[Page 335]
IN THE MATTER OF AN ARBITRATION BEFORE A TRIBUNAL
CONSTITUTED IN ACCORDANCE WITH THE TRADE PROMOTION
AGREEMENT BETWEEN THE REPUBLIC OF PERÚ AND THE UNITED
STATES OF AMERICA AND THE UNCITRAL RBITRATION RULES 2013
PCA Case No. 2019-46
| - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- In the Matter of Arbitration Between: THE RENCO GROUP, INC., Claimants, and THE REPUBLIC OF PERÚ, Respondent. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - | x x Vol. 3 |
- AND -
IN THE MATTER OF AN ARBITRATION BEFORE A TRIBUNAL
CONSTITUTED IN ACCORDANCE WITH THE CONTRACT OF STOCK
TRANSFER BETWEEN EMPRESA MINERA DEL CENTRO DEL PERU S.A.
AND DOE RUN PERU S.R. LTDA, DOE RUN RESOURCES, AND RENCO,
DATED 23 OCTOBER 1997, AND THE GUARANTY AGREEMENT BETWEEN
PERU AND DOE RUN PERU S.R. LTDA, DATED 21 NOVEMBER 1997 AND
THE UNCITRAL ARBITRATION RULES 2013
PCA Case No. 2019-47
| - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - | x |
| In the Matter of Arbitration Between: | : |
| : | |
| THE RENCO GROUP, INC. AND | : |
| DOE RUN RESOURCES CORP., | : |
| : | |
| Claimants, | : |
| : | |
| and | : |
| : | |
| THE REPUBLIC OF PERÚ AND | : |
| ACTIVOS MINEROS S.A.C., | : |
| : | |
| Respondents. | : |
| - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - | x Vol. 3 |
[Page 336]
(Continued)
HEARING ON JURISDICTION AND LIABILITY
Thursday, March 7, 2024
The World Bank Group
1225 Connecticut Avenue, N.W.
C Building
Conference Room C1 450
Washington, D.C. 20036
The hearing in the above-entitled matter came on
at 9:30 a.m. before:
JUDGE BRUNO SIMMA, President of the Tribunal
DR. HORACIO GRIGERA NAÓN, Co Arbitrator
MR. J. CHRISTOPHER THOMAS KC, Co Arbitrator
[Page 337]
ALSO PRESENT:
Registry, Permanent Court of Arbitration:
MR. MARTIN DOE RODRIGUEZ
Deputy Secretary General and Principal Legal
Counsel
MR. JAVIER COMPARINI CUETTO
Assistant Legal Counsel
MS. MAGDALENA LEGRIS
Case Manager (remotely)
Assistant to the Tribunal:
DR. HEINER KAHLERT
Realtime Stenographers:
MS. DAWN K. LARSON
Registered Diplomate Reporter (RDR)
Certified Realtime Reporter (CRR)
Worldwide Reporting, LLP
529 14th Street, S.E.
Washington, D.C. 20003
United States of America
MS. MARÍA ELENA DA SILVA
MS. MARTA RINALDI
D.R. Esteno
Colombres 566
Buenos Aires 1218ABE
Argentina
(5411) 4957 0083
[email protected]
Interpreters:
MR. DANIEL GIGLIO
MS. SILVIA COLLA
[Page 338]
APPEARANCES:
On behalf of the Claimant:
MR. ADAM SCHIFFER
MR. MURRAY FOGLER
MS. JENNIFER CORDELL
MR. BUFORD NEELY
Schiffer Hicks Johnson PLLC
700 Louisiana Street
Houston, Texas 77002
United States of America
MS. SARAH WARBURG KOECHLIN
King & Spalding
Dallas, Texas
United States of America
Claimants' Representatives:
MR. JOSH WEISS
MR. ARI RENNERT
MS. CRYSTAL SALING
[Page 339]
APPEARANCES: (Continued)
On behalf of the Respondent:
MR. DANTE AGUILAR ONOFRE
MR. ENRIQUE JESÚS CABRERA GÓMEZ
MR. OSCAR LECAROS JIMENEZ
MR. ANTONIO MONTENEGRO CRIADO
MS. VANESSA DEL CARMEN RIVAS PLATA SALDARRIAGA
Republic of Perú
MS. GAELA K. GEHRING FLORES
MR. PATRICK W. PEARSALL
MR. BRIAN A. VACA
MS. AGUSTINA ÁLVAREZ OLAIZOLA
MR. KELBY BALLENA
MS. INÉS HERNÁNDEZ SAMPELAYO
MS. TATIANA OLAZÁBAL RUIZ DE VELASCO
MR. MICHAEL RODRÍGUEZ MARTÍNEZ
Allen & Overy
1101 New York Avenue NW
Washington D.C. 2005
United States of America
MR. RICHARD ALLEMANT
MS. VANESSA LAMAC
MS. ROMINA GARIBALDI DEL RISCO
Lazo Abogados
Av. Pardo y Aliaga 699
San Isidro 15073
Perú
[Page 340]
APPEARANCES: (Continued)
Nondisputing Party:
MS. LISA J. GROSH
MR. JOHN D. DALEY
Assistant Legal 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
MR. DAVID M. BIGGE
Chief of Investment Arbitration
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
MR. DAVID STUTE
Attorney Adviser
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 341]
C O N T E N T S
PAGE
PRELIMINARY MATTERS.................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................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WITNESSES:
GUILLERMO SHINNO HUAMANI
Direct examination by Mr. Vaca....................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................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....................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................-343
Cross-examination by Mr. Schiffer................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................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Redirect examination by Mr. Vaca....................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................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....................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................-365
Questions from the Tribunal................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................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JOSÉ ANTONIO PAYET PUCCIO
Direct examination by Mr. Fogler..................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................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......................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................-371
Cross-examination by Mr. Rodríguez...............................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................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.................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................-402
Redirect examination by Mr. Fogler...................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................-500
Questions from the Tribunal................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................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ENRIQUE VARSI ROSPIGLIOSI
Direct examination by Mr. Rodríguez...............................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................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Direct presentation................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................-521
[Page 342]
PROCEEDINGS
PRESIDENT SIMMA: I think we are all set.
Good morning to everybody. I open Day 3 of the
Hearing in our Renco Case, and I see that Mr. Shinno is
already present here.
GUILLERMO SHINNO HUAMANI, RESPONDENT'S WITNESS, CALLED
PRESIDENT SIMMA: Mr. Shinno, welcome. Good
morning to you.
Can you understand me? Can you hear me?
THE WITNESS: I can understand a bit. Thank you
very much. Good morning, but I need translation, please.
I am only hearing English.
PRESIDENT SIMMA: So this will be in Spanish.
All right.
Good morning, Mr. Shinno.
THE WITNESS: Good morning.
PRESIDENT SIMMA: Okay. I go back to English for
good reasons. You should have in front of you a
Declaration, which I would like you to read out. So,
please.
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 SIMMA: Thank you very much. If the
Parties have nothing, I give the floor to Mr. Pearsall for
[Page 343]
Direct. Your Witness.
MR. PEARSALL: Good morning, Mr. President.
Thank you very much. The Direct will be conducted by my
associate Brian Vaca.
PRESIDENT SIMMA: The usual problem, my problem
with names. So you are...
MR. PEARSALL: Brian Vaca.
PRESIDENT SIMMA: Brian Vaca. Okay.
Mr. Vaca, you have the floor.
MR. VACA: Thank you, Mr. President.
DIRECT EXAMINATION
BY MR. VACA:
Q. Mr. Shinno, good morning.
A. Good morning.
Q. My name is Brian Vaca, and I am part of the team,
legal team representing Perú in this arbitration, and I
will be asking you some questions and then Counsel for
Claimant will also be asking you some questions.
I would like to -- the Statement that you
presented on March 8, 2022, would you like to make any
changes?
A. Yes. I would like to say something. In part of
my Statement, I am saying that I am not a public servant.
I am not an attorney, but I continue to chair a State-run
electricity company, and I am the President of the Board,
[Page 344]
and I attend meetings of the Board twice a month. I
thought that that was not being a public servant, but
Counsel told me that those positions are also positions as
a public servant, and I wanted to be as specific about
that.
Q. Thank you, Mr. Shinno.
And what documents have you reviewed to prepare
for this Hearing?
A. Mainly all of the Minutes of the Meeting of
Creditors, and that is the part that I had to see as part
of this process.
Q. And what is your current position?
A. I continue to be the President of this Company in
Arequipa. I am the General Manager of a group of local
mining companies.
Q. Would you please explain what positions you have
had for the Peruvian State?
A. I started in 1994-1995, with an electrical
transmission company that was State-run. That company was
later on privatized. And then I moved on as a General
Manager of OSINERG that then became OSINERGMIN. That is
the body that supervises hydrocarbons, electricity, and
mining companies. This is all related to the environment,
but, in particular, occupational safety and the
environment.
[Page 345]
And since 2001-2011, I was with OSINERG,
OSINERGMIN, and in 2007, OSINERG became OSINERGMIN because
they started to oversee the mining sector in 2007, and then
I became the overseer of the mining activity with
OSINERGMIN in 2011, and that is when I moved on to the
Mining and Energy Ministry as the Director. In early
February 2012, I was appointed Vice Minister for Mines
within the Ministry of Energy and Mines, and I was there
until January 31, 2017.
In spite of leaving my position as a Vice
Minister, I remained with the Ministry for a little bit as
the President of the Meeting of Creditors for Doe Run, and
after that I left the Ministry.
Q. And for your Statement in this Arbitration, did
you focus on a specific point in time?
A. Mainly during my period as Vice Minister, that
was five years from 2012 to the period when I continued as
President of the Meeting of Creditors, and that was
August 2017.
Q. And in the other positions that you had for Perú
between 2001 and 2011, did you come to work together -- or
did you come to meet Doe Run, any official from Doe Run and
anyone related to La Oroya?
A. Well, I started in 2007 to have contact with them
because we oversaw all of the mining and metallurgical
[Page 346]
operations for them to comply with environmental protection
regulations as well as health and safety at work.
Q. Did you review any of the documents or facts
whereby you had meetings with Doe Run between 2001 and
2011, when you were with OSINERGMIN, to prepare your
Statement?
(Overlapping speakers and interpretation.)
MR. SCHIFFER: -- any of this is covered --
(Interruption.)
MR. SCHIFFER: Okay. I don't believe that any of
this is covered in the Witness Statement. The Witness
Statement just talks about his role in the Creditors'
Committee, and there's no evidence he gave about his
interaction with Doe Run Perú back in 2007. So this is
beyond the Witness Statement.
MR. VACA: Mr. President, that's kind of -- I can
repeat the question. We're not getting into substance of
what he did.
PRESIDENT SIMMA: Continue.
MR. VACA: The -- yeah.
BY MR. VACA:
Q. Let me reiterate my question, and my question is
whether you reviewed any of the facts or documents showing
any meetings with Doe Run when you were with OSINERGMIN
between 2001 and 2011 to prepare your Statement?
[Page 347]
A. Not for my Statement.
Q. Thank you very much, Mr. Shinno.
MR. VACA: Mr. President, we tender the Witness.
PRESIDENT SIMMA: Thank you, Mr. Vaca.
And I turn to Mr. Schiffer for your
cross-examination.
MR. SCHIFFER: Thank you, Mr. Chairman.
CROSS-EXAMINATION
BY MR. SCHIFFER:
Q. Good morning, Mr. Shinno.
A. Good morning.
Q. So how much interaction -- and I don't want to
get into the substance of your interaction, but how much
interaction did your department, OSINERGMIN -- I'm sure I'm
butchering that name, but how much interaction did your
group have with Doe Run Perú while you were a part of that
group?
A. It was quite frequent and a lot because we had
constant oversight of the activities at La Oroya.
Q. Right. Isn't it true that you had someone out
there every day?
A. We had, during a specific period of time.
Indeed, we hired an overseeing company for them to be
constantly overseeing and permanently overseeing the
operations at La Oroya.
[Page 348]
Q. Right. Okay. And we've already established that
your Witness Statement doesn't cover any of the substance
of that time period?
A. No.
Q. So, now, let's talk about what your Witness
Statement does cover, and that's your work on the Creditors
Committee. Okay?
A. Correct.
Q. So I believe, if I read your Witness Statement
correctly -- and correct me if I'm wrong -- that your
position is that the MEM didn't make any unilateral
decisions. Everything was put to the Creditors Committee
and they voted on it.
A. The MEM always had a position as another creditor
within the Board.
Q. Right. And so it's your position that the MEM
never exercised its unilateral judgment on matters
pertaining to Doe Run Perú? That was always done by the
group?
A. I don't understand unilateral decision because
the representative of the Ministry with the Board of
Creditors, any decision that had to be made, indeed, was
seen in this case with the Minister of Energy and Mines
with the Vice Minister to see what the best position would
be for the Ministry as another creditor within the Board.
[Page 349]
Q. Right. But you knew that you were just one vote
out of the Creditors?
A. Correct. We were just another vote of about -- a
little bit more than 30 percent.
Q. Sure. And so anything of importance that the MEM
received from Doe Run Perú, like a Plan of Reorganization,
you would, of course, present that to all the Creditors for
a vote, wouldn't you?
A. No. When the Board of Creditors started, the
Company that was going through a restructuring process
presented to the Board of Creditors, the Creditors
each -- each creditor reviewed the plan, analyzed it, and
voted it in favor or against it. So that was the process.
Q. Right. And so you knew that any Plan of
Reorganization would have to go before the Board of
Creditors for a vote; correct?
A. Correct. Everything that came from the Company
during the bankruptcy process had to be decided by the
Board of Creditors.
Q. Thank you.
So I'm going to now hand you hard copies in
Spanish of three exhibits I want to discuss with you. That
way -- I'm going to put the English on the screen, but that
way you have access to the entire document. And they are
C-114, R-111, and R-107.
[Page 350]
MR. SCHIFFER: Do you want a spare copy? I have
a spare.
MR. PEARSALL: Sure.
BY MR. SCHIFFER:
Q. So, B.B., if you could please put just the first
page of C-114 on the screen in English.
Mr. Shinno, do you recognize C-114?
A. I have seen this.
Q. So this is not the first version of a Plan of
Reorganization that Doe Run Perú submitted to try to get
out of the bankruptcy and stay in control of the Company;
right?
A. They presented a Reorganization Plan. There were
some minor changes, but it was basically the same.
Q. Well, okay. So -- but, right now, I'm just
asking, they submitted a plan early in 2012; right? The
first plan.
A. Correct.
Q. Then they revised it once; right? In March.
A. Yes. Correct.
Q. And then they revised it again in May.
A. I do not recall whether there was any other
review or revision. I remember that they presented a plan
that was revised and then it was observed by the MEM.
There was -- a new plan was recommended, even though the
[Page 351]
modifications were minor, and that was also reviewed. I do
not recall the exact dates and -- because this did not show
the observations by the MEM.
Q. Well, for example, when -- were you here when the
Parties gave Opening Statements?
A. When?
Q. Never mind. You would remember if you were here.
I'm going to represent to you that one of the
things that Perú's lawyer said about the Plan of
Reorganization is that Doe Run Perú was demanding indemnity
in the Plan of Reorganization as a condition to the Plan of
Reorganization for third-party claims from Centromín.
Do you remember that being one of the provisions
in one of the early Plans of Reorganization?
A. The observations by the MEM back then had to do
with the planned content, that had to do with financing,
but, mainly, there were other aspects, consideration that
Doe Run was including for the Government so that this plan
would be feasible. There were two variables that were
connected, but one had to do with the Government and the
other one had to do with the Decision by the Board. And
also, the observation by the State was to have to change
the Environmental Regulations that Doe Run had. The State
had to be responsible, given third-party claims that Renco
had already back then in the U.S. I do not recall what the
[Page 352]
third variable or the third condition that Doe Run was
imposing. So these were the main observations by the MEM.
Therefore, in the case of the Peruvian State, they could
not accept, and, for the Reorganization Plan, as a Board of
Creditors or as a creditor, a plan that was conditioned to
these variables could not be accepted.
Q. Okay. Well, with respect to the indemnification,
would you please look at the May 14 Plan and tell me if
there's any statement in there where Doe Run Perú is
seeking indemnification.
I mean, there isn't, is there?
A. It's not in the restructuring or Reorganization
Plan. It is in different documents, different documents
that Doe Run gave to the Ministry of Energy and Mines.
Q. But that was in an earlier version of the plan,
and then they revised the plan and they took out that
demand, didn't they?
A. I do not recall. The consideration for the State
to be -- to assume responsibility, liability for
third-party claims was always there. Now, the fact that it
is part of the Restructuring Plan, that was -- that had to
do with Glenco's--and Renco's financing, but all of this
was conditioned to -- I do not recall the legal term, but
there were some conditions. Those conditions, indeed,
referred to the documents that were with the MEM.
[Page 353]
Q. Okay. Well, I haven't seen that. Now, maybe it
exists. Did you review that document that you're
referring -- because it's not in the plan; right? A
request for indemnification was taken out of the Plan of
Reorganization, wasn't it?
A. I have reviewed -- I am not saying that I didn't
look into the Reorganization Plan, but I mainly saw the
Minutes of the Board of Creditors, and that includes the
Opinions of the Ministry and other companies and, in
particular, the Ministry because we had a representative.
The representative heard these considerations presented by
Doe Run so that the plan would be feasible.
Q. Okay. We're going to get into the Minutes in
just a little bit, but, right now, tell me -- and feel free
to look through it, if you want. Tell me if there is a
provision in there where Doe Run Perú says that, "as a
condition to the reorganization, you have to indemnify us"?
A. No. I do not recall. I do not recall having
that in the plan, not in the plan, no.
Q. Right. Right. Okay. So -- and we can look on
our own to see what the earlier version did. But now, I
want to turn to Exhibit R-111, which was the MEM's response
to this plan. And I want to go through this letter pretty
carefully. So if we could just blow up the top. Okay.
And in the first paragraph -- have you seen this
[Page 354]
letter before, sir?
A. Yes.
Q. Okay. And it's from the MEM to the Chairman and
CEO of Renco Group. It says "Ira Leon Rennert"; right?
You need to answer verbally, sir.
A. Correct.
Q. Okay. So let's just go through it paragraph by
paragraph. It says: "As you are well aware, on May 25,
2012, the Meeting of Creditors of Doe Run Perú in
liquidation, approved the Operational Liquidation Agreement
and named Right Business the Liquidator."
And then it said -- let's move down to the word
"THE LIQUIDATOR" in all caps. Yeah, that sentence, B.B.
"The Liquidator must evaluate if the conditions for
reversing the decision on the fate of Doe Run Perú exist
based on the viability of restructuring."
So am I correct in understanding that, if there
was a Plan of Reorganization, that Doe Run Perú was
proposing that it was a Liquidator that would have to pass
judgment on it as well as the Creditors Committee?
A. Yes. It says that the Liquidator needs to assess
whether there are conditions to be able to reverse to
restructuring because from restructuring they move to
liquidation. That's what it says.
Q. Right. So let's go down to the next paragraph.
[Page 355]
And you say that: "It is important to note that previous
to the signing of the liquidators agreement." So before
that happened, before May 25, "the Company, Doe Run Perú,
submitted a proposal for restructuring on May 14, 2012."
A. Correct.
Q. And that's the plan that we just looked at,
C-114.
A. Correct.
Q. Okay. Now, let's move on. It says: "The
Ministry of Energy and Mines have disclosed some
observations on the same in a meeting held in its offices
with authorized representatives of The Renco Group, Doe Run
Cayman, and Doe Run Perú"; right?
A. Correct.
Q. So you discussed -- somebody from MEM discussed
the contents of the May 14, 2012, Plan of Reorganization
with, basically, Doe Run Perú and its parent companies?
A. Yes. Correct.
Q. And then you go on to say -- the Company goes on
to say: "We understand that the proposal was submitted
with the idea that the Meeting of Creditors could consider
returning to the possibility of restructuring through a
change of direction."
Do you see that?
A. Yes.
[Page 356]
Q. So they submitted this plan to you and they
wanted to have that then submitted to the Creditors for
consideration?
A. Any plan had to be presented. Any and every plan
had to be presented to the Board of Creditors. Correct.
Q. We'll get to that part.
So let's keep moving down. Let's go to the next
paragraph. And I'm just going to paraphrase this one so we
don't take a lot of time. But, basically, you're telling
them that, well, the Company is already in liquidation.
That was approved earlier; right?
A. True.
Q. Okay. So then you go down and talk about the
reasons that the May 14 Plan of Reorganization is
unacceptable to the MEM; correct?
A. Correct.
Q. And we'll read all of them, but I'm not going to
ask you questions about all of them.
So the first one has to do with Doe Run Perú
seeking relief in the court system on the MEM's claimed
credit of 163 million; right?
A. Correct.
Q. Okay. Because Doe Run Perú didn't want to
abandon their legal rights?
A. That was Doe Run's claim, correct.
[Page 357]
Q. Right. Let's move down to Point 2.
So you knew that, in the Plan of Reorganization,
Renco was going to essentially lend enough money to Doe Run
Perú that it could complete the Sulfuric Acid Project;
correct?
A. Correct. About $60 million.
Q. Right. Well, that was just a line of credit. I
mean, that was just the initial money that was going in.
It was a revolving line of credit?
A. I do not recall whether it was a line of credit
or a contribution, but I think it was around $200 million
between Renco and the Renco Group.
Q. Okay. Thank you. That's where I was getting.
And -- but the Ministry's objection was that there wasn't a
firm guarantee that the Project would be done by a
deadline, you know, like a hard stop; right?
That's how the Ministry saw it.
A. That is correct.
Q. And then, under the next paragraph, it says
that -- another objection -- I'm sorry, B.B. Yeah, right
there. With the bold. I'll paraphrase this, and tell me
if I get it right. That the MEM objected to a provision in
the plan, that would give Doe Run Perú the right to suspend
money going into the Project in the event of a severe
economic downturn; right?
[Page 358]
A. Correct.
Q. Yeah. Okay. Are you -- did you ever know that,
when Renco and DRRC made this investment, that one of the
rights they had was that the subsidiary DRP could suspend
payment in the event of economic downturns? Did you ever
know that?
A. I am recalling that. Yes, there were several
variables, additional variables, that led the Ministry to
believe that the plan was not viable, and this was one of
them.
Q. Well, but I'm talking about -- did you ever look
at the original STA and the facts surrounding the STA as
part of the -- well, as part of the Ministry's review of
this plan?
A. Personally, I did not review the STA.
Q. Do you know if anybody involved in this issue at
the MEM did?
A. Counsel with the Ministry must have reviewed it
but not personally because that is a contract that was
entered into 1997, and I started to work with the Ministry
in August 2011.
Q. Okay. Well, I won't ask you about it then
because it doesn't sound like you have any personal
knowledge. So let's go to Point 3.
In Point 3 -- and feel free to look at all the
[Page 359]
subpoints -- but essentially what the MEM is telling Doe
Run Perú is they are not allowed to start up the Facility
unless it could meet all then-current environmental
standards?
A. Correct.
Q. But at the same time, you're telling them that
they have to start up within three months; right?
Let's go down the letter. I think it's up
higher. There it is, Clause 4.1. No, that's not it
either. I'm sorry. The other way, B.B. Sorry. Okay.
I'll come back to that.
All right. So then let's go down to the bottom
of the letter. Okay. So the MEM is saying that your plan
is unacceptable and we're not going to support it; right?
A. That is correct.
Q. And, of course, you knew that you had an
obligation to present this for vote of all the creditors
because you couldn't make a unilateral decision for
everybody on the Creditors Committee; right?
A. Everything that had to be a decision made by the
Board, well, we were one more vote within the Committee of
Creditors, just one more vote.
Q. Right. So let's look at the May 25 Minutes that
I gave you. R-107. And I challenge you to find anywhere
within these Minutes where the May 14, 2012 Plan of
[Page 360]
Reorganization is presented to the Board and voted on by
the Board.
We can do a word search if you want us to. I'm
going to represent to you it's not in there; didn't happen.
A. This was the Minutes in which the Liquidator was
appointed. I think there were three companies; one of them
was chosen, and that company then submitted a liquidation
plan.
Q. Right. But it doesn't reflect that the May 14
Plan of Reorganization was presented and voted on or
discussed or even considered; correct?
A. That is correct, but there are other Minutes, as
well.
Q. Well, okay. Well, then I challenge you to show
me any other Minutes that we have in the record. And if
you want, I believe we have -- we have to go -- we have to
go to the slide from the Opening now and look at every
document. I mean, I'm going to -- I'm going to represent
to you that I've looked at all the Minutes of the Meetings,
and there is no discussion of this Plan of Reorganization
anywhere.
You said you reviewed the Minutes before you came
in here; right?
Did you remember seeing it anywhere?
A. I do.
[Page 361]
Q. Where?
A. It is in one of my annexes to my Statement. I
recall that in January 2012, there was Minutes that a
Restructuring Plan was submitted. I don't know if it was
before Right Business was the Liquidator, appointed as
Liquidator, and Doe Run had presented already the
Restructuring Plan.
Let's recall that the idea, first, was to
restructure things and a plan was presented, and then in
the Minutes there were some observations, and then I recall
that I had read that the Meeting of Creditors had appointed
Apoyo Consultoría, a very prestigious consulting company in
Perú, to assist in the review of that plan. And Apoyo also
ended up concluding that the plan was not viable as
submitted.
Q. Right. And so maybe I'm just stupid, but how can
the Board of Creditors consider a May 14 plan in January of
2012?
A. I recall in January 2012, restructuring was dealt
with. There was a period of time that was provided. I
need help to locate it. And they took some time -- the
Restructuring Plan had been submitted a few days before.
They took some time to review it. And Apoyo was a
consulting firm, and it provided its opinion, and it said
that the plan was not viable.
[Page 362]
And then the different creditors put that to a
vote. And in this case, they decided to reject the plan
and that is why they went to the liquidation stage of the
proceedings.
Q. Sir, I'm going to submit that the MEM never
presented the May 14, 2012, Plan of Reorganization to the
Creditors Committee, and I challenge you or Counsel to
prove me wrong on that.
MR. PEARSALL: Can we just ask in the form a
question, Mr. President, rather than repeated challenges.
That would be helpful, I think, for the witness.
THE WITNESS: If you allow me to add something,
it's not that the Ministry submitted the Restructuring Plan
to the Board of Creditors. Doe Run itself presented, to
the Board, the Restructuring Plan.
I don't know if I have that here with me. Just
one moment. I could look at the annex to my Witness
Statement. It's R-146. On 30 March 2012, Doe Run Perú
submitted its restructuring plan to the consideration of
the Board of Creditors, and that was a meeting that was
going to be held in April 2012. R-146.
BY MR. SCHIFFER:
Q. Okay. And I may be dumb, but May 14 is after
March and April; right?
A. That is correct.
[Page 363]
Q. So how could the May 14 Plan have been presented
to the Board of Creditors in March or April?
A. It was submitted to the Board, the Restructuring
Plan, before. The Company submitted the Restructuring Plan
before.
Q. So you're saying this version, the May 14
version, are you claiming that this version was
somehow -- the date was changed to May 14 when it -- and
when there were no changes?
You know that there were modifications made to
the March plan, and that's why they submitted a new plan in
May?
A. No. The 4 May meeting was held to choose a new
Liquidator. That is why three companies were invited to
it. Each of the companies presented, and then Right
Business submitted a liquidation plan. That was the one
chosen, Right Business was.
This meeting was not to assess the Restructuring
Plan proposed by Doe Run Perú. That happened in other
meetings in April, for example, from what I'm reading here.
Q. Right. So I agree that earlier versions of Doe
Run Perú's Restructuring Plan was presented to the Board
and voted on. I agree with you, but then they revised it
again to meet all the objections, and they submitted it to
the MEM on May 14, as we've seen from the MEM's letter,
[Page 364]
which we just reviewed?
A. Again, the MEM did not submit the Restructuring
Plan, and the Board of Creditors -- we can look at it. We
can look at the order of business, and here it says
"Appointment of the Liquidator" and also the signature of
the agreement. So 4 May, that Meeting was not there to
review the Restructuring Plan submitted by Doe Run.
Q. But wasn't it a fact -- let's go back to your
letter, and then I'm going to -- I don't want to spend much
more time on this.
Can we go back to the letter we were reviewing,
B.B.? R-117, I think -- or R-111. Let's just look at
first paragraph. Doesn't the MEM acknowledge that the
Liquidator has the right to evaluate a new restructuring
that Doe Run Perú was offering?
A. Please repeat the question.
Q. Yeah. Isn't it true that the Liquidator and the
Board of Creditors, for that matter, should consider any
revisions that Doe Run Perú makes to the Plan of
Reorganization, to be fair?
A. And that's what happened. I don't see here in
this meeting, but the new Liquidator, Right Business,
reviewed the Restructuring Plan submitted by Doe Run, and
it considered that that plan was not viable. Not only
Apoyo did that in other meetings, but Right Business, the
[Page 365]
Liquidator, concluded that that plan was not viable.
Q. Right. And that would have been minuted, and
that was an earlier version of the plan; right?
A. That should be in, as said, the Minutes of the
Meeting that had been before. Well, no. The plan is
submitted, it is reviewed, and then a decision is made.
Q. Okay. But this is my last question: Any review
and decision taken on the May 14 plan should be reflected
in Minutes of the Creditors, and it should be in the
record; right?
A. That is the way it should be.
Q. Okay.
MR. SCHIFFER: No further questions.
PRESIDENT SIMMA: Thank you, Mr. Schiffer.
Mr. Vaca.
MR. VACA: Thank you, Mr. President.
REDIRECT EXAMINATION
BY MR. VACA:
Q. Mr. Shinno, in connection with the Restructuring
Plan of 14 May of 2012, C-114, you were just shown it, did
the MEM prohibit DRP, in your understanding, to submit the
plan to the Board of Creditors or it said that it wasn't in
agreement with the plan?
A. It told them that it wasn't in agreement with the
plan.
[Page 366]
MR. VACA: No further questions.
PRESIDENT SIMMA: I have a technical, small
problem. Mr. Vaca, you speak very loud and you are close
to the mike. Just an example to follow. It is just that
my -- at least, in my case, the English translation is a
bit low and a bit in the back and hard to understand. So
if I may ask you to behave badly and get away from the
mike, then maybe we maybe get the English better.
MR. VACA: Absolutely.
MR. PEARSALL: He likes to hear himself speak.
Do you want us to repeat the question back and
forth?
PRESIDENT SIMMA: Yes, please.
BY MR. VACA:
Q. I'm going to ask the question again. In
connection with the Restructuring Plan of 14
May 2012 -- I'm going to start again.
Sir, in connection with the Restructuring Plan of
14 May 2012, C-114, which you were just shown it, did the
MEM, in your understanding, prohibit Doe Run Perú to submit
that Restructuring Plan to the Board of Creditors, or did
it say that it did not agree with the plan?
A. The MEM said that it did not agree with the plan.
MR. VACA: Thank you very much. No further
questions.
[Page 367]
PRESIDENT SIMMA: Mr. Vaca.
Question to my colleagues. We are not going to
have -- sorry -- I have learned a bit from yesterday. We
are not going to have second rounds, if that's fine with
both sides.
So questions to my colleagues whether they want
to ask. No? Chris? Okay.
QUESTIONS FROM THE TRIBUNAL
ARBITRATOR THOMAS: Mr. Shinno, could you explain
to the Tribunal, to the best of your ability, precisely how
the Board of Creditors related to the Liquidator after the
appointment of the Liquidator?
THE WITNESS: Let's see. The Board of
Creditors -- well, always the Board of Creditors is
independent. Its decisions are taken by a majority of the
members, the Creditors.
In this case, any decision, any submission, any
proposal made initially by DRP or by the
Liquidator -- there were a number of liquidators -- had to
be approved and reviewed by each one of the members of the
Board.
Additionally, of course, we had, apart from Board
meetings, coordination meetings with the Liquidator.
Initially Doe Run had meetings with the different creditors
to be able to make the Board meeting more efficient.
[Page 368]
So there were prior meetings to review documents.
There were technical committees, for example, and those
people interested in participating in them were invited to
attend those meetings to "make time" and to have a better
decision made at the Board meeting. That is how the
creditors related to the Liquidator or to the Company.
ARBITRATOR THOMAS: If I may, you just said
"additionally, of course, we had, apart from board
meetings, coordination meetings."
Can you tell me who the "we" is? Is "we" a
reference to MEM, or is it a reference to the body of
creditors?
THE WITNESS: To the body of creditors.
ARBITRATOR THOMAS: Thank you. Just let me
reread your answer.
Thank you very much.
PRESIDENT SIMMA: Thank you. That brings to an
end the witness examination of Mr. Shinno.
Mr. Shinno, thanks for appearing. Thanks for
your cooperation. You are hereby released and to total
freedom. Thank you very much.
THE WITNESS: Thank you very much, Mr. President.
Greetings to everyone here, and my thanks to all. Thanks.
(Witness steps down.)
PRESIDENT SIMMA: Okay. So we'll have a short
[Page 369]
break until Mr. Payet is ready.
MR. FOGLER: Mr. Payet is here.
PRESIDENT SIMMA: Oh, that's you. So if -- why
don't you just take a seat.
MR. PEARSALL: If we could just take 5 to
10 minutes so I can gather my team for Mr. Payet. We
finished a little earlier with Mr. Shinno than I realized.
PRESIDENT SIMMA: That's fine. Wherever you have
a better seat. You stay.
(Brief recess.)
PRESIDENT SIMMA: I apologize, but I should have
been a bit quicker this morning. Before we turn from the
fact Witnesses to the Experts and to Mr. Payet, I have a
question to the Parties, which is a legal question, which I
would get rid of and leave to you.
It's a question that relates to the Contract
case, and the question is whether it is the view of both
Parties that the Arbitration Agreement with regard to
jurisdiction and scope is governed by Peruvian law. I got
to this question because in two paragraphs in the Statement
of Claim, this is said also by the Claimant. The
paragraphs are the paragraphs 124 and 135 of the Statement
of Claim.
So the legal question, which I leave to you, I
mean -- and let's not go into a discussion right away.
[Page 370]
That would be too disruptive, but it will come up with a
view. So whether Arbitration Agreement is governed by
Peruvian law, a point on which both sides agree.
So -- okay. I think -- thank you very much.
JOSÉ ÁNTONIO PAYET PUCCIO, CLAIMANTS' WITNESS, CALLED
PRESIDENT SIMMA: Thank you, Mr. Payet, for your
further extension of patience with me.
Mr. Payet, you should have the Declaration in
front of you, and I would like you to read that out for us.
THE WITNESS: I solemnly declare, upon my honor
and conscience, that I shall speak the truth, the whole
truth, and nothing but the truth, and that my statement
will be in accordance with my sincere belief.
(Interruption.)
PRESIDENT SIMMA: Thank you. I'm sorry, but I'm
used -- from some other type of microphone, that at least
the presiding arbitrator can just keep it red, and that was
easier for me to follow. I'm sorry. So you'll have to
live with that also. Thank you.
So who would direct, please?
MR. FOGLER: I will.
PRESIDENT SIMMA: Okay. Mr. Schiffer. Oh. I'm
sorry.
MR. FOGLER: That's okay. I have a favor to ask,
initially. Mr. Payet has brought with him his Witness
[Page 371]
Statements, but in addition he has a binder that has a copy
of the Contract, the STA and the Bidding Documents that he
would like to have handy to refer to in the event of
questions, and I know that, typically, they're just
permitted to have the Witness Statements themselves.
(Interruption.)
PRESIDENT SIMMA: I call on the author of PO10.
SECRETARY DOE: I think we should hear from the
Respondent first.
PRESIDENT SIMMA: Okay. First, Mr. Pearsall and
then -- or Mr. Rodriguez. Whoever wants it.
MR. RODRÍGUEZ: We have no problem with that.
PRESIDENT SIMMA: No problem? Great.
MR. FOGLER: Thank you.
PRESIDENT SIMMA: Thank you.
DIRECT EXAMINATION
BY MR. FOGLER:
Q. Mr. Payet, the Tribunal has your Reports, your
background information. I'd like to start by having you
tell us what part of your personal background and
experience do you believe is most relevant for the issues
that we're going to be discussing.
A. Well, I practiced M&A law for almost 30 years.
Q. When you say "M&A," please describe more
particularly.
[Page 372]
A. I mean mergers and acquisitions, purchases and
sales of companies. This is an M&A deal; so I think that's
the most relevant experience that I have.
Q. All right. So you cover quite a number of issues
in your various Reports, and we can't cover all of them. I
want to talk to you about two or three this morning. The
first one that I'd like to cover with you is the question
of whether Renco and DRRC are Parties to the Contract.
All right?
A. Yes.
Q. So let's start with something that may be too
basic, but I would like to hear from you, initially, what
is a contract under Peruvian law?
A. Well, a contract under Peruvian law is an
agreement. It's an expression of will of an agreement that
has as its object, as its -- as what it does to create,
regulate, modify, or terminate juridical relations. That's
the definition in the Peruvian Civil Code. So the contract
is the agreement, the juridical relation is the link of
rights and obligations created, modified, or terminated by
the Contract.
Q. Can there be more than one juridical agreement in
a Contract?
A. Yes. I've explained in my Reports that contracts
can be very simple or can be very complex; so if I go and
[Page 373]
buy, you know, an apple from the supermarket, that's a very
simple contract, two parties, one juridical relation.
But if, let's say, if I'm building a power plant,
maybe that's a more complex contract with many parties and
different relations. If I'm doing an M&A deal, that's
typically a complex contract with different parties and
different relations.
Q. In this Contract, the STA, did Renco and DRRC
sign the Contract?
A. Yes, they did.
Q. Is that important?
A. That is important because in this case the
Contract is written, and it's written through the highest
formality that we have in Peruvian law, which is a public
deed for a contract. So that's a type of document that is
issued and signed before a Notary. That's a civil law
Notary, a civil law Notary doesn't just certify the
signature but the whole act in the public deed.
And you see there who goes before the Notary,
what we call "los comparecientes," and the Notary
identifies each and which quality they participate, and
then the Notary explains the document to them, and says "do
you agree with this," and they say "we agree" and then they
sign. Renco and DRRC signed the document in the same way
that any other -- of the other Parties of the Agreement.
[Page 374]
Q. Let's examine a couple of the provisions of the
Contract and of the Notaries' actions, and let's look at
the STA, R-001, at Pages 4 and 5. There's an initial
certification from the Notary. And if -- I've tried to put
both the English and the Spanish versions up here so you
can refer to either, but what is it that we're looking at
here?
A. Well, that's the introductory part of the deed,
where the Notary is enumerating the persons that are, let's
say, before him, "comparecientes," and in what condition,
what legal condition they appear.
And then it says that all them, all the
"comparecientes," that includes DRP, Centromín, Renco, DRR,
Metaloroya, and it says they're all, you know, of legal
age, they are -- they understand Spanish, and I've
identified them with capacity, liberty, and knowledge, to
obligate themselves to contract, to enter into a Contract
of which I give faith, and they deliver to me a "minuta,"
which is a private document, is the one that the Notary
uses to make the deed, duly signed and authorized; so that
I put it into the public deed.
Q. Now, let's go to the end of the Contract where
there's a conclusion at Page 71 and Page 72. And let's
look at it.
A. Yes. That is the conclusion of the public deed.
[Page 375]
You know, this is very formal. You can see it's a contracting process that is very formal, and the Notary is certifying who are the Parties, and whether the Parties are conscious that they are entering into a contract, and then it says, in the end, formalize the instrument, I instructed the signatories of its object and results, what they are contracting about, and what's the effect of what they are doing.
Q. And when it refers in that initial sentence you were just looking at, the English version says "Grantors." You translated it from the Spanish as "Parties."
Who are they referring to?
A. They're referring to -- they're the signatories. They are the persons that have come before the Notary to issue this deed of Contract.
Q. In this case, when the Parties appeared before this Notary, who were those Parties who the Notary is discussing in this conclusion?
A. The persons that he refers to here are the same persons that are in the introduction, are the same, they're what we call the "Otorgantes." And here is after, you know, he's reading all the documents, he basically is saying, did he say when they sign, is he saying, do you understand, they -- have you read all the instrument, but has it -- read all the Contract, and then you say, if you
[Page 376]
agree, and you sign. So after this, they should come the signatures in the deed.
Q. It goes on to say "after which the contents thereof were affirmed and ratified, and they proceeded to" -- it goes to the next page --
A. To sign, yes.
Q. -- "they proceeded to sign" -- can we pull up that part? There we go. To "sign it before me, to which I attest."
And, again, who are the Parties who are certifying that they are signing this document?
A. The Notary is certifying that the person that are signing are the same persons that he identified in the introduction to the deed.
Q. Name them.
A. Oh, the names are there, Polo Robilliard. You know, it's each and every one of them.
Q. Okay. So if you want to pull out your copy of the actual STA, can you name the actual signatories, the people who the Notary is attesting signing the Contract?
A. Yes, of course. It's in the Deed. It's -- so it is assigned, Jeffrey Zelms, in representation of Doe Run Perú and Doe Run Resources, Jorge Merino, in representation of Metaloroya, Marvin M. Koenig, in representation of Renco, and -- yeah, that's it.
[Page 377]
Q. So what do these actions that we've looked at, at the beginning of the public deed and at the end of the public deed, what do they tell us about the participation of Renco and DRRC in this Contract?
A. Well, I believe that Renco and DRRC are Parties to the Contract. Okay? "Parties" is a concept of -- that has to do with two things. Okay? A party is a person that declares their will to enter into the Contract. It's part of that information. Remember what a Contract is, is a declaration of will that constitutes an agreement. So a party is one of the persons that is, let's say, a party of that. Okay?
But the other element, which is also very important, is that declaration of will creates or modifies this legal relation. In this legal relation, a party needs to have rights or obligations. So a party cannot just be a witness. No. A party has to acquire rights and/or obligations in the legal relation that is created by the Contract, and I believe that in the case of Renco and DRR, it's both.
You know, Renco and DRR signed the document and declared their will, and the other Parties declared their will at the same time with -- it's not that they don't know that Renco and DRR, they are all declaring their will in the same instrument. And the other thing that is important
[Page 378]
is, do Renco and DRR acquire rights and obligations from this Contract?
For me, it's very clear that they do because, in the additional clause, they say that they guarantee the obligations of DRP, by which they are acquiring obligations. So they're not witnesses. They are Parties to the Contract.
Q. The Respondents say that this additional clause is a separate Contract, and that Renco and DRRC are not Parties to the main part of the Contract.
What do you say about that?
A. Well, I think that's an artificial distinction, that this is one Contract, one complex Contract with different Parties and different legal relations. There are many reasons why that is that way.
Q. Can we look at the additional clause? It's at Page 66 and 67 of the STA. It's Exhibit -- same Exhibit, R-001. It's at Page -- I have the -- 66 is the PDF Page, not the -- it should be at the very bottom, "Additional Clause." You're too far. It's two pages above. Now, you've gone too far. There we go. There we go. We're getting there. That's it. At very bottom, "Additional Clause." And it goes on to the next page.
"The Consortium composed by the Doe Run Resources Corporation and The Renco Group, Inc. guarantee compliance
[Page 379]
with the obligations contracted by the Investor, Doe Run Perú." All right. Now you've seen this, obviously --
A. Yes.
Q. -- and commented on in your Report.
Why do you believe that this additional clause does not stand alone as a separate Contract?
A. I mean, first, I think that first if you read it, you are going to realize it's part of the same Contract. For example, it says that they signed -- Doe Run and Renco signed, to guarantee the compliance of the obligations of the Investor, Doe Run Perú, therefore, they signed this Contract. So I've -- I understand that Respondents argue that when they say "this Contract," they're saying this individual separate Guaranty Contract.
If that were the case, then which obligations would it guarantee? The only way to understand that it has content, obligatory content, and is not a circular reference, is that when it says "this Contract" it's the STA Contract. There you know which obligations they are guaranteeing or, for example, Mr. Fogler, a "fianza," which is what I understand Respondent say this is, an independent "fianza," and in the "fianza" is a contract where the beneficiary is a party. If this were an independent contract, where is the beneficiary? It's not a party to this clause. It would be crazy.
[Page 380]
Q. Is there any reference in this additional clause to who the beneficiary is of the guarantee?
A. Because this is part of the STA, and there's one Contract, there is a very clear reference when it says "el presente contrato," when it says "el presente contrato," it's referring to the whole complex Contract, STA, therefore, we all understand that the obligations that are guaranteed are the obligations in the STA, and that the beneficiary is the creditor of those obligations.
But if you treated this as an independent contract, you wouldn't understand that. It would be a circular reference. Imagine a guarantee that says, I hereby guarantee the obligations under this guaranty. What's the legal effect of that?
Q. Could the Parties have decided to put the Guaranty in a separate instrument if they had chosen to?
A. Yes, of course. For example, the Perú Guaranty. You know, there's a Perú Guaranty, the Republic of Perú guarantees the obligations of Centromín. They do that. Not in an additional clause. They do that in a separate Contract or Guaranty. So it's not that Perú did not know that you can issue a separate contract with a guarantee.
It's interesting, if I may. If you go to the Bidding Documents, which are interesting, is -- in the Bidding Documents, the Government of Perú told the bidders
[Page 381]
two times that they have to sign this Contract, the STA. The bidders were asking, is there a form of guarantee that I should sign to grant the Guarantee? And the Government tells them, two times, you have to sign the Contract.
Q. Let's look at that. It's R-200, at Page 31, Question 70. Is this what you're referring to?
A. Yeah. So some bidder is asking -- you know, because Section 2.2(d) of the Bidding Documents say that a subsidiary of the consortium is going to execute the Purchase Agreement. So they are asking: "Okay. So how will -- is there a form so that we can issue our corporate guarantee?" And the Government says: "No, you have to sign the Contract. We don't want a separate guarantee. We want you to be in the Contract."
Q. Is there a reference in the Contract itself to the importance of these questions and answers that occurred in the bidding round leading up to the Contract?
A. Yes. As is common in Perú, privatization agreements of the time, the Contract says that the Bidding Documents, the bid conditions and the Q&A during the bidding process, is to be taken into account to interpret the Agreement.
Q. So if there's any question about whether the Guarantors are to sign a contract, can we look at this question and others that are in the questions and answers?
[Page 382]
A. Yes. You should do. Yes. You should do.
Q. And why is it important that Perú insisted that Renco and DRRC sign this Stock Transfer Agreement? What does that tell us about whether those two entities are Parties to the Contract?
A. Well, number one, I think it's -- what it shows is that it's very clear that Perú did not want a separate Guaranty Agreement and wanted DRR and Renco in this Agreement. Okay. That's very clear. They wanted them to do what they did, which was, enter into the complex Agreement with all the other Parties of the Agreement. But the other thing that is important, if I understand your question, is what's the effect?
So for example, if you ask me: Are the Bidding Documents to be taken into account to interpret the Agreement? And I say, "yes, because that's in Section 18 of the STA." Okay. Now, if you say that the "cláusula adicional" is a separate contract, then would you use the Bidding Documents to interpret those are not? You wouldn't know because you would have no rules of interpretation for the separate additional clause contract or the applicable law as the President asked in the introduction. The Contract says this Contract is subject to Peruvian law. But, if the additional clause is a separate contract, is it subject to Peruvian law? Maybe subject to, you know, New
[Page 383]
York law, maybe. I don't know. We would have to get into a private international law discussion.
So I think that -- it doesn't make sense to consider this as an independent contract. It's part -- it's part of the single complex contract that is very common in M&A transactions. This is not a weird situation where you have different Parties in a complex agreement.
Q. Let's move now to a more difficult question, and that is, what rights, if any, do Renco and DRRC have in Sections 5 and 6 of the STA?
And before we do that, let's take a step back, and I want you to explain how this Contract came into being. What happened, for example, the first time Perú attempted to attract private investment to buy these assets?
A. Well, the history in Perú, there's a very good practice in the privatization agency in Proinversión. That is, when they finish a privatization deal, they write a White Book, and the White Book is kind of the post-mortem of the process. And --
Q. Do they do that here? Did they write a White Book?
A. Yes, they did it, yes. And to write my First Report, I read the White Book of the privatization of
[Page 384]
Centromín and there's a unified privatization of Centromín and there's a White Book of the fraction privatization. So what did Perú did? In the early '90s, when we started privatizations, the Government tried to sell Centromín as a whole. Centromín was the former Cerro de Pasco Corporation, U.S. corporation, they have been nationalized in the '70s. They had many things. It had railroads, different things.
Q. Mr. Payet. I'm going to ask for the benefit of the Translator that you slow down.
A. Okay.
Q. And I think that -- I'm not listening to the translation, and I understand you perfectly well, but I want to give them a break. So let's -- and I'm sorry to interrupt you, but go ahead with your discussion of the first round of privatization.
A. Okay. So the Government tried to sell Centromín as a whole, as a whole single entity. They hired the Chase Manhattan Bank and went out for -- in a rush, and they didn't receive one offer, not one. It was deserted. And Centromín had very good assets, for example, Antamina, which is, I think, the richest copper mine in Perú, was part of Centromín. It was just a resource, it was not developed, but it was there, and not one bidder.
And then they changed their advisors and hired
[Page 385]
Credit Suisse First Boston. And what the First Boston told them, after speaking to, you know, investors, they told them it's too complex and it's too risky. And one of the most risky things that investors didn't want to come in was the environmental problems including the environmental problems in La Oroya, which were already very, very serious. So what the Government did, (in Spanish), with the advice of Credit Suisse, is they did what private companies do; you have to create an SPV, you have to segment the assets, you have to keep the liabilities, and design a clean vehicle, if you want to sell it to an investor.
Q. SPV meaning a special-purpose vehicle?
A. Yes, a corporation. And you use (in Spanish) to do that. So that's what it did. There's a resolution of the Peruvian Privatization Committee saying: "We are changing the model for Centromín. Now we're going to create independent units. We're going to create SPVs, we're going to do spin-offs," and that's what they did.
In this transaction -- and that's why I say in my reports, you cannot see this transaction just looking at the STA like it was the only document of the transaction. This is a corporate reorganization. At the same time they're selling the shares of Metaloroya, Metaloroya is receiving -- it's an empty shell. It's receiving what is
[Page 386]
coming from Centromín, and that is why the allocation in 5 and 6 of risks is so important. Because, when you do a corporate reorganization and you split a company, you have to decide which assets and liabilities are in this bucket and which assets and liabilities are in this other bucket, and that's structural. That's part of the transaction. And so -- so that's what they did in this case.
Q. How did the history that you've just described, with the failed first effort and the environmental liability issue that on arose in that first effort, how did they decide to deal with that in Sections 5 and 6?
A. Well, it's interesting because it's a very interesting story, and the documents tell the story. So if you look at the Centromín separate privatization White Book, and it's quoted in my Reports, it's very clear that they have identified the problem, so -- because their advisors told them, and so it's written in the Report. The problem was environmental liabilities. And we need to -- and they say the allocation of liabilities -- and that's in the White Book. The allocation of liabilities is going to be in the corporate documents. Okay.
So they decided to do an allocation where the -- let's say the "old liabilities" were going to be kept by Centromín and the new liabilities supposedly were going to be taken over by the Investor. They put
[Page 387]
that -- when they issued the Bidding Documents, the first Contract -- the Bidding Documents contain, as an appendix, the STA. The first draft of the STA that they sent, there are provisions there about allocation of liability, but it's not as it ended, you know, the way it was designed initially it was like the whole staff is kept by Centromín but all the new staff is going to the Investor.
During the bidding process -- in Perú, it's very common that, during the bidding process, there's this Q&A, and investors in their questions are saying things that worry them. If you look at all the questions, there are many questions saying, "please, take this guarantee out," and things like that. And so it's a negotiation process.
So there's a second version that comes out, and the second version is better for the Investor, and then there's a final executed document that is better for the Investor. More liabilities are kept by Centromín including future liabilities, which was not in the beginning, and less liabilities for the Investor.
Q. Just as in the first failed round, were there questions posed to the Peruvian authorities to the privatization committee that expressed concern about the environmental liabilities at La Oroya?
A. Yes. There were several questions about the environmental -- I mean, you look at the documents from the
[Page 388]
beginning. It's very clear that environmental risk was in the center, was the real issue from a contractual-risk perspective. It was the real issue. So there are many questions about risk and risk allocation, and, essentially, I think, the Government is trying to calm the Investor saying this is going to be reflected in the documents, all liabilities are going to be kept by Centromín. As long as the Investor complies with the PAMA, they're going to be safe.
They broke the PAMA in two. You know, the PAMA, which is the environmental program, to come from a no environmental standards regime that we had in Perú in the '80s to a normal environmental standard regime we were trying to put in place in the '90s, 2000s. The PAMA is, you know, the roadmap to get there.
Centromín had a PAMA for all Centromín, and they separated the PAMA for La Oroya and they -- the PAMA of La Oroya was separated in two parts: PAMA de La Oroya of Metaloroya and PAMA de La Oroya of Centromín because Centromín retained things like cleanup obligations, third-party claims, that had already been in court and that were going to be in court in the future as part of the allocation.
Q. I want to talk now about two concepts that are in Sections 5 and 6, and I want you to explain, under Peruvian
[Page 389]
law, what the difference is between assumption of liability on the one hand and indemnity on the other hand.
A. Yes. Yes. I mean, 5 and 6 are sections that, if you read them and you have been a practitioner like I have been for many years, you realize that they have been very, very carefully crafted. They were carefully crafted. They're trying to cut a thin line and establish these buckets of liability; past liabilities, 100 percent on Centromín; liabilities during the PAMA, Centromín's except if Metaloroya breaches the PAMA; and then future after the PAMA, then it's Centromín, only the ones they cause, and Metaloroya, the ones they cause. So that's the allocation.
Now, the important thing here is the way the Contract is constructed because, since the White Book -- okay, since the White Book, the Government is speaking about liability allocation, allocation of liability. It's not speaking only about indemnity. It is speaking about allocation of liability. So, for example, in, let's say -- 6.2, during the period approval for the execution of the PAMA of Metaloroya, Centromín assumes the responsibility for any losses, damages, or claims of third party attributable to the activities of the Company, of Metaloroya. They're speaking of the future. Okay.
Q. So I want to ask you, does this framing, this word "assume," does it have a particular meaning under the
[Page 390]
Peruvian Companies Act?
A. Well, to assume means to take upon oneself something. That's the, you know, dictionary meaning. Okay. If you assume an obligation, then you take it upon yourself to comply with the obligation. So, for me -- and I know that's not the position that Activos Mineros has in this case. For me, assuming has a meaning, has a content. Assuming doesn't just mean -- it's not like a definition in a contract. Sometimes you have a definition because (in Spanish) this is only for the operation of an indemnity, express-indemnity provision.
I don't agree with that, because I think that "asume" has a meaning. It's not that -- 6.2 has a normative content. It's not just like a definition in a contract. So when they say "asume" it means they take it upon themselves. They become the debtor in the juridical obligation. They take upon themselves the contingency. They become responsible for this. That's what it means, and that's the effect. In corporate organizations -- and that's why I say this is very important to understand the corporate side of this, the Corporate Law side of this.
In a corporate organization, when you split a company, you have to allocate liabilities, and the Peruvian Companies Act says that, in an "escisión," which is a type of company split, in a corporate split, a spin-off, what
[Page 391]
you transfer -- you do not transfer assets individually or obligations individually because this is a restructuring. So you transfer things as a block. This is why we call it a "bloque patrimonial," patrimonial block, "sucesión universal", called in some other jurisdictions. So all -- because that's the only way you can restructure companies. It would be too complex not to do it that way.
So you transfer a block, and, when you do that, that transfers the assets and liabilities. They get transferred. And you're asking about the Peruvian Companies Act, for example. The Peruvian Companies Act in Section -- I think it's 370 -- 278, it says the effect of the transfer of a patrimonial block in a spin-off, and it says: "As of the Effective Date of the spin-off, the receiving company assumes the obligations included in the patrimonial block which cease automatically for the transfer order." That's the effect.
Now, I have to say, this transaction was done in October 23, 1997. That is before the current Companies Act in Perú. The moment this was done, there was no general corporate regulation such as Section 278, but there was a special provision in the Privatization Act. Privatization had a special regulation, in a legitimate Decree 674. And Section 10 of that Decree authorized State-owned companies to be reorganized according to the dictates of COPIC, which
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was the ruling entity of the organization, which is what happened with Centromín. So if you read the STA, it's going to say in the precedence, "according to Section 10, Metaloroya -- Centromín was reorganized." So they had a legal basis to do that.
So that's why what I mean it's important. "Assuming" is not just the definition for the cross-indemnity provision. "Assuming" means taking upon themselves, become the debtor in the juridical obligation, or assume the future contingencies.
Q. So knowing that Centromín assumes who can enforce that obligation that Centromín, as you put it, took upon itself?
A. That's a -- I'm going to admit, that's a difficult question. Okay. For me, I think it's clear that this is one agreement. Very clear that Renco and DRR are Parties to the Agreement, I would say no doubt about it. But who can enforce 5 and 6 requires more complex analysis. Okay. So, for example, Metaloroya has an express indemnity provision in 5 and 6. Centromín has an express indemnity provision in 5 and 6. They have cross-indemnity provisions. So then you say, okay, if they do not assume, then you can, you know --
(Interruption.)
A. You can -- I have the Spanish word -- you can use
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your cross-indemnity provision.
Now, I think that for your question, there are two levels of analysis. Okay. The first level of analysis is does "asume" -- Centromín was suing for damages. That wording --
Q. The wording we have on the screen, the 6.2?
A. Yeah. Will assume responsibilities for any damages in claims by third parties.
Q. Not all of us speak Spanish, so I'm trying to make the record clear.
A. I'm sorry. I'm sorry. Yep. Okay. So that wording, does that wording in this Agreement have normative content? Does that have legal effects, or is it just like a definition, like the definition of whatever definition you include in your agreement? Working capital, that definition is just the definition.
There is going to be another provision that has a normative content, or this has normative, just 6.2, when it says "Centromín shall assume all" or 5.9, for example, when it says "all the rest remains with Centromín," all the rest remains with Centromín. Does it mean something from a legal point of view for a contractual point of view? For me, of course, it does.
This is the central point of reallocation in this transaction, of course it does. What does it mean? It
[Page 394]
means that it is theirs. What are the consequences that it is theirs? And there you have to look at criteria for -- to interpret contracts. Okay? And especially good faith. I mean, good faith is, I would say, the main criteria to interpret contracts in Perú. It is in 168 of the Civil Code. When it says -- you look at the wording and good faith, and it's in the special provisions of our contracts reiterated.
Q. Well, let's -- before we get to good faith, though, are there questions and answers during the bidding process that give us guidance about who might have the ability to enforce Centromín's assumption of responsibility?
A. Well, it is interesting, yes. And it's interesting. There is one question that I think is -- I don't have all the Q&A in my mind, but one question that, for me, it is relevant is, I think, Number 13.
Q. Yes. Let's look at -- it is in R-200 at Page 8. It is Question 13. All right.
So the question here that is being asked by one of the potential bidders is: "In accordance with Clause 6, Centromín assumes responsibility for the technical abandonment of the slag and arsenic deposits," et cetera. "We request that you point out how is Centromín to fulfill such obligations."
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And why is the answer here -- the answer is: "Centromín has set established a fund to finance the execution of obligations of environmental remedying referred to in Clause 6 under the terms of the PAMA of La Oroya. Inasmuch as Centromín maintains this responsibility towards third parties, including Environmental Authorities, control by la Empresa is not necessary."
Why is that significant to you?
A. It is significant for two reasons. One is that it says Centromín has established the fund to finance the execution of the remediation obligation, the environmental obligations, which this is -- I need to use this to interpret the Agreement.
So, for me, "asume" is not just rhetorical. Really, "asume" means "pay." It means go and pay. And they are telling the Investors we are -- we will have the money to go and pay, number one.
And the second is -- because the bidder is asking, will we have to do it and you reimburse us? And they are saying, no, no, no. This has effect to vis-à-vis third parties. "asume" corporate organization. Exactly. So that's why I mean, this is important to understand 5 and 6, what the meaning of "asume" is in all over 5 and 6.
Q. We know that Renco and DRRC are not named in
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Sections 5 and 6?
A. Yeah. They are not.
Q. Do you believe that Renco and DRRC have rights under 5 and 6?
A. Yes. Yes.
Q. Why is that?
A. I think there are two levels of that, where they have contractual rights as creditors or whether they have no contractual rights, like everybody else. I think they have contractual rights as creditors because I think that's the correct construction of the Contract. Okay?
One thing that is important to understand is that in Perú, as is common in civil law countries, you don't need an express provision to be able to enforce a right and seek specific performance nor to have a right to get indemnified if somebody breaches an obligation with respect to you.
Section 1219 of the Peruvian Civil Code says that the effect of an obligation is to give the creditor right to enforce specific performance, indemnification, all that. So the question then is from a contractual perspective, number one, does "asume" have some normative content and what does it mean?
So, for me, it has normative content. It is not just a definition. The normative contents means they have
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to go and pay. And if they have a claim, they have to defend because that's what you do when you are the obligated party. Okay?
Now, the second is, who can enforce that? Who is the creditor of that right? Who holds the right vis-à-vis that obligation? And, number one, I think that Renco and DRR have a contractual right, and, for that, I think good faith, as I was mentioning, is very important, okay, is very important.
Because, I mean, contracts get constructed and interpreted on the basis of what they say, on the basis of the context in which they were entered, on the basis of the purpose that they want to achieve, on the basis of the whole documentation of the transaction.
I have explained in my reports why I think that all those point to Renco and DRR have rights. Okay.
Q. Well, let's put this in a real context, Mr. Payet. What is the situation that Renco and DRRC find themselves to be in, right now, that's relevant to their rights under 5 and 6?
A. Yes. That's the crux of it. Okay. I think that we have a situation -- there is a situation. Okay. There is a critical situation. That's the impression that I have. What is the situation? It is that after the STA was executed, Metaloroya was created, that was transferred,
[Page 398]
et cetera, then Metaloroya, who is the titleholder to the cross-indemnity division, was merged into Doe Run Perú.
Doe Run Perú, that is the investor, acquirer of the shares in this Contract, has been put into receivership. Then Renco and DRR have been sued in Missouri for damages that I understand -- part of the discussions surely in this case -- may be included in what Centromín assumed under 6.2 of the Contract.
Q. Okay.
A. Now --
Q. So if we assume that the Claims in Missouri are asserting that the Plaintiffs, these citizens of La Oroya, have been injured as a result of the conduct of what was then Metaloroya, then DRP, is that a liability that Centromín assumed under this Contract?
A. Well, the conditions for a liability to fall in the lap of Centromín are clearly established in the STA. So essentially for Claims referred to things that happened during the period of the PAMA, which is what I call the "second bucket," for those, unless those were caused because Metaloroya breached the PAMA or established -- those were the conditions that are in 5.3 of the Agreement. Unless you're in that exception, those fall into Centromín.
So let's -- for the purposes of analysis,
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somebody falls -- something falls in Centromín.
For me, the question is, let's imagine that there is a situation and, according to -- if I read the contract -- if I read 5 and 6, it would fall in Centromín. So it's something that Centromín assumed.
For me, the question would be, Mr. Fogler, okay, so in the situation one has where Metaloroya merged into DRP, DRP is being liquidated, and Renco and DRR are being sued. How is the environmental risk that the Parties foresaw since the White Book during the privatization process? How is that going to be allocated? Is it going to be allocated according to 5 and 6, which is Centromín holds the risk? Or for some reason you're going to allocate it to the buyer, which supposedly was covered.
So, for me, good faith, good faith is the key for this. The concept of good faith has many concepts in Civil Law, but one of the most important is good faith should be read to interpret agreements. And how do you interpret agreements in light of good faith? As good-faith parties would do it; objectively.
So, for example, in this situation, what does 5 and 6 mean? Does -- do 5 and 6 mean that you enforce the risk allocation that was done since the White Book all along the Q&A until they executed the Agreement, or you forget about that and say, "Okay. We are sorry," this
[Page 400]
falls into the lap of Renco and DRR.
And I believe that the way this was structured -- because I'm not saying invent the Contract. I'm saying read the Contract in light of good faith and in light of the situation as part of a corporate restructuring, done to isolate the risk from the buyer and give them a clean vehicle to come into Perú and invest in a highly risky asset as La Oroya.
So do we do that or we forget about 5 and 6, and we forget about the White Book, and we forget about the Q&A? And, for me, good-faith interpretation of the Contract would mean saying Renco and DRR are Parties to this Agreement because they are clearly Parties, and 5 and 6 was done to protect them.
5 and 6 doesn't even say Doe Run Perú. It says Metaloroya. Metaloroya is the target company. This is obviously not done to benefit Metaloroya. This is done to protect the buyers. Even DRP, when it was incorporated had PEN 5,000 of capital. It was a shell. The day this was executed, Renco injected $130 million to pay for the --
PRESIDENT SIMMA: Mr. Payet, sorry for interrupting you, but it is difficult to wait for a stop between what you say. And be more --
I have not forgotten about the coffee break, of course, and we are 20 minutes late with it. So question:
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How much -- I do a little planning. How much and what time?
MR. FOGLER: I think I have used up my 45 minutes. I have more to go, but I'm happy to abide by the rules.
MR. PEARSALL: Yeah, Mr. President, Claimant has used 51 minutes, so we have given them some grace, but I think the Direct Examination, at this point, should end.
PRESIDENT SIMMA: Okay. Yeah. Okay. So time is up.
So we will have a coffee break now.
And, of course, after the coffee break, my guess is that your examination will be -- will have to be interrupted by lunch or-- I don't know.
MR. PEARSALL: We don't want anyone hungry. That will be fine.
PRESIDENT SIMMA: I used "assumes" in the other sense of that word.
MR. PEARSALL: We'll look for a reasonable stopping point, no doubt.
PRESIDENT SIMMA: Okay. Thank you very much. So we have a coffee break now until 11:38.
(Brief recess.)
PRESIDENT SIMMA: It looks like we can continue. Everybody seems to be in place. Is that the case? Yes?
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Fine. Thank you.
So I give the floor to Mr. Rodriguez for the examination.
MR. RODRÍGUEZ: Thank you, Mr. President.
CROSS-EXAMINATION
BY MR. RODRÍGUEZ:
Q. Mr. Payet, good morning.
A. Good morning.
Q. My name is Michael Rodriguez, and I represent Activos Mineros and Perú, and I'll be conducting your cross-examination today.
I'm going to start off with some housekeeping, some preliminary issues and preliminary questions, if that's okay with you.
You submitted three Reports in this proceeding; right?
A. Yes.
Q. And you have those there with you?
A. Yes, I have.
Q. Just a bit of housekeeping. Those are clean; correct?
They don't have your notes?
A. No.
Q. Okay. And you drafted those Reports in Spanish?
A. I drafted the first two in Spanish and the third,
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I think, in English.
Q. Okay. Now, a couple of things I want to ask you, if you don't understand a question that I ask, please let me know and I'll be happy to rephrase it. And if you need a break at any time, please let me know, and we'll accommodate you.
A. Thank you.
Q. And I know a couple of people have said it before, but if we could ensure that we don't talk over each other for the Interpreters, that would make their lives a lot easier.
So I'm going to ask you a couple of basic civil law concepts for questions on those concepts, and touch a couple of points that you mentioned in your presentation, if that's okay with you?
A. Yes.
Q. Great. Would you agree that it is possible, under Peruvian law, for multiple contracts to be memorialized in one document?
A. Yes.
Q. Under Peruvian law, some contracts are codified, or "típicos"; correct?
A. Yes.
Q. And some contracts are not codified, they're "atípicos"?
[Page 404]
A. Yes.
Q. And codified contracts, are those regulated by particular articles of the Civil Code; correct?
A. Civil Code and other laws.
Q. Okay. And each codified contract has a unique abstract cause; correct?
A. Not necessarily.
Q. Okay. Can you give me an example of a nominated contract that might have more than one abstract cause? Sorry, a codified contract?
A. So for example, "compraventa."
Q. Umm-hmm. That's a sales contract; correct?
A. Yes. No, I'm sorry, I can't give you an example. I don't have it in my mind. I have it -- is hard to give you an example of that.
Q. Okay. But you understand the concept of abstract cause?
A. Yes, abstract as opposed to "causa concreta" "finalidad"
Q. Correct.
A. Yes.
Q. So would you agree if I said, for a sales contract, for instance, the abstract cause is the purchase of a good in exchange for a payment?
A. Yeah. It's a concept that is kind of
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tautological.
Q. Yes. Is that a yes?
A. Yeah. Probably, yes.
Q. Okay. Thanks. Now, in your Direct Presentation, you discussed a couple of questions and answers in the Bidding Terms; correct?
A. Yes.
Q. And you mentioned that there's a clause in the STA that explains that you should interpret the STA in accordance with the Bidding Terms; correct?
A. Yes.
Q. And that's Clause 18; correct?
A. It's Clause 18, I think, 18.
(Overlapping speakers.)
Q. We can pull it up. Yes.
A. Yeah, because it's 18-something -- because 18 says a lot of things.
Q. Sure. Kelby, can you pull it up? R-001.
A. Do you mind if I use my -- no?
Q. Go ahead.
A. Okay.
Q. And could you go to Clause 18?
A. 18.1.
Q. Yes. We're getting there. Give us a second, please. Thank you.
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It should be PDF 65. And you said it would be 18.1; correct?
A. Yeah, but interpretation and using the Bidding Documents.
Q. And in 18.1(a), it says that the answers to the consultations, you know, it identifies the answers to the consultations as one of those mechanisms of interpretation; correct?
A. Yes.
Q. Okay. And in 18(c), it says that, if there is any discrepancy between the bidding conditions and the Contract, the Contract will prevail; correct?
A. Yes.
Q. Okay. Since you discussed some of those answers in questions, I'm going to take you to R-201, which is the document that contains "las consultas y las respuestas," the answers and questions?
A. Okay.
Q. And I'm going to take you to Question 42.
A. Yes.
Q. We might have the --
A. This is 42 of the second round, I think. Is that two rounds?
Q. Yes.
A. So there are two 42s?
[Page 407]
Q. Yes.
A. Okay. Yes. Yes.
(Comments off microphone.)
Q. We're getting it up. Apologies. There you go. Consultation 42 discusses the release of responsibility; correct?
A. Yes.
Q. And in the answer, Centromín answered that it would relieve Metaloroya of responsibility for third-party claims that correspond to Centromín; correct?
A. Yes.
Q. It doesn't identify anyone else that it would release; correct?
A. No, because the bidder only asked about Metaloroya.
Q. Correct.
A. So they asked, how do you limit Metaloroya? And they say we don't limit Metaloroya. They didn't ask about the Shareholders of Metaloroya.
Q. Is there any other question where a bidder asks about indemnifying anyone other than Metaloroya?
A. Not that I recall, but for completeness, you know, this Consultation Number 42, if you look at the first paragraph of the answer, it is very important because it not -- it doesn't refer to Metaloroya. They were asked
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about Metaloroya, but they say -- the question is "assuming that the owners of Metaloroya comply with the PAMA, and adopt all measures against contamination, and somebody files a claim, how do you propose to protect Metaloroya" and Centromín says two things.
The first thing that it says is positive. It says: "Centromín has implemented the La Oroya organization, and created the provision of funds necessary to comply with the environmental remediation. These will guarantee Centromín's compliance with its obligations."
And then it says: "In addition" -- if you want to look at the Spanish version -- it says "beyond that" -- "besides that, in addition, then we will relieve Metaloroya." So I think that the reading is not that Centromín is -- the Government is saying, by the way, only Metaloroya is being protected. They are saying something very different here.
PRESIDENT SIMMA: Just ask whether the interpretation can cope with that speed.
THE WITNESS: I'm sorry, Mr. President. I'm going to make a real effort to slow down.
PRESIDENT SIMMA: No, but this time, both of you are very quick speakers; so please consider the poor --
MR. RODRÍGUEZ: We will --
(Interruption.)
[Page 409]
BY MR. RODRÍGUEZ:
Q. You reference the first paragraph of the answer; correct?
A. Yes.
Q. How is that first paragraph discussing the provision of funds to comply with remediation relevant to the allocation of responsibility for third-party claims?
A. Because it's the same. It refers to the same clause in the Agreement, 5 and 6, and if you see the allocation of liability had, like, two parts: One was the remediation Part, and the other was the third-party claims, and both are kind of coordinated in 5 and 6.
Q. And the remediation Part is in 5(1) and 6(1)?
A. I'm not sure of the numbers. They are in different numbers, sure.
Q. Okay. Are there -- those remediation obligations, do they have indemnity obligations?
A. Well, indemnity is in 1219 of the Peruvian Civil Code. It's all over the Civil Code. So if you do not comply with an obligation, and that creates damage to your creditor, they have a right to be indemnified as a matter of law.
Q. As a matter of the Civil Code?
A. Yes, of the Civil Code. Yes.
Q. So that would be an extracontractual claim?
[Page 410]
A. No.
Q. No? Contractual.
A. It's a section of obligation that is contractual.
Q. Okay. Excellent.
So I'm going to ask you, now, a couple of questions about your Reports and the documents that you reviewed for those Reports.
You've listed documents that you rely on in your Reports in Annexes at the end of your Reports; correct?
A. Yes.
Q. And you've also cited documents that you rely on in your footnotes; correct?
A. Yes.
Q. Did you rely on any documents that you did not cite in either your annexes or your footnotes?
A. I don't think so. I mean, I don't think so. Something could have slipped. My general knowledge that I read something, like, for example, when I'm explaining the privatization process, part of it is my experience in this earlier document.
Q. That's fine. All right. Thank you.
So Claimants submit a claim for breach of the STA by Activos Mineros in this Arbitration; correct?
A. Yeah. That's my understanding.
Q. And that claim is based on the litigations filed
[Page 411]
in Missouri; correct?
A. That's -- I don't want to characterize the Claims, Claims made by Claimants because that's not part of my expertise.
Q. Sure. Sure. But did you reach conclusions on whether those Claims were viable or not under Peruvian law?
A. Yes. Yes. And on the terms written in my Report. Yes.
Q. Okay. Sure. So you have at least a reasonable understanding of the Claims in order to be able to reach the conclusions; correct?
A. General understanding.
Q. Okay. Did you reach any conclusions on whether Activos Mineros breached the STA?
A. Yes. I put it in my conclusions, but let me explain you one way in which I think Activos Mineros is in breach of the STA. The STA says that Centromín assumes third-party claims originating in the period of the PAMA on certain conditions.
So if, let's say the Missouri Claims, which are third-party claims, fall into that, right now Activos Mineros is not in compliance with their obligation to assume those claims because they are not defending the Claims. They haven't paid the Claims. They're doing nothing with respect to the Claims.
[Page 412]
Q. Okay. Okay. Now you just said "so let's say the Claims in Missouri are Centromín's responsibility."
A. Yes.
Q. Okay. And in your direct examination, you stated that you understand that the Missouri Claims are Centromín's responsibility?
A. Let me put it this way to avoid any confusion.
Q. Sure.
A. I have not examined the Missouri Claims.
Q. Okay.
A. Okay. And the allocation of liability in 5 and 6, and what falls in the lap of Activos Mineros and for what falls in the lap of the buyers, let's say, that depends on conditions set forth very clearly in 5 and 6.
So for example, one of the conditions for Claims related to the PAMA Period, for example, one of the conditions -- I mean, the general rule is Centromín assumes all, but there's, like, exceptions that are, for example, damages attributable to Metaloroya, which are due to the fact that Metaloroya did not comply with the PAMA, for example. Okay. I have not certified whether Metaloroya has complied or not with the PAMA.
I have not examined the causal relation of the Missouri Claims, so I can speak about the categories. I can speak about what the Contract means for me, but I
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cannot -- so that's why I say "let's say" because I have not done a factual analysis of what really happened in La Oroya.
Q. Thank you. So to be clear, you don't take a position, then, on whether the Missouri Claims do or do not fall within Centromín's responsibility under the STA?
A. Yeah. Factually, I haven't done the analysis, and whether they are in one side or the other depends on facts as well as law.
Q. Okay.
A. Okay.
Q. So that's a yes?
A. It's a yes on the basis of my qualification.
Q. Sure.
A. Just to clarify; okay? Because, for example, you asked about the breach, whether they're in breach. Okay? So, yeah, there's a factual analysis about whether the Claim refers to a situation, and then you would have to determine in which lap it falls.
Q. Right.
A. So that type of analysis, that requires factual basis, I haven't done.
Q. Thank you. I appreciate that.
So I'm going take you through a couple of paragraphs in your Reports.
[Page 414]
A. Yeah.
Q. So I'm going to start with your First Report, Paragraph 193, and we'll get it up on the screen.
Let me know when we're done reviewing.
A. 193?
Q. Yes.
A. Yes. Yes.
Q. I'm going to read the last sentence, and let me know, for the record, let me know if I read it correctly.
"Therefore, regardless of the entity sued before U.S. courts, Activos Mineros is responsible for the liabilities at issue, and Renco and DRR are entitled to request that Activos Mineros and Perú face such risk, and compensate them for the damage suffered in the case of failure to comply with such obligation." Correct?
A. Yes.
Q. The obligation you're referring to there is the obligation to compensate?
A. It's -- let me read it again. Yes. It says "faced risk and compensate them for the damage suffered in case of failure to comply with such obligation." Face such risk and compensate. So what -- can I explain what it means?
Q. Of course.
A. Okay. So what I'm saying is essentially what we
[Page 415]
just discussed; okay? That is, there's this allocation in the Agreement. If there's a claim in Missouri that, according to that allocation, it has been assumed by Centromín, then Activos Mineros has the obligation to -- the obligations derived in good-faith from the assumption, meaning, in my opinion, including going and defending and facing the Claims.
So if they don't do that, they will be in breach of their obligation, and under Section 1219 of the Civil Code, the creditor -- in this case, Renco and DRR -- would have the right to enforce and the right to collect any damages.
Q. The reason I'm asking, because the phrase "Activos Mineros is responsible for the liabilities at issue," isn't in -- you're not saying if they are?
A. Yeah, but I'm speaking about liabilities that Centromín kept. Those are the liabilities at issue.
(Interruption.)
A. When I say the liabilities at issue, you have to read two lines before, which is the liabilities that Centromín kept responsibility for. Those are the liabilities at issue, of course, if they don't face them, they're in breach of the Agreement.
Q. Okay.
A. I'm not saying whether, factually, you know, the
[Page 416]
Claim of Mr. Rodríguez, or Mr. González, or Mr. Payet falls in one --
PRESIDENT SIMMA: Sorry. But can you, again, limit your rate of fire.
THE WITNESS: Yes. Yes.
BY MR. RODRÍGUEZ:
Q. Okay. I'm going to take you to a couple of other paragraphs, first Paragraph 89 of your Second Report.
A. Yes. It's the First Report again?
Q. Second Report.
A. Oh, sorry. Yes. Yes.
Q. All right. And I'm going to read the last two sentences. "It is a factual reality that, despite Centromín's responsibility, Renco and DRR have been sued in the Missouri Litigation. If they were to pay any compensation as a product of those litigations, they will be paying for a liability that is not theirs, or at least not exclusively theirs." Correct?
A. Yes.
Q. So that is also not in the conditional; correct?
A. That is not in a conditional. Yes. It says, "not exclusively theirs." Okay. But -- so I'm not referring to all -- there, I am assuming that at least one of the Missouri Litigations falls into the lap of Centromín.
[Page 417]
Q. Sure. Since you didn't review the documents, what are you basing that assumption on?
A. Just on the conversations I had with Counsel for Plaintiffs that -- in general. But there's no specific allocation for that.
Q. Okay.
A. No specific support of that factual claim.
Q. Sure. What specifically were you told about the Missouri Litigations?
A. Really, I haven't been told a lot about the Missouri Litigations. It's just that the -- there are litigations that are basically what it says in the Report, that there are litigations by -- I'm not sure who is representing them, but supposedly the interested Parties in the end are people from La Oroya that allegedly suffered damages as a result of contamination related to the refinery there.
Q. Okay.
A. But I haven't -- really haven't a specific data about that.
Q. Sure.
A. So that's why, in the Reports, I've tried to speak of categories, not of specific, and you point out this phrase does not have a specific function of support on the factual part.
[Page 418]
Q. Okay. I appreciate that.
I'm going to take you to Paragraph 109 of your Second Report.
A. Yes.
Q. Please take a look and let me know when you're done.
A. Okay. Yes.
Q. There we go. The second sentence I'm going to read for the record, and let me know if I've read it correctly.
A. Okay.
Q. "Therefore, Activos Mineros is liable for the PAMA Assumed liabilities. Thus, the debt that Renco and DRR would eventually pay to the Missouri" -- I think you mean "Plaintiffs" there -- "as part of the PAMA Assumed Liabilities corresponds to an obligation of Activos Mineros"; correct?
A. Yes.
Q. Is that in the conditional?
A. No.
Q. Okay.
A. But you have to read the definition of "PAMA Assumed Liabilities." PAMA Assumed Liabilities make reference to the liabilities that, under the Contract, belong to Centromín. So in a sense, it's like a
[Page 419]
tautological paragraph.
Q. That conclusion? Okay.
A. Because it's referring to the PAMA Assumed Liabilities. So what I'm saying there is, if there something that falls into the lap of Centromín, meaning it is a PAMA Assumed Liability, and they don't face it, then they're in breach.
Q. Okay. I'm going to take you to one more paragraph.
A. Okay.
Q. This is going back to your First Report, Paragraph 227.
A. 227.
Q. Yes. I'm going to read it out loud, and let me know if I've read it correctly. "In this sense, in light of Peruvian law, as an additional remedy, Renco and DRR would have the right to be compensated as a consequence of the litigation initiated in the United States of America by means of a subrogation claim."
Did I read that correctly?
A. Yes.
Q. That's also not in the conditional; correct?
A. Yeah, but, that paragraph, you have to put it, I think, in context because it says "in this sense," so it's like a conclusion of a reasoning that comes before.
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So -- because I'm just speaking about subrogation. You know, subrogation assumes that the obligation that you're paying is somebody else's obligation. So I'm just saying here that if -- under the conditions whether it's an addition and an obligation of Centromín if Renco and DRR pay, then they have the right to subrogate.
Q. I'm going to ask two final questions on this topic, and then I'll just move on. You don't know whether any of the Claims in Missouri are actually Centromín's responsibility under the STA; correct?
A. Correct.
Q. And there is nowhere in your Reports where you applied any of the facts of the Missouri Claims to Clauses 5 and 6 of the STA; correct?
A. Correct.
Q. I'm going to take you now to Paragraph 14 of your Second Report. Let me know when you're done reviewing.
A. Yes.
Q. There you state that: "The Plaintiffs in the Missouri Litigations have based their Claim on Article 1970 of the Peruvian Civil Code"; correct?
A. Yes. Yes.
Q. And as a consequence, you conclude that the risk holder would be liable under the theory of strict liability; correct?
[Page 421]
A. Yes.
Q. Later on in your Report, you conclude that that risk holder is Activos Mineros; correct?
A. Yes.
Q. Okay.
I'm going to take you to Paragraph 68 of this Second Report.
MR. RODRÍGUEZ: For Members of the Tribunal and the Interpreters, the relevant sentences are absent from the English translation. So we will switch to Spanish, and we will discuss the Spanish version of Mr. Payet's Report.
BY MR. RODRÍGUEZ:
Q. Let me know when you're ready.
A. I'm ready.
Q. Excellent. I'm going to read the second-to-last sentence.
A. Umm-hmm.
Q. Starting with "he sido": "I've been informed that the Claimants in the Missouri Litigations base their Claim on Article 1970 of the Civil Code of Perú."
Did I read that correctly?
A. Yes.
Q. And then you continue: "I haven't analyzed the substance of the Missouri Litigations, but, assuming that basis, the risk holder is the one that needs to compensate
[Page 422]
the damages that had been generated there"; correct?
A. Correct.
Q. We'll switch back to English now.
When you say you had been informed, who informed you?
A. I'm not totally sure at the moment, but I think it was a conversation with Adam in my office.
Q. And based on that assumption, you state that the risk holder is responsible under strict liability?
A. Yes and no.
Q. Okay.
A. I'm sorry for that, but -- I mean, from a Peruvian law perspective, the holder of -- the refinery would be a risky good for the purposes of 1970 of the Peruvian Civil Code. And pursuant to the reasons explained in my Report, I believe that the holder of the risk of harm derived from the operation of the refinery during the relevant period was Centromín/Activos Mineros.
Now, this -- the relation to this, to the Missouri Claims, is this factual thing that I assume that they -- that Renco had been sued under 1970, but, regardless of that, that's the situation. It's a risky good. The holder is a risk. It's strictly liable under Peruvian law.
Q. Got it. Just so that the Transcript is clear, I
[Page 423]
think what you're saying -- and correct me if I'm wrong -- is that, under Article 1970 of the Peruvian Civil Code, the holder of the risk is the responsible Party for any injury?
A. Yes.
Q. And you're differentiating that from the factual situation here?
A. No. I'm not differentiating it. I'm just saying that my assumption of that discussion to this case -- of the relevance of that discussion to this case is that the Plaintiffs in Missouri have used 1970.
Q. Got it.
And you submitted this Second Report with Claimants' second pleading; correct?
A. I don't recall that. I mean, we have to look at the timing, but I think that -- I'm not sure. I think it was presented with the second Rejoinder.
Q. I can represent to you that this is the May 1 Report, and you submitted it with their second pleading.
And I'm going to take you to Paragraph 27 of Claimants' Reply. Please take a look at Paragraph 27.
A. Okay. Yep.
Q. At the time you submitted your Report, were you not aware that the Missouri Court was not going to apply Peruvian law?
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A. No, I was not aware.
Q. I'm going to take you to Paragraph 125 of your Third Report. Okay. By this time, you switched from Article 1970 is the basis of the Missouri Claims to "I don't know the law that's being applied in Missouri"; correct?
A. No. I think you're not characterizing this correctly. I mean, there are many issues. My reasoning is there are many issues in the Missouri Litigation. And right here, what I'm speaking about is time bar, statute of limitations. So, I mean, maybe it would say "I do not have the knowledge of the applicable law determined in the Missouri Trials for its statute of limitation." Because that's the issue I'm discussing. I'm not discussing the basis of liability, but a statute of limitations. What I'm saying is that the statute of limitations to be considered for this purpose would be the Missouri statute of limitations and not the Peruvian statute of limitations.
Q. Got it. Have the Missouri Plaintiffs filed claims in Missouri under Article 1970 of the Peruvian Civil Code?
A. I don't know.
Q. Thank you.
Now, you said your assumption that they had was relevant to the discussion of strict liability in this
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case; correct?
A. Yes.
Q. I'm going to ask you to read Paragraph 124 of your Third Report.
A. Yep.
Q. In the second-to-last sentence, you say, "nevertheless, according to Respondents, Peruvian law is not applicable to the original Claim"; correct?
A. Yes.
Q. You're referring, when you say "original Claim," to the Missouri Plaintiffs' Claims; correct?
A. Yes. Yes. Yes.
Q. So by this point, you had read our explanation that the Missouri Plaintiffs are filing claims under U.S. law; is that correct?
A. Yes. Yes.
Q. And given the relevance, as you say, to your -- to the application of strict liability in this case of your assumption, did you not think of clarifying which law was the basis of the Missouri Plaintiffs' Claims with Claimants' Counsel?
A. No. No. I assumed this to be -- factually correct, and I put it expressly as an assumption. At least, I don't recall having had the discussion with Plaintiffs' Counsel about this.
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Q. But, by this point, you were aware, we were saying, that Article 1970?
A. Yeah.
Q. And you were aware that which -- the basis of the Claims was relevant to your analysis?
A. Yes.
Q. Okay.
A. It's not determinant for the analysis. Okay. But it's relevant. It's relevant for this case.
Q. Okay. In your discussions in which you obtained information on the Missouri Claims, did Claimants' Counsel ever tell you whether the Missouri Plaintiffs were trying to establish derivative liability?
A. Could you explain a little bit what you mean by "derivative liability."
Q. Figures like piercing the corporate veil or agency?
A. Yes.
Q. They had?
A. Yes.
Q. Okay. Did you take that into your assumptions, as you say?
A. I'm not sure there is any, you know, part of the Report that is based on that being the case or not being the case.
[Page 427]
Q. Right.
A. So maybe if you explained what you think the relevance of that is, I could give you an explanation.
Q. Did you ever consider whether, for instance -- you're talking about -- you spoke about interpreting the Contract in good faith; correct?
A. Yes. Yes.
Q. Are you aware that Claimants are facing claims under the theory of piercing the corporate veil under U.S. law?
A. Yes.
Q. And are you aware that the Missouri Plaintiffs would have to prove fraud or improper conduct on their behalf?
A. No.
Q. No. So you never took that into account when analyzing whether a good-faith interpretation of Clauses 5 and 6 would allow Claimants, if they are -- if they are found to have committed fraud, to take advantage of any indemnity obligation?
A. I think that has no logical connection; the two points have no logical connection. They are not -- one thing is in one area, and the other is in another area.
Q. Okay.
A. What I'm saying is, in order to properly
[Page 428]
construct this Contract, you need to use good faith as a criteria for interpretation, and that will take you to the position that certain liabilities fall on the lap of Centromín.
Now, if those liabilities were caused by bad conduct of the Plaintiffs, it could be relevant to whether the liabilities are imposed, and it could be relevant of whether the conditions of 5 and 6 are comprised. Such as, for example, compliance with the PAMA. But, you know, 5 and 6 don't have -- unless you're condemned by piercing your corporate veil, it doesn't say that. What it says is compliance with the PAMA, environmental practices.
Q. Okay. Can I work with you through a couple of things that you said?
A. Sure.
Q. Great. Let's assume that the Plaintiffs are found responsible in Missouri, and let's assume that they are found responsible under the piercing corporate veil theory.
A. Yes.
Q. Which means that the jury must have found improper conduct or fraud. Let's assume that, under Clauses 5 and 6 of the STA, the allegations made by the Plaintiffs in Missouri are Centromín's responsibility. Given that the jury must have found fraud or improper
[Page 429]
conduct on behalf of Claimants, would you, in this hypothetical, consider that Claimants could nevertheless obtain indemnity and defense from Centromín?
A. I think it's a difficult question to answer without looking at the specifics. In general, what I think is that, you know, the effect of 5 and 6 -- okay, the effect of 5 and 6, for me, is an allocation of liability. Okay. So it's -- once you determine which liabilities are aware, then that's the way it is. That's the consequence of the allocation. It's like a transfer of an asset. You transfer it, that's it. That's the effect. So -- and that's what I mean, that these two points have -- it's very difficult to see the logical connection between those, because it's not that, oh, you're a bad guy, then you don't get -- then we're going to disregard the Corporate Law and contractual liability allocation made in the Agreement.
Q. Okay. Do you think the contracting Parties contemplated providing indemnities to someone who had committed fraud?
A. I think that the Parties contemplated isolating the purchaser of the environmental risk to the degree established in 5 and 6.
Q. Does that include fraud, in your opinion?
A. That includes claims, damages, originating in the PAMA Period, unless the exceptions in 5(3) apply. I think
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you're -- as a Peruvian lawyer, I think you are mixing two things that have nothing to do.
Q. So a party found responsible of having committed fraud could nevertheless get whatever it has to pay in Missouri paid by Centromín; correct?
A. You would need to look at the Contract, and then you would need to tell me what is the basis of -- what legal basis are you using to say that, you know, if there is fraud, whatever, then they do not -- because the effect of this -- this is not only an indemnity provision. You know, this is an allocation of obligations provision. So the effect that this has -- imagine, what you're saying, imagine that there's a merger. Okay. We merge two companies. We split a company and transfer a factory to another company.
And then this new company behaves badly. Are you going to say we're going to disregard the transfer because they -- no. You cannot disregard the transfer.
Q. Okay. So just a couple of seconds ago, you said "it depends" -- right? -- on the basis?
A. Yeah. Because you have -- I mean, that's why I'm saying, if you explain to me what type of reasoning you're using to try to put together these two things that, for me, are totally unconnected from a logical point of view, if you explain your legal basis, maybe -- maybe, you know. I
[Page 431]
cannot find the connection.
Q. Fair enough.
In your direct examination, you also spoke about reading the STA in connection with the restructuring documents; correct?
A. Yes.
Q. Can you remind us how you defined a "contract" in your direct examination?
A. It's an agreement between two or more parties to create, modify, or amend juridical relations.
Q. The reason you say, in your Report, that you should read the restructuring documents together with the STA is because, according to you, they are linked contracts; correct?
A. Yes.
Q. I'm going to ask you -- I'm going to turn to Paragraph 29 of your Second Report.
A. Yeah.
Q. There, you talk about linked contracts or, in Spanish, "contratos coligados."
A. Yes.
Q. Okay. You also refer to them as -- again, in Spanish -- "contratos conexos"; correct?
A. Yes.
Q. But they're the same thing?
[Page 432]
A. "contratos conexos" or "contratos coligados" is the same thing.
Q. And you explained that these linked contracts should be read together; correct?
A. Yes.
Q. And in Paragraph 30 and 29 -- but we can go to 30 -- you explain that each of the Contracts are, nevertheless, autonomous and individual; correct?
A. Yes.
Q. And then in Paragraph 31, you make the point that these Contracts are linked functionally; correct?
A. Yes.
Q. So just to summarize -- let me know if you agree with me -- linked contracts are each an individual contract, nevertheless, they should be read together because they are functionally linked; is that correct?
A. Yes.
Q. Okay. The reason I ask, relates to Paragraph 32 of Claimants' Rejoinder. We'll show you that now. Sorry. It goes through the next page, so we want you to be able to read it all.
A. Yes.
Q. Claimants are using your linked contracts' theory to argue that they are parties of the STA; correct?
A. Well, it says what it says. And I will not --
[Page 433]
Q. I'm asking you what it says.
A. I can read it for you.
Q. Does the heading say "Renco and DRRC are explicit Parties to the STA"?
A. Yes. And I agree that they are Parties to the STA.
Q. I understand.
And they are supporting this argument using your linked contracts' theory; correct?
A. I'm not sure they're using it to support, but it's not an argument to support. It shouldn't be an argument to support because it is the same contract, not linked contracts.
Q. Got it. Following up on what you just mentioned, if the Renco Guaranty and the STA were linked Contracts -- and I know that's not your argument --
A. Yes.
Q. -- they would be individual contracts?
A. Yes. That would have to be read together.
Q. Sure.
A. And you would need to understand what that means and what the effects of that are. But they are not --
(Interruption.)
A. They are not linked contracts; they are the same contract.
[Page 434]
Q. I'm going to take you to JAP-73. We'll start with the title page so that you know what document I'm referring to before we get into it.
A. Yes.
Q. This is a workbook by Walter Humberto Vasquez Rebaza; correct?
A. Yes.
Q. And you cited it to support your argument that the restructuring documents and the Contract are linked contracts?
A. Could you reference, please.
Q. Sure.
A. I have to see how the quote is used.
Q. Sure. Paragraphs 29 through, roughly, 31 of your Second Report.
A. Second Report?
Q. Yes.
A. Second Report. Yes. Okay. Okay. Yes.
Q. I'm going to take you to the top of Page 11 of this Authority, the first paragraph. Take a look. In the parenthetical, the authority states that each contract in the group has its own identity distinct from that of other members of the group; correct?
A. Yes.
Q. And that supports your position that each
[Page 435]
contract in a linked contract group is individual; correct?
A. Yes.
Q. And now we're going to show you the bottom of Page 12.
A. Yeah.
Q. And this supports the argument that you make, that many times in a complex economic program, Parties turn to multiple contracts to execute that economic program; correct?
A. Well, yeah. It's a statement of Mr. Vásquez that I haven't quoted, but that's what he's saying.
Q. Right. But you would agree with this?
A. Not necessarily. I mean, linked contracts are an institution, so may exist. Also, you have complex contracts. That is an institution that exists. It is not that one is, you know, better than the other, one is more prevalent than the other.
Q. So sometimes to execute a complex unitary program, parties can do it through a, as you say -- and correct me if I'm wrong -- unitary complex contract, and other times they can do it through linked contracts; correct?
A. Yes. Yes. I'll give you an example.
Q. Sure.
A. Okay. For example, the Guaranty of Perú is a
[Page 436]
linked contract to the STA. The additional clause is part of the STA.
Q. Okay.
A. And that is because the Parties wanted to do it that way.
Q. I'm going to take you to Page 13. And in the first paragraph, it describes what linked contracts are; correct?
A. I don't think they have a definition. I don't see the definition here.
Q. Okay.
A. I think it is speaking about classification.
Q. Okay.
A. Typology.
Q. Let me read one sentence. Let me know if this supports your interpretation of "linked contracts." "In this hypothesis, a legal transaction (contract) acts or is intended to act on the legal relationship arising from another legal transaction (contract)."
A. I have to confess, I don't totally understand what he's saying there.
Q. Okay. We will go to the next paragraph. It says: "In our view, functional linking can be divided into two subcategories: (a) abstract linking and (b) concrete linking"; is that correct?
[Page 437]
A. That's what he's saying.
Q. Okay. And we are going to take you to Page 28 now, which, Kelby, is JAP -- sorry, is PDF 32.
The second to last or the last complete paragraph talks about the abstract cause that we initially spoke about; correct?
A. Yes.
Q. And it states: "The abstract cause or economic social function is that constant and invariable functionality of the contractual regulation that does not take into account the concrete context or the specific practical purposes pursued, even when they have been assumed by both Parties"; is that correct?
A. Yes. That's a definition of "abstract cause."
Q. And you agreed earlier that each codified contract has its own abstract cause; correct?
A. And it is kind of a tautological concept in that they also have a concrete clause.
Q. Sure. We're going to go back to Page 13, and I'm going to read the last paragraph out loud: "Abstract linking brings together those groupings of contracts that are linked in the abstract, that is, by their inherent nature or by their abstract function (abstract cause) that one of them performs in relation to the other. This is the type of linking present between guarantee contracts
[Page 438]
(personal or property) and the contracts from which the secured credit arises."
Did I read that correctly?
A. Yes.
Q. Okay. Now, in your Third Report, in Paragraph 42 of your Third Report. We will pull it up.
A. Paragraph?
Q. 42. Actually, we can just show the two pages starting on 42. You can review Paragraph 42 and the subsequent paragraphs.
A. Umm-hmm.
Q. Here is your argument --
A. Yeah.
Q. -- that this Contract is, in your -- your position is that it is one contract because they have one cause; correct?
A. It is one contract because the Parties wanted it that way and agreed to it that way.
Q. Okay.
Kelby, please zoom in on Paragraph 45.
I'm going to read the paragraph. Sorry, I mean Paragraph 43. Apologies. "Francesco Misiano, a very influential Italian civil jurist, explains how to differentiate when Parties entered into two contracts or one complex contract."
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He explains that -- and I'll be switching to Spanish now -- "the criterion to be used even in the case in which the will of the Parties offers Judgment, elements is as stated after the discussions in this connection the cause considering as a codified element that individualizes the Contract and it is a simple criterion because whenever there is one sole cause, even complex, there will be unity of contracts."
"But when there is plurality of cause, there will be plurality of contracts, and it continues as it is much more frequent, these are causes that are related to so many other contracts that will be plurality. These nominated contracts are finally plurality of nominated contracts and non-nominated contracts."
Did I read that correctly?
A. Yeah.
Q. Okay. And in Paragraph 46, your conclusion isn't that this Contract is one contract because the Parties wanted it to be so. It is because you say it has one cause?
A. Yes. And because the Parties wanted to do it that way because that's what, you know, the Q&A tells us and what the documents tell us about how the Contract was entered into.
Q. That's not what you say in this paragraph.
[Page 440]
A. No. It doesn't exclude the addition that I'm making. It says here that they had one finality.
Q. Okay. I'm going to go back one to Paragraph 45. You quote the Peruvian Supreme Court?
A. Umm-hmm. Yeah.
Q. And the Peruvian Supreme Court, in this quote, distinguishes between simple contracts that have one legal relationship and complex contracts that are made of multiple legal relationships; is that correct?
A. It doesn't speak of multiple juridical relations. It says: "Complex contracts when different factors diverge and divergence and multiply different contractual forms, but when only in one document." It is not correct to say that it is one contract per juridical relation. That is not correct.
Q. And a complex contract -- your position is that a complex contract is one contract that contains multiple juridical relationships; correct?
A. Yes.
Q. And you cited the Supreme Court Decision for this proposition; is that correct?
A. Yes. Yes.
Q. We are going to pull up that decision now. That is JAP-111. We'll go to the pin cite now.
A. Just to -- you know for clarity's sake, I'm
[Page 441]
mentioning here is that in Peruvian law, the category of complex contracts is recognized.
Q. Okay. Sorry about that.
A. No problem.
Q. You quote the sixth paragraph, the paragraph that starts with "Sixth" in your Reports; correct?
A. Yes. Yes.
Q. And I'm going to start on the first part of the paragraph, and I'm going to read it out loud where it says: "On the subject."
"On the subject, it should be noted that contracts are classified by their complexity to simple contracts when there is only one legal relationship and complex contracts when there are diverse and different factors that can motivate different forms of the Contract but within the same document, that is, when several contracts are grouped together but contained in one."
Is that correct?
A. That's what it says. Yes.
Q. And that's the part that you quoted?
A. Yes.
Q. And then the following sentence you did not quote; is that correct?
A. Yes.
Q. And it says: "Inside the latter type of
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contracts, we find contextual contracts (the figure of which has been maintained by the appellant) in which having absolute autonomy between them, they are found in the same document but none of them influences another, i.e., they are independent of the other, each having its own legal rules."
Is that correct?
A. Yeah. That's what it says. Yes.
Q. Okay. Thank you.
MR. RODRÍGUEZ: I think we can take our lunch break now, if that's okay with the Tribunal.
PRESIDENT SIMMA: I really think that lunch break is highly deserved. This was a difficult exchange but impressive, of course.
Okay. So how much more time will you need after the lunch break?
MR. RODRÍGUEZ: I think I'll need most of the rest of the afternoon with Mr. Payet.
PRESIDENT SIMMA: You will?
MR. RODRÍGUEZ: I think I'll need most of the rest of the afternoon with Mr. Payet.
PRESIDENT SIMMA: Okay. Thank you very much. Let's meet again at 5 to 2:00. 5 to 2:00.
MR. PEARSALL: Mr. President, one little bit of housekeeping, the, you know, unfortunate consequence of
[Page 443]
Mr. Payet bridging the lunch gap means that Mr. Payet will be dining alone today. If you can instruct the witness that he's not to speak to anyone during this time, that would be helpful.
PRESIDENT SIMMA: I was going to tell you that you are probably going to be the only person here. You have a free lunch in the sense of not being bothered by legal, you know, just stemming from that great exchange you had. So enjoy your free lunch, free of any legal.
THE WITNESS: I will do that, Mr. President.
PRESIDENT SIMMA: And you know what it means, legally speaking?
THE WITNESS: Absolutely.
PRESIDENT SIMMA: Okay. Thank you.
MR. FOGLER: Mr. President, we have already advised our witness that he is going to be isolated and that we are not going to speak with him about any of the issues. So he is already aware of that.
PRESIDENT SIMMA: I just thought that "free lunch" would sound a little bit better than "isolated."
MR. FOGLER: Indeed.
PRESIDENT SIMMA: Okay. Have a good lunch.
(Whereupon, at 12:51 p.m., the Hearing was adjourned until 1:55 p.m., the same day.)
AFTERNOON SESSION
[Page 444]
PRESIDENT SIMMA: Good afternoon. I think we are ready to continue the examination of Mr. Payet, and I give the floor to Mr. Rodriguez for -- what is it? The rest of the afternoon.
MR. RODRÍGUEZ: We'll do our best to make sure it is not too extensive.
PRESIDENT SIMMA: You have the floor now.
MR. RODRÍGUEZ: Thank you, Mr. President.
BY MR. RODRÍGUEZ:
Q. Mr. Payet, we are going to show you Article 1435 of the Peruvian Civil Code on the screen. Please review it and let me know when you're done.
A. Yes.
Q. This Article governs the assignment of contractual positions in a contract; correct?
A. Yes.
Q. And an assignment of contractual position under Peruvian law is when an original Party to that contract transfers its position as Party to a third party to that contract; correct?
A. Yes.
Q. If I could have you focus on the last paragraph. I'm going to read it, and I'm going to ask you if I've read it correctly. "If the agreement of the assigned Party had been provided prior to the Agreement between the assignor
[Page 445]
and the assignee, the Contract shall only be effective from the moment that said Agreement has been communicated to the assigned Party, in writing, of a certain date."
Did I read that correctly?
A. Yes.
Q. You would agree that the last paragraph identifies three different subjects?
A. Yes.
Q. The first one is the "assigned party"; correct?
A. Yes.
Q. I'm going to switch to Spanish just to confirm that we understand who those Parties are.
A. Okay.
Q. That party is "el cedido" (in Spanish); correct?
A. "El cedido" (No translation.)
Q. So the assigned Party is the original Contracting Party who remains in the original Contract; correct?
A. Yes. Yes.
Q. The next Party it identifies is the assignor; correct?
A. Yes.
Q. In Spanish, the assignor is the "Cedente"; correct?
A. Yes.
Q. And that is the Party who transfers its
[Page 446]
contractual provision to a third party; correct?
A. Yes.
Q. And the last Party identified is the assignee; correct?
A. Yes.
Q. In Spanish, that Party is "el Cesionario"; correct?
A. Sí. Yes.
Q. And that is the Party that is not a party to the original Contract, who replaces the assignor; correct?
A. Yes.
Q. And the consent of the assignor, the assignee, and the assigned Party are all necessary for an assignment of contractual position to exist; correct?
A. Yes.
Q. And if the consent of one of them does not exist, the assignment does not exist; correct?
A. Yes. It can have effects, let's say, between the assignor and the assignee, obligatory effects, maybe, but you would need the consent of the other party to make it effective.
Q. Of the party that remains in the Contract?
A. Yes. Yes.
Q. Now, I understand your position to be that there are five Parties to the STA, and I'll list them, and let me
[Page 447]
know if I have them right.
A. Yes.
Q. The Party identified as Centromín?
A. Yes.
Q. The Party identified as the Investor, the Party as identified as the "Company"?
A. Yes.
Q. "Renco" and "DRRC"; is that correct?
A. Yes.
Q. Okay.
A. Yes.
Q. And you're aware that DRP assigned its contractual position in the STA as "investor" to another Renco Group entity in 2001; is that correct?
A. Yes.
Q. For purposes of that assignment, under your theory, DRP was the assignor; correct?
A. Yes.
Q. And the other Renco Group entity, which I can represent is DR Cayman --
A. Yes.
Q. -- was the assignee; correct?
A. Yes.
Q. And under your theory, the assigned Parties were Renco, DRR, the Company, and Centromín; correct?
[Page 448]
A. Yes.
Q. And if Claimants were Parties to the STA, that assignment would not exist without their consent; correct?
A. Yes.
Q. And you're aware that Centromín assigned its contractual position in the STA to Activos Mineros in 2007; correct?
A. Yes.
Q. For purposes of this assignment, under your theory, Centromín was the assignor; correct?
A. Yes.
Q. And Activos Mineros was the assignee?
A. Yes.
Q. And the assigned Parties were Renco, DRR, the Company, and the Investor; correct?
A. Yes. Yes.
Q. And if Claimants were Parties to the STA, the assignment would not exist without their consent; correct?
A. Yes. I would like to clarify that the assignment does exist.
Q. Okay.
A. The assignment Agreement does exist. I think what -- once you say is whether it's effective --
Q. Okay.
A. -- from a legal point of view.
[Page 449]
Q. Okay.
A. There is a document and a Contract called "assignment," and has been done and signed by the entities that you referred to. You're speaking about, let's say, validity of --
Q. Okay.
A. -- the Agreement.
Q. Thank --
A. Or effectiveness of the Agreement.
Q. Thank you.
For -- I understand the distinction under law. For practical purposes, the effect of whether it's a question of validity or ineffectiveness, in both circumstances, is that it doesn't happen; correct? The assignment? The Party's -- Party position isn't transferred?
A. As a full assignment, it wouldn't be effective.
Q. Okay. You're aware that both Activos Mineros and Dr. Varsi argue that there is no evidence of Claimants' consent to either of these assignments; correct?
A. I haven't seen the -- you know, the -- I don't recall the argument made in a document, but if you tell me that's the case, well, that should be the case.
Q. Okay. And since you don't recall the argument made in the document, you never addressed this argument in
[Page 450]
your Reports; correct?
A. The -- I'm not -- I don't think I discussed that point. I don't think so.
Q. Okay. Great.
A. Maybe it is in some paragraph, but I'm not sure.
Q. Okay.
A. What I can tell you is --
Q. To the --
A. -- and I think it is in some paragraph in the Report, but what I can tell you is they should have intervened. From my point of view, they should have intervened because they were parties.
Q. But from a legal point of view, if --
A. That vitiates the -- let's say the assignments have a problem.
Q. Sure. Has anyone ever alleged, to the best of your knowledge, that these assignments are not effective?
A. Not to my knowledge.
Q. If they were, Activos Mineros would not be a contracting party; is that correct?
A. Not necessarily. I mean, the relationship between Activos Mineros and Centromín is more complex than just an assignment because it's a relation created by public law. There are special decrees and rules for that.
Q. Okay.
[Page 451]
A. So I've made no analysis and Opinion of that in my Report, but I can tell you it's not just a contractual assignment.
Q. Okay. I'm going to take you to Exhibit R-284, which is Centromín's assignment of its contractual position.
A. Umm-hmm.
Q. I'm going to take you to Clause 3 and zoom in. And I'm going to read Clause 3.1. Let me know if I've read it correctly.
A. Umm-hmm.
Q. "By means of this document, and in accordance with the provisions of Articles 1435, 1439 of the Civil Code, Centromín assigns its contractual position in the Share Transfer Contract to Activos Mineros. Therefore, Activos Mineros assumes the rights and obligations that correspond to Centromín in the abovementioned Contract."
Is that correct?
A. Yes.
Q. And in Clause 3.3, it says: "In accordance with the provisions of Clause 10 of the Share Transfer Contract, Doe Run Perú, the Company, and Doe Run Cayman, Limited, the Investor, have granted their consent in advance for Centromín to be able to assign its contractual position when it deems it appropriate. As a result, the
[Page 452]
intervention of the Company and the Investor in this Contract are not necessary."
Is that correct?
A. Yes. That's what it says.
Q. There is nowhere in this document that discusses Renco or DRRC's consent, is there?
A. No. And -- yes. You're correct. The thing that you see and -- is that, if you look at the STA, the STA has some provisions, including the authorization for assignment, which I think is Section 10 -- that do not mention DRR and Renco as Parties. And from my point of view, that's a defect in the Contract. It's an inconsistency in the Contract.
Contracts are never perfect. In my 30 years of experience, I've never written a perfect contract, I've never seen a perfect contract. Normally, people don't realize that because contracts are not litigated, but when they're litigated, you know, the defects of the Contracts come up.
If you see the original form of STA, which was attached to the bidding documents; okay? -- to the original bidding documents, it did not have an additional provision, and it did not have Renco and DRR as Parties of that Agreement. That happened afterwards. It happened during the Q&A. At some point in time, the Government says Renco
[Page 453]
and DRR have to be Parties of the Agreement, have to sign the STA.
So in order to make them Parties of the STA, they put the additional clause into the Agreement, but they didn't change all the Agreement. So there's a -- there are inconsistencies, for example, this question of assignment of contractual position.
Q. Renco is a sophisticated Party; correct?
A. Yes.
Q. And so is DRRC; correct?
A. Yes.
Q. Is it your testimony that they forgot to insert themselves in Clause 10 of the STA?
A. I don't know.
Q. Okay. Now, you're talking about an imperfection in the Contract.
A. Yes.
Q. Is it your testimony that it's a mere imperfection that Renco and DRRC are not present in Clause 10 of the STA?
A. No. What I'm trying to explain is why there's these inconsistencies in the Agreement.
Q. What about here? Is there an inconsistency here, in that Renco and DRRC are not mentioned?
A. From my view, them being Parties, they should
[Page 454]
be -- I mean, they could grant their authorization in other document, or in another moment, but they should grant authorization.
Q. You haven't seen any such document?
A. I haven't seen any such document.
Q. I'm going to show you Exhibit R-4. I'll represent to you that that's DRP's assignment of contractual position. This is Clause 1.3 of DRP's assignment of contractual position. In the first paragraph, it identifies Centromín, the Investor, and the Company as Parties to the STA; correct?
A. It says it was signed by Centromín, Doe Run as Investor, and Metaloroya as the Company receiving the investment.
Q. It said was entered into; correct?
A. It says the Contract was entered into by -- et cetera.
Q. And the next paragraph talks about the consent; correct?
A. Yes.
Q. Consent for assignment of contractual position?
A. Yes.
Q. And it only identifies Centromín and Doe Run Perú as granting that consent; correct?
A. Yes.
[Page 455]
1 Q. There's nowhere in this document that identifies
2 Renco or DRRC's consent, is there?
3 A. It only mentions Centromín.
4 Q. And Doe Run Perú?
5 A. No. Centromín granted Doe Run Perú the consent.
6 Q. You're right.
7 A. So it only mentions --
8 (Interruption.)
9 A. Centromín. It doesn't, for example, mention
10 Metaloroya.
11 Q. That's, I think, one of those imperfections you
12 were talking about.
13 (Overlapping speakers.)
14 (Interruption.)
15 Q. I think that's one of those imperfections you
16 mentioned?
17 A. Contracts are imperfect.
18 Q. But we know from Clause 10 that the Company did
19 provide its consent in -- ahead of time?
20 A. Yeah, I don't have it in my mind, but if you say
21 that it is in 10, it should be in 10. We can look at 10,
22 but yeah.
23 Q. Yeah, feel free.
24 A. Yeah, for the purpose of the argument, yes.
25 Yes. There it is.
[Page 456]
1 Q. Okay.
2 A. The Investor and the Company authorized
3 Centromín, and the opposite also, yes.
4 Q. Right.
5 A. Correct.
6 Q. Okay. Now, the STA is a Share Purchase Contract;
7 correct?
8 A. No. It's much more than that.
9 Q. Okay. Well, it's, at minimum, a Share Purchase
10 Contract?
11 A. It's a complex Contract. It has many other
12 things.
13 Q. Okay. Now, let me to take you to Paragraph 15 of
14 your First Report.
15 A. Yes.
16 Q. How do you describe -- well, let me correct this.
17 In the first sentence, you address that the
18 assumption and distribution of risks between the Parties to
19 a Share Purchase Contract is essential; correct?
20 A. I haven't said it's essential. I have
21 said -- yeah, sorry, essential. I would say the essential
22 part, because you could have a contract without that, but
23 it's not normal.
24 Q. Sure. Right. So the reason you explain this is
25 because, at least, in part, the STA is a Share Purchase
[Page 457]
1 Contract, even if it has other attributes?
2 A. It's a -- it's an M&A Contract. Okay? Because
3 in an M&A deal, what you're transferring in the end is an
4 enterprise, and you can just use different ways to transfer
5 it. For example, just to clarify why I'm insisting on
6 this, what is more important in the STA? The transfer of
7 Shares or the issuance of new Shares?
8 Q. Okay.
9 A. Because it's not only a transfer of Share. It's
10 not only a sale. It's an investment of Doe Run into
11 La Oroya, into Metaloroya, and that's $126 million. So
12 which was more important? The transfer or the issuance of
13 new Shares? And the issuance of new Shares is not a
14 transfer of Shares. The counterparty of Doe Run in the
15 issuance of new Shares is not Centromín, it's Metaloroya.
16 So it's more complex. It's much more complex.
17 Q. Okay. How about this? We can agree that in this
18 Contract the assumption and distribution of risks is an
19 important part of this Contract?
20 A. Yes.
21 Q. Okay. That is the function of Clauses 5 and 6 of
22 the STA?
23 A. Yes. Probably there is more clauses, but that's
24 the crux of it.
25 Q. Now, in your direct examination you talked about
[Page 458]
1 the concept of assumption of liabilities; correct?
2 A. Yes.
3 Q. Okay. I'm going to take you to the paragraphs
4 where you discuss the concept of assumption of liability.
5 It's Page 42.
6 A. Yes, yes. I'm looking at that.
7 Q. That's -- just for the record, Paragraph 15 of
8 your First Report -- sorry, Paragraph 154 and the following
9 of your First Report.
10 In Paragraph 155, you explain that Clauses 5
11 and 6 don't establish a compensation clause in favor of any
12 individual, in particular; correct?
13 A. Yes, that's what it says.
14 Q. And, instead, what these clauses do, according to
15 you, is determine that Centromín will maintain in its
16 equities the liabilities described in Clauses 5 and 6;
17 correct?
18 A. Yes.
19 Q. And that is the assumption of liability that you
20 were talking about; correct?
21 A. It's not only that. It's all the liabilities
22 in 5 and 6, which include the old liabilities, the PAMA
23 liabilities, and the post-PAMA liabilities. Some of them
24 are future; so maybe "retained" is not exactly the word,
25 because some that are retained and some are just, you know,
[Page 459]
1 assumed. But that's the effect. That's the idea, yes.
2 Q. Okay. And this assumption of liability is
3 specific to Clauses 6.2, 6.3, 5.3, and 5.4; correct?
4 Take your time to review.
5 A. So it's Clause 5.1.
6 Q. Okay.
7 A. 5.1 is because it's referred to in the other
8 clauses, you know. It's -- but it's 5.1, 5.2, 5.3, 5.4,
9 all the 5s. And then 6, 6.1, et cetera. Yep, all the way
10 to 6.5.
11 Q. I just want to make sure that I understand.
12 You're including Clause 6.5 in your assumption of
13 liability?
14 A. 6.5 is the part of the cross-indemnity provision.
15 Okay? That's all this -- if you want to speak strictly
16 where -- which clauses create -- I think 6.5 and the mirror
17 are like ancillary provisions. They're not the main.
18 Okay? The main is the assumption, and the assumption is
19 done, essentially, in, I would say, it's the introduction
20 to 5, La Empresa assumed responsibility, the Company
21 assumes liability, only in the following aspects.
22 And then for 6, which is Centromín, it's starting
23 with 6.1, Centromín assumes the responsibility of the
24 following aspects -- and then it goes. This Part that is
25 remediation, and the other part is third-party Claims, and
[Page 460]
1 the responsibility before third parties.
2 Q. Okay. You would agree that Clause 6.5 contains
3 an indemnity obligation that is --
4 A. Yes.
5 Q. -- limited to the Company; correct?
6 A. Yes.
7 Q. Okay. So Claimants are not alleging a breach of
8 Clause 6.5; correct?
9 A. Not that I know of.
10 Q. So the indemnity obligation has to come from
11 something other than Clause 6.5; correct?
12 A. Yes.
13 Q. And that is in Clauses 6.2 and 6.3; correct?
14 A. It's in the provisions in the Contract plus the
15 Civil Code.
16 Q. Okay. And they're also alleging a breach of a
17 defense obligation; correct?
18 A. Yes.
19 Q. And you understand that, under Clause 8.14, there
20 is a defense clause in the Contract; correct?
21 A. Yes.
22 Q. But that clause is limited to the Company or the
23 Investor; correct?
24 A. Yes.
25 Q. So they're not alleging a breach of Clause 8.14;
[Page 461]
1 correct?
2 A. I cannot certify what they are alleging. My
3 understanding is they are -- I'm not alleging that --
4 (Overlapping speakers.)
5 Q. Okay. Where does the defense obligation that
6 they are alleging arise from, in your view?
7 A. From the assumption of liability.
8 Q. Okay.
9 A. When you assume a liability, you take it upon
10 yourself to comply with that obligation. When you assume a
11 claim, because it is not only says "liabilities" but it
12 also says "third-party claims," what is the meaning of
13 "assumed claim" if it's not going and defending the Claim
14 because you have to go -- it becomes your own. And that's
15 why good faith is important, because when you read the
16 Contract, and the Contract says "assume" you have to
17 determine what "assume" means in good faith.
18 Q. Okay. So I just want to summarize to make sure
19 that I understand the position. There is a way of getting
20 indemnity and defense from Centromín that does not go
21 through Clause 6.5 and 8.14?
22 A. Yes.
23 Q. And to get that, you would have to go through
24 Clause 6.2 and 6.3, if it's a third-party claim?
25 A. You have -- I think that there are two -- let's
[Page 462]
1 say 6.2, 6.3, et cetera, 5, 5.1, 5.9, et cetera, those make
2 the allocation of liabilities. Okay? And the allocation
3 of liabilities has effect for me. They have effect, and
4 one of effects that they have is that they make
5 Centromín/Activos Mineros liable for those
6 responsibilities. Liable for those responsibilities, it
7 makes them the debtor to the third-party Claimant.
8 So when it does that, you have to determine, from
9 a construction point of view, what is the effect of that?
10 What does that mean "to assume"? So you could say "to
11 assume" means nothing. "To assume" is not to assume. It's
12 only like a definition for the purposes of a
13 cross-indemnity provision. Okay? So that's the end.
14 That's the utility of "assumption."
15 I don't agree with that. I say, to assume is to
16 assume. It's to take upon yourself, to make yourself
17 responsible for that. Does that include defense? In my
18 opinion, yes. If you assumed a claim, then you have to go
19 and defend it, because that's, in good faith, the
20 consequence of assuming a claim.
21 Q. Okay. Thank you.
22 Just so that I understand, when you say "a
23 definition," right? If you interpret the "assumption of
24 liability" as a definition, is what you mean -- and correct
25 me if I'm wrong -- that it is merely just identifying or
[Page 463]
1 enumerating the situations in which one Party or another is
2 responsible?
3 A. Yes. You could say -- instead of assumption, you
4 could call it bucket 1, bucket 2, bucket 3, and then
5 indemnity.
6 Q. Right.
7 A. If you get sued by bucket 1, we'll pay it.
8 Q. Right. And that is not the way that you
9 interpret these clauses?
10 A. No, no. That is not the way I interpret.
11 (Interruption.)
12 Q. You interpret these clauses?
13 A. No, I don't interpret them like that.
14 Q. Okay. So there is one way to obtain indemnity,
15 which is through the assumption of liabilities in
16 Clauses 6.2, 6.3, as you interpret them, and the Civil
17 Code?
18 A. Yes, or to seek enforcement.
19 Q. Right. And another way is Clause 6.5 and 8.14,
20 but that's limited to the Company; correct?
21 A. I don't know if it's another way or if it has a
22 different nature. What I would say is that, in the case of
23 Renco and DRR, I agree that there's no express
24 cross-indemnity provision and there's no express defense
25 clause. I agree with that.
[Page 464]
1 Q. I'm going to pull up Paragraph 166 of Claimants'
2 Statement of Claim. I'm going to read, starting at the
3 second sentence which begins with "the plain text." That
4 might be the third sentence. "The plain text of Clause 6
5 establishes that Centromín undertook two different and
6 somewhat overlapping types of obligations with respect to
7 potential third-party damages and claims. An assumption of
8 liability for third-party damages and claims, regardless of
9 which entity associated with the Renco Consortium the
10 third-party should decide to sue, and, two, an obligation
11 to indemnify the Company, i.e., Metaloroya or DRP after the
12 merger of Metaloroya and DRP for any damages, liabilities,
13 or obligations arising from such claims. Centromín's
14 assumption of liability for third-party damages and claims
15 under Clauses 6.2 and 6.3 extends to anyone who could be
16 sued by a third party for damages falling within the scope
17 of the assumption of liability."
18 Did I read that correctly?
19 A. Yes.
20 Q. Do you agree with that interpretation?
21 A. Yeah, in general, I agree. I mean, it's not my
22 wording, and maybe there are nuances, but, yes, I mean, for
23 me, the concept is, in Sections 5 and 6, you have an
24 assumption of liability which is the liability allocation,
25 and that has certain effects that authorizes Renco and DRR
[Page 465]
1 to enforce against Activos Mineros/Centromín or to seek
2 indemnity for noncompliance of those obligations. And on
3 the other hand, there is also a clause that is 6.5 that has
4 an express obligation to indemnify.
5 Q. Okay. And going back to Paragraphs 155 and
6 subsequent paragraphs of your Report -- and you can take a
7 look.
8 Do you cite any authority of Peruvian law to
9 support your reading of the phrase "assumption of
10 liability" or "assumption of responsibility"?
11 A. No, I don't.
12 Q. Okay. I'm going to take you to Dr. Varsi's First
13 Report, and we're going to look at Paragraphs 5.67 and
14 5.68.
15 Give them a look and let me know when you're
16 done, please.
17 A. You want me to read 6.7 and 6.8 or only just 6.7?
18 Q. Yes. Both, just for your context.
19 A. Yes, I've read it.
20 Q. And, obviously, Dr. Varsi disagrees with your
21 interpretation of Clause 6 and 5; correct?
22 A. No. No-no. I think he half-agrees and has a
23 minor discrepancy.
24 Q. Okay. Let's go point by point and see where the
25 disagreement is.
[Page 466]
1 A. Yeah, so for example, he says Clauses 6.2 and 6.3
2 of the Contract are responsibility distribution clauses and
3 not indemnity and defense clauses. I agree with that
4 totally. That's the same thing I'm saying.
5 Q. He disagrees with you on whether those clauses
6 merely enumerate responsibility that are then triggered
7 by --
8 A. No-no.
9 Q. Sorry, can I finish?
10 A. Yes. I'm very sorry.
11 Q. Is it your testimony that Dr. Varsi interprets
12 Clause 6.2 and 6.3 in the same way that you do?
13 A. Well, let -- if I may try to explain where I
14 think is the difference and why I think that my position is
15 the correct one.
16 Q. I'm happy for you to do it. I just want to work
17 through the clauses first, if that's okay.
18 A. Yes.
19 Q. Okay.
20 A. So what would be your question?
21 Q. So under Paragraph 5.68, Clauses 6.2 and 6.3
22 distribute responsibility; correct?
23 A. According to 5.67, that's what he says, and I
24 agree with that.
25 Q. Yes. Okay.
[Page 467]
1 And Dr. Varsi says that Clauses 6.5 and 8.14
2 contain the relevant indemnity and defense obligations;
3 correct?
4 A. He said that they contain -- yeah, indemnity of
5 defense -- I would not say he says the word "relevant."
6 Q. Okay. So let me read the last sentence in
7 Paragraph 5.68. "Clauses 6.5 and 8.14 are limited to the
8 Company and do not cover Renco and DRR. By virtue of a
9 systematic interpretation of Clauses 6.2 and 6.3, it should
10 be concluded that, as with 6.5 and 8.14, those clauses are
11 also limited to the Company."
12 A. Yes. I don't agree with that.
13 Q. Correct. He, in these paragraphs, is identifying
14 clauses that have different functions; correct?
15 A. He is making an argument that I think is not
16 correct.
17 Q. I promise we will get to -- I will let you answer
18 why you think it's incorrect. I just want to establish
19 what the difference is first, and then you can explain why
20 you disagree with him.
21 A. Okay. So what is your question?
22 Q. He does not consider that Clauses 6.2 and 6.3
23 contain an assumption of liability as you have defined it;
24 correct?
25 A. No, I think that is not correct. He says 6.2 and
[Page 468]
1 6.3 are responsibility distribution clauses and not
2 indemnity or defense clauses. That's the same thing I'm
3 saying. He's saying -- I am saying those are
4 responsibility distribution clauses.
5 Q. Where do you think the disagreement is then?
6 A. Okay. The disagreement is that what Mr. Varsi
7 says is this: There is no figure of assumption of
8 liability clauses in Perú. So he says it is the Parties
9 that must shape the obligations arising from said clauses.
10 So what he's saying is, if you say, "I assume a
11 liability," and you don't put more things into more wording
12 into that provision, then it's not effective. And
13 that -- I think that's plain wrong, plain wrong. If a
14 party says in a contract, "I assume a liability," and
15 you're the interpreter, you have to think that they did it
16 for a purpose, and you have to try to understand it. If
17 there's a gap in the Contract, you have to fill it. That's
18 good-faith interpretation. You cannot just say, "oh, no, I
19 would need three more paragraphs to try to understand
20 this," and that's what he's saying. He's taking effect out
21 of that because it's not more detailed, and that's plain
22 incorrect for me.
23 Q. Okay. Thank you.
24 I'm going to show you Paragraphs 5.70 through
25 5.72 now. Please review them and let me know when you're
[Page 469]
1 done.
2 A. Could I see 69? Because he says, "this
3 interpretation would leave it meaningless," but I don't
4 know what interpretation he is speaking of.
5 Q. Yes. Of course.
6 A. Okay. Yeah. Okay. Could I please read the
7 before one?
8 Q. Of course. Sure.
9 A. Okay. Yes. Yes.
10 Q. Let's go back to the following page.
11 A. Yes.
12 Q. I just want to be clear that Dr. Varsi interprets
13 Clauses 6.2 and 6.3 as merely enumerating the situations of
14 responsibility, and the consequences of that responsibility
15 are identified in 6.5 and 6.3.
16 A. So that's why I say he thinks there are
17 definitions.
18 Q. If you want --
19 A. The assumption provisions in the Contract are
20 definitions.
21 Q. I'm happy to use that term.
22 So under Dr. Varsi's theory, Clauses 6.2 and 6.3
23 merely allocate responsibility or identify the situations
24 in which -- let's say enumerate, if that's
25 easier -- enumerate the situations in which Centromín is
[Page 470]
1 responsible and the Company is responsible, but not -- but
2 don't contain any indemnity or defense obligations absent
3 6.5 and 8.14; is that correct?
4 A. Let me -- let me try to phrase it in my own
5 words. Okay.
6 First of all, I think he doesn't have it totally
7 clear in the Report. I respect very much Dr. Varsi. He's
8 a friend, we will have lunch when we go to Lima, but I have
9 to say that I don't -- I think he's a little contradictory
10 here. Okay. Because there's, I think -- could you go up a
11 little bit.
12 Q. Sure.
13 A. In this. Yeah. 67, 5.67, please. Okay.
14 Because, look at this. Clauses 6.2 and 6.3 of the Contract
15 are responsibility distribution clauses and not indemnity
16 or defense clauses. That doesn't mean they are
17 definitions. He said they're responsibility distribution
18 clauses, it means they allocate responsibility. They said
19 what belongs to whom and what belongs to whom.
20 Q. Okay.
21 A. Okay. That has effects in the legal world. That
22 has legal effects.
23 Q. Okay.
24 A. It makes one Party obligated for something. So
25 when you say he says this is just "definitions,"
[Page 471]
1 which -- that is not the case because, if there are
2 responsibility distribution clauses, they have effects,
3 which is what I say. They're assumption of liability
4 provisions. Okay.
5 So what I think is the difference is that what he
6 says is they cannot work by themselves. That's what he's
7 saying. They cannot work by themselves. You need to
8 have -- as he says here -- it is the Parties that must
9 shape the obligations arising from said clauses. I don't
10 agree with that. I say -- that's why I said it's difficult
11 to read 5 and 6. It's not easy. For interpreter, very
12 difficult, but you have to derive a meaning from that.
13 So if party says, "I assume liability," it's not
14 the same as saying, "bucket 1 is composed by these
15 liabilities." It's not the same.
16 If they say it's assumed liability, that has
17 normative content that creates obligations, and you need to
18 determine which those obligations are. So Varsi says they
19 don't work alone, they need, you know, 6.5 and 8.14 to
20 work. I don't agree with that, because the fact that you
21 have 6.5 and 8.14 does not abrogate your legal rights.
22 That cannot be interpreted "contrato conexo." You cannot
23 say that if I grant a right to you, I'm taking one from
24 Patrick. That's not a valid argument in law.
25 So if they have 6.5 and 8.14, good. Does that
[Page 472]
1 abrogate 1219 of the Civil Code for anybody else that is a
2 party to this Agreement? No.
3 Q. Okay. So if I understood you correctly, the
4 disagreement is that you read Clauses 6.2 and 6.3 as the
5 assumption of liability as you have defined it; whereas,
6 Dr. Varsi reads them as just the definition as you have
7 defined it or enumerating?
8 A. No. No. Because I'm reading his Report, and
9 he's saying 6.2 and 6.3 of the Contract are responsibility
10 distribution clauses. And that, for me, means they're
11 assumption of liability clauses, and they have a legal
12 meaning and effect. The thing is, what he says after, for
13 me, is not correct, that he says they cannot work by
14 themselves. They need a procedure. They need an express
15 indemnity, and the fact that you have an express indemnity
16 for Peter means that you are not liable to John. That's
17 not correct.
18 Q. Okay. I'm going to represent to you that Activos
19 Mineros's position is that Clauses 6.2 and 6.3 merely
20 identify the situations which would be -- I'm just
21 representing to you our position --
22 A. Okay sure.
23 Q. -- would be Centromín's responsibility and which
24 ones would not. And I'm going to represent to you that
25 Activos Mineros's position is that the first consequence of
[Page 473]
1 that allocation is found in Clause 6.5. And I'm going to
2 represent to you that the second consequence is found in
3 18.14, according to Activos Mineros. Okay.
4 That position you disagree with?
5 A. Yes.
6 Q. Okay. We're going to show you Exhibit JAP-9.
7 This is an article written by you on contracts, Share
8 Purchase Agreements; correct?
9 A. Yes.
10 Q. And in this article, you discuss some clauses
11 that allocate risk; correct?
12 A. Yes. Please take me to it.
13 Q. Sure. Well, for instance --
14 (Overlapping speakers.)
15 Q. Please read the introductory paragraph. Go back
16 to the first page.
17 A. Yes. Correct.
18 Q. Okay. And one of those types of clauses,
19 according to the first paragraph, is, for instance, a
20 representation of warranties; correct?
21 A. Yes. Yes.
22 Q. And another type of clause is an indemnity clause
23 according, according to --
24 (Interruption.)
25 Q. The indemnity clause.
[Page 474]
1 A. Yes.
2 Q. I think we should just ensure that we don't talk
3 over each other for the Interpreters.
4 I'm going to take you to Page 92.
5 Do you see the heading where it talks about
6 "obligation to indemnify and limits on responsibility"?
7 A. Yes. Yes. Yes. Yes.
8 Q. We're going to discuss this section, but, before
9 we do, do you want to take a guess at -- to whether you
10 describe "indemnity frameworks" as you're doing now, or as
11 Activos Mineros's interprets Clauses 5 and 6?
12 A. I don't want to speculate.
13 Q. Great.
14 A. Could you just take me to the text?
15 Q. Sure. So I'm going to read from the beginning.
16 A. Okay.
17 Q. And I'll ask if I read it correctly.
18 "The regulation of the seller's obligations to
19 indemnify and the limits on its responsibility is one of
20 the central aspects of the Contract for the sale of
21 companies."
22 Did I read that correctly?
23 A. Yes.
24 Q. "As we have seen, the Contract of the sale
25 essentially fulfills a function of risk allocation between
[Page 475]
1 the buyer and seller. Through the regulation of the
2 situations in which -- that are the seller's responsibility
3 and the establishment of monetary and temporal limits to
4 its responsibility, this Clause becomes one of the basic
5 pieces of such assignment to the point where it could
6 render illusory the protection that the buyer seeks through
7 the representations and warranties clauses"; correct?
8 A. Yes.
9 Q. I'll continue. "For this reason, this Clause is
10 often one of the most negotiated clauses in the sales
11 contract, and its content will ultimately be the closing
12 point of the risk allocation agreement between the buyer
13 and seller. As noted in comments to the American Bar
14 Association's Model Stock Purchase Agreement, the conflict
15 between the buyer's desire for protection and the seller's
16 desire not to have ongoing responsibility for a business
17 that no longer belongs to him often results in intense
18 negotiation."
19 So far, correct?
20 A. Yes.
21 Q. Okay. "As such, there is no such thing as a
22 standard set of indemnification clauses. However, there is
23 a standard set of issues that must be addressed in the
24 indemnification clauses of a contract of sale"; correct?
25 A. Yes.
[Page 476]
1 Q. "Normally, the Contract of sale will contain an
2 exhaustive regulation of seller's responsibility and the
3 limits to it"; correct?
4 A. Yes.
5 Q. "This regulation will include, in the first
6 place, an enumeration of the situations that may give rise
7 to the seller's responsibility"; is that correct?
8 A. Yes. That is correct.
9 Q. And in the next sentence, you identify some
10 examples of that enumeration; correct?
11 A. Yes.
12 Q. And you continue -- I'm going to jump to the
13 second paragraph that starts with the word "second."
14 "Second, the Contract will set out the content of
15 the seller's obligation to indemnify." And you explain
16 some -- you elaborate on that; correct?
17 A. Yes.
18 Q. And then it says: "However, the Parties may
19 foresee that, from the occurrence of a third-party claim
20 that may give rise" -- and I'll continue. It's at the
21 bottom -- "to an indemnifiable injury, the seller shall
22 bear the Costs of the Company's defense. In this regard,
23 and also taking into account the seller's interest in
24 having an adequate defense of the Company against a claim
25 that may give rise to compensation, the Contract often
[Page 477]
1 establishes a detailed procedure according to which the
2 buyer must notify the seller as soon as it becomes aware of
3 an event that may give rise to a compensable damage and
4 regulates the mechanisms for the defense of the Company in
5 the case of proceedings initiated by third parties."
6 Did I read that correctly?
7 A. Yes.
8 Q. And so, here, you're describing clauses with
9 three different functions, are you not?
10 A. Yes. I'm describing the typical STA.
11 Q. Okay.
12 A. Could we read the last part of the article?
13 Q. Which part specifically?
14 A. Where I speak about good faith.
15 Q. Do you have a specific page in mind?
16 A. The last two pages, or last three pages.
17 Q. Why don't we do this, you know, Claimants'
18 Counsel can discuss that with you if they want on redirect.
19 A. Okay. But just let me comment what you just read
20 because I think context is important for this.
21 Q. Okay.
22 A. And it's a big difference between what we have in
23 the STA, and that's why I said it's not a Share Purchase
24 Agreement only or mainly. Okay. I'm speaking there, and
25 you'll see I quoted the ABA, that is the Model Stock
[Page 478]
1 Purchase Agreement. It is a typical U.S.-style SPA, where
2 you have -- what you tried to do is eliminate all law and
3 regulating the Contract. That's why you have the sole
4 remedy clause. And you have the structure where you have
5 reps and warranties and then you have express indemnity
6 because that's the U.S. structure that was, you know,
7 applied everywhere, and we apply it in Perú, and you apply
8 it in many places.
9 But there are two things that one needs to bear
10 in mind. Number one, that the legal rules are different.
11 Okay. So for example, when I put the sole remedy clause,
12 meaning there is no liability whatsoever for anything
13 except what is expressly stated in this agreement -- there
14 is no sole liability provision in the STA, by the way.
15 When I do that, I have to tell my client, "Listen, client,
16 this has a limit in Peruvian law because we cannot go
17 against mandatory provisions. For example, if there is
18 gross negligence, you're going to be liable." Okay. You
19 cannot contract against good faith. It's mandatory in
20 Perú. So that's the first thing I tell them, is we have to
21 be careful of the legal rule.
22 And second, we have the good-faith mandate, which
23 is in the last part of the article, so we should not
24 contract like we were in a vacuum or that we were
25 contracting Delaware or in New York.
[Page 479]
1 So that, I think, is an important concept. And
2 the second concept, if you allow me please, is that -- and
3 that's something I have tried to highlight, that this is
4 not just a Sale Purchase Agreement. The Company is being
5 spun off Centromín. At the same time, if you read the Deed
6 of Transfer to Metaloroya, you're going to see that it's
7 conditioned on the STA being closed. If you read the STA,
8 you're going to see all the cross-references because it's
9 the same transaction, and that means that this is not only
10 indemnity. There has to be allocation of assets, rights,
11 and obligations, as part of that transaction. That's why
12 I'm emphasizing that the STA is a very complex contract.
13 It's not only a Share Transfer Agreement.
14 Q. I'm just going to ask you a couple of final
15 questions on this point. And we're going to go back to
16 your First Report, Paragraph 155-157.
17 A. Yes.
18 Q. So -- and I want to focus on Paragraph 156.
19 A. Yes.
20 Q. Based on your interpretation of the notion of an
21 assumption of liability --
22 A. Yes.
23 Q. -- you state that Centromín would be responsible
24 to the Contracting Parties and any third parties; correct?
25 A. What I'm saying there is that the liabilities
[Page 480]
1 that, according to the provisions of the Contract, need to
2 be assumed by Centromín, need to be assumed fully,
3 including in the case of third-party claims.
4 Q. So if the Tribunal were sued for something that,
5 under the Contract, were Centromín's responsibility, the
6 Members of the Tribunal could sue Centromín for indemnity;
7 correct?
8 A. I don't understand how the Members of the
9 Tribunal could be sued for that.
10 Q. Let's say they are, and let's say they lose.
11 Under your interpretation, they could sue
12 Centromín to obtain indemnity?
13 A. The indemnity allocation provisions refer to
14 damages attributable to Metaloroya. So that's a start of
15 it.
16 So I don't understand how the Tribunal could be
17 sued for environmental damage attributable but -- to
18 Metaloroya. It's something that I don't understand. But
19 let's imagine Renco is sued for that.
20 Q. My question was about the Tribunal. Let's
21 assume -- it's a hypothetical -- they are sued for damages
22 that, under Clauses 5 and 6 of the STA, are Centromín's
23 responsibility.
24 A. Yes.
25 Q. And they lose. They could sue Centromín for
[Page 481]
1 indemnity; correct?
2 A. Not for indemnity. I'm not saying here
3 indemnity. What I'm saying is that, whether against third
4 parties or against the Parties themselves, the general rule
5 is that environmental liabilities must be fully assumed by
6 Centromín. I'm not saying indemnity. I'm saying "fully
7 assumed." And let me explain a little bit my reasoning.
8 Okay.
9 Q. Before you do, the Members of the Tribunal could
10 sue Centromín and obtain compensation?
11 A. It's not compensation. Let's let me -- could I
12 explain?
13 Q. I just want to make sure I know your answer
14 before you explain.
15 Whatever it is that they could obtain, it's money
16 from Centromín?
17 A. Yes. Yes.
18 Q. And they could do that?
19 A. Yes.
20 Q. Okay.
21 A. Can I explain?
22 Q. You can explain.
23 A. Okay. So the assumption of liability means that
24 Centromín becomes responsible. Okay. And this is done,
25 remember, in -- the Contract is regulating the allocation
[Page 482]
1 of responsibilities between Centromín and Metaloroya
2 pursuant to the spin-off. Okay. So in a spin-off, in a
3 corporate spin-off -- speaking about Corporate Law. In a
4 corporate spin-off, the patrimonial block is transferred
5 with effects, with general effects. Okay. As I explained
6 in the direct, that's very clearly stated in the Peruvian
7 Foreign Companies Act in 278, or the Peruvian Foreign
8 Companies Act. It wasn't stated in the law at that time
9 because the law that was regulating this was the Special
10 Privatization Act that had three lines about
11 reorganizations. It just habilitated State-owned companies
12 to be reorganized under the dictates of COPIC, which was
13 the entity. So, for me, this is not just a quota. It
14 creates a transfer of the obligation.
15 Now, a transfer of the obligation, of the debtor
16 part in the obligation can have -- has different types of
17 effects. For example, absolutely you have an effect for
18 Centromín that becomes liable. It has an effect for the
19 other Parties here, whoever they are, the Parties of this
20 Contract, because they can sue if they have express
21 indemnity, or whatever, or they can sue for performance
22 under 1219 of the Civil Code. And if they are not parties,
23 they would be paying somebody else's obligation, and you
24 will have to get into the analysis of whether they have
25 subrogation rights, whether they have just restitution,
[Page 483]
1 whether they are co-liable and can access contribution.
2 That's the type of reasoning you would have to get. And
3 the reason for that is that this is not only a Sale
4 Purchase Agreement, this is a complex transaction that
5 includes a spin-off.
6 Now, my limit is I don't think it has a
7 liberatory effect vis-à-vis Metaloroya. So I don't think
8 that the Metaloroya Claimant could not sue Metaloroya.
9 Okay. I think they can sue.
10 In Perú, in a current spin-off, they cannot sue.
11 They could not -- if this was a spin-off, under the
12 Peruvian Companies Act today, they wouldn't be able to sue
13 Metaloroya because the liabilities would have been
14 transferred to Centromín. That's my reasoning.
15 Q. I appreciate that.
16 I'm going to take you to Paragraph 197 of your
17 First Report. Starting at Paragraph 197, in this section,
18 you argue that, if Renco and DRR are considered to not be
19 Parties to the Contract, they would, nevertheless, be
20 third-party beneficiaries; correct?
21 A. Yes.
22 Q. And that's a specific figure under Peruvian law;
23 correct?
24 A. Yes.
25 Q. It is a third party that the Parties to the
[Page 484]
1 Contract have chosen to obtain some benefit from the
2 Contract?
3 A. Yes.
4 Q. If Clauses 6.2 and 6.3 encompass all third
5 parties, why would Renco and DRR need to be third-party
6 beneficiaries to obtain anything from those clauses?
7 A. Now, that -- that's neither way -- you have to
8 read the Reports. What I'm saying, if they are not parties
9 and would not be recognized in Parties, then they would be
10 third-party beneficiaries. The arguments -- there are
11 several arguments that I make in my Report. So --
12 Q. But if Clauses 6.2 and 6.3 -- if anyone can
13 claim -- any third party can claim -- right? -- under
14 Clauses 6.2 and 6.3, what is the purpose of Renco and DRR
15 being third-party beneficiaries?
16 A. Oh, oh, oh, yeah. Let me explain. It's
17 different if you are a party or you are a third-party
18 beneficiary, which is -- you have kind of the same rights
19 like you're a party. You're a creditor, than if you're a
20 third party. I speak about creditor because it's clear.
21 You're in the juridical relation in the active position.
22 So if you're a creditor, you have a package of
23 rights that is different than the rights that a third party
24 has. Okay. So for example, a creditor can seek
25 performance under 1219. So if you are a third party, you
[Page 485]
1 cannot seek -- you can seek maybe subrogation, but you
2 cannot enforce. So that's a big difference.
3 If they're third-party beneficiaries, they could
4 directly claim, like, go and defend, go and pay.
5 Q. Okay. So entities that are not third-party
6 beneficiaries and are not parties couldn't file a
7 contractual claim; correct?
8 A. Not -- it's -- let's speak about noncontractual.
9 Like they could file a subrogation claim, for example.
10 Q. Okay. But not a breach-of-contract claim?
11 A. Not a breach of contract.
12 Q. Okay. Let's talk about subrogation then. I'm
13 going to show you Paragraph 91 of your Third Report. In
14 the second sentence, you say: "It is true that, if the
15 subrogation was configured, Renco and DRR will enter into
16 the position of the creditor, which are the Missouri
17 Claimants, vis-à-vis the debtor, which is Activos Mineros."
18 Correct?
19 A. Yes.
20 Q. Okay. I want to break this down into its parts
21 with you, please. So the first thing you need for
22 subrogation is an original debtor-creditor relationship;
23 correct?
24 A. Yes.
25 Q. And in your view, that original creditor-debtor
[Page 486]
1 relationship would be between Activos Mineros and the
2 Missouri Plaintiffs; correct?
3 A. Yes.
4 Q. In your view that debtor-creditor relationship is
5 based on Article 1970 of the Peruvian Civil Code; correct?
6 A. No. You explained to me that that's not the
7 basis.
8 Q. So if the Missouri Claimant --
9 A. It is whatever basis -- I'm sorry. I forgot.
10 Q. If the Missouri Plaintiffs have not filed a claim
11 against the defendants in the United States under
12 Article 1970, then is it your testimony that Article 1970
13 cannot be the basis of the original creditor-debtor
14 relationship?
15 A. No. No. I'm saying -- you phrase your question
16 and you said that this is based in 1970, but now I -- I
17 understand the basis of the Missouri Claims is not 1970
18 for...
19 (Interruption.)
20 A. -- is not the basis of the claims in Missouri.
21 Q. Okay.
22 A. Now, if you look at Sections 5 and 6 of the STA,
23 they do not speak of 1970. They do not speak about what
24 the legal basis is for a claim of liability against
25 Metaloroya or against Centromín. No, they speak about the
[Page 487]
1 timing and whether there was compliance with the PAMA,
2 noncompliance. Those are the critical aspects to determine
3 where you fall in 5 and 6.
4 So if the -- "if" some of the claims in Missouri
5 or all the Claims in Missouri, whatever, are, let's say,
6 things that are under 6.2, 5.9, et cetera, have been
7 assumed by Centromín, Centromín did not assume them, saying
8 the Missouri Claim, Centromín should say third-party claims
9 for damages attributable to Metaloroya within this
10 framework of time and upon this condition. But if it
11 overlaps with what is happening in Missouri, then those
12 Claims have been assumed by Centromín. Those liabilities
13 have been assumed by Centromín.
14 So it's part of 5 and 6 and Centromín has assumed
15 them as a matter of 5 and 6, and my thesis also on the
16 spin-off of Metaloroya are part of the transaction that
17 this documents regulate.
18 So that's basically my point. If those
19 liabilities belong from the point of view of Peruvian law,
20 of what we're reading disagreement in light of Peruvian law
21 and belong to Centromín, and for some reason they got sued,
22 Renco paid that, then they would have a right to subrogate
23 because those liabilities correspond to Centromín...
24 (Interruption.)
25 A. And Activos Mineros.
[Page 488]
1 Q. Let me ask you another "if" question then.
2 A. Yes.
3 Q. If the Missouri Plaintiffs Claims are not based
4 on Article 1970, then Article 1970 cannot be the basis of
5 the creditor-debtor relationship between Activos Mineros
6 and the Missouri Plaintiffs; correct?
7 A. I'm not sure of that, okay, because -- let me try
8 to explain my thinking. Okay.
9 Here we have substantive and we have procedural,
10 okay, and those are different levels. So when I'm speaking
11 Centromín is liable for this or Metaloroya is liable for
12 that, I'm speaking substantive and I'm speaking regardless
13 of the cause of actions or the legal basis. Okay.
14 So if for some reason Missouri law is applicable
15 to this situation, to this, you know, environmental
16 situation damages or the Peruvian law is applicable, and if
17 it's Peruvian law, if it's 1969 or 1970, from the point of
18 view of 5 and 6 is irrelevant. It covers all, whatever the
19 jurisdiction, whatever the legal basis. It doesn't matter.
20 What matters is when did it happen and did they
21 comply with the PAMA. That's everything that matters. So
22 I'm not so sure what the answer would be to your question
23 because it doesn't depend on where they are suing, what is
24 the basis of the lawsuit. It doesn't depend on that for
25 the operation of 5 and 6.
[Page 489]
1 Q. I understand what you're saying and -- correct me
2 if I'm wrong -- is that under 5 and 6, whatever liability
3 Centromín retained, it retained; correct?
4 A. Yes. It is what it is.
5 Q. Got it. But in order to know what specifically
6 the basis of the original creditor-debtor relationships
7 that you and I just discussed, between Activos Mineros and
8 Centromín, we would have to know what the Missouri
9 Plaintiffs are filing under.
10 Is that your testimony?
11 A. No. No. So it doesn't -- the point I'm trying
12 to make is it doesn't matter.
13 Q. Okay.
14 A. It doesn't matter what the legal basis for the
15 Claim is because we're speaking about subrogation.
16 Q. Yes.
17 A. So, I mean, I go to whatever -- to whatever
18 country, to China and pay your obligation under Chinese
19 laws because I'm getting sued in Perú for that, and then I
20 subrogate against you.
21 Q. So if the Missouri Claims are based on U.S. law,
22 Article 1970 may still be the basis of the relationship
23 between Activos Mineros and Centromín; correct?
24 A. I sincerely do not understand the relevance of
25 1970 to this question. Why are you establishing --
[Page 490]
1 Q. Let's turn to Paragraph 72 of Claimants'
2 Rejoinder. Please read Paragraph 72. We'll get the second
3 page up in a second.
4 A. Yes. Yes. I've read it.
5 Q. In those four bullet points, what Claimants are
6 saying is that -- one of the things -- is that irrespective
7 of the basis of the Missouri Plaintiffs' Claims, the basis
8 of the relationship between Activos Mineros and the
9 Missouri Plaintiffs is Article 1970; correct?
10 A. I'll try to explain what I understand of this. I
11 mean, I'm not competent to really interpret what the
12 Claimants are trying to say in this document, but, for me,
13 it makes sense. Okay.
14 And the reason it makes sense is that 5 and 6,
15 you know, say that -- if you read 5 and 6, it says that
16 liability of Centromín assume are for damages, loss, and
17 third-party claims attributable to Metaloroya, Centromín,
18 or their predecessors. Okay.
19 So if you want -- so if -- if Renco is getting
20 sued for something that is not attributable to Metaloroya,
21 you can say that is not under 5 and 6. Okay.
22 So what -- but -- and there again substance and
23 procedure. I mean, as you know, damages -- physically,
24 let's say, physically or economically are, you know -- have
25 a dimension, physical or economic dimension, and that's
[Page 491]
1 okay. The kid got sick. Yeah. Okay. And that -- you
2 could, you know, trace it to the operation of the refinery.
3 Okay.
4 Now, if you take that to the legal level, the
5 juridical level, you're going to say, "Okay. That
6 relation -- the damage, whatever, can have -- you know, it
7 may be subject to U.S. law, to Peruvian law, whoever." No.
8 Alter ego whatever, you can file in whatever jurisdictions
9 and multiple possibilities. Okay. But it's the same and
10 it's one indemnification, one loss, okay, one, let's say,
11 liability.
12 Q. Yeah.
13 A. Okay. So within that complex reality, 5 and 6
14 say attributable to Metaloroya. So, okay, it needs to be
15 attributable to Metaloroya. One of the ways it can be
16 attributable to Metaloroya is because Metaloroya operates a
17 refinery in Perú, and we have 1970 in Perú, that
18 establishes strict liability for...
19 (Interruption.)
20 A. For risky goods and activities.
21 Q. Okay. So now that you've seen this, I want to
22 back up one moment and just run through the subrogation
23 syllogism. So there must be an original creditor-debtor
24 relationship?
25 A. Yes.
[Page 492]
1 Q. In this case the relevant creditor-debtor
2 relationship would be between Activos Mineros and the
3 Missouri Plaintiffs; correct?
4 A. Yes.
5 Q. And under Claimants' theory, the basis of that is
6 Article 1970; correct?
7 A. From what I've read in the paragraph that you
8 showed me -- I haven't read the whole brief. I'm not
9 competent, you know, to analyze the whole -- I haven't done
10 that.
11 Q. Let's assume --
12 A. Yes.
13 Q. Okay.
14 A. It is better you assume with the question.
15 Q. Yes. That's fair.
16 In that case, if Claimants would be third parties
17 to this creditor-debtor relationship; correct?
18 A. Yeah, Claimants here?
19 Q. Claimants here. Yes. And if they were to pay
20 compensation to the Missouri Plaintiffs as a result of
21 losing the litigations in Missouri, they would step into
22 the shoes of the Missouri Plaintiffs in that
23 creditor-debtor relationship?
24 A. Yes. It wouldn't only be because of losing.
25 They could just pay, they could settle, you know, but they
[Page 493]
1 would be paying the obligation of Centromín Activos Mineros
2 to those Claimants, yes. So they would be subrogating the
3 position of those Claimants, yes.
4 Q. And they would be the new creditors in that
5 original creditor-debtor relationship; correct?
6 A. Yes.
7 Q. When this occurs under Peruvian law, the rights,
8 actions, and guarantees of the original creditor are
9 transferred to the new creditor; correct?
10 A. Yes.
11 Q. And in this case those would be the rights,
12 actions, and guarantees of the Missouri Plaintiffs,
13 vis-à-vis Centromín, or Activos Mineros, based on
14 Article 1970 of the Peruvian Civil Code; correct? Again,
15 assuming that that is the basis.
16 A. Assuming that that is what plaintiffs are saying
17 in their Brief, let's say, because, conceptually, it could
18 be many other things.
19 Q. Sure.
20 A. It could be 1969. It could be whatever.
21 Q. But let's assume that's what they are saying.
22 A. Yeah.
23 Q. Then it would be the rights, actions, and
24 guarantees from that original creditor relationship?
25 A. Yeah, but -- I mean, that's why I'm asking about
[Page 494]
1 1970 so much because really the issue is not the legal
2 basis under the provisional code, but whether what
3 "attributable" means in the Contract.
4 Q. I'm asking because they are making the point, and
5 so I want to work through it.
6 A. Yeah, but -- we have a little difference of
7 opinion.
8 Q. I'm sure. But let's just -- again, assume that
9 the argument is that the basis of the creditor-debtor
10 relationship is Article 1970. Let's assume.
11 A. Okay. You assume. I don't know if that
12 assumption -- you know, corresponds to reality.
13 Q. Okay. I can represent to you that that is what
14 they are claiming.
15 A. Because the concept here, from a Peruvian law
16 perspective, is, okay, does it -- if the legal basis is,
17 you know, total Missouri law, it doesn't matter. It is the
18 same. What we need to see is if this is attributable to
19 Metaloroya.
20 Q. Sure. Let me try it this way. Whatever the
21 legal basis is of that original debtor-creditor
22 relationship, when a new creditor relate -- replaces --
23 A. Yes.
24 Q. -- the original creditor, the rights, actions,
25 and guarantees arising out of that original debtor-creditor
[Page 495]
relationship are transferred to the new creditor; correct?
A. Yes.
Q. And that creditor-debtor relationship remains unchanged other than the change in the identity of the creditor; correct?
A. Yes.
Q. And the limitations of that original creditor-debtor relationship are also transferred?
A. Yes. But they do not -- that doesn't abrogate all the rest of the Agreements I may have with the Party against whom I'm subrogating.
Q. Sure. But the limitations --
A. It doesn't delete all the rest of world.
Q. -- the limitations are transferred, though?
A. What type of limitations?
Q. Prescription periods.
A. Prescription periods would be transferred, yes.
Q. So if Claimants' argument is that Article 1970 of the Peruvian Civil Code is the basis of the creditor-debtor relationship, then the applicable prescription period would be the period applicable to Article 1970 under Peruvian law?
A. No. Sorry. Sorry. That's not the case. Let me go back. I think we're speaking on different wavelengths. What I'm saying, again, is doesn't matter what the legal
[Page 496]
basis of the claim is. In this case, my understanding, from what we discussed earlier, is that 1970 is not the Claim, the basis of the Claim. So it's not the basis of the debtor-creditor relationship in the original Claim. It's whatever they are saying in Missouri.
The issue, under Peruvian law, is whether it is attributable to Metaloroya, because that is the condition set forth Section 5 and 6 for the assumption of liability. That's what Tribunal here needs to read in the agreement and interpret in light of Peruvian law. So that's why I don't understand what the relevance of 1979 here is.
1970 -- if you're saying 1970 is because we want to determine whether it's attributable to Metaloroya, so we need to see whether, if it would have been filed in Perú court, if it had been claimed against Metaloroya, and then you are invoking 1970, and that doesn't make 1970 the basis of the original Claimant, which you will subrogate.
Q. That's why I'm asking you to assume that that is the basis.
If that is the basis, then the applicable prescription period is -- to the subrogation claim is the one that applies under Peruvian law to Article 1970; is that correct?
A. Just to understand, so you're saying, for me, to assume that when the Plaintiffs in Missouri are suing
[Page 497]
Renco, they are suing Renco under Article 1970 of the Peruvian Civil Code?
Q. No, Mr. Payet. I thought you testified that it doesn't matter what they are suing them under.
A. It doesn't matter. Right. Exactly.
Q. Right.
A. So what I'm saying is, for the purposes of statute of limitation, which is you're speaking -- okay. We're speaking about statute of limitations. In the case of subrogation, it is the statute of limitations of the original claim.
Q. The original claim by the Missouri Plaintiffs?
A. Yes.
Q. Against the Claimants?
A. Against the Claimants, yes.
Q. They are not third parties to that relationship, are they?
A. They are not third parties to that procedural relation, but we have an agreement under corporate restructuring where Centromín assumed that -- let's, hypothetically, assume that liability provided that the conditions in 6.2 are complied with.
Q. Let me take you to an Authority you submitted, JAP-92. I'm going to take you to Paragraph 158.
A. Is it a report or --
[Page 498]
Q. It is an Authority.
A. Okay.
Q. I'm going to -- 159 is fine. I'm going to ask you to review the top left quote by Diez-Picazo.
A. Yes.
Q. We'll switch over to the English version. Apologies for that. There he saying that subrogation produces a transfer -- right? -- of the ownership of the credit.
A. Yes.
Q. And in the next paragraph, the Authority states that it's important to remember that subrogation can't imply a worsening of the legal situation of the passive subject, which would be the debtor; correct?
A. Yes.
Q. And if we go up to the top right, that's a quote by Vecchio, and it states that all of the limitations of the original creditor-debtor relationship transfer as well; correct?
A. Yes.
Q. Including the prescription period; correct?
A. Yes. Correct.
Q. So if the basis of an original debtor-creditor relationship is Article 1970, then the prescription period that applies to the new creditor is the one that
[Page 499]
is -- applies to Article 1970?
A. Yes. Let's put a hypothetical. Somebody is run over by a car. That is a risky good and you pay, and there is no doubt that that happened in Lima, Perú. It is 1970, yes. It would be the two-year period for 1970.
MR. RODRÍGUEZ: Thank you. No further questions.
PRESIDENT SIMMA: Thank you, Mr. Rodriguez.
May I suggest we have the coffee break now and we go into redirect afterwards?
MR. FOGLER: That's fine.
PRESIDENT SIMMA: You would probably prefer that too, instead of your performance being broken up. Okay. So we have a coffee break until 35, 3:35.
(Brief recess.)
PRESIDENT SIMMA: Before I give the floor to Mr. Fogler, just -- we have a request. In the morning, a mention was made of the English version of your Report, and some text was missing in the English version. That was before.
MR. RODRÍGUEZ: Yes. It was the part of Paragraph 68 in his Second Report is missing from the English translation.
PRESIDENT SIMMA: So we would like to have a new version of that Report, red line, containing every word that you have in the Spanish version.
[Page 500]
THE WITNESS: Okay. Okay. Mr. President, I'll make sure that it's properly translated.
PRESIDENT SIMMA: Okay.
MR. SCHIFFER: We will handle it. Jen will handle it.
PRESIDENT SIMMA: Okay. Good.
Okay. So then the floor goes to Mr. Fogler.
MR. FOGLER: Thank you, Mr. President.
PRESIDENT SIMMA: For redirect. You have the floor.
BY MR. FOGLER:
Q. We heard some hypothetical questions asking you to make some assumptions, and I want to do the same, Mr. Payet. And I want to also warn you to slow down for the Interpreter and the Court Reporter. I think you have sped up even in the afternoon, so just take your time. I think we'll be done in 10 minutes or less.
You've told us that you haven't studied the Claims of the Missouri Plaintiffs, but I want you to make this assumption: I want you to assume that the Plaintiffs in Missouri are citizens of La Oroya, Perú, who are claiming to have sustained damages as a result of environmental exposure to the operations of DRP's Plant. Okay.
[Page 501]
Is that -- are those damages, that I have asked you to assume, are they covered by Articles 5 and 6 of the Contract?
A. Yes. I'll switch and move this.
MR. SCHIFFER: Here, let me help.
(Comments off microphone.)
PRESIDENT SIMMA: Does everybody who wants to watch Mr. Payet speaking need to --
THE WITNESS: I've watched Respondent's Counsel a lot, so I'll rest a little bit of them.
PRESIDENT SIMMA: I imagine I would too.
THE WITNESS: Okay. Yes. The Section 5 and 6 are referred to damages caused by environmental issues, either derived from Centromín's action, their predecessors, or DRP, in La Oroya. So if that is what the Missouri Claimants are claiming, it would be overlapping. It would overlap.
BY MR. FOGLER:
Q. Okay. Would it matter to you, as far as the application of Articles 5 and 6, what law applied to the damages claimed by the Plaintiffs in that situation?
A. No. What would matter to me, I think, from a contractual perspective, reading the Contract, is whether those damages would be attributable to actions -- not even to actions -- attributable to DRP -- I'm sorry, to
[Page 502]
Metaloroya, Centromín, or their predecessors. And those three, if either, it would determine in which bucket they fall, but that's the coverage of the provision.
Q. Would it matter what the nature of the claim was; that is, whether it was Article 1970 under Perú or some tort law in Missouri, or some other law? Would it matter what the nature of the claim was?
A. In my opinion, no, it wouldn't matter. But I have to say that that is -- you will have to interpret what "attributable" in the Contract means, because it says "attributable to Metaloroya." But it would -- for me, and from my point of view, that "attributable" doesn't require some specific type of legal basis.
Q. Now, I want you to assume that those allegations that I've asked you to assume -- that these citizens of La Oroya are claiming injuries as a result of environmental exposure to the operations of DRP's Plant, now I want you to assume that they are seeking to hold Renco and DRRC liable for those damages. Is that covered by Articles 5 and 6 of the Contract?
A. They are covered as long as those damages are attributable to Metaloroya, Centromín, or the predecessors.
Q. And if they are attributable to Metaloroya, or, now, DRP, who does the Contract say has assumed that liability?
[Page 503]
A. Well, the general rule for -- there's three times since -- three time buckets in the provisions. So it's pre-STA liabilities is 100 percent Centromín, PAMA liabilities that are 100 percent Centromín except if Metaloroya breached the PAMA, et cetera, and then future liabilities after the end of the PAMA that are basically Metaloroya's except -- so that's the allocation.
So it would depend on which of these buckets they fall, but, if they were, like, in Bucket 1 or Bucket 2, they would be basically Centromín's.
Q. And if they were Centromín's, or Activos Mineros's, if Activos Mineros had refused to accept responsibility, would that be a breach of the Contract?
A. Yes, it would be a breach.
Q. All right. Now, are you suggesting that that responsibility is limitless? Are you suggesting that Centromín or Activos Mineros assumes all liability of Metaloroya?
Let me ask a hypothetical. I'm going to change what I asked you before. I want you to assume that there is a citizen of La Oroya who is hit by a truck owned by DRP. Clearly not an environmental obligation.
Is that covered by Articles 5 and 6?
A. I haven't analyzed the hypothetical of the truck, okay, and I'm looking at the provision. I would think that
[Page 504]
a nonenvironmental claim would not be covered, okay, because, you know, all 5 and 6 are related to environmental, and I think that, even though it doesn't say, you know, environmental claims directly, in 5.3, I think that's the meaning of the provision.
Q. What is the title of the fifth clause of the Contract?
A. It says "environmental," but, under Section 18, titles are not determinant of construction.
Q. Well, but it also says, does it not, if you look at the sentence prior to 5.1, "the Company assumes responsibility only for the following," what?
A. Yeah. That's it. You're correct.
Q. Environmental matters?
A. Environmental matters, yes.
Q. And the same is true with respect to --
A. Yes.
Q. -- Centromín?
A. Yes, you're correct.
Q. All right.
A. Yes.
Q. One more hypothetical, one more assumption. We know that Mr. Varsi says that the Renco DRRC Guaranty is in a separate contract, separate from the rest of the STA. Even if it were -- and I know that's not your opinion, but,
[Page 505]
even if it were, would Renco and DRRC have any rights under Articles 5 and 6 of the STA?
A. Yes. If they were not Parties. I think the way I've analyzed this is -- other Parties to the Contract, to the STA, I'd say yes. Number second question, do they derive any rights from 5 and 6, so, in that sense, would they be, like, Parties to 5 and 6? That's the second -- a little more difficult question.
So the hypothetical, I think, you're asking is, let's imagine that they are Parties to the Contract and not Parties to 5 and 6, or they're just like any third party.
Q. I'm trying to imagine what Mr. Varsi's construct is, but I want you to assume that the guarantee obligation that Renco and DRRC have assumed is in a separate contract.
A. Yeah. Okay. Yes, so I would say they are not Parties to the STA. I would say let's imagine that, if you read the STA, interpret the STA, you cannot derive any rights directly to them, like they are not a third-party beneficiary. Let's hypothesize that. They are like a third party. They would not derive contractual rights, but they would, let's say -- for example, they would have a right to subrogate if they pay, either because they would just be like -- they would not have any liability because it's been assumed by Centromín, but they're being sued so they have an interest and they can pay and they can
[Page 506]
subrogate or because they could be joint and severely liable. I mean, it is possible that Centromín, at the same time with them, is liable for this situation, and they could have contribution rights under the 1983 of the Peruvian Civil Code. That's what I mean in -- that contracts do not have effect only vis-à-vis the Parties. Contracts have effect with respect to third parties, not full effects, but they have some effects.
MR. FOGLER: I'll pass the Witness. Thank you.
PRESIDENT SIMMA: Passing the Witness to somebody not familiar with Texan law or whatever means you have ended the --
MR. FOGLER: That concludes my questions, Mr. President.
PRESIDENT SIMMA: That I can understand. Thank you. Thank you. That concludes Mr. Fogler's redirect.
And we are, I think, not supposed -- not to have a second round here. But -- yeah. Questions from colleagues?
You go first.
ARBITRATOR GRIGERA NAÓN: Dr. Payet, you have used the term "spin-off" and "split up."
(Interruption.)
ARBITRATOR GRIGERA NAÓN: Okay. You have used
[Page 507]
the terms "split up" and "spin-offs." When I read the Peruvian corporations law, they have specific regime. And then you have Article 391, which is considered to be simple reorganization where there are transfers of the patrimonial blocks, which if you allow me to put in a different way, clusters of price and obligations.
Now, if you go to what we read as a spin-off or split-up, really in this law, there are certain formalities that to be fulfilled, which are very detailed. You have special balances, special balance sheet, you need to comply with certain formalities like "escritura publica" (in Spanish), a public deed, but you also need to Gazette it. You need to make publications. To which external of these applies to this simple organization? Was it fulfilled in this case?
THE WITNESS: Yes, Professor Grigera Naón. This transaction was done before the current Companies Act coming into force. Okay. The legal basis for this transaction, from the reorganization point of view, was Section 10 of the Privatization Act of 674. That essentially says the SOEs can be reorganized, merged, split, "escisión," according to the dictates of the Company. That's everything it says.
In the Q&A one of the bidders asked -- this is in Question 14. Okay. It asked, it is important for tax
[Page 508]
purposes, which is the nature of assets contribution that Centromín will do in order to establish if the operation responds to a division splitting or to an economic unit transfer.
And CEPRI says it is not an "escisión," but what is known as simple reorganization, this consists in Centromín segregating a part of its patrimony that corresponds to the Metaloroya complex and aeropuerto, contributing it to Metaloroya, receiving and keeping in its assets, as an asset, the shares. That's what it is.
There is -- if I look at -- the Companies Act, the Perú Companies Act was approved by Congress like three weeks after the STA. So people knew what it was going to -- so when they said "reorganise simple," they were speaking about something that not in the current Companies Act but was going to be in the future Companies Act.
So how it works now, where it is properly regulated in detail you have the merger, and then you have two types of transactions, the "escisión" and the "reorganización simple". The "escisión" is a transaction where the Company takes a patrimonial block, transfers it to another entity or new entity, and then the shares this entity issues are not to transferring company but to the Shareholder of the transferring company.
This "escisión" is regulated like a merger, as
[Page 509]
you described, and there needs to be publications in the Official Register so that people can oppose. So creditors, for example, can oppose. If they don't oppose, they get transferred as a matter of law, and that's it, and they cannot claim against the original company. And then there's another "reorganización simple", which is simply you mentioned 291, I think, or 391.
ARBITRATOR GRIGERA NAÓN: 391.
THE WITNESS: You had the exact number. Yeah. And that's a simpler transaction, that there are no publications, but it is still the transfer of a patrimonial block. Okay. So it's the cluster. If you look at that deed, it doesn't say. The Corporate deed doesn't say "reorganización simple". It says "capital increase of Metaloroya."
So it's something that was done with two lines of legal habilitation in the Privatization Act. And I believe that the corporate documents, the reorganización documents should be read with the STA because when -- in the Q&A when the bidders are asking the CORPRI about the allocation, CORPRI says this is going to be -- I don't remember exactly question. I think it is 114.
It says, "The allocation is going to be in the Contract." So for me you need to read both because 5 and 6 are the allocation. That is not in the corporate -- it is
[Page 510]
not in the Shareholder minutes. It's not in the capital increase. It is in the Contract. But if you read both, then you understand. That's the way it was done.
ARBITRATOR GRIGERA NAÓN: Yes. That's maybe the way it was done, but this has an impact on the third parties, on the rest of the world. So what you say sounds appropriate in between Parties, but what about the rest of the world?
And then you always have the question: If you have to do certain things in respect of the rest of the world, those things have a constitutive effect, even inter partes, and not just for these transactions to be effective against the rest of the world.
THE WITNESS: Yes. And exactly. And there are two things I think regarding that. One is that this was done in the '90s. It was done in the mid-'90s, and within the framework of privatization, Perú privatization, as in many other places is like a vertical, very authoritative process where you had the Company that had displaced all the corporate organs of the Companies. So the provision plan approved by a CORPRI was like the law. It was in the '90s.
And the second thing, let's say, today in Perú, if you do an "escisión" under the law, pursuant to 278, I think is, then it's going to have effect towards the
[Page 511]
creditors, and the creditors are going to suffer the change of their debtor, even if they don't want, if they didn't oppose.
And so I believe, in this case, that cannot be sustained, and that's why I think that the transfer could not have a liberatory effect vis-à-vis, Metaloroya. It could not be adverse to the creditor. The creditor could sue anybody.
ARBITRATOR GRIGERA NAÓN: Even in the case of 391? Even in the case of simple reorganization?
THE WITNESS: Right now in Perú, in the simple reorganization, there is kind of debate even though it is being revised now, the Company said -- it has been revised now, the Company said, but there has always been a discussion about the difference between "escisión" and a simple reorganization. And very clear in the "escisión" has a party effect. I would say in the "reorganización simple" you have to take it with a grain of salt about the third-party effects because somebody can raise their hand and say: "What do you mean that now you're my debtor and I didn't even know about it?"
ARBITRATOR GRIGERA NAÓN: This is a little quicksand scenario.
THE WITNESS: Yes. Yes.
ARBITRATOR GRIGERA NAÓN: Under Peruvian law.
[Page 512]
THE WITNESS: Yes, that is part of what is being revised in the new Companies Act to make it clear because the law, as you read, says block of patrimonial, "el patromonial bloc."
ARBITRATOR GRIGERA NAÓN: Which it creates an obligation.
THE WITNESS: Rights and obligations. In one act. In one act.
ARBITRATOR GRIGERA NAÓN: Thank you very much.
THE WITNESS: Thank you, Professor.
ARBITRATOR THOMAS: I'll start off with an easy question. You'll recall your testimony about the White Book and about the history of this particular privatization, and I had a very simple question which was this.
You spent some time talking about the fact that Clause 18 of the STA permits the Interpreter to refer to the bidding conditions and the bidding documents. But you also spent some time discussing the failed prior attempt to sell the asset.
The question I have is this: Under Clause 18 of the STA, would it be permissible, not only to consider the bidding documents, but also the earlier failed privatization to which you had spent a devoted a fair amount of attention?
[Page 513]
THE WITNESS: Yes. I think that there are two levels on which the bid and the auction can be considered. What 18(1) says is that -- it's like a special status, I would say, for the purposes of contract interpretation, to the Bidding Documents and to the Q&A. And that is referred to the bidding documents and the Q&A to the privatization of Metaloroya of this, not the earlier one.
ARBITRATOR THOMAS: Okay.
THE WITNESS: And it gives a special status to them, to the point where it says if there would exist a disconformity within those documents and the Contract, the Contract will prevail which is that, there is not only -- there is semi-part of the Contract. It is the Contract prevails, but it is like contractualized, in a sense.
The earlier privatization I mentioned because I considered as a factual matter that the context in which this transaction was done, is important to know what had happened, that the Government could not sell the integrated operation because of the liabilities.
ARBITRATOR THOMAS: I understand that. My question was a very narrow question.
THE WITNESS: Yeah.
ARBITRATOR THOMAS: As a question of interpretation and having regard to Clause 18, do I take
[Page 514]
that into consideration?
THE WITNESS: Yes. I believe -- and I've said that in my Reports -- that in order to construct a contract, to interpret a contract, one needs to look at the historical situation when the Contract was entered, in order to determine what was the interest that the Parties were trying to protect, and what they were trying to achieve through the Contract, what the function of the Contract was.
ARBITRATOR THOMAS: Okay. Second question. I'm going to attempt to summarize for you what I understood to be your argument, but I don't want to engage in a long debate. I just want you to tell me whether I'm close to a very, very simple summary of one of the key points you were making or not. Okay.
What I was trying to understand is, that there was some discussion about the relationship between Clause 6.5 and 8.14.
THE WITNESS: 8.14.
ARBITRATOR THOMAS: And the fact that they were worded very specifically and had a narrowness, in terms of Parties which had been mentioned in them, to which they were available.
And as I understood your basic argument, you made a great deal about the buckets of responsibility, and your
[Page 515]
point was that an assumption of responsibility, with the emphasis of the word on "assumed," meant that this was of significance as a matter of law. I understand that point.
Do I understand you correctly to be saying that the references to indemnification and the references to defense of claims is something that could be extracted by -- from the application of the Peruvian Civil Code for those Parties that are not mentioned in those two clauses? Is that the gist of your argument?
THE WITNESS: Yes, that is.
ARBITRATOR THOMAS: Okay. That's all I need to know.
Thank you.
PRESIDENT SIMMA: Thank you.
Do the Parties want to tackle this? No. It doesn't seem to be the case.
So that brings your Expert examination to an end. Thank you very much, Mr. Payet.
THE WITNESS: Thank you, Mr. President. It has been a pleasure. Thank you very much.
PRESIDENT SIMMA: You are released from, and I think without further ado, I think we should get into the next phase. Mr. Pearsall?
MR. PEARSALL: Yes, Mr. President. It is around 4:05 right now. And with the goal of hopefully not
[Page 516]
sequestering Dr. Varsi overnight, what we thought we would do is start his Direct first thing tomorrow morning and, instead, take the remainder of the time to answer the President's question with regard to law. And we can have a back-and-forth on that right now so that you're satisfied with that overnight, and then Dr. Varsi wouldn't need to be sequestered overnight. That is our proposal.
PRESIDENT SIMMA: Is your answer on the question of the law, is that going to be -- is that going to take a little time? No, I'm a bit worried that, if we are generous with closing in the afternoon then we might run out of time, and there is no possibility for us to put something at the end of next week.
And so I would -- I mean, I don't know. I would, in the opposite, be ready and have an hour or something, if that would help bringing a part of the exercise to an end today. So like the direct of Mr. Varsi. Could we do that?
MR. PEARSALL: So our direct of Dr. Varsi will likely take the 45 minutes allotted, similar to the direct of Mr. Payet. These are long directs, which will take us up to 5:00 p.m., which is fine. He will then need to be sequestered overnight, if that's the Tribunal's wish, that's fine. We can absolutely do that. I just thought --
PRESIDENT SIMMA: That would help us. Okay. So that means -- you could also, let's say, defer the answer
[Page 517]
on the question of what law rules the Arbitration Agreement to a later stage.
MR. PEARSALL: For us, it's a very simple answer. I don't think it would take more than two minutes.
PRESIDENT SIMMA: Okay. Good. All right.
MR. SCHIFFER: Yeah, so, as the Tribunal knows, that I wasn't the original Counsel, I did not prepare the original Statement of Claim. And so I have to -- and there is so much paper in this case, I can't remember the paragraphs you've cited, and I don't have it with me today. So I was going to go back to the hotel tonight and look at that issue.
I also agree that it shouldn't be a protracted discussion. I think it will be simple, but I need to see what was said before. So no two lawyers ever see the same case the same way. So I just need to figure that out.
PRESIDENT SIMMA: Should we then have your two views at the same time?
MR. PEARSALL: However you'd like to do it, Mr. President. We can either present them to you, you know, tomorrow or whenever you want, and hopefully we'll agree, or we could even discuss between the two of us and maybe present a joint view.
I almost wore an orange tie today, so maybe we're getting on the same wavelength, Adam and I.
[Page 518]
PRESIDENT SIMMA: That would be a very good idea, and thanks for that friendliness incorporation. And I think Mr. Varsi, Dr. Varsi, if you are able.
MR. PEARSALL: We can go right into it.
PRESIDENT SIMMA: Okay. Let's start immediately.
(Brief recess.)
ENRIQUE VARSI ROSPIGLIOS, RESPONDENTS' WITNESS, CALLED
PRESIDENT SIMMA: Good afternoon, Mr. Varsi. I don't have to explain what's happening here. You have been present. I just bid you a good afternoon.
Can you hear me now?
(Comments off microphone.)
PRESIDENT SIMMA: So this is going to be in Spanish. So good afternoon, once again. Would you please read the Declaration that you find in front of you.
THE WITNESS: Thank you very much, Mr. President. Expert Declaration: I solemnly declare, upon my honor and conscience, that I shall speak the truth, all the truth, and nothing but the truth, and that my statement shall be in accordance with my sincere belief.
PRESIDENT SIMMA: Thank you very much.
Direct is going to be Mr. Rodriguez?
MR. RODRÍGUEZ: Yes, Mr. President.
PRESIDENT SIMMA: Okay. You have the floor.
[Page 519]
BY MR. RODRÍGUEZ:
Q. Mr. Varsi, good afternoon.
A. Good afternoon.
Q. I understand that you have a presentation that you will give to the Tribunal; correct?
A. Yes.
Q. Before you do so, I'm going to ask you if you --
A. No translation.
MR. RODRÍGUEZ: I believe Mr. Varsi is not getting the Spanish interpretation.
(Interruption.)
BY MR. RODRÍGUEZ:
Q. Are you hearing me in Spanish now, Mr. Varsi?
A. That's right.
Q. So I'll start again.
I understand that you will be giving a presentation to the Tribunal. Is that -- my understanding correct?
A. Yes, that is correct.
Q. Before you start, I want to ask you if you have any corrections or amendments to your Report that you would like to provide?
A. Yes. Thank you very much. In connection with the presentation made by my colleague, Mr. Payet, he identified a phrase in one of my Reports in which I made
[Page 520]
reference to this Contract, and he thinks that that phrase is contract, which is a phrase out of the Contract, means that I assumed the position, that that is just one Contract. That is not my position. My position is that these are two different Contracts, and that that phrase may be interpreted in one way or another. That's the only clarification I wanted to make.
PRESIDENT SIMMA: Before you continue, I'm experiencing the same problem I had in the morning for some time, which means the very clear strong voice of Mr. Varsi is great, but the English translation is kind of hidden behind, and quite -- it's quite a bit of mumbling. So I would be glad if that could be -- I remember that in the morning, the person in charge really changed it, then it was nice and clear. But maybe it has to do with the position, vis-à-vis, the microphone or something.
MR. SCHIFFER: I think if he sits a little farther away from the microphone, it'll be better.
THE INTERPRETER: Mr. President, this is the Interpreter, I think the Technician should be called upon.
Mr. President, this is the Interpreter, if -- please the Technician could be called upon. I think it's an issue with your console.
Mr. President. Great. So it was just a volume issue. Great. Thank you.
[Page 521]
PRESIDENT SIMMA: Thank you. Okay.
Once again, back to Mr. Rodriguez.
MR. RODRÍGUEZ: Thank you, Mr. President.
BY MR. RODRÍGUEZ:
Q. Mr. Varsi, if that's your only correction, you can begin your presentation.
A. Thank you very much.
THE WITNESS: Mr. President, members of the Tribunal, Counsel for Claimants, Counsel for the State of Perú, I would like to begin my presentation. My presentation is going to be a 35 or 40-minute presentation. I'm going to basically put to you my position in my capacity as an Expert.
The first issue I wanted to deal with has to do with the fact that R-1 contains two Contracts. A Transfer Agreement, which is a Purchase and Sale Agreement and a Guaranty Agreement, which is exactly that, a guarantee. The Transfer Agreement and Renco's Guaranty and DRR's Guaranty, these are two different Contracts. In Peruvian law, there is a clear distinction between a document and the legal transaction that is behind that document. This under Article 225 of our 1984 Civil Code.
A document may contain more than one act or legal effect, and, consequently, may contain more than one
[Page 522]
contract. A public deed is a document, therefore, it may contain more than one contract. The fact that the SCA, R-1, and Renco's and DRR Guaranty, R-1, the Annex R-1, the fact that these two things are in a single document does not entail that these things are one single Contract.
Mr. Payet incorrectly indicates that Annex R-1 only contains one Contract because there is a single cause. R-1, in my opinion, contains two individual Contracts. Each one with its own purpose, and I will demonstrate this as follows.
When we have a plurality of causes, we have plurality of contracts. In Perú, contracts have a structure: The Parties to the Contract, the purpose of Contract, and the cause of the Contract. The number of causes indicates the number of contracts, and you can see here the relevant paragraphs of my Report.
Next.
Along the same lines, the number of causes indicates the number of contracts. The Legal Authorities cited by Mr. Payet in his Third Report so indicate. I'm making reference to the sources that were put to you by him. In connection with Clauses 1 to 19 of R-1, I agree with the conclusion reached by Mr. Payet in Paragraph 46 of his Third Report.
The cause is to try and attain the simple
[Page 523]
reorganization of the transfer of Metaloroya to private Parties. You will see here the reference to the relevant paragraphs. The Guaranty of Renco and DRR has a different cause and a different purpose. It's a different Contract.
Each codified Contract has its own cause. In Perú, it is clearly established that there are contracts -- and that are in accordance -- that are presented in accordance with the law and that are codified. They're codified in the Civil Code, or in any other legal provision that governs the subject matter. Each one of these codified contracts has its own finality and its own cause.
And here you see a citation by Mr. Gutiérrez Camacho that was cited by Mr. Payet. And these -- this reaffirms our position. Each one of these Contracts, which is codified, is unitary in nature. And I'm citing Mr. Payet's reference. R-2 contains two codified Contracts. First, the Transfer Agreement, and that is regulated by the 1984 Civil Code. It is a purchase and sale codified Contract.
It has an abstract cause, which is a transfer of property in consideration for a price, and it has a specific, concrete cause, which is a transfer -- assets of the Company and to allow for private investment. The Guaranty -- in this case the Guaranty of Renco and DRR,
[Page 524]
that is an autonomous Contract, independent Contract. It is regulated by the Civil Code. It's a codified Contract.
It has an abstract cause which is to ensure the performance of the obligations by the debtor, and it has a specific cause, which is the finality of the Guaranty which is to ensure a credit. Now, the Guaranty of Renco and DRR is accessory to the Transfer Contract, that is the purpose.
The finality of the Guaranty to provide support; right? So it is accessory to a main Contract. That will live, per se, but the accessory Contract depends on the existence of the main Contract. It will provide assurance to the main Contract; right?
Okay. Not all contracts require guarantees. This depends on the will of the Parties. So here we are talking about the accessory nature of the guaranty, that is the finality of the guaranty. This is an individual contract, a sole contract. It has its own cause just like the Transfer Agreement has its own cause.
This accessory nature entails that something is wrong in the main contract, then the guaranty will also be impacted because it will not have enough efficacy to go ahead if the Contract is declared null and void, for example. The Contract continues if the accessory guaranty fails. Professor Ribaza has been cited by Mr. Payet, has spoken about this. Professor Payet fails to explain why
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the additional clause is not a Guaranty Agreement. If we look at it, naked eye, it is.
In his Third Report, Mr. Payet says that this is, allegedly, an independent Guaranty. I have never heard that in my professional career. Under Peruvian law, a guaranty is a contract, it is a codified contract, and I make reference here to Article 1868 of the Civil Code. Mr. Payet fails to explain why he considers that DRR's and Renco's Guaranty is not a guarantee, per se.
The definition is perfectly well there, in connection with the cause and the objective, which is to provide a guarantee under Peruvian law. And under any law, I believe, logically speaking, an act with legal affects that meets the definition of a codified contract, well, that means that that Contract is codified. So if it meets the definition of a guarantee, it is a guarantee. Now, DRR's and Renco's guarantee and the transfer Contract, well these are linked contracts.
In Perú, this is not something new, this issue of linkage of contracts. This issue has been developed for a long time, specifically when it comes to these very complex and complicated contracts. Now, Claimants, in their Reply at Paragraph -- in their Rejoinder at Paragraph 32, well, the Claimants say that there are specific Parties to the Contract on the basis of the idea of linked contracts.
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Linked contracts have to do with the legal transaction that comes from another contract. There are different causes; right? And that is what gives rise to this linkage, so linked contracts are connected.
They are related because they have a certain functionality, but they maintain their individuality. This is a basic characteristic of the linkage nature of these. Prof. Vásquez Rebaza has indicated that the kind of link present in guarantee contracts and those that come from a guaranteed credit. Morales Servia, another professor from Perú, who also identifies the guarantee as one of the transactions that is an accessory to the principle contract.
This is a linked contract, but an individual contract in nature. And Mr. Payet says this. The fact that the guarantee and the Transfer Agreement are linked contracts confirms my position.
The assignment of the contractual position of DRP and Centromín confirm the existence of two contracts.
The term itself, "assignment of a contractual position," entails that those that need to participate in that assignment are the Parties themselves, and only the Parties. This clearly leads it to establish that, since the Claimants were not Parties to these Contracts for the assignment of contractual position, that cannot be alleged.
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The lack of consent of Renco and DRR, in contention with the contractual position of Renco and DRR, well, show that these are not Parties to the Contract. They are only Parties to the Guaranty Agreement. And let me cite Article 1435 of the Civil Code. Mr. President, I'm not going to read it. I'm going to move on, because of time, to the next slide.
So the position, the contractual position of DRP and Centromín confirm the existence of two contracts.
Now, I wouldn't want to hypothesize too much, but let's assume that Renco and DRR are Parties to the Contract of transfer. They would be two assignees. That did not happen. Their consent would be necessary. It wasn't necessary -- it was not necessary because there were two assignments of the contractual position. The assignment of the contractual position of Centromín only shows the existence of the consent of the Company and Centromín, the only two Parties that have the power to intervene in that exercise of assignment of contractual position. I have seen no document that contains the consent of the Claimants.
If they were Parties to the Transfer Agreement, the contractual position assignment of Centromín would not be valid. The same happens with the assignment of the contractual position vis-à-vis DRP and the Investor. The
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Claimants are not -- not signatories to the Arbitration Agreement. Let us look at the some basic principles related to Article 14 of the Arbitration Law that deals with nonsignatory Parties. Article 14 provides two different assumptions whereby the arbitral agreement may be extended.
First, the determinant and active participation in the negotiation, making, performance, and termination of the Contract. And this is active and determinant in nature. It has to be.
Second, the will to derive rights or benefits from the Contract.
Article 14 indicates that consent is the guiding criteria that determines the subjective spoke of the Agreement. The consent will be tacit when it is borne of certain conduct from one of the Parties. And this is something that is related, of course, to the provisions of Article 14.
So for consent to exist in an arbitral agreement, we have to look at these two assumptions. And also we have to look at the principle of good faith. This is the guiding principle of all contractual law. That is why Article 14 of the Arbitration Act does not equate a participation in the negotiation with consent. It requires that the consent to submit to arbitration must abide by the
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law. So, of course, the Arbitration Agreement in Perú is a contract. Since it's a contract, it requires the will of the Parties.
As Mr. Bullard has indicated, and I have taken this from Professor Payet annexes, a third party cannot meddle in an arbitral agreement without the consent of those who participated in it. Article 14 cannot be applied retroactively to the Arbitration Agreement. In its Reply, the Claimants say that they are nonsignatory parties because they actively and decisively negotiated the Transfer Agreement. In 1997 -- this is the old law, and, of course, it governed back then when this Contract was entered into -- well, the law in 1997 required by -- required that the arbitral agreement be made in writing. It was an "ad solemnitatem" requirement. It was a requirement set forth in the law. This was a requirement set forth by the law for the clause, the arbitration clause, to be valid. The position of the Claimants entails that the common will of Activos Mineros and the Claimants, well, that existed in 1997.
In spite of the fact that, in 1997, there was a certain formality that had to be abided by, but the Claimants never did that. This reasoning would lead us to apply Article 14 retroactively on the basis of a legal relationship that, in 1997, required for this formality to
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be complied with -- that is to say that the Arbitration Agreement be made in writing.
Article 14 cannot be applied retroactively because of a constitutional law principle, which is enshrined in Article 103 and in Article 3 of the preliminary title of the Civil Code.
Now, to apply the Arbitration Law, which is the current law that Mr. Payet tries to use, this -- to apply this to an act with legal effects, this would create a legal impossibility. So since there is no linkage between Renco and DRR to the Arbitration Agreement, we are not faced with a current legal situation that can be impacted by that Article.
Mr. Payet has cited interesting provisions. He made reference to our dear Prof. Marcial Rubio, and this leads me to talk about the second transitory provision of the current Arbitration Law which has a very specific scope of application.
This is there to apply the law in time in connection with several assumptions. So let us look at the second transitory provision. It says: "Except by agreement to the contrary, in cases before the entry into force of this legislative degree, if a party had received an application to submit the dispute arbitration, the arbitration proceedings will be governed by 26512." And
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the second transitory provision regulates that the procedural rules apply to an arbitration. This is a substantial issue that had to be taken into account. These are procedural and operational regulations. They apply to a process before the change, and then they continue after the change.
The second temporary provision is not in connection with Article 14 because Article 14 has to do with the substance. This is not a procedural clause to be applied to the proceeding. And because of the Constitution and to support my position, that recognizes the principle of the intangible nature of the Contracts.
MR. RODRÍGUEZ: Mr. Varsi, if I could ask you to slow down so that the Interpreters can properly interpret, I would appreciate that.
THE WITNESS: I apologize. I think I got lost. I need a couple of seconds to go back.
So I was saying that this provision, Number 14, Article 14 of the Arbitration Law does not refer -- does not refer to a procedural issue, rather, a substantive issue. And because of the Constitution, there is a principle that is governed there, and that is the intangible nature of the Contract. The Contract is a law between the Parties and no rule may change the contents of the Agreement between the Parties.
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So we are going to get to the conclusion in the Constitution. Our Political Constitution recognizes that the freedom to contract requires that the Parties may freely agree based on the term and the terms of the Contract. And the Contract terms may not be modified by laws or other provisions of any sort. So here there -- you don't need to discuss my position. Here, I am applying the principles under my Constitution, and, as an example here, I referred to the Arbitration Law that differentiates between substantive issues, Article 2 that refers to the Arbitral Convention, and also the title Number 4 that refers exactly to that, to the various procedural acts to the arbitral proceedings as anything that is included in the arbitration laws agreed in this case.
So Article 14 only governs the Article -- Title 4 of the arbitral law. The general Arbitration Law does not allow for the extension of the arbitral clause requested by the Claimants because of two situations. From the legal standpoint, it was not possible to extend this arbitral clause under the law in force because this required the existence of an Arbitration Agreement. I have not seen any evidence indicating that, under the general Arbitration Law, there was a possibility to extend the 1997 Law and, much less, under the situation that is here presented by Claimants. And if there is, from the factual point of
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view, that this law did not allow for the constructive consent, the Claimants could not have had this applied in actual life.
If Article 14 was to be applied, the Claimants would not be nonsignatory Parties because of their participation in the negotiation of the STA. So here, I am talking about the first assumption under Article 14, to be able to transfer to third parties that are nonsignatories.
Under Article 14, you need more than a mere participation in the negotiations to also apply an arbitral clause to a nonsignatory party. A good-faith interpretation of the circumstances should also show express consent.
Article 14 of the Arbitration Law does not account for participation in the negotiation as being the same as consent. The participation of the Claimants in the negotiation of the Contract does not show express consent. DRP was an important part of the negotiation and contracting. The DRR and Renco could not consider DRP as a mere legal instrument because DRP is Party to the Contract. So this would not be logical.
DRP existed during the negotiations and participated in the negotiations. The mere participation by headquarters in the negotiation of a contract is a current occurrence, something that happens every day. No
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one is denying that, therefore, it cannot take us to the conclusion that this is automatically granting consent to arbitration.
If Article 14 was to be applied, Claimants would not be nonsignatory parties due to their participation in the negotiation, and here I include two references. And these are Paragraphed from Professor Payet.
And in my opinion, according to my knowledge this would not apply. If Article 14 was to be applied -- and I continue with the same assumption, the Claimants would not be nonsignatory parties because of their participation in the negotiation.
First, because the participation in the public bid with several other parties could not be equal to a determinative participation, and that is to be active and determinative participation under arbitration law.
And second, we do not know who presented the questions that are cited by Professor Payet to inform his position, and there has been no evidence as to the consent to arbitration by Activos Mineros in connection with Renco and DRR.
And now we move on to the performance. So Claimants would not be nonsignatory parties in the performance of the STA. The Claimants would not be nonsignatory parties based on their argument in connection
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with their participating in the performance of the Contract and this because the evidence presented by Claimants do not show express consent. The evidence presented by Claimants showed that the parent companies helped their subsidiaries, that is an independent subject of the law to comply with their contract obligations.
There is no evidence that the Claimants de facto replaced DRP in the Contract relation, and there is no evidence that there is confusion as to who was operating La Oroya. There is no indicia of the consent by Activos Mineros based on the documents that I have reviewed.
Members of the Tribunal, I cannot confirm the consent in the participation, so if Article 14 was to be applied, Claimants would not be nonsignatory parties for their attempt to derive or obtain rights from transfer contract, and this is the second subject under the contract. So this alleged transfer of rights or acquisition of rights is something that I would like to analyze.
The second path to apply Article 14 also requires the existence of consent determined by the principle of good faith. Article 14 only allows to apply the Arbitral Convention because it does not convey terms or rights from the underlying contracts to new subjects, only the ones that have been part of arbitral clause as Parties to a
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contract by means of the second way to apply or to acquire contract rights by means of extending the Contract. The arbitration Convention may request that application under Article 14. And now we're going to see how this is implemented.
Now, first, the Contract or its rights are granted by means of a legal concept, an institution of the law. And, second, the Convention is also applied by means of Article 14.
In Perú, the authorities have identified the typical cases in which this Arbitral Convention is applied. Because of this intent to obtain the rights, we have the third Party beneficiary. We have, also, the assignment of rights. We have the lifting of the veil, and we also have the assignment of rights.
We even, at Article 14, there would be, in a way, to apply the theory of the lifting of the veil for cases that are very specific. So once again, we are going to back to Professor Bullard, a third party may not be a party to a contract relationship if Article 14 is not complied with.
So this Arbitral Convention cannot be applied to just a mere party that is requesting a contract law. The obligation of a contract right, because consent would be assumed, given good faith. So we should also imagine that
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that happens, so that would be contrary to the principle of the freedom to enter into a contract, and the principle of good faith.
Subrogation would be time-barred. I believe that here that Professor Payet here, in my opinion, corrected this assumption. And this Claim -- and this Claim had already -- it was already time-barred because, as we saw in the alleged case, that there was an act, the act of subrogation.
This would be in the same position as the creditors. So we assumed that position. The position of the creditor with the same rights, with the same obligations, and also with the same limitations.
As part of the limitations, we have the limitation that is imposed by the statute of limitations. So the original debtor-creditor relationship is based on strict liability, according to them, and Article 70. And given -- if their assumption is true by means of subrogation, Claimants would become new creditors given the assets. I am presenting their position.
And, however, as I have already mentioned, in case of a subrogation, the objective aspects of a creditor-debtor relationship, the original one suffers no changes. There is just a replacement. And the rights and the actions of the previous creditor are transferred to the
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new creditor, but also the aspects of the objective aspect, that is to say, the statute of limitations.
The Claim for subrogation has a specific statute of limitations that is applied, that is applied to the original creditor and debtor relationship. That is to say, the alleged subrogation that would be operating in connection with this Contract.
In that case, the statute of limitations, according to our own Civil Code and, in principle, would be the one regulating all of this would be two years, two years that is to be applied to this extracontractual liabilities. So this subrogation Claim would be time-barred because it is based on damages that the Claimants could in Missouri could have presented against Activos Mineros.
I thank you -- and this would have been before November 2004. I thank you all, Members of the Tribunal, President, for the attention.
PRESIDENT SIMMA: Thank you very much, Mr. Varsi. If I understand our agreement, nothing more is going to happen. That is, we are going to have the examination proper tomorrow. I mean, I leave that to you, but I think -- if you think it would make sense to, at least, exercise part of what you have in mind, you can do so. And I think, as far as I understand, my word that we
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could go on until like 5:30. Or -- but I'm in your hands. You are the master.
MR. FOGLER: I'm confident that it will take more than 15 minutes for me to cross-examine Mr. Varsi. I'm happy to go to 5:30, if you wish, but I am doubtful that we will conclude by then, but I will do whatever the Panel wishes.
PRESIDENT SIMMA: Okay. I think it's just going to be one solid unit if we do it tomorrow and start sharp at 9:30.
MR. FOGLER: That's fine.
PRESIDENT SIMMA: That means that, Mr. Varsi, you will have to spend the rest of today and into your night, et cetera, not discussing the case. It should be possible for you. I guess. Thank you.
Any housekeeping?
MR. PEARSALL: Two quick housekeeping points. One, we will get you English translations of those slides by tomorrow. Apologies for not having them today.
And, second, our witness Ada, is on her way. I'm not sure if she will be available -- if her flight will get in time tomorrow if she's called, so she's not set to go until probably -- yeah, Alegre -- late until the afternoon on Friday. But we had assumed she would start on Monday, but if we're ahead of schedule, we'll see how much we get
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through. She might not be available tomorrow. So I just wanted to alert Tribunal to that.
(Comments off microphone.)
MR. PEARSALL: We have two more before. I'm just forecasting it. And if Mr. Doe could just give us the time for today, that would be great.
PRESIDENT SIMMA: Okay. So this concludes today's work. Thank you very much, and see you all tomorrow at 9:30 sharp. Thank you very much.
SECRETARY DOE: If I can offer the time totals thus far: The total for the Claimant is 4 hours 26 minutes, and the total for the Respondent is 10 hours 3 minutes. That does include those times from Day 1, and I can separate out the time for today if you give me a moment to do the math.
(Comments off microphone.)
(Whereupon, at 4:47 p.m., the Hearing was adjourned until 9:30 a.m. the following day.)
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I, Dawn K. Larson, RDR-CRR, Court Reporter, do hereby attest that the foregoing English-speaking proceedings, after agreed-upon revisions submitted by the Parties, were revised and re-submitted to the Parties per their instructions.
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
Transcript Prepared by Larson Reporting, Inc.
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