Portal de Transparencia Económica

Gramercy sends amendment to notice of arbitration as procedure for agrarian reform bonds advances

Lima, 26 de julio de 2016.- The Ministry of Economy and Finance advises about the current status of the arbitral proceeding initiated by Gramercy Funds Management LLC and Gramercy Peru Holdings LLC further to the transparency provisions of the Peru-United States Trade Promotion Agreement (TPA).

“Amended Notice of Arbitration”
Within the framework of the arbitral proceeding initiated by Gramercy Funds Management LLC and Gramercy Peru Holdings LLC pursuant to the Peru-United States Trade Promotion Agreement (TPA), the Peruvian State informs that, on 18 July, Gramercy sent a new document titled “Amended Notice of Arbitration,” attempting to re-write elements of its claim against the Peruvian State.

This is a new effort by Gramercy against the Peruvian State, after the Republic of Peru presented its preliminary response to the “Notice of Arbitration” on 5 July 2016, in which it clearly showed that this proceeding suffers from serious defects regarding competence and admissibility, and violations of fundamental Treaty requirements, including as to the waiver of simultaneous participation by Gramercy in local litigation while it is bringing this proceeding at the international level pursuant to the Treaty.

Likewise, Gramercy reacts after Peru obtained a favorable ruling in the international arbitration related to the case of La Oroya pursuant to the Trade Promotion Agreement between Peru and the United States initiated by The Renco Group, Inc. v. The Republic of Peru. This ruling rejected Renco’s argument regarding the necessary waiver as to its bringing claims against the Peruvian State simultaneously in an international forum and the national judicial system, deciding that “the defective waiver goes to the heart of the Tribunal’s jurisdiction.”

Gramercy previously sought to amend its "Notice of Intent" on 15 April 2016, submitting a new notice (dated 1 February) and sought to add a new claim. Gramercy later insisted on filing its "Notice of Arbitration" on 2 June, immediately prior to the Peruvian run-off presidential elections (which took place on 5 June). Now Gramercy seeks to replace a document again. In its claim, Gramercy asks that Peru disregard current law regarding the payment of legitimate holders of agrarian reform bonds, and seeks preferential treatment.

Gramercy has not demonstrated that it is a legitimate investor that made legal investments in Peru, with no new evidence regarding its alleged acquisition or rate of return sought. Facing this, Peru maintains its observations with respect to the TPA requirements and has reiterated to Gramercy that it reserves all its rights.

Arbitrators in the Case
Also in its “Amended Notice,” Gramercy states that it re-appoints Stephen L. Drymer, a Canadian national who is a partner of with Woods LLP in Montreal, as arbitrator following the resignation of the arbitrator it previously had appointed.

For its part, Peru has proceeded to appoint as arbitrator Professor Brigitte Stern, a French national who is fluent in Spanish and serves as professor at the Université Panthéon-Sorbonne in Paris. The appointment of the president of the tribunal is pending.

Bondholder Process
Peru continues to advance the implementation of the process to pay legitimate holders of the agrarian reform bonds, in accordance with the mandates of the Constitutional Tribunal and the legal framework approved by the Peruvian State. In this way, it will continue to take the steps necessary for the benefit of all participating bondholders. To this end, it is carrying out a rigorous process to authenticate the bonds.

The Gramercy case, on the other hand, is now subject to an international dispute mechanism, a claim that is focused on bonds in Gramercy's control and does not include Peruvian bondholders. Since an international procedure has been started, the negative media campaign that begun against Peru should stop and applicable procedures should be followed.

Peru will comment further in the course of the procedure regarding its ongoing concerns regarding Gramercy's lack of compliance with the waiver requirement and other requirements under the TPA. Peru maintains its call for respect for the Treaty procedure and will continue to pursue respectful consultations regarding the international dispute.

Lima, July 26, 2016