Investor-State Dispute Prevention Institutions in Latin America – The Case of Peru

Abstract

For Peru, the introduction of dispute prevention mechanisms was a consequence of the country's increased openness to foreign investment. Following a severe economic crisis, the government launched several pro-investment reforms in the 1990s. These included signing bilateral investment treaties and free trade agreements with investment protection provisions, as well as investment contracts with foreign investors. The resulting flow of foreign direct investment (FDI) into the country, in turn, increased the likelihood of the state facing investor-state dispute settlement (ISDS) cases. As Peru began to face investment claims in the early 2000s, the Coordination and Response System for International Investment Disputes, also known as “SICRECI” for its acronym in Spanish, was established to manage the practical challenges of coordinating the state's defense. In practice, however, SICRECI's mandate has expanded progressively beyond coordinating ISDS defense, as the institution has undertaken several actions to prevent disputes and otherwise adapted to the specifics of Peru's pro-investment policy. SICRECI became one of the first models of dispute prevention mechanisms, with international organizations showcasing it as an example of how states, in particular developing countries, could address and mitigate a growing number of concerns over the impact of investment arbitration.1