PCA Case No. 2020-11 IN THE MATTER OF AN ARBITRATION UNDER THE UNITED STATES – PERU TRADE PROMOTION AGREEMENT, ENTERED INTO FORCE ON FEBRUARY 1, 2009 - and - THE ARBITRATION RULES OF THE UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW, AS REVISED IN 2013 (the “UNCITRAL Rules”) - between - BACILIO AMORRORTU (USA) (the “Claimant”) - and – THE REPUBLIC OF PERU (the “Respondent”, and together with the Claimant, the “Parties”) __________________________________________________________ CLAIMANT'S MEMORIAL __________________________________________________________ AKERMAN, LLP Three Brickell City Centre 98 Southeast Seventh Street, Suite 1100 Miami, Florida 33131-1714 520 Madison Avenue, 20th Floor New York, NY 10022 September 11, 2020 TABLE OF CONTENTS I. INTRODUCTION ................................................................................. 1 II. FACTS RELEVANT TO AMORRORTU AND HIS INVESTMENT IN PERU . 11 A. Amorrortu's Early Life In Peru ...................................................... 11 1) Amorrortu's Family Settled In Peru Over A Century Ago ............. 11 2) Amorrortu's Education And Early Professional Experience ........... 12 B. Amorrortu's Major Experience in the Petroleum Industry .................. 12 1) Amorrortu's Initial Investment In The Peruvian Oil Industry ....... 12 2) Amorrortu Was Awarded The Operation Of Block III In The 1990s ............................................................................... 15 C. Political Persecution Against Amorrortu .......................................... 16 D. Amorrortu's Exile From Peru And Asylum In The United States .......... 18 1) The U.S. Department Of Justice Grants Asylum To Amorrortu ..... 18 2) Lawsuits In The United States For Human Rights Violations ........ 18 E. Amorrortu's Investment In Peru As A U.S. Citizen ........................... 19 1) Investment In Baspetrol ....................................................... 19 2) Baspetrol Undertakes Several Projects Prior To Presenting A Proposal for Blocks III & IV ................................................... 22 3) Baspetrol Commences Direct Negotiations With PeruPetro.......... 24 4) Baspetrol's Direct Negotiation Proposal For Blocks III & IV ......... 27 5) PeruPetro Violates Amorrortu's Legitimate Right To Direct Negotiation For Blocks III & IV .............................................. 29 III. GRAÑA Y MONTERO'S CORRUPTION SCHEME ................................... 32 A. Graña y Montero ........................................................................ 32 B. The Corruption Scheme .............................................................. 35 1) Graña y Montero Is A Company Owned By A Family That Is Politically, Socially, And Economically Well-Connected And Has Control Over Information Dissemination ................................. 37 2) Graña y Montero Paid Covert Funds To Electoral Campaigns ....... 37 3) Graña y Montero Contributed Millions Of Dollars In Bribes To Corrupt Public Officials To Win Major Public Projects ................. 41 4) Graña y Montero Has Acknowledged Its Responsibility In The Corruption Scheme Of Various Public Projects In Which It Acted Either Alone Or As Part Of The Consortium With Odebrecht .......................................................................... 42 i a) The Lima Metro Project .................................................. 43 i. The Corruption Scheme in the Lima Metro Project ....... 44 ii. Payment of US $9,000,000 in bribes ......................... 47 b) The IIRSA South Project ................................................ 47 i. The Corruption Scheme in the IIRSA South Project ...... 48 ii. Graña y Montero as Stakeholder in the IIRSA South Project ................................................................. 49 c) The Construction Club ................................................... 50 i. The Corruption Scheme in the Construction Cartel ....... 50 d) The Southern Gas Pipeline Project ................................... 51 C. The Corruption Scheme To Award The Contracts To Operate Blocks III & IV To Graña y Montero ........................................................ 54 1) Peru Abruptly And Arbitrarily Decided To Terminate The Direct Negotiation Process Initiated By Amorrortu ............................. 55 2) Evidence Of Corruption In The 2014 Block III & IV Tender ......... 58 a) The Bidding Rules ......................................................... 59 b) The Bidding Rules Were Unlawfully Modified At Least Twice, While The Selection Process Was Ongoing ...................... 59 c) Graña y Montero was illegally favored by being allowed to support its economic indicators with another Peruvian company ............................................................................ 62 d) Grana y Montero sought and obtained the removal of PetroPeru from the operation of Blocks III and IV ..................... 63 IV. THE TRIBUNAL HAS JURISDICTION TO DECIDE THIS DISPUTE ........ 65 A. Amorrortu Is An Investor Of The United States Of America ............... 65 B. Amorrortu Has A Protected Investment Under The USPTPA ............... 68 1) "Covered Investment" Is Broadly Defined In The USPTPA .......... 68 2) Amorrortu Invested In An "Enterprise" That Two Years Later Acquired The Rights To Directly Negotiate A Contract To Operate Blocks III & IV ........................................................ 70 a) Amorrortu's Investment: Baspetrol ................................. 71 b) Amorrortu's Investment Right: Acquired Substantive Rights In Direct Negotiation .................................................. 72 i. The First Phase: Determination Of Availability Of Subject Block For Direct Negotiation ......................... 74 ii ii. Second Phase: Qualification Of Oil Company, Evaluation Of Proposal, And Commencement Of Community Participation Process .............................. 76 iii. Third Phase: Invitation To Interested Companies ..... 79 3) The Definition Of Covered Investment In The USPTPA Includes The Right To Direct Negotiation For Blocks III & IV Acquired By Amorrortu Through Baspetrol ........................................... 86 a) Lemire v. Ukraine ......................................................... 88 b) Bosca v. Lithuania ........................................................ 91 c) EDF v. Romania ............................................................ 93 C. Amorrortu Timely Commenced This Arbitration Within The Statute Of Limitations Period And Complied With All The USPTPA Requirements ............................................................................ 95 V. PERU HAS BREACHED ITS OBLIGATION UNDER THE USPTPA ........... 97 A. PeruPetro Awarded Blocks III & IV As Part Of Graña y Montero’s Corrupt Scheme ........................................................................ 97 1) Applicable Standard To Prove Corruption ................................. 98 2) The Evidence Overwhelmingly Proves Corruption ..................... 100 B. PERU IS RESPONSIBLE FOR THE CORRUPTION SCHEME .................. 104 C. PeruPetro’s Corruption Violated Peru’s Fair And Equitable Standard Obligations .............................................................................. 115 1) Fair and Equitable Treatment: Violation Of Customary Principles Of International Law ............................................. 116 2) Fair And Equitable Treatment: Violation Of Legitimate Expectations ..................................................................... 123 3) Fair and Equitable Treatment: Violation Based On Arbitrary And Discriminatory Conduct ................................................. 130 4) Fair and Equitable Treatment: Violation Of Transparency ......... 132 VI. PERU'S CONDUCT CAUSED SIGNIFICANT LOSSES TO AMORRORTU'S INVESTMENT ......................................................... 135 A. There is a Causal Link Between Peru's Breaches and Amorrortu's Loss ....................................................................................... 136 B. Peru's Actions Are The Proximate And Foreseeable Cause Of Amorrortu's Loss ...................................................................... 139 C. Peru Cannot Argue That The Amount Of Damages Caused By Its Breach Is Uncertain ................................................................... 142 iii VII. AMORRORTU IS ENTITLED TO FULL REPARATION .......................... 144 A. Amorrortu Is Entitled To "Full Reparation" Wiping Out The Consequence Of Peru's Breaches To The USPTPA ........................... 144 B. The Appropriate Date Of Valuation Is The Date PeruPetro Announced The International Public Bidding Process ....................... 148 C. An Income and Market-Based Valuation Methodology Is Appropriate Here ...................................................................... 150 D. Peru Must Compensate Amorrortu USD 96.9 Million ........................ 153 1) Ex-Ante Valuation .............................................................. 153 2) Ex-Post Valuation ............................................................... 155 E. Peru Must Pay Amorrortu's Interest ............................................. 157 F. Peru Must Compensate For All Costs Incurred In This Arbitration ...... 157 G. Peru May Not Deduct Additional Taxes From Award ........................ 158 H. Total Damages Due To Amorrortu ................................................ 158 I. PRAYER FOR RELIEF .................................................................. 159 iv GLOSSARY OF SELECTED TERMS 1P Reserve Multiple Median