Telefónica requests an international arbitration against Peru

Telefónica headquarters in Lima, Peru, in a 2019 image.

Telefónica has filed a lawsuit against Peru before the International Center for the Settlement of Investment Disputes (ICSID), dependent on the World Bank, according to the agency on its website.

The arbitration request was registered last Friday, March 12, although its precise motivations and the amount of the claim have not been disclosed.

The Spanish multinational telecommunications company claims that Sunat - the Peruvian Treasury - and other state bodies, fail to comply with the obligations of the investment agreement between Spain and Peru.

And he would have already reported the problems by letter to the Peruvian government, according to the newspaper

Telefónica has hired Uría Menéndez for arbitration and also Philippi Prietocarrizosa Ferrero & Uría, the South American associate of the Spanish law firm, according to official sources.

The APPRI (Agreement for the Promotion and Reciprocal Protection of Investments between the Kingdom of Spain and the Republic of Peru) is a bilateral agreement signed in Madrid in 1994 by the Foreign Ministers of both countries that entered into force in 1996. The text regulates the treatment that both States give to investors from the other country and indicates how to proceed, for example, in cases of expropriations or judicial disputes.

The purpose was to encourage investment between the two countries, which agreed to give the other party's companies "treatment no less favorable than that granted to their own investors."

Telefónica's decision has come out in the midst of a rarefied relationship between the company and the Peruvian authorities.

Just three weeks ago, the Peruvian Constitutional Court agreed with the Spanish firm in a dispute with the treasury of that country, which demanded the payment of delayed interest for a tax debt.

The ruling exempted Telefónica from paying a part of the interest, specifically 729 million soles (about 163 million euros), considering that the excessive duration of the process harmed the company by causing the amount to continue to grow.

Even so, according to the EFE agency, Telefónica will have to pay 322 million euros to the Peruvian Treasury: about 131 million for the principal of the debt and another 191 million for accumulated interest.

The case was surrounded by tension.

Hours before knowing the opinion of the judges, Telefónica defended itself in a statement against the accusations of one of the magistrates of the Constitutional Court, Marianella Ledesma.

The Spanish company assured that it has paid all the taxes that correspond to it since it began its activity in Peru 27 years ago.

In the years of the controversy over the tax debt (1998, 2000 and 2001), it claims to have paid between 40% and 52% of its benefits, "higher than the 30% stipulated by law."

In 2019, Telefónica already paid 218 million soles for a tax debt originated between 1999 and 2004 that was claimed by Peru.

The dispute with the Peruvian authorities is now prolonged by the lawsuit before the international arbitration body, in a case that threatens to further vitiate already complex relationships that have also affected its reputation.

The company criticized that the sentence was interpreted as a way to forgive Telefónica for paying its tax obligations.

And he responded thus in the statement: "If the ruling is favorable to the company, as has been pointed out in various media, it is not true that the payment of a debt to Telefónica would be forgiven, but that a criterion already defined by the TC in the sense that the administration's own delay in resolving over the legal deadlines cannot cause damage to a taxpayer who exercises his legitimate right to disagree, be it natural person, small, medium or large company ”.

This is not the first time that Telefónica has turned to ICSID to settle disputes with authorities in the region.

He had an open confrontation with Argentina for years, he also sued Mexico and, more recently, in 2018, he presented a request for arbitration against Colombia for an arbitration award in that country that condemns him to pay 1,652 million Colombian pesos (470 million euros ) for the assets used for the implementation of mobile telephony in the South American country.