Peru: Foreign Funds Fueling Lawsuits Against Companies

Peruvian Firms Face Rising Civil Liability claims Amid Social Inflation

Lima, Peru – Peruvian Companies Are Grappling With A Notable Increase In
Civil Liability Claims, Fueled By What Experts Term “Social Inflation.”
This Trend, Characterized By A Heightened Frequency And Severity Of Claims,
Is Prompting Concerns Among Businesses And Insurers Alike. The Rise Is
Attributed To Shifting Societal Expectations, More Guarantee-Oriented
Judicial Decisions, And Increased Legal Activism.

The Surge In Civil Liability Cases Highlights The Growing Need For
Businesses To Understand And Mitigate Potential Risks. Recent Incidents,
Such As The Medifarma Defective Serum Case, The Real Plaza Tragedy In
trujillo, And The Repsol Oil Spill, Underscore The Substantial Impact That
Corporate Activities Can Have on Citizens And The Environment.

Understanding The Rise in Civil Liability Claims

Mariana Carvajal, Casualty Claims Manager At Munich Re, Notes That Social
Inflation Is Evident Across Latin America, Including Mexico, Colombia, And
Chile. This Phenomenon Reflects A Growing social Discontent With large
Companies,Leading The Public To Demand Higher Compensation For Damages.

“Society Is Changing Its Beliefs And Expectations Regarding The Amount You
have To Receive When Damage Is Caused. It Is Getting Much Greater,” Carvajal
Explains. Additionally, Judges Are Increasingly Inclined To Award
Compensations Based On A Company’s Capital Rather Then Solely On The
Magnitude Of The Damage.

The Role Of external Funding

Marco rivera, Director of Kennedys Peru, A Legal Advisory Firm, Highlights
An emerging Trend: Foreign funds Are Financing Large Demands Against
Corporations. These Funds Seek To Profit by Covering Legal Expenses And
Taking A Share Of The Compensation Awarded.

“There Are Very Interested Funds From Outside That Come To Pay Or Finance The
Legal Expenses Involved In Demanding A Large Company,” Rivera States. This
Practice Adds Another layer Of Complexity To The Civil Liability
Landscape In Peru.

The Repsol Oil Spill In 2022 Exemplifies The Potential For significant
Civil Liability. (Photo: Alessandro Currarino/ GEC)

The Impact On Peruvian Businesses

Miguel Ortiz De Zevallos, business Business Division Manager At Pacific
Seguros, Warns that Many Peruvian Companies Lack Adequate
Civil Liability Insurance.Even Large Companies May Not Have Sufficient
Coverage To address Potential claims.

Oscar Cordero, Business Manager at Pacifico Seguros, Emphasizes That
comprehensive Coverage Is Essential. For Example, Restaurants should Include
Specific Contingencies Like Food-Borne Illnesses In Their Policies, Not Just
General Risks Like Slip-And-Fall Accidents.

Did You Know? According To A 2023 Report By The Peruvian Insurance
Association, Approximately 60% Of Small Businesses In Peru Do Not Have Any
Form of Civil Liability Insurance.

The Role Of Civil Liability Insurance

Civil Liability Insurance Is Designed To Protect Businesses From
Financial Losses Resulting From Damages Caused To Third Parties. It Covers
Material And personal damages, Lost Profits, And Moral Damages.

Pacific Seguros Reports That 99% Of Their Civil Liability Claims Are
Resolved Through Negotiation. The Insurer Works With The Client To determine
A Fair Settlement, But A Judge Will Decide The amount If An Agreement Cannot
Be Reached.

Pro Tip: Regularly Review Your Civil Liability Insurance Policy
With Your Insurer To Ensure It Adequately Covers Potential Risks And
Liabilities.Consider Emerging Threats and Changes In The Business
Environment.

Calls For Mandatory Insurance

Ortiz De Zevallos Advocates For Expanding Mandatory
Civil Liability insurance To A Broader Range Of Economic Activities.Currently, Only Certain Sectors, Such As Solid Waste Management And
Hydrocarbon Transport, Are Required To Have This Insurance.

“There Are Many civil Liability Insurances In Peru That Are Mandatory.
But There Are Other Activities Where They Are Not,” Ortiz De Zevallos Says.
Mandatory insurance Woudl Ensure That More Companies Are Prepared To meet
their Social Commitments.

Civil liability Insurance Premiums On The Rise

The Superintendencia De Banca, Seguros Y Afp (Sbs) Reports That
Civil Liability Insurance Premiums Reached S/ 601.1 Million In 2024, A
12.6% Increase Compared to 2023. This growth Reflects The Increasing
Awareness And Demand For This Type Of Coverage.

Year	Civil Liability Insurance Premiums (S/ Million)	Annual Increase
2023	533.8	–
2024	601.1	12.6%

Source: Superintendencia De Banca, Seguros Y Afp (Sbs)

Understanding Your Civil liability Risks

To Adequately Protect Your Business, It’s Crucial To Understand The Specific
Risks You Face. Consider These Steps:

• Risk Assessment: Conduct A Thorough Assessment Of Potential
  Liabilities In Your Industry And Business Operations.
• Policy customization: Work With Your Insurance Provider To Tailor
  Your Civil liability Policy To Address These Specific Risks.
• Regular Review: update Your Policy Regularly To Reflect Changes In
  Your Business And The Legal Landscape.

Frequently Asked Questions About civil Liability

1. What does Civil Liability Insurance Cover?

   Civil Liability insurance Typically Covers Damages To Third Parties,
   Including Bodily Injury, Property Damage, And Associated legal Costs.
   It May Also Cover Lost Profits And Moral Damages.

2. How Is The Amount Of Compensation Determined in A Civil liability Claim?

   The Amount Is typically Determined By Negotiating With the Affected
   Party. If An Agreement Cannot Be Reached, A Judge Will Decide Based On
   The Severity Of The Damage And The company’s Financial Situation.

3. Why Are Judges Granting Higher compensations In Civil Liability Cases?

   Judges Are Increasingly Considering The Financial Capacity Of The
   Company When Determining Compensation, Wich Can Lead To Higher Awards,
   Especially Against Large Corporations.

4. What Are Some Common Examples Of Civil Liability Claims?

   Examples Include slip-And-Fall Accidents, Product Defects,
   Environmental Damage, And Food-Borne Illnesses. The Specifics Vary
   Depending on The Nature Of The Business.

5. How Can Businesses Reduce Their Risk Of Civil Liability Claims?

   Implement Robust Safety Measures, Maintain Proper Insurance Coverage,
   Adhere to Industry Regulations, And Seek Legal Counsel When Necessary.
   Proactive Risk Management Is Key.

What Steps Has Your Company taken To Mitigate Civil Liability Risks? Share
Your Experiences And Insights In The Comments Below. Do You Think Mandatory
Civil Liability Insurance Should be Expanded To More Sectors In Peru?

Peru: Foreign Funds Fueling Lawsuits Against Companies – A Growing Legal Battleground

Peru: Foreign Funds Fueling Lawsuits Against Companies – A Growing legal battleground

Peru finds itself at teh center of a growing trend: an increase in lawsuits against companies funded by foreign entities. This intricate interplay of foreign investment in Peru, legal action, and the mining sector in Peru, along with othre key industries, is reshaping the landscape of corporate duty and international arbitration. This article delves into the details, exploring who is involved, the strategies employed, and the broader implications for businesses operating in Peru.

The Rise of Foreign-Funded Litigation in Peru

The use of litigation funding, where third-party financiers provide the capital for lawsuits in exchange for a portion of any financial recovery, is becoming increasingly common. In Peru,this is especially visible with international investors using funds to pursue claims against corporations. This financial backing allows claimants to pursue costly legal battles that might otherwise be beyond thier resources. The motivations behind these lawsuits often involve environmental concerns, human rights violations, and land disputes.

Key Players and Their Interests

Understanding who is involved is crucial. Key players include:

• Claimants: Frequently enough indigenous communities,environmental NGOs,or individuals alleging harm.
• Funders: Specialized litigation funders and investment funds, often based in Europe or North America. They see potential for high returns.
• Law Firms: Those specializing in international disputes and environmental law in Peru that represent the claimants.
• Targeted Companies: Primarily in the mining industry, infrastructure sector, and agribusiness.

The funders generally invest if they foresee significant payouts derived from successful litigation. The lawsuits frequently allege violations stemming from corporate activities. Companies are experiencing an unprecedented level of scrutiny.

Industries Under Scrutiny: Mining, Infrastructure, and Beyond

Several sectors are particularly vulnerable to these foreign-funded legal challenges. the mining industry in Peru faces perhaps the most intense scrutiny, owing to environmental concerns related to mining projects. Similarly, infrastructure projects in Peru, such as large-scale road construction and energy projects, are also targets.

Here’s a breakdown by sector:

Industry	Typical Allegations	Impact
Mining	Environmental damage,water contamination,land disputes with indigenous communities.	Reputational damage, legal fees, operational delays, potential closure of operations. Mining disputes in Peru.
Infrastructure	Displacement of communities, inadequate environmental impact assessments, corruption allegations.	Project delays, increased costs, reputational harm, impact on foreign investment in infrastructure.
Agriculture	Land rights disputes, environmental violations related to pesticide use.	Restriction on farm activities, compensation awards, image damage

Legal Strategies and Tactics in Peru

The legal strategies employed in these cases are often aggressive. claimants may pursue international arbitration under investment treaties, taking advantage of the peru-United States Trade Promotion Agreement or other similar agreements. This approach bypasses the Peruvian court system and places the dispute before an international panel. Another strategy involves utilizing the “Alien Tort Statute,” a U.S. law, to bring lawsuits against companies in U.S. courts for actions that occur overseas.

Common Legal Approaches:

• International Arbitration: Suing companies under international investment agreements.
• Human Rights Claims: Allegations of human rights breaches committed by firms.
• Environmental Lawsuits: Cases centred around ecological damage to natural resources.

The Broader Implications and Recommendations for Affected Companies

The trend of foreign-funded lawsuits has far-reaching consequences for companies and for the broader Peruvian economy. The increased risk of litigation can deter foreign investment in Peru, particularly in sectors susceptible to environmental or social disputes. Moreover, the cost of defending against these suits, including legal fees and potential settlements, can be considerable, harming company performance.

Recommendations To Mitigate Risk:

• Thorough Due Diligence: Before starting a new project conduct thorough due diligence to identify and address potential risks.
• Community Engagement: Effectively engage with communities impacted by projects.
• Proactive Environmental Policies: Implement stringent environmental programmes and compliance measures.
• Legal Counsel: Consult with leading legal professionals in international and Peruvian law.

By implementing best practices on corporate social responsibility (CSR), addressing environmental concerns head-on, and proactively engaging with affected communities, companies can mitigate risk and maintain a positive reputation.

For further facts, consider the following resources:

• government Regulatory Websites: Official websites for the Peruvian government for access to government policies.
• Specialised Law Firms: Consult with firms providing advice in international law & dispute resolution.
• Industry Associations: Stay updated via memberships in industry associations operating in Peru.