Revista de Economia y Derecho (UPC), Vol. 20, 2008 Posted : 13 Dec 2008 Jean Pierre Espinoza Espinoza Law Offices P.A.
Abstract
On May 3, 2006, the Minister of Commerce of Peru published a letter on the official website stating that the Chapter X of the Trade Promotion Agreement (investment provisions) neither incorporates new legal mechanisms, nor undermines national sovereignty . The letter intended to refute information spread by the Peruvian media inferring that the agreement with the U.S. would allow American corporations to obtain huge compensations from the Peruvian government, without intervention of the Peruvian judicial system, if they feel that the Peruvian system do not favor them. The Minister argued that Article 63 of the Peruvian Constitution allows the parties to solve the controversies in international arbitral tribunals whenever they agree. Therefore, since the possibility of solving disputes in international forums has always existed, this provision of the agreement cannot be considered as an innovation. What the Ministry did not say is that the Trade Promotion Agreement (TPA) will allow the American investors (not only corporations but also investors) to avoid the national forum and sue the government in an international forum if the government does not comply with the minimum standard of treatment required. Under a similar provision in the North America Free Trade Agreement, Methanex (a Canadian company) sued the U.S. for $90 million, and on April 30, 2004, Mexico was compelled to compensate Metalclad (an American corporation) for $16.8 millions for a tantamount expropriation. Is the provision of the Treaty, which allows the foreigner investors to avoid national jurisdiction if any controversy with the nation arises, constitutional? Supposing that the agreement do not overlook Peruvian constitutional law or undermine their national sovereignty, is the mechanism of dispute resolutions between the investors and the government new for Peru? Finally, is Peru (a country that lacks of a well developed administrative system) really prepared to maintain a standard of treatment to American investors not below the standard established in the agreement?