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[Page 542]

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: : x

THE RENCO GROUP, INC., :

Claimants, :

and :

THE REPUBLIC OF PERÚ, :

Respondent. :

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - -- - - -- - - - - - - - - - - - - -- - -- -- -- -- -- -- - -'

- 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

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - -- - - - - - - - - -- - - - - - - - - - - - - - -- - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - -- - - - - - - - - - - - - -- - - - - - - - - - - - -- - - - - - - - - - - -- - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- -- -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- -- -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- -- -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- --- -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- -- - - - - - - - - - - - - - - - - - - - - - - - - - - - -- -- -- -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- --...

In the Matter of Arbitration Between: : x

THE RENCO GROUP, INC, AND :

DOE RUN RESOURCES CORP., :

Claimants, :

and :

THE REPUBLIC OF PERÚ AND :

ACTIVOS MINEROS S.A.C., :

Respondents. : x Vol. 4

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[Page 543]

(Continued)

HEARING ON JURISDICTION AND LIABILITY

Friday, March 8, 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

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[Page 544]

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

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[Page 545]

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

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[Page 546]

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

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[Page 547]

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

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[Page 548]

C O N T E N T S

PAGE

PRELIMINARY MATTERS...................................549

WITNESSES:

ENRIQUE VARSI ROSPIGLIOSI

Cross examination by Mr. Fogler...................554
Redirect examination by Mr. Rodríguez...............601
Questions from the Tribunal.......................605

DANIEL SCHMERLER

Direct examination by Mr. Schiffer................609
Cross examination by Mr. Vaca.....................628
Redirect examination by MR. Schiffer..............648

OSWALDO HUNDSKOPF EXEBIO

Direct examination by MS. Gehring Flores..............651
Cross examination by Mr. Schiffer...................652

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[Page 549]

P R O C E E D I N G S

PRESIDENT SIMMA: Good morning, everybody.

We are on Day 4 of the Renco Hearing, and we are

going to continue the cross-examination of Mr. Varsi. And

so I give the floor to Mr. -- oh, the question of

applicable law. Why don't we get that out of the way

before. Okay.

Mr. Schiffer.

MR. SCHIFFER: We agree that the law of the seat

of the arbitration applies the procedural law in the case.

So there's no controversy about that. We do need time,

however, to look at whether that would apply to declaratory

judgment actions.

I believe -- not to speak for Respondent, but

they believe English law would apply to determine whether

the facts of this case could be determined by declaratory

judgment action under English law, and we've -- this is not

something that we've looked at, at least certainly not in

any reasonable time since the briefing.

And we're a small team, so I'd just like to

hopefully add that to the briefing that we will -- again,

we believe we should be doing after this.

PRESIDENT SIMMA: Thank you, Mr. Schiffer.

Mr. Pearsall or Ms. Gehring.

MS. GEHRING FLORES: Yes. Thanks, Mr. President.

[Page 550]

Our position on the law governing the Arbitration

Clause has been quite clear in all of our briefing, and

certainly you would have to start with the law of the seat

and its choice of laws. And where that leads you is one

place, with respect to what law governs the Arbitration

Agreement.

The question with respect to the remedies open to

this Tribunal is an entirely different question, and that

is not the question that the President asked the Parties,

and we would respectfully submit that the time for Counsel

to investigate this issue and to research this issue has

passed. They did not speak on it in their Rejoinder on

Jurisdiction and Admissibility, and they had an opportunity

to do so.

So, yes, if opposing Counsel wishes to research

the question, that is fine, but they had their opportunity

to submit their argument on this issue, and they did not.

MR. SCHIFFER: Mr. Chairman, I feel like I'm

being somewhat hoodwinked here, because --

PRESIDENT SIMMA: What does that mean?

MR. SCHIFFER: It means -- it's like a gotcha.

Like it's in the U.S., it's called a "gotcha."

Their briefing only talked about procedural law

of English law in connection with the declaratory judgment

issue; so if they're now trying to expand it into other

[Page 551]

arguments and theories, I will say back to them that they

haven't done that.

PRESIDENT SIMMA: Ms. Gehring.

MS. GEHRING FLORES: I merely say we stand on our

arguments. We're not expanding them whatsoever. I'm

merely noting that the time has passed for opposing Counsel

to respond to those arguments. I'm not expanding at all.

MR. SCHIFFER: May I ask a--

MS. GEHRING FLORES: You can find them in our

Briefs.

MR. SCHIFFER: May I ask Counsel a direct

question, then? Are you seeking to apply English law to

anything other than the declaratory judgment action?

MS. GEHRING FLORES: I think our arguments are

very clear in our Brief.

MR. SCHIFFER: Yeah.

MS. GEHRING FLORES: That -- Briefs, that English

law as the seat of the Arbitral Agreement applies to

procedure, which includes remedies available to this

Tribunal. And remedies available to this Tribunal are

governed by English law.

MR. SCHIFFER: Right. But the only remedy you

discuss in the Brief is the declaratory judgment action.

MS. GEHRING FLORES: That's correct, because it's

the only one relevant with respect to your arguments.

[Page 552]

MR. SCHIFFER: I feel like that they are

intending something -- I mean, honestly, I think they are

intending something that I don't believe was ever set out

in the Briefs. If we're going to have a big battle over

this, then we absolutely need time to brief it. I

don't -- I mean, actually there has been a lot of these

gotchas in this case, which hopefully Tribunal sees we

don't play that way, but I don't want to be -- a case of

this importance cannot be decided on a gotcha.

I mean, it just can't be, especially when it's

not clear from their papers what all they're saying,

because I think what Ms. Flores is saying is probably a lot

broader, because a declaratory judgment action, if you

apply English law, to me it's the same as Peruvian law. I

mean, it's the same almost everywhere. So the standard is

the Standard.

It's pretty easy, but I really feel like what she

is now intending to do is say, ah, but you don't get the

benefit of the Peruvian Arbitration Act to determine what

Parties are related to the arbitration, which is an

argument they never made in their briefing. But I think

that's what she wants to apply to now. And I just don't

want to agree to something, and then have them say we can't

brief it anymore, and then try to get the Tribunal to apply

it more broadly than they ever argued before.

[Page 553]

I actually feel that's where they are going.

PRESIDENT SIMMA: Okay. So may I suggest -- this

is getting more interesting than I thought, at least. But

we don't have the time to go into that. So let's -- maybe

we'll find a moment. Oh, yes. Chris.

ARBITRATOR THOMAS: It's a question of

nomenclature, but you said the law of the seat, and its

choice of laws. Do you mean the English rules on conflict

of laws?

MS. GEHRING FLORES: Yes.

ARBITRATOR THOMAS: Okay. I just wanted to make

sure that I understood what might be a difference between

English law and American.

MS. GEHRING FLORES: Sure. Yes. Yes.

ARBITRATOR THOMAS: Okay. Thank you.

PRESIDENT SIMMA: So maybe we find another chance

for that, to take that up before we leave by the end of

next week.

MS. GEHRING FLORES: Yes, let's --

PRESIDENT SIMMA: We will see what we do with it,

but let's not lose further time.

MS. GEHRING FLORES: But I just -- I really do

want it to be clear, that we absolutely and simply just

stand on all of the arguments that we have already

presented in the Briefs. These arguments have been

[Page 554]

presented over years, and Counsel on both sides have had an

opportunity to address these arguments.

We're not expanding, and I do not think that

opposing Counsel, that Renco and DRRC should have yet

another opportunity to respond through the backdoor to

arguments that have already been made over years.

PRESIDENT SIMMA: Okay. Okay. Right. So I

think, if I remember correctly, my question started out

does -- do the Parties agree, and that question has been

answered to my full satisfaction. You do not agree. Let

it be that here. Mr. Varsi has been sitting here now for

about half an hour. It must be terrible for you with your

temper; so why don't we -- okay. Close that for the

moment. And the floor goes to Mr. Fogler for the exam.

ENRIQUE VARSI ROSPIGLIOSI, RESPONDENT'S WITNESS, CALLED

(Continuing)

CROSS-EXAMINATION

BY MR. FOGLER:

Q. Good morning, Mr. Varsi.

A. A pleasure. Mr. Josh. May I call you Mr. Josh?

Q. This is Josh.

A. Excuse me.

Q. Permit me to introduce myself. I am Murray

Fogler, I am one of the lawyers for Renco and DRRC in this

Arbitration.

[Page 555]

As a preliminary matter, I'm never certain how to

address someone of your stature, whether I'm supposed to

address you as Professor Varsi or Dr. Varsi or Mr. Varsi.

What do you prefer?

A. Enrique. How about Enrique?

Q. That's slightly more informal than I'm used to;

so I'm going to call you Mr. Varsi, if that suits you.

I see in the Reports that you have prepared for

us that you, yourself, have, on occasion, served as an

arbitrator.

Is that true?

A. Yes, that is true. I am an arbitrator with the

Commerce Chamber in Lima for over 10 years. I have been an

arbitrator with the Arbitration Center in the Catholic

University of Perú, and also some other chambers of

arbitration within the country.

Q. You are familiar, then, with the obligations of

Parties and Witnesses to make disclosures in arbitrations,

are you not?

A. Of course. And that's what I did.

Q. And you're familiar with the concept of

independence of Experts, for example, are you not?

A. Certainly.

Q. And you made a Statement in your Report,

the -- actually the September 2023 Report. Let me read it

[Page 556]

to you. It's Paragraph 2.1. You say: "I further reaffirm

my independence in the preparation of this Supplementary

Report, and confirm that there is no relationship with the

Parties, their Counsel, or the Arbitral Tribunal to be

disclosed herein."

I didn't see a similar Statement from your prior

Report, but that Statement would apply to all of the

Reports that you have prepared in this case; right?

A. That is correct.

Q. And yet, at the same time that you have served as

an Expert for Perú and Activos Mineros in this case, you

and your law firm were representing the Government of Perú

in a different arbitration; isn't that true?

A. Yes. Yes. And if my memory serves me right, it

was also as an Expert.

Q. Well, actually, you and your law firm were the

lawyers for the Government of Perú in that case, were you

not?

A. I'm not certain. What I know, so far, is that I

am an Expert in an arbitration, and I was asked to provide

an Opinion in connection with the Ministry of Energy and

Mines.

Q. I'm speaking of the Geurent Case. Maybe Geurent

is the way you would pronounce it. I'm not very fluent in

Spanish, but are you familiar with that case?

[Page 557]

A. I do not -- I'm not a representative there. I'm

not Counsel there. It must be a partner from my law firm,

but my policy in my law firm is not to practice, rather to

act as an arbitrator.

Q. You understand, sir, that the Ministry of Energy

and Mines for the Government of Perú is a central actor in

the facts of this case?

A. As far as I know, it is not relevant that the

Ministry of Energy and Mines has any role to play in this

case, and that my law firm defends, or I am an Expert

on -- defends that case or that I am on a -- or as I appear

as an Expert on a particular case. I do not know how this

may impact my autonomy and independence. I think that at

my age and with my background, there is no doubt to cast.

Q. Here's the thing about disclosure; we can't

determine whether your participation in another matter is

relevant or not unless we know about it, unless it is

actually disclosed. True?

A. As you said, yes, it should be that way.

Q. Nevertheless, what is true is that there is no

reference in any of your Reports to any other matter in

which you or your law firm have represented or participated

in any other way in a case for the Government of Perú or

the Ministry of Energy and Mines; right?

A. No, but there is the information that you have

[Page 558]

just shared with me that is the disclosure that I did in

due course, and that is what should be there.

Q. Let's move on. I want to talk to you about some

of the -- some pretty basic concepts about contracts in

Perú. In Perú -- just as we do in the United States -- you

have freedom of contract, that is Parties are free to make

any contract they wish so long as it's legal; right?

A. That is correct. So the will prevails as well as

the Contract. The freedom to enter into a contract.

Q. By way of example, if a company wants to sell

assets or the stock of a subsidiary to another company, the

two Parties, the buyer and seller, can allocate liabilities

and assets, however they may agree; right?

A. That is the freedom to contract.

Q. Here in this case, we are talking about

environmental liabilities. That's the basic issues in this

Arbitration, and we know we're going to hear quite a bit

more later from other folks, but Perú has an established

legal principle that the Party that pollutes is responsible

for paying for damages that might be caused by the

pollution; isn't that right?

A. That is the general law on the environment.

Q. Nevertheless, two Parties can agree to allocate

the liabilities for pollution in a different way, if they

desire, can't they?

[Page 559]

A. As long as they do not go against the law.

Q. Okay. Well, that's what the Parties did here.

That is, when Centromín and Renco and DRRC were negotiating

the Stock Transfer Agreement, they negotiated an allocation

of responsibility for environmental claims, didn't they?

A. No. They did not go against the law. What they

did was to distribute risks, liabilities, and also

indemnity as part of a contract relationship, but they were

not beyond the law.

Q. I wasn't suggesting that what they were doing was

improper or illegal. I'm just asking you to confirm that,

in the Stock Transfer Agreement, in Articles 5 and 6, they

made an Agreement about how to allocate responsibility for

environmental matters; right?

A. The way you asked me first, you were taking me to

offer you an answer meaning that they were breaking the

law. That was my understanding.

Now, the question you're asking me whether they

assigned liabilities under the contract based on Clauses 5

and 6 and the answer is, yes, that is clearly stated,

responsibilities, liabilities for Centromín and liabilities

for the Company.

Q. And if there were to be any dispute between

Centromín, on the one hand, and DRP on the other hand,

about the proper allocation of responsibilities, clearly

[Page 560]

that dispute would be subject to the arbitration provision

in the Contract; right?

A. Would you please repeat the question?

Q. Certainly. We've discussed very generally -- and

I'm talking in general terms -- that in Articles 5 and 6

there is a division of responsibilities for environmental

matters between Centromín on the one hand, and -- I'm

calling it DRP because it acquired Metaloroya.

So when I say "DRP," I mean Metaloroya and DRP.

In the Article, in Articles 5 and 6, if there were a

dispute between Centromín and DRP about allocation of risk

for a particular environmental matter, that would clearly

be subject to the arbitration provision in the Contract,

wouldn't it?

A. Indeed, because they are the Parties.

Q. So the question that here we're debating is

whether Renco and DRC have a right to arbitrate a dispute.

And that's what I want to generally talk to you about here

this morning. All right?

So let's -- what I want to do -- do you have a

copy for yourself of the STA, the Contract at issue?

Do you have one in front of you?

A. No, I do not. I only have my Reports.

MR. FOGLER: With the permission of the Tribunal,

I would like to hand to the Witness, R-001, a Spanish

[Page 561]

version of the Contract. And here's a copy for

Mr. Rodriguez too.

PRESIDENT SIMMA: Okay. Go ahead.

BY MR. FOGLER:

Q. I'm going to show you certain provisions of the

Contract, but I want you to have the entire Contract in

front of you in case you wish to consult any other

provision while we're discussing this.

The first provision that I want to talk to you

about we have discussed here before is Article 18,

Clause 18, which you will find -- it's at PDF Page 65.

It's numbered 64, I believe. And I've put the English

version up here, but I want you to obviously feel free to

consult the Spanish, which is, by the way, the

primary -- the preferential version of the Contract. And

you've seen this before; right?

A. Yes.

Q. And as part of your work, the review of the

Contract was important, wasn't it?

A. It is key.

Q. In this particular clause, we see that the

Parties agreed that there would be certain other documents

that would be available to consult in the event there were

questions about the interpretation of the Contract;

correct?

[Page 562]

A. Yes, indeed.

Q. We have the Answers to Consultations in Part (a),

and we have the Bidding Conditions in Part (b) of this

section; true?

A. Indeed.

Q. I assume then that, in the course of your work,

that you consulted with these answers and bidding

conditions in the performance of the work that you did; is

that right?

A. Yes.

Q. Okay. So as we are keeping the ultimate question

in mind, I want to talk to you about some of the Bidding

Documents that are referenced here in this Clause 18.

That's where I'm going. I want you to -- I want to make

sure that we're communicating. So if you don't understand

any of my questions, please ask me to rephrase it, and I'll

be happy to do so.

A. Thank you very much.

Q. Let's start with the first round of bidding,

which is R-167. This was, if I'm not mistaken, in January

of 1997.

You've seen this document before? It's a

multi-page document and we're going to -- I'm not going to

talk to you about all of it, you'll be relieved to hear.

But I want to go to Page 10, and you will see this is

[Page 563]

English, but let's start at the heading for this

2.2 section. This is about the participants, the people

that -- or the entities that could submit a bid for the

Metaloroya stock. And you see, in Part (a), the Tender is

open to both Peruvian and foreign companies. There are

certain other discussions about how to proceed with the

process.

MR. RODRÍGUEZ: Excuse me, Counsel. This is the

English version of the document, and Dr. Varsi does not

read English. That's the only request.

MR. FOGLER: I think we have -- I don't think we

have a Spanish version in what was provided to us, so

maybe -- let me just read the part that I want and it can

be translated so he can understand it. I apologize. We

will have -- for most of the documents, we do have a

Spanish version, but, unfortunately, for this one, all we

have is the English.

BY MR. FOGLER

Q. So I want to focus you to Part (d) of this. And

by the way, the handwriting and notation just came with the

exhibit, so that's not part of my question. I just want to

focus on what the typed portion is. So let me read this,

and hopefully the translation will help you understand. It

says: "A subsidiary of the Company that won the bid could

[Page 564]

subscribe the Contract, only if the Company winning the bid

owns at least 67 percent of the subsidiary's shares and

takes on its own subsidiary all the Contract obligations."

All right. Did you follow?

A. Yes.

Q. All right. So in the original bid, the

procedures were set out, by the way, by a committee

established by the Peruvian Government. You're aware of

that, aren't you?

A. Certainly.

Q. And my understanding is that these instructions

or qualification procedures were prepared by this Committee

to have a transparent process for companies that were

interested in participating in the process.

Is that your understanding too?

A. That is correct.

Q. But this particular provision of the bidding

conditions, one of the items that we are permitted to

consult with in the Contract, it is apparent that, if there

is a winning bidder who establishes a subsidiary, they want

to impose two conditions on that winning bidder, one being

you have to own 67 percent of the subsidiary, and the

other, the winning bidder has to agree to all of the

obligations of the subsidiary; right?

A. Yes.

[Page 565]

Q. Let's look at the second round of bidding. It's

R-187.

And here, happily, we do have a Spanish version.

This, I believe, is a couple of months later in 1997.

Apparently, companies had prequalified, and there had been

some prior questions and answers.

Do you remember that?

A. Yes.

Q. And now, they've refined the process and they've

come out with more explanatory material for the potential

bidders.

So let's go to Page 10. And again, we see this

same section on participants. I can't read that far, but I

know he's going to call this out for me, and now it's going

to cover up the Spanish version, so that's -- perhaps he

can call out the Spanish as well and we'll both be able to

follow as I ask my questions. We're not on the same

provision. One is (c) and the other is (d). So let's

start with (c). And let's see -- I want the Witness to be

able to follow along.

There we go. All right. I'm going to read the

English, but I want you to follow along in the Spanish

version here, and it says, the highlighted portion: "The

Consortium members" -- and I'll stop right there because

part of the prequalification permitted a consortium of

[Page 566]

companies to bid together.

You're aware of that, are you not?

A. Yes.

Q. So: "The Consortium members jointly and

severally assume compliance with the obligations arising

from the Contract. The responsibilities of the members of

the Consortium with respect to all obligations arising from

their participation in the contest is equally joint and

several."

Now, here we're talking about -- I mean, Renco

and DRRC were a consortium who bid on the Metaloroya

shares; right? And if they had directly contracted with

Centromín, the idea here is they would both be jointly and

severally responsible for all of the obligations; true?

A. Crystal clear, yes, as you just mentioned it.

Q. And we have a concept in the United States about

what joint and several liability is, and, I assume, that

it's the same in Perú; that is, the -- if there are two

parties that are jointly and severally liable, they are

both equally liable. They are -- it gives the option to

the aggrieved Party on the other side to sue one or both

and hold both of them responsible; right?

A. Yes.

Q. Let's move down to Part (d). And here, you see,

parallel with what we looked at in the first round of

[Page 567]

bidding, the circumstance if the Consortium or the winning

bidder wants to establish a subsidiary to enter into the

Contract. And let me read this. It says: "A subsidiary

of the Awarded Company of the Buena Pro may sign the

Contract, to the extent that the Awarded Company owns at

least 67 percent of the Shares of the subsidiary and

assumes jointly and severally with the subsidiary the

obligations arising from said contract," the same concept

that we looked before; that is, it's okay if the winner of

the bid sets up a subsidiary, but they want to make sure

that that winner is going to be obligated jointly and

severally with the subsidiary; right?

A. Yes.

Q. And so, we see it in this case. In this case,

when Renco and DRRC won the bid and set up a subsidiary,

Centromín wanted to make sure that Renco and DRRC were

obligated to all of the obligations of the subsidiary;

right?

A. As stated in the documents you showed me.

Q. Well, it's stated in the Contract too because

there are many obligations that Metaloroya -- now

DRP -- have in the Contract; right?

A. Would you allow me to interrupt you? To conclude

the previous comment, would you please ask me the question

before we move on so that I do not lose connection with the

[Page 568]

previous point? Before we go into the Contract, I would

like to complete the issue of the question that you want to

ask me about the bids.

Q. I'm confused. I did not have another question

about the bids. I was under the impression that you and I

had agreed on what the language meant from these Bidding

Documents.

Do we have a dispute?

A. No. No. What the text means, what we read, you

and I cannot discuss things that are not stated in those

texts, but, afterwards, as part of the process, as part of

the bidding process, there were two key facts. If you

allow me to explain them.

First, we have the creation of the subsidiary

that is an independent legal personality that is autonomous

with its own rights, and it is -- it has its own

collective -- it is a legal persona of its own collective

right, and we -- it also had the main Shareholder that was

also undertaking some of the demands under the bidding.

But then, we have the assignment of rights, and the

assignment of rights by Renco and DRR also sets a very

important fact because this obligation -- the obligations

that were established during the bidding process were

assigned to DRP. And contrary to this, or against this, we

have the signing of the Guaranty, and they are going to

[Page 569]

be -- that is, Renco and DRR will be liable,

vis-à-vis -- DRP's liabilities. So this is the Contract

that we have as a result of the bidding.

Q. Thank you, Mr. Varsi. I'm not certain that I

followed all of that, but my point, I think, is much

simpler. In the Contract itself, it is obvious that there

are a number of obligations that are imposed on DRP; true?

There's an investment commitment of $120 million over the

first five years, for example; right? Correct?

A. That is an obligation, yes.

Q. There are reporting obligations, where the

Contract obligates DRP to make certain reports to

Centromín; right?

A. That is correct.

Q. There are many obligations in the Contract for

DRP.

A. That is correct.

Q. All of those obligations are guaranteed by Renco

and DRRC; right? All of them.

A. Yes. Certainly.

Q. If there were a breach by DRP, Centromín would

have the Option, as we were discussing earlier in the

context of this joint and several liability issue.

Centromín would have the Option of making a claim against

DRP only or against Renco and DRRC only, or both of them,

[Page 570]

all together; true?

A. Could be. Could be.

Q. We agreed earlier that, in the event that there

was a dispute about an obligation between Centromín and

DRP, that that dispute would be subject to arbitration;

right?

A. The arbitral clause applies to the Parties.

Centromín, the Company, and DRP, that are the ones that

signed the Assignment Contract as stated under the contract

clause.

Q. Right. I understand your point. I want to make

sure that we're all clear about what you are telling us.

It is your view, however, that, if there was a dispute

arising under the Contract about an obligation of DRP, and

Centromín wanted to make a claim against Renco and DRRC,

Centromín would have to file a separate lawsuit. That's

your opinion?

A. No. I don't think I am understanding. Would you

please repeat your question.

Q. Yes. Let me give you just a hypothetical

example. Let's suppose that Centromín believed that DRP

had breached its obligations to complete the PAMA.

You understand?

A. Yes.

Q. And Centromín wanted to enforce that obligation,

[Page 571]

not only against DRP but against DRRC as the guarantor.

Okay? Because DRRC has guaranteed that obligation, has it

is not?

A. Let's see. The Party to comply with the

obligation is the Contracting Party. In this case, DRP.

And in case that DRP does not comply, the one guaranteeing

compliance with those obligations by means of the Guaranty

under the additional clause -- that is, this bond is Renco

and DRRC that are not Parties to the Contract. They assume

responsibility as guarantors due to the noncompliance with

an obligation under the Contract, under the Assignment

Contract. It is not that, because they are guarantors,

they are Parties to the Contract, to the assignment

Contract, and I think that that was clear from my

presentation yesterday.

Q. It was quite clear. That was not my question,

though. My question is, if Centromín wants to enforce an

obligation that it believes DRP has breached and Centromín

wants to bring a claim against both the obligor, that is

DRP, and the guarantor, DRRC, is it your position that it

must file two separate proceedings?

A. I have not said that. So they claim for

complying. So who was the one that was in breach? DRP;

correct? So Centromín says, "please, you need to comply."

So they are saying this is a rare situation, given that

[Page 572]

noncompliance, they do have the possibility to apply the

Guaranty that is a different contract.

So there you have the necessary channel to

determine the compliance with the obligation by means of

DRP, and once it has been complied with, that is when you

can demand for the application of the Guaranty for DRRC and

Renco by means of that special clause, but you cannot ask

them to comply. They need to comply based on the Guaranty

and also the bond that is part of the commitment.

Q. My question must not have been very clear, so I

want to try again.

I am focused now on a choice of forum -- that is,

where and how Centromín might bring such a claim, and I

think we have agreed initially -- let's take it step by

step. I think we have agreed that Centromín would have a

right to go after either or both DRP and DRRC if there was

a default in an obligation by DRP.

We agree on that, don't we?

A. I do not agree with that. The issue of the

Guaranty is quite specific. Let me repeat, and if you do

not understand what I say, I can clarify this because I

don't want you to keep asking me the same question, given a

situation that is very clear in my opinion.

Let us imagine the case that DRP breaches and

Centromín demands compliance with an obligation directly

[Page 573]

from Renco or DRR. That would work as long as there is no

exclusion clause under the Contract. The exclusion benefit

is to go directly against the obligee without constituting

arrears. That is one of the paths that we would have, that

Centromín would have against DRR and Renco. The normal

path is for Centromín, given the breach by DRR, as for

compliance, and if this does not happen, then the bond

would be applied against Renco and DRR. That is my answer.

Q. How would Centromín enforce the Guaranty? Would

Centromin have the right to arbitrate a claim against DRRC

on the Guaranty?

A. So the Guaranty would be enforced by means of a

proceeding that is not an arbitration because the arbitral

clause was limited to the Parties, and the Guaranty is a

clause that is not part of the Contract and that applies

for the relationship in between the Parties -- that is to

say, Centromín or DRP and, on the other hand, the

Guarantors, Renco and DRR.

Q. You have made your position quite clear. I just

want to make sure that you and I are communicating, and I

believe that what you are telling me and -- correct me if

I'm wrong -- you are telling me that the way the Parties

constructed their agreement, the Guarantors are not jointly

and severally liable with DRP.

Is that what you're saying?

[Page 574]

In other words, I thought -- I'm hearing you say

that Centromín must exhaust its claims against DRP before

it can ever assert a claim on the Guaranty.

Is that what you believe?

A. Under Peruvian law, the nonfulfillment -- the

breach of an obligation requires that you need to present

the Claim immediately, and once there is -- for breach, and

after that, the Guaranty may be enforced. So in this case,

we have Centromín that may demand Renco and DRR to enforce

that Guaranty, but the way to enforce the Guaranty would

not be by means of the arbitral clause because that

Guaranty does not have that arbitral jurisdiction.

Q. Let's move on.

You have stated in your Report that you believe

Renco and DRRC have no obligations under the Contract;

true?

A. They do not, correct.

Q. Even though they have guaranteed each and every

obligation that DRP has under the Contract; right?

A. Yes.

Q. Okay. You have also stated that you believe

Renco and DRRC have no rights under the Contract; is that

true?

A. Yeah. They don't have any rights.

Q. Let's look at Clause 17. This is the

[Page 575]

confidentiality provision of the Contract. You've read

this part too, have you not? Right?

A. Of course.

Q. If there is a dispute about the confidentiality

obligations of the Contract, that would be an arbitrable

issue, would it not?

A. Yes.

Q. Let us read the provision: "Following the

closing and in the maximum extent allowed by law, Centromín

agrees to maintain, and to require its other commercial

units to maintain, the confidentiality of all data,

financial information, business information, customer

lists, process and technology information, and all other

information concerning the La Oroya Metallurgical Complex,

and of the Consortium and the Investor and the Company."

Now, you know how the Contract defines the word

"consortium," don't you?

A. Yes.

Q. The Consortium is Renco and DRRC; true?

A. Yes.

Q. This is a promise by Centromín directly to Renco

and DRRC that it will maintain as confidential any

information that it received from Renco and DRRC; true?

A. Yes. It is an obligation that only pertains to

Centromín as a party to the Contract.

[Page 576]

Q. If there were a breach of this provision -- and

I'm assuming -- this is a hypothetical question. If

Centromín disclosed -- in violation of Clause 17 of the

Contract, if it disclosed confidential information of Renco

and DRRC, Renco and DRRC would have a claim to assert

against Centromín, would it not?

A. Of course they would have a claim. Of course.

Q. That claim would be subject to the arbitration

clause, wouldn't it?

A. No.

Q. You told me just a minute ago that this Clause 17

is governed by the arbitration clause?

A. Clause 17, it is, but in connection with the

Contract Parties, not the bidders, not the ones forwarding

to the Contract, not the third parties, not the guarantors.

Q. It's time now to examine, a little bit more

carefully, your proposition that there are really two

Contracts instead of three -- instead of one, excuse me.

All right.

A. Not three.

Q. Just one.

A. Two. My position is two.

Q. Two.

A. I apologize.

Q. My mistake. No. No. My mistake.

[Page 577]

A. Okay.

Q. I want to show you one of the slides that you

provided to us yesterday as the starting point for our

discussion here. It is the seventh slide. I'm putting up

the English. Do you have -- do you have a hard copy or a

copy of the Spanish? To the extent this is difficult for

you, we'll put up the Spanish version here, but, for me, I

need to look at it, first, in English.

So the heading of your slide here is "where there

are a plurality of causes, there is a plurality of

contracts." And you had this discussion with us yesterday

that, in your view, there's a separate cause, one separate

cause for Clauses 1-19, and a separate cause for the

additional clause of the guarantee; right?

A. Yes. Yes.

Q. The cause of the 19 clauses of the base Contract

in your view -- you've quoted this from Mr. Payet -- "is to

achieve the simple reorganization and transfer of

Metaloroya to private companies." Okay. And you were

quite animated in talking about how you and Mr. Payet

agreed on this point.

Let's examine several other provisions of the

Contract. Okay. I'm going to start off with the one that

you have cited here. Clearly, there is a transfer of

shares of the Metaloroya from Centromín to DRP. That is

[Page 578]

Article 1 of the Contract; right?

A. Yes.

Q. In fact, let's put the Contract up so that we can

follow along. The first clause appears on Page 9. It's

numbered 8, but I'm using the PDF version so that Mr. Neely

can keep up.

So you see here in the first clause, this is the

transfer of the Shares. There's a price listed, and it

identifies that the transfer is to occur from the Seller,

Centromín; to the Buyer, DRP; right?

A. Yes.

Q. But there are additional -- I'll call them

contracts -- in this Contract as well. Let's look

at -- ah. The third clause, the third clause begins on

Page 11. Now we are talking about the increase of the

Company's stock capital. You've read this provision too;

right?

And in this provision, this is no longer talking

about a sale of Shares from Centromín to DRP; right?

Now we are talking about the issuance of new

shares by Metaloroya to DRP, a different transaction,

aren't we?

A. The way you mentioned it, it would be another

contract.

Q. So, now, there are --

[Page 579]

A. Another contract within this Contract.

Q. So, in your view, is this stock issuance subject

to the arbitration clause?

A. Being a part of the assignment contract is

subject to arbitration clause.

Q. We're talking about two different Contracts, now,

in your view. One Contract is for the sale of the

original --

MR. RODRÍGUEZ: Excuse me, Counsel.

I -- respectfully, I think you are misrepresenting

Mr. Varsi's position as to whether there are more than two

contracts in this document.

THE WITNESS: If you allow me. Two minutes ago

you told me that within this document, within this

Contract, there was more than one contract, as I would call

it, several contracts, and you took me to the stock capital

increase and also the decision now. And now I believe that

you are following the logic that there is more than one

contract within the same contract.

If you ask me what is within this assignment

contract, there is a sale, and as part of that sale there

are several legal transactions, some corporate transactions

that allow for the performance of this operation, that is

to say, the sale of the Metaloroya.

That is my position, and I apologize that we may

[Page 580]

not be -- that you may be using some terms that go against

your own position because that may be related to that. I

don't know.

BY MR. FOGLER:

Q. Let's look at one additional provision of the

Contract. It is 8.19 on Page 53. Here we have an option

that has nothing whatsoever to do with Metaloroya.

Centromín grants to DRP a preferential right to purchase

30 percent of the Shares of two different companies, don't

we?

It is Number 52 in your Spanish version, I

believe.

A. That is correct, yes.

Q. This has nothing whatsoever to do with the

assignment of Renco and DRRC's rights to DRP, does it?

A. This is a provision that is part of the Contract

as to the Parties that entered into it.

Q. Is it a separate cause?

A. It is a separate cause. It is part of the

purpose of the Contract to sell La Oroya. That is, you

have a series of acts, of legal acts, that need to take

place. Each and every one of them with a specific cause to

attain a specific end.

Q. I'm recalling the heading of your slide. Your

slide said, "If there are a plurality of causes, there's a

[Page 581]

plurality of contracts." Right?

A. That is correct.

Q. In your view, as I appreciate what you're saying,

Clause 8.19 is a separate autonomous, independent contract

from the rest of it?

A. This is not a contract. This is a right. This

is a prerogative. This is a concession. This is something

that is being given to Centromín, and Centromín is giving

to the investor. If you want, I can give you the right to

purchase those Shares. So we cannot confuse "right" with a

legal act and with the Contract. And here we clearly see

the terminology.

The preferential right to purchase the Shares,

this is a corporate right that Centromín is giving the

Investor. Let's see if the investor is interested, and if

they are interested, well, then there will be an assignment

based on that preferential right.

Q. You aren't suggesting, are you, Mr. Varsi, that

these Parties could not have set a separate deal in a

separate document, for Centromín to give this preferential

right to DRP?

A. I did not suggest that. If you're asking me

whether I would suggest that, whether there could be

something like that, whether something like that could be

done, that is different. But at no point during my

[Page 582]

1 presentation am I saying things that -- this, what you just

2 mentioned.

3 Q. Well, my point, simply, is that, as Mr. Payet

4 told us yesterday, it is quite possible for parties to

5 agree to put different agreements in the same document and

6 call it one contract, isn't it?

7 A. Nowadays, contracts are so complex and they are

8 so reliant on others that we can, basically, say that there

9 are no simple sale contracts, as we had them before. So

10 today, sale contracts always have some additional content

11 of legal acts that will allow for their performance.

12 Now, as Professor Payet mentioned, this is a

13 complex contract. I think it is one of the most complex

14 contracts entered into by Perú, and its purpose or its

15 assignment, I think, justified it, that is, that was the

16 sale of Metaloroya.

17 And I apologize if I get too excited about this,

18 but those of us who are Peruvians and have gone by

19 La Oroya, this is a village that has suffered a great deal

20 due to contamination. So I think that the purpose of this

21 Contract is more than legal.

22 It had an asset commercial, but even beyond that,

23 it had a human purpose, humane purpose to allow for those

24 living in La Oroya to have a clean business. To have a

25 company that would allow them to recover the nature that

[Page 583]

1 had been so deeply devastated in La Oroya.

2 Q. These Parties knew how to put different

3 agreements together into one document, didn't they?

4 A. Yes. Of course.

5 Q. And here's another example. I'm going to give

6 you a copy of the amendment to the Contract.

7 You've seen that too, haven't you? You knew

8 there was an amendment to the STA?

9 A. Yes. Yes. A modification with the participation

10 of the same parties but no Renco or DRR participating in

11 it; correct?

12 Q. Well, DRRC signed this Contract that I'm putting

13 in front of you. This amendment was dated in December of

14 1999. And you're aware that DRRC signed this amendment,

15 aren't you?

16 Do I need to repeat my question? No, I'm asking

17 who signed the contract?

18 A. If we read the record, the minutes, here it says

19 that there will be a modification to this assignment

20 contract for the increase of the stock capital and transfer

21 of Metaloroya and also the assignment and possession

22 granted by one party -- from Centromín on the one hand and

23 on the other we have the DRP. With the intervention

24 here -- we have an intervention here, but we have two

25 Parties, and -- FOPRI -- we have the FOPRI; that is a State

[Page 584]

1 organism.

2 Q. Again, Mr. Varsi, I fear I have failed to make my

3 question clear. It was pretty simple: DRRC signed this

4 Contract. That's true, isn't it?

5 A. We do not see that in the document. Let me see

6 if I can verify this again, whether they signed at the end

7 of the deed as something. I don't know if you have

8 identified that quickly for me not to take up so much time.

9 I would appreciate if you could let me know if you see the

10 signature.

11 We are talking about the signing of the public

12 deed but not this separate document, the minutes that are

13 completely different. So here we have Doe Run Perú with

14 Mr. Buckley, that I understand he was a witness in this

15 proceeding, Dr. Raúl Ferreyro on behalf of DRR, as you

16 mentioned, and Mr. Barcelos on behalf of FOPRI.

17 Q. You have confirmed that Mr. Ferreyro signed it

18 for DRRC; right?

19 A. Yes. But it doesn't mean that he's a party to

20 the Contract, to this amendment contract.

21 Q. Look at the name of this Contract. Let's go to

22 the third page. There's a title to this Contract. It's a

23 long one.

24 It says: "Modification of the Contract to

25 transfer shares, increase capital and subscription of

[Page 585]

1 Shares of Metaloroya S.A." That's referring to the STA,

2 isn't it, the exhibit we have been looking at? But there's

3 more, isn't there?

4 A. Yes.

5 Q. It goes on: "As well as transfer of the granting

6 of the beneficiation and rural property that is granted by

7 Centromín and by Doe Run Perú with the action by the

8 Executive Management FOPRI, and Doe Run Resources

9 Corporation."

10 The point here is that this not only modifies the

11 Contract, it adds an Additional Agreement about the

12 transfer of property that is separate from the original

13 Contract, doesn't it? Right?

14 A plurality of causes; true?

15 A. If you allow me.

16 What we see on the screen is the public

17 deed -- is the cover page of the public deed because the

18 Contract, as presented by the Parties for the Notary to

19 sign it as a deed, starts on Page 5. So the causes that

20 you are trying to address in this conversation should be in

21 the document by the Notary, not on that cover page.

22 Q. I was trying to make this shorter, but you are

23 welcome to review this document. It is 20-plus pages, but

24 it has two different agreements in the same document,

25 doesn't it?

[Page 586]

1 One is an agreement to amend the prior contract.

2 The second is a new agreement to transfer additional

3 property from Centromín to Doe Run Perú; right?

4 A. Yes. Yes. Let's be more pragmatic. There are

5 some legal acts that took -- that were performed as part of

6 this complex sales contract. So as part of this amendment

7 contract, there had been some legal acts that had been

8 included, and they all had their own abstract and concrete

9 purposes. So they had a predetermined object intended to

10 make this assignment, this sale of Metaloroya more

11 efficient.

12 Q. Is this document one contract or two?

13 A. This is just one contract that has several legal

14 acts.

15 Q. Now we come to the additional clause in the

16 Contract. You're probably thinking, finally, we are going

17 to talk about --

18 A. No. No. No. No. I am so happy. I am very

19 happy to be able to help the Tribunal, to contribute my

20 experience, and also, with the request by Activos Mineros,

21 to appear. I'm really satisfied to be able to be here to

22 cooperate with you.

23 Q. Perhaps, I was secretly expressing the Tribunal's

24 wish that I get to the point.

25 PRESIDENT SIMMA: Just, Mr. Fogler, coffee break

[Page 587]

1 is approaching. And I don't want to kind of interrupt this

2 pursuit for happiness at the wrong moment, so, if you

3 indicate what would be a good point, would that be a good

4 point?

5 MR. FOGLER: Any time, yes.

6 PRESIDENT SIMMA: So everybody is happy about it?

7 MR. FOGLER: Yes.

8 PRESIDENT SIMMA: Okay. So let's have the coffee

9 break until 11:05.

10 (Brief recess.)

11 PRESIDENT SIMMA: We continue the examination of

12 Mr. Varsi.

13 You have the floor, Mr. Fogler.

14 MR. FOGLER: Thank you, Mr. President.

15 BY MR. FOGLER:

16 Q. Let's turn to the Additional Clause in the

17 Contract, R-001 at Page 66 and 67.

18 Obviously, this has been a subject of great

19 review and study by you, has it not?

20 A. Yes, sir.

21 Q. It is your view that this Additional Clause is

22 autonomous, separate, independent, stands on its own.

23 Is that true?

24 A. It is a Contract.

25 Q. Not exactly my question.

[Page 588]

1 Is it a separate, independent, autonomous

2 Contract from the rest of the STA?

3 A. That's what I answered. It is a separate

4 Contract, and it is independent from the other.

5 Q. All right. Can you show me in this provision who

6 is the beneficiary of the Guaranty?

7 A. The Investor.

8 Q. So DRRC and Renco have guaranteed only to DRP.

9 That's it?

10 A. Yes.

11 Q. So Centromín has --

12 (Overlapping speakers and interpretation.)

13 Q. -- under this agreement?

14 (Interruption.)

15 Q. Centromín has no rights under this Guaranty.

16 Is that your testimony?

17 A. Yeah. We have to look exactly at what the clause

18 says. This is a Guaranty. It is express, and it shows who

19 is the debtor and who is the guarantor.

20 Q. So is the answer to my question, yes; that is,

21 Centromín has no rights under this Guaranty?

22 A. The guarantor and the debtor, well, who is the

23 guarantor? Renco and DRR. And who is the debtor? Well,

24 DRP.

25 Q. So we were discussing many minutes ago what would

[Page 589]

1 happen if DRP failed in one of its obligations.

2 Do you remember that discussion?

3 A. Of course.

4 Q. And B.B., we don't have the right provision up

5 here. It's the Additional Clause at the bottom of the page

6 and the top of the next page.

7 A. Umm-hmm.

8 Q. But in that discussion -- and we saw the Bidding

9 Documents at the very beginning of our discussion, where it

10 was made clear by the Committee designated to privatize the

11 business, they wanted to make sure that the winning

12 bidders, if they set up a subsidiary, would be on the hook,

13 would be directly obligated for all of the obligations of

14 the subsidiary.

15 Do you remember us discussing that?

16 A. Yes. Of course, yes.

17 Q. Did they just make a big mistake with this

18 Additional Clause by failing to give Centromín any right to

19 enforce the Guaranty?

20 A. You're putting words in my mouth. I have not

21 said that. If you allow me, sir. If you allow me,

22 Mr. Murray.

23 Given the breach by DRP -- and who would be DRP

24 breaching against? Centromín. Centromín is the one that

25 enforces the guarantee, vis-à-vis, Renco and DRR. So I

[Page 590]

1 don't see the problem here. I don't see the discussion. I

2 don't know where you would like to go with this. This is a

3 very simple matter, truth be told.

4 The performance of obligations by DRP in the

5 Contract, well, that is something that is guaranteed by

6 Renco and DRR. If DRP breaches its obligations, and then

7 Centromín will enforce the clause.

8 Q. Show me in this Additional Clause where it is

9 that Centromín has the right to enforce the Guaranty?

10 A. It doesn't have to say it expressly. Let's see.

11 If we look, the Additional Clause that we have here, it

12 says: "The Consortium composed by DRR and Renco guarantees

13 compliance with the obligations by the Investor, DRP."

14 Q. So, Mr. Varsi --

15 A. If you allow me sir, I can -- I haven't finished.

16 Q. My apologies.

17 A. No problem. Okay. So what they are doing here

18 is they are guaranteeing the performance of obligations,

19 obligations by DRP. What are DRP's obligations? In this

20 Contract and against whom? Well, against the other Party

21 in this Contract. I'm talking about DRP; right? And I'm

22 talking about the obligations that DRP has, vis-à-vis,

23 Centromín.

24 Q. You told us that this stands by its -- on its own

25 and we can't tell just from the Additional Clause whether

[Page 591]

1 the obligations that are being guaranteed relate to the

2 STA, or maybe they relate to DRP's tax obligations to the

3 Government of Perú, or maybe they relate to their payment

4 obligations to the employees of the Company. You can't

5 tell what obligations are being guaranteed, unless it's

6 specifically part of a single unified Contract, can you,

7 Mr. Varsi?

8 A. That is not the case. I think your

9 interpretation -- and I wouldn't want to qualify it, but I

10 think it's very linear, it is very superficial in nature.

11 If we interpret and understand this clause, and we do it in

12 good faith, well, evidently this is referring to the

13 obligations under the Transfer Contract.

14 The only obligations are the ones that are

15 included in the Transfer Contract. We don't have labor

16 obligations. We don't have tax obligations, Social

17 Security obligations. So we need to interpret these

18 provisions on the basis of the content and the principle of

19 good faith. And, also, we have to, of course, take into

20 account the finality of the Contract, the purpose of the

21 Contract.

22 Q. You are suggesting that you must incorporate the

23 provisions of the STA into the Additional Clause in order

24 for it to make any sense, aren't you?

25 A. I have not said that.

[Page 592]

1 Q. Do you believe that the choice of law provision

2 applies to the Additional Clause?

3 A. I haven't understood your question.

4 Q. Well, you know the Contract has a choice of law,

5 Peruvian law applies to the Contract. What law applies to

6 the Additional Clause?

7 A. Sí, sí, sí.

8 Q. What law applies?

9 A. Well, since there is no express indication then,

10 of course, it is Peruvian law.

11 Q. Is it Peruvian law because that's what the

12 Parties chose in the Contract?

13 A. If the Guaranty is an independent Contract, and

14 there is no change in jurisdiction in connection with

15 applicable law, then the law of the place where the

16 Guaranty was entered into has to be the one that governs;

17 right? I wouldn't want to talk about things that I'm not

18 an Expert on.

19 Q. Does the provision that we've looked at, at the

20 very beginning, that permits the Parties to use the Bidding

21 Documents and the questions and answers -- does that help

22 interpret the Additional Clause too?

23 A. You are making reference to...

24 Q. Clause 18.

25 A. Okay. 18, you're saying; right? You are making

[Page 593]

1 reference to Clause 18. No, because this is an independent

2 Contract.

3 Q. Well, you understand, sir, that it was not simply

4 some random choice that Renco and DRRC signed the STA. You

5 know that was part of the Bidding Documents, don't you?

6 A. Yes, of course. Of course. They are the ones

7 that participated in the bid.

8 Q. So let's look at the Bidding Documents again.

9 Pull up R-200. There was a specific question and

10 answer about this at Page 31. Here's Question 70. We're

11 going to put the Spanish version too.

12 The question was: "Definition of 'investor.' As

13 per Section 2.2(d) of the Bid Documents" -- we actually

14 read that at the very beginning of this examination -- "the

15 signatory to the Contract may be a subsidiary of the

16 Company that won the bid. Is there a form of Guaranty that

17 the Company that won the bid will be required to sign, or

18 can it simply pledge its Shares in the subsidiary to secure

19 its obligations."

20 That's the question that was asked by one of the

21 bidders, and the answer given by the Committee, the Awardee

22 of the Buena Pro -- which I take to be the bid

23 itself -- the Awardee of the Buena Pro must subscribe the

24 Contract.

25 You saw that in the study that you made, didn't

[Page 594]

1 you?

2 A. Yes, it's on the document.

3 Q. And it was reiterated -- let's look at the second

4 round because it came up again in R-201 at Page 5,

5 Question 6.

6 The question here was: "Regarding the answer to

7 Question 70" -- the one we just read -- "of the First Round

8 of Questions, which established that the winner of the

9 'most favorable bid' must sign the Contract. This answer

10 has a contradiction with 2.2(d) of the Bases that

11 establishes that a subsidiary of the most favorable bid

12 could sign the Contract. In any case, does the answer to

13 Question Number 70 modify Item 2.2(d) of the Bases."

14 And we're talking about the same issue that we've

15 been covering from the very beginning of examination this

16 morning. That is, must the winning bidders guarantee, be

17 jointly and severally liable, sign the Contract. These are

18 all related ideas, aren't they, sir?

19 A. Yes, they're all related.

20 Q. So the answer given in the second round is that:

21 "The answer to Question 70 of the first Round does not

22 modify Paragraph 2.2(d) of the Basis. In accordance to

23 such paragraph, the subsidiary will subscribe the Contract

24 in his capacity of El Inversionista. Nevertheless, the

25 prequalified Empresa must subscribe the Contract to assume

[Page 595]

1 solidarity El Inversionista's obligation, independently of

2 the Guaranties contemplated by the Contract."

3 So it was very clear throughout the entire

4 bidding process that the Committee and Centromín wanted to

5 make sure that the winning bidders were going to be liable

6 for all of the obligations of the subsidiary that they set

7 up; true?

8 A. And that happened. That indeed happened. They

9 are liable in their capacity as guarantors under the

10 Guaranty in the Additional Clause. So the wish was

11 granted.

12 Q. The Parties certainly could have. They were free

13 under their freedom of contract. Had they desired, they

14 could have put this Guaranty in a completely separate

15 independent document, could they not?

16 A. Yes. Of course. Yes, of course.

17 Q. And we know that because that's exactly what Perú

18 did when it guaranteed the obligations of Centromín.

19 There's an entirely separate Contract; right?

20 You've seen the Guaranty, haven't you?

21 A. I have, yes.

22 Q. And it states expressly who the beneficiary is,

23 what obligations are being required, and that they are

24 going to be subject to -- expressly subject to the

25 Arbitration Clause in the Contract, this Contract, the STA,

[Page 596]

1 don't they? Right?

2 A. Yes. In the Perú Guaranty, which has a different

3 document, it is a separate document. It is pretty well

4 structured. Yes.

5 Q. They didn't have to do that with the Additional

6 Clause to the STA because all of the specific terms are

7 already in the Contract including choice of law,

8 arbitration, how to interpret the Contract. All of that is

9 incorporated in the Additional Clause because it's part of

10 the same Contract; right?

11 A. No. No. That's not true. There is no

12 requirement by the Regulations or in the Regulations that

13 the Guaranty needs to be included in a separate document.

14 In this case, the Parties decided that they were going to

15 have an independent Contract, the Guaranty, but in the same

16 document. And then, of course, this was later made into a

17 notarized document, a public deed.

18 Q. Parties are free, not only to include different

19 agreements in the same contract, they can also agree to

20 include different documents in the same contract, can't

21 they?

22 A. Include documents in a contract. I don't

23 understand what you mean. Let's see. The Contract is

24 contained in a document when it is in writing. We have

25 verbal contracts, oral contracts, they're very common now,

[Page 597]

1 and, of course, there is no evidence. They're not

2 expressed, or, rather, express.

3 A contract is contained in a document. In this

4 case, a document may contain a number of contracts, and a

5 number of contracts may include a series of acts with legal

6 effects in order to, perhaps, fulfill some purpose, some

7 specific purpose. So I think, perhaps, you mixed some of

8 these terms up.

9 Q. My question was not very clear, and I apologize.

10 In this Contract, we see references to annexes

11 that are not actually part of the Contract.

12 You know that, don't you?

13 You know what I'm referring to?

14 A. Yes. Of course. Of course. Of course.

15 Q. Article 8 has references to many annexes. There

16 is an annex in 8.4 for information on employment contracts

17 and collective agreements of workers, and Annex 5 is a list

18 of surface lands and concessions, and Annex 6 is a list of

19 fixed assets. These are separate documents; right?

20 A. Yes.

21 Q. They are expressly part of this Contract, aren't

22 they? Right?

23 A. Yes.

24 Q. And they are expressly part of this Contract

25 because that's what the Parties agreed to in Article 18.

[Page 598]

1 They made sure to be very clear that the annexes are part

2 of the Contract. That's at 18.4; right? Right?

3 A. Yes.

4 Q. They didn't have to do that with the Additional

5 Clause because it was already part of the Contract; isn't

6 that true?

7 A. The Additional Clause is not part of the

8 Contract. It is a consequence of the breach of a contract.

9 And let me reiterate my position, the Assignment Contract

10 is the main contract -- the Transfer Contract is the main

11 contract. The additional contract is a guaranty clause.

12 Guaranty -- and it's additional to what? To the Contract.

13 This guaranty clause is supplementary. It is the

14 consequence of not doing something or of breaching an

15 obligation under the Contract. So if there is no contract,

16 there is no guaranty that is enforced. There's no reason

17 for that guaranty, and that is the relationship

18 between -- the symbiotic relationship between the existence

19 of a guaranty between Renco and DRR vis-à-vis the transfer

20 Contract for Metaloroya as such.

21 Q. I regret having to terminate your contentment

22 with our little question-and-answer session, but I have one

23 more subject, and then I'm going to conclude. In the list

24 of materials that you provided, attached to your Reports, I

25 did not see any of the Pleadings or documents or

[Page 599]

1 depositions from the Missouri Litigation, and I take it

2 from that that you were not asked to undertake any review

3 of the proceedings in Missouri; is that correct?

4 A. Indeed. I learned of that on a very basic way

5 when drafting my Reports. I was informed more yesterday in

6 this Hearing when Mr. Payet was examined, but I have

7 minimal information.

8 What is it that I know? I know that there is a

9 proceeding underway, that the Claim was not admitted, that

10 there is not even an identification of who the

11 Plaintiff -- the affected Parties are, who the affected

12 Parties are. I do not know much beyond that. And my role

13 as an expert cannot go beyond what I was asked to do.

14 Q. And so you had not been asked to, nor have you

15 given any opinions about whether the Claims of the Missouri

16 Plaintiffs relate in any way to Article 5 and 6 of the

17 Contract; correct?

18 A. First of all, I followed the instructions given

19 as an expert. And in my Report, there is a reasoning based

20 on the documents that I have reviewed.

21 Q. Okay. And I take it from your answer and the

22 lack of discussion in your Reports about this, you're not

23 aware of any ruling in Missouri that relates to whether the

24 Claims of the Missouri Plaintiffs are barred by any

25 statutes of limitations; is that correct?

[Page 600]

1 A. No. At any rate, I have addressed the issue

2 based on some assumptions, hypotheses that may have been

3 reflected, but this is also what Mr. Payet did. Mr. Payet

4 worked on a document, but he may have gone beyond a little

5 bit more in his conclusions and arguments, but I just

6 wanted to refute his position given the Reports that he

7 drafted.

8 Q. I think the answer to my question was you were

9 confirming that you have not reviewed and have no opinion

10 about whether the Missouri Litigation has decided any issue

11 about statute of limitations of these Plaintiffs; is that

12 correct?

13 A. No. Once again, let me reiterate, Mr. Murray, I

14 do have the basic information.

15 Q. All right.

16 A. And I told you the information that I handled. I

17 do not have more, and I don't think there is a reason for

18 me to go beyond that, and not to suggest, the Party that

19 asked me to draft the Report, something that they thought

20 it was not necessary for me to do.

21 Q. I'm not fussing at you, Mr. Varsi. I'm just

22 trying to establish the limits of your Opinions. I think

23 we're clear.

24 MR. FOGLER: And with that, I conclude my

25 examination. Thank you, Mr. President.

[Page 601]

1 PRESIDENT SIMMA: Thank you, Mr. Fogler.

2 We get to the stage of the redirect.

3 Do you need any preparation?

4 MR. RODRÍGUEZ: If -- with the Tribunal's

5 permission, if we could have five minutes to discuss.

6 PRESIDENT SIMMA: Certainly.

7 MR. RODRÍGUEZ: Thank you.

8 PRESIDENT SIMMA: So we break for five minutes.

9 (Brief recess.)

10 PRESIDENT SIMMA: We are ready to continue, and

11 it's going to be Mr. Rodriguez, or? Okay.

12 MR. RODRÍGUEZ: Yes, Mr. President.

13 PRESIDENT SIMMA: Mr. Rodriguez, you have the

14 floor. And, of course, you know about 10 times as much as

15 issues like leading questions, et cetera.

16 MR. RODRÍGUEZ: Yes. Yes.

17 PRESIDENT SIMMA: Thank you.

18 REDIRECT EXAMINATION

19 BY MR. RODRÍGUEZ:

20 Q. Mr. Varsi, I'm going to ask you about two

21 subjects. I'm going to ask about two subjects that you

22 discussed with Mr. Fogler. The last subject you discussed

23 was the statute of limitations rulings in Missouri, and I

24 want to ask about that subject first.

25 Did you explain, in your Reports, what statute of

[Page 602]

1 limitations would apply to the subrogation claim? And, if

2 so, can you explain that to the Tribunal?

3 A. Yes. Thank you very much. It was striking in

4 Mr. -- in Prof. Payet's position, to read about when the

5 statute of limitations was to be applied because he's

6 referring to subrogation, that is an allegedly existing

7 legal concept, that is subrogation, that is to be applied

8 under Peruvian law.

9 So if we follow that path, and also based on the

10 alleged damage that is being claimed and that is the strict

11 liability under Article 1970, the statute of limitations,

12 according to Article 2001 of the Civil Code, is two years.

13 I'm saying this because it is not proper to allege just a

14 whimsical statute of limitations and, much less, the law

15 that is not to be applied. So this is also supported on

16 the assumption whereby subrogation would be

17 enforced -- that is to say, the new creditor acquires

18 rights, privileges, and positions, as well as limitations,

19 and, as part of those limitations, the statute of

20 limitations is included.

21 That was the understanding I had. And let me be

22 totally frank, it was difficult for me to understand the

23 position of Dr. Payet's.

24 Q. Thank you.

25 We are going to put up on the screen Exhibit R-1.

[Page 603]

1 Could you please read to yourself, just review, VIII.

2 A. Yes.

3 Q. We'll put up the English. Would the Tribunal

4 like to review the English version on the screen?

5 You discussed with Mr. Murray various bidding

6 questions and bidding conditions today.

7 Could you explain to the Tribunal how the

8 Consortium's assignment of its rights influences how you

9 should use or interpret those bidding conditions for

10 purposes of interpreting the Contract?

11 A. Yes. When Mr. Murray asked me a series of

12 questions, I precisely mentioned to him that there had been

13 an assignment or transfer that was also memorialized in the

14 Contract where it says: "According to the Bidding Terms

15 and Conditions, the Consortium has transferred its rights

16 or assigned its rights to the Investor, and the assignment

17 has been authorized." So we see that everything that had

18 happened throughout the bidding process was later on

19 assigned by means of this assignment to the Investor.

20 Q. Just one more question. We're going to show you

21 Clause 18.1(a)-(c). When you're done reviewing, please let

22 me know.

23 A. Yes.

24 Q. Could you please explain to the Tribunal how

25 18.1(c) influences how you used the Bidding Documents and

[Page 604]

1 questions to interpret the Contract?

2 A. Yes. This Clause 18 is a typical clause because

3 the Bidding Contracts, we could say, have a preliminary

4 stage that some call an "administrative" or "precontract

5 phase," according to others, whereby there are some

6 commitments, obligations that are undertaken to be able to

7 enhance their position as bidders. Whatever is agreed and

8 when it becomes part of the bidding process, could be part

9 of the Contract in -- or they may exert some influence, as

10 long as there is no divergent concepts between the Bidding

11 Terms and conditions and the agreed terms of the bidding.

12 But the Contract prevails because the Contract is the final

13 document agreed by the Parties, if there is any difference

14 or any dispute in between the two documents, and this has

15 to do with global application.

16 This goes beyond Peruvian law, but the Bidding

17 Terms and conditions are part of the Contract, meaning that

18 there is no -- as long as there is no dispute, no lack of

19 clarity. And if that happens, whatever is agreed in the

20 document is applied.

21 MR. RODRÍGUEZ: No further questions.

22 PRESIDENT SIMMA: Thank you, Mr. Rodriguez.

23 That brings us to questions from the Tribunal.

24 Are there any? Yes.

25 Mr. Thomas, go ahead.

[Page 605]

1 QUESTIONS FROM THE TRIBUNAL

2 ARBITRATOR THOMAS: I'll start with the last

3 subject which was touched upon by Mr. Rodriguez. It's an

4 issue that I had been pondering while I listened to

5 Mr. Fogler's cross-examination of you.

6 There was considerable time spent on the Bidding

7 Conditions and the questions and answers that were given to

8 the bidders during that process. You'll recall those

9 questions from Mr. Fogler.

10 The question I have for you is this: Do you see

11 any inconsistency between the answers that were given in

12 the bidding round and the ultimate terms of the Contract,

13 in terms of how the Consortium related to the Contract?

14 I'm trying to say this in a neutral fashion.

15 Maybe, to be a little bit more precise so you can

16 answer this question, do you see any -- a consistency

17 between the bidding answers or inconsistency with the

18 Contract?

19 THE WITNESS: I thank you for the question.

20 The truth is that there is some inconsistency and

21 lack of logical relationship in some of the answers offered

22 during the bidding process, and that's the reason why the

23 decision was made to move forward with the assignment so

24 that in the future this would not have an impact on the

25 purpose of the Contract. And for greater certainty, this

[Page 606]

1 assignment that was finally recognized as part of the

2 Contract program.

3 ARBITRATOR THOMAS: I'm not sure that I

4 understand, completely, your response.

5 Could you be a little bit more specific?

6 THE WITNESS: Yes. What I mean is, that the

7 answers given the questions during the bidding process were

8 not always following the same path. I recognized that some

9 of the answers were inconsistent with the other ones.

10 So to avoid for this to have an impact in the

11 future on the Contract relationship, a decision was made to

12 have an assignment so that all of the obligations

13 undertaken as part of the bidding process by Renco and DRR

14 were assigned to the investor.

15 ARBITRATOR THOMAS: A second question, a very

16 minor question. Is there any significance to calling the

17 Additional Clause, "the Additional Clause," from a Peruvian

18 law perspective? The title. Just the title.

19 THE WITNESS: That is a question that is the

20 subject of discussion at the university level. Why is it

21 an Additional Clause? Because it is a clause that

22 supplements, that confirms, or that makes the operation

23 final. And as part of an Additional Clause, some acts in

24 these Contracts are entered that allow for the -- for

25 complying with the main purpose.

[Page 607]

1 But, to be very honest, I wouldn't think there is

2 much to say about this choice of words because that clause,

3 at any rate, should have been called by its own

4 name -- that is to say, clause, a guarantee clause.

5 That was the Contract in which this was included,

6 but if you allow me, the Additional Clause name, as I

7 mentioned at the beginning, as indicated by its own name,

8 is the one that allows you to ratify compliance with the

9 main obligation.

10 ARBITRATOR THOMAS: Okay. One more question, if

11 I may.

12 I'd like to understand the mechanics of your

13 analysis of the relationship between DRP's performance of

14 the Contract and the guarantee. You had some exchanges

15 with Mr. Fogler fairly early on in the cross-examination,

16 and I didn't get clarity on this specific question.

17 Is it your -- and I don't mean to put words in

18 your mouth. I want you to answer this question, but I'm

19 trying to describe what the issue is.

20 Is it your position that, if Centromín formed the

21 view that DRP was in breach of an obligation under the STA,

22 that it would, first, have to commence an arbitration under

23 the STA vis-à-vis DRP and obtain an award to that effect,

24 and then would have to commence a litigation against Renco

25 and DRRC in order to give effect to the Award that had

[Page 608]

1 determined a breach of DRP?

2 THE WITNESS: Those would be the steps to be

3 followed by Centromín, given DRP's breach. DRP's breach

4 would be cured by means of an arbitration proceeding, and

5 for Centromín to be able to secure the compliance with the

6 DRP obligations under the additional guarantee clause, they

7 would need to demand the performance of that guarantee in a

8 judicial court because the additional court is not under

9 the arbitration clause.

10 ARBITRATOR THOMAS: Okay. Thank you very much.

11 PRESIDENT SIMMA: Thank you, Mr. Thomas.

12 Any questions?

13 ARBITRATOR GRIGERA NAÓN: No.

14 PRESIDENT SIMMA: No questions.

15 That brings to an end your examination,

16 Dr. Varsi. Thank you for your contribution, patience, and

17 time that you spent, and you are hereby released. And you,

18 actually, are going to have a free lunch, so thank you.

19 THE WITNESS: I thank you. Thank you all.

20 (Witness steps down.)

21 PRESIDENT SIMMA: So we have 50 minutes left, and

22 I think that is enough time to bring up the next Expert,

23 Mr. Schmerler.

24 DANIEL SCHMERLER, CLAIMANTS' WITNESS, CALLED

25 PRESIDENT SIMMA: Welcome, Mr. Schmerler.

[Page 609]

1 Before your examination, I would like you to read

2 out the statement that you find in front of you. Oh, that

3 you're -- you're now in front of.

4 You have the floor.

5 THE WITNESS: Can you hear me? Can you hear me?

6 I solemnly declare upon my honor and conscience

7 that I shall speak the truth, the whole truth, and nothing

8 but the truth, and that my statement shall be in accordance

9 with my sincere belief.

10 MR. SCHIFFER: Good morning, Mr. Schmerler.

11 PRESIDENT SIMMA: This is English; right?

12 THE WITNESS: Good morning, sir.

13 MR. SCHIFFER: This will be in Spanish. Spanish.

14 DIRECT EXAMINATION

15 BY MR. SCHIFFER:

16 Q. So, Mr. Schmerler, you speak English? You need

17 to answer audibly. You need to say the word yes.

18 A. I speak English, but I want my examination to be

19 conducted in Spanish.

20 Q. Right. Because that's your mother tongue, and

21 you feel more confident and comfortable speaking Spanish?

22 A. That is correct.

23 Q. All right. So I may show you a few things in

24 English. Not very many things, and -- but most of it, what

25 we show you will be in Spanish.

[Page 610]

1 Do you have hard copies of your Reports with you?

2 A. I do not.

3 Q. Okay.

4 THE WITNESS: Thank you.

5 BY MR. SCHIFFER:

6 Q. And, as I understand it, you've issued two

7 Reports in this case?

8 A. That is correct.

9 Q. So you'll have them there for reference whenever

10 you need to use them.

11 The first thing I'd like to do is to present you

12 with a slide from our Opening Statement dealing with your

13 subject matter.

14 And Counsel and the Tribunal may recall the

15 slide, but I just want to focus for right now on the

16 relevant international law principles. Okay? I'm going to

17 read it out loud: "The Standard for a denial of justice is

18 that it exists when a Court's Decision is manifestly

19 arbitrary, lacking a legal basis or justification, or in

20 excess of mere judicial error."

21 Do you see that?

22 A. Correct.

23 Q. And have you reached an opinion in this case as

24 to whether there has been a denial of justice?

25 A. I have.

[Page 611]

1 Q. What is your opinion?

2 A. I consider that when the case was resolved for

3 the recognition of claims by MEM, in connection with DRP, a

4 denial of justice situation has existed.

5 Q. Okay. And are all the reasons set out in detail

6 in your Reports?

7 A. That's correct.

8 Q. Now, if I were the Tribunal, I would -- first

9 thing I'd want to know is where do the Experts agree, and

10 then where do they disagree? Because there is a lot of

11 words in everyone's Reports. So I'd like to show you a

12 couple of paragraphs from Mr. Hundskopf's Report, his First

13 Report, and I believe it's 116. And I'm going to blow that

14 up in English -- or is that in Spanish?

15 A. English.

16 Q. Thank you. Okay. I'll read it. Paragraph 77

17 says: "With regard to claims arising from compensation,

18 although the judiciary has full power to establish such

19 amounts, this does not affect the fact that within the

20 framework of a credit recognition proceeding, and in

21 accordance with the powers granted by the LGSC, the

22 insolvency Authority may recognize credits arising from

23 compensation, provided that the evaluation of the

24 documentation submitted clearly shows that the law,

25 Contract, or the Declaration of the Parties allows

[Page 612]

1 determining the amount of compensation."

2 My question for you is: Do you agree with this

3 proposition, disagree, or partly agree, or tell us if

4 there's any common ground here?

5 A. I agree that -- and I said this in my Report.

6 When the compensation has been determined in a different

7 fora, for example, by the judiciary or by Contract, with a

8 legal damages clause, or, for example, for termination of

9 employment of workers, there may be room for the Chamber of

10 the INDECOPI Tribunal to recognize that, if this is

11 included in the law or in the Contract.

12 Now, a Declaration of the Parties? That I

13 disagree with.

14 Q. The sentence -- or the part of the sentence that

15 says "declaration of the Parties allows determining the

16 amount of compensation," is that the clause you disagree

17 with?

18 A. Yes, that section. That portion, rather.

19 Q. And just very --

20 (Overlapping speakers and interpretation.)

21 Q. And very briefly, please explain to us what you

22 disagreed with about that sentence.

23 A. Yes, of course. As I indicate in my Report, in

24 both my Reports, the Reports that I submitted, all of the

25 case law that has allowed INDECOPI to determine an amount

[Page 613]

1 of compensation that existed priorly, they have to do with

2 cases when a Contract has existed and both Parties agreed

3 that there was an amount of compensation. So we have to

4 quantify the amount of the compensation damage existed,

5 liability existed, and one of the Parties had to pay to the

6 other for compensation purposes. So they needed to

7 quantify it. So INDECOPI did that, recognized that.

8 Now, the same thing happens in cases when it is

9 clear that there was the termination of an employee, and

10 because of the Contract termination or legal termination,

11 then that would allow INDECOPI to quantify the amount.

12 That case law has never stated that this had to do with the

13 declaration of the Parties.

14 The Company says, okay, I owe compensation.

15 That's a recognition of -- by the Company. So if you take

16 information by one of the Parties, and you do that, well,

17 that's something that has not happened in the case law of

18 INDECOPI, which is the bankruptcy Authority in Perú.

19 THE INTERPRETER: Mr. Schiffer, this is the

20 Interpreter, we're going really fast.

21 MR. SCHIFFER: Yeah, I have asked him to slow

22 down, and I think from now on, if he starts speeding up,

23 I'm going to take my hand and make a signal; so that will

24 remind him to speak much slower. Yeah. That's -- I feel

25 your pain that way.

[Page 614]

1 THE INTERPRETER: Thank you, sir.

2 BY MR. SCHIFFER:

3 Q. So, let's take a look at Paragraph 78, for the

4 sake of completeness, and I'll read that out loud and

5 you'll tell the Tribunal whether you and Mr. Hundskopf have

6 common ground or not on that paragraph: "A different

7 situation arises when the insolvency Authority lacks the

8 necessary evidentiary elements that facilitate

9 demonstrating the amount of the credits that are the

10 subject matter of a request for recognition. In such

11 cases, the Commission can only make a recognition when the

12 Court has determined that in the corresponding judicial

13 proceeding," that being the compensation, I assume.

14 Do you agree or disagree with this proposition?

15 A. I agree with that proposition.

16 Q. Now, I want to show you another provision of

17 Mr. Hundskopf's Report.

18 B.B., if we could go to the next callout.

19 And this is in Paragraph 66 of his First Report.

20 And I'll read it out loud:

21 "In this case, the credit of the MEM under the

22 responsibility of DRP originated from the obligation to

23 implement the PAMA in accordance with Supreme Decree

24 016-93-EM. The failure to comply with said obligation to

25 perform means that DRP is obliged to pay compensation in

[Page 615]

1 favor of the MEM for the value of the PAMA implementation,

2 which was valued by the same Company according to the

3 Report submitted on January 27, 2010, by DRP to the MEM."

4 Do you agree with that proposition?

5 A. I do not agree with it.

6 Q. So let's go back to, just briefly, B.B., to the

7 first slide I showed him. The -- I'm sorry, the PowerPoint

8 from the Opening.

9 If we look at the relevant Peruvian Bankruptcy

10 Code principles, I highlighted -- I know there are many,

11 but I highlighted Article 4, and it says -- I won't read

12 the number, but it "requires creditors to prove the

13 existence, origin, legitimacy, and amount of their credit."

14 Do you understand that to be the applicable

15 principle at play here?

16 A. That's correct.

17 Q. Can you explain your understanding of "existence,

18 origin, and legitimacy"?

19 A. Let me explain. These requirements are included

20 in the law. They're also enshrined in Resolutions from

21 INDECOPI. And this is a precedent, and they must be

22 complied with, compulsorily. So there is a resolution of

23 this kind that is cited by the Reports of both Parties.

24 Q. Right. But I'm not interested in the history.

25 Just tell us what you understand, as an Expert in this

[Page 616]

1 field.

2 What do you understand the words "existence,

3 origin, and legitimacy," what do they mean?

4 A. Existence entails a legal relationship that is of

5 an asset nature. There is an obligor and obligee. There

6 is a Party that has an obligation, vis-à-vis the other

7 Party, that is property-related.

8 Origin means the source, the source of that legal

9 relationship and the recognition of the credit. The source

10 in Perú, for example, and in many other cases are the law

11 and the agreement by the Parties, a contract. So in one of

12 those sources, one must establish the relationship. Is it

13 a contract? Is it a document? Legitimacy has to do with

14 the beneficiary who is the party that has the right to ask

15 for the credit and also the amount of the quantum; right?

16 Q. Let me ask another question. Under Peruvian

17 bankruptcy law, in order for a credit to be

18 recognized -- and let's assume we're talking about a

19 contract case, not a labor law case, where there are

20 special laws. Okay. We're just talking about contracts

21 right now.

22 Does the contract have to give the person making

23 the claim a specific right to receive compensation?

24 A. If we were talking about a compensation that is

25 included in the Contract, for example, a liquidated damages

[Page 617]

1 clause, the consequence is compensation. If an obligation

2 was not performed, and that could, of course, bring about a

3 recognition of the claim.

4 Q. Well, of course.

5 A. Or the credit.

6 Q. But more generally speaking, under Peruvian

7 bankruptcy law, does the origin -- so the origin would be

8 the Contract. Does it have to specifically grant the right

9 to compensation in order to get over the hurdle of

10 Article 4 that we're looking at on the screen?

11 A. That would be something that would bring about

12 recognition. Why? Because -- the insolvency

13 Authority's --

14 Q. Okay. I didn't ask why. We can move on now.

15 Let's go to the PAMA, which is the basis for Perú's Claim

16 for a credit. Okay? And I believe we have that teed up.

17 That's C-88. And we'll go particularly to the Penalties

18 Clause.

19 Have you reviewed this document in preparing your

20 Reports in this case?

21 A. Yes, I have.

22 Q. Okay. Do you understand that this is the "origin

23 and legitimacy" from which Perú says they're owed

24 $163 million?

25 A. Please repeat the question. I didn't hear the

[Page 618]

1 Section of the question.

2 Q. Okay. This PAMA document is the document that

3 Perú says is the origin and legitimacy for their claim?

4 A. Yes.

5 Q. Is there anything in the PAMA that gives Perú the

6 right to receive compensation from, in this case, DRP, in

7 the event DRP defaults on its obligations under the PAMA?

8 A. Not expressly. No. What I see here is that

9 there are some consequences, some penalties, but there is

10 no right for compensation.

11 Q. That's the point. So what are their rights if

12 there's a default?

13 A. The consequences of the breach under PAMA is to

14 impose penalties. It may be, for example, the closing of

15 the establishment or a fine or any other kind of

16 administrative-type decision.

17 Q. Okay. Well, I'm going to represent to you that

18 there is only -- do we have -- I think we have Mr. Isasi's

19 Statement. Paragraph 25, Page 6. Let's blow that up.

20 So according to the Chief Legal Officer of the

21 MEM during the relevant time period, he says that the only

22 possible alternative under the PAMA, "if DRP was in

23 default, was to find DRP and ultimately close the CMLO."

24 Okay.

25 Do you see that? Is that your understanding of

[Page 619]

1 what the PAMA allows?

2 A. I agree that that is what it says, on the basis

3 of the document you showed me before.

4 Q. Right. And let's go back to the PAMA, please.

5 Is there anything in here that imposes an obligation on the

6 MEM or any organ of the Peruvian Government to complete a

7 project that DRP fails to complete?

8 A. No.

9 Q. Okay. So the PAMA doesn't give the MEM a

10 specific right to compensation in the event of default.

11 I think we've established that; true?

12 A. That's correct.

13 Q. And I think we've already established that the

14 PAMA doesn't obligate the MEM to pick up where DRP left off

15 if there's a default; true?

16 MR. VACA: Mr. President --

17 MR. SCHIFFER: I'm just summarizing what I

18 believe he's already testified to. We've been through

19 this.

20 MR. VACA: We let a few go, but, at this point,

21 it's probably five or six that I've counted.

22 (Comments off microphone.)

23 MR. VACA: No. We said that there have been a

24 few leading questions and we let them go, but, at this

25 point, I think it's time to stop doing that, asking leading

[Page 620]

1 questions.

2 PRESIDENT SIMMA: Right. I apologize because I

3 have a problem with leading questions put at the direct

4 where I see maybe a different limit than in the other case

5 we had a couple of days ago, but that's my fault. So you

6 are right. Okay.

7 BY MR. SCHIFFER:

8 Q. I'll move on.

9 So what is the reason you believe that the

10 INDECOPI Court system exceeded its authority -- and it

11 wasn't just mere judicial error -- in recognizing

12 Perú's -- the MEM's claim under the PAMA?

13 A. I think that it was a majority vote that was

14 taken. And it is a majority vote that contains an

15 incorrect decision that is not in line with the regulations

16 that govern INDECOPI, which is an administrative authority.

17 So that is why a credit was recognized and, from what I

18 have reviewed, that should not have proceeded that way.

19 Q. And why shouldn't it have proceeded that way?

20 A. There are a number of reasons. I'm going to try

21 to summarize them very briefly.

22 Q. Actually, I only want the main one that has to do

23 with the origin and legitimacy of the Claim?

24 MR. VACA: Another leading question,

25 Mr. President.

[Page 621]

1 MR. SCHIFFER: No, I'm not leading him.

2 MR. VACA: He's testifying.

3 PRESIDENT SIMMA: I said I hope I'm learning

4 about this topic, but this is a question that I would let

5 pass. Thank you.

6 BY MR. SCHIFFER:

7 Q. Are you still good with my question,

8 Mr. Schmerler?

9 A. I have understood the question. Yes. So the

10 main reason is that a resolution was issued -- should I

11 answer? Shall I answer?

12 Q. Yes. You should. We were just waiting for

13 everyone who needed translation to get it. So if you could

14 start over, please. I'm sorry. One more time.

15 A. The main reason why that credit should not have

16 been recognized is because the Tribunal went ultra vires

17 when it ruled on the recognition of credits. Why? Because

18 it defined the existence of a compensation. And as I said

19 in my Reports, this is a matter that goes beyond the

20 competence of the INDECOPI, the administrative authority,

21 specifically in the case of insolvency, to rule on these

22 matters. There are many other reasons, but that would be

23 the substantial reason.

24 Q. And should the INDECOPI court system have

25 recognized a claim for compensation using and relying on

[Page 622]

the PAMA?

A. No.

Q. You have answered question.

Is there -- so -- okay. You know, they messed

up, they made a mistake. That's not denial of justice. Is

there anything that you've seen that actually shows that

they absolutely knew that they were in the wrong and did it

anyway? Any case law that you found that makes an

exclamation point on your point?

A. There are cases, yes, that are similar to this.

They originate in regulatory or administrative obligations

like Doe Run or other mining companies that went into

insolvency many years later. Although the MEM wanted these

obligations to do to be recognized and to bring about the

right to a credit, the two instances of INDECOPI, first the

commission and then the appellate body, said that this was

not the case because there were obligations to do something

that entailed rights, but they did not have property

content. And, therefore, they didn't have the right to

issue a recognition.

There were two cases in two different instances

after Doe Run.

Q. Let's look at those cases. Let's look at the

first case. Do you recognize -- and I believe -- just so

we're clear on the exhibit numbers, this is DS-58.

[Page 623]

Do you recognize this as --

A. I can look?

Q. Yeah. You can look.

A. That is a resolution that was attached as an

annex to my First Report.

Q. Right.

A. The Tribunal, it's the Second Report.

Q. Let's look at this, first, the date, as we can

all see, is August 9, 2021. And then I'll just go ahead

and read the key paragraphs. Number 3: "In a motion filed

on March 18, 2019, the Ministry of Energy and Mines

requested the allowance of claims against Minera Santa Rosa

in the amount of" -- call it 17 million plus

interest -- "arising from the debtor's obligation to post

environmental guarantees to ensure compliance with the Mine

Closure Plan provided in the law." Okay. I mean, I

paraphrased that a little bit, but that's what you

understand the Claim to be, as we can all read.

Let's go down.

A. That's correct.

Q. Okay. And then let's go down to the next.

They -- again, Paragraph 33, the MINEM, which is, I

believe, the successor to MEM, they said that the Claim

derived from Santa Rosa's obligation to post an

environmental bond to cover the estimated cost of closure.

[Page 624]

So they're actually talking about a bond that the MINEM

could have used to finish the Project in that case. Is

that your understanding?

A. Yes.

Q. Okay. So let's look at Paragraph 35. "In this

regard, it is necessary to specify that neither The

Mine-closure Law nor its regulations establish, as a

consequence of the failure to provide environmental

guarantees, a claim in favor of the MINEM that can be

quantified based on the economic value of the environmental

bonds posted. As can be seen in Paragraph 29 of this

ruling, the Mine Closure Regulation only empowers the MINEM

to exercise the following powers in the event of failure to

post an environmental bond."

And let's go down to the next page.

Covering -- the rights are: Prevent the development of

exploration, exploitation, and mining process activities.

Second thing they can do is paralyze the activities for a

maximum period of two years. And those are the -- again,

I'm not going to read all of it, but those are the rights

they have under the law, as you understand it, as -- the

Opinion, obviously, we can all read.

Let's go down to Paragraph 37: "Thus, although

Minera Santa Rosa was obliged to post bonds in favor of the

MINEM in the amount of $17 million to secure the compliance

[Page 625]

with the Measures established in the Closure Plan, the

monetary value of such guarantees does not grant MINEM, as

the competent authority for the supervision and control of

the obligations assumed in the Closure Plan, the right to

obtain a benefit from Minera Santa Rosa equivalent to such

amount, in the event this obligation is not performed. The

value of the obligation to do is different from the value

for which the Parties guaranteed said obligation in the

event of default."

And can you just elaborate on the obvious words

that we can read here, why you think this case is important

and applies?

A. What happens in this case is that there are

obligations in connection with the Mining Regulations that

apply to a mining company, a mining company that is in

insolvency proceedings. And the MEM asked them to

recognize a credit. What INDECOPI is examining in the two

administrative instances is that -- the fact that certain

obligations exist and, if we look at 35, we are going to

see an explanation of what those obligations are.

Although, obligations to do are established there, these

are not property-related obligations that can be

transferred to a right to a credit in favor of the MEM.

Since the Regulations do not grant a property-related

right, then the Ministry cannot become a creditor in the

[Page 626]

insolvency proceedings. Why is this important?

Q. I don't think we need to get why -- I don't think

we need to get into why it's important right now, but do

you find the facts in law in this case to be substantially

the same as the facts in law in our situation? Do

you -- it's not leading.

MR. PEARSALL: Just a reminder, this is his

direct examination.

PRESIDENT SIMMA: Even I recognize this as

leading; right?

MR. SCHIFFER: Okay.

BY MR. SCHIFFER:

Q. How do you view the facts in this situation

versus DRP?

A. I see that, in both cases, we are faced with

obligations to do that are different. These are

administrative obligations. These are obligations to do

that have a no-property content, but, as we've seen, the

results have been different. In the 2011 case that is

being discussed at this Hearing, these cases that we have

brought to show how later on INDECOPI has decided on

similar situations.

Q. Okay. And there is -- is there another case that

you also cited in your Report that's identical to this

case?

[Page 627]

A. There is another case of another mining company,

the Kavicka (phonetic) mining company that is also of 2019,

and it quite similar to this one that was presented here,

the Santa Rosa one.

Q. And we're not going to take the time to go into

that one, but it's DS-59 in your Report.

A. Correct.

Q. So, with that, I thank you very much for your

answers, Mr. Schmerler.

MR. SCHIFFER: And I'm finished with our direct.

PRESIDENT SIMMA: Thank you, Mr. Schiffer.

I think -- would you prefer spending the next

15 minutes in starting the exam, or should we have a

slightly earlier lunch break and then continue at 1:30

instead of 1:45? I'm in your hands.

MR. VACA: Thank you, Mr. President. On our

side, we'd prefer to take the lunch break. We think that

would be better, that way people aren't hungry during the

cross-examination, if that's okay.

PRESIDENT SIMMA: It's good for the people not to

be hungry.

MR. VACA: It's good for the people not to be

hungry, at least that's my position.

PRESIDENT SIMMA: Okay. So Mr. Schmerler.

THE WITNESS: Yes.

[Page 628]

PRESIDENT SIMMA: Mr. Schmerler, you will have to

have a lunch without engaging any discussion with anybody

about the case.

So we meet again at 1:30. Thank you.

(Whereupon, at 12:33 p.m., the Hearing was

adjourned until 1:30 p.m., the same day.)

AFTERNOON SESSION

PRESIDENT SIMMA: So I give the floor to Mr. Vaca

for the examination of Mr. Schmerler.

You have the floor, sir.

MR. VACA: Thank you, Mr. President. I'll be

conducting this cross-examination in Spanish.

CROSS-EXAMINATION

BY MR. VACA:

Q. I think your mike is on.

A. Good afternoon.

Q. How are you doing, Mr. Schmerler?

My name is Brian Vaca, and, together with my

colleagues, I represent the Republic of Perú and Activos

Mineros in this Arbitration.

Before we start, I would like to ask you to speak

slowly and clearly for your answers to be interpreted and

transcribed properly for the benefit of everyone.

A. Understood.

Q. And if you'd like to have a pause at some point,

[Page 629]

please let me know.

A. Certainly.

Q. Mr. Schmerler, have you read the Decision in the

ELSI Case?

A. What case?

Q. ELSI. E-L-S-I.

A. Would you please be specific about that Decision?

Q. My question is whether you recognize ELSI or not.

A. I do not know it by that name, no.

Q. Have you read the Mondev Case, M-O-N-D-E-V?

A. No.

Q. Have you read a book that was written by Jan

Paulsson?

A. No.

Q. Very well. In addition to the Standard of

denegation of justice shown to you by Claimants' Counsel,

you have no other basis to understand what that Standard is

under international law?

A. I have followed in my analysis the documents

given to me in connection with the credit recognition file,

and I have prepared the Reports that you have seen.

Q. When you're talking about the documents, are you

talking about the facts, what happened, what actually

happened in Perú?

A. Whatever is related to the credit recognition in

[Page 630]

this, in the specific case.

Q. Very well. So you are not -- you wouldn't say

that you are competent to opine, as an Expert, on the

meaning of the Standard of the denegation of justice under

international customary law?

A. My expertise is in the area of bankruptcy law in

Perú, and based on that, I prepared my Report.

Q. I would like to ask you some basic questions to

make sure that I have properly understood some of the

reasons why you opine that the MEM credit against DRP, Doe

Run Perú, should not have been recognized. I would like

you to go to your First Report.

Can you see it on the screen?

A. Yes.

Q. If we move on to the second page, in the

contents, you include Section IV.3.2. That Section

reads: "INDECOPI does not have jurisdiction to determine

an indemnity."

Have I read it correctly?

A. Yes. This is the way you have it on the screen.

Q. And if we move on to Paragraph 109, at Page 47.

I would like to read that paragraph.

You said: "From the assessment of the set of

standards mentioned, it is clearly seen that the

determination of the damage, as well as the potential

[Page 631]

indemnity, since these are matters that have to do with

civil liability, are acts that are within the exclusive

jurisdiction of the judiciary. Following those thoughts,

and also as long as the administrative Authorities do not

have a jurisdictional role, only the bodies that are part

of the judiciary, courts and chambers may issue or may

decide indemnities, and that is not allowed for other

bodies that are part of the public administration."

Have I read this correctly?

A. Yes.

Q. And I would like, now, to move on to

Paragraph 138 at Page 54. In this paragraph, you

state: "In addition, as stated in this Report, the

administrative Authorities, as in the case of the

Commissions and Chambers with the INDECOPI from the

bankruptcy area, are not bodies that may establish

indemnity since that is limited under the constitution and

the laws of Perú exclusively for the judiciary, and also

because the LGSC does not grant those powers to the bodies

in terms of their role in the petitions for the -- for

credit recognition."

Have I read this correctly?

A. Yes.

Q. To sum up what I just read, would it be proper to

say that your argument or the position that you express

[Page 632]

here in these paragraphs is that no administrative

Authority in Perú has jurisdiction to determine the

existence of an indemnity or compensation as a result of

civil liabilities since this is a role for a power that is

reserved to the judiciary.

Is this a fair summary?

A. I would say that it comes close enough.

Q. Very well. I understand that Doe Run Perú filed

an adjudicatory administrative Claim against the Resolution

of 2011, 1743 of 2011?

A. Yes, that is part of the case.

Q. And I also understand that the jurisdiction to

hear this Claim was with the Fourth Temporary Court that

specializes in adjudicatory administrative issues with the

Superior Court?

A. Yes. That is the name of the Court.

Q. I'd like to show you that document, that is

R-141. This document was presented by Doe Run Perú;

correct?

A. This is the Statement of Claim; correct?

Q. Yes. If we look at Page 28 of this Claim by Doe

Run Perú, you will see -- you can see the title of

Section 5, where it says "concepts of credit and credit

under the provisions of Article 1," and then -- and there

it says legal requests common to both autonomous demands,

[Page 633]

but if we look at Page 50 now, towards the end of the page,

you're going to see that there is a subparagraph under 5,

that is Section (d). I am going to read the title, and it

reads: "The Court cannot fix compensation because that's

the sole jurisdiction of the judiciary."

Have I read it correctly?

A. Yes.

Q. And, in general, we could say that this is the

same argument that you have presented for the paragraph

that we read; correct?

A. Well, yes. On its face, yes.

Q. I also understand that on October 18, 2012, the

Fourth Temporary Court specializing in adjudicatory

administrative matters issued a Judgment indicating that

the Claim was meritless; is that correct?

A. Yes.

Q. And then on November 5, Doe Run presented an

appeal against that Claim -- against the Judgment by the

Court, and this is something else that you recognize;

correct?

A. Yes. I understand that everyone knows that.

Q. And after the fourth court issued a Decision in

the First Instance. In the Second Instance, I understand

that the eighth judgment -- Eighth Court also issued a

decision against Doe Run; correct?

[Page 634]

A. Yes.

Q. And on August 22, 2014, Doe Run presented a

cassation request against the Doe Run Judgment; correct?

A. Yes.

Q. I would like to show you C-191.

This document was presented by Right Business

S.A. for Doe Run Perú.

A. Yes.

Q. This document is a cassation request against the

Judgment by the Court that was confirmed in the First

Instance; correct?

A. Yes.

Q. And if we look at Page 6 -- and I can tell you

that we are at the substantiation of the Claim presented.

I would like to call your attention to the text that we

have in uppercase at the bottom of the page. Here, Right

Business S.A. for Doe Run Perú said: "The Decision whose

nullity has been sued in this proceeding is contrary to the

Constitution and the laws by establishing that INDECOPI may

set compensation, notwithstanding that this is an exclusive

power of the judiciary."

Have I read it correctly?

A. Yes.

Q. And here, again, just to confirm, would it be

correct to say that this is an argument that you have also

[Page 635]

presented in your Report, in general?

A. Yes.

Q. Continuing with these basic questions to make

sure that I have understood some of the reasons why you

opine that the MEM credit against Doe Run Perú should not

have been recognized, I would like to move on to another

reason that you present. I will show you, again, your

First Report. And now, we are going to look at the

content, second page, and I would like to look at Section 4

that says, "in existence of a MEM credit vis-à-vis DRP." I

don't know if you see that in your contents. And there is

a subsection, rather, Section 4. And there, you have a

subsection that is 4.3.3(b), and it says that the origin of

the alleged MEM credit has not been evidenced; is that

correct?

A. Yes.

Q. And as part of that section, I would like to read

to you Paragraph 171, at Page 62. Well, it starts at the

end of Page 61, and it moves on to the next page -- 171,

rather.

It is Paragraph 171 on Page 62 of the PDF.

I will read that paragraph from your Report. You

said: "As can be seen, both the Resolution of the INDECOPI

commission and the singular vote of Member Ferreyros,

coinciding pointing out that in the Regulations governing

[Page 636]

the PAMA, a serious of possible consequences is established

in case the mining company (essentially the imposition of

administrative sanctions of a fine or cessation of

operations). In this case, DRP fails to comply with

executing the actions (finance built) adhering to the

Project that it extends, but in no case does this entail

the possibility that a patrimonial obligation is

originated, generated, or managed, that is a debt on the

part of DRP in favor of the MEM or some other entity or

person."

Have I read this correctly?

A. Yes.

Q. Now, I would like to look at what Doe Run Perú

said in the first administrative instance before the

INDECOPI commission. And on the screen, I will show you

OEH-10. This is a pleading presented by Doe Run Perú to

the Bankruptcy Commission with INDECOPI; correct?

A. Yes.

Q. And on the second page, I will show you one of

the items that Doe Run Perú told the Tribunal that they

needed to bear in mind. They said -- and I am reading the

third item. There is a number 3, the third one: "Doe Run

Perú said the effects and consequences of the PAMA breach

(a situation that DRP disputes) are specifically regulated,

and the Regulation does not provide in any case that, given

[Page 637]

their breach, there is a need to compensate for the value

of the Project in favor of MINEM. So for the latter one to

perform the last phase of PAMA, its breach is related to

the application of pecuniary sanctions and the existence of

a plan by OEFA."

A. It doesn't say -- it says "a demand of a

cessation plan in charge of OEFA."

Q. Okay. So, "the demand for a plan for the

cessation of the charge by OEFA." Have I read it

correctly?

A. Yes.

Q. I would like to review what Doe Run presented in

the second instance of the administrative proceeding, and I

will show you the Exhibit C-172. This document on the

screen was presented by Doe Run Perú before the First

Chamber of the INDECOPI -- correct? -- for the defense of

competition?

A. Yes.

Q. If we look at the second paragraph on the seventh

page, and I can tell you that this section addresses the

origin, the existence, the amount, and also the legitimacy

of the PAMA credit that MEM invoked. And there, Doe Run

Perú argued: "In the present case, there is no rule that

authorizes the State in general, or MINEM in particular, to

charge or claim monetary amounts that may be necessary to

[Page 638]

develop the work to comply with the purpose of the

obligation imposed on the administered Parties by law, nor

of the duties arising from it. Indeed, the State (through

its competent institutions) is only authorized to monitor

and sanction noncompliance (or incentivize compliance)."

Have I read it correctly?

A. Yes.

Q. That is, once again, Doe Run Perú is stating that

PAMA -- or that in PAMA, there is no provision that, in

case of breach, there is a need to restore the value of the

Project in favor of MINEM; correct?

A. Yes.

Q. I would like now to look at what Doe Run Perú

stated in the Adjudicatory Administrative Court. I am

going to show you R-141. This document -- and we just saw

it -- is the challenge of the administrative Resolution;

correct?

A. Yes.

Q. And if we go to Page 43 of this Claim, if you

look at the title at Subsection (c), it says: "The

obligation to comply with the PAMA is not a monetary or

quantifiable obligation."

Have I read it correctly?

A. Yes.

Q. And if we move on to Page 46 of this Pleading by

[Page 639]

Doe Run Perú, I am going to read what the first sentence

says. It reads: "This ratifies the position, meaning that

the PAMA does not imply an obligation to do that could

be -- that could result in an immediate monetary debt in

favor of the State represented by the amount of the

investment."

Have I read it correctly?

A. Yes.

Q. That is, Mr. Schmerler, Doe Run, again, is

presenting an argument that you presented in your First

Report; that is, that PAMA -- or the PAMA does not provide

that, in case of breach, there is a need to restore the

monetary value of the Project in favor of MINEM; correct?

A. Yes.

Q. And I apologize, we are about to come close to

the story time, and I know that I am reading a lot, and we

are now moving on to questions to understand your Opinion

in connection with the MEM credit against Perú, and we are

going back to the first -- Doe Run Perú -- and we are going

back to your First Report.

At Paragraph 126, Page 51, you represent the

following. You say, on the fourth line, you start a new

sentence and you say: "Thus, it must be born in mind that

the quantification of the amount of an obligation is not

equivalent to the termination of its existence. This means

[Page 640]

that one has to -- one has to make sure beforehand whether

there has been a relationship between the obligor and the

obligee. This may be based on an agreement or it may be

legal in nature. It determines the need to value the

amount of money in connection with a potential obligation

by the obligor in favor of the counterparty."

Did I read this correctly?

A. Yes.

Q. Now, let's look at the administrative proceedings

and what Doe Run Perú submitted there. And let us go to

another document, C-172. I'm going to read at 2.3, the end

of Page 7. I'm going to wait until this is put on the

screen. I'm going to begin reading. I'm going to be

reading 2.3 at the end of Page 7. It says

here: "Referring to the existence of the PAMA credit,

MINEM is confused or it thinks that it seeks to confuse,

arguing that the credit exists whenever it" -- and I'm

going to the next page -- "results from failure to comply

with an obligation quantifiable in money and that DRP

itself acknowledged owing, giving proof of such

recognition, ergo, the existence, with Letter 01959297,

submitted by the appellant to MINEM on 27 January 2010. On

this point, it should be first noted that you,

Mr. President, have already cautioned the quantification of

an obligation as nothing to do with its existence."

[Page 641]

Have I read DRP's argument correctly?

A. Yes.

Q. I will now show you C-196. This document is an

appeal to the ruling that was handed down in first instance

in the Administrative Court submitted by the DRP in

liquidation, represented by Right Business, its Liquidator;

correct?

A. Yes.

Q. It says here at Page 4 -- I'm going to read the

argument submitted by Doe Run Perú in this lawsuit: "With

regard to the PAMA Project under review, it should be noted

that, while this Party indicated that the estimated

investment to complete the Project is $163 million" -- and

I'm rounding the amount -- "his does not entail, nor does

it generate an acknowledgment of a credit in favor of

MINEM, as it is only an estimate of the value or the

estimate of the works to be implemented in order to meet

the objective of the PAMA. Consequently, since the origin

is not reliably verifiable, the existence, legitimacy, and

the amount of Claims invoked by MINEM, INDECOPI should not

have recognized them."

Have I read this correctly?

A. Yes.

Q. Again, Mr. Schmerler, DRP puts the same argument

that you have included in your Reports, that the

[Page 642]

quantification of the amount of an obligation does not

really determine the existence of that obligation?

A. That's right.

Q. Thank you for your patience. We are going to

move on.

In your presentation, during your direct

examination, Claimants' Counsel showed you DS-58, if memory

serves, which is one of the resolutions that you appended

to your Second Report to support your argument that

INDECOPI has not recognized, in the same manner, the

requests for credit submitted by MEM, as it did in the

MEM's request in connection with Doe Run Perú?

A. So I'm looking at Resolution 051 from INDECOPI

dated August 2021, and this is company Minera Santa Rosa

case and, yes, the question was asked about this earlier.

Q. Very well. Let us put that document on the

screen, DS-58, and I'm going to read Paragraph 24. At 24

here, the Chamber said -- sorry. I'm going to show you the

Spanish version. I think that would be more useful.

"As mentioned in the background of this ruling,

MINEM invoked the allowance of claims against Minera Santa

Rosa for the amount of $16 million as principal and

$300,000 as interest derived from the debtor's obligation

to post environmental bonds to ensure compliance with a

Closure Plan, in support of which MINEM submitted a copy of

[Page 643]

the documentation indicated in Paragraph 5 of this ruling."

I haven't read the exact amount, of course, but

I've read this correctly; right?

A. Yes.

Q. So in this example, the credits invoked by MEM

were, according to MEM, derived from the debtor's

obligation to post environmental bonds; right?

A. Yes.

Q. And the obligation, according to the MEM in this

example, is borne of the Mine Closure Law; right?

A. Yes, of the Regulations from that industry.

Q. Well, yes. It has to do with mine closures;

right, sir?

A. Yes, mine closures. It is in here.

Q. And the Chamber actually looked at the

consequences on the applicable regulations; right?

A. Yes. And this is further developed in this

ruling later on.

Q. Let us now look at Paragraph 38. And here the

Chamber says, "Subsequently, taking into consideration that

the -- that in the Closure Plan, the Parties have not

established the elements that are now determining the

amount of the claims invoked by MINEM against Minera Santa

Rosa due to the failure to post environmental bonds

detailed in Table 2 of this ruling. It is not possible to

[Page 644]

convert the conduct of Minera Santa Rosa into a monetary

equivalent for its recognition in bankruptcy proceedings."

Have I read this correctly?

A. Yes.

Q. In this example, it was the General Directorate

of Environmental Matters, the one that established the

yearly contribution for environmental guarantees; is that

right?

A. Yes. It is important to look at 35 and 36. I

think it is important for us to see that they analyzed

there the alleged obligation put forth by the MEM. This is

34 and 35.

Q. Okay. We agree. Claimants' Counsel, perhaps,

will ask you questions about that, if they so wish.

A. Yes. It was just a clarification, sir.

Q. Yes. Let us look at something else. Let's look

at some of the statements that you include in your two

reports.

If we look at the First Report at Paragraph 118

at Page 49, you say: "The work of the Commission will have

to do with evidencing the existence -- will confine itself

to verifying the existence of the credits invoked in the

Application for Recognition because, as explained by the

INDECOPI Tribunal, that Resolution 268-97, the Act of

Recognition of Credits by the Bankruptcy Authority, does

[Page 645]

not determine the existence or nonexistence of the debts,

but it is declaratory in nature. Through said procedure,

the Bankruptcy Authority verifies that these are credits

incorporated into the process and verifies that the

Applicants are really the holders of the credits that

support the request."

Did I read that correctly?

A. Yes. And this reproduces what the Resolution

says, and it is also included in the Expert Reports

submitted by Perú.

Q. Would it be correct to say that your position is

that the bankruptcy authority cannot determine the

existence of debts, but it only has a declaratory nature?

A. Indeed. If we're talking about a compensation,

in particular, what I have said in my Reports is that,

INDECOPI -- not only the bankruptcy Tribunal, but also

consumer issues, et cetera, INDECOPI does not have

jurisdiction in this case because it goes beyond the

authority given to it by the law.

Q. Okay. Let us see if I understand your position.

You are reaffirming what you have stated in this paragraph?

A. Yes.

Q. Let us now look at your Second Report. I only

have one more paragraph that I wanted to show you, and this

is Paragraph 26 of your Second Report.

[Page 646]

At Paragraph 26 you say: "In this regard" -- you

have your Report there and you can see the context, but it

says here: "In this regard, it is necessary to point out

that INDECOPI's functional bodies may indeed interpret the

legal rules to recognize claims, but this does not allow

them to distort them by granting themselves powers beyond

those granted to them by the law. This would imply a

violation to the principle of legality."

And the last part, in it you say: "Determining

or creating a claim exceeds the role of verifying or

confirming its existence, which is the specific attribution

of the Peruvian Bankruptcy Administrative Authority

according to Peruvian legal system."

Have I read this correctly?

A. Yes.

Q. Okay. Let us go back to the document that you

submitted during your direct, and we looked at it a moment

ago. This is Resolution 0551 of 2021. This is DS-58.

You cited this to show that in no other case

INDECOPI opined in the same manner that it opined in the

2011 resolution. Let us now look at this document, and I

would like to show you at Paragraph 20 of the analysis

conducted by the Chamber.

The INDECOPI Court says: "As stated by the

INDECOPI Court in previous rulings, the insolvency

[Page 647]

authority is competent to determine, within the framework

of an insolvency proceeding, the existence, origin, the

legitimacy, ownership, and amount of the claims invoked by

the creditors of an insolvent debtor so that their

recognition does not constitute in any way a contentious

matter of private law that can only be elucidated in

jurisdictional or arbitral jurisdiction."

"Rather, since this a disputed matter within a

bankruptcy proceeding, it requires a ruling by the

administrative authority. Since it has been given the

power to verify, determine, and rule on the existence,

origin, legitimacy, ownership, and amount of a claims

invoked in a bankruptcy proceeding."

Have I read this correctly?

A. Yes, word for word.

Q. Let us now look at Paragraph 26 of your Second

Report that we just read a few minutes ago. And this

Paragraph 20, and you and I agree that this comes from a

resolution that you cited and that you included in your

direct.

On the left, you have DS 58 in the paragraph that

I just read to you, and this is a Resolution that you

included in your Second Report.

On the right, we have Paragraph 26 of your Second

Report, and I wanted to ask you a very simple question.

[Page 648]

Do you agree that these two paragraphs say

exactly the opposite in connection with the jurisdiction of

the administrative authority to determine the credits

invoked?

A. I don't think they are completely opposed to each

other.

MR. VACA: No further questions.

THE WITNESS: I think it is important to take

into account the precedent here, which is Resolution 268.

PRESIDENT SIMMA: Was that the interpreter just

completing the statement, the last statement?

THE INTERPRETER: The interpreter just said what

the witness said, and what he said is that it is important

to take into account the precedent here, which is

Resolution 268.

PRESIDENT SIMMA: Okay. Thank you very much. So

the floor goes to Mr. Schiffer.

REDIRECT EXAMINATION

BY MR. SCHIFFER:

Q. Mr. Schmerler, do you want to clarify any of the

answers that you've given? Because you seemed, at the end,

to want to explain, so if you want to explain your last

answer, please feel free.

A. Basically, what I wanted to say is that I was

asked whether there was a contradiction or there wasn't a

[Page 649]

contradiction between the two paragraphs shown, but I

wanted to say -- and this is in my Report, in both Parties'

Report, really.

I wanted to say that the nature of a credit

recognition procedure, which is an element of the process

here, has to do with verifying the credits. So this

is -- the Resolution 268 is a precedent that must be

complied with. DS-37 is the exhibit number, which is the

Resolution of Banco de Crédito del Perú against Droguería

Lidar, and it is cited in a number of sections in my

Report. It explains how credit recognition works and what

are the limits of the conduct of the body.

That's what I wanted to state.

MR. SCHIFFER: We have nothing else.

PRESIDENT SIMMA: Thank you very much,

Mr. Schiffer. I heard the mike. She said there was no

further question or clarification. So that brings me to my

colleagues, whether they have questions. There are no

questions.

That brings an end to your examination,

Mr. Schmerler. Congratulations, you're a free man again.

THE WITNESS: Thank you very much.

(Witness steps down.)

PRESIDENT SIMMA: I was going to say that we

should just not lose time and have Mr. Hundskopf in the

[Page 650]

witness stand. Thank you.

OSWALDO HUNDSKOPF EXEBIO, RESPONDENT'S

WITNESS, CALLED

MS. GEHRING FLORES: Mr. President, I just wanted

to ask for a brief humanitarian break.

PRESIDENT SIMMA: Sure.

MS. GEHRING FLORES: All right. Thank you.

(Brief recess.)

PRESIDENT SIMMA: I think we are all set.

I recognize Mr. Hundskopf in the witness stand.

OSWALDO HUNDSKOPF EXEBIO, RESPONDENTS' WITNESS, CALLED

PRESIDENT SIMMA: Welcome, Mr. Hundskopf.

Would you be so kind and read out the Statement

that should be in front of you or on the screen?

THE WITNESS: Good afternoon, everyone.

With all due respect, 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.

Thank you.

PRESIDENT SIMMA: Thank you very much.

Who is going to direct?

MS. GEHRING FLORES: I will, Mr. President.

PRESIDENT SIMMA: Okay. Thank you. Ms. Gehring

Flores, you have the floor.

[Page 651]

MS. GEHRING FLORES: Thank you. And for this

brief direct, I will be speaking in Spanish.

PRESIDENT SIMMA: Okay.

DIRECT EXAMINATION

BY MS. GEHRING FLORES:

Q. Professor Hundskopf, I don't think that you have

to be so close to the mike, but you have to be careful with

the distance between you and the mike.

Mr. President, Members of the Tribunal, I will

now introduce Mr. Hundskopf to be tendered for

cross-examination. He has been an Expert, recognized

Expert, in insolvency law, and he has prepared two Expert

Reports that are part of the file of this arbitration.

They were submitted on 14 March 2022 and 23 August 2023.

Mr. Hundskopf has been practicing law for more

than 50 years, and he has been a precursor and an eminent

Authority in the development of insolvency law in Perú,

from the beginning of the issues of bankruptcy law in the

country.

Without further ado, this is the end of our

direct, and I would like to tender the Witness for

cross-examination purposes.

MR. SCHIFFER: Good afternoon, Mr. Hundskopf.

How are you today?

PRESIDENT SIMMA: You have the floor.

[Page 652]

MR. SCHIFFER: Oh, sorry.

PRESIDENT SIMMA: That's fine.

MR. SCHIFFER: I jumped the gun. I'm sorry.

CROSS-EXAMINATION

BY MR. SCHIFFER:

Q. Good afternoon, Mr. Hundskopf.

A. Very well. Thank you.

Q. I noticed in your Report that you cited a number

of cases that you claim support the view that the MEM's

claim of credit under the PAMA was a legitimate claim;

true?

A. Yes, indeed.

Q. And in my Opening Statement, I tried to give fair

warning that I was going to talk to you about those cases.

Did -- was that relayed to you?

A. No, but, I assume that there is no problem

because -- yes.

Q. We'll go through the cases, then.

First, I want to show you Paragraph 113 of your

First Report, and I'm going to show it in English, and I'll

read it so that you can then hear it in Spanish.

MS. GEHRING FLORES: I apologize.

Mr. Hundskopf, do you have your Report in Spanish

there, because we have it in English on the screen?

THE WITNESS: It's the first one; correct?

[Page 653]

MS. GEHRING FLORES: Well, yes, but it is the

first one, sorry the one -- the one on the screen.

(Discussion off the record.)

MR. SCHIFFER: Maybe. Hang on. Let me give you

the date. It's 14 March 2022.

MS. GEHRING FLORES: It's the first one.

MR. SCHIFFER: Yeah.

THE WITNESS: Umm-hmm.

BY MR. SCHIFFER:

Q. And the language I've highlighted is your words:

"From the review it is noted that neither DRP nor DR Cayman

have used this argument in the former's contentious

administrative complaint, nor in the appeals or cassation

petition. Beyond that, attention must be paid to the fact

that there were no cases identical to that of DRP-MEM, but

certainly cases in which there has been a pronouncement by

the insolvency Chamber in favor of recognizing

compensation, even when there is no judicial pronouncement

in this regard."

Now, let me, first of all, ask you, flat out,

have you read the PAMA?

A. Yes. Of course I did.

Q. Have you seen anywhere in there where it says

that the MEM is entitled to compensation, in any amount, in

the event of default by DRP?

[Page 654]

A. Specifically?

Q. Yeah, specifically?

A. Specifically, I don't think there is any

obstacles in doing so. And let me tell you why, because --

Q. Please answer my question first and then can you

explain.

A. Okay.

Q. So is there any specific provision in the PAMA

that said in the event of default by DRP, the MEM is

entitled to damages or compensation?

A. There is none. There's no impediment, not only

in PAMA but also in the legislation, in the legal framework

supporting PAMA --

Q. Well, I'm not --

A. -- in the legislation in force or in the

bankruptcy system in Perú.

Q. And isn't it true that all the cases you cite,

the origin of the claim was something where either a

contract gave the nondefaulting party an express right to

compensation, or it was a matter of labor law where the

Civil Code gives the employee an express right to

compensation? Isn't that true?

A. I apologize. The question, are you talking about

the Civil Code and the employee? The Civil Code is

different from labor legislation.

[Page 655]

Q. Okay. Then I misspoke. Let me break it down.

All the cases that you cite in your Report deal

with, on the contractual side, either a Promissory Note or

a Contract for the sale of goods where, if there's a

default, the nondefaulting Party has the express right to

recover damages; correct?

A. Correct.

Q. And you also cite a number of labor cases where

there's, by law, if an employee is terminated, the employee

has a statutory right to seek compensation on some formula

based on their salary; correct?

A. Correct.

Q. And that is the standard case law that you cited?

A. But if you allow me --

Q. Actually, sir, I think if you can just answer my

questions, please, and I think you did. Let me move on.

You do not cite the Santa Rosa Case that

Mr. Schmerler discussed earlier; true?

A. Umm-hmm.

Q. That's yes?

A. 2021.

Q. Right. And you do not cite the DS-59, the

Compañia Minera Case; true?

A. Yes.

Q. Were you aware of these cases when you prepared

[Page 656]

your Report?

A. Yes, but, if you allow me, can I explain?

Q. Not yet. Just want to have answers to my

questions, please. I'm trying to make my questions super

simple so we can move along.

Had you read those cases at the time of your

Report?

A. I wouldn't be able to specify because I don't

cite them. I don't cite them in my Report.

Q. Right. But my question is, did you know about

them when you wrote your First Report?

A. Not back then because the First Report was in

2022, and the second one in August 2023; right? So, yes,

my first one is March 2022.

Q. Well, your Report, but -- B.B., will you please

pull up the Santa Rosa Case that we covered with

Mr. Schmerler and look at the date.

A. That case is of 2021.

Q. Right. So that's before you wrote your Report.

Of course.

Did you read that case before you completed your

Report in this case?

A. I heard, very attentively, the explanation by

Mr. Schmerler, and I don't have many comments to make about

it.

[Page 657]

Q. No, that's -- I appreciate that. That wasn't my

question. My question was, had you read that case before

you wrote your Report?

A. No.

Q. Did you read that case before you wrote your

Second Report?

A. I don't think so because I would have made a

comment directly. I would have compared if -- those

Reports to the one in 2011.

Q. Okay. So I'll just put it to you. Since we

reviewed the Santa Rosa Case, don't you think that case has

applicability to the situation?

A. Would you allow me to respond?

Q. I will. But if you say yes or no first, and then

you can respond.

A. I believe no, because it is a completely

different case from the November 2011 Resolution. One

thing is to have a proceeding, to have a credit recognized,

and something completely different is to have the

proceeding of a company that is going through bankruptcy

such as Santa Rosa.

We are completely -- they are completely

different situations, both Resolutions of 2021 are

different, different companies, but with a similar content.

They have to do with the termination of the corporate life

[Page 658]

of those corporations, and in the case -- in the other case

is completely, completely different. The 2011 case is

completely different. It's a different juncture.

Q. Let me ask you a few questions about that.

So in the two cases that Mr. Schmerler cited in

his First Report, there were mining companies that went out

of business and the mines had to be closed; correct?

A. Yes. Certainly. Yes. Certainly.

Q. And in both cases, under the law, they were to

have put up a bond in the amount that it would cost to

actually close the mines. Is that true?

A. Yes, but I insist, the issue of 2011, that is the

Resolution that I deal with in my Reports, has nothing to

do with a Company that is in bankruptcy. This a Company

that is a running business. That is an ongoing business.

It is completely different.

Q. So you're -- okay. So what you're saying is

because DRP hadn't yet been liquidated, that the cases that

we cite to have no applicability, even though facts are

almost identical and the Courts' ruling is the total

opposite? That's your distinction?

A. (No translation.)

Q. So what -- what authority do you have --

(Interruption.)

Q. I think he said, yes.

[Page 659]

A. I said that both 2021 Resolutions are different

legal situations as of the one in 2011.

Q. Right. So what Authority, Legal Authority can

you point us to that says that when a company is in

bankruptcy, liquidation, one set of rules apply versus when

a company is in bankruptcy, almost liquidation, they don't?

A. In Perú, when the bankruptcy law is applied, we

are no longer talking about bankruptcy. Bankruptcy is the

final, final stage in the life of a corporation. It is the

very final stage. It's no longer a bankruptcy proceeding.

That would be an administrative proceeding, but with very

specific characteristics. If you give me two minutes, I

can explain to you the difference between the previous

regime of the Bankruptcy Law and the current one. If you

authorize me, I think that it would be very important to

clarify, because INDECOPI is the one --

Q. And as -- has been stated many times, your lawyer

will have a chance, if you feel like you haven't had an

opportunity to fully explain yourself, I promise you, you

will get that chance, if they ask you. Okay? So please

don't -- you know, be patient with me, and let's try to go

question and answer. All right?

A. I apologize.

Q. So you realize that in the two cases that

Mr. Schmerler cited, that you did not, both of those

[Page 660]

involved the MEM seeking a credit in bankruptcy for the

amount of the Bond?

A. But MEM's attitude is completely different from

the one that we see in 2011. That's the reason why we

understand their petition or their situation is different.

And if you allow me, I hope you take the Article of 2011.

Q. Let's compare and contrast the two situations.

So in the 2011 bankruptcy against DRP, the MEM said they

were entitled to a credit -- I mean -- yeah, a credit in

the bankruptcy for compensation in the amount of an

estimate that DRP gave to complete the Sulfuric Acid Plant;

right?

A. Yes.

Q. And in the two cases that Mr. Schmerler cites,

that you don't cite, the MINEM was seeking a credit in

bankruptcy for the amount of the Bonds that the mining

Company should have put up to close the mine but didn't;

correct?

A. Yes. Correct. But if you allow me, I can

explain.

Q. Sure. Please explain.

A. I want to mention the following: The regime that

replaced the bankruptcy law that exists in Perú as of 1992

that is part of a completely different legal framework, is

a stage when there was an attempt to control

[Page 661]

hyperinflation, and the crisis of an administration -- that

is, Mr. Fujimori's administration. So the framework is

completely different. It is a Decree Law. What does it

mean? That Congress was shut down and, with the authority,

Mr. Fujimori passed Decree-Law 25,886, August 1992. This

is not a law approved by Congress, so the attitude was

completely different. And let me tell you, in a way we

needed to -- there was a need to revitalize or make

decisions so as to foster the recovery, the economic and

financial recovery of the society and of the corporation

and for the activities to continue. And I am speaking here

with knowledge, but some lawyers were invited by Mr. Carlos

Torres, who was a Minister back then, who was also a Dean

at the University of Lima. We were asked to attend a

meeting to give an opinion on the Decree Law of 1992.

Do you know why I tell you this? Because the

regime is so specific that this was not mentioned. Before,

it was only the judiciary, the one that could go into the

termination of a company bankruptcy, but that is not the

case. But when INDECOPI was created in 1990 -- 1992, has

powers. It has powers that usually are not discussed, not

only to issue resolutions, to issue declaratory judgments,

but also ones that have to do with the Constitution. And

also the financial-economic solution. So the powers of

INDECOPI changed completely when the Bankruptcy Law was

[Page 662]

1 abrogated and when a completely different regime, the one

2 in force, was created.

3 Q. Okay. B.B., will you put up my Opening Statement

4 slide. No. No. It's the slide that we showed

5 Mr. Schmerler right off the bat. There we go.

6 Will you highlight the second bullet? Yeah, that

7 one.

8 Mr. Hundskopf, do you see the

9 highlighted -- well, I'll read it in Spanish. It

10 says: "Article 4 of Decree-Law Number 26116 requires

11 creditors to prove the existence, origin, legitimacy, and

12 amount of their credit."

13 Are you familiar with that standard?

14 A. Yes.

15 Q. And that standard existed in 2012?

16 A. Exactly. Precisely. Article 4.

17 Q. And existed in 2021?

18 A. Umm-hmm.

19 Q. Yes?

20 A. Yes.

21 Q. And it existed today?

22 A. Yes. But, please, the Decree-Law has been

23 replaced by another one. 26116 has been replaced with

24 another one.

25 Q. But the concept remains the same. It's the same

[Page 663]

1 concept.

2 "Yes" or "no"?

3 A. Yes, but you are asking me whether the -- not the

4 Decree. The concept is the same. The attitude of INDECOPI

5 is just evidentiary. They are trying to fight, fight for

6 the consolidation and the continuity of the Companies, but,

7 if that is not possible, they liquidate the Company. But

8 it is an administrative proceeding. It is not a judicial

9 one. And I am speaking because I have experience with

10 INDECOPI.

11 Q. Okay. And I'm not trying to be disrespectful to

12 you, and I'm not trying to say that you don't have

13 experience, but I have limited time, and when you give

14 lengthy explanations, you're eating away at my time, which

15 is valuable. So if we could have simple Q&A, that would be

16 very appreciated. And I only have one other topic to

17 cover.

18 So you talk a lot in your Report about the actual

19 activities of the Creditors Committee in this case?

20 A. It's not a committee. It's a Board.

21 Q. Okay. I'm sorry. The Board.

22 And the Board was made up of creditors?

23 A. Yes.

24 Q. You have to answer out loud for the Court

25 Reporter.

[Page 664]

1 A. And the Ministry of Energy and Mines was the main

2 Creditor with 31 percent.

3 Q. Exactly. But the Ministry of Mines was in

4 a -- all the other Creditors, they were simply just

5 creditors. They wanted to get money back from the debtor;

6 right?

7 A. That is correct, but let me explain something, if

8 you allow me.

9 Q. No. I'm not allowing. Okay. I'm sorry. I'm

10 not allowing. So let's continue.

11 The MEM -- the MEM had two hats. They were an

12 alleged creditor, but they were also the governing body for

13 what the mining companies could and could not do; right?

14 A. Yes. Yes.

15 Q. So if the MEM imposed a rule or a law, for

16 example, that said that DRP was not allowed to operate

17 until they met an environmental standard that was

18 impossible to meet, they could thwart any Plan of

19 Reorganization through the regulatory powers; true?

20 A. Clearly, there was a positive interest by the

21 MEM. The MEM was a creditor, and they needed to present

22 themselves and be recognized as such. And it is completely

23 correct because there is a -- public and private creditors

24 are both creditors, and they both participate in the Board.

25 Q. I understand that. But my point was that the MEM

[Page 665]

1 had special powers of regulation that none of the other

2 Creditors had; is that true?

3 A. Correct. They had several offices -- several

4 offices, but, once again, they are protecting a company so

5 that it doesn't get dissolved, it later on gets liquidated,

6 but that is a different story. There might be an

7 assignment, but that is a different story. But the

8 Ministry of Energy and Mines presents itself as a creditor

9 because that's what it was, and that's why there was a plan

10 within the financial sector. The request is the same. The

11 petition is the same. The one presented by Doe Run in

12 November 2010.

13 Q. So I think what I just heard was that the MEM,

14 through its Regulatory Authority, could help the debtor

15 come out of bankruptcy, or it could force the debtor to

16 liquidation. It had that power.

17 A. In the letter of November 2010 --

18 (Interruption.)

19 MS. GEHRING FLORES: -- Of what the Witness said.

20 MR. SCHIFFER: I don't -- that's a speaking

21 objection which --

22 (Comments off microphone.)

23 MR. SCHIFFER: It's a speaking objection.

24 MS. GEHRING FLORES: And that might exist in U.S.

25 practice, but --

[Page 666]

1 MR. SCHIFFER: Your side raised it.

2 PRESIDENT SIMMA: I think the Transcript needs

3 clarification. So what do you need precisely?

4 MS. GEHRING FLORES: I said that's

5 mischaracterizing. I'm saying that Mr. Schiffer

6 mischaracterized what the Witness had said. So if

7 Mr. Schiffer wants to read back what the Witness said from

8 the Transcript, he can. We have a LiveNote.

9 MR. SCHIFFER: Okay. I understand that

10 Ms. Gehring Flores doesn't like leading questions here, but

11 I'm entitled to do it, and the Witness is free -- he was

12 shaking his head, yes, in answer to my question. And

13 before he could verbalize the yes, Ms. Flores jumped in to

14 give him a speaking objection, which Mr. Pearsall took me

15 to task for the other day. So I would say what's good for

16 the goose is good for the gander.

17 In other words, if she wants to make an argument,

18 then we need to excuse the Witness, and you can make your

19 argument. But I would like to proceed with my questions,

20 because you're burning my time now.

21 MS. GEHRING FLORES: I'm only asking you to use

22 the Transcript to say back to the Witness what the Witness

23 said.

24 MR. SCHIFFER: And I refuse to -- I am refusing

25 to do that. So I'm going to ask my question.

[Page 667]

1 MS. GEHRING FLORES: That's it. I guess we could

2 hear from the President of the Tribunal to see what he

3 thinks.

4 PRESIDENT SIMMA: At the moment this occurred, I

5 looked at the text because I had a problem understanding

6 the longer quote that precedes your exchange. But is it

7 worth, let's say, spending more time on this? Can we just

8 go on? I think -- I didn't --

9 MS. GEHRING FLORES: I think we can go on if

10 Mr. Schiffer would quote back to the Witness what the

11 Witness -- the words of the Witness from the Transcript and

12 not mischaracterize what he said.

13 PRESIDENT SIMMA: Yes. Why don't you just -- is

14 that a big problem?

15 MR. SCHIFFER: It actually is not how this works,

16 in my experience. She does not get to tell me how I get to

17 ask my questions. If she wants to clarify with the

18 Witness, she has a chance to do that on redirect. I'm

19 doing cross-examination, which is -- you know, which is

20 always hard because you usually have a witness that doesn't

21 want to give you answers that you're looking for. And I

22 would just like to have my last question read back, and he

23 can -- he can give a verbal answer to the physical answer

24 that he was giving, and I think he even said, "correcto,"

25 but I could be wrong. And then that's probably the last

[Page 668]

1 question I've got.

2 PRESIDENT SIMMA: Can you just ask this question?

3 BY MR. SCHIFFER:

4 Q. Question: "So I think what I just heard is that

5 the MEM, through its Regulatory Authority, could help the

6 debtor come out of bankruptcy, or it could force the debtor

7 to liquidation. It had that power."

8 A. I apologize. There was no bankruptcy. There was

9 no bankruptcy in 2011. There was no bankruptcy. The

10 procedural Law on Bankruptcy was abrogated in August. The

11 Bankruptcy Law was a judicial proceeding. The procedural

12 Law on Bankruptcy is a judicial proceeding, and the

13 bankruptcy system right now is completely different. The

14 INDECOPI Regulations may be quasi jurisdictional. Of

15 course, they may be of a constitution and declaratory, and

16 they could be of justice too.

17 Q. So I think it's a matter of terminology. We're

18 not speaking the same language, and that's my fault.

19 What would you call the procedure that DRP was

20 going through back in 2012?

21 A. It was a bankruptcy --

22 Q. Okay.

23 A. -- proceeding. The bankruptcy proceeding has two

24 paths, the reactivation or the dissolution, but not

25 bankruptcy.

[Page 669]

1 Q. Okay. So the MEM, we established, has regulatory

2 power; true?

3 A. Yes.

4 Q. And in a bankruptcy proceeding, whether the

5 debtor goes into reorganization or liquidation depends on

6 the Plan of Reorganization, doesn't it?

7 A. It is the Board of Creditors, the one that makes

8 the decision, and the MEM was a recognized creditor. It

9 was legitimate, 31 percent.

10 Q. I understand that. But what the Board would have

11 to approve or disapprove is a Plan of Reorganization

12 submitted by the debtor. Isn't that how it works?

13 A. Yes. That's the way it was. In three stages:

14 First, there was an attempt to reorganize. It did not

15 work. They moved onto liquidation; and then to a third

16 stage, they went back to reactivation; and, finally, they

17 went into liquidation. It is a historical process that

18 is -- has been proven.

19 Q. So I'm going to ask you this hypothetically

20 because I don't think this question is within your area of

21 expertise, but I want to apply it to the bankruptcy law.

22 So assume that the MEM had an environmental

23 standard that it required the debtor to meet, but no one

24 could meet it, and that, as long as the debtor's plan

25 didn't show that it was going to meet the standard, they

[Page 670]

1 weren't going to allow the debtor to continue.

2 Now, in that case, there would be really nothing

3 to vote on; right? The plan is dead in the water.

4 Is that -- under that hypothetical --

5 MS. GEHRING FLORES: Excuse me, I think this

6 question was started with, "this goes outside the area your

7 expertise."

8 MR. SCHIFFER: Hypothetically --

9 MS. GEHRING FLORES: Well, is it or is it not?

10 MR. SCHIFFER: Ms. Gehring, you don't -- you are

11 abusing this process. And I am sorry, but this is, you

12 know, beyond the pale.

13 I said -- my question was: I'm asking you to

14 hypothetically assume that the MEM was enforcing a law that

15 made the debtor's Plan of Reorganization dead in the water.

16 Okay.

17 PRESIDENT SIMMA: Mr. Schiffer, sorry for

18 interrupting, but I have -- at least, I have the impression

19 that this question -- I cannot agree with you on that.

20 That an expert on bankruptcy law would not be -- it would

21 not be, let's say, capable of giving an answer to the

22 question.

23 MS. GEHRING FLORES: I'm not saying that he's not

24 capable of answering a hypothetical. I'm just

25 stating -- restating what Mr. Schiffer started his question

[Page 671]

1 with, which was: "This is outside your area of expertise

2 but," and so, if he's going to ask a hypothetical that is

3 outside the area of expertise of the Expert, I am

4 Objecting. Even if it is a hypothetical.

5 MR. SCHIFFER: Okay. Can I read my question back

6 verbatim? Because -- and may I ask that this not go

7 against my time because -- I mean, I would be finished by

8 now if it weren't for Ms. Gehring Flores's continued and

9 constant interruptions. I have to find the question.

10 BY MR. SCHIFFER:

11 Q. "So I'm going to ask you this hypothetically

12 because I don't think this question is within your area of

13 expertise, but I want to apply it to the bankruptcy law."

14 Okay. That was the lead-in.

15 So I assume that the MEM had an environmental

16 standard -- excuse me. I'm asking him to assume that the

17 MEM had an environmental standard that required the debtor

18 to meet but no one could meet it, and as long as the

19 debtor's plan didn't meet this impossible requirement, then

20 the plan -- then the MEM wouldn't allow the plan to go

21 forward. Okay. I'm asking to assume that.

22 My question to you is, have you ever seen before

23 in bankruptcy where a governmental body is involved where

24 they have both a regulatory hat and a creditor's hat?

25 A. Oftentimes, in different areas in Perú, in the

[Page 672]

1 fisheries section, in the shipping section, in all of the

2 areas, we see that because the State participates in the

3 area of fisheries. There is a Fisheries Ministry that is

4 called production in all of the sectors we see that.

5 But what I'm telling you is that, as of the

6 abrogation of the Procedural Law on Bankruptcy 1992, this

7 is no longer a judicial proceeding. This is an

8 administrative proceeding, but very special, very special

9 with qualities that were unknown before.

10 And what is the intent? We are trying to obtain

11 the necessary funds to pay -- to assume the cost and

12 expenses of the environmental protection in the area that I

13 think was very important.

14 Q. Okay. I'm going to shift gears.

15 Was the MEM obligated -- under the PAMA, was the

16 MEM obligated to complete the Sulfuric Acid Plant?

17 Did it have that affirmative obligation?

18 A. There are stages. There were some studies that

19 were conducted, but, at some point, Doe Run was not paying,

20 and, unfortunately, a decision -- an original decision, an

21 initial decision for projection continuity had to be

22 changed. And they moved on to the liquidation of the

23 Company, and then, clearly because of the liquidation

24 entity, they went back to the reorganization and

25 reactivation.

[Page 673]

1 Q. Okay.

2 A. And then on the fourth step.

3 Q. And then my question: If you look at PAMA, which

4 you say you've looked at, is there an obligation on the

5 part of MEM to complete what the mining company doesn't

6 finish? There is?

7 A. In the PAMA, there was a plan, a progressive plan

8 of investment to get to the final stage, and the issue

9 became frustrated because I think the whole thing would

10 have been very successful. I'm sorry I have to answer this

11 way, but I'm telling you the truth.

12 There were prior stages, and in the last stage

13 they stopped contributing, and since they stopped paying,

14 the Creditors Committee had to reorganize; right?

15 Q. My question -- one more time, and then I'll quit

16 after this, I promise, no matter what you say.

17 Did you ever see an obligation by the MEM written

18 out in the PAMA that says that, if DRP defaulted, that the

19 MEM would have to finish what DRP didn't finish?

20 A. Yes. Well, I have not seen that, personally

21 speaking, but I have read the letter of November 2010. And

22 this is mentioned in the First Instance Resolution of

23 INDECOPI and in the appeal stage as well and in many

24 writings, and they talk about a debt that Doe Run had that

25 had to be overcome. And an important part of all this was

[Page 674]

1 the protection of the environment.

2 Q. Did you ever see anything, anything in writing,

3 where the MEM said: "We want this credit so we can finish

4 the plant"? Anything? Any letter? Anything?

5 A. I have never been a public servant at a Ministry,

6 but I'm sure that they had requirements of all kinds. I'm

7 sure.

8 Q. I presume. I'm asking what you have seen in this

9 case.

10 Have you seen any document where the MEM

11 explained that: "We want a $163 million credit so we can

12 finish the Sulfuric Acid Plant"? Have you ever seen those

13 words or words to that effect?

14 A. That amount was not stated by the MEM. It was

15 put by Doe Run in a letter of 2010, letter of 2010, by Doe

16 Run, and the 160-odd million -- well, that was evidenced

17 point by point. 163-odd million, and one of these points

18 was the financing for environmental purposes. Full stop.

19 Q. Mr. Hundskopf, do you understand your role here

20 today? Are you here to be an objective expert, or are you

21 here to be an advocate for the Republic of Perú?

22 I'm just curious what you think your role is.

23 A. With all due respect, sir, what I'm doing is I'm

24 ratifying and reiterating what I have said in my First

25 Report of March 22, my Second Report of March, and if you

[Page 675]

1 read those, you are going to see that there is no

2 contradiction in my statements. I ratify what I have said.

3 I insist, with all due respect, sir.

4 Q. Okay. I'm going to try one more time on this

5 question, and let's not quibble with numbers. Have you

6 seen anywhere where the MEM said that: "We want a credit

7 in bankruptcy so that we can complete the Sulfuric Acid

8 Plant"?

9 A. The requirement was Doe Run's requirement. The

10 Committee of Creditors accepted this.

11 Q. Okay. So if, assuming that I'm right and that

12 the MEM had no intention of actually performing the work

13 itself, can you explain why it would want to be a creditor

14 in the bankruptcy?

15 A. It's not that it wanted to be a creditor. It was

16 a creditor. It was a creditor, of course. Why is it a

17 creditor? Because there was a communication supported by

18 lots of material by Doe Run, and they set the 163 million,

19 and this is not a figure that was set by the MEM. I have

20 to say that.

21 MR. SCHIFFER: Those are all the questions that I

22 have, Mr. President.

23 PRESIDENT SIMMA: Thank you, Mr. Schiffer.

24 I give the floor to Perú for the redirect. It's

25 going to be Ms. Flores.

[Page 676]

1 MS. GEHRING FLORES: Thank you. Thank you,

2 Mr. President. No questions.

3 PRESIDENT SIMMA: Thank you very much.

4 So question to my colleagues?

5 ARBITRATOR GRIGERA NAÓN: No questions.

6 PRESIDENT SIMMA: On the part of colleagues.

7 Okay. So we are over the -- overtime with regard

8 to the coffee break, but maybe we just have a -- let's have

9 a quick look at what remains to be done, if anything, needs

10 to be done or can be done.

11 Sorry, Mr. Hundskopf, you are excused.

12 THE WITNESS: May I step down, sir? With all due

13 respect, may I step down?

14 PRESIDENT SIMMA: Yes, please.

15 THE WITNESS: Thank you very much. Thank you

16 very much for the opportunity that you have given me to

17 explain and supplement what I have written in my two

18 Reports. Thank you.

19 (Witness steps down.)

20 PRESIDENT SIMMA: Thank you. Okay. Now, you are

21 free. But can we -- so my point is, the next witness is

22 Madam Alegre Chang. I overheard, so she must be --

23 MS. GEHRING FLORES: Ms. Alegre.

24 PRESIDENT SIMMA: Okay. Is she -- would she be

25 available?

[Page 677]

1 MS. GEHRING FLORES: She is in transit.

2 PRESIDENT SIMMA: In transit.

3 MS. GEHRING FLORES: From Perú.

4 PRESIDENT SIMMA: Okay.

5 MS. GEHRING FLORES: So we were not contemplating

6 at all that she would come up today, and we apologize for

7 that, but she is -- she is on her way, but she won't arrive

8 until tomorrow.

9 MR. RODRÍGUEZ: So we have no choice, even if we

10 are full of expectations, it is to bring this to an end;

11 right? So instead of coffee break, you can go where you

12 want.

13 And we need to be very disciplined next week, so

14 we have one of the Experts per day plus Ms. Chang. So we

15 will see each other again on Monday at 9:30.

16 MR. PEARSALL: Just before we break,

17 Mr. President, as has become my custom, can we just check

18 the time of the day? Thank you, sir.

19 PRESIDENT SIMMA: Okay.

20 SECRETARY DOE: Unfortunately, I'm going to have

21 to disappoint because, of course, we did have all those

22 objections, and we have a pending request, as to the

23 allocation of time. So I think I'm going to have to get

24 back to the Parties by email after the Tribunal has been

25 able to discuss exactly what to do with that.

[Page 678]

1 MR. PEARSALL: Should we handle the -- does

2 Mr. President want argument on whether objections should be

3 included within the allotment of time, or would the

4 Tribunal just like to take that on its own and give us a

5 ruling? Obviously --

6 PRESIDENT SIMMA: Does PO10 say something?

7 SECRETARY DOE: It does. It allocates the

8 objection against whoever loses on an objection.

9 PRESIDENT SIMMA: So who lost the objection?

10 SECRETARY DOE: Well, from my part, I'm not even

11 sure if we have one, two, three, or four objections to deal

12 with. But that's where I'm not sure I'm in a position to

13 say with certainty exactly --

14 MR. PEARSALL: Understood. Well, you have

15 two hours of working time to figure that out for us,

16 Mr. President.

17 PRESIDENT SIMMA: So you're going to get an

18 answer by email?

19 MR. PEARSALL: No rush. No rush. Up to you,

20 sir.

21 PRESIDENT SIMMA: All right. So that was humor,

22 the last.

23 MR. FOGLER: Mr. Doe, I think the objections are

24 immaterial to the total length. Can you give us just a

25 feel for overall? That way we'll have at least a working

[Page 679]

1 number to go with.

2 MR. SCHIFFER: I'll make this even easier because

3 I don't want the Tribunal to have to deal with this. It's

4 picky. So I will withdraw my request to have her

5 objections count against my time because it is -- we're

6 going to be fine with time. I'm not worried about us.

7 PRESIDENT SIMMA: I could imagine that would be

8 helpful for both sides to get what you call a "feel," and,

9 you know, Martin, just a feel.

10 SECRETARY DOE: In that case, the total amount of

11 time that the Claimant has used is 7 hours and 18 minutes;

12 and the Respondent has used 11 hours on the dot.

13 MR. PEARSALL: Thank you.

14 PRESIDENT SIMMA: Okay. Have a good weekend.

15 (Whereupon, at 3:14 p.m., the Hearing was

16 adjourned until 9:30 a.m., Monday, March 11, 2024.)

[Page 680]

POST-HEARING REVISIONS

CERTIFICATE OF REPORTER

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.

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Dawn K. Larson

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