Title

AGREEMENT BETWEEN THE KINGDOM OF SPAIN AND THE REPUBLIC OF PERU ON THE RECIPROCAL PROMOTION AND

PROTECTION OF INVESTMENTS

Preamble

The Kingdom of Spain and the Republic of Peru, hereinafter referred to as the contracting parties.

Desiring to intensify economic cooperation in the mutual benefit of both countries.

Aiming to create favourable conditions for investments by investors of either Contracting Party in the territory of the other party; and

Recognizing that the promotion and protection of investments under this Agreement stimulates the initiativas in this field,

Have agreed as follows:

Body

Article 1. Definitions

For the purposes of this Agreement: 1. The term "investor" means:

(a) Natural persons who, in the case of the Kingdom of Spain, are residents of Spain in accordance with Spanish law and, in the case of the Republic of Peru, are nationals of Peru in accordance with its legislation.

(b) Legal persons, including companies, associations of companies, firms and other organizations constituted or, in any case, duly organized under the law of a Contracting Party and effectively controlled in the territory of the same Contracting Party.

2. The term "investment" means any kind of asset, such as property and rights of every kind, acquired in accordance with the law of the host country of the invest- ment and, in particular, through not exclusively, the following:

- Shares and other forms of participation in companies;

- Rights derived from any kind of contribution made with the intention of creating economic value; expressly including any loans granted for that purpose, whether or not capitalized;

- Movable and immovable property, and such other property rights as mortages, pledges, usufructs and similar rights;

- All intellectual property rights, expressly including patents for inventions, trade marks, manufacturing licences, technological know-how and goodwill;

- Rights to engage in economic and commercial activity conferred by law or under a contract, especially concessions to search for, cultivate, extract or exploit natural resources.

3. The term "returns on an investment" refers to the amounts yielded by an investment, as defined by the preceding paragraph, and includes in particular, though not exclusively, profits, dividends, royalties and interest.

4. The term "territory" means the land territory and the adjacent maritime areas over which the Contracting Parties exercise sovereignty and jurisdiction in accordance with their own legislation and international law.

Article 2. Promotion and Acceptance

1. Each Contracting Party shall, to the extent possible, promote investments made in its territory by investors of the other Contracting Party and shall accept such investments in accordance with its laws.

2. This Agreement shall also apply to investments made before its entry into force by investors of one Contracting Party in the territory of the other Contracting Party in accordance with the laws of the latter Party.

Article 3. Protection

1. Each Contracting Party shall protect within its territory the investments made in accordance with its laws by investors of the other Contracting Party and shall not obstruct by unreasonable or discriminatory measures the management, maintenance, development, use, enjoyment, extension, sale or, where appropriate, liquidation of such investments.

2. Each Contracting Party shall grant the necessary permits in connection with such investments and, within the framework of its laws, shall permit the exe- cution of contracts relating to employment, manufacturing licences and technical, commercial, financial and administrative assistance.

3. Each Contracting Party shall also, grant, as required, the necessary permits in connection with the activities of consultants or experts engaged by investors of the other Contracting Party.

Article 4. Treatment

1. Each Contracting Party shall guarantee within its territory fair and equita- ble treatment for the investments made by investors of the other Contracting Party.

2. Such treatment shall be no less favourable than that accorded by each Con- tracting Party to investments made within its territory by investors of a third State which enjoys most-favoured-nation status.

3. The treatment shall not, however, extend to the privileges which a Con- tracting Party may grant to the investors of a third State by virtue of its current or future association with or participation in a free trade area, customs union or com- mon market or under any other similar international arrangement.

4. The treatment accorded under this article shall not extend to tax deductions and exemptions or other similar privileges granted by either Contracting Party to investors of a third country under an agreement for the avoidance of double taxation or any other taxation agreement.

5. In addition to applying the provisions of paragraph 2 of this article, each Contracting Party shall, in conformity with its national law, accord to the invest- ments of investors of the other Contracting Party treatment no less favourable than that accorded to its own investors.

6. Any conditions more favourable than those contained in this Agreement which one Contracting Party has agreed to extend to investors of the other Contracting Party shall not be affected by this Agreement.

Article 5. Nationalization and Expropriation

Nationalization, expropriation or any other measure having similar charac- teristics or effects that may be applied by the authorities of one Contracting Party against the investments in its territory of investors of the other Contracting Party must be exclusively for reasons of public interest, in accordance with the law, and shall in no case be discriminatory. The Contracting Party adopting such measure shall pay to the investor or his or its legal beneficiary, without undue delay, appro- priate compensation in convertible and freely transferable currency.

Article 6. Compensation for Losses

Investors of one Contracting Party whose investments or returns on invest- ments in the territory of the other Contracting Party suffer losses owing to war, other armed conflicts, a state of national emergency, rebellion, mutiny or other similar circumstance shall be accorded, by way of restitution, indemnification, compensa- tion or other settlement, treatment no less favourable than that which the latter Contracting Party accords to its own investors or to investors of any third State. Any payment made under this article shall be prompt, adequate, effective and freely transferable. 

Article 7. Transfers

1. Each Contracting Party shall guarantee to investors of the other Con- tracting Party in respect of investments made in its territory the unrestricted transfer of returns on those investments and of other related payments, including in partic- ular, though not exclusively, the following:

- Returns on an investment as defined in article 1;

- Indemnities as provided for in article 5;

- Compensation as provided for in article 6;

- Proceeds from the sale or liquidation, in full or in part, of an investment;

- Amounts necessary for the reimbursement of loans and the payment of interest thereon;

- Amounts necessary for the purchase of raw or other materials, semi-manufac- tured or finished products or for the replacement of capital goods, or any other amount necessary for the maintenance and development of an investment;

- Salaries, wages and other remuneration received by nationals of one Contracting Party who have obtained in the other Contracting Party the necessary work permits in connection with an investment.

2. The host Contracting Party of the investment shall enable an investor of the other Contracting Party, or the company in which the investor is invested, to have access to the foreign exchange market on a non-discriminatory basis in order to purchase the necessary currency to make the transfers referred to in this article.

3. Transfers shall be made in freely convertible currencies once the investor has complied with the fiscal obligations laid down under the laws in force in the host Contracting Party of the investment.

4. The Contracting Parties undertake to facilitate the procedures necessary for such transfers to be made without excessive delay or restrictions, in accordance with the practices of international financial centres. In particular, no more than two months shall elapse between the date on which the investor duly submits the neces- sary applications for making the transfer and the date on which the transfer actually takes place. Accordingly, each Contracting Party undertakes to carry out the neces-

sary formalities both for the purchase of foreign currency and for its effective trans- fer abroad before the end of the above-mentioned period.

5. The Contracting Parties shall accord to the transfers referred to in this article treatment no less favourable than that accorded to transfer made by investors of any third State.

Article 8. Principle of Subrogation

1. Where one Contracting Party has provided a financial guarantee against non-commercial risks in respect of an investment made by one of its investors in the territory of the other Contracting Party, the latter Contracting Party, shall, once the former Contracting Party had made a payment in connection with the financial guarantee, recognize the transfer to the former Contracting Party of the economic rights of the investor. Such transfer shall enable the former Contracting Party to be the direct beneficiary of any payments in compensation for which the investor might be entitled.

2. Subrogation shall apply in respect of rights of ownership, use or enjoyment or any other property right only if the relevant authorizations required under the laws in force in the Contracting Party in which the investment was made have first been obtained.

Article 9. Disputes between  a Contracting Party and Investors of the other Contracting Party

1. Any investment-related dispute which may arise between a Contracting Party and an investor of the other Contracting Party with respect to issues regulated by this Agreement shall be notified in writing by the investor, together with a detailed report, to the host Contracting Party of the investment. The parties to the dispute shall, as far as possible, endeavour to settle such differences amicably.

2. If the dispute cannot be thus settled within six months from the date of the written notification mentioned in paragraph 1, it shall be submitted, at the choice of the investor, to:

- The competent courts of the Contracting Party in whose territory the investment was made;

- An ad hoc arbitral tribunal established under the Arbitration Rules of the United Nations Commission on International Trade Law; 1 

- The International Centre for the Settlement of Investment Disputes (ICSID) established under the Convention on the Settlement of Investment Disputes between States and nationals of Other States, which was opened for signature at Washington, D.C., on 18 March 1965, 2 provided that both Parties to the present Agreement have acceded to that Convention.

3. Arbitration shall be based, in the following order, on:

- The provisions of the present Agreement and of other agreements concluded between the Contracting Parties;

- The national law of the Contracting Party in whose territory the investment was made, including the rules on conflict of laws;

- The generally accepted rules and principles of international law.

4. The arbitral award shall be final and binding on the parties to the dispute. Each Contracting Party undertakes to carry out the award in accordance with its national law.

1. United Nations Official Records of the General Assembly, Thirty-first Session, SupplementNo. 17 (A/31/17), p. 34.

2. United Nations, Treaty Series, vol. 575, p. 159.

Article 10. Disputes between the Contracting Parties

1. Any dispute between the Contracting Parties relating to the interpretation or application of this Agreement shall, to the extent possible, be settled by the Gov- ernment of the two Contracting Parties.

2. If a dispute cannot be thus settled within six months from the start of the negotiations, it shall, at the request of either of the two Contracting Parties, be submitted to an arbitral tribunal.

3. The arbitral tribunal shall be constituted as follows: each Contracting Party shall appoint one arbitrator and these two arbitrators shall select a national of a third State as president. The arbitrators shall be appointed within three months and the president within five months from the date on which either of the two Contracting Parties informs the other Contracting Party of its intention to submit the dispute to an arbitral tribunal.

4. If either Contracting Party fails to appoint its arbitrator within the period specified, the other Contracting Party may invite the President of the International Court of Justice to make the necessary appointment. Where the two arbitrators are unable to agree on the appointment of the third arbitrator within the designated period, either Contracting Party may invite the President of the International Court of Justice to make the necessary appointment.

5. If, in the case provided for in paragraph 4 of this article, the President of the International Court of Justice is prevented from acting or is a national of either Contracting Party, the Vice-President shall be invited to make the necessary ap- pointments. If the Vice-President is prevented from acting or is a national of either Contracting Party, the appointments shall be made by the most senior member of the Court who is not a national of either Contracting Party.

6. The arbitral tribunal shall issue its ruling in accordance with the law, the provisions of the present Agreement of other agreements in force between the Con- tracting Parties and the universally recognized principles of international law.

7. Unless the Contracting Parties decide otherwise, the tribunal shall deter- mine its own procedures.

8. The tribunal shall take its decision by a majority of votes, and such decision shall be final and binding on both Contracting Parties.

9. Each Contracting Party shall defray the expenses of the arbitrator appointed by it and of its representation in the arbitral proceedings. The remaining expenses, including those of the president, shall be shared equitably by the two Contracting Parties.

Article 11. Entry Into Force , Extension and Termination

1. This Agreement shall enter into force thirty days after the date on which the two Contracting Parties notify each other that their respective constitutional for- malities for the entry into force of international agreements have been completed. It shall remain in force for an initial period of fifteen years and thereafter shall be renewed indefinitely, unless denounced in writing by one of the Contracting Parties twelve months before the date of its expiry.

After the initial period of validity, either Contracting Party may terminate this Agreement at any time, provided that it gives twelve months' written notice.

2. In the event of termination, the provisions of articles 1 to 11 of this Agreement shall continue to apply for a period of fifteen years to investments made before termination.

Conclusion

DONE at Madrid on 17 November 1994 in duplicate in the Spanish language, both texts being equally authentic.
For the Kingdom of Spain,

Mr. Javier Solana Madariaga,

Minister of Foreign Affairs

For the Republic of Peru

Efraín Goldenberg schriber,

The President of the Council of Ministers and Minister of Foreign Affairs