A U.S. junk bond company’s attempt to collect $800 million from Peruvian taxpayers over an environmental clean-up dispute was dealt a blow earlier this week. In an award released to the public on Tuesday, a trio of arbitrators ruled that the company had failed to correctly file their litigation materials. As a result, the tribunal had no jurisdiction over the case.
Like the Philip Morris cases I discussed earlier this week, the Renco Group v. Republic of Peru case had become a poster child for critics of so-called investor-state dispute settlement, or ISDS. The company was owned by Ira Rennert, a controversial billionaire accused of bleeding distressed companies into bankruptcy and building one of the largest homes in the United States. And he was suing Peru for – among other things – not granting him a third extension of his clean-up obligations for a pollution-emitting smelter he owned there. The facility was faulted for turning the village of La Oroya into one of the 10 most polluted places on the planet, leading to cancer and other ailments in the local population.
The case has taken many twists and turns since being filed in late 2010. For instance, Rennert argued that his claim – brought under the U.S.-Peru trade agreement – shielded him from a tort claim brought by La Oroyans in Missouri state courts. For a timeline of the messy treaty and domestic proceedings, see here.*
Although two of the arbitrators sided with Peru in the decision this week, the matter is far from settled. Renco immediately announced their intention to re-file the case with the corrected paperwork. Thus, a case where the preliminary phases had already dragged on for years could drag on for years more.
Here are a few takeaways from the case.
Getting the rules right matters
The momentary win for Peru highlights a key role that policymakers can play in carefully limiting investors’ access to the jurisdiction of ISDS tribunals.