	Introduction

The U.S.-Peru Trade Promotion Agreement (PTPA) follows current U.S. free trade agreement (FTA) practice in containing two types of formal dispute settlement: (1) State-State, applicable to disputes between the Parties to the PTPA, and (2) investor-State, applicable to claims by an investor of one Party against the other Party for breach of PTPA investment obligations. The United States-Peru Trade Promotion Agreement Implementation Act, which approves the PTPA and provides legislative authorities needed to carry it out, was signed into law December 14, 2007 ( P.L. 110-138 ). The Agreement entered into force on February 1, 2009. A protocol of amendment, signed June 24 and June 25, 2007, which revises the PTPA to incorporate certain provisions involving labor, the environment, intellectual property, government procurement, port security, and investment, entered into force on the same day. The additional language stems from a bipartisan agreement on trade policy between Congress and the Administration finalized on May 10, 2007 (often referred to as the May 10 agreement), setting out various provisions to be added to completed or substantially completed FTAs pending at the time. The same approach to labor and environmental disputes is found in U.S. free trade agreements with Colombia, Korea, and Panama, each of which continue to await approval by Congress. To date, no disputes have been initiated under the PTPA State-State dispute settlement mechanism. On July 19, 2011, however, the Office of Trade and Labor Affairs (OTLA) of the U.S. Department of Labor accepted for review a petition by a Peruvian union representing tax agency workers filed under Chapter Seventeen of the PTPA, the agreement's labor chapter, alleging that Peru had violated the PTPA by failing to effectively recognize collective bargaining rights as required under Article 17.2.1 of the agreement. The review could possibly lead to further State-State dispute settlement proceedings if efforts to settle the dispute through consultations are unsuccessful. To establish a violation of an obligation under Article 17.2.1, the United States must demonstrate that Peru has failed to adopt or maintain a law, regulation or practice in a manner that affects trade or investment between the Parties. The firm, which alleges that Peru violated investment agreements and PTPA investment obligations with regard to its treatment of a metallurgical smeltering and refining operation run by a Renco affiliate in Peru, reportedly filed its arbitral claim in April 2011. State-State Dispute Settlement (Chapter Twenty-One)

State-State or general dispute settlement is set out in Chapter Twenty-One of the PTPA, which applies to disputes involving the interpretation or application of the Agreement or wherever a Party considers (1) that an actual or proposed measure of the other Party is or would be inconsistent with the PTPA, (2) that the other Party has violated the PTPA, or (3) that one or more of enumerated PTPA benefits owed it by the other Party—for example, a tariff reduction—is being nullified or impaired by a measure of the other Party that not inconsistent with the agreement. Labor and Environmental Disputes

Due to its incorporation of principles set out in the inter-branch "May 10 agreement," the PTPA differs from earlier FTAs with labor and environment chapters in containing additional labor and environmental obligations, not restricting its general dispute settlement procedures to specified provisions of its labor and environmental chapters, and not limiting the remedy for non-compliance with an adverse panel report to the payment of an annual monetary assessment, that is, a fine by the defending Party. As noted earlier, in the event the prevailing PTPA Party does propose trade sanctions, the defending Party has the option of paying an annual monetary assessment to the prevailing Party, or, if the Parties agree, to a fund that would distribute funds to the defending Party to facilitate compliance with its obligations in the case. Investor-State dispute settlement may also be invoked in certain cases involving investors and investments in financial services institutions in the United States and Peru. A tribunal may only make monetary awards to the claimant and thus may not direct a Party to withdraw or modify a disputed measure.
The U.S.-Peru Trade Promotion Agreement (PTPA) follows current U.S. free trade agreement (FTA) practice in containing two types of formal dispute settlement: (1) State-State, applicable to disputes between PTPA Parties, and (2) investor-State, applicable to claims by an investor of one State Party against other State Party for breach of a PTPA investment obligation. A Party in a State-State dispute found to have violated a PTPA obligation is generally expected to remove the complained-of measure; remedies for non-compliance include compensation and the suspension of PTPA concessions or obligations (e.g., imposition of a tariff surcharge on the defending Party's products), with the defending Party having the option of paying a fine to the prevailing Party or, in some cases, into a fund that may be used to assist the defending Party in complying in the case. An investor-State tribunal may only make monetary awards and thus may not direct a PTPA Party to withdraw or modify the offending measure. If the defending State Party does not comply, the investor may seek to enforce the award under one of the international conventions for the recognition and enforcement of arbitral awards to which the United States and Peru are party. State-State dispute settlement may also be initiated against the non-complying Party.
The PTPA State-State dispute settlement mechanism differs from earlier U.S. FTAs in that it applies to all obligations contained in the labor and environmental chapters of the PTPA instead of only domestic labor or environmental law enforcement obligations. In addition, in the event a Party is found to be in breach of one of these obligations and has not complied in the dispute, the prevailing Party may impose trade sanctions instead of, as under earlier agreements, being limited to requesting that a fine be imposed on the non-complying Party with the funds to be expended for labor or environmental initiatives in that Party's territory. The changes stem from a bipartisan agreement on trade policy between Congress and the Administration finalized on May 10, 2007 (May 10 agreement), setting out various provisions to be added to completed or substantially completed FTAs pending at the time. Among the aims of the agreement was to expand and further integrate labor and environmental obligations into the U.S. free trade agreement structure. The same approach to labor and environmental disputes is found in FTAs entered into with Colombia, Korea, and Panama, each of which continue to await congressional approval.
Implementing legislation approving the PTPA and providing legislative authorities needed to carry it out was signed into law on December 14, 2007 (P.L. 110-138). The agreement entered into force on February 1, 2009. A protocol of amendment revising the PTPA to incorporate provisions involving labor, the environment, intellectual property, port services, and investment, as set out in the May 10 agreement, entered into force on the same day.
To date, no disputes have been initiated under the PTPA State-State dispute settlement chapter. On July 19, 2011, however, the U.S. Department of Labor agreed to review a petition filed by a Peruvian labor union alleging that Peru had failed to effectively recognize collective bargaining rights in violation of the PTPA labor chapter. The fact-finding review could possibly lead to a State-State dispute proceeding if the United States considers that Peru has acted inconsistently with the agreement and efforts to settle the dispute through consultations are unsuccessful. To establish a PTPA violation, the United States must demonstrate that Peru has failed to adopt or maintain a law, regulation, or practice in a manner that affects trade or investment between the Parties. In addition, one case has been brought under the PTPA investor-State dispute settlement mechanism. In April 2011, a U.S. firm filed an arbitral claim alleging that Peru had violated its PTPA investment obligations in its treatment of a metallurgical smeltering and refining operation run by the claimant's affiliate in Peru.