Arbitration of Government Contracts in Latin   America: Peru, the Example to Follow?               Franz Kundmüller       ...
• Global Environment   – Globalization´s Density• Perú in Numbers• Dispute Settlement   – Evolution of the DS tools• Peruv...
Global EnvironmentGlobalization´s Density
Global Environment• Since 1990, the exchange of goods and services grew to  45% of the global GDP• FDI has grown 2000% sin...
Global Environment                          Trade Agreements 2002 (IDB)                                                   ...
Global - Legal Environment                      Multilaterales Treaties 1995              3731 Multilateral Treaties•Econo...
Devlin (2002), Integration and Trade Agreements;Pacífic Basin,“spaghetti bowl”                                            ...
Global FDI inflows (UNCTAD)
Investment Arbitration in the World
Perú
Perú in numbers• 3,080 km Coastline, 5 neighbour countries• 200 miles of Territorial Sea• 1´285,215 km2 total area, 3rd bi...
Perú 1981 – 2010 (UNCTAD)Perú                 1981 - 1990      1991 - 2000      2001 - 2010Population           21.76 mill...
Happiness Index Erasmus University Rotterdam    http://worlddatabaseofhappiness.eur.nl Assessed at: 03-Feb-2008•   Denmark...
Peruvian Statistics Institute; March 2012       (Instituto Peruano de Estadísticas e Informática)• Urban Poverty in Perú u...
Peruvian infrastructure deficit 2008National Competitiveness Council (Consejo Nacional de                  la Competitivid...
Three Goals and Competitiveness Agenda• Peruvian Minister of Economy (April 2012):   – Perú should reach the No. 1 positio...
Dispute SettlementEvolution since the 90´s
The “big picture” during the 90´s             Adr´s
Confidence and Judiciary (IDB; 1997)•   Japan 68%               •   Chile 27%•   Germany 67%             •   Colombia 26%•...
GDP and     Confidence                      GDP per capita                            •Japan 19,390 US$Less GDP per capita...
Judiciary, duration of the judicial process•   Argentina, over 2 years in the 45% of cases•   Chile, 2 years and 9 months•...
New Legal Framework for Arbitration, following sources               (UNCITRAL, ICSID, Conv. NY.)Bolivia, 1997            ...
Peruvian legal framework (domestic and             international)             Arbitration
Peruvian Constitution 1993• Art. 139: Arbitration, “independent” Jurisdiction such as  the Military Jurisdiction (?!); ori...
Peruvian Arbitration Law: State• Art. 4   – Definition of the concept of State: Includes every public     organization and...
International Treaties and “stability contracts”  Investment Arbitration (our own “Spaghetti Bowl”)• 10 Free Trade Agreeme...
Arbitration and legal framework• NY and Panamá Convention for the recognition and  enforcement of arbitral awards• Washing...
Arbitration Agreement in Procurement Contracts• Mandatory clauses in the contract   – That could be triggered by the State...
Arbitration and State
State Immunity– European Convention on State Immunity 1972– US Foreign Immunities Act 1976– UK State Immunity Act 1978– UN...
Arbitration and State• Domestic Level: Democratization of the dispute settlement  needs derived from the contract   – Grav...
Study: Arbitration in Procurement• 1,400 Cases• 1998 – 1st quarter of 2010• Total disputed amount:   – Aprox. 1,2 BiUS$• T...
ConclusionsThank you for your attention!
Arbitration of Government Contracts in Latin America: Peru, the Example to Follow?
Arbitration of Government Contracts in Latin America: Peru, the Example to Follow?
Arbitration of Government Contracts in Latin America: Peru, the Example to Follow?
Arbitration of Government Contracts in Latin America: Peru, the Example to Follow?
Arbitration of Government Contracts in Latin America: Peru, the Example to Follow?
Arbitration of Government Contracts in Latin America: Peru, the Example to Follow?
Arbitration of Government Contracts in Latin America: Peru, the Example to Follow?
Arbitration of Government Contracts in Latin America: Peru, the Example to Follow?
Arbitration of Government Contracts in Latin America: Peru, the Example to Follow?
Arbitration of Government Contracts in Latin America: Peru, the Example to Follow?
Arbitration of Government Contracts in Latin America: Peru, the Example to Follow?
Arbitration of Government Contracts in Latin America: Peru, the Example to Follow?
Arbitration of Government Contracts in Latin America: Peru, the Example to Follow?
Arbitration of Government Contracts in Latin America: Peru, the Example to Follow?
Arbitration of Government Contracts in Latin America: Peru, the Example to Follow?
Arbitration of Government Contracts in Latin America: Peru, the Example to Follow?
Arbitration of Government Contracts in Latin America: Peru, the Example to Follow?
Arbitration of Government Contracts in Latin America: Peru, the Example to Follow?
Arbitration of Government Contracts in Latin America: Peru, the Example to Follow?
Arbitration of Government Contracts in Latin America: Peru, the Example to Follow?
Arbitration of Government Contracts in Latin America: Peru, the Example to Follow?
Arbitration of Government Contracts in Latin America: Peru, the Example to Follow?
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Arbitration of Government Contracts in Latin America: Peru, the Example to Follow?

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  • South- South / Blocs (Mercosur) South-South / Hub & Spoke (Mexico/Chile) North-South / Bloc (NAFTA/FTAA) North-South / Hub & Spoke (EU or US or CA bilaterals)
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  • Arbitration of Government Contracts in Latin America: Peru, the Example to Follow?

    1. 1. Arbitration of Government Contracts in Latin America: Peru, the Example to Follow? Franz Kundmüller fkundmuller@limaarbitration.net www.limaarbitration.net
    2. 2. • Global Environment – Globalization´s Density• Perú in Numbers• Dispute Settlement – Evolution of the DS tools• Peruvian Legal Framework – Access of the State to Arbitration• State Arbitration Experience – Procurement, Graphics – Best Practices in Investment Disputes
    3. 3. Global EnvironmentGlobalization´s Density
    4. 4. Global Environment• Since 1990, the exchange of goods and services grew to 45% of the global GDP• FDI has grown 2000% since the eighties• 100 biggest global organizations; 49 are States and 51 are transnational companies• Increasing number of States• 50,000 international treaties registered in UN• Global crisis CASSESE, Sabino (2002) El Espacio jurídico Global; Revista de Administración Pública No. 157, Enero-Abril 2002
    5. 5. Global Environment Trade Agreements 2002 (IDB) 400 Trade agreements Economic cooperation agreements 300 200 100 01967 1972 1977 1982 1987 1992 1997 2002
    6. 6. Global - Legal Environment Multilaterales Treaties 1995 3731 Multilateral Treaties•Economic issues, 1622, 43%•Politics and Diplomacy, 838, 22%•Human Rights and Hum. Law, 311, 9%•Military, 162, 4%•Environment, 319, 8%•Others, 479, 14%KING, ALLEN, DIRLING (2003); International Law and Globalization: Allies, Antagonists orIrrelevance?; Syracuse Journal of International Law and Commerce, Winter 2003 .
    7. 7. Devlin (2002), Integration and Trade Agreements;Pacífic Basin,“spaghetti bowl” FTAA PR China CACM Hong Kong Brunei Costa Panama Taiwan Rica Cambodia El Salvador Russia Canada Guatemala Uruguay Indonesia Honduras Paraguay Laos Argentina Brazil Nicaragua Japan Mercosur Malaysia USA Myanmar Philippines Mexico Bolivia ASEAN Colombia Singapore South Korea Chile Venezuela Ecuador Bahamas Thailand Andean Dominican APEC Vietnam New Zealand Community Republic Intra-LAC APEC Peru CARICOM in force Australia Dominica Trinidad & Tobago Intra-Asia- Suriname Grenada Barbados Pacific in force Jamaica St. Vincent & Grenadines Intra-LAC Papua New Guinea Guyana Antigua & Barbuda Under Negotiation St. Kitts & Nevis Belize Trans-Pacific Haiti St. Lucia Under Negotiation Negotiations under strong consideration Source: Ando, Estevadeordal, Miller (2002)
    8. 8. Global FDI inflows (UNCTAD)
    9. 9. Investment Arbitration in the World
    10. 10. Perú
    11. 11. Perú in numbers• 3,080 km Coastline, 5 neighbour countries• 200 miles of Territorial Sea• 1´285,215 km2 total area, 3rd biggest country after Brasil and Argentina in the region• 12 cities with over 200 thousand habitants• Coast Stripe (Deserts and Valleys); 87hab x km2: 11%; Mountains (Sierra); 22hab x km2: 30%;• Amazon Basin (Jungle); 4hab x km2: 59%• High biodiversity, 20% of the total of birds; 40 to 50,000 types of plants• Over 84 “micro climates” (114 in the world), over 75 “eco systems” within a single country
    12. 12. Perú 1981 – 2010 (UNCTAD)Perú 1981 - 1990 1991 - 2000 2001 - 2010Population 21.76 millions 25.66 millions 29.54 millionsPer Cápita GDP US$1,354.- US$2,078.- US$9,200.-% GDP Growth - 0.9% 4.45% 8.9%FDI inflows, millionsof US$ 29 3,106 9,200% of the GDP 19.3% 20.16% 29.1%Exp.% of the GDP 15.76% 16% 28.05%Imp.% of the GDP 13.83% 18.16% 20%
    13. 13. Happiness Index Erasmus University Rotterdam http://worlddatabaseofhappiness.eur.nl Assessed at: 03-Feb-2008• Denmark 8.2 • Chile 6.7• Colombia 8.1 • Uruguay 6.7• Mexico 7.6 • France 6.5• USA 7.4 • Greece 6.4• Germany 7.2 • China 6.3• Britain 7.1• • India 6.2 Italy 6.9• Spain 6.9 • Japan 6.2• Argentina 6.8 • Peru 6.0• Brasil 6.8 • Bolivia 5.8• Venezuela 6.8 • Russia 4.4
    14. 14. Peruvian Statistics Institute; March 2012 (Instituto Peruano de Estadísticas e Informática)• Urban Poverty in Perú until 2010 20% of the population• Rural Poverty in Perú until 2010 61% of the population• Poverty reduction 2004: 58.5% 2007: 42.4% 2010: 30.8% 2005: 55.6% 2008: 37.3% Extreme Poverty: 2006: 49.1% 2009: 33.5% 7.6%• Infrastructure Deficit: 30 to 40 BillionUS$
    15. 15. Peruvian infrastructure deficit 2008National Competitiveness Council (Consejo Nacional de la Competitividad) Sector Deficit US$ millions Transport 13,961 Water and Sewage 6,306 Electric Power 8,329 Gas 3,721 Telecom 5,446 Total 37,760
    16. 16. Three Goals and Competitiveness Agenda• Peruvian Minister of Economy (April 2012): – Perú should reach the No. 1 position until 2014 • Investment; Perú is No. 2 in the Region • Doing Business; Perú is No. 2 in the Region • Human Development; Perú is No. 16 in a group of 24 countries – Perú has a competitiveness Agenda in 7 issues (STI, Entrepreneurship and Edu, Internationalization, Infrastructure, ICT, Environment, Doing B) – Competitiveness slightly above the average of the region
    17. 17. Dispute SettlementEvolution since the 90´s
    18. 18. The “big picture” during the 90´s Adr´s
    19. 19. Confidence and Judiciary (IDB; 1997)• Japan 68% • Chile 27%• Germany 67% • Colombia 26%• UK 66% • El Salvador 25%• France 55% • Mexico 22%• Uruguay 53% • Venezuela 22%• USA 51% • Bolivia 21%• Italy 43% • Perú 21%• Spain 41% • Ecuador 16%
    20. 20. GDP and Confidence GDP per capita •Japan 19,390 US$Less GDP per capita means •Germany 19,770 US$less confidence in theJudiciary? •France 18,430 US$ •Uruguay 6,670 US$International cooperation •Chile 7,060 US$for the reform of theJudiciary Systems during •Colombia 5,460 US$the nineties •Perú 3,110 US$ •Ecuador 4,140US$
    21. 21. Judiciary, duration of the judicial process• Argentina, over 2 years in the 45% of cases• Chile, 2 years and 9 months• Colombia, 2 years and 9 months• Costa Rica, 10 months• Paraguay, over 2 years• Perú, 4 years and 6 months• Uruguay, 8 months• Peru procurement disputes: over 4 years, legal limitations for State-arbitration
    22. 22. New Legal Framework for Arbitration, following sources (UNCITRAL, ICSID, Conv. NY.)Bolivia, 1997 Guatemala, 1995Brasil, 1996 Honduras, 2000Colombia, 1998 México, 1993Costa Rica, 1997 Panamá, 2002Chile, internacional 2004 Paraguay, 2000Ecuador, 1997 Perú 2008El Salvador, 2002 Venezuela, 1998
    23. 23. Peruvian legal framework (domestic and international) Arbitration
    24. 24. Peruvian Constitution 1993• Art. 139: Arbitration, “independent” Jurisdiction such as the Military Jurisdiction (?!); origin: 1979• Art. 63 – … the (peruvian) State and the peruvian public entities can submit to national or international arbitration their disputes concerning contractual relations, through the form established by law• Art. 62 – … the conflicts deirved from contractual relations can only be settled through arbitration or judicial means, according to the rules of protection of the contract or those established by law. Through “stability contracts”, the peruvian state can establish contractual warranties and security. These contracts can not be modified by new laws
    25. 25. Peruvian Arbitration Law: State• Art. 4 – Definition of the concept of State: Includes every public organization and government level (central, regional and local) – Disputes among public organizations can be arbitrated too – The state can arbitrate disputes derived from contracts with nationals or foreigners, domiciliated or non domiciliated within peruvian territory – Disputes derived from financial activities could be arbitrated too• 14th Complementary Rule; recognition of awards to be enforced according with ICSID rules
    26. 26. International Treaties and “stability contracts” Investment Arbitration (our own “Spaghetti Bowl”)• 10 Free Trade Agreements (USA, China, Chile, Japan …)• 3 Economic Complementation Agreements (Mexico, Cuba and Mercosur)• 36 Bilateral Investment Treaties 53 Investment Agreements• 769 Tributary Stability Agreements
    27. 27. Arbitration and legal framework• NY and Panamá Convention for the recognition and enforcement of arbitral awards• Washington (ICSID) Convention• Peruvian Arbitration Law 2008, harmonized with international standards and global environment• Aprox. 60 sectorial laws, decrees and rules, which include the Peruvian Procurement Law• Procurement: Settlement of disputes derived from the execution phase of the contract; Peruvian Procurement Law: DL 1071
    28. 28. Arbitration Agreement in Procurement Contracts• Mandatory clauses in the contract – That could be triggered by the State • Bails • Rescissory clauses – That could be triggered by the State and the Private Contracting Party • Conciliation and Arbitration• The obligation to include these clauses is established in the Peruvian Procurement Law (Development of the Art. 138 of the Constitution).
    29. 29. Arbitration and State
    30. 30. State Immunity– European Convention on State Immunity 1972– US Foreign Immunities Act 1976– UK State Immunity Act 1978– UN Convention on State Immunity, 2004; Art. 1 y 2 (signed by the PRCH) • Mercantile transactions excluded – Sell and Buy of goods and services – Financing activities and warranties – Any other mercantile activity, including works contracts and others– From Structuralism to Functionalism
    31. 31. Arbitration and State• Domestic Level: Democratization of the dispute settlement needs derived from the contract – Gravitational Force of State Sovreignty – Weak institutions and poor annual budget execution – State: “Complex” decisionmaking • Interests, sectors involved, civil society, etc. – Tendence to “evasive practices” due to auto-control and audit activities – Privilege in the control of information – Political risks (electoral years vs. “normal” years) – Delays in payment (Budgetary Laws and Rules)
    32. 32. Study: Arbitration in Procurement• 1,400 Cases• 1998 – 1st quarter of 2010• Total disputed amount: – Aprox. 1,2 BiUS$• Total Contracts: – Aprox. 13 BiUS$
    33. 33. ConclusionsThank you for your attention!

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