The ICSID Tribunal partially granted the claim brought by a Canadian investor against Peru. The investor had intention to explore potential silver ore deposits in Santa Ana, located next to the Peru-Bolivian border.
In Peru, a foreign national can only gain rights to natural resources in border regions if there is a “public necessity”, determined by an executive decree. Claimant’s Peruvian national employee, Ms. Villavicencio, filed numerous applications corresponding to the Santa Ana Project in her own name. The option agreements were concluded, giving Claimant the option to acquire the mining concessions if it successfully obtained all requisite authorisations to acquire them. The option agreements were registered. All necessary authorisations having been obtained, in 2007
Supreme Decree 083-2007 confirmed a public necessity of Santa Ana Project and authorized Claimant to acquire, own, and operate the corresponding mining concessions. Claimant exercised its options for the transfer of mining rights. Soon afterwards, the local communities started to violently protest against the Santa Ana Project. The offices of Claimant were ransacked and burnt. After Claimant’s unsuccessful efforts of to settle the dispute, the protests erupted again with numerous strikes.
Under this pressure, the authorities decided to suspend the Santa Ana Project. Later, Peru adopted another decree refusing public necessity of the project, arguing that Claimant obtained an indirect interest in Santa Ana through a Peruvian national without authorisation. The authorities also filed a suit to invalidate option agreements and mining concessions. Claimant was never afforded the opportunity to be heard before revoking its mining rights, and had never
been compensated. In turn, Claimant filed a constitutional action seeking annulment of the second decree. The action succeeded.
The tribunal found Peru liable for the indirect expropriation of mining concession. The Tribunal stated that there was therefore no need to determine whether the second decree had also constituted a direct expropriation, a breach of fair and equitable treatment or a failure to provide full protection and security, as Claimant had argued. However, it evaluated Claimant’s damage at US$30.4 million including the amount actually invested in the project, arbitration costs and interest (out of the US$522 million it had asked for). The choice was justified by the
seriousness of situation that Peru faced and the uncertainty as to the success of the project.