Peru asks tribunal to dismiss US$1.6bn Gramercy claim
By Davide Scigliuzzo
NEW YORK, July 6 (IFR) - The Republic of Peru has asked an arbitration tribunal to dismiss a US$1.6bn claim filed by hedge fund Gramercy over 40-year old agrarian bonds.
In an official response made public on Wednesday, Peru's lawyers accused Gramercy of conducting a "desperate smear campaign" against the sovereign in an attempt to reap hefty returns after snapping up the bonds on the cheap.
They argued that by refusing to participate in Peru's already established process to pay legitimate holders of the so-called land bonds, Gramercy was seeking preferential treatment compared to other creditors.
"Instead of participating in this process, Gramercy attacks Peru and the system that it has put in place, in an effort to obtain increased returns to which it has no right," lawyers from White & Case wrote in the response.
The land bonds were issued decades ago under Peruvian law and in local currency as compensation to landowners whose property was expropriated.
As Peru went through years of hyperinflation and changed its currency twice, however, their value became uncertain.
Gramercy, which began investing in the land bonds in late 2006, has argued that a 2013 ruling by Peru's constitutional tribunal and the payment mechanism later set up by the finance ministry undervalue the bonds by several billion dollars.
The hedge fund filed a US$1.6bn arbitration claim against Peru on June 2, alleging that the Andean country had indirectly expropriated its investment in violation of the Trade Promotion Agreement between Peru and the United States. (Reporting by Davide Scigliuzzo; editing by Shankar Ramakrishnan)
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