A team of lawyers in Sidley’s office in Washington, D.C. recently obtained a significant victory on behalf of the firm’s longtime client, the Republic of Peru. The arbitration, involving one of Peru’s largest natural gas projects, was administered by the International Centre for Settlement of Investment Disputes. The tribunal ordered the claimants to pay more than US$64 million in damages, including costs and attorneys’ fees, to Sidley’s client, Perupetro, a state agency that authorizes the exploration and exploitation of natural gas.
A consortium of oil companies had brought the dispute before the tribunal because it disagreed with Perupetro’s interpretation of the contract between the consortium and Perupetro regarding royalties for the sale of gas extracted from Peru’s Camisea region. “The dispute concerned 10 cargoes of liquid natural gas or LNG from Peru,” said Jennifer Haworth McCandless, a partner in the D.C. office who provided day-to-day management of the matter. She added, “Perupetro received information that the delivery location of those shipments was not actually the final destination. According to our client’s interpretation of the contract, the royalties were to be calculated and paid based on the final destination of the LNG.”
The consortium, Haworth McCandless said, contended the opposite—that the royalties were to be calculated based on the shipment’s first destination, wherever the LNG was initially offloaded, regardless of whether it went on to anywhere else. “They had paid based on a different, lower rate than what Perupetro thought it was entitled,” she added.
Sidley argued in a counterclaim that the consortium’s interpretation deprived Perupetro of tens of millions of dollars in royalties. The tribunal unanimously agreed with Perupetro’s interpretation, awarding our client more than US$64 million in damages. That sum was the difference Perupetro would have been paid if the consortium had interpreted the contract the way Perupetro did, plus the added variables of 6.25 percent interest, attorneys’ legal fees and costs, and arbitration costs.
It was a rare result, said Haworth McCandless. “It is unusual that a tribunal would award a party 100 percent of what they sought. It was a clean sweep for Perupetro. Tribunals are typically reluctant to rule 100 percent in one party’s favor. It is by no means a given,” she said.
Stanimir Alexandrov, co-leader of the firm’s Global Arbitration, Trade and Advocacy practice, led the team, which also included partner Andrew Shoyer, co-leader of Sidley’s International Trade team, who participated in the hearing, and partner Marinn Carlson, who contributed to the briefs. Associate Courtney Hikawa and foreign lawyer María Carolina Durán, were key members of the team. The entire team was assisted by Gavin Cunningham, Trey Hilberg, and Anastassiya Chechel (all of whom are now alumni of the firm) and Samantha Taylor.