[Page 978]
BEFORE THE INTERNATIONAL CENTRE FOR THE SETTLEMENT
OF INVESTMENT DISPUTES
- - - - - - - - - - - - - - - - - - - - x
In the Matter of Arbitration between: :
:
FREEPORT-MCMORAN INC., :
:
Claimant, : Case No.
: ARB/20/8
v. :
:
REPUBLIC of PERÚ, :
:
Respondent. :
:
- - - - - - - - - - - - - - - - - - - - x Volume 4
Thursday, May 4, 2023
The World Bank Group
1225 Connecticut Avenue, N.W.
Conference Room C1-450
Washington, D.C. 20003
The Hearing in the above-entitled matter
came on at 9:29 a.m. before:
MS. INKA HANEFELD
President of the TribunalMR. GUIDO SANTIAGO TAWIL
Co-ArbitratorMR. BERNARDO M. CREMADES
Co-Arbitrator
[Page 979]
On behalf of ICSID:
MS. MARISA PLANELLS VALERO
ICSID SecretariatMS. CHARLOTTE MATTHEWS
Assistant to the TribunalRealtime Stenographers:
MS. DAWN K. LARSON
Registered Diplomate Reporters (RDR)
Certified Realtime Reporters (CRR)
B&B Reporters/Worldwide Reporting, LLP
529 14th Street, S.E.
Washington, D.C. 20003
United States of AmericaSR. LEANDRO IEZZI
D.R. Esteno
Colombres 566
Buenos Aires 1218ABE
Argentina
(5411) 4957-0083Interpreters:
MR. CHARLES ROBERTS
MS. SILVIA COLLA
MR. DANIEL GIGLIO
[Page 980]
On behalf of the Claimant:
MR. DIETMAR W. PRAGER
MS. LAURA SINISTERRA
MR. NAWI UKABIALA
MR. JULIO RIVERA RIOS
MR. SEBASTIAN DUTZ
MR. FEDERICO FRAGACHÁN
MS. MICHELLE HUANG
MS. ASTRID MEDIANERO BOTTGER
MS. LUCIA RODRIGO
MR. PEDRO FERRO
MS. MARY GRACE MCEVOY
MR. REGGIE CEDENO
MR. THOMAS MCINTYRE
MR. ORRIN CASE
MR. GREGORY A. SENN
MR. CHRISTOPHER V. TRAN
Debevoise & Plimpton LLP
66 Hudson Boulevard
New York, New York 10001
United States of AmericaMR. LUIS CARLOS RODRIGO PRADO
MR. FRANCISCO CARDENAS PANTOJA
MR. LOURDES CASTILLO CRISOSTOMO
MR. JOSÉ GOVEA
MR. ALEJANDRO TAFUR
Rodrigo, Elias & Medrano
Av. Pardo y Aliaga 652
San Isidro 15073
PerúParty Representatives:
MR. DAN KRAVETS
MR. SCOTT STATHAM
Freeport-McMoRan Inc.MS. PATRICIA B. QUIROZ PACHECO
Socied Minera Cerro Verde S.A.A.
[Page 981]
On behalf of the Respondent:
MR. STANIMIR A. ALEXANDROV
Stanimir A. Alexandrov, PLLC
1501 K Street, N.W.
Suite C-072
Washington, D.C. 20005
United States of AmericaMS. JENNIFER HAWORTH MCCANDLESS
MS. MARINN CARLSON
MS. MARÍA CAROLINA DURÁN
MS. COURTNEY HIKAWA
MS. ANA MARTÍNEZ VALLS
MS. VERONICA RESTREPO
MS. ANGELA TING
MR. NICK WIGGINS
MS. NATALIA ZULETA
MR. GAVIN CUNNINGHAM
MR. KEVIN DUGAN
MS. ARA LEE
MS. SADIE CLAFLIN
MR. NOAH GOLDBERG
Sidley Austin LLP
1501 K Street, N.W.
Washington, D.C. 20005
United States of AmericaMR. RICARDO PUCCIO
MR. OSWALDO LOZANO
MS. SHARON FERNANDEZ TORRES
MS. ANDREA NAVEA SÁNCHEZ
MR. RENZO ESTEBAN LAVADO
Navarro & Pazos Abogados SAC
Av del Parque 195
San Isidro 15047
Lima
Perú
[Page 982]
Party Representatives:
MS. VANESSA DEL CARMEN RIVAS PLATA
SALDARRIAGAMR. MIJAIL FELICIANO CIENFUEGOS FALCON
Ministry of Economy and FinanceMR. EDMÓSTINES MONTOYA JARA
SUNAT, Republic of Perú
[Page 983]
APPEARANCES: (Continued)
NON-DISPUTING PARTY:
For the United States of America:
MR. ALVARO J. PERALTA
MR. DAVID M. BIGGE
Attorney-Advisers
Office of International Claims and
Investment Disputes
Office of the Legal Adviser
U.S. Department of State
Suite 203, South Building
2430 E Street, N.W.
Washington, D.C. 20037-2800
United States of America
[Page 984]
PAGE
PRELIMINARY MATTERS...................................985
WITNESSES:
MARÍA CHAPPUIS CARDICH (Continued)
Cross-examination by Mr. Alexandrov...............985
Questions from the Tribunal.....................1011
Redirect examination by Mr. Prager..............1032
Recross-examination by Mr. Alexandrov...........1037
LEONEL ESTRADA GONZALES
Direct examination by Mr. Rivera................1042
Cross-examination by Ms. Durán..................1050
Redirect examination by Mr. Rivera..............1109
Recross-examination by Ms. Durán................1123
CARLOS ALBERTO HERRERA PERRET
Direct examination by Ms. Huang.................1132
Cross-examination by Ms. Haworth McCandless.....1140
JUAN FELIPE GUILLERMO ISASI CAYO (appearing remotely)
Direct examination by Ms. Haworth McCandless....1187
Questions from the Tribunal.....................1193
Additional question by Mr. Prager...............1213
CÉSAR AUGUSTO POLO ROBILLIARD
Direct examination by Ms. Haworth McCandless....1229
Cross-examination by Mr. Prager.................1232
[Page 985]
PRESIDENT HANEFELD: Good morning. Welcome to Day 4 of our Hearing.
Before we continue with the examination of Ms. Chappuis, do the Parties have any housekeeping matters to address?
MR. PRAGER: Good morning, Members of the Tribunal. Nothing from the Claimant's side.
MR. ALEXANDROV: Nothing on our end, either. Thank you, Madam President.
PRESIDENT HANEFELD: Then I hand over to you for further cross-examination.
MARÍA CHAPPUIS CARDICH,
CLAIMANT'S WITNESS, CALLED (continued)
MR. ALEXANDROV: Thank you very much.
CROSS-EXAMINATION (continuing)
BY MR. ALEXANDROV:
Q. Good morning, Ms. Chappuis.
Can we look at Tab 30 of your binder, which is CWS-5, Mr. Davenport's First Witness Statement? And if we can look at Paragraph 38, the first sentence, he says: "We were also aware that César
[Page 986]
Polo, who then served as Vice Minister of Mines, expressed doubt about whether the Stability Agreement would apply to the Concentrator."
Do you see that?
You need to turn on the microphone, please.
Can you repeat your answer? My question was: Do you see that?
A. Yes. I'm reading it.
Q. Can we turn to Tab 14, CWS-11, Ms. Torreblanca's First Witness Statement? And we'll be looking at Paragraph 25.
And in the middle of that Paragraph 25--in the middle of that paragraph, she says: "Around the same time"--beginning in the fourth line--"I remember that Vice Minister of Mines César Polo had expressed doubts about whether the Stability Agreement would actually apply to our investment in the Concentrator."
So, my question to you is: Did you know at the time that Vice Minister Polo had expressed those doubts to Cerro Verde?
A. No.
Q. Thank you.
[Page 987]
And, indeed, I think in your direct examination, which is the Transcript of yesterday--in English it's Page 837 at Line 22. I'll read it to you and we'll show it on the screen.
You were asked--it begins on Page 837, last line. The question: "Do you have any recollection as to whether at that time Mr. Polo mentioned that the scope of stability would be limited to an Investment Project?"
And you said what you told me today. You said: "No. Never. He never mentioned that." And then you added: "Moreover, had he mentioned it, I would have told him: 'You're crazy. You're totally wrong. That's impossible.'"
You see that, don't you?
A. Yes.
Q. Now, let us look at your First Witness Statement, Paragraph 53. And you say, beginning in Line 5: "Vice Minister Polo--Vice Minister Polo had a different view and was generally against Cerro Verde not paying Royalties for its Concentrator operations."
Do you see that?
[Page 988]
A. Yes.
Q. So, you knew that Vice Minister Polo had a different view against Cerro Verde not paying Royalties for the Concentrator operations. Isn't that right?
A. As I mentioned at the Sumitomo Hearing in February, I did not attend the meetings on the Royalties with the participation of Messrs. Polo, Isasi, and Tovar. I knew these comments because of third-party comments, but he never told me, directly to me, something like this.
At the meetings we had, in my working team of engineers and attorneys, Engineer Tovar participated, and he never presented any objection to any of the things that we were deciding and reaching a consensus on. Had he told me that, if he had told me that, if Mr. Polo or Mr. Tovar had told me that, we would have first analyzed together the Law and the Regulations.
And in those 10 years when neither Mr. Polo nor I were at the Ministry, they would have issued the list of the tax stability contracts that had already
[Page 989]
been signed in the DGM, and what was the criterion of the DGM. So I would have told him this is the criterion, and, for me, from the mining point of view, it is correct. As DGM, I am going to act based on the consensus of my group of attorneys and engineers.
Q. Okay. So, you did not attend the meetings in the Ministry about royalties. You learned of Mr. Polo's views from third persons, and you mentioned that you discussed that in February.
So, let us look at your testimony at the February Hearing. And I ask that we look at Tab 6, which is C-1135, Day 3, at Page 895 in the English.
A. I apologize. What is the page number?
Q. In English, it is 895; in Spanish, it is 891. And in Spanish, it begins Line 10, I believe; in English, Line 2 of 895.
And we'll show this on the screen.
A. I apologize. In Spanish, what page did you tell me?
Q. Tab 5. Did I say Tab 6? I'm sorry. Tab 5.
A. Okay. 5. What page?
Q. Spanish 891, Line 10. We have those on the
[Page 990]
screen, if it helps, Ms. Chappuis.
A. Yes. I am reading.
Q. Okay. So, you mentioned in February that you had a general view against Royalties, and Arbitrator Garibaldi is asking you here: "What does it mean to have an opinion against Royalties? Against Royalties for stabilized companies?"
Your answer: "With the Administrative and Tax Administration for the entire mining sector. That is to say, I think Royalties are prejudicial for mining."
And then I followed up and I said: "Okay. So, just to be clear, your view generally about Royalties is that mining companies in Perú should not be paying Royalties?"
And your answer was: "In Perú, in Chile, in the United States, all over the world."
Do you see that?
A. Yes. At the Ministry we shared the opinion; the Minister, Polo, Tovar, we were all against the Royalties.
And Polo told me, "We need to find a way to
[Page 991]
make it the least prejudicial for the industry." And I told him, "I think that we need to fight." And he told me, "Please understand me. The fight is lost already. We need to see how this can be not as harmful."
And I said: "I apologize, but I am no longer going to participate." I said, "I think that the Ministry should fight for that."
Q. Well, it is interesting that you say you had those discussions with Vice Minister Polo because, if we look at the Transcript--again, Tab 5. In Spanish, 890, Line 6; in English, 893, Line 7.
A. Would you tell me, please, what document we are talking about?
Q. Same document. Tab 5, CE-1135.
A. Where?
Q. In Spanish, Page 890, Line 6.
A. That is at Tab 5.
Q. I'm sorry. It begins in page 889 in Spanish, Line 12. And in English, it's 893, Line 7. You see that on the screen.
So, what you said then was--and I quote from
[Page 992]
the English: "I'm telling you that Vice Minister Polo and I did not discuss Royalties." Contrary to what you just said now.
You said then: "I'm telling you that Vice Minister Polo and I did not discuss Royalties." And then you continue: "Because, in the first meeting we had about Royalties, I opposed his position, and I said, 'I'm not going to come again to those Royalty meetings because I oppose Royalties.' And he said, 'If you don't want to come to these meetings, don't come.' This is my opinion, my position. I don't agree with Royalties. And he said: 'Well, we'll continue to meet to discuss Royalties.' So, I kept abreast because people from my Directorate went to these meetings on the Royalties with the Vice Minister. But I did not discuss this directly with him, and least of all specifically on Cerro Verde."
And then if we can look at English Page 895, Line 18; and in Spanish, it's 892, Line 8.
A. In Spanish, what is the number--
Q. 892. You testify about that first meeting, and you say: "Engineer Polo said, 'I respect your
[Page 993]
point of view, but this battle is already lost. We have to carry on in the hope that Congress doesn't approve the Royalties Law that can be very prejudicial for the sector.'"
So, that's what you say Vice Minister Polo told you; correct?
A. I just told you the same that is here.
Mr. Polo agreed with me that the Royalties were detrimental to mining, but that the battle was already lost, and my position was, let us continue to fight. And he said: "No more. We have already lost. Let's try to make it so that it is as least harmful as possible."
But we never talked about companies that had a Tax Stability Agreement, and the words "Cerro Verde" were never said.
If you read all of the Chilean newspapers today, they are talking about Royalties.
Q. Ms. Chappuis, I'm not asking about Chile--
(Overlapping speakers.)
A. And they had removed all of the Tax Stability Contracts--
[Page 994]
(Overlapping speakers.)
Q. I'm not asking about Chile, so let's continue with your testimony.
You confirmed that you said then what you said now. We will have Vice Minister Polo come and explain his view. Let's continue reading.
"So, I said"--you say--"'Don't invite me again to these Royalty meetings. I'm not going to come.' And he said: 'If you don't want to come, don't do so.'"
Now, then, if we look at Page 893 of the English, from the beginning of the page--in Spanish it's 890--the question is: "So, you're saying now"--I'm waiting for this to appear on the screen: "So, you're saying now that you testified in writing in Paragraph 53 of your Witness Statement that Vice Minister Polo's different view, you learned it from others. He never expressed to you directly this view."
I'm waiting for us to show this on the screen.
So, the question is: "So, are you saying
[Page 995]
now that what you testified in writing in Paragraph 53 of your Witness Statement about Vice Minister Polo's different view, you learned from others? He never expressed to you directly this view?" And you said: "I found out--rather, people, and I had too much work, quite simply, and I had decided not to go to these Royalty meetings where there was a lot of discussion, surely, on the Royalties and other issues. But I didn't go to those meetings. From the first meeting onwards, I said, 'I will not take part in these Royalty discussions.' And Engineer Polo said, 'Well, I'm not going to make you come to these meetings.'"
And then I say: "Just to clarify, he was your boss, wasn't he?" And you say: "Yes. But the fact that he was my boss did not mean that I cannot have my own personal criteria on this."
So, your personal view on this did not seem to have been consistent with the view of your boss and the leadership of the Ministry; is that correct? This was your personal view.
A. You are confusing the facts. I heard
[Page 996]
through third parties, in hallway conversations, of a very personal opinion Engineer Polo had about Cerro Verde. He did not communicate it to me directly.
A different issue was the Royalty draft bills that were in Congress, whereby everyone within the Ministry knew that it was harmful to mining.
In connection with those draft bills in Congress on Royalties, I told Polo: "Let us fight." But he told me: "The fight is lost." "Let's insist," I said. And he told me: "We have already lost. Let's try for it -not to be as detrimental."
And I said: "Well, if there's not going to be a fight. Here, everyone has an opinion against Royalty, but everyone goes--then do not invite me, I have a lot of work."
Q. Understood. Thank you for the clarification.
ARBITRATOR TAWIL: Can I ask a question?
Good morning.
To better understand what you are saying, the meetings that you were not going to participate were the meetings on the discussion about the
[Page 997]
conceptual aspect of Royalties, or how the Royalties were going to be applied to the mining companies?
THE WITNESS: Congress was looking into royalty draft bills. I think this was 2004. Then Mr. Polo started to convene us all, and at a meeting we all said "it is detrimental to mining. It's going to be harmful." Additionally, it would get us into a big problem with the companies, some companies that we had privatized, because those companies that we had privatized were already paying a 3 percent Royalty to the Government.
ARBITRATOR TAWIL: I apologize for the interruption. I do understand that. I'm asking you about the next stage, when we leave behind the conceptual discussion with Congress. Then there were meetings as to how the Royalties were going to be applied, in particular for the stabilized and non-stabilized companies.
Did the Ministry have those meetings?
THE WITNESS: Well, the Ministry--I no longer attended those meetings. It seems that they received all of the draft bills from Congress, and
[Page 998]
they were trying to see how to control.
At the outset, there were some Royalties for sales, then to operational profits. There were many bills before Congress, and it was only in June 2004 when the Royalty Law was passed by Congress. But immediately, the Ministry did not issue the Regulations.
Without a regulation, it is impossible to implement a law, and that law was appealed before the Constitutional Court that only issued a decision in late 2004. So, I left the Ministry in December 2004, when the Constitutional Tribunal, the Constitutional Court, had just issued a Decision, but during 2004, we were all at ease within the Ministry because we were waiting for the Constitutional Court's Decision.
ARBITRATOR TAWIL: Thank you.
BY MR. ALEXANDROV:
Q. Let's come back to the distinction you made between Royalties in general and the application of the Royalties to Cerro Verde.
And you said--and I'm looking at the Transcript at 9:45:49. You said: "I heard through
[Page 999]
others of a very personal opinion Engineer Polo had about Cerro Verde."
So, when you heard from others about this opinion of Vice Minister Polo, that Cerro Verde should pay Royalties on the Concentrator Plant, did you go to Vice Minister Polo to say "You're wrong" or "You're crazy," as you said yesterday, or did you do nothing?
A. I was in charge of approving everything related to Tax Stability Contracts. I had a team, a legal team and engineers, who opined in a way, and they, over the last 10 years, when Polo or I were not there, had acted pursuant to the same criterion with all of the contracts that had been signed.
Q. Ms. Chappuis, can we focus on my question?
And my question was: When you heard through others that his view was that Cerro Verde should pay Royalties on the Concentrator Plant, did you go and talk to him to tell him he was wrong? Yes or no.
A. I just explained the Arbitrator--
(Overlapping interpretation and speakers.)
Q. Can we just say first, yes, or no and then explain--
[Page 1000]
A. I just explained the Arbitrator that in 2004, that was my last year with the DGM. This law was passed in June 2004, and it was sent to the Constitutional Court. So, we were not aware whether that law was going to be declared unconstitutional.
So, throughout 2004, there was a peaceful moment. We never talked about it. We were just waiting what the Constitutional Court was going to say--
(Overlapping interpretation and speakers.)
Q. Ms. Chappuis, I'm sorry. This is not a response to my question. My question was this, and I will repeat it. It's a simple question, a factual question.
You testified that had--yesterday and in your Witness Statement that had you--had Minister Polo told you that Cerro Verde should pay Royalties on the Concentrator Plant, you would have told him, you're crazy, that is wrong.
Now, you say he never told you. You learned about his view from third parties, and I'm asking you, when you learned about his view from third parties,
[Page 1001]
did you go to him to say, "You're wrong"?
And it requires really a yes-or-no answer.
You either went to him and say, I heard what you think and you're wrong, or you did not.
MR. PRAGER: Mr. Alexandrov, you misrepresent the record. She did not say that, when Mr. Polo said that Cerro Verde has to pay Royalties, that "You're crazy." The comment was being made with regard to the drafting of Article 83.3, which was in 1991, which was 13 years before.
BY MR. ALEXANDROV:
Q. Well, let's look at the Transcript. The Transcript says: "Do you have a recollection whether at that time Mr. Polo mentioned that the scope of stability would be limited to an investment project?"
Answer: "Never. He never mentioned that. Had he mentioned it, I would have told him: 'You're crazy.'"
MR. PRAGER: That time is 1991. We were discussing the drafting of the Mining Law.
MR. ALEXANDROV: That's fine. And then--
(Overlapping speakers.)
[Page 1002]
MR. PRAGER: It did not mention Cerro Verde.
MR. ALEXANDROV: Well, then Ms. Chappuis testifies that Vice Minister Polo--and I showed her the Witness Statements of Mr. Davenport and Ms. Torreblanca, and Ms. Chappuis herself testified she heard from third parties later on that Minister Polo believes that Cerro Verde should pay Royalties on the Concentrator Plant.
MR. PRAGER: Well, that's a different question.
MR. ALEXANDROV: Well, that is my question. And I'm asking--may I continue?
BY MR. ALEXANDROV:
Q. And I'm asking you, Ms. Chappuis, when you heard from third parties that Minister Polo believed Cerro Verde should pay Royalties on the Concentrator Plant, did you go and tell him, "César, you're wrong."
Yes or no?
A. When I heard that, it seemed strange because he was against charging Royalties. So, my first impression was just to listen and say, this person that comes with that gossip, piece of gossip, may be
[Page 1003]
wrong, and I did not attach any importance to it, and as I said, in 2004, royalties were not an issue. We were not talking about that because it was in the hands of the Constitutional Tribunal, and we were all waiting for the Stability Agreements to be respected.
All of us had the same expectations, so it was not something that I was going to go and tell Polo, "What do you think," or "What is it that you don't think?" It was not an issue. That law had been sent to the Constitutional Court. When the Court in late 2004 resolved this, I was leaving the Ministry.
Q. So, let me understand your testimony.
First, you're saying you heard about his view, but you thought it was gossip. Second, you're saying, "I didn't go and talk to him because this was not a topic for discussion." But it was very much a topic for discussion between Cerro Verde and MINEM in 2004, wasn't it?
I mean, Mr. Davenport and Ms. Torreblanca have testified about numerous meetings at MINEM discussing this exact topic, and you're telling us now that this was not a topic for discussion; correct?
[Page 1004]
A. With me, I don't know who Ms. Torreblanca and Mr. Davenport may have met with, but in the General Directorate on Mining, that I headed up, the position was always the same. The Agreement signed by the Peruvian Government is going to be complied with. The Peruvian Government is going to respect the Contracts that it signed.
Q. Okay. Well, can we go to Tab 34, RE-198. That's an email you sent on June 11, 2004, to a number of people. The subject is "a meeting with Cerro Verde, new Stabilization Agreement."
Let me ask you first who the addressees are. Who was Rosario Padilla?
A. Legal Director. It's called Technical-Legal Director. She's the Head of Legal at DGM.
Q. Who was Jaime Chávez?
A. An attorney in the legal division. Today he is Vice Minister for Mining.
Q. Oswaldo Tovar is?
A. He's an engineer who is a witness in this proceeding.
Q. Thank you. And who is Luis Saldarriaga?
[Page 1005]
A. An engineer in charge of reviewing the studies of the Tax Stability Agreement.
Q. And who is Luis Panizo?
A. Attorney, General Directorate for Legal Affairs at the Ministry.
Q. And so, the subject is--we established was "Meeting with Cerro Verde, new Stabilization Agreement." And you're saying: "Can you come to my office on Tuesday the 15th at 11:00?"
Matter: "Request for inclusion of the Sulfides Project in the Stabilization Agreement of Cerro Verde. Is that legal?"
So, you just said, and you've stated that in your Witness Statements, that from the very beginning, you and everybody believed that the 1998 Stabilization Agreement stabilized the whole--what you call the "mining unit." But on June 11, you still have a question whether the inclusion of the Sulfides Project in the Stabilization Agreement is legal; isn't that right.
A. It is not as you are describing it. As I explained in the February Hearing, we had had lengthy
[Page 1006]
discussions, including with Minister Polo, because 10 years had gone by and the companies were, once again, making large-scale investments. The companies had their Tax Stability Agreements and the Company Tintaya asked for what we called a succession of the Tax Stability Agreement because it was going to make a $120 million investment. All of the discussions that we had had, lengthy ones, because of Tintaya, we had reached a consensus that Tintaya's Application did not proceed. They were asking to terminate the Stability Agreement they had and sign a new agreement to cover the investment they were going to make and that they be given an additional 15 years.
And after many meetings, we reached the consensus that that was illegal, that the law did not provide for it. It did not provide for any succession of tax stability agreements. So, once again, I found out that Cerro Verde was asking for a meeting because of the 800 million Concentrator. So, in my mind, my first reaction on Friday, 6:15 in the afternoon, when I'm scheduling meetings for the following week, I thought that Cerro Verde was also going to come with
[Page 1007]
the same request as Tintaya to terminate the Contract or Agreement they had and to ask for a new one to cover the next 15 years. That's why I asked "is this legal," because we had already done this with Tintaya.
Now, Tintaya was a case of secondary mining. It wasn't the same as Cerro Verde. So, the day of the meeting, Ms. Padilla came in, and she told me by way of greeting, "You're mistaken. Cerro Verde doesn't want a new tax stability agreement."
Q. Ms. Chappuis, the differences--your discussion of the differences between Tintaya and Cerro Verde are very interesting, and we'll come back to that. But with all due respect, what you're asking here is not about Cerro Verde's willingness, as you understood it, to terminate the existing contract and sign a new one. Let's look at the email. You say, request for inclusion of the Sulfides Project in the Stabilization Agreement of Cerro Verde. You are not asking whether it's legal to terminate the Contract, the existing Stabilization Agreement, and enter into a new one. You are asking, is it legal to include in the existing Stabilization Agreement the sulfide
[Page 1008]
project. Isn't that right?
There is nothing here in your email about terminating the existing Contract and signing a new one.
A. In the subject line, I clearly write or wrote "new Tax Stability Agreement." This was 2004, and Cerro Verde had had a contract for--or an agreement for five years. It had 10 more years, and they were making an $800 million investment. So, naturally, one presumes that they are going to want 15 years and not the 10 years that were remaining.
That's why I made the mistake and I said "new," they are going to come in and ask for a "new" agreement. And Ms. Padilla, who was more familiar with the details said, no, you are mistaken, they don't want a new agreement, as Tintaya did. They are going to stick with the same Agreement they had already signed. For the next 10 years? Yes, for the next 10 years. Nothing more, not one more day.
Q. So, you've testified and witnesses from Cerro Verde, Ms. Torreblanca, Mr. Davenport have testified that they met with you in 2003, in 2004 to
[Page 1009]
discuss whether the existing 1998 Stabilization Agreement covered the Concentrator Plant, and you're saying that, until June 11 of 2004, you were under the erroneous impression that what they were asking was a new stabilization agreement.
Is that your testimony?
A. In 2003, I met with them because they came to ask me whether we were going to respect the tax benefit that they had, which was a reinvestment of profit without payment of Income Tax. This is in the record. We made a decision in December of 2003. We told them that even though that provision had been repealed three years earlier, we were going to respect what was set in the Tax Stability Agreement. That was in 2003.
Copper was at $0.85. They came back in 2004 when copper had gone up to $1.20, and so there they were more positive and they thought that they could build that Concentrator by reinvesting the profits that they had obtained in the four previous years or the four coming years, or something like that.
Q. Okay. Let's leave the Reinvestment Program
[Page 1010]
aside for a moment. I understand you had meetings about that. Is it your testimony that until June 11, June 15, of 2004, you did not know that Cerro Verde was asking for a confirmation that the existing 1998 Stabilization Agreement covered the Concentrator Plant. You did not know that until Ms. Padilla told you, "You've made a mistake."
Is that your testimony?
A. Mr. Alexandrov, we were talking about an $800 million investment. Okay? $800 million.
Q. Can you please answer my question? I know what we're talking about, $800 million. I'm asking you a specific question. You said, when you sent this email on June 11, you thought they wanted to terminate the existing Agreement and enter into a new agreement that would cover the Concentrator Plant. You've also testified that you had meetings with them, so my question is, is it your testimony that until June 11, 2004, you did not know that their position was the Concentrator Plant was covered by the existing agreement and they wanted a confirmation of that? You did not know that, and you thought they wanted a new
[Page 1011]
agreement.
Is that your testimony? I'm asking you to confirm, yes or no.
A. I had not met with them, and I did not know exactly what they were going to ask for, but Ms. Padilla already knew, and she told me they are not going to ask for a new agreement, as Tintaya did. They want it to be in the Contract, the Agreement that they already had, which had only 10 more years remaining.
Q. Thank you very much.
MR. ALEXANDROV: That concludes my cross-examination.
PRESIDENT HANEFELD: Any redirect, or do you want to--yeah, please.
ARBITRATOR CREMADES: The impression that Cerro Verde gives is that they wanted to ask in writing for a confirmation, and you had told them or insinuated to them that there was no need because it was covered by the '98 Agreement.
Is that right? Did you give them enough
[Page 1012]
reasons to think that? You assume the personal responsibility that it was not presented in writing despite their willingness to do so?
THE WITNESS: Yes, that is true. As I have said here, I worked for three years with the inspectors from the Ministry of Energy and Mines. When I was at Tintaya, I was on the other side of the table. I was the mining company, and I knew what the criteria was of the SUNAT and of the Ministry when it came to dealing with the investments that were made during the period covered by a tax stability agreement.
When I worked at Tintaya, when I was on this side of the table, I knew that all the investments made, whatever the amount, were included. There was no qualification process of the Ministry to determine whether this investment qualifies but this one doesn't; this one yes, this one no. There wasn't. You were given a time period and all the investments were covered. And I've also noted here that mining is very capital intensive, and on a constant basis, on a monthly basis, major investments are made.
[Page 1013]
So, I clearly understood what a tax stability agreement was about, and what both the Ministry and SUNAT think about that.
ARBITRATOR CREMADES: Nonetheless, you were telling us that there was gossip that there was a contradiction with your boss--excuse me, please--that there was a contradiction with Mr. Polo. Indeed, you say that you trusted that the Constitutional Court would resolve the issue in the direction that you thought was appropriate.
Wasn't there more than enough reason to, say, apply for it in writing and get the clarity of yes or no, rather than telling them, do not submit it?
THE WITNESS: Excuse me, but you are mixing up two different things. You're mixing up investments in a context of tax stability, which was the Concentrator--does the Concentrator fall within it or not?--and you're mixing it up with the Royalties Law, and in all parts of world, Tax Stability Agreements are respected. This was a matter that the Constitutional Court was just resolving, and it resolved it in an unprecedented manner.
[Page 1014]
In 2004 we were not discussing Royalties and how they were going to be handled because the matter had been forwarded to the Constitutional Court, and that's why I wanted to cite the example of now this--right now, this month, in Chile--that for the discussion of Royalties, they have separated all the companies that have tax stability agreements, and they are looking at them in another way and they are going to respect them up until 2024, 2025, 2027. States respect tax stability agreements, and they don't invent taxes or give them different names for them to not be included in a tax stability agreement.
ARBITRATOR CREMADES: Thank you very much.
PRESIDENT HANEFELD: I would like to ask a follow-up question, now, if you don't mind. We already discussed yesterday your views on the scope of the Stability Agreement, and yesterday you testified that it extends to the entire concession regardless of its exhibit to the Investment Plan and how that forms an integral part.
Let me now turn to Exhibit 1 of the Stability Agreement. And maybe you can put it on
[Page 1015]
screen, that it's easier for the Witness to discuss it.
THE WITNESS: What I'd like to clarify is that that Investment Plan is very summary, and even though it is very summary, it includes the stripping, the stripping away of all the Primary Sulfides.
PRESIDENT HANEFELD: I fully understand.
So, let's now move to Exhibit 1, so the 1998 Stability Agreement. And there reference is made to the concession of beneficiation, and the Beneficiation Plant with a capacity of 33,000 MT/day. Is, in your view, this description of the capacity of 33,000 MT/day important and in a way defines the scope of the Stability Agreement, or is it also irrelevant, in your view, for the scope of the Stability Agreement?
THE WITNESS: No. What it's saying there is that there is a Beneficiation Concession, which only has--because at that time that's all there was--a beneficiation plant with a capacity of 33,000 tons.
At that time, that Concession Beneficiation, which I was describing here, there was just one plant for 33,000 tons operating, and the small Concentrator
[Page 1016]
for 3,000 tons was at a standstill, and this Project, as the Oxides were removed as part of the stripping, so as to be able to reach the Primary Sulfides, were sent to a new plant, which no longer was--had a capacity of 33,000 tons, but, rather, 48,000 tons.
And so, they would remove this Oxide material and send it to that plant, which cost them $50 million, because the other--well, the difference is in the crushing equipment and the trucks. So, they send it to that new plant.
Now, as I explained yesterday, these Tax Stability Agreements set a time frame. These Tax Stability Agreements set a time frame in which you, the mining Companies, can make all the investments you deem advisable, and you can extract natural resources.
And so, you can't set or take note only of the size of this plant. So, what it says there is that the Beneficiation Concession, currently at the time it is signed, it only had a capacity of 33,000, which then became 48,000, and there, the Mining Concessions Cerro Verde 1, 2, and 3, as I commented yesterday, they were, say, this big, and they covered
[Page 1017]
7,000 hectares.
PRESIDENT HANEFELD: And when the Concentrator was built, what was then the capacity?
THE WITNESS: The Concentrator had the--Beneficiation Concession had an area of 451-hectares, and this area had to be expanded because the Concentrator is very large and it was expanded to over 1,000 hectares, twice the size.
Now, what is this geographic area for?
Well, it's simply for the geographic information systems at the Ministry.
Now, your question about the capacity has an environmental connotation as well, and you were right; the capacity increases and it is required to respect environmental provisions, environmental laws--
PRESIDENT HANEFELD: How much did the capacity increase? How much?
THE WITNESS: The capacity increased from 48,000 tons per day. Well, the problem is that a plant--
PRESIDENT HANEFELD: How much did it increase?
[Page 1018]
THE WITNESS: Three or four times more,
let's say. But, look, the thing is, we cannot
measure--well, as we talk about how much is 48,000 per
day, and it went to about four times as much, but it's
a different type of process, but, well--now, here
we're talking about the administrative issue, let's
say. But that doesn't mean that Cerro Verde hasn't
also delivered or submitted an Environmental Impact
Study. With its new Concentrator Plant, it was
required to conduct a new Environmental Impact Study.
PRESIDENT HANEFELD: My focus is not on the
Impact Study. My focus is now on this increase by
three to four times the capacity. And so, the
original Beneficiation Concession, at the time the
Stability Agreement was concluded, 1998, covered
33,000 MT/d. Now we talk about a capacity of three to
four times more.
Why did you think that, nevertheless, the
Beneficiation Concession, valid at 1998, did not, in a
way, limit or define the scope of the Stability
Agreement, but the new Concession, which was rendered
eight years later?
[Page 1019]
Why do we need to consider, in your view, a
Concession which was only granted many, many years
after the Stability Agreement was concluded?
Can you explain what your view on that is?
THE WITNESS: Because the mining Companies
are continuously making investments to grow, because
the content--we're talking about volumes, because the
copper content is reduced over time. I don't know if
you know what I mean--that is to say, when it was
Oxide ore, then you have an ore coming in with a
content of .7 percent copper.
But when it becomes Primary Sulfides, the
content drops to .4. This requires you to have a
larger plant because you need to increase the volume
of ore that you remove extract in order to maintain
the production of physical copper that needs to be the
yield of that process.
Now, it was in Perú's interest for the
mining companies to expand their capacity, their
output for more physical copper to be produced. That
is why these Tax Stability Agreements are entered
into, so that the Company is able to make all the
[Page 1020]
investments, and so that it can increase its capacity.
That's why it was granted the Reinvestment
of Profit, because if that benefit were not granted it
wouldn't have been possible to build the Concentrator,
which is the largest plant. It's larger because it
processes ore with .3 or .4 percent copper; whereas,
the Oxide Plant processes ore that is .7 or .8 percent
copper.
PRESIDENT HANEFELD: So, just now to verify
my understanding. So, your testimony is that the
Stability Agreement covers whatever capacity is
ultimately produced, regardless of what has been
stated in Exhibit 1.
THE WITNESS: Yes.
PRESIDENT HANEFELD: Yes. Thank you.
And did you verify this understanding of
yours when Cerro Verde came and wanted to build the
Concentrator, thereby enlarging, significantly, three
to four times the capacity? Did you verify with your
legal team that this extended Beneficiation Concession
would be, then, the decisive one under the Stability
Agreement?
[Page 1021]
THE WITNESS: Yes. Perhaps, you may be
confused about what a beneficiation concession refers
to. And excuse me for telling you a bit of history.
When we were a Spanish Colony, King Carlos V
imposed this beneficiation, or instituted
beneficiation concessions, and imposed a rate--
PRESIDENT HANEFELD: Sorry. I will be happy
not to listen, and we get to that, because I have
questions on another extension of the Beneficiation
Concession--
(Overlapping speakers.)
(Interruption.)
THE WITNESS: That's a rate that
comes--dates to the times of the King of Spain, that
is at the level of production--
PRESIDENT HANEFELD: Ms. Chappuis, I don't
want to talk about the King of Spain now. I would
really--just get a simple answer on my question of
whether you have discussed the extension of the
Beneficiation Concession by three to four times with
your legal team, whether it would bring it under the
scope of the Stability Agreement. This is my
[Page 1022]
question, and I would like your answer on that.
THE WITNESS: The Beneficiation Concession
that Cerro Verde had, it was called the Cerro Verde
Beneficiation Plant, was fully covered. There were no
restrictions for extending the capacity or the
geographical area, no legal provision imposed a
restriction. Quite the opposite. There were
expansions and they had our full support to extend the
capacity or the surface area.
PRESIDENT HANEFELD: Then let us put again
on screen this Exhibit RE-198, that Mr. Alexandrov
already had referred to.
"Request for inclusion of the Sulfides
Project in SA of Cerro Verde, so is this legal?"
What was discussed, then, in this meeting
with your team on June 15? Did it challenge or
discuss your views that the extension of the
Beneficiation Agreement would bring the Concentrator
under the Stability Agreement--or what did you
discuss? On what did you seek legal advice?
I really just want to understand.
THE WITNESS: The subject says "meeting with
[Page 1023]
Cerro Verde, new Stability Agreement." I made a
mistake. I thought that Cerro Verde was going to ask
for a new Stabilization Agreement. To terminate the
one that they had, because five years had elapsed and
ask--they only had 10 years left. So, they were going
to ask, I thought, the 15 years that they could ask.
10 years they still had remaining, but with
a new Contract they would have gotten 15 years.
PRESIDENT HANEFELD: I understand. And when
your misunderstanding was corrected by one of the
email recipients, what happened then? Now, did you,
nevertheless, discuss with them the request for
inclusion of the Concentrator Project in the Stability
Agreement, or did you not discuss?
Did you cancel the meeting? What happened?
THE WITNESS: We met, as we usually met, and
we start from the premise that they were not asking
for a new Agreement. They're not asking for a new
Agreement. That would mean that the older Contract
would be terminated, but they are not asking for that.
The only thing that they are asking for is for this to
be taken as an investment within the Agreement that
[Page 1024]
they already had.
PRESIDENT HANEFELD: And what was, then, the
comment by your team members, by the lawyers? Did
they confirm your view that the extension of the
Beneficiation Concession would bring the Concentrator
under the scope of the 1998 Stability Agreement?
Did the lawyers confirm that to you?
THE WITNESS: Yes, because it was fully
protected. All investments were fully protected. We
didn't have a single provision that said that, for new
investment, you needed to qualify for them. All of
the investments made within that 15-year period were
included. They only had 10 years remaining, Cerro
Verde did. All investments made in that Mining Unit.
PRESIDENT HANEFELD: Just again, because I
just want to be precise on this point, so it was
confirmed and discussed in this meeting that the
extension of the Beneficiation Concession would bring
the Concentrator under the protection of the Stability
Agreement?
THE WITNESS: Yes, totally.
PRESIDENT HANEFELD: And who exactly
[Page 1025]
confirmed that to you? Was it Padilla Rosario--or who
of the individuals?
THE WITNESS: No. As you can see, this
meeting includes lawyers and engineers. Us engineers
explained to the lawyers the technical issues, what
was going to be done: It was a Concentrator, what was
going to be processed, how many tons, all the
technical matters. So, the lawyers had all the
details, in connection with the laws and Regulations,
and they would say whether things proceeded or not.
And they would say: "This can go ahead. In
this technical case that you are narrating, this can
go ahead, this is an investment within a Stabilized
Mining Unit. This Stabilized Mining Unit had mining
concessions and a beneficiation concession."
PRESIDENT HANEFELD: And do we have any
minutes of this meeting in which you obtained this
express confirmation by the lawyers?
THE WITNESS: No.
PRESIDENT HANEFELD: Any other record? No.
It was just this meeting. So, you rely on this
meeting on the 15th of June? This gave you the
[Page 1026]
comfort to give this assurance to Cerro Verde "you are
safe."
THE WITNESS: Yes. This was not the only
Company that had put a request like this to us. There
were other mining Companies that received a benefit
that was the same or similar to Cerro Verde's.
PRESIDENT HANEFELD: And so--and Mr. Tovar
also attended the meeting; right?
THE WITNESS: That's right. And he never
made any observation whatsoever. He knew what we were
deciding within the DGM from June '04 onwards.
PRESIDENT HANEFELD: Thank you. This--yes.
ARBITRATOR CREMADES: You know there have
been a number of Stabilization Contracts for Cerro
Verde. The third one was made in 2012. In the 2012
Contract, what you are saying was implicit is included
expressly in the Stabilization Agreement. This new
2012 Agreement, doesn't it entail a ratification that
a mistake was made, and that is why things were
rectified in 2012?
THE WITNESS: First, I wasn't there in 2012.
Second, the provisions of '91 and '92, the ones that
[Page 1027]
we drafted with Mr. Polo, well, they were based on an
Investment Promotion Law that was declared of national
interest. The country was in ruins, and there was an
internal war with a high level of terrorism.
Perhaps, you may think that these laws are
very benevolent. But we have to look at the context
of 1991 and 1992. Oftentimes, we didn't have
electricity in our office because the terrorists had
blown up the electricity grid in Lima. That is the
context in which this Law was passed.
Now, if things were changed in 2012, well,
the context was different.
ARBITRATOR CREMADES: Thank you very much.
PRESIDENT HANEFELD: So, please, Claimant,
go ahead with your--and now redirect, and then we will
probably continue with our questions.
MR. PRAGER: If you want, you can go ahead
with the questions. We would need about couple of
minutes just to confirm that I have the views of my
team before I ask questions.
PRESIDENT HANEFELD: Okay. I think we are
well in time. Maybe I continue with, now, my
[Page 1028]
questions, and then--and now you can consult.
I have studied overnight and now everything,
again, relating to this extension of the Beneficiation
Concession, and I note there was this Application in
August 2004 by Cerro Verde, which is Exhibit CE-457,
and I also noted that there is no mentioning of the
Stability Agreement.
But, as we discuss, the extension of the
Beneficiation Agreement has, in your view, a very,
very--and a great effect. And so, I also looked at
the approval of the extension of the Beneficiation
Extension, and this is Exhibit CE-476. And so, maybe
we can look together to this document that you can
explain better to me why, in your view, it has this
really enormous effect.
So, if I look to the signature lines, it
appears that it was Hugo Mendieta Espinoza, an
engineer, who suggested that the Director authorizes
the construction and installation of the modification
of the Beneficiation Concession, and that it was then
countersigned by Oswaldo Tovar Jumpa.
Is this correct? It was not you? It was
[Page 1029]
Mr. Tovar who signed this document?
THE WITNESS: That was the procedure, that
had to be signed by Mr. Tovar. But what is your
question specifically? It says here that the
installation and construction of a Beneficiation
Concession for Cerro Verde is to be authorized. But
specifically, ma'am, what is your question. This is
signed by Mr. Tovar, indeed. Yes.
PRESIDENT HANEFELD: Exactly. And this is
what I noted. And I thought, if you give the
assurance to a Company that the extension of a
Beneficiation Concession will give them the protection
that they seek, I thought you may have been involved
also in the extension of the Beneficiation Concession.
But my understanding is--and this is what I just want
to verify--that it was Mr. Tovar who gave the final
approval or authorization--or were you involved?
THE WITNESS: Mr. Tovar, who's an engineer,
was the person in charge of approving the extensions.
To conduct approval on the file, he asked for the cash
flows that showed exactly the tax regime. He also
participated in all these meetings, at all times where
[Page 1030]
we said that the Concentrator was within the tax
benefit granted to Cerro Verde. He never put any
objection to me.
PRESIDENT HANEFELD: So, I read on the
bottom of Page 2 that: "Based on the evaluation,
Cerro Verde has complied with the ordinary procedure
for Concession of Benefits stipulated in Articles 35
and 36 of Executive Decree Number 18-92-FM."
What does this Executive Decree state?
THE WITNESS: It indicates the procedure to
apply for a beneficiation concession, an extension of
a Concession, or a change-it's a Regulations on
Procedures.
PRESIDENT HANEFELD: And does this Executive
Decree also discuss or address Stabilization
Agreements?
THE WITNESS: The Stabilization Agreements
have a specific set of Regulations that govern them.
I remember the name. It is the Regulation of
Articles XXXX. It has a specific Regulation. This is
a Regulation, which is the Regulation of the General
Mining Law, that includes the full range of procedures
[Page 1031]
that we had to go by.
PRESIDENT HANEFELD: But if I understand you
correctly, you are the Expert on this Law, and these
advocates--or this Executive Decree does not concern
Stability Agreements. It's about all other aspects?
THE WITNESS: That's exactly right. But in
the procedure, you need to establish the cash flows,
and if you look at the application, the file submitted
by Cerro Verde, you can see that Cerro Verde was
already considering Tax Stabilization.
PRESIDENT HANEFELD: And this is because
they also submitted the Feasibility Study, which was
based on the assumption that it was stabilized.
Is this correct?
THE WITNESS: That's exactly right. Also,
Mr. Tovar asked them to provide a lot of information.
He met many times with them, many times.
PRESIDENT HANEFELD: Thank you. This would
conclude my questions.
Do you have additional questions? No.
Then, please.
MR. PRAGER: If we could just have
[Page 1032]
two minutes. Thank you.
(Brief recess.)
MR. PRAGER: Ms. Chappuis, I have a couple
of questions for you.
REDIRECT EXAMINATION
BY MR. PRAGER:
Q. The President asked you about whether the
lawyers in your team, in the DGM, shared the view with
you. Let me ask you that question.
In the internal meetings that you had
discussing Cerro Verde's question regarding the
Concentrator inclusion in the Stability Agreement, do
you recall whether all lawyers in your team,
Ms. Padilla and the others, were agreed that the
inclusion of the Concentrator in an expanded
Beneficiation Concession would mean that the
Concentrator is stabilized?
A. Yes, they were in full agreement. There were
no objections.
(Interruption.)
Q. Can you repeat the answer one more time?
A. Yes. All of them were in full agreement,
[Page 1033]
and none of them made any objections.
Q. And you have discussed that issue with them?
A. Yes. Also, they coordinated constantly with
the Mining Council and with the Legal Advisor of the
Ministry, and nobody placed an objection.
Q. And the President also pointed you to
Annex I of the Stability Agreement, where the
Beneficiation Concession is described in a specific
capacity of the Beneficiation Concession.
In the practice of the DGM at the time that
you were there, was it the view that the capacity as
stated in the Stabilization Agreement limited the
scope of Stability Guarantees?
A. No. Not at all. In other words, we didn't
have--we did not make any qualification to the
investments that could be covered during this 15-year
period. There was no observation, no qualification
whatsoever. All investments were welcome.
Q. And in the practice of the DGM, have you
seen companies increase the--expand their
beneficiation concession to include new investments?
A. Yes, we have seen that.
[Page 1034]
Q. Does this include also companies that have
been stabilized, companies that--
A. Yes. All of the Companies were under a
Stabilization Agreement. We had over 40 stability
agreements.
(Overlapping interpretation and speakers.)
BY MR. PRAGER:
Q. What I was asking is whether you have
observed in your practice at the DGM that companies
that had Stabilization Agreements that included a
beneficiation concession have expanded that
beneficiation concession while the Stability Agreement
was in force to include new investments?
(Overlapping interpretation and speakers.)
MR. ALEXANDROV: Is that part of the
cross-examination? Do you--
MR. PRAGER: Yes. I'm just asking a
question.
MR. ALEXANDROV: Well, I'm asking--you're
doing redirect. I don't think I cross-examined her on
that.
MR. PRAGER: This is in response to a
[Page 1035]
question that the President asked.
MR. ALEXANDROV: I'm not sure. I'll leave
it in the hands of the President. I don't think the
President asked about other companies.
MR. PRAGER: The President asked a specific
question about Annex I, whether the 33,000 MT/d in the
Beneficiation Concession limited the scope of the
Beneficiation Concession, and I'm following up on that
specific question.
PRESIDENT HANEFELD: Please go ahead.
BY MR. PRAGER:
Q. So, my question was whether, while you were
at the DGM, in your experience, can you describe to us
whether companies that had Stability Agreements that
included a beneficiation concession expanded that
beneficiation concession to include new investments?
A. Yes, many of them. Almost all of them.
They were always making investments to expand
capacity.
Q. And at the time that you were at the DGM,
was it the DGM's view that those new investments in
expanded beneficiation concessions that were
[Page 1036]
stabilized were also covered by the Stability
Agreement?
A. Yes, they were covered. All of the
investments that were made within the 15-year period,
not a day more, all of the investments, all kinds of
investments. There was no restriction.
Q. And when the beneficiation concessions for
those Companies were expanded to include the new
investments, did the beneficiation concession
approvals mention Stability Agreements?
A. Indirectly. They have to attach the cash
flows, and that shows the economic and tax structure.
Indirectly, yes.
Q. I think--
MR. PRAGER: No further questions. Thank
you very much.
PRESIDENT HANEFELD: Do you have one?
MR. ALEXANDROV: One question that actually
follows up on one of your questions, Madam President.
And the question was about the meeting on June 15 that
was discussed in the email that Ms. Chappuis sent on
June 11, and the presence of Mr. Tovar.
[Page 1037]
So, I want to show Ms. Chappuis the Second
Witness Statement of Mr. Tovar, Paragraph 16 and 17,
and we will put them on the screen, but I would like
to read the English into the record.
RECROSS-EXAMINATION
BY MR. ALEXANDROV:
Q. So, it's Paragraph 16 first.
And so, Mr. Tovar says: "What I do remember
is that on June 11, 2004, Ms. Chappuis informed DGM
officials--including MINEM's attorneys and Legal
Advisors--that Cerro Verde was applying to include the
Concentrator Project under the Stabilization
Agreement. Specifically, Ms. Chappuis sent us an
email with the subject line 'Meeting with Cerro Verde
new CET,' whereby she called to a meeting on Tuesday,
June 15 in her office informing us about a 'request
for inclusion of the Sulfides Project in the
Stabilization Agreement,' and asked us whether Cerro
Verde's application to include the Concentrator
Project under the Agreement was legal. It is clear
from this email that Ms. Chappuis, one, knew that the
Primary Sulfides Project was not included in the Tax
[Page 1038]
Stabilization Agreement, Contrato de Estabilidad
Tributaria, and that she was passing along the
Company's intent request to include it; and, two, she
did not know if Cerro Verde's request was legal or
not, so she had to consult with her team, including
me."
He then reproduces the email and he
continues on Paragraph--he continues in Paragraph 17.
"Given that I was the individual responsible
for examining and approving the expansion of the area
and installed capacity of the Beneficiation
Concession, it would make little sense for
Ms. Chappuis to have confirmed to Cerro Verde that,
with the expansion of the Beneficiation Concession
area, the effects of the Stabilization Agreement would
be extended, without first discussing with me. I can
confirm that this discussion never took place, and I
never stated (nor could have stated) that this
expansion could have included the Concentrator under
the scope of the Stabilization Agreement."
Having seen that testimony, Ms. Chappuis, my
question is: Do you believe that Mr. Tovar
[Page 1039]
misremembers what happened at the meeting and his
testimony is incorrect?
A. As I have explained here, we were having all
of these conversations regarding Tintaya. Tintaya
wanted a new Tax Stability Contract, to terminate the
one they had because they were making an investment
for $140 million. They wanted to initiate, to sign a
new contract, and to have 15 additional years.
So, I was misinformed, and I thought that
Cerro Verde, with their investment, wanted to do the
same, because they had 10 years of stability. So, it
was going to take four years to build. So, they would
only have six years left with stability. So, I
reasonably thought that they were going to ask us for
a new CET, but Dr. Padilla told me, no, they are not
going to request a new Tax Stability Agreement. They
will remain with the same one.
Q. You are repeating your testimony, but the
question was different. Is Mr. Tovar misremembering
what happened on June 15, and is his testimony
incorrect? That was my question.
A. I am not going to opine on other Witnesses.
[Page 1040]
MR. ALEXANDROV: Thank you, Madam President.
PRESIDENT HANEFELD: Thank you very much,
Ms. Chappuis. This concludes your testimony, so you
are now released as a Witness. Thank you.
THE WITNESS: I apologize. Oftentimes it
may have been where I could have had better manners or
been kinder in my answers. I thank you.
PRESIDENT HANEFELD: We thank you. Thank
you.
(Witness steps down.)
PRESIDENT HANEFELD: So, our next Witness
would be Claimant's Witness, Mr. Estrada; right?
(Comments off microphone.)
PRESIDENT HANEFELD: Okay. Sorry. Then we
do a break now of 15 minutes, and then we continue
with Mr. Estrada.
(Brief recess.)
LEONEL ESTRADA GONZALES,
CLAIMANT'S WITNESS, CALLED
PRESIDENT HANEFELD: Welcome, Mr. Estrada.
You have been called as a Witness in this Arbitration
by Claimant. I may briefly introduce the Tribunal.
[Page 1041]
I'm here with my co-arbitrators, Professor Tawil and
Dr. Cremades. My name is Inka Hanefeld.
Under Rule 35(2) ICSID Arbitration Rules,
you are required to give a declaration. Can you
please read it out? It should be on your desk.
THE WITNESS: Good morning.
I solemnly declare, upon my honor and
conscience, that I shall speak the truth, the whole
truth, and nothing but the truth.
PRESIDENT HANEFELD: Thank you very much.
Then we turn to your Witness Statements.
Do you have your Witness Statements, CWS-6
and 17, in front of you?
THE WITNESS: Yes.
PRESIDENT HANEFELD: Can you confirm that
these are your Witness Statements and they correspond
to your recollection?
THE WITNESS: Yes. These are my Statements.
PRESIDENT HANEFELD: Thank you very much.
We turn to Claimant for the direct.
MR. RIVERA: Thank you, Madam President.
With your permission, I'm going to switch to Spanish.
[Page 1042]
DIRECT EXAMINATION
BY MR. RIVERA:
Q. Thank you for being here, Mr. Estrada.
A. Thank you.
Q. I will be asking you some brief questions
regarding your Statement.
Did you read the Statements presented by the
President of the Tax Tribunal in this Arbitration,
Ms. Olano?
A. Yes.
Q. You might have seen that Ms. Olano said that
she appointed her personal assistant, Ms. Úrsula
Villanueva, as substitute law clerk for Chamber 1 due
to lack of personnel.
What do you opine about this? What is your
opinion?
A. First, during my 14 years at the Tax
Tribunal I never heard the term of substitute law
clerk. There is not a position that we see in the
manuals or in any rule of the Tax Tribunal. The first
time that I heard of that term, was for this
Arbitration.
[Page 1043]
Those who worked at the Tax Tribunal, we had
law clerks, Chamber law clerks, and that category is
very different from the position that this substitute
law clerk had that was the asesora de Presidencia,
Úrsula Villanueva.
The law clerks usually had to be accepted
through a merit competition, and this was different
from the asesora de presidencia, who was trusted staff
of President Olano--that is to say, she was appointed
directly by her without any other public competition.
And law clerks also reported our work to the "vocales"
and, regardless of the Chamber, Úrsula Villanueva did
not do so. Her only boss was Dr. Olano, who was her
right hand.
And the work, the main work by the Chamber
law clerks, was to participate in the drafting of
resolutions for our "vocales." But Úrsula Villanueva,
as asesor de presidencia, only had to help with the
tasks that Dr. Olano had, and none of those tasks was
related at all with the issuance of Resolutions. That
was a power that was the purview of the Chambers.
An additional difference is that Chamber law
[Page 1044]
clerks, whenever we became members of the Tax
Tribunal, we had a specific term established in our
contracts. In the case of Úrsula Villanueva, this was
not, she as trusted staff could be removed at the will
of Dr. Olano.
Also, Dr. Olano does not state the truth
when she said that she appointed Úrsula Villanueva to
work with the First Chamber. I have been there for
14 years in the institution, and I never saw Úrsula
Villanueva go to a Chamber as a law clerk.
What happened, in fact, was that the case
files were actually removed from the Chamber and taken
to the office of Úrsula Villanueva that was in front
of Dr. Olano's office, and that's where she worked on
the case files. But she never participated as a law
clerk that was in person at one of the Chambers. This
was even more irregular because, even though the Tax
Tribunal reports to the Ministry of Economy and
Finance, the various Chambers, when dealing with case
law or resolving disputes, as the last administrative
resort, had to be done exclusively within the chamber.
And the fact of removing the case files and that they
[Page 1045]
were worked on by the asesor de presidencia definitely
breached this principle of independence that should
have been characteristic of the Tax Tribunal.
The "vocales" did not have any contact with
the outside world or the Ministry of Economy. The
only contact that the institution had with the
Ministry of the Economy was through Dr. Olano, the
President of the Tribunal. But the chambers had no
contact. And making her own asesora de presidencia
intervene in the decision-making process of case
files, that was a completely irregular situation.
Dr. Olano justified this decision with two
arguments. She said that she did so because there was
no rule against it, and that is completely wrong.
In Perú, all public servants, such as
Dr. Olano, have to observe the principle of legality.
The principle of legality assumes that a public
servant may only and exclusively do what is provided
for under a rule or the law. There is no rule against
it, but it was required to have a rule to empower her
to do so, and there was no empowerment in the laws.
Dr. Olano also said that she did it because
[Page 1046]
there was a shortage of staff. In the 14 years that I
was at the Tax Tribunal, we always had shortage of
staff. We always needed law clerks, and given the
shortage of staff, Dr. Olano, in full use of her
powers, had to call for this public competition to
have new law clerks come into the institution.
But if, because of an urgency or a situation
or to resolve a file or record, they could not wait
for this public competition based on merits, what
should have been done, as she did, was to move around
law clerks from one Chamber to the other one.
Dr. Olano in this arbitration presented two
examples of that, and they are two proper examples,
former colleagues of mine. Juan Regalado was one of
them and I don't recall the name exactly of my other
colleague. And she moved stuff from one chamber to
the other. And I also was seconded to another Chamber
to help with some concrete case files for a set period
of time and after that I returned to my chamber.
So, what Dr. Olano said is completely
irregular. It is irregular for her to appoint her
only asesora to work on a case file, but it is even
[Page 1047]
more irregular for Dr. Olano to participate in the
discussion, deliberations around that case file.
So, I think that what she says is incorrect.
Q. Thank you very much, Mr. Estrada.
In the last round Perú presented the witness
statement by Mr. Sarmiento, who was a "vocal" of
Chamber Number No. 10, which you did not have the
opportunity to answer.
Now, he, Mr. Sarmiento, says that the
2006-2007 Royalties case file was deliberated by
Chamber 10. Could you give us your opinion about it?
A. I believe that Mr. Sarmiento's opinion is
completely biased. Mr. Sarmiento from Chamber 10,
which met in relation to this matter, there were three
vocales. The other two vocales, Moreano Valdivia and
Luis Cayo, are no longer members of the Tax Tribunal.
They are engaged in private practice, and the only
current vocal of that chamber is Mr. Sarmiento.
Now, as a current vocal, it is evident that
he could not say something other than what he's
saying. He could not say that, in effect, there
wasn't a proper deliberation of the case file
[Page 1048]
before--or in Chamber 10, because that would imply
that he would be committing an omission in his duties,
and that has repercussions. An administrative
proceeding against Mr. Sarmiento could be initiated on
this ground.
Let us also recall that Mr. Sarmiento's
direct boss is Ms. Olano. So, it's clear that his
statement helps to bolster that of his direct
superior, but she's not only his superior, but also
Ms. Olano has a lot of weight in the process of
ratification to which the members of the Tax Tribunal
are subject every three years. So, to say something
different than Mr. Sarmiento said could put at
risk--well, he would be opposing his superior and it
would place at risk his ratification process.
Now, Mr. Sarmiento holds--or upholds as
evidence, in one way or another, that there was
deliberation on that matter with only two documents.
He presented session minutes, and he also presented as
evidence the Resolution signed by the three vocales.
Now, in the session minutes, if you have
occasion to review that document, it's a document that
[Page 1049]
doesn't prove whatsoever that there's been a
deliberation. It is a document that is drawn up by
the administrative secretary of the Chamber, and it
contains only the result of the vote in a case file.
In the session minutes, they have the
taxpayer's information, the number of the case file,
the number of the resolution, the outcome of the vote,
but it doesn't show that there's been any
deliberation.
And the second document, which is the
Resolution signed by the three vocales, doesn't show,
either, that there's been deliberation because, if you
take a look at that Resolution, it is identical to the
Resolution that was issued by Chamber 1 three weeks
earlier. It's impossible to think that three vocales
in a different place, in a different Chamber, or,
rather, in a different date, deliberate and have the
exact same conclusion as another Chamber.
To make a simile of that situation, this
arbitral procedure is being--unfolding before two
different Tribunals. It would be the same logic to
think that three arbitrators, despite the fact that
[Page 1050]
they conclude the same thing and have the same
considerations for their Decision as the other three
arbitrators who already looked at this case in
February.
So, it is not justified--the fact that it
has been signed by all three vocales doesn't justify
or prove that there's been deliberation.
Q. Thank you very much.
MR. RIVERA: With that, we conclude the
direct and yield to the attorneys for Perú.
MS. DURÁN: I will also turn to Spanish,
with your permission.
CROSS-EXAMINATION
BY MS. DURÁN:
Q. Good morning, Mr. Estrada.
It's nice to see you once again. We already
know one another, but just so that it's in the record,
I am María Carolina Durán, and I am a member of the
team representing the Republic of Perú in this
Arbitration.
As last time, we need to speak with pauses.
This rule applies to you and to me. It's also very
[Page 1051]
important that we take a pause between my questions
and your answers, and I do likewise when you conclude
your answers. Please don't take my pause as an
invitation to continue speaking. I'm just waiting for
the interpretation into English to catch up with us.
And, since we have little time, I would ask that you
please answer my questions directly.
Mr. Estrada, have you seen the Transcript of
the last Hearing?
A. Yes, I was able to see that.
Q. Of your Witness Statement?
A. Likewise.
Q. Excuse me. Did you see the Transcript of
your testimony at that Hearing?
A. Yes, only that.
Q. And what about the Opening Arguments?
A. No.
Q. And the testimony by President Olano and
Mr. Sarmiento, did you see those?
A. No, not at all.
Q. You are an attorney licensed since 2006;
correct?
[Page 1052]
A. Yes, since 2006.
Q. And you began to work at the Tax Tribunal in
2004; is that right?
A. That is right.
Q. So, you began to work at the Tax Tribunal
before you ended your undergraduate degree in law;
correct?
A. Yes.
Q. And you worked, as you said a moment ago, at
the Tax Tribunal for 14 years; correct?
A. Yes, that is correct.
Q. And just to continue with the chronology,
you left the Tribunal in 2018; correct?
A. Yes.
Q. During those 14 years, you held the position
of law clerk, at the different levels; correct?
A. Yes, at all possible levels.
Q. But always as a law clerk; correct?
A. Yes, of course.
Q. Now, in those 14 years, you were never a law
clerk for Chamber 1; correct?
A. Yes, I was, actually, a couple of times.
[Page 1053]
Not as the permanent law clerk, but with the exception
of the Chamber on Customs, I went through all the
different Chambers at some point in time.
Q. At the last Hearing--when I speak of the
last Hearing, I'm talking about the Hearing in the
case of SMM Cerro Verde--you said that you were in
Chambers 2, 4, and 10.
Are you changing your testimony?
A. No. I also said that I had been in the
other Chambers for some time, such as--for specific
cases such as this case in Chamber 1.
Q. And in those cases, when you were in
Chamber 1, was it because you were designated there
temporarily just for a particular case?
A. Yes, for a specific time period or for a
specific case.
Q. And in Chamber 1, when you were at
Chamber 1, you were not involved in the Cerro Verde
Cases; is that right?
A. No.
Q. And when you were in Chamber 10, you were
not in the Cerro Verde Cases, either; is that correct?
[Page 1054]
A. It is correct.
Q. Then in your Witness Statement, you
established that, since 2019, you've worked at a law
firm called TS Asesores; correct?
A. Yes.
Q. Do you continue working there?
A. Yes.
Q. In which year was that law firm established?
A. I think it was 2017.
Q. And I was looking for information about this
law firm, as I did the last time, and I did not find a
website.
Could you tell us, please, how many lawyers
work at that law firm?
A. The firm has three partners, four senior
attorneys, and several legal assistants, depending on
the workload, actually. I believe that about 12 to 20
people work there.
Q. Who are the partners?
A. Jorge Mendoza, Iván Vera, and myself.
Q. Now, just for clarification, why at the last
Hearing did you tell me that, formally speaking, you
[Page 1055]
were not a partner at that law firm?
A. In the Articles of Incorporation, I'm not a
partner, but I also noted that I am treated as a
partner. I charge as a partner. I purchased the
office where the law firm works out of as a partner.
It's only in the Articles of Incorporation that I
wasn't there, because I was working at that time in
the public sector.
Q. And at your LinkedIn page, it appears that
you also work at a law firm called Mendoza, Vera
& Estrada. I understand this is the same as TS
Asesores?
A. Yes, the same partners.
Q. At the February Hearing, you established
that that law firm was not working, was not operating.
Is that still the case?
A. Yes, it is.
Q. And that's why that law firm doesn't have a
website, either?
A. Yes, that's right. It exists, and we don't
intend to have a website.
Q. Now, at the Cerro Verde Hearing, you said
[Page 1056]
that Cerro Verde is a client of TS Asesores law firm
in relation to the SMM Cerro Verde case; correct?
A. Yes.
Q. And you also said that when you said "Cerro
Verde's lawyers," you're talking about the
international lawyers of Cerro Verde--that is to say,
the Debevoise firm; correct?
A. Correct.
Q. Is it correct to assume that the Debevoise
lawyers are also clients of TS Asesores for the
purposes of this Arbitration, Freeport?
A. No. The only client is Cerro Verde.
Q. So, that was just for the previous case?
A. Cerro Verde, I understand--I'm not all that
familiar with arbitration--is the client of the law
firm. There are two Shareholders--Cerro Verde has two
Shareholders--but the client is SMCV.
Q. Okay, but now I'm a bit confused, because
you told me the client was the Debevoise law firm.
A. In both cases.
MR. RIVERA: Would you mind taking him to
the place where he said that in his Transcript? I
[Page 1057]
think that's not what he said, so I think we would be
grateful if you could show him exactly what he said.
MS. DURÁN: Yes.
BY MS. DURÁN:
Q. We can turn to the Transcript, which is at
Tab 3, at Page 1047 in the Spanish-language version.
I don't have the number--the page number for the
English-language version.
This is--it's 1043 of the English.
Do you see it?
A. Yes.
Q. So, the first question that I put to you is:
"SMCV, which I will refer to as Cerro Verde, is or has
been a client of TS Asesores?"
And your answer is: "It is the client of TS
Asesores."
And then if we scroll down to Line 22 of the
same page, it says--
(Comments off microphone.)
MR. RIVERA: I was just saying, if you could
read the following line immediately after the one that
you read, because I think it's important for context.
[Page 1058]
MS. DURÁN: I'm sorry. His questions, he can--those, he can do it on redirect. I don't think they give any context.
I will read it just for the record.
BY MS. DURÁN:
Q. The question is: "Does TS Asesores have any relationship with the Rodrigo law firm, which I understand is a local one?"
"None." That's what you said at that time.
And then I asked you: "On what do you advise SMCV?"
And you say: "In this case, I don't know if it's directly with Cerro Verde but, rather, with the attorneys for Cerro Verde."
Do you see that?
A. Yes.
Q. And then we have a similar exchange in which I'm a bit confused as to whether the client is the attorneys or the Company, Cerro Verde, and then you explain, and you say, at Line 12: "Let's see. The lawyers of the law firm for Cerro Verde contacted my partners--I understand that was in 2018," and then you
[Page 1059]
provide an explanation, which we'll get into in just a moment.
And then I ask you to clarify for me: "Just for clarification, the Cerro Verde lawyers are whom?"
And you say: "Debevoise."
Do you confirm your testimony?
A. Yes.
Q. Now, just to clarify, the contact with the lawyers at Cerro Verde, the international lawyers for Cerro Verde, you take that as a single case because it's the same facts?
A. Yes.
Q. But it's for purposes of both Arbitrations; correct?
A. I understand that that is the case.
Q. And as we just read, the attorneys from Debevoise made contact with your firm as of 2018-2019; correct?
A. I could specify that date on occasion of the last hearing, and, actually, the date is 2019.
Q. Okay. And you also established that, since 2019, advisory services were being provided to the
[Page 1060]
attorneys for Cerro Verde and Cerro Verde in general, which entailed facilitating the location of former members of the Tax Tribunal for them to discuss the exact same thing that they discussed with you, which was regarding their experience at the Tax Tribunal; is that correct?
A. Correct. But there I must also add, because in light of your question, I checked that with my partners. They were informal calls that were never charged.
Q. They were never charged?
A. No.
Q. How many calls were they?
A. They were informal calls, two or three, nothing more than that, with them. The first contact with me came in September 2020, and it was as of 2021 that charges began.
Q. Excuse me. Could you say once again when you began charging?
A. 2021.
Q. And I understand that, based on what you said last time, you signed a contract with Debevoise
[Page 1061]
based on your participation in this Arbitration?
A. The Contract was signed with Cerro Verde.
Q. When?
A. In 2021.
Q. 2021. Not 2020, as you said before?
A. 2021.
Q. What date in 2021?
A. I don't have the exact date, but it was when I agreed to be a Witness.
Q. You also explained to us that, as from your participation, there were a number of calls with the international lawyers, that there were several conversations regarding your experience in the Tax Tribunal.
Do you confirm your testimony?
A. Yes.
Q. And I understand that, in those calls, your partners also participated?
A. Yes, particularly in the first part.
Q. How much are you charging to participate in this Arbitration?
A. It's an hourly fee. I don't have a precise
[Page 1062]
estimate.
Q. At the last Hearing you said that you charged more or less $420 or $428; is that correct?
A. Yes, it is.
Q. And you also said that the hourly charge of your partners, Jorge and Iván--I understand they're your partners--that they charge the half of that; is that right?
A. Yes, it is.
Q. How many hours--at the last Hearing, you said that for your First Statement you had taken about 20 to 26 hours.
Do you confirm your testimony?
A. Yes.
Q. For drawing up the First Witness Statement for this case, how many hours did you spend?
A. Well, I have only presented two Witness Statements, and they were presented in both cases, but it's just one Statement; in other words, the time that I devoted to it is just what I indicated to you, 20 to 26 hours.
Q. When your First Statement was submitted in
[Page 1063]
this case, did you have an opportunity to review it?
A. Of course. I signed it. It's identical to the one that was presented in the previous case.
Q. Did you review it to see if any change had been made?
A. No. It's identical except for the introductory part.
Q. Did you review it?
A. Yes, of course. They're identical.
Q. And did you devote one hour to it?
A. I don't think so. I just reviewed it to sign it, but let's say one hour.
Q. Okay. For the Second Witness Statement in the SMCV Cerro Verde Case, you said that you had taken approximately 20 hours.
Do you confirm your testimony?
A. Yes.
Q. And I understand, then, that the Second Statement that was submitted in this case--
A. Same situation.
Q. Okay. In other words, you signed it, reading it through quickly, and that was that, and
[Page 1064]
then you submitted it.
Now, for the Hearing in the Cerro Verde Case, you told us that you had spent two days preparing in New York with the Debevoise lawyers; correct?
A. Correct.
Q. How much time have you dedicated to your preparation and participation in this Hearing?
A. Two days in Lima.
Q. In Lima?
A. Two days.
Q. Two days?
A. Yes.
Q. How many hours?
A. From 9:00 to 5:00. Seven or eight hours.
Q. For two days?
A. Yes.
Q. Mr. Estrada, in all, as you had an opportunity to review some points after the last Hearing, do you know how much your law firm has charged in all?
A. For what?
[Page 1065]
Q. I understand that for you this is two Witness Statements by you--well, it's really four--and participating twice in the Hearings. How much have you charged in all?
A. I don't have the exact amount. What I do understand clearly are the hours that I have devoted to it, but I don't handle the invoicing.
Q. You don't have any idea of a number?
A. Of hours, yes; but the total amount, well, one has to do the multiplication to number of hours times hourly charge.
Q. Of course. I did a rough calculation--but you can correct me if you think I'm wrong--of your first two Witness Statements. So, that's to say, 26 plus 20 at $420 yields a total of $20,000. And we'd have to add the 16 hours, times two, for your participation in the Hearings; correct?
A. Correct.
Q. So, almost $40,000, it could be?
A. Well, you've done the calculation. I'd have to check it, but if you say so.
Q. Well, it's already being verified. The
[Page 1066]
attorneys for the other side will be able to correct that if they think it's necessary.
Now, Mr. Estrada, just to confirm, in your Witness Statements, you do not establish anywhere your relationship with Cerro Verde, nor your relationship with the attorneys, nor the payment that you are receiving for being here; correct?
A. Correct.
Q. Thank you.
If we turn to Paragraph 2 of your Second Witness Statement--and I understand that that is at Tab 2, though I think you also have them in the small binders. It might be easier for you.
Are you there?
A. Yes.
Q. You indicate that: "Counsel for Freeport assisted me in preparing this Witness Statement"; correct?
A. Correct.
Q. And, as I understand, based on the exchange we had at the last Hearing, the dynamic was that you would have calls with the Claimant's lawyers, then
[Page 1067]
they would send you a draft, you would review the draft, you would make the changes you considered necessary, and then it would go from there; correct?
A. Correct.
Q. And as we established a moment ago, in reviewing those witness statements your partners, Iván Vera and Jorge Mendoza also participated; correct?
A. Most of the calls, yes.
Q. And in your Witness Statements, you did not establish either that Jorge Mendoza and Iván Vera participated in the calls that you had with Cerro Verde's lawyers; correct?
A. I do not indicate it.
Q. Now, I can assume that the words that are contained in this Statement are yours?
A. Yes, of course.
Q. And I see that you included a number of footnotes. Is it correct to conclude that when you've put footnotes there, you do so in order to provide support for what you're saying in the Statement; correct?
A. Correct.
[Page 1068]
Q. When you considered it necessary to include them to support what you were saying, then you did so; correct?
A. Yes.
Q. Now, let's go to the first paragraph of your First Statement--of your Second Statement. I'm sorry.
A. Yes.
Q. You state that--you confirm that you have personal knowledge of the facts and matters that you then are to describe; correct?
A. Yes.
Q. In your First Witness Statement--that's the end of the first paragraph. Let's put it up on the screen.
A. Yes.
Q. In your Second Statement, you added: "Whenever I testify on subjects beyond my personal knowledge, I identify the source of the information and the basis for my understanding"; correct?
A. Correct.
Q. And you confirmed for us at the last Hearing
[Page 1069]
that you included this to indicate that there are some issues that go beyond your personal knowledge; correct?
A. Yes.
Q. The documents that you cite to were provided to you by the Debevoise lawyers; right?
A. Yes.
Q. Claimant's lawyers?
A. Umm-hmm.
Q. Perfect. Thank you.
Let us now look at your work as a law clerk.
In your First Witness Statement you say that as a law clerk, you provide assistance to the vocales of the Tax Tribunal in resolving the disputes presented by the taxpayers against SUNAT's resolutions; correct?
A. Correct.
Q. Just to contextualize this, if SUNAT determined that a taxpayer fails to pay a tax or it pays it insufficiently, the SUNAT issues assessments--that is to say, the determination and penalty resolutions?
A. Correct.
[Page 1070]
Q. And the taxpayer may challenge those decisions by SUNAT, first within the SUNAT itself and then to the Tax Tribunal; correct?
A. Correct.
Q. The Resolutions by the Tax Tribunal may be challenged to the courts of Perú?
A. Yes, in a contentious proceeding.
Q. They can go up to the Supreme Court of Justice; right?
A. Yes.
Q. To be clear, there are three instances at the judicial stage?
A. I'm not sure, I do not handle the judicial part very well.
Q. Okay. Fine. It is not your expertise. We can talk about that with other Experts. No problem.
So, the Tax Tribunal solves the controversies between the taxpayer and SUNAT, basically; right?
A. Amongst other administrations, yes.
Q. Those disputes are solved specifically by the Specialized Chambers; right?
[Page 1071]
A. Yes.
Q. There are cases that can go to the Plenary Chamber, but specifically, Specialized Chambers are the ones that solve those issues?
A. Yes.
Q. Within those Specialized Chambers, there are three vocales; right?
A. Correct.
Q. How many Chambers does the Tribunal have today?
A. 11. 12, rather. 12. My apologies.
Q. I'm sure you know the number better than I do, sir.
Once the appeal against a decision by SUNAT comes to the Tax Tribunal, it is assigned to one of those Specialized Chambers on the basis of the specialty of each Chamber; correct?
A. Correct.
Q. And within the Chambers, one of the three Tax Tribunal vocales is the "vocal ponente"; correct?
A. Correct.
Q. And that "vocal ponente," what he or she
[Page 1072]
does is to lead the Resolution of that case file. He prepares a draft of the Resolution that is discussed with the other vocales?
A. Yes. With the assistance of a law clerk.
The vocal always works together with a law clerk. So, they draft a resolution, and it is submitted to the other Tax Tribunal vocales.
Q. Okay. They use a law clerk. The Tax Tribunal vocales always use law clerks?
A. That's a rule. Exceptionally, there were vocales that could not use law clerks, but the rule is that they use them.
Q. You say a "rule." Is it a rule based on regulations?
A. No, it's not in the regulations, but it is in the Manual of Procedures of the Tribunal.
Q. In your Witness Statement you said "generally," and now you are giving a more definitive answer.
A. Generally, but it is also included in the manual that the vocal may give the case file to a law clerk.
[Page 1073]
Q. May?
A. He may do it, but it is a rule that was applied in almost all cases.
Q. So, it wasn't always used?
A. In very exceptional cases, in very specific cases, a vocal did not have the assistance of a law clerk.
Q. Okay. Very well. You spoke about the procedural manual, and also we have the Manual of Organization and Functions of the Tribunal; correct?
A. Correct.
Q. And there we have the functions of the different officials within the Tax Tribunal, as we have in all of the entities where the functions are clearly established; correct?
A. Correct.
Q. In that manual, the function of the Tax Tribunal vocales is to decide the case files assigned to them, to attend the chamber's sessions where the members issue their votes on the matters in question, and also to have oral hearings, amongst other things; correct?
[Page 1074]
A. Yes, correct.
Q. The manual of organization is CA-186. It is behind Tab 5. I see that you're trying to look for it. Page 78 of this document indicates what you have said to me in summary form; is that correct?
A. Yes, that's correct.
Q. In connection with the oral hearings, the oral hearings are basically hearings; right?
A. Yes.
Q. The Parties present their arguments. SUNAT does so, the taxpayer does so, and the Tax Tribunal vocales of the Chamber are present there; correct?
A. Yes, correct.
Q. I understand that, from a regulatory viewpoint, two of the vocales that are going to be deciding the case have to be present during the oral report?
A. Yes, necessarily.
Q. Otherwise the hearing has to take place again ; correct?
A. Yes, correct.
Q. In your Witness Statement, you say at
[Page 1075]
Paragraph 28--I think it's your First Witness Statement.
You say that the law clerks try to be present during the oral hearings; correct?
A. Regularly, the law clerks were present. We were present during the oral hearings.
Q. But not always?
A. If it was a simple case that didn't really require the presence of the law clerk or if it was known that they were going to say something that was not novel, the law clerk was not there. But if there were cases that were a little more discussed or that needed more work from the law clerk, the law clerk was always present. Or when no law clerk was appointed to that case, well, of course there was no law clerk for the case.
Q. So, the oral hearings can take place without a law clerk?
A. That's the exception.
Q. But it can be done?
A. Yes, of course.
Q. But if the vocales are not present, no oral
[Page 1076]
hearing can take place?
A. That's right.
Q. In this Manual of Organization and Functions of the Tax Tribunal--we can show it on the screen if you wish.
A. Yes, please.
Q. It is behind Tab 5. It's on the screen.
Here it talks about, for example, Taxation Specialist IV. That is one of the law clerk levels.
A. What page?
Q. Yes, excuse me. I'll tell you the page. It is Page 83 of the document.
A. Umm-hmm.
Q. So, Taxation Specialist IV is one of the kind of law clerk that we have; right?
A. Yes.
Q. The functions are studying requested cases, proposing the solution of a dispute submitted, they have to do research on case law if asked by the Tribunal vocal, they gather regulations, and also they prepare the Draft Resolution for each one of the files that was assigned to them; correct?
[Page 1077]
A. Yes, correct.
Q. And this you explained in your Witness Statement at Paragraph 29. You mention here what you call the "decision stage" that takes place after the oral hearing; correct?
A. Correct.
Q. Let's look at Paragraph 29 of your First Witness Statement. We are going to show it on the screen.
It says here, first the law clerk looks at the whole file and meets with the "vocal ponente" to discuss the Resolution; correct?
A. Yes, that's correct.
Q. And I'm reading out of your Witness Statement.
Then after this meeting, the law clerk prepares a draft resolution, the Draft Resolution, which is a draft of the Resolution; correct?
A. Correct.
Q. And that draft is first examined by the "vocal ponente"?
A. Yes, that's normally the case.
[Page 1078]
Q. And the "vocal ponente" may make changes of the draft?
A. Yes, they can do it.
Q. Once the "vocal ponente" is happy with the contents of the draft, it is sent then to the other vocales of the Tax Tribunal of the Chamber for it to be reviewed?
A. Yes.
Q. And those two other Tribunal vocales can, of course, make changes to the draft?
A. Yes, they can do so.
Q. The law clerks cannot oppose those changes to the Draft Resolution?
A. Well, if you're asked, you can justify why you are presenting a certain consideration, but if they insist, you cannot oppose to their statements.
Q. Of course.
And that Draft Decision is the subject of deliberation by the three Tax Tribunal vocales of that Chamber, and they decide the case; correct?
A. Yes.
Q. In general, during the deliberations amongst
[Page 1079]
the members, the law clerks are not present?
A. Generally, no, but sometimes we are called upon to explain something to the Chamber and we were present of course.
Q. Of course. The Decisions of the Tax Tribunal specialized chambers do not need to be unanimous?
A. No, they can be decided by a majority.
Q. If there is a vocal that disagrees with the Resolution, it can issue a dissenting opinion?
A. Yes. They usually do that amongst peers, yes.
Q. Of course. And the vocal that chooses to disagree and submits a dissenting opinion, does he or she use a law clerk?
A. It depends on the nature of the Opinion. Sometimes the "vocales" issued dissenting Opinions in a reiterated manner, in matters which for them were in a certain way, and the Tribunal had another Opinion, so they just copied another Opinion and they didn't really need a law clerk. If the vote was very short, it could be made by the vocales. But if the vote
[Page 1080]
needed some substantial modification, they used a law clerk.
Q. In your two Witness Statements, sir, you conclude--and you did so during your direct--you conclude that the President of the Tribunal and the assistant--I think you call her an "asesora" now--unduly influenced in the Resolutions of the Royalty Cases of '07, '06, and '08 of Cerro Verde; correct?
A. Correct.
Q. Just to confirm, you did not participate in any of those cases; correct?
A. Correct.
Q. You did not participate in the oral hearings related to those cases?
A. I did not participate in those either.
Q. You did not participate in any of the communications amongst the vocales in connection with those cases?
A. Correct. My conclusion, however, does not have to do with my direct participation. It has to do with the documents I was able to see after my
[Page 1081]
experience of being in the Tax Tribunal for 14 years.
Q. Right. You make reference to an email by Úrsula Villanueva with Ms. Olano; correct?
A. There are a few emails, I think.
Q. At Paragraph 40 of your First Witness Statement?
A. Yes, that's correct.
Q. I understand that you received that email for the first time between 2020 and 2021; right?
A. 2021.
Q. And that email was provided to you by Claimant's Counsel; right?
A. Correct.
Q. I understand that Claimant's Counsel obtained that email via the transparency proceedings?
A. Yes, requests for access to information.
Q. Did you verify where the email came from?
A. No.
Q. We had already said that this email, like the other ones that you cite, you obtained via the Claimant's Counsel in 2021; correct?
A. Correct.
[Page 1082]
Q. Just to set a timeline, as you indicated in our other Hearing, the email by Ms. Villanueva was sent before the oral hearings that were related to the Royalty Cases of '06, '07 and '08.
A. Before the oral hearings, but after the notification for the oral hearings--
Q. Yes, but before the oral reports as such; is that correct?
A. Yes.
Q. After the oral hearings, as we established, there are deliberations on the Draft Resolutions, and in those deliberations, the law clerks are not present?
A. Generally, they are not.
Q. At Paragraph 47 of your First Witness Statement, you say that evidence that Ms. Villanueva participated in the case of 2008 was the initials that appear under the signature in the Resolution; correct?
A. Her initials appear below the signature, and Ms. Olano also recognizes this in her Statements.
Q. Right. Just to understand, this Resolution with these initials, this was served on the taxpayer
[Page 1083]
when the resolution is notified; correct?
A. Correct.
Q. The practice, as I understand it and you explain it, is that the signatures, more or less, include the work route of who participated in the preparation of the Resolution in capital letters; correct?
A. Correct.
Q. And the lowercase initials are the ones of the Secretary of the Chamber?
A. Yes, the Administrative Secretary.
Q. Okay. Thank you for the correction.
To be clear, the first initials, "Z.D.," in this case, are the ones from the "vocal ponente," and then you have the rapporteur, which is not the law clerk--
A. Yeah, the rapporteur is not the law clerk.
Q. And then if you there is a law clerk, you write the initials?
A. Yes, the initials of the law clerk.
Q. I understand from your testimony in the last Hearing, that the initials of the law clerks are
[Page 1084]
not always included, although they may have participated?
A. There are some very rare exceptions. The unique exception in which a law clerk has participated and his initials are not in the Resolution is when the draft is so bad that the vocal had to redo it and the vocal of the Tribunal withdraws the initials of the law clerk.
Q. Okay. So, including these initials is a practice by the Tax Tribunal, but it's not the obligation of the Tax Tribunal?
A. I do not remember any Resolution without the initials in the 14 years I was there.
Q. That was not my question.
My question was, it is not a rule--it is not an obligation to include these initials?
A. If you're saying that it's not in the manual, it's not in the manual of procedures, but I do not remember a single resolution without the initials of the work route.
Q. Sometimes in the work route, perhaps a law clerk is not mentioned, even though the law clerk
[Page 1085]
participated in it; correct?
A. Yes, correct.
Q. To illustrate this point, if we go to Tab 7--
ARBITRATOR TAWIL: Excuse me. I do have a follow up question, rather, just to understand.
You said that the initials are there unless the draft is really bad and the draft has to be remade and the initials are withdrawn?
THE WITNESS: When a law clerk participated and the initials are withdrawn, it could be the situation that I mentioned, which is because the work has not been done properly. The other situation is when there was no participation also by a law clerk, so there are no initials by the law clerk, but that's in very rare cases.
ARBITRATOR TAWIL: Would it be reasonable to think that internally, within the Tax Tribunal, the fact that the initials are there is like a recognition of the work done by the law clerk, and when the initials are removed is a recognition that the work has not been done properly?
[Page 1086]
THE WITNESS: In principle, yes, but the idea of the work route is that the Administrative Secretary of the Chamber can always take the latest version corrected by the vocales.
ARBITRATOR TAWIL: Okay. Thank you.
BY MS. DURÁN:
Q. Okay. Let us move to Tab 7. This is RE-2 58. Let us look at the signature portion of this, the last page. I see that you have it on the screen as well.
A. Yes.
Q. You can see the number of the Resolution, 213-10-2018. And "10" means that it comes from Chamber 10; correct?
A. Yes, correct.
Q. And when we look at the signature, first you have "G.C.," Guarníz Cabell. He was the "vocal ponente" in that case?
A. Yeah, she was. She was the "vocal ponente."
Q. And then it says T.S., which is the rapporteur clerk?
A. In this case, Claudia, yes.
[Page 1087]
Q. Toledo Sagástegui?
A. Correct.
Q. And then we have lowercase initials, which are the Administrative Secretary's initials?
A. Yes, correct.
Q. Thus, it is one of those cases in which or there was no law clerk or there was a law clerk, but he or she was penalized?
A. Yes. This is a typical case, in which normally a vocal could not use a law clerk. These were very specific cases, typically when the draft Resolution was very, very simple, like this, very straightforward.
This is a case related to Payment Orders.
Payment Orders in Perú are only issued on the basis of your own tax return. So, the work of a Tax Tribunal vocal or a law clerk in this case is only to verify that the amount of the Payment Order is the same amount in the tax return. So, it's very short.
Another case where no law clerk was used is when the members that made the Resolutions--well, there were many members in the Tax Tribunal that had
[Page 1088]
had many years of experience as law clerks of the Tax Tribunal, so they knew how to draft this very well. They were very familiar with the drafting of these things, so they could prepare their Resolutions without using a law clerk.
Q. Tab 8, please. This is RE-257, for the record. This Decision is numbered 12478-1-2019, and "1" says that it belongs to Chamber 1?
A. Yes, that's correct.
Q. Let's look at the last page please, at the signature section, and we have two signatures up top.
The rapporteur clerk, and then we have the dissenting opinion; correct?
A. Correct.
Q. So, in this Resolution, we have a 2:1 ratio?
A. Not for the full Resolution. The dissenting opinion has to do with just one aspect of this Resolution.
Q. The initials here, we have two types of initials: "M.V.," which is Moreano Valdivia, he is a Tax Tribunal vocal--it is under the rapporteur clerk and under the dissenting opinion of vocal Moreano
[Page 1089]
Valdivia--and then the initials of the Administrative Secretary?
A. Yes, in this case they didn't include the ones from the Secretary rapporteur of the Chamber.
Q. Yes, but you said it was part of the custom?
A. Well, what I said is that there shouldn't be a single resolution without a work route.
Q. But it sometimes happens; right?
A. Without a work route? No, I've never seen a Decision without a work route. The one that you're showing to me has a work route.
Q. So, the rapporteur did not participate in this Resolution, or is it incomplete? Is the work route incomplete?
A. Well, the work route came from the latest draft, which is from the folder of Mr. Moreano.
ARBITRATOR TAWIL: That's the capital letters. What about the lowercase letters here?
THE WITNESS: That would be the Administrative Secretary of the Chamber.
BY MS. DURÁN:
Q. To be clear, we have three different
[Page 1090]
individuals: The rapporteur clerk, the administrative secretary, and the law clerks?
A. Yes, of course.
Q. Their roles are completely different; right?
A. The rapporteur is a lawyer, the administrative secretary is an administrative assistant, or executive assistant, I think it is called, and the law clerks--all of us were lawyers.
Q. And the Resolutions should always bear the signature of the three members that made the Resolution?
A. Yes, necessarily.
Q. You say that in the Cerro Verde Cases, it is irrelevant that the Resolutions were signed because they were going to be signed anyways because of the influence of Ms. Olano; correct?
A. Correct.
Q. Your testimony, then, is that the Tax Tribunal vocales agreed to sign just to please the President?
A. I don't know if just to please the President, but they signed a Resolution that was
[Page 1091]
identical to the one issued before in connection with which they opposed, via a series of emails. They said that there was lack of coordination, or irregular conduct of Chamber 1, but then they signed this identical Resolution without any kind of change, the three vocales did.
Q. You're talking about Chamber 10, but in connection with Chamber 1, there were three different Tribunal vocales that signed it as the Resolution that was issued. Those three Tribunal vocales were also under the influence of Ms. Olano, that's why they signed the Resolution?
A. Well, the Draft Resolution out of Chamber 1 was worked on by Úrsula Villanueva, and it was also deliberated with Ms. Olano. There was a same kind of pressure that Chamber 10 vocales had.
Q. You did not really live through any of these events?
A. It's not necessary for me to live through them.
Q. My question is different. You didn't live through any of these events?
[Page 1092]
A. To reach my conclusion, I don't have to be present. I concluded what I concluded on the--based on the documents that I was shown, and of the 14 years that I was working in that same institution.
Q. Sir, please reply to my question.
You did not live through any of these events?
A. Again, I wasn't present. I already said that.
Q. Thank you.
As we have seen, you also present a series of allegations. They are quite serious against President Olano. And you say at Paragraph 33 of your First Witness Statement--we can look at it on the screen.
A. Please go ahead.
Q. Towards the end of that paragraph, you say: "However, during my time at the Tax Tribunal, I witnessed how President improperly intervened to influence the resolution of cases of high interest to her, with the help of her assistants"; correct?
A. Correct.
[Page 1093]
Q. You do not have any citation to support your assertion; correct?
A. No. It is just my conviction.
Q. And is that what you lived during 14 years that you were at the Tax Tribunal?
A. I don't know if I lived this during 14 years, but I saw this starting a specific year.
Q. Did you ever present any claim?
A. No.
Q. And you do not either refer to any administrative proceeding against President Olano throughout the 14 years; correct?
A. Correct.
Q. Now, we move on to the next paragraph of your First Witness Statement. In there, you explain how you believe that there was an intervention in the resolution of the cases; correct?
A. Correct.
Q. In the first five phrases, you do not cite any document?
A. Correct.
Q. And then you state that, at the same
[Page 1094]
paragraph, that Dr. Olano supposedly influenced the process because she had a lot of power to ratify the "vocales"?
A. Yes. She was the person who was mainly responsible for it.
Q. And you state--I have the impression that the "vocales" would reject the draft resolutions that supposedly came from Presidency. That was your impression?
A. Could you say that again?
Q. In the last phrase of Paragraph 34--and in English it should be on the next page.
Do you see it?
A. Yes.
Q. But you never made any claims against it during your 14 years at the Tribunal?
A. No.
Q. Mr. Estrada, did you ever participate of the Ratification Commission?
A. As a member of the Commission or as a vocal to be ratified, no, but I am familiar with the process because we helped our vocales throughout this process.
[Page 1095]
Q. Just to clarify, in connection with the Ratification Commission that assesses the "vocales" who are seeking to be ratified. In those sessions of that Commission, did you ever participate or not?
A. No. Only members of the Commission participated of those meetings.
Q. And if I recall correctly, in your Statement in February, the answer was "no, never"?
A. Yes. Clearly, as a member of the Commission or as a "vocal" to be ratified no, but I am familiar with the processes, because the "vocales" always just asked us for help. There is a lot of administrative work to be done and documents to be completed. So, we did help the "vocales."
Q. So, you were helping the "vocales" that were trying to get ratified?
A. Yes.
Q. And you are saying that it required a lot of documentation, because it required to file their resumes, resolutions they had issued, among others?
A. Well, the typical thing that a vocal asked you for, the "vocal" had to present three Resolutions
[Page 1096]
from the last three years, and we search what we thought were their best Resolutions. We discussed them with them. We chose them together, and then we had more of the administrative portion, sort documents. There was a lot of paperwork.
Q. Those three Resolutions that you looked for is because you assess the quality of the Resolutions issued; correct?
A. It assesses the quality of the Resolutions.
There are two Assessments that are related to the President of the Tribunal. One is presented by the vocal, and another evaluation is on the resolutions that they have randomly found of the vocal.
Q. And those others, are they randomly selected?
A. Yes. Usually, what the Tax Tribunal did was hire a notary to do the random selection, and then we analyze their randomly selected Resolutions.
Q. Random means randomly?
A. Randomly.
Q. Fine. Now, on the Ratification Commission, you have four members; correct?
[Page 1097]
A. Yes.
Q. Who are those members?
A. We have the President of the Tax Tribunal, the Dean of the oldest public law school of Perú, the Dean of the oldest private law school of Perú, and a member of the Ministry of Economy and Finance.
Q. And the member of the Ministry of Economy and Finance has the deciding vote; correct?
A. In case of a tie, yes.
Q. Sure, because there are four members, they need someone to decide if there is a tie, right?
A. Yes.
Q. And the Deans of those universities, I understand that they are respected universities in tax matters and law, and they are the ones that participate in these commissions; correct? Academics?-
A. Well, I do not know whether they have specific Tax Expertise necessarily, but they are the deans of the oldest law schools. Whether they have
[Page 1098]
tax expertise, I do not recall. I do not recall any
Law Dean that has been an Expert on taxes.
Q. But when you're saying that they are the
oldest ones, are they the most important universities
in Perú?
A. Yes.
Q. Now, if we look at Tab 12, CE-667.
A. Okay.
Q. That document is a document that you cite
several times to allege the influence by the President
of the Tax Tribunal; correct?
A. Yes.
Q. And this is an interview to a former "vocal"
of the Tax Tribunal, Ms. Ana Maria Cogorno? Correct?
A. Correct. Former vocal.
Q. Yes, she was. And she gave this interview
once she left the Tax Tribunal, correct?
A. Yes.
Q. If we can look at Page 2. I do not know if
your version will have a page number, apologies, but
it is question 16.
A. I don't have numbered questions in Spanish.
[Page 1099]
Q. Apologies, it is a printing problem. We can
put it on the screen so it can be located.
Here, the question is: "Would you recommend
a young professional to join the Tax Tribunal?"
Are you there?
A. I'm looking for it.
MR. RIVERA: Sorry. Can the witness have the
complete document? It's not in his binder. And also,
I mean, I think it would be good for him to have a
reference.
MS. DURÁN: You're saying that you don't
have the complete document?
MR. RIVERA: I'm saying that the complete
document is not in his binder; right? I mean, he just
said that numeration is off. So, can he--
MS. DURÁN: No, it's not that numeration is
off. The printing, when you print it, unfortunately,
the numbers of the questions do not appear, but it's
on the screen.
THE WITNESS: I found the question.
MS. DURÁN: And I understand that the
Witness found what we are asking him about.
[Page 1100]
BY MS. DURÁN:
Q. The question is, would you recommend a young
professional to join the TF. TF is the Tax Tribunal;
correct?
A. Yes.
Q. And her answer is "yes," correct?
A. "Yes, but."
Q. So, we can read the "but" if you want. It
says: "But I would tell him that you have to have a
calling"?
A. Yes. It is a remark.
Q. So, in general to work in the public sector,
you need to have the vocation for it; correct? A call
to that type of work; correct?
A. Yes. That's what I mean in that answer with
the "but."
Q. If you want, we can continue to read it.
"So, that is the recommendation. It is not
just about getting a job. You have to be a good
technician and have an interest in public service to
be in the Tax Tribunal"; correct?
A. Yes.
[Page 1101]
Q. And if we now look at Page 6. I am afraid
you will to have count the Pages. I apologize. That
is the last page of the interview, and the
second-to-last answer to the question that says--take
some time.
A. Okay.
Q. Are you there?
A. Yes.
Q. This is an answer that you cite in your Witness
Statement to say that, because of the influence of the
President of the Tax Tribunal on the ratification,
correct? Do you remember?
A. Yes. This is a question that is highly
related to other questions answered by Dr. Cogorno in
this case, but I am citing this, indicating that she
indicated her unhappiness with the ratification
process.
Q. What she said, the question is: "Take some
time to think about your new occupations." They are
saying to her: "well, what comes for the future.
Correct? And many people look to you as an example."
And she says, "I would like to teach and be a
[Page 1102]
consultant now"; correct?
A. Yes.
Q. And then she said it's great to be
absolutely free, and not to be wondering if there will
be ratifications or not, whether they liked it or not.
And then she continues.
And you did not quote what follows: "But
I'm still happy, and I'm very grateful for the Tax
Tribunal for all that time, because I learned a lot
and I met very valuable people"; correct?
A. Yes. She's happy to leave the institution.
Q. She's thanking the institution?
A. When one reads that answer, and reads that
with the previous answers to this question, the
deepest question by Dr. Cogorno had to do with the
pressure at the time of ratifying a "vocal." So,
she's happy. She doesn't need to be part of a process
that she thought was completely unfair and unnecessary
every three years.
Q. First of all, she does not use the words
"unfair"; correct?
A. If we look at a previous question, she does
[Page 1103]
not say "unfair," but she says that it is a pressure
mechanism.
Q. You can look at this later on with your
attorney, but it says "I am happy," and she thanks the
Tax Tribunal; correct?
A. But I understand that "happy" is because she
left the institution, and she is thanking the Tax
Tribunal--not the Tax Tribunal but for all her time
there. She learned a lot and she met very valuable
people. I do not think she's thanking the
institution. Just the time she was there, and also
the people that she met while being there.
Q. Yes, because she appreciates whoever she
met. So, she thinks that they were very valuable
people. So, in this interview, Mr. Estrada,
Dr. Cogorno does not mention the President at any
time; correct?
A. Well, she discusses quite a bit the position
of Dr. Olano and there are no more than two
Presidents. There is only one. So, when she
questions the position of the Tax Tribunal President,
she does not mention Dr. Olano directly, but, clearly,
[Page 1104]
Dr. Olano was the President back then.
Q. Just to confirm, in spite of all of these
alleged disagreements, that Ms. Cogorno had, she
recommended a young person with a vocation to go to
work at the Tax Tribunal; correct?
A. Yes, but also with a caveat saying "but."
Q. Regarding having vocation?
A. Yes.
Q. And she thanks the very valuable people that
she met there?
A. Again, to the people that she met. I don't
think that she's thanking the institution.
Q. Dr. Cogorno--did she ever put a claim against
Dr. Olano?
A. Only in this interview she expressed her
disagreement. I believe, I understand that the
"vocales" could not offer any interviews while they
were vocales.
Q. That's why I'm asking you about Dr. Cogorno,
when she left. Did she present any claims against
President Olano?
A. I do not recall anything beyond this
[Page 1105]
interview, but in this interview, she criticizes.
Q. Mr. Estrada, in your Second Witness
Statement--I think you do it in both, but in the
Second one you refer to a culture change, when
allegedly there was a change in the tradition when
Legislative Decree 1115 was passed for giving a bonus
on the performance on the "vocales" of the Tax
Tribunal. Correct?
A. Can you show me that?
Q. Yes. This will be Paragraph 15 of your
Second Statement.
A. Did you say second?
Q. Yes.
Are you there?
A. Yes.
Q. There, it refers to the efficiency or the
performance bonus. In that same paragraph, you also
say that that the bonus was never implemented?
A. Yes. That's why it was negative incentives,
since it was never implemented.
Q. Mr. Estrada, the 1115 Legislative Decree
says that there is an authorization to pay the bonus.
[Page 1106]
Correct?
A. It is saying that it will be regulated through
the Ministry of Economy, and authorizing the MEF to
pay that bonus.
Q. Sure, precisely. And here it says, clearly,
that it had to be authorized by the MEF before making
any payment. Correct?
A. Well, there should be a rule. The
Legislative Decree refers its regulation to a Supreme
Decree that was never issued. That's why it was so
perverse, so negative.
Q. But if the Legislative Decree only says "do
it," you cannot wait until it is actually regulated to
be paid?
A. When a rule, such as a law or legislative
decree, refers its regulation to a law of a lower
hierarchy, what is normal, what is correct and what
should always happen is that this law has to exist.
The exception is what happened in this case. That is,
that the Ministry of Economy in 2013-2014 years and
onwards did not regulate, did not implement the
bonuses, but that was a perverse aspect of these
[Page 1107]
bonuses, because the only reason why a Ministry of
Economy and Finance is not regulating an expense is
because they do not have the resources.
In the understanding of the vocales in that
moment, it was to facilitate the existence of
resources in favor of the MEF so that they no longer
had the pretext of not regulating the bonuses due to
lack of resources. If they had implemented this bonus
immediately after the law was passed, it would have
been less harmful the effect that it caused than the
fact that it was not regulated.
Q. But the truth is that it was never
regulated?
A. Correct.
Q. It could never be expected to be paid?
A. But, once again, you need to wait for a
regulation that refers back to another one to be
regulated, to be actually regulated. The
extraordinary thing is what happened here, and that is
what generated a perverse incentive for all the
vocales during the first years. At a certain point, I
understand that the vocales must have gotten tired of
[Page 1108]
waiting for the regulation, but for at least the two
or three years immediately after the issuance of
Legislative Decree 1115 there was a lot of expectation
from the vocales in the sense that it would be
regulated.
MS. DURÁN: Can I take 30 seconds?
(Pause.)
MS. DURÁN: I have no further questions.
Thank you.
PRESIDENT HANEFELD: Thank you very much.
Any questions in redirect?
MR. RIVERA: Yes, we do have several. We
would be--
PRESIDENT HANEFELD: Several.
MR. RIVERA: Yes. We would be grateful if
we could break for lunch, and then come back and do
the redirect, Madam President.
PRESIDENT HANEFELD: Yeah. We would prefer
the questions now. Just in order to--and now for the
further planning, we have to end the Hearing today at
5:30 our time, and I think Mr. Isasi is waiting on his
remote testimony.
[Page 1109]
So, how much time do you need for your
questions?
MR. RIVERA: I hope to be brief,
Madam President, hopefully 10-15 minutes.
PRESIDENT HANEFELD: Then we would like to
conclude.
MR. RIVERA: Okay. Can we have
three minutes just to--
PRESIDENT HANEFELD: Sure. Sure.
MR. RIVERA: Okay. Thank you.
(Pause.)
PRESIDENT HANEFELD: So, we continue with
the redirect.
MR. RIVERA: Thank you, Madam President.
Yes, we're ready. I'll switch to Spanish again.
BY MR. RIVERA:
Q. As you heard, we are short of time, so I am
going to ask you some questions about your Statement
and the questions by the attorney on behalf of Perú.
Please respond as briefly, but as specifically, as
possible.
[Page 1110]
A. Very well.
Q. Perú's Counsel mentioned that you were not
in attendance in Chamber 1 and Chamber 10, that you
did not participate in the Resolution of case files
for the 2006, '07, and '08 Royalty Cases.
Do you recall that?
A. Yes.
Q. And you said that you did not need to be
present to offer your Statement on the irregularities
that were presented in general at the Tax Tribunal and
in this specific case?
A. Correct.
Q. My colleagues showed you the email that you
referred to to indicate the irregularities. This is
the email that Úrsula Villanueva sent to the President
Olano.
Do you recall that?
A. Correct.
Q. My question here is: Do you think that this
is a familiar email, or why is it that you can
identify this email based on your experience?
A. One second, please. Could you please show
[Page 1111]
the email on the screen?
Q. Yes.
MR. RIVERA: Could you help us?
BY MR. RIVERA:
Q. I think it is in your Statement.
A. Yes. I have it here.
Q. Based on your experience that you mentioned,
were this the type of emails that you saw frequently?
Or what type of email was this?
Did you usually see it?
A. Well, this is a typical type of
communication between a law clerk and the "vocal
ponente." In other words, I must have sent 50 emails
like this one for different reasons to a "vocal" I was
working with.
This is an email for coordination purposes,
and it is not only recognized by Ms. Olano in her
Statement, but it is also signed by Úrsula Villanueva
in the Resolution.
It is a typical email when a law clerk has
reviewed the case file, and in this case, Úrsula
Villanueva, because she says: "I sent you the
[Page 1112]
arguments of both Parties," and this is because she
has had the case file at hand. She also said that she
sent "as well as the main clauses of the Stability
Agreement." That is related to all of the Cerro Verde
disputes.
"There are arguments for both sides." That
means that she has a position, and "I am more or less
leaning to one side" to make a comment, and -then she
says: "When you can, read the arguments and we can
discuss it."
This is a typical email sent by the chamber
law clerk to the "vocal ponente" to deliberate a case
file later.
Q. Thank you. You were also asked about
irregularities that you witnessed. What types of
irregularities, briefly, did you witness? When did
you start seeing them?
A. As of 2012 and up to--or between 2004 and
2012, when I was with the Tax Tribunal, workload
increased significantly, but the Chamber would usually
solve--resolve these files based on the oldest one
presented.
[Page 1113]
As of 2012, when the Legislative Decree
related to the bonuses was published and there was a
new administration in Perú. We started to see news
indicating that there was a large amount of money that
was being litigated at the Tax Tribunal.
So, starting then, Ms. Olano started to send
some information and some lists that included the
files of the Tribunal, that included from the highest
to the lowest amounts, but they broke away from this
principle to resolve the issues based on seniority or
the oldest case files presented. That initiated in
2012 and continued all the time.
Q. So, was Cerro Verde part of these lists?
A. Yes. Cerro Verde's case files were in these
lists.
Q. So, if I understand you correctly, Cerro
Verde was included in these lists because of the
amount?
A. Yes, because of the amount that has been in
dispute before the Tax Tribunal.
Q. In addition, my colleague took you to a
document, which is the document at Tab 12, which is
[Page 1114]
the interview with Ms. Cogorno.
A. Correct.
Q. Who was Dr. Cogorno, very briefly?
A. Ms. Cogorno was a vocal of the Tribunal who
served as a vocal of the Tax Tribunal for about
20 years. She was the presiding vocal of Chamber 1
when I came in. She retired because she hit the age
limit.
Q. By age limit. When did she retire? Do you
remember more or less?
A. I don't remember exactly, but it must have
been about 2013.
Q. That is, more or less around the date the
royalty case was resolved.
A. Yes.
Q. Now, the next page at the top is the
question that begins: "What is your opinion about
ratification of the vocales of the Tribunal?"
A. All right.
Q. It seems to me this is one of questions that
you were referring to in your response.
Could you explain more or less what
[Page 1115]
Ms. Cogorno is saying here? It's Question Number 32.
Could you read the question, please?
A. "What is your opinion of the ratification of
the vocales? It seems to me a bad idea that they
ratify the vocales. It's a form of indirect pressure.
There are sufficient grounds for removal in the Tax
Code because ratification may be impartial or a means
of pressuring, even more so now that it has to be done
every three years."
Q. So, here Ms. Cogorno is saying that it is a
means for bringing pressure to bear.
Did you hear this from other members?
(Interruption.)
(Stenographer clarification.)
(Comments off microphone.)
MR. RIVERA: I will just rephrase the
question again.
BY MR. RIVERA:
Q. Did you hear what Ms. Cogorno said, that it
was a way of bringing pressure from the other vocales?
A. Yes. There's no vocal who wants to be
ratified in his functions every three years,
[Page 1116]
especially because the criteria for ratifying the
vocales of the Tribunal--well, there were objective
criteria, such as their CV, a psychological
evaluation, but those two components accounted for
only 10 or 20 percent. The lion's share of the
criteria for ratification, 60 percent, depended
entirely on Ms. Olano.
Q. And can you read the next question that
begins: "Do you trust the Ratification Commissions"?
And could you read the question first, please?
A. "Do you trust the Ratification Commissions?"
And her answer is: "I don't know what the
criteria are under which each of the members of the
Commissions acts. I would prefer to have the Ministry
of Economy and Finance make changes based on the
grounds of Tax Code."
Q. So, is she saying she trusts?
A. No. In reality, no one trusts the
Ratification Commissions. What they wanted--the Tax
Code had specific grounds for removal of a member of
the Tribunal.
So, a ratification process, when you had not
[Page 1117]
engaged in any of the grounds, were political pressure
with respect to how they would act.
Q. Thank you very much, Mr. Estrada. My
colleague from the other Party also mentioned the
bonds--or the bonuses, rather. This was an
expectation and that nobody expected them.
If we could turn to Question 56 of this
article. It's the next-to-the-last question. It
begins with "bad things, what do you mean?" Do you see
that?
A. Okay.
Q. Could we begin on the last word of that
page, the last word of that page, where it begins with
the word "tampoco"? If you can read the question and
start with "tampoco."
A. "Bad things? What do you mean? Neither
have they paid us the bonus created by Legislative
Decree 1115, which had to be paid on a quarterly
basis, according to that rule.From July 2012 onwards
and until this date, the Supreme Regulatory Decree has
not been issued, and that's why they do not pay. In
any case, they owe it to me as from July 2012."
[Page 1118]
Q. So, it was an expectation.
A. All of the vocales evidently expected it.
Q. Now, moving on to another topic: These
irregularities that you witnessed in the Tax Tribunal
that you mentioned in answering the lawyers' questions
from the other Party, she spoke of the deliberation
and decision-making process within the Tax Tribunal.
When irregularities such as this came up on the part
of President Olano, was there any possibility of a
discussion--or deliberation, that is to say, or
dissenting votes?
A. Well, as I told the attorney, the
possibility of dissenting votes, especially from
Mr. Moreano was always with his peers. When a draft
had been prepared upon by the Presidency, obviously,
then that diminished a lot that possibility. I never
saw a dissenting vote when Villanueva had worked up
the draft. Thus, yes it was pressure. So, what was the
capacity for deliberation? Well, this is a Draft
Decision from the boss. It is difficult to oppose
that when, that same year or the next year, you're to
be ratified.
[Page 1119]
Q. Now, you mentioned Mr. Moreano.
Mr. Moreano, in fact, was bothered upon receiving this
draft, the draft from Chamber 1. Mr. Moreano was
upset. Why was Mr. Moreano upset?
MS. DURÁN: I'm sorry--
MR. RIVERA: You're asking about a specific
resolution from Moreano, so I'm asking the question
about Moreano. And also, you asked him about the
resolution process, so this is a question about the
resolution process. I'm sorry. It is. I'm just
asking about--
MS. DURÁN: No, you're asking about the
coordination.
MR. RIVERA: I'm asking about the
Chamber 10.
PRESIDENT HANEFELD: Please go ahead.
MR. RIVERA: Okay. Thank you.
Excuse me. I'm going to try to speak a
little more slowly.
BY MR. RIVERA:
Q. You mentioned--it was mentioned the
deliberative process in Chamber 10, or the
[Page 1120]
deliberative process in general?
A. Yes.
Q. Also, a Resolution by vocal Moreano was
mentioned. When you speak of Mr. Moreano, and you're
also talking about this Resolution process, why do you
believe that Mr. Moreano was upset for having received
a Resolution that already resolved a matter that was
before their Chamber? Shouldn't he be happy that a
complex case was already resolved?
A. Well, not actually. What should have
happened at the Tax Tribunal, and what was done when
the Chambers had either the same case or very similar
cases, they should coordinate first before issuing
even a draft. What would happen, in fact, would be
that one would advise a law clerk--or rather, name a
law clerk from Chambers 10 and 1, and then they would
sit down together and we would begin discussing with
our vocales the matter. Moreano was upset not because
the work had been done, but rather because he did his
work in vain. Let us recall that the case file before
Chamber 10 had an oral hearing one month before the
one before Chamber 1.
[Page 1121]
Normally in the Chambers when the case file
is submitted for oral hearing there's already a draft
resolution because there needs to be something to show
the vocales when the Parties present their arguments
so that the vocales have knowledge of the case that is
being presented, the "vocal ponente" presents an
initial draft.
Obviously, the fact that Chamber 1 had
issued the Resolution with no coordination, because
that's what the complaint is about, not that they are
working on it, but that the Resolution was issued,
throws out all the work that Chamber 10 had done in
this case.
Q. Very briefly, Mr. Estrada. Now, answering
the questions by Perú's lawyers, you spoke about the
work of the law clerks.
Why do you think it was unlikely that vocal
Cayo had worked on this case file without a law clerk?
I'm talking about the case file regarding the
2006-2007 Royalties.
A. I don't think it's unlikely. I think it's
impossible for him to work on it alone. Mr. Cayo, all
[Page 1122]
the time I was in Chamber 10 I worked with him.
Mr. Cayo came into the Tax Tribunal, but his own only
expertise was that he was an accountant. He obtained
his law degree the same year that he came into the Tax
Tribunal.
As accountant, well, accountants have many
difficulties when it comes to writing particularly
such complex or technical writing as the Tax Tribunal
has to do.
So, Mr. Cayo, in the cases that were simpler
than this, and really any case, he would always turn
to a law clerk. The Cerro Verde case file was a
particularly complex one. It was a controversy that
had not been decided by the Tax Tribunal. It was a
very voluminous case. I knew that because I handled
it. It involved about five volumes, each volume has
500 pages and the controversy involved a significant
amount.
So, it is impossible for him to have worked
on it alone unless, as I understand that occurred, he
took the Resolution or the case file from Chamber 1
and then just copied it and adjusted the data.
[Page 1123]
Q. Thank you very much.
MR. RIVERA: That is all the questions,
Madam President.
PRESIDENT HANEFELD: Thank you.
A question on recross?
MS. DURÁN: Unfortunately, yes, Madam
President. I will be very brief.
BY MS. DURÁN:
Q. Mr. Estrada, you say in response to one of
the questions put by the lawyer for the Company that
as of 2012, the culture at the Tax Tribunal changed;
right?
A. In the terms of resolving the matters on a
first-come, first-serve basis.
Q. You left in 2018; correct?
A. Correct.
Q. For six years, did you denounce--during
those six years, did you denounce any of the
irregularities that you are discussing here?
A. No, I was a law clerk for a Chamber. It's
the vocal who is most prejudiced by the conditions.
[Page 1124]
I, as a law clerk, would do what the vocal would ask
me to.
Q. But you saw irregularities, and you did not
denounce them to anyone?
A. The irregularities did not involve me. They
did not involve my work, so I did not.
Q. Now, you spoke about the ratification
process with the lawyer for Freeport.
If we could--and you spoke of the
percentages or scores that were assigned to the
members who were seeking ratification. If we could
turn to Tab 11, please.
For the record, that is Exhibit CA-232. And
if you can turn to Article 17, please.
A. I'm there.
Q. You're there.
Article 17, you're there?
A. Yes.
Q. There's a table that shows the scores, and
it also--it speaks of CV, quality evaluation,
evaluation of effectiveness and efficiency, and the
psychological evaluation, and there's a personal
[Page 1125]
interview.
And I'm told there's no
interpretation--there is no translation of this
document, so--for which I apologize.
So, I will read it in Spanish.
So, it shows the different scores for the
different criteria that are the basis for evaluation
of the vocales; correct?
A. Correct.
Q. The quality evaluation has a 30 percent
weight; correct?
A. Yes.
Q. Now, if we can look at or turn to
Article 22. And I'm so sorry because there is no
translation for this either. Are you there?
It says, at 22.1 it says: "At the meeting
called by the President of the Commission, each member
thereof shall evaluate and grade, based on the
conscience and exercising the principle of freely
evaluating the CVs of the specialized Chamber members,
the quality of the Decisions," that we had already
established that some are chosen randomly, "presented
[Page 1126]
by the members and provided by the President of the
Tribunal," but when it says "provided by the President
of the Tax Tribunal" it's through that random process;
correct?
A. There are two aspects where the President of
the Tax Tribunal steps in.
Q. No, but that's not my question.
A. To answer your question, I need to tell you
that she prepares two Reports: One for the quality
evaluation, a report is done on the Resolutions
proposed by the vocales; and in terms of effectiveness
and efficiency, a report is drawn up on the
Resolutions that have been randomly chosen by those
vocales who are subject to ratification.
Q. And if we look at 22.2, it says "for
evaluating quality, the Commission may draw on the
services of a specialized third person"; correct?
A. Correct.
Q. Those Resolutions can be turned over to a
third person to independently evaluate the quality of
the Resolutions, correct?
A. Now, in all the years I've been at
[Page 1127]
Tribunal--and I've seen many ratification processes of
the vocales I work with--the only third-party who
would be brought in from the outside was a notary who
would choose the Resolutions. I've never seen them
call in a third person to evaluate the quality of
those Resolutions.
Q. But it could be, right?
A. It is in the rule as a power, but I've not
known of them to have exercised it.
Q. Now, you spoke about the email from
Mr. Moreano, and you said what Mr. Moreano meant to
say there. Did you speak with Mr. Moreano about what
he meant to say?
A. We can read what it says. It's not necessary
to interpret what it says. He says--it's clear what
he says.
Q. No, I meant--that's not my question. My
question is if you talked with him?
(Comments off microphone.)
MR. RIVERA: So, if you're asking about the
email, it's just fair that you show him the email.
MS. DURÁN: Madam President, I'm not asking
[Page 1128]
about the email. My question is simply if he talked
to "Vocal" Moreano about that email.
MR. RIVERA: Which email? So, can
you--you're referring to an email, so he should have
the document available.
MS. DURÁN: You asked him in redirect about
an email. He knows perfectly well what email I'm
talking about.
MR. RIVERA: Sorry, there were various
emails. So, which one are you talking about?
MS. DURÁN: I will rephrase my question.
BY MS. DURÁN:
Q. Mr. Estrada, did you speak with Mr. Moreano
about correspondence or emails that he's written?
A. This email, no, but we would always discuss
any correspondence that Mr. Moreano would have issued.
He was my boss for several years.
Q. But you did not discuss this email with him?
A. No.
Q. Now, you make a number of assertions that
six vocales, including your former boss, Mr. Moreano
signed because a decision came from the President of
[Page 1129]
the Tax Tribunal. Did you at any time denounce them
for having signed something that they had not decided?
A. I have only learned that they signed
something that they did not write on occasion of this
Arbitration. I did not know that when I was at the
Tax Tribunal.
MS. DURÁN: Okay. I have no further
questions.
PRESIDENT HANEFELD: Thank you very much.
If the Tribunal has no--
(Comments off microphone.)
PRESIDENT HANEFELD: So, we do not have any
questions to you, so you are released as a Witness.
Thank you so much.
(Witness steps down.)
PRESIDENT HANEFELD: Let us now discuss the
afternoon.
Our next Witness will be Mr. Herrera; right?
And can the Parties already estimate how long this
will take? Do we need to inform Mr. Isasi?
MS. HAWORTH MCCANDLESS: Madam President, I
will be doing the cross-examination of Mr. Herrera,
[Page 1130]
and having not initiated the cross-examination nor
heard his answers I can't say exactly how long. I
don't necessarily anticipate it being, ideally, more
than an hour and a half.
PRESIDENT HANEFELD: Okay. And so, you will
keep Mr. Isasi informed--
MS. HAWORTH MCCANDLESS: Yes.
PRESIDENT HANEFELD: --so he would be at our
disposal?
And what about--we could shorten the lunch
break, if the Parties agree. Then we could resume
already at 2:00. Would this be an option?
MS. DURÁN: Yes. We are in your hands.
PRESIDENT HANEFELD: Okay. Then we will do
so. See you at 2:00 p.m.
(Whereupon, at 1:17 p.m., the Hearing was
adjourned until 2:00 p.m., the same day.)
CARLOS ALBERTO HERRERA PERRET,
CLAIMANT'S WITNESS, CALLED
PRESIDENT HANEFELD: Welcome back.
We will now hear our next Witness,
[Page 1131]
Mr. Herrera.
Welcome, Mr. Herrera.
To introduce us briefly, this is our
Tribunal in this case. I'm sitting here with
Professor Tawil and Dr. Cremades. My name is Inka
Hanefeld. You have been called as Witness in these
proceedings by Claimant, so I need to ask you to read
out the Declaration under 35(2) of the ICSID
Arbitration Rules, which should be in front of you.
Could you be so kind to read it out to us?
THE WITNESS: Good afternoon.
I solemnly declare, upon my honor and
conscience, that I shall speak the truth, the whole
truth, and nothing but the truth.
PRESIDENT HANEFELD: Thank you very much,
Mr. Herrera. Now, we come to your Witness Statements.
Do you have your Witness Statements, CWS-12 and 22, in
front of you?
THE WITNESS: I do have both Witness
Statements before me.
PRESIDENT HANEFELD: And can you confirm
that these are your Witness Statements and that they
[Page 1132]
correspond to your recollection?
THE WITNESS: Yes, these are my Statements.
They have been prepared on the basis of my
recollection.
PRESIDENT HANEFELD: Thank you very much.
Then we hand over to Claimant, who will ask
you some questions. Then the Respondent will ask some
questions, and we may have questions at a later stage.
Thank you.
BY MS. HUANG:
Q. Good afternoon, Mr. Herrera. Thank you so
much for joining us. I'm going to ask you a couple of
questions.
Could you please describe your role and your
involvement in the negotiations of the U.S.-Perú TPA?
A. In the negotiations of the trade agreement
with the U.S., I was appointed as leader of the
negotiating team for the investment chapter. The team
was made up of officials from different agencies. I
came through ProInversión. There were people from the
Ministry of Economy, the Ministry of Trade, from the
[Page 1133]
Ministry of Foreign Affairs. There were lawyers and
economists. Behind us we had a team of lawyers that
supported us at all times. I participated in all of
the negotiation rounds except for the last one,
because at that time the negotiation of the chapter
was almost closed.
I also participated in coordination meetings
with the Andean countries and in the virtual meetings
that were held with the United States for coordination
purposes and also some negotiations that we had in the
interim.
Q. Can you explain how the negotiations
progressed from multilateral to bilateral?
A. Initially, indeed, the negotiations were
multilateral in nature, with Ecuador and Colombia. We
held coordination meetings to define a negotiation
strategy. On that basis we found common interests,
and we also saw that there were some discrepancies,
and some internal discrepancies, amongst us.
So, from the very beginning, we understood
that there would come a time during the negotiation
when the countries could start bilateral negotiations.
[Page 1134]
That is what happened, indeed, and Perú at one point
in time deemed necessary that, to be able to end the
negotiations in a timely manner, it was important to
have bilateral negotiations.
Q. In your Witness Statements, you testify
about your understanding of several provisions of the
TPA. Based on your understanding and experience, when
does the limitations period under Article 10.18.1
begin to run?
A. The limitations period, the three-year
limitations period starts to run when the investor
gains knowledge of the fact that a violating measure
has been applied and that that measure has caused
damage. Each measure may create a specific damage,
and for each independent damage, there is a specific
limitations period applied to it.
Q. You also testify about the fork-in-the-road
provision in Article 10.18.4 for Investment Agreement
Claims.
Could you explain the U.S. and Perú's
initial negotiation positions and how they came to
eventual agreement on the language "same Alleged
[Page 1135]
Breach" in the provision?
A. The fork-in-the-road provision, or
bifurcation, as it's also known, was a mechanism that
the Andean countries sought from the very beginning.
Our concern was that we could face in international
tribunals the same claim that could have been
submitted previously in local courts. This was shown
in one of the draft texts of the chapter, and this was
kept during a period of time, where we asked for an
election of forum that would be exclusive and
definitive, and also, the idea of res judicata was put
to the negotiation. But the U.S. never accepted this.
The U.S. said that it wanted to provide the
most protection possible and access to international
arbitration to its investors, and when we were
negotiating the acceptance of this idea of an
Investment Agreement, the United States restricted the
concept of fork-in-the-road to avoid only that the
same violation claimed before local courts could then
be submitted to an Arbitral Tribunal.
Q. Could you explain what kind of adjudicative
bodies the fork-in-the-road provision covers when it
[Page 1136]
mentions Administrative Tribunals and other binding
dispute settlement procedures?
A. When we were discussing the fork-in-the-road
concept, we had a concern, a concern that both Parties
had, which was for the local fora to have the same
level of independence that the International Arbitral
Tribunal would have. On the other hand, when dealing
with the possibility of violation of a contractual
obligation, what was sought was for the fora looking
at these disputes would be capable to resolve issues
related to contract violation.
The natural challenge was a Civil Court, we
thought, but we also thought that a contentious
administrative Tribunal could be an alternative for
some cases to be put to it and solved by it.
We also thought that there was a need to
preserve the possibility that the investor may have to
go to settlement dispute resolution mechanisms that
were already included in the Agreements entered into
between the State and the investor--that is to say,
commercial arbitration under Peruvian law.
Q. Can you please explain the negotiation
[Page 1137]
history behind the nonretroactivity provision in
Article 10.1.3 and the Parties' understanding of the
final provision?
A. From the outset, the Andean countries were
seeking to have the investment chapter, specifically
the dispute resolution mechanism, to be applied only
to disputes derived from acts or events that took
place after the Treaty had entered into force. The
U.S. was not in agreement. The U.S. was saying that
if the investment chapter, as established by
Article 1. Well, if the investment chapter is to be
applied to measures taken by the State, then the
dispute-resolution mechanism had to be applied to the
measures taken after the Treaty entered into force and
that caused damage after the Treaty entered into
force.
There was a lot of discussion on the
language of that paragraph, and then the final
conclusion reached was that the best thing to do was
to apply the provisions of the Vienna Convention.
Q. In your Witness Statements, you explain that
you discussed the reliance requirement in the
[Page 1138]
1 Investment Agreement provision, Article 10.16.1. You
2 discussed this with the U.S. delegation because they
3 initially proposed the language in that provision.
4 Can you describe Perú's understanding of the
5 provision after that conversation with the U.S.?
6 A. Indeed. Everything related to the Trade
7 Agreement was very important for us. That is why we
8 sent an email to the U.S. delegation for them to
9 explain to us in a detailed manner how that paragraph
10 would apply. The reply was that the paragraph was to
11 be understood by reading it in a comprehensive manner
12 under the definition of "Investment Agreement" and
13 under the definition of "Covered Investment."
14 Our conclusion was that the Investment
15 Agreement may be signed by an investor or by a
16 company, by a local company. That was the most common
17 case for Perú.
18 Secondly, the reliance requirement could be
19 met by the investor or by the Company. The important
20 thing that was highlighted was that the Claim had to
21 be directly related to the investment and the Damages
22 caused to the investment that was carried out in
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1 reliance of the Investment Agreement.
2 Q. And based on your understanding, is there a
3 temporal limitation in Article 10.16.1?
4 A. There isn't. No mention was made of any
5 temporal limitation under 10.16.1. This was of great
6 concern to us because we always understood, and the
7 U.S. always put this to us, that the coverage on
8 Investment Agreements had to do with those agreements
9 entered into when the Treaty came into force and also
10 had to apply to the Investment Agreements, or
11 contracts that may qualify as Investment Agreements,
12 subscribed before the Treaty entered into force.
13 Perú at one point in time during the
14 negotiation suggested that perhaps a waiver could be
15 included so that the chapter would only include the
16 Investment Agreement signed two years after. Chile
17 had done something like that.
18 The U.S. said no, and there was a parallel
19 negotiation with the Central American countries that
20 the U.S. was having parallelly and they were
21 considering the possibility for the chapter to only
22 apply to agreements entered into from the entry into
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1 force of the Treaty. Well, in the case of the Andean
2 countries, and specifically in the case of Perú, they
3 said, no, it's impossible.
4 All of the existing agreements need to be
5 covered. The problem was that at that point in time,
6 there were contingencies related to some contracts
7 made by the Government with U.S. investors, so the
8 investors were worried, and this was a worry that was
9 taken up by the negotiator.
10 Q. Thank you very much, Mr. Herrera.
11 MS. HUANG: Madam President, I have no
12 further questions.
13 PRESIDENT HANEFELD: Thank you.
14 CROSS-EXAMINATION
15 BY MS. HAWORTH MCCANDLESS:
16 Q. Good afternoon, Mr. Herrera. My name is
17 Jennifer Haworth McCandless, I'm part of the team that
18 represents the Republic of Perú in this Arbitration.
19 I think we have met before in Perú, because
20 you're a member of the commission, the Special
21 Commission that represents Perú. I think at one point
22 in time I remember meeting you in Lima. And I am
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1 going to be asking some questions about your Witness
2 Statements, obviously I'll be asking them in English,
3 and you, I understand, will continue testifying in
4 Spanish. So, we will need to both take a pause, but
5 you were doing an excellent job with Counsel for
6 Claimant with respect to not talking over her, so you
7 and I may be able to accomplish this if I pause after
8 I do my questions and you pause before your give your
9 answers and if we both have the translation, so we
10 will both be able to understand when the translation
11 has stopped. But you are in agreement with acting
12 accordingly?
13 A. Good afternoon, Jennifer. It's a pleasure
14 to see you. Yes, of course.
15 Q. And similarly, if I pause, as I will, in
16 order to allow for the translation to finish, I am not
17 inviting you to continue with an explanation. I am
18 just waiting for the translation to finish. Okay?
19 A. Very well.
20 Q. We are passing out--you should have a binder
21 in front of you with some of the documents to discuss
22 during this cross-examination.
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1 So, I want to first talk about the process
2 that you undertook in writing your Witness Statements.
3 Did you yourself write your Witness
4 Statements?
5 A. Yes, I wrote my Statement.
6 Q. You state in Paragraph 2 of your First
7 Witness Statement--I think it is also in your Second
8 Witness Statement, but I'll read the First Witness
9 Statement. You say: "Counsel for Freeport and
10 Sociedad Minera Cerro Verde assisted me in preparing
11 this Statement."
12 So, what you stated just now, that you wrote
13 your Witness Statement, is inconsistent with that
14 statement that Counsel for Claimant assisted you.
15 Is it that you wrote your Statement, or did
16 you work with Counsel for Claimant to write your
17 Statement?
18 A. Yes, indeed. I prepared my Statement with
19 the assistance of Counsel.
20 Q. How did they assist you? How did you work
21 cooperatively with Counsel for Claimant?
22 A. Counsel for Claimant provided documents to
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1 me for me to be able to prepare my Statement. I was
2 given a binder with documents on the Ministry of Trade
3 reports, for example; also a number of drafts of the
4 investment chapter; some emails that had existed
5 during the negotiation back then; and some other
6 documents that were submitted by Perú as well.
7 Q. And we'll talk about those documents that
8 Counsel for Claimant gave to you, but I was talking
9 more about the process of writing the Witness
10 Statements.
11 Could you please explain that process,
12 please?
13 A. Yes, of course. I prepared drafts of the
14 Statement, and I sent those drafts over to the law
15 firm, and we came to a final language.
16 (Overlapping interpretation and speakers.)
17 Q. And you were the primary author, then, of
18 the--of your written Statements, and you gave it to
19 Claimant, or did they write a draft and give it to you
20 to review?
21 A. I prepared my comments in connection with
22 each one of the points. They formatted everything,
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1 and I reviewed the final version.
2 Q. You have stated in Paragraph 12 that you're
3 an economist; is that correct?
4 A. Yes. Yes. I'm an economist.
5 Q. All right. So, you're not a lawyer;
6 correct?
7 A. I'm not a lawyer, no.
8 Q. In Paragraph 4 of your First Witness
9 Statement, you make a reference. You say: "I
10 understand that a treaty must be interpreted in good
11 faith in accordance with the ordinary meaning to be
12 given to its terms in their context and in light of
13 the Treaty's object and purpose, and that in certain
14 circumstances a treaty may resort to supplementary
15 means of interpretation, including the preparatory
16 works to the Treaty and the circumstances of its
17 execution."
18 Did you write that?
19 A. Not really, no, I did not write that phrase,
20 but that is a phrase that sounded to me as a very
21 common phrase because of my experience in
22 negotiations, negotiations with the United States in
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1 connection with this Treaty and also other investment
2 chapters that I assisted with other--in negotiation
3 with other countries.
4 Q. Yes. It sounded rather lawyerly-like, so
5 since you're economist, I thought perhaps you didn't
6 write that text, and you confirmed that.
7 You say that you carefully reviewed the
8 final Spanish versions of your Witness Statements, and
9 you confirmed that they reflect your independent
10 memory and understanding; is that correct?
11 You stated that, I believe, in Paragraph 2.
12 A. Yes. Indeed, this document reflects my
13 recollection and understanding of the negotiation
14 process.
15 Q. And I assume that when you state something
16 in your Witness Statement that you--for which you have
17 contemporaneous documentary support, that you cite to
18 it in support of that; correct?
19 A. Yes, indeed. This statement reflects my
20 recollection. When I prepared the first drafts, I
21 reflected in their--my recollection and I supported
22 that on documents provided to me by Counsel, as I
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1 mentioned, when I had certain doubts.
2 Q. Because you state in Paragraph 1 that
3 whenever you testify on subjects beyond your personal
4 knowledge, you identify the source of the information
5 and the basis of your understanding; correct?
6 And you stated that, I think, also in your
7 Second Witness Statement.
8 You have to answer.
9 A. Yes. Yes, of course. As I said, when I had
10 a doubt, I went to the documents that were given to
11 me.
12 Q. So, to be clear, you are admitting and you
13 admit in your Witness Statements that you are
14 testifying on issues, in some circumstances, beyond
15 your personal knowledge; is that correct?
16 A. My statements are based on my recollection
17 and everything that I went through during the
18 negotiation as the head of the negotiating team.
19 Undoubtedly, there are some concepts that I wasn't
20 really an expert on during the negotiation process. I
21 was not a lawyer, and we had lawyers that were
22 specialists and provided support to us in that regard.
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1 So, in the Proinversión team, we had a
2 lawyer that was a specialist in international law, for
3 example.
4 Q. So, is--the statement that you have in your
5 Witness Statement is correct that you are sometimes
6 testifying on subjects beyond your personal knowledge
7 in this Witness Statement--is that correct?--or do you
8 wish to change your Witness Statement?
9 A. No, I don't want to do it anyway.
10 (Overlapping interpretation and speakers.)
11 Q. So, in answer to the question, does--your
12 Witness Statement includes you--you talk about
13 subjects that are beyond your personal knowledge;
14 correct?
15 A. I narrate situations that contain facts that
16 go beyond my personal and professional domain.
17 Q. Okay. So, the answer, I think, is yes.
18 And in that case, when you say that
19 you--when you're talking about issues that are beyond
20 your personal knowledge, you identify the source of
21 that information and the basis of your understanding
22 by citing to those documents, but if you also, as you
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1 testified shortly before, cite to documents on which
2 you have--on situations or statements in which you do
3 have personal knowledge, how is a reader supposed to
4 understand if the documents that you're using are
5 based on your personal knowledge or not based on your
6 personal knowledge?
7 A. The document is based on my personal
8 knowledge and the recollections I have of the
9 negotiation.
10 Q. But on topics on which you don't have a
11 personal knowledge you're citing, and on topics that
12 are your personal knowledge you're citing, so how is
13 one supposed to derive whether or not the Statements
14 are based on your personal knowledge or not?
15 A. There are specific aspects that,
16 undoubtedly, I am not an expert on. There are legal
17 aspects that I'm not an expert on. I refer to those
18 in a general manner. I do not really discuss them in
19 depth. It would be unethical. I don't have the
20 ability to discuss those things, but I do make
21 reference to them because they are part of my
22 recollection, and the memories I have of the
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1 negotiation.
2 Q. Okay. I'm not sure I'm going to get the--a
3 clarity on that, but, perhaps, when you say "I"--when
4 you discuss things in your--like "I recall" or "I
5 understood," maybe that's reflecting your own personal
6 recollection, and when you're saying something more
7 general, then that's, perhaps, not your personal
8 recollection.
9 Would that be fair?
10 A. I think that you are understanding this in a
11 very convoluted manner. Indeed, there are times where
12 I refer only to what I recall, and I don't really
13 delve into legal issues.
14 Q. Okay. Thank you.
15 And you state in Paragraph 5 of your First
16 Witness Statement and also in your Second Witness
17 Statement, that you relied--and you discussed it also
18 just a few minutes ago--that you relied on
19 contemporaneous summaries of the TPA negotiation
20 rounds prepared by the Ministry of Foreign Trade and
21 Tourism, or MINCETUR, and emails between U.S.
22 negotiators and yourself, and the drafts of the
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1 U.S.-Andean Free Trade Agreement and the TPA.
2 And we will discuss in a few minutes those
3 documents, but I wanted to confirm that these were
4 documents on which you relied in writing your Witness
5 Statements; is that correct?
6 A. Yes, indeed.
7 Q. And you state in Paragraph 7 of your First
8 Witness Statement that you worked as a Government
9 official in Perú from 1976 to 2001; is that correct?
10 A. I'm sorry. Where do I say that? At which
11 paragraph.
12 Q. In Paragraph 7 of your first Witness
13 Statement. You state that you worked as a Government
14 official in Perú from 1976 to 2017; is that correct?
15 A. Yes, until 2017.
16 Q. I didn't think that was going to be a
17 complicated question, but that's okay. It's a long
18 period of time to remember.
19 And you state in Paragraph 10 of your First
20 Witness Statement that, from 1997 to 2013, you were
21 the leader of the Peruvian delegation negotiating
22 bilateral Investment Agreements and investment
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1 chapters of the TPA; is that correct?
2 A. Yes. In effect, I was in charge of the
3 negotiation as team leader in many cases, and in some
4 others I was a member of the negotiating team in
5 several meetings and in several Investment Agreements
6 or Investment Treaties.
7 Q. And you held that role in your capacity
8 working as ProInversión--at ProInversión as its
9 representative to the Negotiating Commission for
10 Investment Promotion and Protection; correct?
11 A. Yes, that is correct. Actually, my
12 experience with respect to negotiation of
13 International Investment Agreements comes from before
14 my time in ProInversión, when I would participate at
15 the National Commission of Foreign Investment and
16 Technology, which is when Perú began to negotiate
17 Bilateral Investment Treaties.
18 Q. Yes. And in Paragraph 14, you're saying
19 that: "As ProInversión's representative to the
20 negotiating Commission, I lead the Peruvian delegation
21 in the negotiations of the investment chapter."
22 So, that's how you've characterized it.
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1 Can you please describe the internal process
2 conducted in Perú to adopt an official position in the
3 negotiating process?
4 A. Yes, of course.
5 Q. Briefly. Sorry.
6 A. As I indicate there, a negotiating
7 commission had been established for negotiating
8 International Investment Agreements, both bilateral,
9 and when it was decided to begin the negotiation with
10 the United States, also the Free Trade Agreement in
11 the investment chapter. As I mentioned, initially,
12 the team was made up of representatives of the
13 Ministry of Economy, the Ministry of Trade, the
14 Ministry of Foreign Affairs, and ProInversión, which
15 presided over the--or chaired the Commission.
16 So, we had internal coordination, but also
17 coordination with other sectors, particularly for the
18 negotiation of the Treaty with the United States to
19 determine the nonconforming Measures that we would
20 have to address.
21 Q. So, it was an interagency process. Is that
22 how you're describing it? It's an interagency
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1 process, and it involved more than just one agency;
2 correct?
3 A. Yes, in effect, there was coordination among
4 the different agencies.
5 Q. And it's possible that members of that
6 interagency, the interagency representatives, they
7 might disagree with something say that you were
8 negotiating or that your team were negotiating. It's
9 possible there were disagreements among the members of
10 different ministries in the interagency process;
11 correct?
12 A. Yes, indeed, on some occasion, let's say
13 that I was too careful or cautious on issues in
14 respect of which other institutions wanted to yield
15 more quickly in the negotiation.
16 Q. And was the Ministry of Economy and Finance
17 the lead agency in charge of the investment chapter of
18 the TPA?
19 A. Yes. Actually, the Ministry of Economy was
20 a coordinating entity for the negotiation of several
21 chapters that were within the scope of its competence.
22 One of these investments, also financial services and
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1 others.
2 Q. And the MEF, Ministry of Economy and
3 Finance, formed the negotiating Commission for
4 Investment Promotion and Protection, and that's what
5 you chaired; correct? So, you were working underneath
6 the umbrella of the MEF, the Ministry of Economy and
7 Finance?
8 A. Yes, that's right.
9 Q. And did you personally make the final
10 decisions regarding Perú's official position in the
11 negotiation, or did you report to somebody at the
12 Ministry of Economy and Finance?
13 A. All of the positions were coordinated among
14 the different agencies, and specifically in the case
15 of the Investment Agreement, there was direct
16 coordination with Minister Zavala and also with
17 Minister de la Flor--I'm sorry, Ministry of Trade.
18 Q. And did you--do you know Javier Illescas?
19 He's the Director of International Economy. Did you
20 report to him?
21 A. Yes, I've known Javier Illescas for a long
22 time. I have not worked under him at any time, but
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1 Javier Illescas was part of the negotiating team. He
2 was the coordinator for the MEF, of the discussion
3 tables that were under--of its competence, but was not
4 participating directing in the negotiations at any
5 time, at least not on investments.
6 But, yes, there was a representative from
7 the MEF.
8 Q. But did you discuss with him? Did you
9 report to him on issues that you negotiated--you were
10 negotiating?
11 A. All of the coordination, or most of the
12 coordination was through the MEF representative on the
13 team, but, on occasion, I did have direct meetings
14 with Javier Illescas.
15 Q. And did the negotiating commission keep its
16 own Meeting Minutes or notes or writings or--about
17 the--regarding the negotiating rounds for the TPA?
18 A. There were never official minutes of the
19 meeting, but the members, the negotiating team, we
20 would generally take notes, which were then compared,
21 plus each one would provide a Report on their own
22 participation in the round, that was forwarded
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1 internally to their own agency, and then it was all
2 consolidated by the Ministry of Trade.
3 Q. So, did you--you probably don't, but do you
4 have access to any of those documents, the more--the
5 ones that weren't necessarily fed up to the MINCETUR,
6 but the documents that reflected the more immediate
7 notes or--informal. You said it wasn't formal, but of
8 the--that you would have taken, perhaps, in the
9 negotiations?
10 A. Yes. We would generally exchange the notes
11 that we would take, so I have some of the notes
12 because I actually lost a lot of files because of a
13 computer problem at one point in time.
14 Q. So, you have those in--like, personally, you
15 have those? Like, I mean, you are no longer working
16 for the Government. But you have copies of those
17 notes. Is that what you're testifying?
18 A. I have the archives of notes that I
19 personally took that stayed in my computer. They are
20 not official notes. They were used for me to draw up
21 the official Reports that were presented to
22 ProInversión, Ministry of Economy, and Ministry of
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1 Trade.
2 Q. And did you review those notes prior to
3 writing your Witness Statements here for this
4 arbitration?
5 A. Yes. On some occasion, I reviewed the notes
6 because, as I mentioned, sometimes you might remember
7 things one way, but you're not certain, and so I
8 looked to see if I had any notes in regard to certain
9 issues, so as to be able to confirm my recollections.
10 Q. But I don't recall seeing anything like that
11 cited in your Witness Statement.
12 Did you cite to any of those, or did you put
13 them--have them placed on the record?
14 A. No. Actually, I did not because, as I say,
15 these are notes that have no official value, and the
16 summaries that were provided to me from the Ministry
17 of Trade already have the comments of those notes.
18 Q. They are not official notes, but
19 nevertheless, you said you consulted them to write
20 your Witness Statement. So, why didn't you give those
21 notes to Counsel for Claimant to add them to the
22 record?
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1 A. I did send the notes that I had to the
2 lawyers.
3 Q. Oh, sorry. I should have asked the first
4 question that you gave it to your Counsel. I assumed
5 that you hadn't.
6 Okay. So, you gave notes to the Counsel for
7 Claimant, but they're not on the record. And you said
8 in Paragraph 5 of your Witness Statement, that in
9 preparing your Witness Statement, you relied on, and
10 you itemize it--contemporaneous summaries of the TPA
11 negotiation rounds by the Ministry of Foreign Trade
12 and Tourism, posted on the Ministry's website, emails
13 between the U.S. negotiators and myself, and drafts of
14 the U.S.-Andean Free Trade Agreement and the TPA.
15 And you don't state that you relied on your
16 own notes, and you were--you don't even qualify this
17 by saying "among other things."
18 So, do you want to amend that testimony in
19 your Witness Statement in Paragraph 5, to indicate
20 that you referred to other documents that are not on
21 the record, in preparing your Witness Statements?
22 A. Personally, I don't think it's necessary
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1 because, as I say, those are nonofficial notes, and
2 they're already reflected in the summaries of the
3 Ministry of Trade.
4 Q. It just states that in preparing your
5 Witness Statement, you list three different sources.
6 It's not--the fact that they're your own personal
7 notes and not official is irrelevant to the question
8 of what you relied on when you wrote your Witness
9 Statement.
10 Do you wish to amend your Witness
11 Statements, and state that you relied on additional
12 documents in preparing your Witness Statements?
13 A. I really don't. As I said, the Statement
14 mainly reflects my memories of the negotiation
15 process, the process in which I was involved
16 completely. And those notes, at any rate, I've not
17 taken anything from those notes that would not be
18 reflected in the official documents. It was just to
19 confirm some of my recollections.
20 Q. Well, unfortunately, we won't be able to
21 test that because we haven't seen those.
22 In Paragraph 4 of your First Witness
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1 Statement and in Paragraph 5 of your Second Witness
2 Statement, you state that it's--your Statements are
3 based on your personal experience as a negotiator of
4 the TPA on behalf of the Peruvian Government; correct?
5 A. Yes, that is correct.
6 Q. And you also state that you do not quote in
7 paragraph--same paragraph. Sorry. Yes.
8 That you do not purport to speak on behalf
9 of Perú in preparing--in your Witness Statements;
10 correct?
11 A. Clearly, I'm not speaking on behalf of Perú.
12 I am reflecting what I experienced in the negotiation
13 process as the Head of the Negotiating Team.
14 Q. But you are testifying in your Witness
15 Statements about what happened in the discussions with
16 the United States, when you were negotiating the TPA;
17 correct?
18 A. Yes, indeed.
19 Q. And you are discussing what you did as a
20 Government official on behalf of Perú during the
21 course of the negotiations.
22 Did I get that right?
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1 A. Yes.
2 Q. And did you consult with your former
3 employer to get permission to testify regarding the
4 negotiations with the United States regarding the TPA?
5 A. No, I have not asked for permission from the
6 Government to provide testimony. As far as I know,
7 there's nothing that would impede me from doing so.
8 Q. Did you think about whether you needed to
9 get permission?
10 A. Actually, at some point in time I said,
11 well, I've worked for the State. I'm going to provide
12 a Witness Statement. The Witness Statement is based
13 on my recollections as a public official at that time.
14 I am going to say what I saw. I'm going to reveal
15 what was discussed, and I didn't have any reason to
16 seek permission.
17 Q. Did you consult with someone about whether
18 you needed to get permission?
19 A. No, I did not consult anyone, but I did tell
20 some officials that I was being hired by Freeport's
21 lawyers.
22 Q. And so, how did you reach your conclusion
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1 that you were free to testify about the negotiations
2 between Perú and the United States regarding the TPA?
3 A. Because there is nothing that establishes
4 such a limitation in Perú.
5 Q. Are you aware of a provision in the text of
6 Unico Coronado of the Law 27806, which is a law on
7 transparency and access to public information?
8 MS. HUANG: Objection. The document is not
9 on the record?
10 MS. HAWORTH MCCANDLESS: It's not on the
11 record, but I'm asking him his knowledge of it. I'm
12 not asking about the content. I'm just asking if he's
13 aware of this, and that's a perfectly--
14 (Overlapping speakers.)
15 MS. HAWORTH MCCANDLESS: --to ask.
16 MS. HUANG: Perhaps, it would be helpful to
17 show him the document then.
18 MS. HAWORTH MCCANDLESS: I would just want
19 to ask his knowledge, if he's aware of it. That's my
20 question. So--but I want to go through and say what
21 the document says.
22 MR. UKABIALA: If Claimant could just be
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1 heard very briefly on this.
2 (Tribunal conferring.)
3 PRESIDENT HANEFELD: As you may imagine, I
4 also do not know this at all and these provisions, so
5 please keep in mind that you also have to keep us with
6 you.
7 MS. HAWORTH MCCANDLESS: Yes. It's just a
8 simple, single question.
9 BY MS. HAWORTH MCCANDLESS:
10 Q. Are you aware of a provision in the Texto
11 Unico Coronado, which is Law Number 27806, which is
12 the Law on Transparency and Access to Public
13 Information, which provides exceptions for the right
14 to have access to information held by public entities,
15 including elements of international negotiations or
16 disclosure of this information would harm the
17 negotiating process or alter the adopted position of
18 the State.
19 Are you aware of that Law and that specific
20 provision?
21 A. No. As I have said, those notes are not
22 official. I am not keeping any official document of
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1 Perú from the time of the negotiation process. They
2 are personal comments regarding my personal
3 understanding.
4 Moreover, what one can find in my Statement
5 is only what is reflected in my personal
6 documents--that is to say, the official documents from
7 the Ministry of Trade and the negotiating history,
8 which is in the different draft versions in the
9 emails. That is what is in my Statement, and it is
10 cited very meticulously.
11 Q. And are you aware that by testifying in a
12 manner inconsistent with the State's official
13 position, that there is a risk that that testimony
14 might alter the adopted position of the State and,
15 therefore, disclose information that might be
16 prohibited?
17 MR. PRAGER: Madam President, if there were
18 any concerns about that, that should have been raised
19 before. I mean, what's happening here is that the
20 Witness is being intimidated, and that's entirely
21 inappropriate.
22 MS. HAWORTH MCCANDLESS: The Witness is not
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1 being intimidated, I'm just asking him some questions.
2 (Overlapping speakers.)
3 MR. PRAGER: Respondent knew for several
4 months, in fact, more than a year and several months,
5 that Mr. Herrera is testifying. If there were any
6 concerns, they should have been raised appropriately,
7 and not when the Witness is sitting here. What's
8 happening here is Witness intimidation, and it's
9 entirely inappropriate, and I object in the strongest
10 terms against it.
11 PRESIDENT HANEFELD: We have taken note.
12 Mr. Prager, what is your comment on that?
13 MS. HAWORTH MCCANDLESS: Oh, I obviously
14 disagree. Respondent has called Mr. Herrera here to
15 cross-examine him, and this is the point in which
16 we're cross-examining and probing the--what his
17 testimony is about, and whether he's appropriately
18 here to be testifying on behalf of Perú or not.
19 It's a perfectly appropriate line of
20 questions for someone who submitted a Witness
21 Statement, who was a former Government official, and
22 is now testifying against the State, and to probe
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1 whether or not what he's actually testifying about,
2 and whether he is aware that that is potentially
3 inconsistent with Perú's official position in this
4 Arbitration.
5 PRESIDENT HANEFELD: The Tribunal will
6 briefly consult and then come back to the room.
7 MR. PRAGER: I just wanted to add that he's
8 not here on behalf of Perú. So, I wanted to have that
9 clarified.
10 MS. HAWORTH MCCANDLESS: But he's testifying
11 on the negotiations when he was an official of the
12 Government of the Perú in those negotiations. It's
13 hard to separate those two.
14 (Tribunal conferring outside the room.)
15 PRESIDENT HANEFELD: Mr. Herrera, I
16 apologize for this short break, but we just wanted to
17 now reach consensus on how we want to proceed.
18 We have heard what your concern was on
19 Respondent's side. We have heard your objection,
20 Mr. Prager. We would like you to move on with the
21 next topic.
22 MS. HAWORTH MCCANDLESS: Absolutely, Madam
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1 President.
2 MR. PRAGER: Madam President, if I might
3 still, just for the purpose of the record, at no point
4 has Respondent requested that his testimony or his
5 Witness Statement be treated as protected information
6 under this--in this proceeding, under the TPA, and
7 they would have had the opportunity to do that.
8 PRESIDENT HANEFELD: You make your point
9 really clear, and I will have understood that.
10 And, Mr. Herrera, I hope you feel still
11 comfortable testifying.
12 Do you?
13 THE WITNESS: Yes, ma'am. Thank you very
14 much.
15 PRESIDENT HANEFELD: Perfect. Then we
16 proceed with the next line of questions.
17 MS. HAWORTH MCCANDLESS: Thank you, Madam
18 President.
19 BY MS. HAWORTH MCCANDLESS:
20 Q. And as you discussed in Paragraph 5 of both
21 your Witness Statements, and as we discussed a little
22 bit earlier today, you state that, in preparing your
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1 Witness Statements, you relied on contemporaneous
2 summaries of the TPA negotiation rounds prepared by
3 MINCETUR, and also on emails and drafts of the
4 negotiations provided by Counsel for Freeport;
5 correct?
6 A. Yes, that's correct.
7 Q. And then in Paragraph 5 of your Witness
8 Statement, you also indicate that you understand that
9 those emails and those negotiations--drafts and
10 negotiations were obtained through requests under the
11 U.S. Freedom of Information Act; is that correct?
12 A. Yes, that's what I was told by the lawyers.
13 Q. And with respect to the documents that you
14 received from Counsel for Freeport, did you talk with
15 Counsel before they submitted their FOIA request to
16 the U.S. Government to give input on what they should
17 be asking for in order to make sure that the documents
18 they received reflected the--your negotiations?
19 MR. UKABIALA: I'm sorry. We would just
20 object to the grounds that opposing Counsel is asking
21 the Witness to reveal privileged communications
22 between--between the Witness and Counsel. And there
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1 is actually a privilege protocol agreed between the
2 Parties in this proceeding that protects precisely
3 that information.
4 MS. HAWORTH MCCANDLESS: Madam President,
5 this is not asking anything that's privileged. I'm
6 asking whether he was consulted by the lawyers before
7 they submitted their FOIA request. That's hardly
8 privileged information.
9 It's just, did he have any input in
10 the--when they were submitting their FOIA request and
11 identifying what the FOIA request scope was, did he
12 have any input? That's not privileged information.
13 MR. UKABIALA: That goes directly to
14 Counsel's legal strategy in developing the evidence to
15 be submitted in this proceeding.
16 MS. HAWORTH MCCANDLESS: I'm not asking
17 about the content. I'm just asking if he provided any
18 input.
19 PRESIDENT HANEFELD: So, it's just about the
20 question of whether there was some communication and
21 not about the content?
22 MS. HAWORTH MCCANDLESS: Whether he was--he
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1 gave any input to determine the scope of the FOIA
2 request. That's it. That's my only question.
3 MR. UKABIALA: Madam President, if I could
4 just read to you from the privilege protocol that was
5 agreed to between the Parties in this proceeding.
6 It says--Counsel is asking communications
7 between Witness and Counsel and, pursuant to
8 Section 3.1, those communications shall not be
9 disclosable in the Arbitration.
10 MS. HAWORTH MCCANDLESS: Madam President,
11 I'm not asking for the actual content of the
12 communication, just the fact of whether he was
13 consulted. That's my only question on that issue.
14 PRESIDENT HANEFELD: So, can you now put
15 this provision on screen? Because my Transcript is
16 not complete enough. When we have to make a Decision
17 on whether this question is legitimate or not, I need
18 to see the legal basis for our Decision.
19 MR. UKABIALA: If you could give us a
20 moment, we can print out copies of it; otherwise, we
21 would need control of the--of the--
22 PRESIDENT HANEFELD: And, to be honest, it's
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1 really unfortunate. We want now to avoid such debates
2 in the Hearing room in front of the Witness. We want
3 to hear what the Witness has to testify.
4 So, do both Parties wish to continue this
5 debate, or can we avoid it by permitting the question
6 of whether there was a conversation? Yes? No? Go on
7 to the next topic?
8 MS. HAWORTH MCCANDLESS: That's fine from
9 Respondent's perspective.
10 MR. UKABIALA: We're in your hands, Madam
11 President. We would prefer for opposing Counsel to
12 move on from this line of questioning.
13 MS. HAWORTH MCCANDLESS: I don't have--it's
14 not a line. It's a single question. And I will move
15 on after I hear his answer.
16 PRESIDENT HANEFELD: Yes, please, move on.
17 Let us avoid such debate.
18 BY MS. HAWORTH MCCANDLESS:
19 Q. Yes, after I hear your answer. If you
20 would, please answer the question; then I will move
21 on.
22 A. Quite sincerely, I don't recall that I told
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1 them, "Ask for this or that information." What is
2 true is that the summaries, for example, from the
3 Ministry of Foreign Trade, well, I've seen them at
4 some point in time on the website of Ministry. I
5 don't know if they're still there, but at some point
6 in time I recall they were at the Ministry's website.
7 Yes, it says "published at the Ministry's website."
8 Drafts of the FTA--well, I've been provided
9 with some of these. I recall that there were many
10 more, but, but I have not asked that they specifically
11 give me this or that document. It would be
12 impossible. I cannot have such a specific
13 recollection.
14 Q. Thank you.
15 And as we discussed earlier, from 1976 to
16 2017, you held various positions with the Government
17 of Perú, and now do I understand it correctly that you
18 work as an independent consultant since July of 2017?
19 A. Yes, that is correct.
20 Q. And on what types of matters have you been
21 engaged as a consultant?
22 A. Those are consultancies at the personal
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1 independent level. I do not have a consulting company
2 behind me. I was working with a legal firm on some
3 issues. It is not the legal firm that is here with
4 the mining company. It is a different legal firm in
5 connection--a different law firm in connection with
6 the treatment of foreign investment in the country,
7 trying to support them with some steps, processes that
8 need to be complied with.
9 And also I have worked with a British
10 consultancy firm for promoting investment on
11 information technology in Central America. And I also
12 worked with a local consulting firm on a program of
13 the Ministry of Trade at a different point in time.
14 On the other hand, I am also an advisor. I
15 provide some sort of advisory services at meetings
16 with embassies that are credited to being in the
17 country, and they call me to ask for opinion on
18 various issues in connection with national events.
19 Q. Do you get paid? Do you get paid by the
20 hour for your consultancy work, or how does it--how do
21 you get paid?
22 A. Yes. Yes. That's the way it is. I usually
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1 work on an hourly basis.
2 Q. And approximately how much do you get paid
3 per hour?
4 A. In general, 200 dollars an hour.
5 Q. And were you engaged to provide Witness
6 testimony in this Arbitration? Were you paid?
7 A. Yes. I have a contract, indeed, for my work
8 in this Arbitration.
9 Q. And you were paid for preparing your two
10 Witness Statements and also for
11 participating--preparing for and participating in this
12 Hearing?
13 A. Yes, indeed.
14 Q. And what is your hourly rate? Are you being
15 paid for this?
16 A. In this case, I am paid $250 an hour.
17 Q. Is it 250?
18 A. That is correct.
19 Q. So, slightly above your typical rate?
20 A. Yes.
21 Q. And you don't--I didn't find, but correct me
22 if I'm wrong, did you indicate that you are being paid
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1 for presenting your Witness Statements and testifying?
2 Did you indicate that in either of your
3 Witness Statements?
4 A. I don't think I have mentioned that.
5 Q. In Paragraph 11 of your First Witness
6 Statement, you state that you appeared on behalf of
7 Perú in different arbitrations, including Duke
8 Energy v. Perú; is that correct?
9 A. Yes, that is correct.
10 Q. And you provided two Witness Statements in
11 that case; is that right?
12 A. I remember attending the Hearing, the Duke
13 Hearing, and I also remember very well who prepared
14 me.
15 Q. And you state in your Witness Statement in
16 this submission that you testified in that case about
17 the negotiation and execution of Judicial Stability
18 Agreements; correct?
19 A. Yes, that is correct.
20 Q. And in this case, you're not talking about
21 or testifying about scope of Stability Agreements, are
22 you?
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1 A. No, I wasn't asked about the scope of the
2 Legal Stability Agreements.
3 Q. Is that because in Duke you testified that
4 the scope of the Legal Stability Agreement is strictly
5 limited to specific investments mentioned in each
6 agreement? Could that be the reason why you're not
7 testifying here on that issue.
8 MR. UKABIALA: I'm sorry. We will just have
9 to intervene. The Witness is being asked to testify
10 on matters that are beyond the scope of his Witness
11 Statements, and that has been clearly established in
12 PO4.
13 PRESIDENT HANEFELD: Can you rephrase your
14 question, please?
15 MS. HAWORTH MCCANDLESS: Sure.
16 BY MS. HAWORTH MCCANDLESS:
17 Q. In his Witness Statement, he mentions that
18 he was testified--submitted a witness statement in
19 Duke Energy v. Perú regarding the negotiation,
20 execution of Juridical Stability Agreements.
21 My question is, you are not testifying here
22 about the scope of stability agreements. Is it
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1 potentially because there's an inconsistency in what
2 you stated in that Witness Statement versus what is
3 being testified here about the scope of stability
4 agreements?
5 MR. UKABIALA: This is not a rephrasing of
6 the question--I'm sorry, this is not a change in the
7 question. It's just a rephrasing of the same
8 question. The Witness does not testify about the
9 scope of stability agreements In this proceeding or
10 about Duke Energy, except to mention that he gave
11 testimony in that case.
12 MS. HAWORTH MCCANDLESS: I'll move on, Madam
13 President.
14 BY MS. HAWORTH MCCANDLESS:
15 Q. Turning to the TPA negotiations regarding
16 the limitations period, in Paragraph 22 of your First
17 Witness Statement, you stated that: "Based on the
18 discussions in the U.S., with the U.S. team, it was
19 clear to the Peruvian delegation that Article 10.18.1
20 referred to actual or constructive knowledge of past
21 events--that is, for example, based on loss or
22 knowledge"--I'm sorry--"loss or damage that has been
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incurred and not loss or damage that could develop
sometime in the future"; correct?
It is Paragraph 22 of your First Witness
Statement, which is behind Tab 1, if you want to look
at the document.
A. Yes, indeed. The understanding that we had
and also the way in which we discussed this with the
U.S. was that the prescription, the statute of
limitations period had to do with the real knowledge
of events that have occurred.
Q. And with respect to loss or damage, you're
saying that your understanding was that 10.18.1 of the
TPA required actual loss; right?
You say "loss or damage" in the center of
that paragraph, "loss or damage that has been
incurred." So, in your view it was loss that was
actual loss, that 10.18.1 of the TPA requires actual
loss; is that correct?
A. Yes, indeed. There needs to be damage, the
damage must have occurred.
Q. And in your view, that's what the U.S.
delegation also understood "incurred" meant, because
[Page 1179]
at the beginning of that sentence you say, "based on
discussions with the U.S. team."
So, I assume that your understanding was
that was the U.S. delegation's understanding as well;
is that correct?
A. Yes, indeed. We always talked about damages
that have occurred.
Q. Are you aware that the U.S. Government has
submitted a Non-Disputing Party submission in this
case, in which it states that for there to be a loss
or damage--for loss or damages incurred in
Article 10.18.1 of the TPA, the Claimant does not have
to actually have sustained a loss. If you look at
Tab 4 where it's the U.S. Non-Disputing Party
submission--
MR. UKABIALA: Yeah, we would just ask that
you read what the U.S. actually wrote in the
submission, because I believe that's a
mischaracterization of the U.S. submission.
MS. HAWORTH MCCANDLESS: I'm going to show
him the paragraph right now. It is Paragraph 11,
behind Tab 4. And this is the U.S. Non-Disputing
[Page 1180]
Party submission, and in the second sentence it
says: "Moreover, the term 'incurred' broadly means
'to become liable or subject to.'"
And there's a Footnote 16 that refers to a
case, United States v. Laney, in which the
parenthetical states: "Finding that 'to incur' means
'to become liable or subject to,' and that a person
may become 'subject to' an expense before she actually
disburses any funds."
Do you see that text?
A. Yes, I see it, and I believe that this is
not in opposition to what we discussed in the
negotiation with the U.S. delegation. The fact that
there is no disbursement, no financial disbursement
does not imply that there was no damage.
BY MS. HAWORTH MCCANDLESS:
Q. Well, it says "before actual disbursement of
any funds." If we look at the next sentence, it says,
in Paragraph 11: "Therefore an investor may have
incurred loss or damage even if the financial impact
of that loss or damage is not immediate," and there's
a footnote, Footnote 17, which refers to the Berkowitz
[Page 1181]
Case, and in parentheticals that states "finding the
date on which the Claimant first acquired actual or
constructive knowledge of the loss or damage incurred
in consequence of the breach implies that such
knowledge is triggered by the first appreciation that
loss or damage will be or has been incurred--will be
incurred."
Do you see that text as well?
A. Yes. Yes, indeed. I see it.
MS. HAWORTH MCCANDLESS: Just one moment.
Madam President, I have no further
questions.
PRESIDENT HANEFELD: Thank you.
Any questions in redirect?
MS. HUANG: No further questions. Thank
you.
PRESIDENT HANEFELD: Mr. Herrera, we also do
not have questions. So, you are hereby released as a
witness. Thank you very much.
THE WITNESS: I thank the Tribunal and
everyone in attendance and my dear friend Stanimir.
(Comments off microphone.)
[Page 1182]
THE WITNESS: I thank you, and I just hope
that my Statement is useful to get to a good
resolution of the case.
PRESIDENT HANEFELD: Thank you.
(Witness steps down.)
PRESIDENT HANEFELD: So, do the Parties wish
a short break before we continue? Probably we need a
break?
MR. ALEXANDROV: Before we do that, Madam
President, can I raise a procedural point? We saw a
situation where one lawyer defending the Witness,
Ms. Huang, ceded the floor to Mr. Ukabiala and
Mr. Prager and back to Mr. Ukabiala making procedural
objections during the examination of Mr. Herrera.
We are a bit reluctant to agree that this
should be the practice where you have a role of
lawyers and one after the other after the other raises
procedural objections. We need to understand what the
position of the Tribunal is. If the Tribunal is fine
with that, that's fine. With us, we will then use the
same practice. We have been sticking to the practice
of, whoever is at the microphone, either conducting
[Page 1183]
the direct examination or the cross-examination, is
the one to raise procedural objections in relation to
the examination of that witness.
If the view of the Tribunal is that the
practice of having one, two, three lawyers raising
objections one after the other, that's fine. We just
need clarity going forward.
PRESIDENT HANEFELD: I think we made it
clear that we hope not to receive any further multiple
objections, so hopefully the problem will not arise
again.
PRESIDENT HANEFELD: How long do you need to
get Mr. Isasi?
MS. HAWORTH MCCANDLESS: I think a 15-minute
break is appropriate at this moment, if that's okay.
PRESIDENT HANEFELD: Okay. Then we do a
15-minute break and meet again at half past 3:00 p.m.
(Brief recess.)
FELIPE ISASI CAYO, RESPONDENT'S WITNESS, CALLED
(appearing remotely)
PRESIDENT HANEFELD: Good afternoon,
Mr. Isasi.
[Page 1184]
Can you hear and see us well?
THE WITNESS: Yes. I'm hearing well.
PRESIDENT HANEFELD: Thank you. Then we
welcome you as Witness in these proceedings.
I briefly introduce the Tribunal. My name
is Inka Hanefeld. I'm the presiding arbitrator in
this Arbitration. I'm here with my co-arbitrators,
Professor Guido Tawil and with Dr. Bernardo Cremades.
Can you hear me?
THE WITNESS: There's echo. I hear an echo
in here as well, but please go on, ma'am. I think I'm
going to be okay. I think what I'm going to do is
turn the volume down and perhaps things are going to
be a little better.
Okay. Go ahead. Please go ahead.
Good afternoon. Good afternoon, Madam
President, Members of the Tribunal.
PRESIDENT HANEFELD: Mr. Isasi, you have
been called as a Witness in these proceedings by the
Respondent. As such, you need to make a Declaration
under Article 35(2) of the ICSID Arbitration Rules in
which you declare that you will state the truth and
[Page 1185]
nothing but the truth.
So, could someone be so kind to give
Mr. Isasi this Declaration?
Otherwise, I can also read it out to you.
(Comments off microphone.)
THE INTERPRETER: He's talking to someone
else.
THE WITNESS: You need to give me the text
of the Declaration, the oath. Last time I was given a
sheet of paper with it. Please, the oath. Give me
the Witness Declaration.
Perhaps if you show it on the screen, I can
read it, but I don't see it here.
PRESIDENT HANEFELD: Okay. It will be put
on the screen for you in just a minute.
THE WITNESS: Shall I read it?
I solemnly declare, upon my honor and
conscience, that I shall speak the truth, the whole
truth, and nothing but the truth.
PRESIDENT HANEFELD: Thank you very much.
And then we get to your Witness Statements.
Do you have a clean copy of your Witness
[Page 1186]
Statements, RWS-2 and 9, in front of you?
THE WITNESS: RWS-2 and RWS-9. Yes, I do.
PRESIDENT HANEFELD: And can you confirm
that these are your Witness Statements and that they
correspond to your recollection, or do you have
anything you want to correct?
THE WITNESS: I'm sorry. Is the member of
Tribunal speaking to me, or is a Party lawyer speaking
to me?
PRESIDENT HANEFELD: No, I'm the President
of the Tribunal. I hope you see me and you hear me.
THE WITNESS: I cannot hear you.
PRESIDENT HANEFELD: You cannot hear me or
you can't see me? Then we have an issue that needs to
be resolved right away.
THE WITNESS: I can't hear Madam President.
I only hear the interpreter, and that is why it's
confusing. I don't know if the President is speaking
or if the interpreter is speaking or a counselor is
speaking.
(Comments off microphone.)
PRESIDENT HANEFELD: But can you--you do not
[Page 1187]
see me now? You should see me.
THE WITNESS: Now I can see you, Madam
President.
PRESIDENT HANEFELD: So, I was the one
talking, but I'm only in command of English, but it
needs to be translated. And you hear the translator.
THE WITNESS: That's right.
PRESIDENT HANEFELD: So, coming back to your
Witness Statements, do you have anything to amend or
correct?
THE WITNESS: I do not. No rectification
whatsoever.
PRESIDENT HANEFELD: Perfect. Then we can
proceed. You will now first be questioned by the
Respondent's counsel, and then be cross-examined by
Claimant's Counsel, and we as a Tribunal may also have
additional questions.
THE WITNESS: Very well. Thank you.
BY MS. HAWORTH MCCANDLESS:
Q. Good afternoon, Mr. Isasi.
The President of the Tribunal showed you--or
[Page 1188]
referenced your Witness Statements, and you have them
in front of you.
Do those Statements--are they based on your
personal knowledge and experience?
A. Yes.
Q. Could you please describe your educational
background?
A. I am a lawyer. I graduated from the
Catholic University of Perú in 1976. I also have done
studies at the master's degree level in public
administration at the Instituto Ortega y Gasset within
the Universidad Complutense de Madrid.
It doesn't have any official validation. It
wasn't a course of studies here in Perú by the
Continental University.
I also have received training in corporate
management from ESUN, the Escuela de Selección de
Universidad de Centroamerica, among others.
Q. What is your current position?
A. I am a partner of the Fernando Sánchez
Abogados.
Q. What positions did you hold at the Ministry
[Page 1189]
of Energy and Mines?
A. You mean currently or previously?
Q. No, previously.
A. I understand that you're asking me about the
Ministry.
Q. What positions did you hold at the Ministry
of Energy and Mines when you worked there?
A. Okay. I was the General Director of Legal
Advisory of the MINEM between 2004 and 2007. I was
the Vice Minister of Mines between '07 and '09, June
'09.
Q. And you wrote an opinion in April of 2005
about Mining Stabilization Agreements.
Could you please explain briefly why you
wrote that opinion?
A. Are you making reference of the 14
April 2005 Report that was issued by my office at the
request of the National Superintendents of Tax
Administration to answer inquiries in connection with
the scope of legal Stabilization Agreements entered
into by Perú. This in connection with the application
or nonapplication of the Royalties Law to mining
[Page 1190]
concession titleholders under those Agreements.
Just to clarify, I want to say that this was
also done to clarify the Constitutional Court Judgment
in connection with the legality of the Royalties,
Mining Royalties Law. The Claimants had said that
this law violated taxability. The Constitutional
Tribunal said that Royalties are not a tax and,
therefore, it is not protected by the Stabilization
Agreements, and that is why all mining concession
titleholders had to pay Mining Royalties.
If you wish, I can explain further, or if
you ask me questions, I can talk about the core of my
Report.
Q. What is it that you concluded in your
Report?
What did you conclude in your Report?
A. I can't hear the translation. I cannot hear
the translation.
Q. Can you hear me now?
A. I can't hear the first word.
THE INTERPRETER: Madam President, maybe if
Counsel waits three or four moments before asking the
[Page 1191]
question, that may help. There's a delay.
BY MS. HAWORTH MCCANDLESS:
Q. I will repeat my question.
What was the conclusion--what did you
conclude in your Report?
A. My Opinion was that, although it is true,
all of the mining concession holders, as the
Constitutional Court said, must pay the royalty for
mining because royalties are not taxes. It is also
true that Stabilization Agreements entered into by
Perú in the mining sector had a specific provision for
administrative stabilization.
As an exception, those Mining Titleholders
that had made these agreements were protected in their
investment projects which is circumscribed by a
feasibility agreement under the Contract. When
calculating the Mining Royalty for the basis of
calculation of the royalty and the application of that
royalty, they had to bring in the amount corresponding
to the stabilized project within the limits of the
Contract, the Agreement.
Q. And the Opinion--in the Opinion that you
[Page 1192]
expressed in the Report of April 2005--I'm sorry--is
that consistent with MINEM's view of the scope of
Mining Stabilization Agreements during the time you
worked at MINEM?
A. That's right. The institutional opinion by
the Ministry has always been that Stabilization
Agreements only protect the company within the limit
of the investment project. You have a specific
investment project, and the purpose of it is that the
Rate of Return expected by the investor is not
distorted by an act of the prince, by a supervening
act.
Q. Thank you, Mr. Isasi.
MS. HAWORTH MCCANDLESS: I have no further
questions.
PRESIDENT HANEFELD: Then we hand over to
Claimant for cross-examination.
MR. PRAGER: Madam President, given the
technical difficulties and the Hearing issues and
where we stand in the schedule, we will forego the
cross-examination of Mr. Isasi and, instead, focus on
witnesses who actually came here to New York.
[Page 1193]
PRESIDENT HANEFELD: Okay. This is noted.
Then we will also not have recross.
MS. HAWORTH MCCANDLESS: My only recross is
we are in D.C., as opposed to New York, but that's a
very small point.
MR. PRAGER: That's a good point.
PRESIDENT HANEFELD: Mr. Isasi, we take the
opportunity to ask one or the other question. Now, to
you, with the permission of my co-arbitrators, I just
start, and you will jump in, if necessary.
PRESIDENT HANEFELD: So I follow the
chronology of your--
THE WITNESS: I can't hear you very well,
Madam President. It's distorted. The voice of the
interpreter is distorted.
PRESIDENT HANEFELD: Mr. Isasi, I was
informed that the Zoom technician is trying to solve
it because we can hear and see you perfectly well. So
it seems to be a problem of the Zoom connection, and
we hope to solve it quickly.
THE WITNESS: Thank you.
[Page 1194]
(Comments off microphone.)
PRESIDENT HANEFELD: Then we can proceed. I
will speak very slowly so that the translator can
follow.
And I will also make sufficient breaks so
that we should not encounter difficulty. But if you
have difficulty to understand me, please say so.
THE WITNESS: Thank you very much.
PRESIDENT HANEFELD: My first question
relates to Paragraph 6 of your First Witness
Statement, where you state: "MINEM's position was
always that Cerro Verde had to pay Royalties on the
sales arising from the Primary Sulfides."
We have heard in this Arbitration different
testimony by Ms. Chappuis who testified that in a
meeting on the 15th of June 2004, so shortly before
you joined MINEM, there was consensus that Cerro Verde
with its whole concession would be exempted from
Royalties.
Have you been informed about such meeting?
THE WITNESS: What is the date again, ma'am?
PRESIDENT HANEFELD: The date is the 15th of
[Page 1195]
June 2004, so shortly before you joined MINEM in your
position.
THE WITNESS: I don't have any news in
connection with that statement. All of the evidence I
have points to the fact that, from the very beginning,
when I started working at the Ministry of Energy and
Mines, there was a clear consensus that the
Stabilization Agreements only protected in connection
with the subject matter of the Contract.
This had to do with the theory of contracts.
We didn't have any specific laws stating that.
Article 61 of the Constitution protects the subject
matter of the Contract, the purpose of the Contract
that cannot be modified by external agents, external
factors. That's the idea.
We were always aware that the Stabilization
Agreement only protected the purpose of the Contract.
If you're talking about Cerro Verde, the purpose of
the Contract was a Leaching Project that was clearly
circumscribed under the Feasibility Agreement, and
under the Contract it is an integral part of the
Agreement. That is the scope of protection; nothing
[Page 1196]
beyond that. Anything outside the Contract is not
part of this.
PRESIDENT HANEFELD: Then I would like to
put on the screen the document RE-198 and discuss it
briefly with Mr. Isasi. This is an email by
Ms. Chappuis of 11th of June 2004.
Can we put it on screen for the witness
please?
THE WITNESS: It is too small. I can't see
it.
PRESIDENT HANEFELD: It is an email by
Ms. Chappuis of June 11, 2004.
Can you read the recipients to which this
email was directed? Can you see it?
THE WITNESS: Rosario Padilla, Jamie Chávez
Riva, Oswaldo Tovar, Luis Saldarriaga Colona, and Luis
Panizo, Director of Legal Affairs, my predecessor. I
wasn't there at that opportunity.
PRESIDENT HANEFELD: So, when you started in
July 2004, these people had already left?
THE WITNESS: Let's see. Luis Panizo was
part of the Mining Council. Rosaria Padilla, perhaps,
[Page 1197]
yes. Perhaps, she was there at the DGM still. Jamie
Chávez Riva, I think he was the advisor to the Vice
Minister, Vice Minister Polo. He was seconded by the
Institute of Mining Concessions. Oswald Tovar was the
Director of Mining Promotion.
PRESIDENT HANEFELD: And the email states
"Matter: Request for"--for me the English version,
can you also enlarge it?
The email states as: "Matter: Request for
inclusion of the Sulfides Project in Stability
Agreement of Cerro Verde - is this legal?"
Is this a question that was also raised to
you at the time--
(Overlapping interpretation and speakers.)
THE INTERPRETER: Please continue.
PRESIDENT HANEFELD: Is this a question that
was posed to you at the time, or would you have
expected that it would have been posed to you at the
time?
THE WITNESS: Not at that time, no, I don't
think so. I don't recall that a question was posed to
me in connection with this specific matter at that
[Page 1198]
time.
Now, at some point in time, I have become
aware of certain discrepancies that Mr. Polo, Vice
Minister of Mines, had with Ms. Chappuis. She was the
DGM, but I wasn't able to understand the scope of
those discrepancies.
I do recall that, on one occasion, César
Polo, as Vice Minister of Mining, asked me a question
as to my opinion regarding the protection provided by
the Stability Agreement.
I don't recall that it had to do
specifically with Primary Sulfides, but I do recall
quite clearly that the Minister at that time,
Kahaundria (phonetic) told César Polo: "Don't worry
about that. Let the one who has a fresh mind here
analyze the topic and give his opinion."
And I clearly stated my opinion sharing the
opinion of Jaime Chávez Riva--I'm sorry, of César
Polo, an opinion that shared by Jaime Chávez Riva, I
understand, and also the attorneys at the DGM.
Rosaria Padilla was one of those.
All of us thought that the Stabilization
[Page 1199]
Agreement was limited exclusively to the investment
project that was delimited by the Agreement.
Therefore, the Primary Sulfides Contract was not
included in the Leaching Agreement.
As I say, I do recall that at some point in
time afterwards that issue was raised with me. I
always said that Primary Sulfides was not encompassed
in the protection afforded by the Stability Agreement
for the Leaching Project.
ARBITRATOR TAWIL: Hello. I'm one of the
arbitrators.
You just mentioned that you came to learn or
you knew that there were discrepancies between César
Polo and Ms. Chappuis.
Could you explain to us what were those
discrepancies and what you knew about them at the
time?
THE WITNESS: No. No. I felt that there
was some tension in the relationship between those two
persons. I wasn't concerned to find out because these
were matters that didn't involve my office.
ARBITRATOR TAWIL: And you didn't know what
[Page 1200]
the position of the Director General for Mining was?
THE WITNESS: The truth is, I don't recall
what her position might have been.
I assume, that there was a discrepancy
between them, but I wouldn't be able to explain to you
just what it was, about what subject matter it
revolved around, so much so that Ms. Chappuis retired
from the Ministry a short time thereafter.
PRESIDENT HANEFELD: And then let me turn to
the next item, which is the application and extension
of the Beneficiation Concession.
Were you involved in this extension of the
Beneficiation Concession which took place on the 28th
of October 2004?
Were you consulted on this issue by any
means?
THE WITNESS: The expansion.
PRESIDENT HANEFELD: Yes. And the
Application for that was in August 2004, and the
Decision was rendered in October, end of October 2004.
This was the extension of the Beneficiation Concession
to the Concentrator.
[Page 1201]
Have you been involved in this issue?
THE WITNESS: No. Because--well, let me
explain. In the structure of the Ministry of Energy
and Mines, each General Directorate had its own legal
counsel office and its own technical personnel, and
matters such as those would be resolved there.
The General Directorate for Legal Advisory
Services is an office of legal counsel for the top
level management, the Minister, the Vice Ministers,
and the Secretary General. So, I did not have to be
involved in that issue.
PRESIDENT HANEFELD: And if the extension of
the Beneficiation Concession had the effect of
bringing the Concentrator under the protection of the
1998 Stability Agreement, would this have been an
issue in which you would have been involved? Was it
of such an importance or significance that then you
would have been involved, or do you only come in when
the Minister calls you to come in?
THE WITNESS: Well, let's see. How can I
explain it to you? The expansion of operations,
mining operations and the--well, the only effect is to
[Page 1202]
authorize that one carry out the activity. But one
cannot amend the Agreement. One would have had to
have incorporated that expansion in order for it to
enjoy stability. It would have had to have been
included in the Agreement. And, on that, no doubt
they would have had to consult with me because in that
case, they would be compromising--or involving the
Minister of the sector, and it's likely that I would
have been consulted. But that's not what happened
because, as I say, the Leaching Project was clearly
definable and distinguishable from the Primary
Sulfides Project.
If you read in the Claim, Cerro Verde says
that at a given point in time before deciding to make
the investment they thought about including the
Primary Sulfides Project, yet they discarded that.
Why? Because it wasn't profitable. That was a
business decision.
Had they wished to incorporate it in a
stability agreement, they would have had to have made
a mutual commitment to make a greater investment on a
project which at that time they considered would not
[Page 1203]
be profitable. The thing is, many years afterwards,
the mineral prices shot upwards, and so, it turned out
that the Sulfides Project could at that point be
profitable. So, they would have had to have asked for
a new stability agreement for that project.
The thing is they did not do so because the
Law on Royalties had been approved, so it no longer
protected them against anything.
PRESIDENT HANEFELD: Then I come to a
different question, relating to Paragraph 20 of your
Second Witness Statement, where you describe Cerro
Verde as a specific case where both a stabilized
project and a nonstabilized project coexists within a
single concession.
Do you know of any other such cases that
arose at your time during office and how the question
of Royalties was handled in that case, so the specific
scenario that you had a stabilized project and
nonstabilized project within one concession, or are
you not aware of other cases?
THE WITNESS: Can you tell me where I said
that? Because at Paragraph 20 of which, the Second
[Page 1204]
Statement?
PRESIDENT HANEFELD: Yes. It should be the
Second Statement, RWS-9. Let me check again. There,
at Paragraph 20. There you state: "Furthermore"--
(Overlapping interpretation and speakers.)
THE WITNESS: It doesn't say anything.
There's a problem here.
PRESIDENT HANEFELD: I read: "Furthermore,
as I explained in my First Witness Statement"--
THE WITNESS: Yes, go ahead. Read it to me,
please.
PRESIDENT HANEFELD: "Furthermore"--
(Overlapping speakers.)
THE WITNESS: As I explained in my First
Witness Statement--
PRESIDENT HANEFELD: Exactly.
(Overlapping speakers.)
THE WITNESS: The Report of April 2005 was
not referring to specific cases like Cerro Verde,
where both a stabilized project and a non-stabilized
project coexist within a single concession. I don't
know of other cases. I haven't mentioned other cases.
[Page 1205]
I was raising a hypothesis. The matter is quite
clear, as I see it.
A mining concession covers a very large area
from anywhere from 100 to 1,000 hectares, each
concession. In this case they have three concessions.
Well, a project is carried out on part of
the concession. Over a delimited area of the
Concession, an investment project. So, it may happen,
for example, that a company has two pits within the
same concession. One pit develops a leaching project
and enters into a stability agreement. And the other
pit is going to extract only concentrates, and it
doesn't enter into a stability agreement. It's two
different objectives. There are two totally different
projects. The one enjoys stability, it has a
stability agreement. That one is protected. The one
that does not have a stability agreement is not
protected. And they are in the same concession.
Now, in the case of Cerro Verde, it's the
same situation. It's just that in--successively
within the same concession, there's an initial stage
where they say, my objective is to get to the copper
[Page 1206]
cathode, and I'm going to leach. The objective was
leaching, to finance the Leaching Project. That
ended. And they had discarded continuing to work
because they considered it wasn't profitable.
Years later, they consider that it is
profitable. So, at that moment, they should have
sought a new stability agreement for that project.
There was a possibility--in Peruvian law there was a
possibility such that, even if the Leaching Project
was being carried out and had not yet ended--this is
what the Agreement states specifically--the Primary
Sulfides Project could have been incorporated in
timely fashion within the original project, for which
one would have had to have amended the Agreement and
with which the investor would have had to make a new
investment. But that had a time frame, and that time
frame was prior to execution of the Leaching Project.
Now, that time passed for them, and they never asked
for a stability agreement, nor that the Primary
Sulfides Project, as far as I understand it, be
incorporated into the Leaching Project.
So, it's the exact same thing of the example
[Page 1207]
I gave of two pits, two operating areas in a single
concession, one protected, the other not. Where it is
by stages, vertically speaking. In one case it is
horizontal, in the other case it is vertical; one
protected and the other not.
PRESIDENT HANEFELD: And then I would have
one final follow-up question to you, Mr. Isasi, from
my side. This relates to Paragraph 23 of your Second
Witness Statement, RWS-9. And there you make
reference to a list of agreements of guarantees and
measures for the promotion of investments. This is in
Exhibit RE-175.
Maybe we can put this list on screen. And I
would kindly request you to explain, now, what this
list means, what this is supposed to tell the
Tribunal, what was the background of this list.
THE WITNESS: I have to read to be able to
remember, but it says clearly there--ah, yes, of
course. The inquiry of April of 2005, as I told you,
was an inquiry by SUNAT where we were asked for an
opinion regarding the scope of protection provided by
Stability Agreements.
[Page 1208]
And they also asked for a list of all the
Contracts or Agreements that had been entered into, so
that SUNAT could evaluate whether they were or were
not protected.
So, we in the Office of Legal Counsel
received a list from DGM, which was the one that had
the authority it maintain those lists, and together
with my Report, I submitted the list that I had
received from DGM to the SUNAT, and there it clearly
says "Cerro Verde Leaching Project," not "Primary
Sulfides."
PRESIDENT HANEFELD: So, you refer to
Line 18, where you say, okay, this is Cerro Verde and
the project is the Leaching Project. And the
investment was 237 million, and you say this is the
expression from MINEM that only this Leaching Project
was stabilized.
Do I understand you correctly?
THE WITNESS: That is right.
PRESIDENT HANEFELD: Then let us just, and
I'll go through two other examples so that I better
understand.
[Page 1209]
If we go to Line 9, there the company name
is "Southern Perú Limited." And then as a project in
Line 9 it states: "Electrowon Leaching, Investment,
118 million." So, it's your position that it was
MINEM's and then SUNAT's official position that, for
Southern Perú Limited, also only a leaching project
called "Electrowon" with an investment of 118 million
was stabilized?
THE WITNESS: I haven't studied that case,
so I couldn't tell you. What I can tell you is that
the list did not imply an a priori pronouncement on
the part of the DGM or on the part of the Office of
Legal Counsel at the Ministry regarding the scope of
the agreements.
We would send the agreements to the SUNAT
because they asked us for a complete list of
agreements that had been entered into. The
methodology, as I said in my statements and in my
presentations on multiple occasions to Congress, was
that the competence for delimiting or not delimiting
and how much to delimit, or rather, to the assessment
or non-assessment or how much to assess Royalties on
[Page 1210]
these investments was that SUNAT had to review each
case and review each agreement to determine whether
there was an administrative stability clause that
protected it because there are some agreements that
don't have the administrative stability clause and
they are not protected vis-à-vis Royalties.
So, each agreement had to be reviewed, and
on that basis, one would determine the basis for
calculating the Royalty. If it had the administrative
stability clause, then from those mineral resources or
concentrates that were extracted from that mining
investment would be subtracted from the basis of
calculation, and one would pay the difference.
I stated this on multiple occasions to the
Congress and in my statements and in my opinions.
The thing is that when the inquiry came in
the month of April of 2005, it was a general inquiry.
We were not asked about who pays and who doesn't pay.
We were simply asked, what is the scope of the
stability agreements in general with respect to Mining
Royalties, because there had been a judgment by the
Constitutional Court that it was thought wasn't
[Page 1211]
sufficiently clear.
For example, when SUNAT inquired on 30
March 2005, the Judgment of the Constitutional Court
had not yet been adopted, and they were drawing up the
inquiry. Why? Because the members of the
Constitutional Court had been making contradictory
statements regarding the legal nature of Mining
Royalties, whether or not it was a tax, whether it was
protected by stability. So, when I received the
inquiry from SUNAT, the Judgment had been adopted, and
likewise the clarification of the Judgment had been
adopted. So, I made a general statement, not
regarding any specific project, but in general terms
about, well, while that--while what the Constitutional
Court said is true, which is to say that all mining
concessions, all Mining Titleholders are under the
obligation to pay Mining Royalties because Mining
Royalties are not a tax and they are not protected by
Tax Stability Agreements.
Nonetheless, I said, on an exceptional
basis, these specific projects--not the concessions,
not the companies--these specific projects should be
[Page 1212]
respected insofar as they have an administrative
stability Clause. Why? Because the Mining Royalty,
if it's not a tax, is consideration for the extraction
of the ore, which belongs to the State. Therefore,
they're administrative in nature, not tax in nature.
If there's an administrative stability clause, then
they are protected, but only with the respect to the
scope of the investment project.
I said this clearly at Number 17 and in the
conclusion of my April 5, 2005, Report.
PRESIDENT HANEFELD: Thank you very much,
Mr. Isasi.
We have no further questions.
MR. PRAGER: Madam President, I have now a
few follow-up questions I want to ask.
MS. HAWORTH MCCANDLESS: Sorry, Madam
President, Respondent would object to Claimant's
Counsel asking any questions at this point. They
waived their right to cross-examine Mr. Isasi.
MR. PRAGER: No, no, no. Everybody has the
right to ask follow-up questions if the Tribunal asks
questions. I waived my right to my primary
[Page 1213]
cross-examination.
MS. HAWORTH MCCANDLESS: We maintain our
objection. We are in the hands of the Tribunal.
PRESIDENT HANEFELD: Please go ahead,
Mr. Prager.
BY MR. PRAGER:
Q. Mr. Isasi, first of all, good afternoon.
Buenas tardes.
My name is Dietmar Prager. It's a pleasure
to meet you, although remotely.
You--
(Overlapping interpretation and speakers.)
A. Likewise. Good afternoon.
Q. You answered in response to a question by
the President that it has always been the position of
MINEM that stability benefits are limited to an
Investment Project. So, I wanted to ask you whether
the Mining Council forms part of MINEM?
A. The Mining Council is an autonomous
administrative organ, technically speaking, that is
part of the Ministry of Energy and Mines. It's part
[Page 1214]
of the administrative structure because people are
paid by the Ministry of Energy and Mines, but it is an
autonomous collegial body.
Q. And would you agree with me that the Mining
Council is the last administrative instance in mining
matters?
A. I don't think that that question has a
yes-or-no answer because, of late, the powers of the
Mining Council have been reduced, and it has very
limited functions. I wouldn't be able to tell you
this with any precision because it's 20 years since
I've been involved in that issue.
Q. But sitting here today, you do not remember
whether in 2004 the Mining Council was the last
administrative instance for appeals in mining matters.
Is that your testimony?
A. In general it was the final administrative
instance in mining matters, but delimited to certain
spheres.
In the case of Mining Royalties, no, because
in the case of Mining Royalties, well, that was
entrusted by law expressly to the SUNAT and the
[Page 1215]
Ministry of Economy and Finance and the Tax Tribunal
and the Supreme Court in terms of the administrative
litigation aspect.
Q. But in your recollection, would you agree
with me that the Mining Council was the--in 2004--is
it your recollection now that in 2004 the Mining
Council was the last administrative instance in mining
matters other than Royalties?
MS. HAWORTH MCCANDLESS: Madam President,
he's asked that question before. Mr. Isasi just
answered it.
MR. PRAGER: Fine.
BY MR. PRAGER:
Q. Let me ask you the next question.
Before you came to your conclusion that the
position of MINEM has always been that investment
projects are limited to--
(Overlapping speakers.)
A. You're putting words in my mouth. Excuse
me. I have not said what you just said. So, I would
ask that you please not put words in my mouth, because
I have come here with the very positive goodwill to be
[Page 1216]
a Witness as to the truth. I have no interest in one
Party or the other winning in this proceeding. I'm a
Witness as to the truth, and that's what I have sworn
to do.
What I would say is that the Mining Council
was the last administrative instance in certain
mining-related subject matter. The scope of that
competence, I am not familiar with, and I have no
reason to know that. It's part of the procedure
that's in my Statement.
Q. Mr. Isasi, I was about to ask you a
question, and the question was, before you came to the
conclusion that a position of MINEM has always been
that investment projects--that Stability Guarantees
only apply to investment projects.
Did you review the Decisions of the Mining
Council on matters of Stability Agreements?
MS. HAWORTH MCCANDLESS: I'm sorry. I
object to the line of questioning, I'm not sure how
that follows on the questions of the President.
MR. PRAGER: Well, I can tell you how that
follows to the question of the President. Because if
[Page 1217]
he answered in response to the question, that it has
always been the practice of MINEM. So, I'm testing on
what he bases that, what--on what kind of information
he bases that statement.
PRESIDENT HANEFELD: Yes, please go ahead.
BY MR. PRAGER:
Q. Mr. Isasi, do you need me to repeat the
question--
(Overlapping interpretation and speakers.)
A. May I answer?
Q. So, let me reask the question.
A. I understood the question perfectly well.
And what I can tell you is that I reiterate that the
Mining Council was an autonomous body. I reiterate
that when I refer to the institutional position of the
Ministry, I'm referring to the Ministry. The Ministry
of Energy and Mines, mining sector, was structured
with two subsectors: Energy and Mining.
A vice Minister for Mining and, below them,
certain General Directorates. And the Mining Council
is not there. And in the Ministry, we debated that.
Many times, we discussed the matter. Many times, the
[Page 1218]
institutional position was always the one that I have
upheld.
Q. Mr. Isasi, you didn't answer my question.
Did you look at the practice of the Mining
Council before you came to that conclusion?
Did you or did you not?
A. No, that is not in my Report.
Q. That is correct, it is not in your Report,
but I wanted to ask you, did you consider or look at
the practice of the Mining Council before you came to
your conclusion that investment projects are
only--that the stability benefits are only limited to
investment projects?
A. No. I did not review. I did not review
Resolutions by the Mining Council. I reviewed the
law. I reviewed the Constitution and all of the legal
citations in that Report. That's what I recall. This
is 20 years after.
Q. Let me ask it to you another question that
the President asked you, and that was with regard to
Paragraph 23 of your Second Report, where there is the
list of the Stability Agreements that was sent, that
[Page 1219]
you said were sent to SUNAT. And I just wanted to
make sure that I understood you correctly. And you
correct me.
Were you saying, when you were asked about
the various titles, that the title of the Stability
Agreement, which is reflected here in the second
column--that the title of the Stability Agreements--
(Overlapping speakers.)
MR. PRAGER: --scope of the Stability
Agreements?
MS. HAWORTH MCCANDLESS: I'm sorry. That's
a mischaracterization. That's not--we were--I will
object because the assertion in his question is
erroneous, as a fact, matter of fact. He said that's
listed as the title of the Stability Agreement.
PRESIDENT HANEFELD: Let us put the list
again on screen, and then we all see what it states.
MR. PRAGER: Exactly.
If somebody could put that on the screen
again. It is a--here we go.
BY MR. PRAGER:
Q. Mr. Isasi, let me take it slowly.
[Page 1220]
Do you see the list here that says
"Project"?
A. The Project that is stabilized. The Cerro
Verde Project has stabilized. And that goes--that is
defined under the Contract as a Cerro Verde Leaching
Project, and it is limited by a Feasibility Study. I
do not know what your question is. At any rate, that
list shows the Contract on guarantees and investment
Measures as required by SUNAT, and sent by the office,
the General Office of Mining.
And as Director General, I conveyed this,
together with the Report. I do not see the doubt, the
follow-up doubt that Counsel has.
Q. Well, Mr. Isasi, you don't know what the
question is, because you were not waiting until I
asked you the question.
So, here comes my question.
Would you agree that the second column
that's listed as "Project" contains the titles that
you can find in Clause 1.1 of each Stability
Agreement?
A. I do not understand your question.
[Page 1221]
Q. Let me ask you that way.
What is your understanding what the column
entitled "Project" shows? Does it show a title of the
Stability Agreement, the name of the Project? What is
your view on what this column shows?
A. As a matter of fact, the question should be
asked to the General Director of Mining that sent this
information. I see the list of Agreements, of
guarantees and Measures for Investment Promotion.
This is just a list of Contracts, Agreements. What I
see is that the General Director has identified a
Company or a Leaching Project, Cerro Verde, for
237 million, and that agrees with the Leaching Project
that is part of the Contract, and that is already
delimited by a Feasibility Study.
I cannot tell you beyond that whether there
is a mistake by the Director, and he assigned a
project name to a company or a company to something
else. I do not know. That is the list of all of the
Contracts with guarantees and Measures for Investment
Promotion for SUNAT to do their work, and, as I
understand, they did it.
[Page 1222]
Q. Mr. Isasi, if you look at the third line,
Minera Yauricocha, the Project is described as
"Centromín Perú."
Is it your position that the stability
benefits applied to the entire Centromín Perú Company?
A. I am not here to speak about Centromin, I do
not know what the legal situation with Centromín is.
Q. What about Line 11?
Do you see that? Sociedad Minera De Zinc De
Cajamarquilla, is it your position that the Stability
Guarantees applied also to "Others," and if so, would
the "Others" be identified?
A. Once again, I am here to speak about the
specific Cerro Verde Case. I have not been in the
mining sector for 20 years, and I have not reviewed
the cases of the other companies whose names are there
on the screen. I cannot offer you an opinion as
you're asking me to do.
Q. Thank you. Mr. Isasi.
MR. PRAGER: I don't have any other
questions.
MS. HAWORTH MCCANDLESS: Respondent has no
[Page 1223]
further questions. Thank you.
(Overlapping interpretation and speakers.)
PRESIDENT HANEFELD: Mr. Isasi, then there
are no further questions. We thank you very much for
being available by a video screen, and you are now
released as a Witness. Thank you.
THE WITNESS: I thank you. Thank you. Good
afternoon.
(Witness steps down.)
MR. PRAGER: Thank you.
MS. HAWORTH MCCANDLESS: Thank you.
PRESIDENT HANEFELD: I suggest that we have
now a break.
MR. ALEXANDROV: Madam President, may I be
heard for a moment?
PRESIDENT HANEFELD: Sure.
MR. ALEXANDROV: We strongly object to this
conduct of Counsel for Claimant, essentially waiving
their right to cross-examine a Witness, and then
spending no less than 15, 20 minutes asking questions
allegedly arising out of the Tribunal's questions, and
we reserve our rights in that regard.
[Page 1224]
MR. PRAGER: If I may respond to that, it is
common practice that, if the Tribunal asks questions,
the Parties have a right to ask follow-up questions.
My questions were clearly based on questions that you
asked and answers that Mr. Isasi gave in response.
So, there is, in our view, absolutely no
basis for the objection, and I think it's a practice
that our--that the other side has also used to follow
up on Tribunal's questions.
MR. ALEXANDROV: Madam President, I'm not
asking for a ruling, and this statement is
unwarranted. I was just reserving Respondent's
rights.
PRESIDENT HANEFELD: This is noted.
The Tribunal's suggestion on how to proceed
would be that we now start with Mr. Polo, if this is
possible, and I'm fine with the Respondent. But as we
have to end the Hearing today, really at sharp 5:30,
it may well be that we start then with the
cross-examination only tomorrow.
So, it will be the introduction of the
Witness and the direct, and then you start with
[Page 1225]
cross-examination tomorrow. Is this fine?
MS. HAWORTH MCCANDLESS: Madam President, I
don't have a very long direct with Mr. Polo, so I
assume, within the time frame between now and 5:30, we
could start on the cross.
PRESIDENT HANEFELD: Okay. Then we do that,
but I just need to say, we need to stop sharp at 5:30.
You already have an estimate, how long your
cross-examination of Mr. Polo will be?
MR. PRAGER: Well, if experience from the
previous arbitration counts, unless Mr. Polo
fundamentally changed his character, he's a very
talkative guy.
(Overlapping speakers.)
MR. ALEXANDROV: Madam President, I object.
We cannot characterize the conduct of a Witness based
on a previous hearing. This is inappropriate.
PRESIDENT HANEFELD: Yeah. So, we just keep
it simple.
MR. PRAGER: Yeah. Keeping it simple, is,
we will surely continue tomorrow, and my estimate,
right now, is that we're going to--it's probably going
[Page 1226]
to extend into the late morning, depending on how
things are going.
PRESIDENT HANEFELD: Okay. This is noted.
Then I would suggest that we right away start with
Mr. Polo's testimony and then continue tomorrow.
(Brief recess.)
PRESIDENT HANEFELD: Can the Witness stay in
the room, or do you...
MR. ALEXANDROV: I don't think it matters.
PRESIDENT HANEFELD: Okay.
MR. ALEXANDROV: Madam President,
Ms. Torreblanca is listed as a Witness. She's not
listed as a Party representative or a member of the
legal team. So, she has no role to play in the
cross-examination of the Witnesses. We see that she's
sitting next to the cross-examiner, and we believe
that is inappropriate.
She can stay in the room, but, again, she
has no role to play in the cross-examination of
Witnesses. So, we invite her to sit somewhere else,
not where she'll be whispering in the ears of the
cross-examiner or passing notes. Thank you.
[Page 1227]
MR. PRAGER: Ms. Torreblanca represents
Cerro Verde, but the fact that she's sitting next to
me right now is purely fortuitous, and not intended to
be my whisperer, but I think she will be happy to go
somewhere else.
(Comments off microphone.)
MR. ALEXANDROV: For the record, she does
not represent Cerro Verde because she's listed in the
List of Participants as a witness only. So, we ask
that she moves where she was.
(Comments off microphone.)
PRESIDENT HANEFELD: Thank you very much for
your cooperation. The problem is solved.
CÉSAR AUGUSTO POLO ROBILLIARD,
RESPONDENT'S WITNESS, CALLED,
PRESIDENT HANEFELD: Then we can turn to
you, Mr. Polo.
Welcome. Thank you very much for being
here.
I introduce, briefly, the Tribunal. My name
is Inka Hanefeld. I'm the presiding arbitrator in
this Arbitration. I'm here with my co-arbitrators,
[Page 1228]
Professor Guido Tawil and Dr. Bernardo Cremades.
You have been called as Witness by the
Respondent, by Perú in these proceedings, so I need to
ask you to make a Declaration under Article 35 of the
Arbitration Rules, that you will speak the truth, and
I kindly request you to read it out.
THE WITNESS: I solemnly declare, upon my
honor and conscience, that I shall speak the truth,
the whole truth, and nothing but the truth.
PRESIDENT HANEFELD: Thank you very much.
Do you have your Witness Statement, RWS-1
and 8 in front of you?
THE WITNESS: Yes.
PRESIDENT HANEFELD: Can you confirm that
these are your Witness Statements, and that they
correspond to your recollection, or is there anything
you wish to amend or correct?
THE WITNESS: No. My Statements are signed.
PRESIDENT HANEFELD: Thank you. Then we
will turn to the Respondent, who will ask you some
questions in direct, then later on you will be
questioned by the Claimant. We will not manage to
[Page 1229]
complete your testimony today because we have to end
the Hearing day today at sharp 5:30, so your testimony
will continue tomorrow, and then also we have the
opportunity to ask you some questions.
So, I turn to Respondent.
MS. HAWORTH MCCANDLESS: Thank you, Madam
President.
DIRECT EXAMINATION
BY MS. HAWORTH MCCANDLESS:
Q. Good afternoon, Mr. Polo.
You have the two Witness Statements in front
of you, and you confirmed that they had your
signatures.
Are the Statements based on your personal
knowledge and experience?
A. Yes.
Q. Could you please describe your formal
education?
A. I'm a civil engineer. I graduated in 1967
at the National Engineering School of Perú. I am a
civil engineer from the National Engineering
University of Perú. I graduated in 1967. I'm also a
[Page 1230]
graduate with honors of the Pacific University with a
master's degree in business management, with
specialization in finance.
Those would be graduate studies, and I have
also studied economics of development in France as
postgraduate studies and planning of development in
Perú as postgraduate studies, and also some other
minor studies.
Q. What is your current position?
A. I am retired.
Q. What positions did you hold before you
retired, particularly in the Ministry of Mines and
Energy?
A. I was Vice Minister of Mines, twice, for a
total of almost six years as Vice Minister under two
different administrations, and I also worked with four
Ministers and I renewed the trust twice--that is to
say, five different people entrusted that position to
me during two different Administrations with
Mr. Fujimori and Mr. Toledo.
Q. Could you please explain, briefly, what the
Minister of Mines, Mr. Fernando Sánchez Albavera,
[Page 1231]
asked you to do when you were Vice Minister with
respect to the creation of Decree 708?
A. The Minister, Fernando Sánchez Albavera and
myself trained together at the planning institute, and
we were familiar with each other, and he told me,
given your experience with investment project and your
working in the mining sector, in addition to the
academic background, I'd like for you to propose some
stable rules to promote investments in the mining
sector, which is what--which is one of our strengths.
This would entail guarantees, benefits, and
to promote long-term projects, or projects with a long
maturation period.
Q. In your experience as Vice Minister of
Mines, what is the scope of a Stability Agreement?
A. The Stability Agreement is thought--or
designed to give clear instructions and rules for
investment projects, and also for expansions of
Projects, specifically linked to the Project.
This is not for the mine titleholder, the
Concession, or the Administrative mining unit. The
idea was to promote new investments that entailed
[Page 1232]
stable, clear and promotion rules.
Q. When you were Vice Minister of Mines for a
second time, the Mining Royalty Law was enacted.
In your view, what is the relationship
between the obligation to pay Royalties and
Stabilization Agreements?
A. The Stability Agreements stabilized based on
the approval of Feasibility Studies, which were
attached to the Agreements, prevent or protects any
impact from the Royalties of the new law. This is a
shield, because there is a stabilization of the rules
of the game, and this was at Decree 708.
Q. Thank you.
MS. HAWORTH MCCANDLESS: Madam President, I
have no further questions.
CROSS-EXAMINATION
BY MR. PRAGER:
Q. Hello, good afternoon, Mr. Polo. It's a
great pleasure to meet you again.
I will be asking you, again, a series of
questions. If you do not understand a question,
please ask me to clarify it, and we both have to be
[Page 1233]
careful to respect the translation time and not to
talk over ongoing translation. I will do my best.
MS. HAWORTH MCCANDLESS: Do you have--have
you handed out cross binders for at least the Witness
but also for us and, perhaps, the Tribunal as well?
PRESIDENT HANEFELD: We have them already.
MS. HAWORTH MCCANDLESS: Oh, well, you gave
it to the right people, but I believe the Witness
might also want it.
MR. PRAGER: The Witness may want to have
one as well. Yes.
PRESIDENT HANEFELD: Apologies. We only
have for the direct, sorry, not for the cross.
MR. PRAGER: It has been a long day.
BY MR. PRAGER:
Q. I think everyone has the binder. So, let's
start.
Mr. Polo, you testified at the Hearing in
the SMM Cerro Verde v. Perú Case in February; right?
A. Yes, that is true. And it is also a
pleasure to see you again.
(Comments off microphone.)
[Page 1234]
Q. Did you review the Transcript of your
testimony in the SMM Cerro Verde v. Perú Hearing in
preparation of this Hearing?
A. Yes, recently.
Q. Did you review the Transcript of the
testimony of any other Witness or Expert in the
SMM Cerro Verde v. Perú Hearing?
A. Not at all. Which translates as no.
Q. Okay. Did you review the Transcript of the
Opening Statements of the Parties in the SMM Cerro
Verde v. Perú Case, or in this Case?
A. I reviewed everything very quickly.
Q. Let me take it part by part because I asked
you two things at once.
Did you review the Transcript of the Opening
in the SMM Cerro Verde v. Perú case?
A. Are you talking about the whole document?
Are you talking about all the document in the--of the
Transcript.
MS. HAWORTH MCCANDLESS: I'm not sure he
understands the question.
MR. PRAGER: Okay.
[Page 1235]
MS. HAWORTH MCCANDLESS: You might want to
explain what that is because that's a term that we
know, but I'm not sure he knows.
BY MR. PRAGER:
Q. Well, let me ask it that way. You told us
that you reviewed the Transcript of your testimony in
the SMM Cerro Verde Case.
Did you review any other parts of the
Transcript in the SMM Cerro Verde Hearing, other than
your testimony?
A. Just your questions and my answers.
Q. Okay. So, you did not review, for instance,
a Transcript of the Opening Statements that the
attorneys made at the outset of the Hearing?
A. I did not, no. No, the Statements no, the
questions you asked me, the answers are provided. The
intervention by Respondent's Counsel, at some point.
So, that's all I've read.
Q. Can I also ask you--before you signed your
Witness Statements, did you review the Witness
Statements of any of Perú's Witnesses?
A. I do not know of any other Witness
[Page 1236]
Statement, of anyone else.
Q. Let me ask you specifically: Did you review
the Witness Statements of Mr. Tovar?
A. I'm not a lawyer. Perhaps some of the terms
are legal and they may confuse me. I knew of the
testimonies that were in a binder for the case, and I
saw where they opined. I saw those testimonies, but I
didn't read them all because it was overwhelming,
really. I just saw some of them, only some.
And I got an idea--I have my own idea, and I
think that that was enough. I didn't go in depth in
connection with the testimonies of the Respondent or
the Claimants. Well, I looked at some of the things
that the Claimants--rather, the Respondents said, the
Respondent said, but I focused on my own things. That
was quite enough.
Q. I will try not to use any terms that are too
much lawyer-like, so please tell me if I do.
But can you explain me, when you reviewed
the Witness Statements of some of Perú's Witnesses?
A. Before February. Before I went to the
February Hearing. So, the testimonies are the sort of
[Page 1237]
documents that were given to me, similar to my own
testimony. I reviewed some of them, and I think one
by Mr. Isasi, Mr. Flury, I worked with Mr. Flury, and
also some documents related to your Expert, the female
lawyer, and also from the constitutional Experts. But
some things, not everything. It was too much to read.
Not everything. It was impossible to read everything.
Q. So, when you say you reviewed those Witness
Statements of, for instance, Mr. Isasi, or the
Constitutional Expert, did you review them in
preparation of the SMM Hearing?
Did I understand you correctly?
A. I did it to get information about that. I
was sent all of the testimonies and I looked at mine
in detail, of course, and some other things, that's
it. Just to have some idea of things. At the time I
didn't even know that I was going to become a witness.
Simply, I looked at what I did, what others did. I
reviewed that. That's all.
Q. Okay. I'm a little bit confused. You said
this February, but this February you knew that you
were a witness. Were you referring to February of
[Page 1238]
this year or to February of a previous year?
A. The testimonies, I would have had to review
them before February. I think I didn't know--before
February, of course, before the first Hearing--I think
I didn't even know that I was going to be a witness.
I just reviewed that, and then I came to know that I
was going to be a witness, and I'm not certain, I'm
not sure.
Q. Mr. Polo, are you saying that you reviewed
those Witness Statements before you signed your own
First Witness Statement?
A. No. My Witness Statement had been signed
before. After I looked at the other ones that I
received, and I'm sure that was the case for the other
ones as well. That's what I recall.
I wouldn't have been able to prepare my
testimony by studying the testimony by others. But if
you want me to say that, no, that was not the case.
Q. It was at some point after you submitted
your First Witness Statement.
Did you review them before you submitted
your Second Witness Statement? Did you review--just
[Page 1239]
to be precise, did you review the Witness Statements
of Mr. Isasi and the Constitutional Expert before you
submitted your Second Witness Statement?
A. I don't think so. I have received advice
from Respondent's Counsel, Perú, and I have acted
always, always in accordance with their advice, and
that's how I have managed things. I have followed the
procedure. That's all.
Q. You mentioned specifically the Witness
Statement of Mr. Isasi.
Do you recall also having reviewed the
Witness Statement of Mr. Tovar?
A. I don't think so. I do not recall having
reviewed Mr. Tovar's. I know them both very well.
I've worked with them. I was trying to remember in
connection with Isasi's testimony--I know you will
recall that I was Vice Minister 31 years ago. I was
trying to remember what I recalled and to look at it
with Isasi.
Q. So, if I understand you, sitting here today,
you do not recall whether you reviewed Mr. Isasi's
Witness Statement before you wrote your Second Witness
[Page 1240]
Statement or after you wrote your Second Witness
Statement?
A. Let me tell you, I followed the instructions
given to me by Counsel and in the order I was given
the documents and at the right time. I didn't pay
attention to those things.
Q. Mr. Polo, when you prepared for this
Hearing, I assume you spent some time with your
lawyers to prepare; is that right?
A. That's correct.
Q. And I think when you prepared for the SMM
Hearing, the same is true? You spent some time with
your lawyers to prepare for the Hearing; right?
A. That's correct. I had never been involved
in Hearings such as this, so this was completely new
to me. I was explained the procedure, they explained
things to me by the Tribunal, et cetera.
Q. Can you tell us how many hours approximately
you have spent preparing for each of the two Hearings?
A. It's a lot. I wouldn't be able to tell you.
Quite a lot. I study like a maniac.
Q. "Muchisimo" meaning more than 20 hours for
[Page 1241]
each Hearing?
A. Much more than that. What you want to do,
imagine, is to do your best, to be faithful to what
you do and to--or what you did, rather, and to
remember everything. Well, 200 hours, I would think,
easily to the two Hearings; right? 200 hours.
Q. 200 hours for each Hearing or together?
A. Together. The second Hearing had some more
hours because it's the second one, and one wants to
recall what one said at the first Hearing, what you
admitted, what you wanted to clarify, what you wanted
to ratify, you wanted to understand the concerns of
both Parties more and to say, you know, your own
truth, what is correct.
Q. And to be clear the 200 hours were spent
preparing for the Hearing and not also writing the
Witness Statements?
A. No. The procedure for the Witness
Statements, I can explain it to you, what it was, if
you wish.
Q. No. I was just asking you specifically
whether the 200 hours include the time that you spent
[Page 1242]
preparing the Witness Statements, or whether they were
just preparing for the Hearing?
A. The preparation of the testimony,
that's--that takes a long time. So, I prepared for
the Hearings on the basis of my Witness Statements and
also on the basis of some explanations as to what the
procedure is like, and also Counsel for Respondent
asked a few questions, and I answered the questions as
I always do.
Q. Did Mr. Isasi participate in any of those
preparation meetings that you described?
A. He did not. I worked with Counsel, and we
did this virtually. At the beginning I was sharing
with them my experience to see whether I was going to
become a witness or not, if they were interested in
me, then I provided more information as I recollected
things and as I added things. And then I found out I
was going to be a witness.
Q. Did Mr. Tovar participate in any of the
preparation meetings?
A. He did not. I dealt directly with Counsel.
Q. Did you discuss with Mr. Isasi or with
[Page 1243]
Mr. Tovar the case before you came to testify in this
Hearing?
A. I did not. Isasi worked closely with me up
until 2005. There are some things that he and I dealt
with together, and those were very clear in my mind,
the presentations to Congress, to the Constitutional
Tribunal, and some public presentations as well.
Q. Well, did you ever discuss some of those
facts with Mr. Isasi when you prepared for your
testimony, to refresh your memory?
A. No. I just wanted to ask him because I was
confused as to the date in connection with a
presentation made by Isasi. It was very clear to me
that I had been with him at the Congress, and he said,
no, you were no longer the Prime Minister. And he
clarified that to me.
Q. And how did that happen? Did you call him,
or did you meet or...
A. It was a phone call. I first spoke to his
second in command and I said, okay, that colorful
presentation that is very clear that was prepared
about profit reinvestment, was I the Vice Minister
[Page 1244]
then, when that presentation was made or not? I don't
think I was the Vice Minister, but I thought I was.
And he said: "No, you were no longer the
Vice Minister." Zegarra said. And Isasi confirmed:
"You were no longer the Vice Minister." So, that was
something that was strange. After being Vice
Minister, the Minister asked me to go on as his
consultant, as his advisor, so I was just his advisor.
And perhaps I thought I participated in that
capacity in that presentation, but many, many years
have gone by, so you can't really ask me to ascertain
those things that I cannot really recall.
Q. Which presentation was that that you're
referring to now?
A. It was a presentation that had to do with
Mining Royalties. It had to do with profit
reinvestment. There were some Congress people that
wanted everyone, all of the companies, without any
distinction, to pay Royalties. The Ministry--Isasi,
Chappuis, myself, the Minister--we all said that the
investment projects that had a stabilization agreement
were protected, and they should pay no Royalties. We
[Page 1245]
said that at the Congress, at the Constitutional
Tribunal, and we proposed this in a draft communique.
We also discussed this at the offices of the Minister
of the Economy and with--people of SUNAT were there.
I was also part of the MINEM, and other people were
present there at that meeting, the Ministry of the
Economy people were there. They presided over the
meeting.
Q. Other than a conversation with Mr. Isasi
about that meeting, anything else that you discussed
with him to refresh your memory?
A. No, but we both knew that we could not
speak.
Q. What about with Mr. Tovar? Did you have any
discussion about Mr. Tovar about your testimony?
A. Not at all. I do not know what I said, and
he doesn't know what I said; I do not know what he
said.
Q. And I asked you about the preparation for
this Hearing. When you prepared for the SMM Hearing,
did you--when you had preparation meetings, was
any--was Mr. Isasi, was Mr. Tovar present at any of
[Page 1246]
those meetings?
A. No. With Counsel.
Q. So, you were exclusively preparing with the
lawyers--
(Interruption.)
Q. So, you were exclusively preparing with your
lawyers for the meeting? Is that your testimony?
A. Yes, with the lawyers in Lima. We had a
meeting.
Q. Did you have a meeting here in Washington
with the lawyers as well?
A. For this Hearing and for the other Hearing?
Yes. Yes. With Counsel. I always met with them when
dealing with these issues.
Q. And at the meeting with your lawyers
preparing for the SMM Case--right?--here in
Washington, were any--was Mr. Isasi or Mr. Tovar
present?
A. I don't think Isasi was present. I knew
that Tovar was present, just him.
Q. So, when you said Mr. Tovar was present, are
you saying that he was present at the preparation
[Page 1247]
meeting that you attended?
A. No.
Q. You're referring to Mr. Tovar testifying
here in Washington?
A. Yes. I knew that that's what he did.
Q. Mr. Polo, I will very briefly start to ask
you questions about your background. We have to break
in 10 minutes. So, let me start a little bit about
your general background.
You became--I think you mentioned it
earlier--for the first time Vice Minister for Mines in
August 1990; right?
A. The first time, yes, August 1990, correct.
Q. And the Government appointed you to that
position on proposal of Mr. Fernando Sánchez Albavera,
who was then Minister of Energy and Mines; right?
A. He recommended that I take that position,
yes.
Q. And Mr. Sánchez Albavera was the first
Minister of Energy and Mines under the Government of
Mr. Fujimori; right?
A. Correct.
[Page 1248]
Q. So, at that time, if we put ourselves
back--that was in 1990, by the way; right?
A. August 1990.
Q. So, putting ourselves back in time to
August 1990, is it fair to say that Perú's economy was
going through significant economic turmoil?
A. Yes. There was a very serious economic
crisis at the end of the previous administration.
Q. I think you mentioned at the last Hearing
that there was inflation reaching 7,000 percent?
Is that your recollection?
A. Yes. I have read my Statements. Depending
on the period you're looking at, you can have enormous
inflation rates. They were all enormous. The last
two years were terrible. I read about enormous
inflation rates out of the Statement made by former
Minister.
Q. And is it fair to say that international
financial organizations deemed Perú to be an
ineligible borrower?
A. It was ineligible because it was in default,
it defaulted its payments.
[Page 1249]
Q. And Perú was also suffering from domestic
terrorism at that time; right?
A. That is true.
Q. And for sure, terrorists attacks, you know,
killed thousands of Peruvians, but they also targeted
mining Companies; right?
A. That is correct, yes. I was threatened
twice.
Q. Why did terrorism focus also on Mining
Projects?
A. Well, they acted in the Andean areas, in the
high areas, and the most important economic force was
the mining Companies, and also they provided
explosives; right? And they considered that all of
the workers there were traitors to the cause. They
killed them. They stole the explosives, et cetera.
Q. So, the--is it fair to say that the
combination of the financial crisis and of the
terrorist attacks had a significant impact on private
investment in the mining sector?
A. That is correct. Also, it had to do with
the policy of the former administration.
[Page 1250]
Q. When you say it also had to do with the
policy of the former administration, what do you mean?
A. Alan García's Administration. Initially, he
created a discriminatory system for the handling of
the exchange rate and foreign currency, in spite of
the fact that there was a Legislative Decree 109 that
supposedly provided for stability.
Q. I think you mentioned at the SMM Hearing
that the last important investment in the mining
sector was made towards the end of the military
Government at the end of the '70s, in the Cuajone
Project.
Is that still your recollection?
A. I was thinking about this, and it was signed
at the beginning of the military Government, and the
investment began at the end of the military
Government. I think the Contract was signed in '69,
and then production begun in 1977. I think so, around
that time.
Q. By the time you started as a Vice Minister,
that was the last important investment in the mining
sector, the Cuajone Investment in the '70s; is that
[Page 1251]
right?
A. Private. Private mining sector. There were
some investments that were made in the State-run
Companies such as Tintaya, and Minero Perú, some of
them that were related to Cerro Verde.
Q. And you mentioned the Government-owned
sector.
I recall that you used to work for about
10 years in the 1980s for a Company called Centromín;
right?
A. Yes. 20 years in total. I had a first
period as Vice Minister, and then I worked for
Centromín later on as well. 20 years in total.
Q. Can you explain to the Tribunal what
Centromín was?
A. Centromín was born after the expropriation
of Cerro De Pasco Corporation. It was a foreign
company that existed in the certain area of Perú, and
the largest mining Company of Perú. It was
expropriated. It went to the hands of the State, and
Centromín was created.
Q. So, it was a State-owned Company?
[Page 1252]
A. Yes, it was a State-owned Company. Yes.
That's right. It was the property of the State.
Q. And I think you mentioned that Centromín was
operating a number of mining units?
A. Yes. Seven mining units with their
Concentrators and the whole logistics around it.
Under a single unit, that was called Centromín. That
was the Company.
Q. And that was the case in 1990, when you're
trying to--as the Ministry, as Vice Minister; right?
Just so, that we place it in time.
A. Yes, that's true.
Q. And did Centromín also own companies that
were not active in the mining sector?
A. It had some Projects, Toromocho, for
example, I recall. It wasn't a mine yet, but it was a
Project that was there, and then there were others
that I cannot recall at this point in time.
Q. But my question was specifically whether
Centromín also owned companies that were not active in
mining, in the mining sector, non-mining activities.
A. Yes. There were some activities that were
[Page 1253]
carried out by Centromín, but there were related
companies: Renasa, Explosivos Exsa, Reactivos
Nacionales, COMSA, which was a construction company in
the mining sector. We're talking about 30 some years
that have gone by already.
Q. And I recall you mentioned--and you correct
me if I say this wrong--but when you worked as Vice
Minister, you were on loan from Centromín?
A. Yes. That's right. It was a very, very--a
very usual thing. They did that to reinforce the
people who worked in the central Government.
Q. And that means that Centromín was paying
your salary; is that correct?
A. Yes. I received my salary from Centromín,
the same salary that I had without being the Vice
Minister.
Q. And after you concluded your first term as
Vice Minister, you went back to Centromín as an
advisor to the President; is that correct?
A. That is correct.
Q. Is it--
MR. PRAGER: I'm conscious of the time, no
[Page 1254]
worries.
BY MR. PRAGER:
Q. Is it also correct that Centromín in--let me
place again in a time--in 1990, 1991, was
intending--sorry, let me rephrase that.
Is it correct that in 1991, the Government
intended to privatize Centromín's assets in a
comprehensive sale?
A. At the beginning, it wasn't comprehensive in
nature. I think there was a Project, 647, or
something like that. It was a draft law, and the
initial position was for the takeover to include the
majority of things. We hoped to have majority private
participation via a capital contribution.
MR. PRAGER: Thank you very much. I will
stop for today, conscious of the time.
PRESIDENT HANEFELD: Thank you very much.
So, we will see you again tomorrow.
Do the Parties have any issues to raise
before we conclude?
MR. PRAGER: None on behalf of Claimant.
MS. HAWORTH MCCANDLESS: Not on behalf of
[Page 1255]
Respondent.
PRESIDENT HANEFELD: Thank you very much.
Then we conclude the day and see you tomorrow morning.
(Whereupon, at 5:27 p.m., the Hearing was
adjourned until 9:30 a.m. the following day.)
[Page 1256]
CERTIFICATE OF REPORTER
I, Dawn K. Larson, RDR-CRR, Court
Reporter, do hereby certify that the foregoing
English-speaking proceedings were
stenographically recorded by me and thereafter
reduced to typewritten form by
computer-assisted transcription under my
direction and supervision; and that the
foregoing transcript is a true and accurate
record of the English-speaking proceedings.
I further certify that I am neither
counsel for, related to, nor employed by any
of the parties to this action in this
proceeding, nor financially or otherwise
interested in the outcome of this litigation.
Signature
Dawn K. Larson