Procedural Posture

This document is a Complaint filed by IC Power Ltd and Kenon Holdings Ltd (Plaintiffs) in the United States District Court for the District of Columbia. The Plaintiffs seek the recognition and enforcement of an arbitral award rendered against the Republic of Peru on October 3, 2023, in ICSID Case No. ARB/19/19, pursuant to 22 U.S.C. § 1650a and Article 54 of the ICSID Convention.

Background and Underlying Award

The underlying arbitration was conducted pursuant to the Free Trade Agreement between Peru and Singapore. The dispute arose from regulatory measures implemented by Peru's mining and energy regulator, OSINERGMIN, which unilaterally modified the rights of Plaintiffs' Peruvian subsidiary regarding the provision of secondary frequency regulation services. The ICSID tribunal found that Peru abruptly repudiated the legal framework it had devised, rendering its actions "seriously arbitrary" and constituting a breach of the fair and equitable treatment standard under Article 10.5 of the Treaty. Consequently, the tribunal awarded Plaintiffs $110.7 million in damages, alongside pre- and post-award interest and costs.

Relief Sought

In the present action, Plaintiffs invoke the court's subject matter jurisdiction under the Foreign Sovereign Immunities Act (FSIA), noting Peru's waiver of sovereign immunity by signing the ICSID Convention. Plaintiffs request that the court enter an order recognizing the ICSID award as binding and enforce the pecuniary obligations imposed therein as if it were a final judgment of a court of general jurisdiction of one of the several States. The Complaint notes that while a request for supplementation/rectification regarding the interest calculation remains pending before ICSID, such a request does not stay enforcement of the Award.

Procedural Posture

This document is a Decision on Annulment issued by an ICSID ad hoc Committee regarding an application for partial annulment filed by the Republic of Peru. Peru sought to annul portions of the Award rendered on October 3, 2023, in favor of Claimants IC Power Ltd. and Kenon Holdings Ltd., specifically challenging the Tribunal's finding that Peru breached the Minimum Standard of Treatment (MST) under Article 10.5 of the Singapore-Peru Free Trade Agreement (FTA) by issuing Resolution No. 141.

Principal Legal and Procedural Issues

Peru sought annulment under three grounds pursuant to ICSID Convention Article 52(1): (b) manifest excess of powers, (e) failure to state reasons, and (d) serious departure from a fundamental rule of procedure. Peru argued that the Tribunal failed to apply customary international law (CIL) by relying on arbitral jurisprudence rather than independently analyzing State practice and opinio juris to determine that "seriously arbitrary" conduct violates the MST. Peru further contended the Tribunal failed to state reasons for equating "egregious" conduct with "serious" conduct. Procedurally, Peru alleged a violation of its right to be heard and equality of arms due to the Tribunal's exclusion of belatedly submitted expert evidence (the Tabors Report and PSR Analysis) and its sua sponte reliance on Peru's pleadings from unrelated arbitrations without affording an opportunity to comment.

Committee's Analysis and Findings

The Committee systematically rejected all three grounds for annulment. Regarding the manifest excess of powers, the Committee held that the Tribunal correctly identified CIL as the applicable law. It found that the Tribunal's reliance on prior arbitral awards as subsidiary means to identify the content of CIL was methodologically sound and aligned with international judicial practice, including the International Law Commission's guidelines. The Committee emphasized that assessing the evidentiary value of those awards fell outside its annulment mandate.

On the failure to state reasons, the Committee applied the established MINE standard, concluding that the Tribunal's reasoning could be easily followed from Point A to Point B. The Committee noted that the Tribunal's use of the terms "serious" and "egregious" was merely terminological and reflected the same substantive threshold, thus requiring no further justification.

Addressing the procedural challenges, the Committee affirmed the Tribunal's broad discretion over the admissibility of evidence. It ruled that excluding late-filed expert reports did not violate fundamental procedural rules, as Peru had been afforded ample opportunity to present its case within the established procedural calendar. While the Committee noted that the Tribunal's reliance on Peru's external pleadings lacked "procedural courtesy," it concluded this reference was incidental and not outcome-determinative, thereby failing to constitute a serious departure from a fundamental rule of procedure.

Decision and Operative Directions

The Committee dismissed the Application for Annulment in its entirety. Exercising its discretion on costs, the Committee ordered Peru to bear all costs of the annulment proceeding, including the fees and expenses of the Committee and ICSID. Furthermore, finding that the annulment request was not frivolous but ultimately unsuccessful, the Committee ordered Peru to reimburse 50% of the Claimants' costs of legal representation.