In a landmark arbitration decision, the International Centre for Settlement of Investment Disputes (ICSID) has ruled in favor of the Spanish energy infrastructure company Enagás, ordering Peru to pay $194 million (€186 million) related to the cancellation of the Peruvian Southern Gas Pipeline (GSP) project.

This decision highlights the complexities of international investment agreements and their ramifications for both national governments and foreign investors.

According to the ICSID award, Peru violated the Peru-Spain Agreement on the Reciprocal Promotion and Protection of Investments (APPRI), failing to adhere to its obligations and consequently incurring liability towards Enagás.

Included in the total awarded is a simple annual interest of 1.44%, compounded semi-annually since January 24, 2018, until the completion of payment, as well as 75% of Enagás’s legal costs.

This outcome arises from a broader context of challenges surrounding the GSP, initially awarded to a consortium led by Brazilian company Odebrecht, Enagás, and Graña y Montero in a venture valued at more than $7 billion.

However, the Peruvian government terminated the concession in January 2017 amidst widespread corruption scandals associated with Odebrecht.

The decision to revoke the project, pivotal to Peru's energy strategy, over integrity concerns left Enagás seeking to recoup its significant investments through arbitration.

The ruling underscores the sensitive balance between sovereign governance and the protection of foreign investment under international law.

Financially, the impact of the award will be reflected in Enagás's 2024 annual accounts upon a detailed analysis of the ruling.

Despite the arbitration's outcome, significant discrepancies between the award and the $505 million (€484 million) claimed by Enagás suggest continued financial strain.

Nevertheless, Enagás maintains a commitment to its investment strategy, including renewable hydrogen infrastructure aligned with the European Union's Project of Common Interest list.

Enagás has expressed intent to pursue an amicable settlement with Peruvian authorities to facilitate compliance with the ICSID ruling.

This diplomatic approach bodes well for both parties, aspiring to a resolution that aligns with mutual interests and sustains commercial goodwill.

Beyond the immediate fiscal implications, the ruling serves as a potent reminder of the fragility of international infrastructure projects, where judicial outcomes can pivot on intricate geopolitical and economic landscapes.

It invites stakeholders to reflect on the safeguards necessary in global investments and the ongoing evolution of international arbitration as a tool for conflict resolution.