Reproduced from www.worldbank.org/icsid with permission of ICSID.
Notice of Intent to submit claims to arbitration pursuant to Article 10.16 of the United States-Peru Trade Promotion Agreement and Article 821 of the Canada-Peru Free Trade Agreement (the "Notice of Intent")
Pursuant to Chapter 10 of the 1 February 2009 United States-Peru Trade Promotion Agreement (the "US-Peru TPA") and Chapter 8 of the 1 August 2009 Canada-Peru Free Trade Agreement (the "Canada-Peru FTA") (collectively, the "Treaties"),
Kaloti Metals & Logistics, LLC ("Kaloti Metals") (collectively, "Claimants") hereby provide this Notice of Intent to submit to arbitration against the Republic of Peru ("Peru"
or "the State") claims arising out of Claimants' investment in Peru, including investments made in its mining and precious metals industries.
1. is a national of the United States of America and is an investor in the State. A copy of his passport is attached as Exhibit A.. .. is a national of Canada and is an investor in the State. A copy of his passport is attached as Exhibit B. Kaloti Metals is a State of Florida, United States of America, limited liability company and is an investor in the State. Copies of Kaloti Metals' articles of organization and 2019 State of Florida annual report are attached as composite Exhibit C. Kaloti Metals is a gold and precious metals company that provided both U.S.-based and Latin America-based customers with complete precious metals solutions including trading, financing, and assaying.
own 25% and 37.5% of Kaloti Metals, respectively.
4. Peru has breached its obligations under the Treaties, including the following provisions:
US-Peru TPA Article 10.3: National Treatment
Article 10.5: Minimum Standard of Treatment
Article 10.7: Expropriation and Compensation
Canada-Peru FTA Article 803: National Treatment
Article 805: Minimum Standard of Treatment
Article 812: Expropriation
V. Factual Basis for the Claims
5. Before Peru expropriated Claimants' investment, and enacted arbitrary and discriminatory measures targeting their enterprise, Kaloti Metals was a prosperous company dedicated to commercializing Peruvian gold, including purchasing gold from local Peruvian suppliers for subsequent sale on the international market. After establishing operations in Peru, Kaloti Metals' business grew rapidly and, despite Peru's ruinous conduct, it managed to put at least US $790 million into the Peruvian economy before its demise. In 2013 alone, the company generated over US $560 million in sales of Peruvian gold.
6. Claimants initially chose to invest in Peru because of its legal framework and rich gold supply. But that legal framework failed. Peru used its powers arbitrarily and unjustly to paralyze Kaloti Metals' import and export operations, subjecting the company and its owners to a public scandal by baselessly linking it to crimes of purchasing illegal gold and money laundering. Through a series of immobilizations and seizures beginning in November 2013, Peru took, without justification, over US $17.6 million of gold that Kaloti Metals owned and legally purchased in accordance with Peruvian law, without notice and without giving the company an opportunity to defend its property interest in the gold. Incredibly, four out of the five seizures at issue were effected pursuant to judicial and administrative proceedings to which Kaloti Metals was not a party.
7. Peru's discriminatory and expropriatory scheme began when the Superintendencia Nacional de Aduanas y de Administration Tributaria (the "SUNAT"), Peru's tax and customs agency, initially immobilized Kaloti Metals' gold shipments--the first of many expropriatory measures--purportedly to determine whether its suppliers had legally sourced the gold purchased. The agency, however, refused to return the gold even after Kaloti Metals and its suppliers provided documentation evidencing that the gold was in fact legally sourced and purchased and that Kaloti Metals, not its suppliers, was the legal owner of the gold.
8. These immobilizations by the SUNAT were just the first step in a long history of discriminatory and arbitrary conduct by Peru. Following the immobilizations, local prosecutors then initiated investigations against Kaloti Metals' suppliers for purported money laundering, again without formally charging or providing notice of these investigations or proceedings to Kaloti Metals. Based on these investigations, Peruvian courts issued seizure orders against Kaloti Metals' gold, even though the allegations of money laundering have not been substantiated or proven to this day. In a kind of cruel irony, the courts then rejected a number of the company's petitions for the return of the gold precisely because the company was not a party to the criminal proceedings at issue. Other petitions to have the gold returned remain pending without resolution.
9. With that, Peru expropriated Kaloti Metals' property and violated the State's international obligations. Peru's actions not only destroyed the Kaloti Metals enterprise, but also impugned the integrity of its owners and operators. The injuries damaged the name, brand, and perception that others had of Kaloti Metals and its owners. Banks questioned fund transfers, which affected Kaloti Metals' ability to meet its obligations. The media reported the State's actions, reaching many with whom Kaloti Metals did business. As a result, Kaloti Metals' base of customers and suppliers diminished and its sales dropped precipitously, eventually causing the company to shutter its Peruvian operations in September 2018.
10. In the end, after taking its property, ruining its reputation, and effectively making it impossible for the company to conduct business, Peru succeeded in destroying Claimants' investment and eliminating the company's promising future prospects.
58. Notwithstanding Claimants' willingness to attempt to resolve the dispute, Claimants reserve all rights as to any dispute, including the right to pursue international arbitration as provided by the Treaties. Claimants also reserve any other rights under the law or any other applicable agreements or instruments, including the right to seek compensation for any remaining issues that are not settled directly or through an international arbitration proceeding, as provided in the Treaties. Finally, Claimants reserve the right to amend, modify, and/or expand upon this Notice of Intent.
59. Nothing herein is intended to prejudice or waive any rights or entitlements that Claimants, or any other parties, may have under the law, the Treaties, or any other applicable agreements or instruments.