The Dispute:

Bear Creek Mining Corporation v Peru concerned the proposed Santa Ana silver mining project in the Puno region of Peru. Bear Creek, a Canadian mining company, held mining concessions associated with the project and alleged that Peru had breached the Canada–Peru Free Trade Agreement after the State revoked the legal basis for the project in the context of intense local opposition and social unrest.¹

The dispute brought several issues together: the relationship between foreign investment and local communities, the significance of consultation and social acceptance, the State’s response to public unrest, and the boundary between regulatory action and expropriation.The central question was therefore not simply whether Peru could regulate mining, it was:

When community opposition places pressure on a State to intervene in an investment project, how should international investment law allocate responsibility between the State and the investor?

The Santa Ana project and community opposition:

Santa Ana was located in an area inhabited by Aymara communities. Opposition to the project intensified over time and culminated in major protests in 2011. The Tribunal recorded significant social unrest surrounding the project, including protests directed at the continuation of mining activities.²Peru ultimately adopted Supreme Decree No 032, which revoked the decree that had enabled Bear Creek’s mining concessions to operate and brought the Santa Ana project to an end. The Tribunal found that the measure permanently deprived Bear Creek of its rights in relation to the concessions.³

Peru maintained that the measure was connected to the protection of social and environmental conditions and to the circumstances surrounding the unrest. Bear Creek, by contrast, argued that the State had unlawfully expropriated its investment and breached the protections contained in the FTA.⁴

What is a Social License?

One of the most frequently discussed aspects of Bear Creek is the Tribunal’s treatment of the concept of a social licence to operate.The Tribunal was careful not to suggest that “social licence” was a clearly defined doctrine of international law. Instead, at paragraph 406, it observed that the concept was not clearly defined in international law, while noting that relevant international instruments concerning indigenous communities contemplated consultation directed towards obtaining community consent.⁵

That distinction is important.The Tribunal did not create a freestanding international-law requirement that every investment project must obtain an independently defined “social licence”. Rather, it examined community engagement as part of the factual and legal context in which the parties’ arguments concerning the State’s measures had to be assessed. The Tribunal considered that Bear Creek could have undertaken additional outreach to communities affected by the project. ⁶But the analysis does not end there…

Could Peru rely on the investor’s failure to obtain greater community support?

This became a critical issue. Peru argued, in substance, that Bear Creek’s own failure to obtain sufficient community support contributed to the unrest and therefore justified the State’s intervention or at least affected its responsibility.

The Tribunal asked a more precise question: “Could Peru establish that the additional outreach allegedly required of Bear Creek was legally required, and that its absence caused or contributed to the social unrest in a way capable of justifying Supreme Decree 032?“⁷

The Tribunal concluded that it could not.Bear Creek’s community-engagement programme had been known to, approved by and supported by relevant Peruvian authorities. The Tribunal therefore did not accept that the investor’s conduct could be used retrospectively to transform Peru’s own approval of the programme into a legal justification for revoking the investment. ⁸ This is one of the most important features of the award.

The Tribunal did not say that investors have no responsibility towards affected communities. Instead, it distinguished between responsible community engagement and the proposition that an investor’s shortcomings automatically transfer responsibility for subsequent State action back to the investor.

Expropriation and the State’s regulatory response

The Tribunal found that Supreme Decree 032 permanently deprived Bear Creek of its rights in relation to the Santa Ana concessions. At paragraph 422, it characterised the measure as openly, directly and intentionally revoking Bear Creek’s right to acquire, possess and operate the concessions, bringing the project to a halt. ⁹The legal significance of this finding is considerable.

The Tribunal’s analysis demonstrates that a State measure does not have to involve physical seizure of an investment before expropriation can become relevant. The permanent deprivation of legally protected rights may itself constitute the decisive interference.

At the same time, the award illustrates the difficulty of relying on the language of “public interest” or “social necessity” as an automatic shield against treaty liability. The existence of legitimate public concerns does not, by itself, answer the separate question of whether the requirements of the applicable treaty have been satisfied.

Investor conduct and contributory fault

The case becomes even more interesting at the damages stage. Although the Tribunal found Peru internationally responsible for breaches of the FTA, the parties disagreed over whether Bear Creek’s own conduct should reduce the amount recoverable.

This was particularly contentious because the factual record contained evidence that Bear Creek could have undertaken more extensive engagement with affected communities.

The majority did not reduce compensation on the basis of contributory fault in the manner advocated by Peru. However, the issue received particular attention in the partial dissent of Professor Philippe Sands, who considered that the investor’s conduct contributed to the social unrest and should have affected the damages calculation.¹⁰ The distinction between the majority and dissent is analytically valuable.

It shows that investor responsibility and State responsibility need not be mutually exclusive categories.An investment dispute can involve shortcomings on both sides while still requiring a tribunal to determine which conduct legally caused the treaty breach and what consequences should follow.

Damages and the problem of valuing a socially contested investment

Bear Creek also presents an important valuation problem.The Santa Ana project was not an established producing mine. Its future economic value depended on regulatory approvals, development, financing and the ability to operate in an environment marked by substantial community opposition.That made future-value valuation particularly difficult.

The Tribunal rejected the use of a conventional discounted cash flow valuation for the Santa Ana project and ultimately awarded compensation based principally on the claimant’s invested amounts rather than the much larger prospective value claimed for the project.¹¹This aspect of the award is particularly relevant to investment disputes involving projects that are still under development.

The legal finding of expropriation does not automatically mean that the investor receives the value of an idealised future project. The tribunal must still determine what loss can actually be established under the applicable principles of compensation.

Why Bear Creek Mining Corporation v Peru matters

Bear Creek sits at the intersection of three areas that are often analysed separately: investment protection, because the investor invoked treaty protections; community participation, because local opposition became central to the dispute; and regulatory authority, because Peru responded to the conflict through a measure that permanently affected the investment. This makes the case particularly valuable for understanding the relationship between investment law and communities.

The award does not establish that community opposition automatically defeats an investment claim. Nor does it establish that investors possess an international-law entitlement to proceed regardless of local resistance. Instead, it exposes a more difficult institutional question:

Where an investment generates substantial social conflict, who bears the legal consequences of that conflict — the State, the investor, or both?

A broader investment-law lesson:

Bear Creek also demonstrates why investment arbitration cannot be understood solely through the text of treaty standards such as expropriation or fair and equitable treatment.The factual architecture surrounding an investment can become legally significant.

The history of community engagement, the conduct of government authorities, the development of domestic regulatory decisions, the character of the investor’s rights and the foreseeability of social opposition can all become relevant to questions of liability and compensation.The case therefore provides an important bridge between investment protection and investment governance. It raises a question that extends beyond Peru:

Can an investment-protection regime adequately account for the social conditions under which an investment operates, without converting community resistance into a legal veto over investment or, conversely, treating affected communities as external to the investment relationship?

That question is particularly significant in resource projects across Africa, where mining, energy, infrastructure and agricultural investments can intersect directly with land, livelihoods and community interests.

Case takeaway

Bear Creek demonstrates that the legal consequences of community conflict cannot be separated neatly from the operation of an investment. The case places social licence, investor conduct, State regulatory action and expropriation within the same analytical frame, making it a useful comparative reference point for understanding investment disputes involving communities in East Africa.

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FOOTNOTES

1. Bear Creek Mining Corporation v Republic of Peru (ICSID Case No ARB/14/21), Award, 30 November 2017, paras 1, 152–55. ↩︎
2. ibid, paras 152–55, 172–75, 188–97. ↩︎
3. ibid, paras 202, 422–23. ↩︎
4. ibid, paras 379, 388, 400–14. ↩︎
5. ibid, para 406. ↩︎
6. ibid, paras 406–07. ↩︎
7. ibid, para 408. ↩︎
8. ibid, paras 407–14. ↩︎
9. ibid, paras 422–23. ↩︎
10. ibid, paras 565–69, 656–68; Partial Dissenting Opinion of Professor Philippe Sands QC, paras 19, 39. ↩︎
11. ibid, paras 594–602, 640. The Tribunal’s approach to valuation is also discussed in contemporary analysis of the award. ↩︎