gold tribunal found Peru’s treatment of the investor was “grossly unfair and unjust”.
• Denial of justice ‒ allegations include excessive delays in judicial proceedings, refusal to enforce judgments, or failure to prosecute criminal conduct. In Lupaka Gold, criminal complaints filed by the investor against community members who occupied the mine remained unresolved for more than four years, with no arrests made.

Expropriation

Expropriation claims in Peru typically fall into the following three categories.

• Direct expropriation ‒ physical seizure of property or formal transfer of title. Lupaka Gold involved physical seizure of a mine by a rural community, which the tribunal found constituted direct expropriation attributable to the State.
• indirect/creeping expropriation ‒ regulatory changes or administrative actions that substantially deprive investors of their investment’s value without formal taking. The Lupaka Gold tribunal also found indirect expropriation through state omissions that enabled third parties to seize the investment.
• Regulatory expropriation ‒ changes in environmental, tax, or sector-specific regulations that fundamentally alter the investment’s economic viability.

Breach of contract

Many disputes involve allegations that Peru or state-owned entities violated concession agreements, particularly in infrastructure and mining sectors. Recent cases include unilateral contract terminations following Comptroller General observations, as seen in the Kuntur Wasi airport concession case.

Peruvian legislation and investment treaties signed by Peru generally broadly respect party autonomy to select arbitrators in investor–state arbitrations. There are no significant nationality restrictions, except those typically established in treaties.

When parties fail to agree on the constitution of the tribunal under the ICSID Convention, Article 38 of the ICSID Convention establishes that either party may ask the president of the ICSID Administrative Council to make pending appointments.

In international arbitrations, particularly under the ICSID Convention, Peruvian courts have a very limited role in the selection of arbitrators. The ICSID system is autonomous and excludes national judicial intervention in the appointment process.

In ICSID arbitrations, challenges are governed by Article 57 of the ICSID Convention, which allows challenging an arbitrator who manifestly lacks the required qualities, particularly independence and impartiality. This is a high standard; the deficiency must be evident or obvious.

The most common grounds include undisclosed conflicts of interest, prior relationships with a party, prior opinions on issues in dispute, or multiple appointments that generate conflicts.

The ICSID Convention requires that arbitrators be persons of high moral character, have recognised competence in the fields of law, commerce, industry or finance, and inspire full confidence in their impartiality.

Arbitrators must be independent of the parties and lack interest in the outcome of the dispute. They must disclose any circumstances that may give rise to justifiable doubts about their independence or impartiality.

Arbitral tribunals in investment arbitrations have the power to grant provisional and interim measures. This power is recognised in both the ICSID Convention and the UNCITRAL Arbitration Rules and other institutional rules.

Measures ordered by arbitral tribunals are binding on the parties, not merely recommendatory. Non-compliance with such measures may have consequences in the determination of liability and costs.

Common types of provisional measures include:

• orders for preservation of evidence;
• prohibitions on aggravating the dispute;
• measures to maintain the status quo; and
• confidentiality orders.

In international arbitrations, particularly ICSID, domestic courts have a very limited role regarding provisional measures. The ICSID system is autonomous and excludes intervention by national courts.

Arbitral tribunals have the power to order security for costs when circumstances justify it. This is a specific provisional measure designed to protect a party from the risk of being unable to recover its costs if it prevails in the arbitration.

Third-party funding of arbitration claims is legal in Peru. There is no prohibition in Peruvian legislation that prevents investors from obtaining third-party funding for their investment arbitrations.

Investors resort to third-party funding primarily to manage financial risk, to preserve capital, or when they lack sufficient resources to finance costly arbitrations that can extend for years.

To date, Peruvian courts and tribunals have not issued published decisions specifically addressing third-party funding arrangements in investor–state arbitrations – although the practice is legally permissible.

There is no automatic legal requirement to disclose the existence of third-party funding in investment arbitrations. However, tribunals increasingly require disclosure to assess potential conflicts of interest, particularly if the funder has connections with arbitrators, experts, or other participants.

The existence of third-party funding has been considered by some tribunals as a relevant factor when deciding security for costs applications. The reasoning is that if a third party finances the claim with expectation of profit, it should also be willing to guarantee the counterparty’s costs.

Pre-Arbitration Requirements in Treaties

Most investment treaties signed by Peru include procedural requirements that must be met before initiating arbitration. These typically include formal notification of the dispute and periods for consultation or negotiation.

Content of Notification

Notice of dispute typically must identify the investor, describe the measure objected to, specify the treaty provisions allegedly violated, and preliminarily quantify damages.

Consequences of Non-Compliance

Failure to comply with pre-arbitration requirements may result in successful jurisdictional objections. Tribunals generally interpret these requirements as conditions precedent to their jurisdiction.

Inherent Public Interest in State Arbitrations

When a sovereign state becomes party to investor–state arbitration, the mere fact of state involvement creates an inherent public interest that fundamentally distinguishes these disputes from purely commercial arbitration. The State exercises sovereign regulatory powers on behalf of its citizens, manages public resources as trustee for the population, and may commit taxpayer funds to satisfy awards. These characteristics generate legitimate demands for transparency that transcend the traditional confidentiality assumptions of commercial arbitration.

However, Peru’s legal framework establishes a critical exception: Article 51.3 of the Arbitration Law (Legislative Decree 1071) (as modified by Emergency Decree 020-2020) mandates that when the Peruvian State participates as a party, arbitral proceedings and awards are public once the arbitral process concludes, subject only to exceptions established in transparency and public information access regulations. This provision reverses the traditional confidentiality presumption for state disputes.

This mandatory transparency applies regardless of treaty provisions or institutional rules. Each arbitral institution must develop procedures for implementing this obligation, while in ad hoc arbitrations, the participating state entity assumes direct responsibility for publication. The exceptions reference Law No 27806 (Transparency and Access to Public Information), which protects legitimately confidential business information, security-sensitive materials, and information subject to constitutional privacy guarantees. Having established Peru’s domestic transparency mandate, the broader question remains as to whether this model should be adopted more widely in investment arbitration.

The core tension is whether confidentiality should remain the default rule (with exceptions for transparency) or whether transparency should be the presumption (with limited exceptions for genuinely confidential information). The international community has increasingly moved towards the latter position – although implementation remains inconsistent.

Evolution of Transparency Standards in Investment Arbitration

International practice has evolved significantly during the past two decades. Traditional arbitration emphasised confidentiality as a core feature, treating proceedings, submissions, and awards as private matters between disputing parties. This approach made sense for purely commercial disputes where business competitors might exploit disclosed information.

However, civil society organisations, academics, and some governments have challenged this model’s application to investment disputes. Critics argue that when arbitral tribunals evaluate sovereign regulatory measures (environmental protections, public health regulations, tax policies, or infrastructure decisions),  the public has a right to understand the legal arguments, evidence, and reasoning that may result in substantial public expenditure or constrain future policy choices.

Peru’s Treaty Framework

While Peru’s earlier BITs contain no transparency provisions and proceed under institutional rules that historically protected confidentiality, modern agreements such as the USA–Peru Trade Promotion Agreement and the CPTPP incorporate transparency mechanisms that complement Article 51.3’s domestic mandate.

First-generation BITs (1990s to early 2000s)

Peru’s BITs from this period generally contain no specific transparency provisions. These disputes proceed under institutional rules (typically, the ICSID Convention or UNCITRAL Arbitration Rules) that historically did not mandate publication of proceedings or awards beyond basic case registration. Under ICSID Rule 48(4), the ICSID may not publish awards without consent of both parties, meaning full awards remain confidential unless both the State and the investor agree to publication.

Modern FTAs

Peru’s more recent agreements reflect international shifts toward greater transparency. The USA–Peru Trade Promotion Agreement and the CPTPP include provisions addressing transparency, such as publication of awards and mechanisms for non-disputing party submissions (amicus curiae briefs). These treaties recognise that investment disputes involve public interest considerations requiring greater openness than traditional commercial arbitration.

UNCITRAL Transparency Framework

The UNCITRAL Rules on Transparency in Treaty-Based Investor‒State Arbitration (2014) (the “UNCITRAL Transparency Rules”) represent the most comprehensive international effort to systematise transparency. These rules establish:

• publication of key documents (notice of arbitration, response, statements of claim and defence, transcripts, orders, and awards);
• public hearings as the default, with exceptions for confidential information;
• procedures for non-disputing party submissions;
• protection mechanisms for confidential business information; and
• a central repository maintained by UNCITRAL.

The Mauritius Convention on Transparency (2014) provides a mechanism for states to apply the UNCITRAL Transparency Rules to their existing investment treaties without renegotiating each agreement individually. Peru has not yet adopted the Mauritius Convention, meaning the UNCITRAL Transparency Rules apply only to treaties explicitly incorporating them or concluded after 1 April 2014 and only if both parties agree.

Balancing Transparency and Legitimate Confidentiality

The challenge lies in identifying what information genuinely requires confidentiality protection when the State’s participation creates a presumption-favouring disclosure. The following categories merit consideration.

• Information warranting confidentiality protection ‒ this includes:
1. proprietary business information and trade secrets belonging to the investor or third parties;
2. confidential financial data whose disclosure could harm competitive position;
3. technical specifications or processes with independent commercial value;
4. security-sensitive information ‒ the disclosure of which could threaten national security; and
5. information necessary for settlement negotiations where confidentiality facilitates resolution.
• Information presumptively subject to disclosure ‒ this includes:
1. legal arguments and treaty interpretation positions;
2. factual allegations regarding state conduct;
3. evidence of regulatory measures and their justifications;
4. expert opinions on matters of public policy;
5. arbitral tribunal’s legal reasoning and conclusions; and
6. final awards determining state liability and compensation.

Procedural Mechanisms for Balance

Parties and tribunals can employ various mechanisms to achieve appropriate balance, as follows.

• Redaction protocols – documents can be published with specific redactions protecting confidential business information while disclosing legal reasoning and factual background. Tribunals increasingly establish detailed procedures identifying categories of information subject to redaction and requiring parties to justify confidentiality claims rather than presuming non-disclosure.
• Tiered access – some proceedings adopt differentiated access levels, such as:
1. full public access to legal submissions and awards;
2. restricted access to designated confidential annexes containing proprietary information; and
3. closed sessions for testimony involving trade secrets.
• Non-disputing party participation – amicus curiae procedures allow interested parties (including affected communities, environmental organisations, or public interest groups) to provide tribunals with perspectives on public policy implications while maintaining party control over core evidentiary record.
• Staged transparency – proceedings may maintain confidentiality during initial phases to facilitate settlement discussions, with automatic publication of awards after issuance and potential subsequent release of procedural history.

Practice in Peruvian Arbitrations

Peru’s practical approach to transparency has been case-specific rather than systematic. Some awards have been published (eg, Lupaka Gold), enabling public analysis of the tribunal’s reasoning on attribution, full protection and security, and expropriation standards. Other cases have maintained greater confidentiality. The determining factors appear to be applicable treaty provisions, institutional rules, and party agreements rather than a comprehensive state policy on transparency.

This ad hoc approach creates several challenges. Without systematic transparency, it becomes difficult to assess whether recurring issues in Peru’s defence strategies warrant policy adjustments, whether certain regulatory practices systematically generate liability, or how tribunals interpret Peru’s treaty obligations. Democratic accountability and legislative oversight are compromised when information about pending cases or settlement negotiations remains inaccessible.

The Normative Case for Default Transparency

Given that state participation inherently implicates public interest, a strong argument exists for inverting the traditional confidentiality presumption in investor–state arbitration. Under this approach, transparency would be the default rule, with confidentiality requiring specific justification limited to genuinely proprietary information, trade secrets, or security-sensitive matters.

This position recognises that the State acts as trustee of public resources and exercises sovereign regulatory powers affecting entire populations. Arbitral proceedings that may result in payment of public funds or influence future regulatory decisions directly implicate democratic accountability.

Citizens have a legitimate interest in understanding:

• what regulatory measures investors are challenging;
• on what legal grounds such challenges proceed;
• what evidence supports or refutes allegations of treaty breaches;
• how tribunals interpret treaty obligations; and
• what amounts states must pay and why.

Current institutional frameworks, however, do not fully implement this principle. ICSID rules still require bilateral consent for publication of complete awards. The UNCITRAL Transparency Rules apply only to certain treaties. Many arbitrations involving states proceed with substantial confidentiality.

Recommendations for Improved Balance

To better align practice with the public interest rationale for transparency:

• Systematic transparency commitment – Peru could unilaterally commit to transparency in its investor–state arbitrations, either through adoption of the Mauritius Convention, incorporation of the UNCITRAL Transparency Rules in future treaties, or declaration that it will consent to publication of awards and key procedural documents in all cases.
• Clear confidentiality protocols – establishing standard procedures for identifying legitimately confidential information would create predictability while presuming disclosure of legal arguments, factual allegations regarding state conduct, and arbitral reasoning.
• Public case registry – maintaining an accessible database of pending and concluded cases, including basic information about claims, procedural status, and outcomes, would enhance transparency without compromising legitimate confidentiality interests.

Conclusion

The appropriate balance between confidentiality and transparency in investor–state arbitration involving Peru should recognise that state participation creates a presumption favouring disclosure, with confidentiality limited to information requiring specific protection. While international practice has evolved towards greater transparency, implementation remains incomplete and inconsistent. Peru’s approach has been ad hoc rather than systematic, determined by specific treaty provisions and case circumstances rather than comprehensive policy.

As international standards continue evolving, Peru would benefit from adopting a more transparent approach that recognises both legitimate confidentiality needs and the public’s right to understand how sovereign powers are being challenged and public funds potentially committed. Such transparency enhances not only democratic accountability but also the legitimacy and credibility of the investment arbitration system itself.

Arbitral tribunals in investment disputes have broad discretion to award different types of remedies. Investment treaties signed by Peru typically do not impose specific limits on types of remedies, beyond those limits recognised in international law.

The most common form of remedy is monetary compensation for damages suffered. Tribunals calculate damages based on the value of the affected investment and consequential losses.

Discounted Cash Flow (DCF) Methodology

DCF is the preferred methodology for valuing operating businesses or projects with reliable financial projections. This approach projects future cash flows and discounts them to present value using an appropriate discount rate that reflects project risk.

In Lupaka Gold, the tribunal applied DCF methodology, with the following notable features.

• Dual scenarios ‒ experts valued the investment under two production scenarios (355 tonnes per day and 590 tonnes per day), reflecting different levels of planned expansion.
• Conservative adjustments ‒ risk premiums of 3.3% (base scenario) and 6.9% (expansion scenario) were added to reflect uncertainty regarding projects not yet in commercial production.
• but-for analysis ‒ experts compared actual value (nil after expropriation) with projected value in the absence of treaty breaches.
• Treatment of planned acquisitions ‒ the tribunal allowed inclusion of revenues from a processing plant the investor planned to acquire, finding it “highly probable” that the acquisition would have occurred but for the breaches.

Market Value

When active markets exist for comparable assets, market-based valuation provides objective evidence of value. This methodology is particularly relevant for:

• publicly traded companies (market capitalization);
• assets with established secondary markets; and
• recent arm’s length transactions involving similar investments.

Market value is less common for unique or specialised investments, such as early-stage mining projects or infrastructure concessions with specific terms.

Asset-Based/Cost Approaches

Cost-based methodologies value investments based on amounts invested or replacement costs. These approaches are typically used for:

• early-stage projects without operating history;
• situations where DCF would be too speculative; and
• assets valued primarily for their physical components rather than their income-generating capacity.

In Lupaka Gold, the claimant presented sunk costs as a “sanity check” on DCF valuations but did not rely on costs as the primary valuation method.

Selection of Appropriate Methodology

Tribunals consider multiple factors when selecting valuation methodologies:

• stage of investment development (greenfield versus operating business);
• availability and reliability of historical financial data;
• nature of treaty violation and its timing;
• reliability of future cash flow projections; and
• expert evidence regarding industry standards for similar projects.

The Lupaka Gold tribunal’s acceptance of DCF methodology for a mine approaching but not yet in commercial production reflects modern practice in favouring income-based approaches over purely cost-based methods when sufficient evidence supports reliable projections.

Arbitral tribunals have the power to award interest on compensatory sums. Interest compensates the investor for the use of money from the date of damage to effective payment.

Parties have the right to request recovery of their legal costs, expert fees, and arbitration costs (arbitrators’ fees and administrative expenses). Tribunals consider the degree of success of each party, procedural conduct, case complexity, and reasonableness of costs incurred.

Under general principles of international law, the investor has a duty to take reasonable steps to mitigate its losses following the host state’s treaty breach. The investor is not required to take extraordinary or commercially unreasonable measures. The burden of proving failure to mitigate typically falls on the respondent state.

Awards rendered under the ICSID Convention receive privileged treatment in Peru. Article 54 of the ICSID Convention requires each contracting state to recognise ICSID awards as binding and to enforce their pecuniary obligations as though they were final judgments of domestic courts. Peru’s status as signatory to both the ICSID Convention and the New York Convention means the enforcement pathway depends on the award’s classification.

ICSID awards proceed directly to recognition through the Superior Court of Peru without substantive review, requiring only administrative processing to confirm formal compliance with recognition requirements such as authenticity of the award, verification that it is binding and enforceable, and accurate calculation of the sums due. Non-ICSID awards follow the New York Convention enforcement route through the Superior Court of Peru, where grounds for refusal are limited to those enumerated in Article V of the New York Convention.

Regarding awards set aside at the seat of arbitration, Peruvian courts would likely refuse enforcement pursuant to Article V(1)(e) of the New York Convention ‒ although recent jurisprudence on this specific issue remains limited. For awards subject to ongoing set-aside proceedings at the seat, courts possess discretion under Article VI of the New York Convention to suspend enforcement proceedings pending resolution of challenges at the seat. However, the frequency with which Peruvian courts exercise this discretion remains unclear from available case law.

Peruvian courts adopt a generally favourable approach toward recognition and enforcement of arbitral awards, applying the principle of “maximum effectiveness” (máxima eficacia) established in both the New York Convention and Article 74.2 of Peru’s Arbitration Law (Legislative Decree 1071).

Recognition proceedings are non-contentious in nature and characterised as “formal and declarative acts” that do not permit review of the merits of the arbitral dispute. As Peruvian courts have emphasised, the judicial task is limited to reviewing form rather than substance; courts do not examine the facts underlying the controversy, the arbitrators’ interpretation of applicable law, or the legal conclusions reached.

Standard for Refusing Enforcement on Public Policy Grounds

Article 75.3(b) of Peru’s Arbitration Law (Legislative Decree 1071) allows courts to deny recognition when an award “is contrary to international public policy”. This ground for refusal is subject to three interpretive principles consistently applied by Peruvian courts, as follows.

• Exceptionality ‒ public policy is an extraordinary defence applicable only in extreme circumstances that would undermine fundamental constitutional principles.
• Restrictive interpretation ‒ the taxative list of grounds for refusal must be interpreted narrowly to avoid expanding grounds beyond those explicitly provided.
• Manifest evidence ‒ the violation must be evident and manifest, not requiring extensive factual investigation by the recognising court.

In the recent case of Lima Expresa v Municipalidad Metropolitana de Lima (Expediente 00395-2024, First Commercial Chamber, September 2025) (“Lima Expresa”), Peru’s courts clarified that allegations of corruption underlying a contract do not constitute grounds to deny recognition unless:

• the corruption has been definitively established by competent authorities (not merely alleged or under investigation);
• the arbitral tribunal failed to address such allegations; and
• there is proven causality between the alleged corruption and the contract’s validity.

The Lima Expresa case demonstrates that ongoing criminal investigations, fiscal accusations, or legislative reports ‒ without definitive judicial determinations ‒ are insufficient to invoke the public policy exception. Courts have rejected arguments that would convert public policy objections into vehicles for re-examining the arbitral tribunal’s factual findings or evidentiary assessments.

Domestic versus international public policy

Peruvian courts apply the international public policy standard, which is narrower than domestic public policy. International public policy encompasses only those fundamental principles and values essential to Peru’s legal order and societal organisation, including constitutional rights, due process guarantees, and principles recognised by the international community.

Position on Sovereign Immunity

Immunity from jurisdiction versus immunity from execution

By ratifying the ICSID Convention and including arbitration clauses in investment treaties and state contracts, Peru has waived immunity from jurisdiction for covered disputes. Peruvian law does not permit the State to invoke sovereign immunity to avoid recognition of validly rendered arbitral awards.

However, immunity from execution over state assets remains governed by principles of international law. Peruvian law distinguishes between:

• non-immune assets ‒ commercial assets and property not dedicated to public service functions; and
• immune assets ‒ property dedicated to essential public services, diplomatic premises, military assets, and central bank reserves.

ICSID awards: special regime

For ICSID awards, Article 54 of the ICSID Convention provides a privileged enforcement regime. Peruvian courts must recognise ICSID awards as binding and enforce pecuniary obligations as if they were final judgments of Peruvian courts, without any review on public policy or other substantive grounds.

Practical challenges

Although the legal framework supports enforcement, practical challenges exist, as follows.

• Identification of non-immune state assets available for execution can be complex.
• Budgetary procedures may delay voluntary compliance.
• As demonstrated in the Kuntur Wasi case, institutional co-ordination failures can result in enforcement defaults despite legal obligations.

Summary

Peruvian courts maintain a pro-arbitration stance that strongly favours the recognition and enforcement of foreign awards. The public policy exception is applied restrictively and requires manifest, proven violations of fundamental principles – not mere allegations or ongoing investigations. Although sovereign immunity from execution exists for certain assets, Peru’s treaty obligations and domestic law preclude using immunity as a general defence against award recognition.

Peruvian access-to-information laws provide a practical mechanism for identifying attachable state assets. Creditors may request details from government entities regarding assets, property holdings, and commercial activities. This transparency mechanism enables preliminary asset mapping before initiating execution proceedings – although response quality and completeness vary depending on the governmental entity involved.

Peruvian courts maintain limited intervention in investor–state arbitrations given Peru’s adherence to the ICSID Convention and the New York Convention. The legal framework for corporate veil piercing exists through Article 12 of the Corporate Law (Law No 26887), which establishes liability for those acting without proper authority or on behalf of invalidly constituted companies, and the Civil Code’s general principles prohibiting abuse of rights (Article II, Preliminary Title) and fraud (Article V, Preliminary Title).

For asset tracing and recovery following an investment award, Peruvian procedural law provides mechanisms through the Civil Procedure Code, including various forms of attachment:

• embargo en forma de inscripción (attachment through registration) for registered assets;
• embargo en forma de retención (attachment through retention) for bank accounts and credits; and
• embargo en forma de depósito (attachment through deposit) for movable property.

The Arbitration Law (Legislative Decree No 1071) governs recognition and enforcement of foreign awards, with courts limited to reviewing public policy grounds, due process, and absence of fraud.

The theoretical basis exists in Peruvian law to disregard corporate separateness when there is proven patrimonial confusion, fraudulent transfers, or abuse of corporate form. The Civil Code provides the acción pauliana (Paulian action) (Articles 195 to 197) to revoke transfers made in fraud of creditors, as well as actions for simulation (Articles 190 to 194) to nullify fictitious transactions ‒ both potentially relevant for asset recovery when corporate structures have been used to dissipate assets.