Simons is a lawyer with more than 25 years’ experience; an arbitrator, a specialist in procedural law, arbitration law, civil law, constitutional law, administrative law and regulatory law governing telecommunications, fishing, energy and hydrocarbons. We talked to Adrian about the Odebrecht suit against the Peruvian state.
Leaders League: What is your opinion regarding the Odebrecht lawsuit against the Peruvian state?
Adrian Simons: It is not easy to give a detailed opinion regarding Odebrecht’s claim against the Peruvian state due to the limited information available. Nonetheless, the company has issued a written statement which summarizes its position.
Let us briefly see what is attributed to the Peruvian state:
- Not having convened a private bidding procedure, within 12 months of the unilateral termination of the Concession Contract.
- This situation has made it impossible for a new private investor to enter, who would have assumed the investment made in the project. According to Odebrecht, this project was at 33% towards completion, with an investment of $12bn .
- Consequently, Odebrecht requires the Peruvian state to cover such investment costs.
Leaders League: What justification has Odebrecht used to submit their claim before ICSID?
AS: According to the arbitration agreement contained in Article 11 of the Agreement for the Promotion and Reciprocal Protection of Investments between the Republic of Peru and the Belgo-Luxembourg Economic Union, the term for the submission of any claim expires after three years of the date in which the Claimant learned of the infraction and of their loss or damage. Therefore, had they not filed their claim before this term expired, they would have forfeited their right to a payment for the investment made. This works like a statute of limitations.
Since Odebrecht is in insolvency proceedings in Brazil, the Board of Creditors is forcing the company to commence all legal proceedings needed to comply with payment of their debts.
LL: What are the different possible outcomes concerning the Odebrecht demand to the Peruvian state?
AS: A possible scenario would be that the Arbitral Tribunal rejects Odebrecht’s claim under the grounds of Article 2 of the Agreement for the Promotion and Reciprocal Protection of Investments. This article stipulates that the investor (in this case, Odebrecht) must make their investment complying with the Peruvian legal system. This means that only investments made in a lawful manner are protected.
Taking the aforementioned into account, the defense of the Peruvian State must prove that the investment was made unlawfully since the concession was awarded through fraudulent or illegal means.
There was a similar case brought before an ICSID Tribunal (Inceysa Vallisoletana S.L. v. Republic of El Salvador), which determined the following in the award:
- Investments made unlawfully are excluded form the protection given to those made in compliance of the contracting state law.
- Any investment made against the laws of the contracting state stands outside of the reach of the Investment Protection Agreement and, therefore, of the arbitration agreement.
- The principle of good faith applies, which cannot be undermined when seeking compensation for acts performed against the law.
- Notwithstanding the criminal proceedings which are being held before ordinary judges, the Arbitral Tribunal can analyze the evidence of violations committed by the investor during the bidding process and determinate whether or not it has protection under the Agreement.
Finally, I must warn that, in order for the Peruvian state to exercise an adequate defense, it must conduct itself in a depoliticized manner and, above all, it must keep criminal justice (including the Prosecutor’s Office) out of this international dispute.