[Page 1]
THE INTERNATIONAL CENTRE FOR THE SETTLEMENT OF
INVESTMENT DISPUTES
- - - - - - - - - - - - - - - - - - -x
In the Matter of Arbitration :
Between: :
:
LUPAKA GOLD CORP., :
:
Claimant, :
: Case No. ARB/20/46
and :
THE REPUBLIC OF PERÚ, :
:
Respondent. :
:
- - - - - - - - - - - - - - - - - - -x Volume 1
HEARING ON THE MERITS
Monday, March 26, 2023
The World Bank Group
1125 Connecticut Avenue, N.W.
Conference Room C3-150
Washington, D.C.
The hearing in the above-entitled matter
came on at 9:27 a.m. before:
PROF. JOHN R. CROOK, President
MR. OSCAR M. GARIBALDI, Co-Arbitrator
DR. GAVAN GRIFFITH KC, Co-Arbitrator
[Page 2]
ALSO PRESENT:
ICSID Secretariat:
MS. LUISA FERNANDA TORRES
Secretary to the Tribunal
Realtime Stenographers:
MS. MARJORIE PETERS
Registered Diplomate Reporter (RDR)
Certified Realtime Reporter (CRR)
Worldwide Reporting, LLP
529 14th Street, S.E.
Washington, D.C. 20003
United States of America
SR. LEANDRO IEZZI
SR. VIRGILIO DANTE RINALDI, S.H.
D.R. Esteno
Colombres 566
Buenos Aires 1218ABE
Argentina
Interpreters:
MS. SILVIA COLLA
MR. DANIEL GIGLIO
MR. CHARLES H. ROBERTS
[Page 3]
APPEARANCES:
On behalf of the Claimant:
DR. MARC VEIT
MR. JAIME GALLEGO
MR. LUIS MIGUEL VELARDE SAFFER
MS. GUILLERMINA HUBER
MS. STELA NEGRAN
Lalive (London) LLP
9 Cloak Lane
London EC4R 2RU
United Kingdom
MR. TIMOTHY L. FODEN
Boies Schiller Flexner, LLP
5 New Street Square
London, EC4A 3BF
United Kingdom
Representing Lupaka Gold Corp.:
MR. GORDON ELLIS
[Page 4]
APPEARANCES: (Continued)
On behalf of Respondent:
MS. VANESSA RIVAS PLATA SALDARRIAGA
MR. JHANS PANIHUARA
Ministerio de Economía y Finanzas
MR. ERICK VARGAS GUEVARA
Presidencia del Consejo de Ministros
MS. ESPERANZA MOLLA LEÓN
Ministerio de Energía y Minas
MR. PAOLO DI ROSA
MR. PATRICIO GRANÉ LABAT
MR. TIM SMYTH
MR. BRIAN BOMBASSARO
MS. ANA PIRNIA
MS. BAILEY ROE
MR. ANDRÉS ÁLVAREZ CALDERÓN
MS. LAURA ARBOLEDA
MS. GABRIELA GUILLÉN
MS. EMILY BETANCOURT
MS. ALEXIA MORÁN
Arnold & Porter Kaye Scholer, LLP
601 Massachusetts Avenue, N.W.
Washington, D.C. 20001
United States of America
MR. HUGO FORNO FLÓREZ
MR. JAVIER BUENO
J&A Garrigues, S.l.p.
Av. Víctor Andrés Belaúnde
332, Oficina 701
San Isidro - Lima
Republic of Perú
[Page 5]
On behalf of the non-disputing parties:
MR. SCOTT LITTLE
Director and General Counsel
MS. KRISTA ZEMAN
Deputy Director and Senior Counsel
MR. CHRIS KOZIOL
Counsel
Trade Law Bureau
Global Affairs Canada
Lester B. Pearson Building
125 Sussex Drive
Ottawa, Ontario
Canada, K1A 0G2
[Page 6]
C O N T E N T S
PAGE
PRELIMINARY MATTERS.......................................7
OPENING STATEMENTS
CLAIMANT OPENING STATEMENT
Mr. Foden...........................................19
Mr. Velarde.........................................30
Mr. Gallego.........................................66
Mr. Foden..........................................117
Dr. Veit...........................................142
RESPONDENT OPENING STATEMENT
Mr. DiRosa.........................................170
Mr. Grané..........................................190
Mr. Smyth..........................................264
Mr. Grané..........................................297
Mr. Bombassaro.....................................339
Ms. Rivas Platas...................................352
CONFIDENTIAL SESSIONS: 52-53; 56-58; 68-70; 73
[Page 7]
P R O C E E D I N G S
PRESIDENT CROOK: Good morning, Ladies and
Gentlemen.
All right. Well, I think you all know who
we are and perhaps, at this point, we can go on the
record and formally open this hearing, and I will then
invite each party to identify those who will have
speaking roles with us this morning.
So let us open this hearing in ICSID Case
ARB/20/46, Lupaka Gold Corporation versus the Republic
of Perú.
The Panel has done a good deal of
preparation and consultation, but we do look forward
to hearing from you.
I wonder if we--we have got big teams here
and I don't know that we need to introduce everybody,
but I wonder if we could get on the record sort of
who's going to be doing the speaking, beginning with
the Claimants.
Over to you, sir.
MR. GALLEGO: Thank you very much. Good
morning, Members of the Tribunal.
[Page 8]
I am Jaime Gallego.
Next to me is Marc Veit.
After that is Mr. Tim Foden.
After that is Luis Miguel Velarde Saffer.
They will be speaking.
At the end is Mr. Gordon Ellis.
PRESIDENT CROOK: We greet you, and greet
the other members of your team as well.
All right. On the Respondent's side.
MR. GRANÉ: Good morning, Mr. President,
Members of the Tribunal, esteemed colleagues.
My name is Patricio Grané, on behalf of the
Republic of Perú.
Next to me, Ms. Vanessa Rivas Plata, the
President of the Special Commission that represents
Perú in investment arbitration.
To my left, my partner, Paolo Di Rosa.
To his left, Timothy Smyth.
And to his left, Mr. Brian Bombassaro.
All of us will be having speaking roles
today.
PRESIDENT CROOK: Very good. We look
[Page 9]
forward to working with you and we greet all of the
others on your team. In the interest of time, perhaps
you will forgive us, we are not introducing everybody.
We can perhaps come back and get the rest of you
tomorrow.
All right. Now, in terms of procedure
today, I think we indicated that for medical reasons,
it may be necessary for us to take brief breaks. We
have built in time for that in the schedule. We will
just see how that goes, but we would appreciate your
understanding and forbearance if that may be something
that we need to do.
Now, let me ask: From either side, are
there any more administrative matters we need to
attend to?
Claimants, anything on your side?
MR. GALLEGO: Yes, sir, just a few points.
PRESIDENT CROOK: All right.
MR. GALLEGO: As to the witnesses, it would
be a convenience if they are ready at least one slot
before to testify. We see that there is a distinct
possibility that Mr. Saavedra may be needed one slot
[Page 10]
before, so that would mean that he possibly could
testify on Thursday night. We would just flag it so
that he be available.
PRESIDENT CROOK: On that, I guess we could
encourage the parties to work that out as best you can
before you come to us to sort it out, but you will
keep in contact on that, I'm sure.
MR. GALLEGO: Thank you, sir.
For our opening statement, we may be
slightly longer for the first bit, it's split in two
parts, around an hour 40 we have seen, and slightly,
therefore, shorter for the second part.
PRESIDENT CROOK: I think the answer will be
that we will probably interrupt your first bit if it's
that long, but we'll see how that goes.
MR. GALLEGO: Okay.
I also wanted to raise that Mr. Bravo
obviously will be testifying in English. His English
is good, but it's not his mother tongue; therefore, if
he really needs to, he may speak in Spanish with the
help of the interpreters now and again. He doesn't
intend to do it throughout, obviously, but he may need
[Page 11]
that.
PRESIDENT CROOK: All right. We'll do what
we need to do.
MR. GALLEGO: Okay.
As to Mr. Retuerto, he will be
cross-examined remotely, as we know. We are concerned
about the technical difficulties that have been raised
by the Respondent. We'd just like to know if these
have been fixed.
And then if they have been fixed, well, then
it's been sorted, but we'd just like an update on
that.
PRESIDENT CROOK: Okay. Anything further on
Claimant's side?
MR. GALLEGO: For the moment, that's it.
Thank you.
PRESIDENT CROOK: All right. Thank you,
sir.
On Respondent's side?
MR. GRANÉ: Thank you, Mr. President.
A couple of housekeeping issues. They do
not pertain to the opening, so I'm happy to address
[Page 12]
them now or...
PRESIDENT CROOK: Let's do it now.
MR. GRANÉ: Perfect.
The first issue concerns the number of
bundles, PO-6 Section 23 calls for 12 copies. We
understand that the court reporters do not require
their two hard copies, and we understand that the
interpreters, instead of three copies, would only need
two.
With the Tribunal's indulgence, we would
request, therefore, that we reduce the number of
bundles that may be used so that we don't kill as many
trees.
PRESIDENT CROOK: I'm all for not killing
excessive trees. I see a positive reaction from the
reporters, and I trust that we will get the same from
the interpreters. So if that's the case, that's fine.
We can save trees.
MR. GRANÉ: Thank you. Therefore, we will
prepare only nine copies instead of 12.
The second issue concerns experts. We have
approached opposing counsel to suggest that experts be
[Page 13]
allowed to bring in their notes with them, both on the
presentation and their expert reports. As the
Tribunal knows, that's not unusual. And that is the
request that we put to the Tribunal.
Obviously, fact witnesses will not be
allowed to bring anything into the room, but again,
experts tend to be different in that respect, so
that's our request.
PRESIDENT CROOK: We'll revert to that, but
are there any other administrative things you want to
raise?
MR. GRANÉ: I can respond to the question
from opposing counsel as to Mr. Retuerto.
PRESIDENT CROOK: Okay. Well, let's do the
question of experts bringing in supporting material.
Claimant's view on that is.
MR. GALLEGO: Thank you, Mr. President.
Our view on that is that it's slightly
troubling that they need their notes. Speaking notes,
of course, are fine, but anything else than that we
don't think is appropriate.
If there is an insistence for them to have
[Page 14]
their own notes, then they should be shared with us.
PRESIDENT CROOK: Perhaps I don't understand
the issue.
I thought the issue was that the experts
wanted to bring in their supporting materials,
reports, matters of that kind that they referred to in
their reports.
Is that what we're talking about or are we
talking about something different?
MR. GRANÉ: No, that's correct, but in
preparation for their presentation and their
cross-examination, experts usually will make notes on
the margins of their reports, and we are requesting
that experts be allowed, again, in conformity with not
unusual practice in investment arbitration.
PRESIDENT CROOK: Okay.
MR. GRANÉ: But having said that, we would
object to the proposal from the other side that those
expert notes be shared with the other side before
their presentation.
ARBITRATOR GARIBALDI: May I make a comment?
PRESIDENT CROOK: Please.
[Page 15]
ARBITRATOR GARIBALDI: If the expert
presentations are going to take the form of PowerPoint
presentations, the PowerPoint presentations are
themselves a guide to what the expert is going to say,
so that would obviate the notes.
If the notes take the form of aiding the
expert in the cross-examination, I don't think they
are appropriate. That's my own view. It's not the
Tribunal's view. That's my own view.
PRESIDENT CROOK: Okay.
ARBITRATOR GARIBALDI: So one thing is notes
that are in aid of the initial presentation in view of
direct examination, which I can understand that are
useful, unless the expert uses a PowerPoint
presentation, in which case, they are not necessary.
But I don't think that notes for cross-examination
are--I don't think they're appropriate.
PRESIDENT CROOK: All right. We will
attribute the appropriate comments to the appropriate
Arbitrator.
Let me just see if I understand clearly what
the issue is here.
[Page 16]
As I understand it, the experts will have
prepared their reports on the basis of focused reports
by others. They will, in all likelihood, have
annotated those with their personal notes, and the
issue is whether they can bring in those reports with
their personal notes; is that the issue?
MR. GRANÉ: That's correct, Mr. President.
MR. GALLEGO: That's how we understand it.
PRESIDENT CROOK: All right. The Tribunal
will take this up and be back to you. We don't have
to decide this today, I don't think.
All right. Any other matters that we need
to attend to? Hearing none...
MR. GRANÉ: Well, there is the issue that--
PRESIDENT CROOK: Sorry, we need the
clarification on the technical situation.
MR. GRANÉ: Of course.
Mr. President, the background to this is
that we indicated last week to opposing counsel when
we were conducting certain tests that there had been
some technical issues, that we were solving them. We
did this, of course, in the interest of efficiency and
[Page 17]
transparency.
The next day, those issues were resolved.
We also indicated that to opposing counsel.
At the moment, we do not anticipate any
connectivity issues with Mr. Retuerto.
I take the opportunity to invite opposing
counsel to raise these issues with us. I don't think
we need to take up the time of the Tribunal. I think
the coordination so far has been quite cooperative,
and I expect it to stay that way.
If any issues arise, we will let you know as
soon as possible. Thank you.
PRESIDENT CROOK: I welcome that spirit as
we move forward.
Remind me, when will we be doing the remote,
that comes up Thursday, Friday?
SECRETARY: It's Wednesday, sir.
PRESIDENT CROOK: Oh, Wednesday, okay.
SECRETARY: It's Wednesday.
And, sir, if I may?
PRESIDENT CROOK: Please.
SECRETARY: We are planning--and this is a
[Page 18]
formal invitation to both parties. We're planning to
conduct a test, and we invite a test on tomorrow at
the end of the day.
So for counsel to have whoever is managing
the connection on the remote side for the witness, we
would plan on doing it after the hearing concludes
tomorrow. And for counsel for the Claimant, if
somebody wants to stay at the end of the day and see
the conduct of that test, we will welcome you to.
PRESIDENT CROOK: Okay. Well, thank you for
that invite for the parties to work with the secretary
to tend to the arrangements that are required.
Anything further on the administrative side?
Okay. If not, let us turn to the Claimant's
opening. You have three hours available.
At this point, do you assess, will you be
using the full time allocated? If so, that's fine,
but just for our planning purposes.
MR. GALLEGO: Yes.
PRESIDENT CROOK: Okay. Very good. Then we
are standing by.
OPENING STATEMENT BY COUNSEL FOR THE CLAIMANT
[Page 19]
MR. FODEN: Good morning. My name is
Timothy Foden, and I'll be starting today's
presentation.
Now, I'm sure that the experienced members
of this Tribunal have sat on commercial arbitration
cases before. So I'd like the Members of the Tribunal
to imagine for a moment that you're hearing a
commercial case regarding a breach of contract. And
in this imaginary case, the Respondent turns up to the
hearing with the primary defense that it didn't breach
the contract because it was unable to fulfill the
relevant obligation in the first place.
Now, you'd be sitting here thinking, how did
a case where the Respondent has effectively admitted
to a breach even make it to hearing? Shouldn't this
case have been settled ages ago?
Well, you don't have to imagine it, because
that is the case before you today, except it's an
investment treaty case.
Perú signed a free trade agreement just a
few years ago, in 2009, that required it not to
expropriate foreign investments and to provide those
[Page 20]
investments with full protection and security.
Today, you're going to hear from our friends
opposite that Perú's breaches are somehow excused for
a variety of reasons, but predominantly owing to
nebulous concepts of social license and its own
inability to stem a growing tide of local unrest in
relation to mining projects.
But that's not how treaty obligations work.
In fact, this is precisely what these obligations are
there for in the first place.
Think of how hollow and meaningless treaty
standards would be if states simply shrugged their
shoulders and said, in effect, we're unable to provide
the protections for a treaty that we freely negotiated
14 years ago. We just can't do it.
Like I said, if the Respondent here was a
commercial party, the award would write itself.
But even Perú's attempts to clothe the
inaction that resulted in its breaches of the FTA with
some fashionable sense of ESG and social license
simply don't marry with reality.
The local Community of Parán, of which you
[Page 21]
will hear so much this week, didn't blockade the
Claimant's mind because it had legitimate grievances
or environmental concerns; rather, this is a
municipality with a long track record of criminality,
which took my client's mind at gunpoint to both mine
and sell its valuable ore and to protect its thriving
marijuana business from police scrutiny; and in so
doing, people were injured and a life was lost.
That's worth repeating.
In the course of their legal takeover of the
mine, Parán killed a subcontractor of Lupaka gangland
style in a restaurant. So don't be fooled when Perú
tells you this afternoon that it was some innocent
rural community abused by a multinational mining
company.
On the contrary, Parán's conduct towards
Lupaka could be described as both extortionate and,
sadly, murderous.
And what's more, Parán didn't actually have
any legitimate claim to the area in which the Claimant
had actually built its mine infrastructure. And it's
for that reason that the Claimant was under no legal
[Page 22]
obligation to come to an agreement with the Parán
Community for land surface rights, but try it did,
anyway.
The Claimant made scores of good faith
efforts to ensure a broad social license with Parán.
Truly, Lupaka wanted to be a good neighbor.
To that end, the Claimant attended an endless series
of meetings, even after it became clear that Parán had
no real intention of negotiating, and systematically
reneged on each and every commitment it made to the
Claimants in the presence of government officials.
Now, I hope you'll indulge me in one of a
couple of analogies this morning. See, I have twin
eight-year-old boys; one is bookish and small, and the
other is aggressive and big. Obviously, they're
fraternal.
Over the years, when the bigger one picks on
the little one, as he inevitably does, he'd never do
it in my presence, and he'd always promise that he
would stop. But as soon as I would leave the room,
I'd hear the little one yelling, "Ouch!"
In this case, Parán is the bigger boy, and
[Page 23]
Lupaka was the smaller one. The difference between me
and the central Peruvian authorities in this analogy
is that, after a while, I stopped believing that the
bigger boy would honor his commitments, and I took
action, I put him in time-out.
Perú never took any action. Either because
it didn't care or it was incapable, Perú never took
any steps to contain Parán's bullying. All they ever
did was keep telling the Claimant that they had to
keep engaging in dialogue, engaging in dialogue. Of
course, that didn't work.
Perú has a monopoly on police power within
its borders. So sooner or later, it had to deploy its
coercive power and put Parán in time-out.
What Perú will tell you is that it couldn't
justify the use of force in the circumstances, not
only because it would have been inconsistent with
Peruvian law and policies, but because historically,
and even now, in the midst of what is effectively a
national emergency in Perú, its use of force has only
exacerbated conflict.
But how Perú uses its coercive power isn't
[Page 24]
for the Claimant or even the Tribunal to decide. It's
not the investor's concern that the clear, obvious
need for force is one that the sovereign state can't
meet effectively because it has a history of using
that force excessively.
Of course, the Claimant never wanted Perú to
use excessive force. It simply wanted the central
government to exercise its police powers in a
responsible manner.
And Perú is obligated under the treaty to do
so. It can't excuse that obligation now by simply
saying, sorry, we're really bad at it.
To deploy another analogy, when the Los
Angeles police department--they didn't stop policing
in the wake of the unfortunate Rodney King episode 30
years ago in which several police officers beat
Mr. King savagely in public view in a grim reflection
of that department's long history of brutality.
Following that episode, when Los Angelenos
called 9-1-1, they weren't met with the response,
sorry, we won't come out to investigate your home
invasion because we might use excessive force on the
[Page 25]
intruder. They did their jobs. Yet, that's what Perú
is telling you. They didn't come to my client's aid
because historically, they were really bad at doing
so.
That's simply not good enough, and the
Tribunal should dismiss it for what it is. It's the
kind of balderdash that Respondent states have come up
with when they've clearly breached their obligations,
and they just have nothing else to say about it.
Lupaka, and any foreign investor, has to be
able to trust that Perú was going to exercise its
police powers in an effective, responsive and
proportionate manner. The FTA's protections, they're
not conditional in this regard. They provide
protections, and the investor is allowed to expect
that those protections will be deployed in a
responsible manner.
But in a sense, how Perú would have acted is
immaterial because they didn't act at all. And who
has benefited from Perú's intransigence?
Well, since 2019, the Huaura province of the
Lima region has a new mining company. It's Parán
[Page 26]
itself. See, for three years now, Parán has mined the
Invicta project.
Now, remarkably, in yet another
manifestation of Perú's ceaseless victim-blaming, it
argues that the Claimant effectively got what it had
coming to it; specifically, Perú contends that Lupaka
mismanaged its relationship with Parán by disregarding
the community's environmental concerns. According to
Perú, this prompted Parán's opposition to the project
and its subsequent taking of the mine.
Now, this is simply untrue, and the pictures
that you're going to see on the screen in a moment,
hopefully, make that falsehood abundantly clear.
If Parán had environmental concerns, it
would have made those concerns clear during the
protracted discussions that it had with the Claimant.
It didn't.
At no point did Parán flag concerns about
environmental degradation. No, its concerns were far
more base and selfish than that. And if Parán
actually did harbor such environmental concerns, it
certainly wouldn't be mining the mine itself, using
[Page 27]
extraction methods that are plainly environmentally
hazardous, but that is apparently the case, as can be
seen on the photos on the slide in front of you.
So while Parán never flagged those concerns,
it did raise its flag over the project, as you can see
there on the slide.
Now, maybe this afternoon, Perú will tell
you that Parán isn't exploiting the mine some three
years after it first began doing so, four years in
fact. But I seriously doubt it, and that's because
they can't. They can't issue such a denial.
See, just last year, Parán opposed Perú's
attempts to close the mine on three separate
occasions. Do these seem like the actions of an
aggrieved local community? No. This opposition just
reflects only Parán's desire to keep exploiting the
mine that it took at gunpoint from my client.
None of this is in dispute. In fact, Perú
didn't even address this illegal exploitation at all
in its Counter-Memorial. It only did so in its
Rejoinder.
Think about that for a moment. The
[Page 28]
Claimant's entire case theory here is that Parán took
the Invicta project to mine it for itself, and Perú
did nothing to stop them. Yet, Perú didn't think it
was necessary to address that case theory until some
18 months into this dispute.
And when it did, Perú contended that we, as
the Claimant, haven't established that Parán planned
all along to mine Invicta.
Pardon me, but that is entirely besides the
point.
The Claimant doesn't have to establish some
mens rea component to prove a treaty breach, and
evidence speaks for itself. Parán is mining the
Invicta project. You'll hear that this week from some
of the witnesses.
Now, this Tribunal has to decide what it
wants to do about that.
Does it want to ignore or excuse the brazen
theft of my client's project because Perú's lawyers
have sought to mask a clear treaty breach behind some
factually hollow social license defense, or does it
want to give meaning to the FTA and fulfill its
[Page 29]
mandate by compensating Claimant for the loss of its
investment?
I think it's pretty clear where we stand on
that.
Now, it remains for me to do two thing
things. First is to explain to the Tribunal that when
we speak of the Claimant or my client or IMC or
Lupaka, we're using those expressions interchangeably,
though Mr. Velarde will explain to you the corporate
structure of the Claimant to make it clear.
And second, I'd like to set out for you the
order of our proceedings over the next two-and-a-half
hours and change.
First, you're going to hear from my friend,
Luis Miguel Velarde, on the status of the Invicta
project at the time of Parán's takeover and Lupaka's
good faith efforts to reach an agreement with Parán.
Then you're going to hear from Mr. Jaime
Gallego on Perú's failure to protect Lupaka's
investment and the resulting breaches of the FTA.
Then you're going to hear from me again on
the mine's mineral resources and the Claimant's
[Page 30]
ability to meet its repayment obligations under the
loan agreement that it had in place with a company
called Pandion.
And finally, you're going to hear from my
old friend, Dr. Marc Veit, who's going to explain to
you the compensation to which the Claimant is entitled
as a result of Perú's breaches of the FTA.
So with that, I will hand it over to
Mr. Velarde.
MR. VELARDE: Good morning, Mr. President,
Members of the Tribunal. My colleague, Jaime Gallego,
and I will address the factual part of our opening
presentation.
As we delve into the facts, please bear in
mind that the main facts of this case are not in
dispute. Where the parties disagree is on the
implication of these facts.
As Mr. Foden just said, I will first
describe the Invicta mine and its status when the
Parán Community decided to take the mine, and I will
then describe Lupaka's efforts to engage and reach an
agreement with Parán; such efforts having failed
[Page 31]
because Parán did not want an agreement with Lupaka.
I will then start with the first part.
In October 2012, Lupaka acquired 100 percent
of the shares of Andean American Gold Corp., and as a
result, Invicta Mining Corp. or IMC, owner of the
Invicta mining project and various mining concessions.
At the time of Lupaka's acquisition in 2012,
Andean had planned to develop a very ambitious mining
project on the Victoria Uno concession. Essentially,
Andean's mine plan assumed open pit or extraction to
process 5100 tons per day of ore by means of an onsite
processing plant.
In 2014, two years after acquiring the
Invicta project, Lupaka conducted mining and
methodological studies with a view to revising the
project's mine plan.
Based on these studies, Lupaka decided to
substantially modify the Invicta mining plan. In
particular, it decided that mining at Invicta would be
conducted entirely underground. The production rate
would be significantly lower than forecasted by
Andean, and that ore processing would be done fully
[Page 32]
offsite.
These changes entailed a significant
reduction in the social and environmental footprint of
the project. Perú's Ministry of Energy and Mines
approved the revised mine plan on 11 December 2014.
The revised project remained focused on the
Victoria Uno concession. The map you have on the
screen shows the territorial boundaries of the
Lacsanga Community shaded in green in the upper half
of the map, the Santo Domingo community shaded in blue
in the bottom right and in the center, and the Parán
Community shaded in yellow.
These are the official boundaries of the
rural communities which have been plotted using the
coordinates from Perú's public registry known as the
SUNARP.
The box in dark red is the surface on which
the Lacsanga Community authorized IMC to conduct its
mining activities, to build the mine infrastructure,
and to use an access road to the project.
The small elements in red represent Lupaka's
mine infrastructure, some of which is also located on
[Page 33]
land belonging to Santo Domingo, with whom Lupaka also
had an agreement signed in October 2010.
As you can see, there was no mining activity
or infrastructure on Parán's land. The Claimant
submitted this map with its Memorial, and Perú did not
challenge it--challenged it in its Counter-Memorial.
Perú's contemporaneous documents confirm
that the project was located on land belonging to
Lacsanga and Santo Domingo.
This was clearly stated in the operational
plan prepared by the Sayán police in February 2019,
the police force with jurisdiction over the area of
the project.
As you can see on the top of the screen,
this plan acknowledges that 70 percent of the project
is in Lacsanga, and 30 percent in Santo Domingo.
Let me open up our emphasis here.
The Respondent has argued for the first time
in its Rejoinder that three of the mining components
of the project were located on Parán's land; namely, a
water reservoir, a water well and a pump house.
The Claimant has not had the chance to
[Page 34]
respond to this belated argument, which is
opportunistic.
Indeed, Peruvian authorities never told
Lupaka that some of the project's mining components
were located on Parán's land; and therefore, that
Lupaka needed to reach an agreement with this
community to develop the project. Never.
Instead, Peruvian authorities repeatedly
requested Parán to leave the blockade, as is clear
from the witness statements of Mr. Trigoso and
Mr. León provided by Perú. This was because they knew
that IMC had the necessary surface rights to develop
the project.
Perú's claim is not even supported by its
own regulatory expert, Ms. Dufour.
As you can see on the bottom of the slide,
Ms. Dufour concedes in Paragraph 330 of her report
that, "It is not an objective of this report to
determine who is the owner of the land where the
Invicta project components are located."
Perú's belated allegation is also incorrect.
One of the mining components Perú refers to is a water
[Page 35]
well located in Huamboy, specifically on land
belonging to Mr. Marcos Tena, a former IMC employee.
As stated in an administrative resolution issued by
Perú's Water Authority in 2009, this well is drilled
on property belonging to Mr. Marcos Tena, who, by
means of an agreement, has ceded his land for the
construction and operation of this well to IMC.
As to the other two mining components,
Perú's claim ignores that they were not necessary to
develop the project.
Mr. Julio Castañeda, IMC's former general
manager, will be here with us this week to explain
this issue further.
With this, I close the parentheses regarding
these three mining components.
ARBITRATOR GRIFFITH: Counsel, can I
interrupt you for a second?
The map on page 14 that we have in our print
doesn't include the box in part of Lacsanga lands
which came up on our screen. We don't have that box
part on our print.
MR. VELARDE: We can update the map. It is
[Page 36]
on the record with the box, it's just a printing
issue.
ARBITRATOR GRIFFITH: Perhaps it could be
scrolled in our prints that you handed up. Not now,
of course.
PRESIDENT CROOK: Yeah, perhaps most
efficiently, you can just provide us a corrected print
of this map with the missing data shown.
MR. VELARDE: Yeah, happy to do so. Thank
you.
As I noted before, the authorities approved
IMC's revised mine plan in December 2014.
From that point onwards, Lupaka invested
time and resources to develop the project. The
Claimant addressed these developments in Section 3.1
of its Reply, and Perú has not denied them.
Let me mention three milestones.
First, Lupaka had the key permits and
approvals to develop the project, including an
Environmental Impact Assessment study and a Mine
Closure Plan, both updated in 2015 and 2016 as
required by Peruvian law. These are the key
[Page 37]
environmental instruments of any mining project. You
can see other permits and approvals listed on the
screen.
Second, as I mentioned before, Lupaka had
the necessary surface rights from the communities of
Lacsanga and Santo Domingo to develop the project.
The surface rights agreements with Lacsanga
have led to Lupaka building an access road to the
project site. You can see on the screen an official
map taken from the website of the Ministry of
Agriculture of Perú, which the Claimant submitted with
its Memorial.
This official map shows the borders between
the three rural communities, which, to be clear, are
part of the original map. The Claimant did not add
them. The Claimant only added the boxes with the
names of the communities corresponding to each
territory. In this official map, one can see the
Lacsanga access road to the site, and that it does not
enter Parán's land.
Third, Lupaka had funding to develop the
project. In June 2016, Lupaka signed a financing
[Page 38]
agreement with PLI Huaura, providing Lupaka with $7
million to develop the project. Lupaka used these
funds in its mine preparation and development works
which were completed before the blockade.
So Lupaka had the land, Lupaka had the
permits, and Lupaka had the funding to develop the
project by October 2018 when Parán blocked the
Lacsanga access road to the site.
There were only two outstanding issues
before Lupaka could exploit the mine at the time of
the invasion by Parán, which I will address in a
moment.
Perú agreed on these two issues as being the
only ones that were pending in its Counter-Memorial.
It also referred to the amendment of the project's
mine closure plan, but then it agreed it was not
necessary.
In its Rejoinder, however, the State added
new requirements, in its Rejoinder. I will also
address them.
The first pending issue was the final
inspection of the mine by the Ministry of Energy. As
[Page 39]
you can see on the screen, on 6 September 2018, that
is one month before the blockade, Lupaka informed the
Ministry that it had concluded its mine preparation
and development works, and requested that the final
inspection be conducted.
This inspection could not take place due to
the blockade. Had this inspection been conducted,
Lupaka would have passed it.
The second pending issue was the
certification of Lupaka's water management system.
Lupaka built this system in mid-2018 in response to
the findings from Perú's Environmental Enforcement
Agency, the OEFA, that some of the Invicta mine
effluents exceeded the maximum permissible limits.
The purpose of Lupaka's water system was
twofold: First, to ensure that the mine effluents
complied with the maximum permissible limits, and
second, to ensure that all mine effluents were reused
in IMC's, Invicta's, activities.
To achieve this, Lupaka's water system
consisted of two ponds excavated in the rock and
located inside the mine tunnels next to each other.
[Page 40]
The effluents from the mine entered the first pond,
which you can see on the right, where it was purified,
and then transferred through three pipelines to the
second pond, from where it was then pumped to the
upper levels of the mine to be reused in IMC's mining
activities.
Lupaka's water system proved to be effective
before the blockade.
The first document you have on the screen is
a directorial resolution issued by Perú's
Environmental Enforcement Agency, the OEFA.
This Resolution refers to laboratory tests
conducted on 20 June 2018, that is some four months
before the blockade, which confirmed that the Invicta
mine effluents "have values within the Maximum
Permissible Limits." Perú has never contested these
findings.
The next document on the screen is a
technical report issued by the water authority in the
area of the project, the Huaura Water Authority, in
July 2018, some three months before the blockade.
In Paragraph 5.3 of this report, the water
[Page 41]
authority confirms, after conducting an inspection at the Invicta mine, that, "There is no evidence of off-mine wastewater discharge."
Then Paragraph 6.3 states that, "No direct impact on the water resources of the Community of Parán and surrounding areas has been found."
In other words, as of July 2018, Lupaka's water system was up and running, and Perú's water authority had confirmed its effectiveness. Lupaka should have had no difficulties in certifying its water system in the second semester of 2018.
Now, you will hear Perú take an extremely formalistic view here to delay the start date of exploitation at Invicta. Even though Lupaka built its water management system to comply with the maximum permissible limits as requested by the OEFA, and even though Perú's own water authority confirmed that Lupaka's water system prevented any impact on the water sources of the Parán Community, Perú will tell you, further to the expert opinion of Ms. Dufour, that Peruvian law does not admit the possibility of building or operating first a mining component, and
[Page 42]
certifying it later.
Hence, Perú's case is that Lupaka needed to destroy its fully functional water system, obtain its environmental certification, and then rebuild that same system from scratch.
This, of course, makes no sense. You will be hearing from Mr. Castañeda on this this week.
PRESIDENT CROOK: Counsel, let me just interrupt you briefly.
Is there any evidence on that point other than the report, the expert report?
MR. VELARDE: On that point, you mean which point?
PRESIDENT CROOK: The point that the system had to be destroyed so that it could be rebuilt.
MR. VELARDE: No. This is only addressed in Ms. Dufour's expert report submitted with the Rejoinder, and nowhere else.
These were the only pending requirements addressed in Perú's Counter-Memorial; however, as mentioned, Perú changed its position in the Rejoinder.
As you can see on the bottom of the screen,
[Page 43]
further to Ms. Dufour's expert report, Perú argued for the first time in its Rejoinder, for the first time in its Rejoinder, that Lupaka also needed to obtain additional water licenses and other permits, and also to obtain registration on the Hydrocarbons Registry before it could start exploiting at Invicta.
These new requirements were not raised contemporaneously, and the Claimant, of course, has had no chance to address them. They should, therefore, be disregarded.
Just as the Claimant has had no chance to address these new requirements, it has also not been able to address the unreasonably long time that Perú's regulatory expert assumes it would have taken Lupaka to comply with these requirements.
As you can see on the screen, Perú's regulatory expert assumes that Lupaka would have taken much longer than the maximum legal time frames to obtain these new permits and approvals, sometimes four times as much, based on what the expert calls "the actual time frames."
This is unreasonable for at least two
[Page 44]
reasons:
First, because Perú's case is premised on conduct of its public officials being in breach of the mandatory deadlines provided in Perú's own law. The Respondent cannot rely on its own turpitude.
Second, Perú's expert only relies on a very small sample of cases to support the actual time frames she uses.
Therefore, even if the Tribunal were to conclude that Lupaka needed to comply with these new requirements, "none," the Tribunal should use the legal time frames and dismiss Ms. Dufour's so-called "actual time frames."
It should be noted in any event that even under all these unreasonable assumptions, Perú's regulatory expert concludes that Lupaka could have started processing Invicta's ore with the Mallay plant in January 2020.
This is the very same date on which Mr. Gordon Ellis, Lupaka's founder and President, has testified that Lupaka would have had to start making gold repayments to PLI Huaura further to the
[Page 45]
acquisition of the Mallay plant.
My colleagues will refer to this acquisition later.
However, the point now is that the analysis of Perú's regulatory expert is moot as she concedes that the permits would have been granted by the time the processing was due to start.
I will now move on to the second part of my presentation where I will describe the many actions that Lupaka undertook to engage with Parán, and why an agreement was not reached.
Let me start with a preliminary comment. As I showed earlier, the project was located on land belonging to Lacsanga and Santo Domingo, not on Parán's land. This is important because Peruvian law only required Lupaka to reach an agreement with the owners of the land where the project was located, which Lupaka did.
You have on the screen Article 23 of Perú's Mining Regulations. This article establishes the requirements that Lupaka needed to comply with before it could start exploiting the Invicta mine.
[Page 46]
The requirement in a) was complied with when the National Institute of Culture issued certificates of absence of archaeological ruins in 2009 and 2010. This is Exhibit C-0059.
The requirement in b) is to "have the environmental certification issued by the competent authority, subject to the rules of citizen participation." The project also complied with this. Its Environmental Impact Assessment study was approved by the Ministry of Energy in 2009, after IMC conducted the citizen participation activities mandated by law in the area of influence of the project, and was then modified in 2015 and 2016, and approved by the authorities.
Perú disputes that the social obligations contained therein were complied with. I will address this in a moment.
The requirement in c) is to "obtain permission for the use of land by prior agreement with the owner of the terrain." Lupaka complied with this by signing surface rights agreements with Lacsanga and Santo Domingo.
[Page 47]
And the requirement in d) is to "obtain any other licenses, permits and authorizations required by the legislation." These are the specific pending requirements that I discussed before, and which relate to Ms. Dufour's opinion.
As you can see, nowhere in Article 23 is there a requirement for Lupaka to reach an agreement with Parán to develop the project.
While Perú's position on this issue is nebulous, it appears to concede that there is no express legal obligation in this regard. However, Perú and its witnesses tried to fill this void by resorting to the notion of social license to operate. Perú's witness, Mr. Trigoso, states that, "Beyond the legal obligation... experience shows that for a mining project to be successful, the mining company must obtain and maintain the approval and support of the communities in the area" (as read), including the Parán Community.
The Claimant is, of course, aware of the notion of social license to operate, but this notion cannot be discussed in the abstract.
[Page 48]
Peruvian mining law is sophisticated and regulates what a mining company must do to obtain a social license to operate from the surrounding communities. This is reflected in the specific social obligations that mining operators must comply with in relation to mining projects.
One of the social obligations is to conduct citizen participation activities within rural communities in the area of influence of the mining project, which is mentioned in the Article 23.b) of Perú's mining regulations that we just saw, and which Lupaka complied with.
The Claimant addressed the citizen participation activities conducted by IMC in Section 3.2.1 of its Reply.
Another social obligation under Peruvian law is to prepare and execute the social programs provided in a mining project's Environmental Impact Assessment study. Lupaka, again, complied with this, which is not a minimum, as Perú contends. This is an obligation that Peruvian law imposes on mining companies.
[Page 49]
On these social obligations, Perú will tell you that Lupaka did not comply with all of them, because in 2016 and 2017, the OEFA found that Lupaka had not implemented some education and health-related programs, among others.
But this criticism is unwarranted, because, as we explained in Section 4.3.3 of the Reply, during this period, Lupaka's activities at the project were suspended, as the company was in critical negotiations with Lacsanga and Parán to secure an access road to the project. The State was informed about this.
Without an access road, the project could simply not be developed. There would be no project.
Lupaka secured the right to build this access road and started executing these social commitments, including the Parán Community and all social activities planned for 2018.
Perú and its witnesses adopt a notion of social license to operate that goes beyond Peruvian law, and that assumes that a mining company is obliged to reach an agreement with a local community at any price, even if the community even is clearly acting in
[Page 50]
bad faith. This is not reasonable.
Perú would also tell you that Lupaka's view that it was not obliged to reach an agreement with Parán confirms its disregard for this community. This is false.
Lupaka strived to engage with Parán, as it knew it was important to have a good understanding with surrounding communities. Lupaka also wanted to secure an alternative route to the project through Parán.
Let me refer to some of the efforts that Lupaka made in this regard.
Lupaka started engaging with Parán shortly after it acquired the project in October 2012. For example, from 2013 to 2015, as you can see on the upper part of the screen, Lupaka supported infrastructure projects for the benefit of Parán.
In the next excerpt on the slide, you can see that Lupaka engaged with a large number of individual members of the Parán Community, visiting their farmland and providing technical assistance on agricultural practices. Lupaka knew this would be of
[Page 51]
interest as Parán is an agricultural community.
The next excerpt on the bottom of the screen is taken from the witness statement of Mr. Eric Edwards, CEO and President of Lupaka between 2011 and 2015, and witness for the Claimant in this case.
In paragraph 64.c), Mr. Edwards also refers to IMC "onetoone interactions with individual community members," but also discusses, you can see this in paragraph b), IMC's engagement with the rural communities as a whole, referring to the frequent meetings held by IMC's Community Relations team with the rural communities to discuss the project.
Mr. Edwards also refers to Lupaka's opening of a local office to allow members of the rural communities, including, of course, Parán, to stop by, ask questions about the project, and share concerns.
You have this in paragraph 64.a) of Mr. Edwards' witness statement.
Confidential information.
(End open session.)
[Page 52]
[Page 53]
[Page 54]
O P E N S E S S I O N
MR. VELARDE: Importantly, Perú's authorities never complained about Lupaka's engagement efforts. Never.
Perú will tell you that this was the case because the State entity on the ground in charge of fostering dialogue does not have a preventive role. This runs contrary to common sense and is obviously an excuse made up for the arbitration.
Building on these engagement efforts, Lupaka and Parán entered into discussions in 2016 with a view to concluding an agreement. On 6 October 2016, Lupaka sent Parán a detailed proposal for an agreement, which included an investment of $200,000 per year or $2 million over a 10-year period in projects related to water infrastructure, the development of agricultural techniques, and others to be defined by Parán.
I will not go into the details of this proposal, which you can see on the screen, and which Mr. Julio Castañeda addresses in Section 5.4 of his first witness statement.
In exchange for Lupaka's commitments, Parán
[Page 55]
would commit to allow Lupaka to use an access road to the site through Parán, among other things. Perú has not criticized Lupaka's good faith proposal in any way.
Parán made a counter-proposal to Lupaka in November 2016. Again, I will not go into the details of this counter-proposal in the interest of time, which Mr. Julio Castañeda also addresses in Section 5.4 of his first witness statement.
I will just say that Lupaka made an effort to accommodate a large part of Parán's counter-proposals, including, as you can see on the left side of the screen, by increasing the amount of the yearly investments, and by accepting to contract all companies in Parán to provide services to the project. You have this on the lower part of the screen.
Confidential information.
(End open session.)
[Page 56]
[Page 57]
[Page 58]
[Page 59]
O P E N S E S S I O N
MR. VELARDE: Lupaka was making every effort to reach an agreement with Parán, so it accepted to pay the 300,000 soles before an agreement was signed, just as Parán requested. Lupaka paid this in two installments; the first on 18 December 2017, and the second on 31st January 2018.
Note that Lupaka paid this debt and continued negotiations with Parán when Lupaka had already secured an access road to the project site through Lacsanga. The agreement with Lacsanga was signed in July 2017.
If Lupaka's only interest was to secure an access road to the site, as Perú will tell you, Lupaka would not have paid Parán, because it had already secured such an access road. Lupaka paid because it wanted to reach an agreement with the Parán Community.
Bear this in mind when Perú tells you that Lupaka disregarded or marginalized Parán. This is simply false.
PRESIDENT CROOK: Counsel, let me interrupt you. I think it would be timely at this point if we
[Page 60]
could take a five-minute break on the scheduled break time. Would that be convenient for you? Are you--and is this a suitable time? We need to do this very quickly, though.
MR. VELARDE: This is fine. I have two more pages to go, but this is fine.
PRESIDENT CROOK: Let's just rise for just five minutes.
MR. VELARDE: Okay.
(Whereupon, there was a recess in the proceedings, 10:33 a.m. - 10:40 a.m.)
PRESIDENT CROOK: All right. Counsel, over to you.
MR. VELARDE: Thank you, Mr. President.
Before the break, I told you that Lupaka paid the 300,000 soles, some $88,000 requested by the Parán Community.
Lupaka expected to resume dialogue regarding an agreement with Parán shortly after paying these 300,000 soles.
As you can see in the first excerpt on the screen, which is a monthly report prepared by IMC's
[Page 61]
community relations team, Parán told Lupaka that dialogue with the company would begin once the company had paid the 300,000 soles. And the second excerpt shows that the Parán leadership confirmed this when it received this payment.
Lupaka expected to rapidly reach an agreement, because, as we saw, 90 percent of Parán's members agreed with Lupaka's revised proposal. Yet, Parán disregarded its commitment and imposed new conditions before resuming negotiations.
Specifically, Parán refused to resume negotiations, first, until Lupaka paid a penalty that Parán had unilaterally imposed in relation to the same 300,000 soles debt.
While contemporaneous documents show there was some back and forth in relation to this penalty, Parán finally agreed to set it aside.
On the screen, you have the letter that IMC sent to Parán summarizing the agreements reached after a meeting with the president of Parán, its governing committee and legal advisors, which leaves no doubt about this.
[Page 62]
And second, Parán also required compensation for exploration works carried out on Parán's land. Note that the letter sent to Lupaka requesting this compensation is dated 19 December 2017, but it was only delivered to Lupaka two months later, when Lupaka had already paid Parán the full 300,000 soles.
Lupaka could not accept this new payment request. Parán was asking that Lupaka continue making significant payments in the hope of resuming negotiations at some point, something that Lupaka was no longer sure would happen.
If anything, Parán's behavior showed that it was trying to extract money out of the company without a real interest in reaching an agreement.
This was in the first quarter of 2018, and things only got worse thereafter. Parán started taking active measures against the project.
Let me give you two examples, which are not in dispute. First, on the left of the screen, you have an excerpt of a report prepared by IMC's community relations team in March 2018. There, you can see that Parán proposed to Santo Domingo to form
[Page 63]
an alliance against the project, offering in exchange to give up on its territorial dispute with Santo Domingo.
You will hear Perú refer to territorial disputes between Parán and the other communities, and how that supposedly obliged Lupaka to reach an agreement with Parán.
Well, here, as you can see, Parán was offering to give up on its land claims if Santo Domingo agreed to block the project.
Second example, in May 2018, the President of Parán tried to convince the President of Santo Domingo to demand 4 million soles more from Lupaka, this is some $1.3 million, for the use of the Santo Domingo land, proposing to split that money in equal parts.
But Parán wasn't just taking actions against Lupaka. It was also taking actions against the other communities.
In the interest of time, I will just say that Parán insisted, over time, on its request that Lupaka transport all its ore exclusively through
[Page 64]
Parán.
Lupaka informed the State that this request blocked any possibility of an agreement, because, first, it was unfair to the other communities, and also ignored that Lupaka was obliged to make significant annual payments to Lacsanga for the use of its road.
Members of the Tribunal, I have just described the reasons why Lupaka could not reach an agreement with Parán. It was not because Lupaka had an inexperienced community relations team, as Perú wants you to believe. No.
Parán did not want an agreement with Lupaka. Why it did not wish to do so is not material; however, the State's own internal documents show that this was because the Parán Community believed the project would interfere with the drug business on Parán's territory. Perú says this doesn't make sense; yet, its own civil servants were stating this at the time.
Perú cannot criticize the terms of the proposals that Lupaka made to Parán to reach an agreement, because, as we saw, 90 percent of Parán
[Page 65]
accepted Lupaka's proposal. Instead, Perú tries to confuse matters by saying that Lupaka gave preference to Lacsanga.
But let us recall that to get the project off the ground, Lupaka needed to have an agreement with Lacsanga in whose territory the project was located. But even after Lupaka reached an agreement with Lacsanga, Lupaka continued making efforts to reach an agreement with Parán, to no avail.
Before giving the floor to Mr. Gallego, I just realized that in the transcript when I was discussing about the water management system, which consists of two--which consists of two ponds, I think that the transcript shows points instead of ponds, so just to clarify that.
With this, I give the floor to Mr. Gallego to address the last part of our factual presentation.
Thank you.
ARBITRATOR GRIFFITH: Counsel, could I ask you what the word "bocamina" means? I'm sorry, I'm not a Spanish speaker. "Bocamina" in the box on Page 40, what's that?
[Page 66]
MR. VELARDE: That's the mine at it, if I--
ARBITRATOR GRIFFITH: At it.
MR. GALLEGO: It's the entrance to the mine.
ARBITRATOR GRIFFITH: It's the entrance, thank you.
MR. GALLEGO: Members of the Tribunal, I will be taking about 45 minutes for the remainder of--for this part of the presentation.
PRESIDENT CROOK: We are scheduled, I think, for an official break at 10 minutes after the hour. Perhaps--sorry, quarter after the hour.
Perhaps, as you draw near to that, you'll let us know an appropriate point to--for us to take that break.
MR. GALLEGO: Thank you, Mr. Chairman.
I'll now address the State's failure to restore law and order despite Parán's illegal actions.
As Mr. Velarde just explained, Parán was not negotiating in good faith, and its menacing discourse only grew worse despite Lupaka's efforts.
On 4 May 2018, Parán sent a letter to IMC falsely claiming that IMC has taken possession of our
[Page 67]
land, installing a camp and contaminating our springs.
Based on these false accusations, Parán gave Lupaka an ultimatum. As can be seen from the letter, Parán stated, "We ask you to vacate the territory of our rural community within 15 calendar days; otherwise, we will proceed to evict you." (As read.)
This was the prelude to the violent invasion of June 2018.
IMC's community relations team met with Parán leadership on 15 June 2018, in an attempt to avoid the invasion by Parán. This was to no avail.
During this meeting, Parán's leadership informed IMC that Mr. Soyman Retuerto, then Subprefect of the Leoncio Prado District and one of Perú's witnesses in this arbitration, had authorized Parán to invade the mine. This was memorialized in the report for the month of June 2018, prepared by IMC's community relations team.
Confidential information.
(End open session.)
[Page 68]
[Page 69]
[Page 70]
[Page 71]
O P E N S E S S I O N
MR. GALLEGO: On 23 July 2018, Parán wrote to the Minister of Energy and Mines to give its version of these events, and this is what Parán said.
"Recently, in an ordinary assembly, we decided to carry out a peaceful inspection inside the facilities of the mining company with the intention of verifying for ourselves what they have been denying, that they are working, the case being that we found that they are, indeed, working..."
And then the letter goes on to say that there are environmental violations.
This is just another example of Parán's false accusations. Not only had the armed invasion been brutally violent, but IMC was not exploiting the mine, nor were there contamination in the way they alleged. None of this is in dispute.
Parán planned a new invasion of the site for 11 September 2018; however, on 10 September 2018, the police did intervene in view of Parán's announced invasion for the next day. The Order for the police intervention is at C-0136, and projected on the
[Page 72]
screen.
The first highlighted portion of the extract shows that police had a wide mandate to ensure that public order was maintained. The second highlighted portion further shows that the role of the police was and is to guarantee compliance with the law and reestablish public order.
Doing so was not discretionary for the police, as is Perú's case. It is required to do so, and it was going to counter the use of force or violence by Parán with appropriate means.
On 10 October 2018, Parán sent a letter to the Minister of Energy and Mines, again, making a new series of false acquisitions against Invicta about the exploitation of the mine and the supposed environmental breaches.
This letter was a clear attempt by Parán to justify the invasion that would take place only four days later, and is another example of Parán's bad faith.
Confidential information.
(End open session.)
[Page 73]
[Page 74]
O P E N S E S S I O N
MR. GALLEGO: Yet, Perú states that its response to this invasion was, and I quote, "reasonable." It also blames Lupaka for not seeking help early enough, which, of course, makes no sense.
Perú states that because in October--because of the October invasion, Parán was already on the ground and armed. The police's decision not to intervene was, and I quote, "entirely consistent with Peruvian law."
This is obviously mistaken. Peruvian law is clear that there should be police intervention in the circumstances.
First, the Constitution's basic tenet on law enforcement found in Article 166 of the Constitution says, "the fundamental purpose of the National Police is to guarantee, maintain and reestablish internal order. It provides the protection and assistance to the persons and the community. It ensures compliance with the law and the security of public and private property. It prevents, investigates and combats crime".
[Page 75]
Even under this basic tenet, it is clear that the State should have intervened to redress Parán's criminal conduct, and thereby, allow IMC to continue with its mining project at Invicta.
Second, there is Article 920 of the Civil Code.
Three days after the invasion, on 17 October 2018, Invicta sent a letter to the police requesting police support to recover possession of the site.
The police were obliged to assist Invicta in recovering control of the site.
Indeed, Article 920 of the Peruvian Civil Code, which regulates the so-called "Extra Judicial Possession Defense," leaves no room for any doubt in this regard.
As can be seen from the last extract at the bottom of the slide, the National Police of Perú "must provide necessary support to guarantee strict compliance with this article under penalty of the law".
Perú has said on this that Article 920 only requires that the police play a supporting and
[Page 76]
supervisory role with respect to a dispossessed property owner's own efforts to regain their property.
It also states that the police's assistant [recte: assistance] or support could not have taken the form of use of force as a result of this article.
This is worth a brief comment.
As the Tribunal is well aware, the situation is that Parán had invaded the site and set up a roadblock with 100 of its members who were heavily armed and had proven to be very violent.
Perú seems to be suggesting that Lupaka had the right to organize a security force in the circumstances, to evict the Parán invaders, and that if it had done so, Perú's police would have stood by and watched.
It is ironic that Perú is suggesting this, when it criticizes the intervention of WDS, Lupaka's private security force, a few months later.
Perú's position is also contrary to the reality in Perú. In the case of Las Bambas, which is a major copper mine in Perú whose operations have also been blocked by communities, the police did carry out
[Page 77]
a forceful intervention in 2022 precisely on the basis of this Article 920 of the Civil Code, as one can see from a report of the ombudsman that is on file and that is on the screen.
Perú also says that Lupaka did not comply with the requirements of Article 920, and that's at Rejoinder Paragraph 185, and tries to create confusion by referring to regulations that apply to the recovery of State-owned land.
Yet, a simple reading of this provision, that is 920, shows that Lupaka only had to inform the police about the dispossession and request support, which it did, as we have seen. No Peruvian authority ever told Lupaka that it would not receive police support because of protocol requirements.
Third, Perú's own defense in this arbitration confirms that the police must intervene in circumstances such as these. Perú's criminal law excerpt, Mr. Meini, explained, and I open quote, "The use of force is never discretionary," and that the police "can and should" use force in any of the situations listed in Article 8.2 of Legislative
[Page 78]
Decree 1186.
Here, we are at least in two of the situations, if not more, specified in Article 8.2. That is, namely, to detain a person committing a crime, and to protect or defend protected legal interests.
Indeed, Parán were on Lacsanga's land continuously, and were blocking IMC from accessing its own site, and its right to exploit the mine. In the words of Perú's criminal expert, Mr. Meini, the police "can and should use force" in these circumstances.
But the Tribunal does not need to decide this matter under Peruvian law. It is making a decision under international law.
It is clear that under international law, Perú had an obligation to protect foreign investors from criminals. Already at this point, there was, at the very least, a breach of the obligation under international law to afford FPS to Lupaka's investment.
Aware of its duty to intervene, the police initially responded positively. Indeed, on 25 October
[Page 79]
2018, eight days after Lupaka's letter, the police informed IMC that the "PNP Colonel Chief of Huacho Police Division, has ordered that the respective order of operations be formulated in order to be able to provide the police support and thus maintain public law and order."
However, ultimately, the police did not intervene. As we will see as we go through the chronology, this was only one of several instances where the police made it clear that it believed that forceful intervention should take place in order to allow IMC to recover access to the mining site.
Parán was armed at the time, because Perú's Army provided arms to it in the 1990s when it created the Rondas Campesinas. This is confirmed by Perú in this arbitration. You can also see this referenced in an internal PCM document at the top of the screen; PCM is an organ of the Peruvian State.
The Police Operational Plan states that Parán's Rondas Campesinas had some 16 rifles provided by the army. On the slide is an extract from the Police Operational Plan confirming this.
[Page 80]
Parán was also in possession of other arms, as the Police Operational Plan also confirms, and which you can see on the second extract confirming that other than the rifles, they held pistols, revolvers and carbines.
Parán was also in control of Invicta's explosives magazine which contained various tons of explosives. This is also confirmed by the report attached to the Police Operational Plan.
In response, Perú states, and I quote, "There is no evidence to suggest that, during the Access Road Protest, or during the encounter with the [WDS] on 14 May 2019, the Parán's Ronda Campesina actually used any of the firearms that had been distributed to it decades earlier by the Peruvian military."
ARBITRATOR GARIBALDI: A quick question, counsel.
What is the Spanish word used for "rifles" here in the original?
MR. GALLEGO: I think it's "retrocargas."
ARBITRATOR GARIBALDI: Retrocargas.
[Page 81]
1 MR. GALLEGO: Which is a bit of an
2 old-fashioned word, in my opinion, but I would
3 translate it as rifles.
4 ARBITRATOR GARIBALDI: But it says
5 12-gauge--16 12-gauge rifles. I thought a 12-gauge
6 refers to a shotgun. Anyway, it doesn't matter, but
7 it is interesting that--retrocargas. Retrocargas
8 could be a shotgun that is--never mind.
9 PRESIDENT CROOK: As one who wandered around
10 the field as a misspent boy carrying a 12-gauge, it is
11 a shotgun.
12 MR. GALLEGO: Thank you, Mr. President.
13 I think there is a discussion about
14 long-range weapons and short-range weapons, and that's
15 reflected in the evidence. In any event, whether
16 there were given shotguns or rifles, the point stands,
17 there were 16 of them provided to the Parán Community
18 by the army.
19 So Perú says that there's no evidence that
20 they actually had these weapons provided by the army
21 during the Access Road Protest, or during the incident
22 of 14 May 2019.
[Page 82]
1 Now, if you see the letter on the screen
2 from 25 January 2019 from the Huacho police department
3 to the head of the Lima Region, General Arata,
4 requesting that General Arata order that the arms
5 provided by the army to Parán's Ronda Campesina be
6 confiscated as it is misusing them. Now, that is in
7 the first highlighted portion.
8 In its reasoning, it explains how a Lacsanga
9 inhabitant has received multiple wounds as a result,
10 and that the Parán Community has been carrying out the
11 forceful blockade since October of 2018. And that's
12 in the second and third highlighted portions.
13 Now, this is obviously contrary to Perú's
14 position.
15 Sadly, this plea from the police in January
16 2019 fell on deaf ears at the time. And Perú also
17 ignores this letter in this arbitration, despite the
18 Claimant having referred to it in the Reply.
19 As to the events of 14 May 2019, it is
20 undisputed that approximately 100 heavily armed
21 members of Parán entered the site, opened fire against
22 the WDS guards, and Mr. Estrada, as well, and that is
[Page 83]
1 IMC's employee.
2 Parán's members would have likely been
3 carrying all the arms they had, including those
4 provided by the State.
5 Now, Perú's response is that, I quote,
6 "Importantly, Claimant has not shown that a forceable
7 stripping of such weapons, had it taken place, would
8 have dampened the community's opposition, prevented
9 the road access protest or in any way helped to
10 resolve the conflict."
11 That's in Paragraph 268 of the Rejoinder.
12 Now, this is wholly disingenuous and defies
13 any logic.
14 It is not the same to confront--it is not
15 the same to confront a heavily armed mob than to
16 confront one that is not. The police should have been
17 able to lift the blockade in such wholly different
18 circumstances, and WDS would have been able to hold
19 its ground at the site in May 2019.
20 Now, I'll come back to this event later.
21 Now, I've just been informed that it's
22 actually escopetas, which is rifles in the original.
[Page 84]
1 ARBITRATOR GARIBALDI: Sorry. Escopeta is
2 not rifle. Escopeta is shotgun.
3 MR. GALLEGO: Okay.
4 By this point, it was entirely clear--I
5 respectfully disagree with that, Mr. Garibaldi, and
6 I'm sorry, we'll have a look at that. But anyway,
7 I'll carry on for the sake of time.
8 ARBITRATOR GRIFFITH: If you want to attach
9 the word 12-gauge, I think you're stuck with the
10 shotgun, unless you're very convincing.
11 MR. GALLEGO: Thank you, sir. Take note.
12 By this point, it was entirely clear that
13 Perú's police forces should intervene, this with the
14 view not only of Lupaka, but also of the police.
15 Following Lupaka's further requests for
16 police intervention in early December 2018, the police
17 had been assessing an intervention. This was
18 not--this has not been contested by Perú.
19 On the slide is an internal police document
20 showing the various approvals obtained relating to
21 such intervention. The document shows approvals by
22 the general staff office for operational plans in
[Page 85]
1 Lima, the legal department of the police in Lima, and
2 the police division in Huacho.
3 Now, this is why the police had finalized an
4 operational plan dated 9 February 2019, which is at
5 C-0193, and which CPO Soria sent to his superior in
6 Huacho for approval and onward transmission to Lima.
7 The operational plan is a very detailed account, of
8 which 55 pages are on file out of 105 pages which CPO
9 Soria sent to his superior on 9 February 2019, as can
10 be seen from the slide.
11 The plan provided for 280 police officers to
12 be on the ground, 280, of which 200 would be from the
13 specials operations unit in Lima, and the rest from
14 other police units. It is clear that this plan had
15 been prepared over a significant period of time and
16 had been finalized.
17 Indeed, the operational plan had been
18 carefully prepared. It mapped out a phase strategy,
19 as you can see from the points that have been put on
20 the slide.
21 The operational plan also had an
22 intelligence report, as well as a report evaluating
[Page 86]
1 the risk attached to the same.
2 And as Mr. Bravo testifies, the police
3 authorities also took the time to meet with IMC and
4 coordinate critical aspects of the operational plan.
5 On 20 February 2019, Mr. Bravo coordinated
6 further with Colonel Arbulú to suggest that he approve
7 the plan. Mr. Bravo received confirmation of this on
8 14 February 2019.
9 Also on 14 February 2019, Mr. Bravo
10 coordinated with CPO Soria to tie off any remaining
11 points before the plan went ahead.
12 And he received oral confirmation, Mr. Bravo
13 received oral confirmation that all the police
14 hierarchy had approved a plan.
15 Mr. Bravo then received confirmation that 19
16 February 2019 was set as the date for its execution.
17 Despite all this, the plan did not go ahead.
18 Now, Perú has not contested any of this
19 evidence; however, Perú does make the general
20 allegation that the police act autonomously, and that
21 if the plan did not go ahead, it is because the police
22 decided that they should not and that they are
[Page 87]
1 entitled to do so under Peruvian law.
2 Yet, this story does not match Perú's
3 internal documents, nor Mr. Bravo's understanding at
4 the time. All the evidence points to the fact that it
5 was Mr. Saavedra or other high-ranking officials
6 within the Ministry of the Interior who blocked the
7 implementation of the operational plan.
8 Now, for example, as can be seen on the
9 slide, Mr. Saavedra candidly stated in a WhatsApp
10 message to Mr. Bravo on 15 February 2019, that the
11 implementation of the operational plan could not go
12 ahead because, he said, if we do not adhere to the
13 protocol on the use of public force and there are
14 consequences, these will fall back on the country, and
15 the national and international press will do their
16 thing, which is why we must be scrupulous.
17 The inference here is clearly that
18 Mr. Saavedra feared negative political consequences.
19 Mr. Saavedra comments on this very briefly in
20 Paragraph 23 of his statement. He says that it is
21 untrue that unfavorable publicity in the media was the
22 only consideration; yet, he does not give any further
[Page 88]
1 explanations.
2 Ultimately, the Tribunal does not need to
3 decide whether it was the Ministry of the Interior or
4 another instance that blocked the Police Operational
5 Plan. What matters is that there was no good reason
6 not to proceed, given the circumstances.
7 Parán was acting criminally by taking
8 Lupaka's mining site with violence; its members were
9 brandishing firearms; they were using them against
10 Lacsanga members, and they had taken control of IMC's
11 explosive magazine.
12 Parán had also been so bold as to impede an
13 inspection of the explosives magazine by the
14 prosecutor, accompanied by the police on two
15 occasions, in December 2018, and February 2019, and
16 had also shown repeatedly and without exception that
17 they were not willing to enter into any reasonable
18 dialogue to come to an agreement.
19 It is for this reason that the Police
20 Operational Plan at C-0193 was a finalized document,
21 which had been prepared and approved by numerous
22 police instances. It is--its implementation made
[Page 89]
1 sense to many within the police forces, not least of
2 which those officers on the ground and those not
3 focusing on a political agenda.
4 PRESIDENT CROOK: Counsel, I see from your
5 slides that we're about to move to the 26 February
6 agreement. Perhaps this would be a time for us to
7 take our break?
8 MR. GALLEGO: Yes, it would. Thank you.
9 PRESIDENT CROOK: Let me invite you when you
10 come back, could you briefly clarify for us the
11 relevance, as a matter of international law, of all we
12 have heard about who did or did not block the
13 performance of the intervention plan.
14 How is that relevant to your international
15 law argument that there was a failure of full
16 protection and security? Just very briefly. Thank
17 you.
18 ARBITRATOR GRIFFITH: Counsel, could I also
19 flag, perhaps not for your opening, but I note on page
20 60 of the slides, the last point in the first box is
21 the guarding of the site by the police for a maximum
22 of 72 hours.
[Page 90]
1 Perhaps at some time before the final
2 addresses--we're not having a final address, but
3 sometimes might we have submissions on the
4 relationship between the police intervention for 72
5 hours and the capacity to conduct the mining
6 operations?
7 PRESIDENT CROOK: All right. Let's convene
8 in ten minutes.
9 (Whereupon, there was a recess in the
10 proceedings, 11:17 a.m. - 11:28 a.m.)
11 PRESIDENT CROOK: Okay. We can start.
12 MR. GALLEGO: I'll just address the two
13 questions in order.
14 First, as to the relevance as to who blocked
15 as a matter of international law, it is not for us to
16 say who blocked the Police Operational Plan. The
17 evidence that we are marshalling shows that numerous
18 individuals within the police and also outside the
19 police in other State organs thought that the police
20 should intervene.
21 Now, that is a clear demonstration that this
22 should have happened, if you needed it, given the
[Page 91]
1 circumstances of Perú's actions.
2 As to the second question on 72 hours and
3 the capacity to conduct the mining operations, it is
4 Lupaka's submission that what should have happened
5 here is that the Parán Community should have been
6 disarmed. They-Lupaka precisely was contracting WDS,
7 as a security force, to enter with the police and to
8 be able to secure its own site once the police had
9 left after 72 hours-.
10 In any event, the police should have
11 provided sufficient security to protect them against a
12 further invasion by Parán.
13 The Claimant has provided evidence that the
14 Ministry of Energy and Mining's team in charge of
15 mediating negotiations with the community, the OGGS,
16 knew that further negotiations were going to be
17 unproductive by early 2019.
18 The evidence here is again directly from
19 Perú's internal documents and where officials are
20 stating in no uncertain terms that there is no point
21 in continuing the negotiations.
22 For example, let us see C-0468 of 20
[Page 92]
1 February 2019, which was already shown by Mr. Velarde.
2 The author, Mr. León, one of Perú's witnesses in this
3 arbitration, states as follows: "The social process
4 that the mining company maintains with the community
5 is affected by the presence--is affected by the
6 presence of interests outside the State (producers of
7 local marijuana plantations). The MININTER is aware
8 of this problem and is activating the corresponding
9 mechanisms. Also, it is known that the local police
10 is preparing an operations plan in the community,
11 having identified long-range weapons among community
12 members."
13 "Recommendations: Coordination at the
14 highest intersectoral level between the MEM and the
15 Ministry of the Interior in order to activate as soon
16 as possible the mechanisms for the re-establishment of
17 public order in the area by the MININTER. Dialogue
18 mechanisms are not appropriate in the case because the
19 community leadership manages a double discourse with
20 the State and with its population, evidencing with it
21 the presence and active participation of local actors,
22 who, with an economy outside the law, subsidize
[Page 93]
1 activities contrary to public order against the mining
2 project."
3 Now, what does Perú say to this? It says
4 that these are just the opinions of a civil servant at
5 a particular time, but not the institution's opinion.
6 That is, the institution thought it reasonable for
7 dialogue to proceed.
8 Now, this is highly questionable on the face
9 of this document and others like it.
10 In any event, even if Perú's position was
11 correct, these documents are devastating for Perú's
12 case, because it shows that the opinion of several
13 people from the OGGS, who attended meetings on the
14 ground, with Parán, was that further negotiations were
15 not going to yield any results in light of the fact
16 that Parán had among its ranks drug traffickers who
17 would not see the benefit of an agreement with Lupaka.
18 Following the decision by a higher authority
19 in the State, the police should not intervene, there
20 were negotiations with Parán on 26 February 2019.
21 These led to a preliminary agreement with Parán, with
22 obligations for both Parán and Lupaka.
[Page 94]
1 But the agreement was only a first step. It
2 merely started what in Perú is called a dialogue
3 table, a formal setting in which the parties would
4 further negotiate with the intermediation of the State
5 to reach a further agreement.
6 Now, Perú heavily relies on this 26 February
7 2019 Agreement for two main points. First, it says it
8 is proof that there could be agreements with Parán;
9 and therefore, that it was right not to order
10 forceable intervention.
11 Second, that the events subsequent to this,
12 particularly concerning the topographer mentioned in
13 the agreement, showed that Lupaka was the problem, not
14 Parán.
15 Yet, the facts show that Perú is yet
16 clutching at straws in both instances. While the 26
17 February 2019 Agreement was encouraging the day it was
18 signed, it proved to be a smokescreen for Parán's bad
19 faith shortly thereafter.
20 Indeed, the Parán Community did not lift the
21 blockade on the Lacsanga road at all.
22 Now, this is undisputed. Yet, as can be
[Page 95]
1 seen from the screen, point 5 of the agreement is
2 unambiguous that this was required immediately. It
3 says the parties agree that the rural Community of
4 Parán will suspend all, all coercive measures as of
5 this date, which will be ratified by the community
6 assembly.
7 Now, the community assembly did ratify this,
8 as Mr. León testifies. So while the Parán Community
9 signed an agreement, it showed absolutely no
10 willingness to comply with it, even if it allowed
11 Lupaka's personnel to access the site for a few days
12 on foot, through Parán's precarious road.
13 Now, that's the first point.
14 Now, as to the topographer referred to at
15 point 4 of the agreement, he or she was to be used,
16 and I quote, "to identify and locate the affected
17 land, rural Community of Parán."
18 Now, this is in line with Parán's
19 long-standing claim that there was environmental
20 damage on its land, which was discussed during the 26
21 February 2019 meeting, and at the meeting, immediately
22 preceding this, as well, on 29 January 2019, as
[Page 96]
1 Mr. Bravo has testified.
2 Parán's demand that a unilaterally appointed
3 topographer conduct a survey to build a useable road
4 on Parán's land and to be paid an amount of $9,000
5 came on 15 March 2019.
6 Now, that's two-and-a-half weeks after Parán
7 still failed to lift the blockade on the Lacsanga
8 road.
9 Lupaka denied that this was the purpose of
10 the topographic survey in the letters to Parán and to
11 the MEM in the following days.
12 Now, despite Parán's unreasonable demand,
13 Mr. Ansley and Mr. Bravo met with Parán officials on
14 19 March 2019. They offered to consider it and make
15 enhancements on the Parán road over time. Perú has
16 not made any comment on these conciliatory offers,
17 even though Mr. Bravo referred to them in his witness
18 statements.
19 Perú was also informed about this meeting
20 contemporaneously.
21 In response to Lupaka's offers at that
22
[Page 97]
1 meeting on 19 March 2019, Parán's president demanded
2 that the agreements with Lacsanga and Santo Domingo be
3 canceled, which was, of course, impossible, and
4 expressly stated that Parán had no intention of
5 lifting the blockade.
6 Again, Perú has not reacted to this. The
7 following day, on 20 March 2019, Parán forcefully
8 re-evicted Lupaka's employees, who had recently been
9 allowed on-site. Perú hardly refers to this except to
10 say that it was a demonstration or a protest by Parán.
11 Now, just stepping back for a moment: Even
12 if Perú is entirely correct that Lupaka's breached its
13 obligations regarding the topographer, and just
14 ignoring that Lupaka offered to abide by Parán's
15 demands, as we have seen, Lupaka's supposed breach
16 could hardly be an excuse for Parán's reaction on 20
17 March 2019. Its renewed aggression could only have
18 made it patently clear again that Parán would never be
19 willing to negotiate reasonably.
20 Lupaka was not going to continue to spend
21 its time attending sham dialogue meetings after this
22 unless Parán showed some goodwill and lifted the
[Page 98]
1 blockade, as it made patently clear.
2 The Respondent, in its desperation, places
3 enormous significance on the events of 14 May 2019 by
4 which WDS entered the site; yet, Perú has not
5 correctly portrayed one key detail of these events and
6 which shows that Lupaka did nothing wrong here.
7 Now, let me briefly revisit the facts in
8 relation to this event.
9 The Claimant has shown that IMC retained WDS
10 as a plan to secure the site after police had entered
11 the site.
12 Indeed, as testified by Mr. Bravo, the
13 police continued to consider that an operation plan
14 was required, and he and other IMC staff were
15 coordinating with the police to carry it out.
16 The Respondent has not contested this.
17 Mr. Bravo obtained confirmation from Colonel Arbulú,
18 the head of the Huacho police division that the plan
19 was going ahead. Again, this has not been contested
20 by the Respondent.
21 Yet, on 14 May 2019, the day the police were
22 supposed to intervene and remove the blockade, they
[Page 99]
1 did not show up. Again, uncontested.
2 WDS entered the site unimpeded. There were
3 no Parán members at the site of the blockade, as shown
4 by a video shot on that day. Let us see a short clip
5 of this video with Marco Estrada, who, as I said, was
6 IMC's employee, and he's speaking to the interviewer
7 in this video.
8 (The video was played.)
9 So this is the only point that the
10 Respondent contests. It ignores the video. Instead,
11 it provides a police report from February 2020 as
12 evidence to support its case that WDS removed five
13 members of the Parán Community while approaching the
14 mine.
15 Yet, the police were not there, so they
16 couldn't have seen this. They did, however, record
17 Parán's account of the event shortly after it
18 occurred.
19 Now, a few hours later, Parán members
20 arrived with full force to the mining site, which, by
21 the way, is not on Parán's land, as we have seen.
22 Parán was shooting their guns, leading to the flee of
[Page 100]
1 WDS personnel, as well as Mr. Estrada. They did not
2 return fire.
3 Two WDS guards were shot, one receiving a
4 bullet wound in the mouth. The next day, another WDS
5 employee was shot dead by a Parán Community member.
6 There were no injuries to anyone at Parán. Again,
7 Perú does not contest any of this.
8 To the best of the Claimant's knowledge, the
9 police still did nothing in respect of Parán's
10 egregious conduct.
11 Perú states that the incident with WDS
12 forever buried any hopes that Lupaka could have had to
13 enter into an agreement with Parán; that the incident
14 was squarely Lupaka's fault, and that it marked a
15 point of no return in the relations with the
16 community. At least Perú is consistent in this
17 arbitration with the position it took at the time;
18 yet, it is completely flawed given the facts that I
19 have just rehearsed.
20 As Mr. Foden demonstrated at the beginning
21 of this presentation, in July 2019, Parán decided to
22 take Lupaka's stockpiled ore at the site. Mr. León
[Page 101]
1 confirms that he knew that Parán was exploiting the
2 mine during the third quarter of 2019.
3 Furthermore, a few months later, in November
4 2019, the police confirmed during a site inspection
5 that Parán was exploiting the mine. The police
6 intercepted various trucks loaded with ore that month
7 near the project site.
8 Parán has continued exploiting the mine to
9 the present day, as other contemporaneous documents
10 show, including some authored by Perú's own witness,
11 Mr. Nilton León.
12 I will not show you this evidence again in
13 the interest of time. I just wish to refer to the
14 meeting that Mr. Bravo held on 15 July 2019 with
15 Mr. Augusto Cauti, then Deputy Minister of the MEM.
16 During this meeting, Mr. Bravo explained to
17 Mr. Cauti that Parán was already exploiting the mine;
18 in response to which, Mr. Cauti said that if that was
19 the case, he would call the Deputy Minister at the
20 MININTER to ask for a police intervention.
21 Now, Mr. Bravo has testified on this, and
22 Perú has not contested his testimony. Even if late,
[Page 102]
1 because this came in July 2019, this could still have
2 been Lupaka's salvation if the police had intervened
3 then; yet, as we know, this didn't happen.
4 As I noted earlier, the police did intervene
5 on 14 December 2021, after this arbitration was
6 started. Perú points to various other supposed
7 differences in a submission as compared to the
8 situation when Lupaka held the Invicta mine, namely
9 that the intervention in December 2021 has as its
10 objective the closure of the mine that's stopping
11 Parán's illegal mining activities, and that the
12 intervention did not occur during a period of active
13 State-facilitated dialogue, among other things.
14 Yet, Perú's arguments are unsupported by any
15 evidence that this was the true reason for the
16 difference. Indeed, as is clear from the evidence,
17 Parán took Lupaka's ore as from July 2019.
18 And in addition, Mr. León has testified that
19 as from the third quarter of 2019, they were actually
20 exploiting.
21 Even on Perú's case, therefore, it is as of
22 this time that the conditions were fulfilled for there
[Page 103]
1 to be a police intervention. Yet, there was no police
2 intervention until more than two years later, on 14
3 February 2021. By then, it was, of course, too late.
4 To the best of the Claimant's knowledge,
5 Parán continues to exploit the mine, as Mr. Foden
6 said. This puts to rest any of the Respondent's
7 arguments that Lupaka's financing agreements are at
8 the root of its loss. Indeed, if Lupaka was still
9 holding title to the mine today, it would be in
10 exactly the same position.
11 Now, with that, I come to the end of the
12 factual part, and I will now move on to jurisdiction
13 and the other legal arguments.
14 Just a few words on jurisdiction, then.
15 The Claimant has established that it has met
16 the standards in the relevant Articles of the FTA and
17 the ICSID convention. This is undisputed except for
18 two points that Perú raises.
19 First, Perú alleges that the Claimant lost
20 standing by disposing of its investment prior to the
21 initiation of the arbitration. However, as we have
22 shown, the relevant time to assess whether a Claimant
[Page 104]
1 is a protected investor is when the State breached its
2 obligations. At that time, Lupaka held its
3 investment.
4 In any event, the parties agree that a
5 tribunal would retain jurisdiction in special
6 circumstances, as the Aven and Costa Rica tribunal
7 formulated, even if the investment is lost prior to
8 the proceedings being initiated. Such special
9 circumstances exist where the State's actions and
10 omissions have directly caused this loss; and indeed,
11 this is what happened here.
12 Indeed, the State's actions and omissions
13 led Lupaka to be forced to transfer its interests in
14 IMC and the mine to PLI Huaura in August 2019.
15 My colleague will elaborate further on this
16 when addressing causation.
17 In the Rejoinder, the Respondent states that
18 there is an exception to the special circumstances
19 principle that applies; and hence, there is no
20 jurisdiction.
21 It states that Lupaka's subsidiary, Andean
22 American Corporation, transferred to PLI Huaura not
[Page 105]
1 only the shares in IMC but also all of its rights
2 pertaining to IMC, which it states would include
3 treaty rights.
4 The Respondent also states that PLI Huaura
5 is a potential investor under the FTA because of its
6 Canadian nationality.
7 Yet, a private agreement could not affect
8 the rights of Lupaka under the FTA. Also, PLI Huaura
9 would not be able to bring a claim on the basis--on
10 the same basis as Lupaka, as the breaches would have
11 occurred before its supposed investment, and PLI
12 Huaura would not have incurred a loss under them.
13 Hence, the Tribunal should reject this
14 argument.
15 And on this point, I refer the Tribunal to
16 Paragraphs 6 to 8 of Canada's nondisputing party
17 submission, which shows that Canada is in line with
18 the Claimant's position here.
19 Second, the Claimant has met all the
20 relevant conditions precedent, including the waiver
21 requirements. Perú alleges that Lupaka should have
22 submitted a separate waiver to file claims on behalf
[Page 106]
1 of IMC. This is wrong, because the Claimant stands
2 within the scope of the exception at Article 823.5,
3 which is set out at the bottom of this slide.
4 With that, I now move on to the merits.
5 First, on attribution. The applicable
6 principles are found in the ILC articles.
7 Article 4 notes that the conduct of any
8 State organ shall be considered an act of that State
9 under international law.
10 We have just referred to the many actions
11 and omissions of State organs and government officials
12 over the years. These include the actions of
13 Mr. Retuerto, one of Perú's witnesses whom you will
14 hear from this week, as well as the actions and
15 omissions of the various ministries and the police.
16 There is no dispute that the conduct of these State
17 organs is attributable to Perú.
18 The Claimant's case is also based on the
19 actions of Parán, as being attributable to the State.
20 Now, this is because Parán forms a
21 "territorial unit of the State," as referred to by
22 Article 4, as we have developed in our pleadings.
[Page 107]
1 On this point, Perú invokes inapposite
2 arguments to evade its responsibility. For instance,
3 Perú argues that Parán is an indigenous community
4 which enjoys a special status akin to that of a
5 non-State actor under international law.
6 However, the evidence unequivocally shows
7 the contrary.
8 As you can see in the excerpt of Article
9 [recte: Exhibit] C-0009, the MEM stated that Perú
10 (sic)[recte: Parán] does not meet the criteria to
11 qualify as an indigenous people. Importantly, the
12 Respondent, in its Rejoinder does not contest the
13 correctness of this determination by the MEM. (As
14 read.)
15 In any event, whether it is an indigenous
16 community or not under Peruvian law, the analysis
17 should focus on a case-by-case assessment of the legal
18 status afforded to the community by the State.
19 Parán qualifies as a territorial unit
20 because it was empowered with autonomous jurisdiction
21 and police authority over its territory. I will come
22 back to these powers in a moment.
[Page 108]
1 Perú disputes this conclusion by stating
2 that it was not responsible because Parán was granted
3 full autonomy; yet, it cannot evade its international
4 responsibility in this way.
5 Nor can Perú rely on Mr. Meini for the
6 proposition that the other State organs could not
7 interfere with the autonomy of Parán as a rural
8 community. To state the obvious, rural communities do
9 not stand above the law. As you can see from the
10 excerpts of Peruvian law on this slide, including
11 Article 1 of the General Law of Rural Communities,
12 like all Peruvian citizens, members of rural
13 communities must comply with Peruvian laws.
14 Moving to the next basis for attribution,
15 Parán's actions are also attributable under Article 5
16 of the ILC articles. The legal test under this
17 article is undisputed, but the parties disagree
18 whether it was factually met.
19 The first prong requires that the personal
20 entity be empowered by law to exercise elements of
21 governmental authority. Parán, and its Ronda
22 Campesina, met this requirement as a rural community
[Page 109]
1 under Peruvian law.
2 We respectfully invite the Tribunal to
3 carefully review the relevant Peruvian legal
4 provisions on the following slides for your ease of
5 reference.
6 Here are a few excerpts from the
7 Constitution at Exhibit C-0023 and the reference to
8 the General Law on Rural Communities at
9 Exhibit C-0024, which shows that Parán enjoyed wide
10 jurisdictional powers.
11 Such powers are further set out in the
12 General Law on Rondas Campesinas at R-0116, which also
13 shows that Parán enjoys wide administrative and police
14 powers over the territory they control.
15 On the next two slides, you have excerpts
16 from other regulations at Exhibits R-0103 and C-0025
17 and C-0609, granting jurisdictional and police powers
18 to the Ronda Campesina to maintain peace and security,
19 and intervene in the peaceful resolution of conflicts.
20 The following slides focus specifically on
21 the Rondas' police powers with the Regulations on
22 Committees of Self-Defense, for example, allowing them
[Page 110]
1 to carry and use weapons in accordance with the law,
2 including shotguns and ammunitions provided by the
3 army.
4 The Peruvian Supreme Court further confirms
5 that the special status under criminal law of Ronderos
6 when acting within the scope of their authority. In
7 doing so, the decision that's shown on the screen
8 eloquently sets out the scope of the Rondas
9 Campesinas' jurisdictional and police powers, which
10 confirms that they were empowered by law to exercise
11 elements of governmental authority.
12 Now, Perú attempts to minimize the scope of
13 these powers, but this must fail. Perú emphasizes
14 that it did not delegate governmental powers, but
15 merely sought to ensure respect for the relevant
16 communities' customs, traditions and institutions, but
17 clearly, the legal provisions we have just set out go
18 a lot further and show that Parán was granted
19 exceptional powers which are normally reserved to
20 State organs.
21 Turning to the second prong of the test
22 under Article 5 of the ILC articles, the Claimant
[Page 111]
1 showed that the community and its Rondas Campesinas
2 were effectively exercising governmental authority
3 during the key events.
4 The evidence summarized somewhat busily here
5 shows that the community as a whole was involved. You
6 can see here references to its president, governing
7 committee and Rondas Campesinas. The individuals
8 involved were acting under the direct instructions and
9 orders of Parán's self-governing organs. Parán also
10 carried out these acts using the rifles or shotguns
11 provided by the army, as we saw previously.
12 Indeed, Perú's position that the acts that
13 Parán undertook were the work of isolated individuals
14 is contradicted by the record. In addition, Perú has
15 failed to put forward a witness from the Parán
16 Community that would corroborate its theory.
17 Now, a few words on the last basis for
18 attribution; that is that Parán's actions are also
19 attributable to Perú under Article 7 of the ILC
20 articles.
21 This article covers acts carried out with
22 ostensible governmental authority. The parties agree
[Page 112]
1 that the actions at the heart of this case are illegal
2 under Peruvian law, but Parán's conduct was not so far
3 removed from the scope of the authority granted to it
4 under Peruvian law. Nor can the actions in dispute be
5 characterized as private acts. As a result, these
6 acts remain within the scope of governmental authority
7 granted to Parán.
8 For these reasons, Perú cannot escape the
9 conclusion that Parán's conduct is attributable to the
10 State.
11 I will now turn to Perú's breaches of the
12 FTA, and start with our claim that Perú unlawfully
13 expropriated Lupaka's investment in breach of Article
14 812.
15 Applying the principles set out under
16 Article 1 on this slide to the facts of the case, this
17 leads to the conclusion that Parán directly
18 expropriated the Claimant's investment.
19 Indeed, if you decide that the acts of Parán
20 are attributable to Perú, there is no question that
21 there has been a direct taking. Parán holds the mine
22 even today.
[Page 113]
1 And irrespective of attribution, Perú
2 directly expropriated the investment because similarly
3 to Wena v. Egypt and Amco v. Indonesia, Perú did
4 nothing to prevent the seizure of the mine or restore
5 it to the Claimant, despite knowing that its omissions
6 would lead to the loss of the property.
7 Alternatively, Perú indirectly expropriated
8 the Claimant's investment.
9 Annex 812.1 provides additional guidance to
10 determine what constitutes indirect expropriation. We
11 will briefly address these factors, which are listed
12 in this article.
13 First, there has been a substantive
14 deprivation of the value of the investment, as well as
15 of Lupaka's rights as an investor. Now, you will hear
16 from our experts at Accuracy that the value of the
17 Claimant's investment was brought to a negative by
18 Perú's actions and omissions.
19 Second, Perú violated Lupaka's distinct,
20 reasonable and investment-backed expectations. Perú
21 should have disarmed Parán, addressed the illegal
22 marijuana business, ejected it from the blockade,
[Page 114]
1 which was on Lacsanga's land. Perú should also have
2 ejected Parán from the mining site.
3 Indeed, while there, Parán took IMC's
4 explosives, stockpiled ore, and used machinery to
5 exploit the mine itself. Instead, Parán was given a
6 de facto blanket immunity for all its illegal actions.
7 Third, on the character of the measures,
8 there were unjust--these were unjustified and
9 unreasonable. Perú's intent to promote dialogue and
10 diffuse the conflict is not relevant where the effect
11 of the measure was expropriatory.
12 And finally, we are far removed from any
13 legitimate public welfare objection that are set out
14 in Paragraph C of Annex 812.1; nor can there be any
15 doubt that any consideration given to the possible
16 harm which would be inflicted on Parán if police were
17 to intervene was disproportionate and discriminatory,
18 notably considering the other examples where Perú did
19 use force in the face of opposition to mining and
20 other projects.
21 We have also shown and you will hear during
22 the testimonies and explanation of the witnesses that
[Page 115]
1 there clearly was a pattern, an entrenched policy
2 decision not to intervene, and therefore, to give
3 carte blanche to Parán.
4 As a result, even if you decide against
5 attributing the acts of Parán to the State, the
6 State's actions and omissions form a composite act
7 constituting an indirect expropriation.
8 As to FET, you will have seen the
9 differences in opinion between the parties as to the
10 boundaries of this standard.
11 However, in our submission, you need not
12 make a ruling on the outer limits of the FET standard
13 since Perú's treatment of Lupaka's investment fell
14 below the narrowest conception of FET under
15 international law.
16 It is evident that at the very core of this
17 FET standard stands an obligation for a State to
18 enforce its own laws; yet, Perú continuously breached
19 these.
20 The Claimant is not complaining about
21 individual breaches of Peruvian law, but about Perú's
22 systematic failure to act in accordance with its own
[Page 116]
1 laws, and indeed, to act fairly and equitably in the
2 circumstances.
3 In response, Perú emphasizes a series of
4 affirmative actions that its authorities took,
5 essentially, encouraging dialogue; yet, this is no
6 response where Perú was asking that the Claimant
7 continue to negotiate with a gun to its head, and
8 thus, let Parán coerce and harass the Claimant in
9 breach of its own laws.
10 Lastly, as to FPS, under Article 805.1 of
11 the FTA, it is clear that Perú breached this
12 obligation, too.
13 The same set of facts is relevant to
14 establish a breach of FET and FPS. We would direct
15 the Tribunal to our written pleadings here as Perú has
16 not raised anything new in its Rejoinder, save for
17 overemphasizing the State authorities' wide discretion
18 to decide whether to use force.
19 (Clarification requested by the Realtime
20 Stenographer.)
21 SPANISH COURT REPORTER: I'm not hearing the
22 interpretation.
[Page 117]
1 MR. GALLEGO: With this, I end my
2 presentation of the legal arguments and hand over to
3 my colleague, Mr. Foden.
4 MR. FODEN: Hello again, Members of the
5 Tribunal. I'm going to now focus on the project's
6 significant economic potential, potential that IMC was
7 on the eve of realizing when Perú breached its
8 obligations under the FTA.
9 I'm then going to address IMC's advanced
10 plans to acquire the Mallay plant, which would have
11 increased its daily production from 355 tons to 590
12 tons per day, plans that were, of course, cut short by
13 the blockade.
14 I'm going to also explain Lupaka's strong
15 capacity to service the PPF Agreement, both with or
16 without the Mallay plant.
17 Now, all of this has been supported by the
18 report submitted by Micon, the Claimant's expert on
19 mining operations. You're not going to hear from
20 Micon this week, nor has Perú submitted a report to
21 rebut the evidence adduced by Micon.
22 It's worth pausing here to consider the
[Page 118]
1 Respondent's curious approach to this crucial expert
2 evidence.
3 See, Perú knows that Micon's evidence is
4 that not only was the project likely to produce
5 significant volumes of gold during a time of high gold
6 prices, but it can't challenge that evidence; and in
7 so doing, it has made two tactical blunders.
8 The first is that it's chosen not to test
9 Micon's evidence via cross-examination. You heard
10 that right.
11 The Respondent has chosen not to challenge
12 the technical evidence that fortifies the assumptions
13 made by Accuracy in their quantum report. As such,
14 that evidence stands unchallenged.
15 To the extent that Perú relies on
16 AlixPartners, its quantum expert, to challenge mine
17 production estimates, that reliance is seriously
18 misplaced. AlixPartners just simply don't have the
19 expertise to question Micon's conclusions.
20 And while it's one thing not to
21 cross-examine a technical expert, it's another thing
22 altogether not to rebut that evidence with evidence of
[Page 119]
1 your own.
2 And that's the second thing: Perú has
3 chosen not to submit an expert report who can
4 undermine Micon's conclusions. Again, that means that
5 Micon's evidence stands unrefuted.
6 Instead, with its last written submission,
7 Perú submitted the report, the legal report, of
8 Ms. Dufour, which barely engages with Micon's mining
9 report, and shifts Perú's case from one of technical
10 improbability to one full of novel arguments
11 concerning regulatory approval deadlines and permits
12 allegedly outstanding before exploitation could
13 commence.
14 Now, this is remarkably convenient. Perú
15 decided in the last submission to change its case and
16 not meet the Claimant's rebuttal evidence head-on, but
17 shift the goalposts by bringing in a new expert who
18 the Claimant is unable to rebut by adducing similar
19 evidence in the short window between the Rejoinder and
20 this hearing; all the while simply moving on from the
21 submissions that prompted the Claimant to retain Micon
22 to submit a report in the first place.
[Page 120]
1 In any event, Ms. Dufour's report is an
2 exercise in confirmation bias. Perú has simply asked
3 her to come up with timelines for the issuance of
4 permits, albeit timelines that contravene Perú's own
5 laws, to suggest that IMC would not have been able to
6 meet its payment obligations in time under the PPF
7 Agreement.
8 Now, of course, she doesn't say that. She
9 doesn't say that's what her report is for, but it's
10 pretty clear that's what she set out to do.
11 Now, unlike Micon, you will hear from
12 Ms. Dufour this week, because although Tribunals often
13 decline to hear from legal experts during a hearing,
14 we consider that her conclusions are particularly
15 cynical, and that's clearly suggested by their belated
16 timing.
17 What's more, Perú's last-minute effort to
18 suggest that its own failure to meet its regulatory
19 deadlines would have meant that Pandion would
20 foreclose on its agreement with Lupaka suffers from a
21 lack of commercial sense that is often typified of
22 Respondents in these proceedings.
[Page 121]
1 If Perú considers that a lender would rather
2 refuse forbearance on a lucrative gold streaming loan
3 agreement because of permit delays that would last a
4 few weeks, months, maybe even a year in favor of
5 proceeding on foreclosing on a debt for pennies on the
6 dollar, then you also have to take its quantum
7 submissions on the but-for scenario with a grain of
8 salt, because they're just simply out of touch with
9 commercial reality.
10 Also, Ms. Dufour's conclusions just ignore
11 the facts. The Claimants establish that when Parán
12 set up the blockade, IMC was operationally ready to
13 commence mining.
14 Now, as Mr. Ellis explained in his witness
15 statements, by early October 2018, IMC had all of its
16 mining infrastructure in place and had excavated at
17 the 3400 meter and the 3430 meter levels and had
18 planned--and had even identified the stopes that it
19 intended to blast first under its mining sequence.
20 Of course, these allegations, too, have to
21 be accepted by the Tribunal because the Respondent has
22 remarkably chosen not to cross-examine the Claimant's
[Page 122]
1 lead witness, Mr. Ellis, who's at the end of this
2 table.
3 ARBITRATOR GRIFFITH: I've never seen a
4 slide like that, I must say.
5 MR. FODEN: Now, we've spoken before about
6 tactical blunders, but in my 15 years of practice in
7 international arbitration, I've never seen a
8 Respondent choose not to examine the chairman of the
9 Claimant company. As an advocate, I hanker for
10 opportunities to cross-examine chairmen and CEOs. Our
11 friends don't seem to share that similar affinity.
12 But we can all surmise the reason for their
13 reluctance, they know that Mr. Ellis is a vastly
14 experienced and successful mining executive with a
15 credible story of an earnest foreign investor that was
16 bullied by a local municipality without any assistance
17 from Perú, notwithstanding its obligations under the
18 FTA.
19 In short, the Respondent knew that
20 Mr. Ellis's testimony could hurt them, so he's not
21 here, even if he is here.
22 Now, let me guide you through the geological
[Page 123]
1 data that supports the project scope which, of course,
2 didn't become a reality because of the blockade.
3 In 2012, prior to actually acquiring the
4 project, Lupaka obtained an NI-43-101 mineral resource
5 estimate from SRK. We call this the 2012 SRK Report.
6 Now, you might be familiar with it, but
7 NI-43-101 is the name of the Canadian regulation that
8 governs the reporting of mineral resource estimates
9 and exploration results.
10 They form--they come in the form of a really
11 lengthy technical report. And because the purpose of
12 the Canadian regulation is to protect investors from
13 potentially misleading reporting, those reports have
14 to be prepared by an independent, qualified
15 consultant, and those consultants are operating in
16 issuing that report under potential civil or criminal
17 penalties for misstatement.
18 And the preparer of this particular report,
19 SRK, is arguably--excuse me--the world's foremost
20 mining consultant, and it's an industry leader by
21 reputation.
22 The 2012 report showed that the primary
[Page 124]
1 mineralized zone was located in what's called the
2 Atenea vein and it had a mineral resource of 5,827
3 kilotons with an average grade of 3.89 of gold in the
4 measured and indicated categories.
5 Now, as explained by Mr. Edwards in his
6 witness statement, that report noted that the overall
7 gold recovery was 84.8 percent. This recovery rate is
8 very high, and it aligned with previous independent
9 studies, which, of course, made this project very
10 attractive.
11 Of course, you won't hear this from
12 Mr. Edwards this week, because, again, the Respondent
13 has forfeited the opportunity to examine him.
14 Now, as I believe Mr. Velarde explained, in
15 2014, the Claimant made the strategic decision to
16 reduce the scope of the project from 5,100 tons per
17 day to 355, and it was going to outsource the
18 processing of the project's ore to a third-party
19 processing plant.
20 And on this basis, the Claimant obtained a
21 preliminary economic assessment, a PEA, again from
22 SRK, and this was in April of 2018.
[Page 125]
1 Now, PEA is a study that includes, amongst
2 other things, an economic analysis of the potential
3 viability of a project's mineral resources, and it
4 takes place typically before a feasibility study. The
5 PEA helps mining companies understand the risks and
6 the uncertainties associated with a mining project,
7 and it helps move them along towards an investment
8 decision.
9 The 2018 PEA relied on the 2012 SRK Report,
10 but it also relied on contemporaneous bulk sampling
11 results from the Atenea vein. The results of that PEA
12 were highly promising. It confirmed the mineral
13 resource estimates that SRK had established in 2012,
14 and it concluded that the project was not only, of
15 "considerable merit," but also that gold could be
16 economically extracted.
17 In 2018, the Claimant went and hired a
18 company called Red Cloud. Red Cloud is a
19 Toronto-based consultancy and investment bank, and it
20 focuses primarily on junior mining companies. It
21 updated the 2018 PEA to reflect an increase in
22 production capacity to 590 tons per day, based on the
[Page 126]
1 prospective purchase of the Mallay plant.
2 Now, as explained by Mr. Castañeda in his
3 first witness statement, the Mallay plant was a nearby
4 and relatively modern plant, and it had a capacity of
5 600 tons per day.
6 The Red Cloud model, therefore, envisaged a
7 higher production rate compared to the 2018 PEA, lower
8 unit processing costs, an in-house processing plant,
9 and significantly lower transport costs.
10 Now, since the Red Cloud model wasn't
11 supported by a detailed mine plan, in these
12 proceedings, the Claimant has gone and engaged that
13 consultancy Micon to perform a detailed review of all
14 of these underlying documents, and assess
15 independently the various inputs into accuracies DCF
16 analysis.
17 In many ways, Micon's report serves as a
18 feasibility study, because the Claimant did not do a
19 feasibility study. Instead, it relied on the PEA and
20 the Red Cloud model.
21 Now, I say this because Micon developed an
22 updated mine layout, a development schedule and a
[Page 127]
1 production plan that identified the specific sections
2 of the resource that were to be mined in each year
3 under this 590-ton-per-day scenario. This is what
4 mine engineers typically do in a feasibility study.
5 Micon's update to the Red Cloud model
6 confirmed the feasibility of a mine plan for 590 tons
7 per day. It extended the production schedule from six
8 to ten years, and it raised confidence in the
9 resulting production plan and cost estimate to a level
10 that was comparable with the 2018 PEA.
11 Now, as explained earlier, the Claimant's
12 primary position is that the acquisition of the Mallay
13 plant would have allowed it to reach this operational
14 capacity of 590 tons per day.
15 And as you'll see this week, the evidence on
16 the record corroborates that Lupaka would have
17 acquired the Mallay plant in March 2019 but for the
18 blockade.
19 Now, you're going to hear Perú label the
20 Claimant's acquisition of Mallay as hypothetical, but
21 the evidence shows differently.
22 The Claimant effectively needed two things
[Page 128]
1 to finalize its acquisition of the Mallay plant.
2 First, it had to finalize the draft agreement with the
3 then-owner, Buenaventura, and second, it had to get
4 funding for the purchase; and both of these tasks were
5 within hand.
6 By the time of the blockade, Buenaventura
7 and Lupaka, through IMC, had agreed on the terms of a
8 ready-for-execution-draft Mallay purchase agreement,
9 which reflected a purchase price of $10.4 million US,
10 plus VAT.
11 What's more, that purchase agreement
12 actually granted the Claimant the right to process up
13 to 8,000 tons per month at a rate of 600 tons per day
14 from the signing of the agreement through the close of
15 its transaction. So they could have used Mallay
16 before they were--even had finished the deal to buy
17 it.
18 Now, concurrently, Pandion, the lender, and
19 Lupaka had agreed the final terms of the Amendment and
20 Waiver Number 3 to the Second Amended and Restated PPF
21 Agreement. We just called this the draft amendment to
22 the PPF Agreement, and that agreement was going to
[Page 129]
1 fund the Mallay acquisition.
2 At the closing of the purchase agreement,
3 Pandion was going to unlock a further tranche of the
4 loan for approximately $13 million, and it would have
5 granted Lupaka a nine-month extension, during which no
6 gold repayments were required.
7 Now, this ready-for-execution amendment is
8 not just for the Mallay purchase--it's significant not
9 just for the Mallay purchase, but it's also
10 demonstrative of Pandion's willingness to be flexible
11 about repayment terms where its economic interests
12 were going to be served. And I'm going to return to
13 that point shortly.
14 Now, as explained by Mr. Ellis in his second
15 witness statement, Pandion, Buenaventura, and Lupaka
16 had all agreed that they would sign the two agreements
17 on the 15th of October 2018. That date should
18 resonate with you, because it's the day after the
19 blockade went into place. Indeed, Lupaka had board
20 approval to do just that, they were going to issue a
21 press release the very next day.
22 The only outstanding steps to close the
[Page 130]
1 Mallay purchase agreement was for Buenaventura to
2 obtain the formal approval of the Mallay community to
3 transfer the surface rights to Lupaka.
4 Now, despite some delay due to the renewal
5 of Mallay's governing committee in the community, the
6 Mallay's community consent was finally approved and
7 granted in March of 2019.
8 So, as you can see, the deal for Mallay
9 would have gone through but for the blockade. Indeed,
10 Buenaventura issued--expressed its disappointment with
11 the blockade and Lupaka's resulting inability to
12 follow through with the deal.
13 Now, since Lupaka had obtained the Mallay
14 community's consent in March 2019, this meant that the
15 first gold repayment would have been due in January
16 2020.
17 Now, you're going to hear Perú say that
18 Schedule P-2 to the draft amendment to the PPF
19 Agreement provided for Lupaka's gold repayments to
20 start in September 2019.
21 Our friends opposite, their view is that
22 even if the Mallay transaction would have crystallized
[Page 131]
1 following the community's consent, the Claimant would
2 have equally defaulted on its repayment obligations.
3 Now, this is just wrong. Perú's theory
4 doesn't make any commercial sense. Pandion would have
5 benefited far more from implementing the PPF Agreement
6 than from enforcing its rights and selling the debt.
7 No matter what Perú says, Pandion was
8 supportive of the project and, as a financial
9 institution, had no interest in taking over the IMC
10 and operating the mine itself.
11 Now, as you can see on the screen and as I
12 mentioned moments ago, Pandion had shown a similar
13 degree of flexibility in the past with respect to
14 other obligations under various iterations of the PPF
15 Agreement, and there's no reason to believe that this
16 forbearance wouldn't have been present in the face of
17 mere short-term delays to obtaining certain approvals
18 or permits, as Ms. Dufour suggests.
19 As you saw earlier, Pandion only sold its
20 interest in PLI Huaura in July of 2019. That's nine
21 months after the blockade. That's the point at which
22 it saw that there was no hope for the occupied and
[Page 132]
1 inaccessible Invicta project.
2 Let's now turn to the terms of the draft
3 amendment to the PPF, which again would have been in
4 place but for the blockade.
5 Now, as you can see on the screen, Lupaka's
6 gold repayment obligations under the draft amendment
7 would have increased from a total of 64,630 ounces to
8 be repaid by November 2023.
9 Now, as forecasted by Micon, Lupaka had to
10 mill a minimum monthly tonnage of 7,200 tons per month
11 during the first four months, and 11,343 tons per
12 month at its peak to meet the obligations under the
13 PPF.
14 Now, with the Mallay plant, Lupaka would
15 have met those obligations with plenty of room to
16 spare each month.
17 Both of the targets were readily achievable.
18 And even if ore processing at the Mallay
19 plant was delayed, Lupaka would have been able to meet
20 its payment obligations by engaging a third-party
21 processing plant, or even simply paying Buenaventura
22 to process ore at Mallay before the purchase was
[Page 133]
1 completed.
2 The Claimant had also entered into a
3 one-year contract with Huancapeti II, which is a
4 nearby processing plant, to which it started to
5 already send large shipments of ore right before the
6 blockade in October of 2018. And as I just mentioned,
7 it was making arrangements to already process ore at
8 Mallay before it took ownership.
9 You're going to hear Perú say that the
10 Claimant's problems with potential ore processing
11 options were insurmountable. Well, to steal a phrase
12 from the Profumo Affair, they would say that, but it
13 just doesn't make it true.
14 As explained by Mr. Castañeda in his witness
15 statement, it's normal to identify obstacles and risks
16 at the outset of processing operations. And in any
17 case, Lupaka could have solved any technical issues by
18 refining internal procedures without incurring high
19 costs or further delays.
20 What is more, in order to secure adequate
21 toll processing capacity and give a margin for
22 potential contingencies, Micon has conservatively
[Page 134]
1 provided for a three-month ramp-up period in which the
2 production schedule increased gradually, in line with
3 the Claimant's gold repayment obligations under the
4 PPF Agreement.
5 Lastly, even if the Claimant wouldn't be
6 able to meet the initial production schedules, and
7 that Pandion, for some economically irrational reason,
8 insisted on immediate repayment, the Claimant could
9 still make those payments in cash rather than physical
10 gold, if necessary.
11 Indeed, the Claimant had a very strong track
12 record of raising financing. And Mr. Ellis set out
13 that track record at a table in his witness statement.
14 Now, Perú's experts, AlixPartners, they
15 tried to undermine the Claimant's ability to raise
16 capital by relying on an example from March 2019,
17 where the Claimant only obtained 66 percent of the
18 capital raise it was seeking to perform.
19 Now, the Tribunal will note that this
20 attempt to raise financing happened five months after
21 the blockade, when the Claimant had no access to its
22 own project.
[Page 135]
1 Good luck to anyone trying to raise capital
2 in those circumstances.
3 The Claimant's ability to raise financing
4 before the blockade, though, shows a different
5 picture.
6 Between March of 2014, when the Claimant
7 shifted its focus to this project, and until May of
8 2018, when the last round of financing took place
9 before the blockade, the Claimant hit 102.67 percent
10 of its fundraising goals through both debt and equity.
11 MR. GRANÉ: Mr. Foden, sorry to interrupt, I
12 am informed that the remote transcript is not working.
13 SECRETARY: Yeah, I have to circulate a new
14 link, but I didn't want to interrupt.
15 PRESIDENT CROOK: Sorry, I'm not clear where
16 we are.
17 So do we have remote transcript or not?
18 SECRETARY: We do, sir. The link shifted
19 between the one that I had circulated and the one that
20 is being used at the moment, so I will circulate it in
21 a moment.
22 But the transcript is working in the room,
[Page 136]
1 so...
2 PRESIDENT CROOK: Okay. All right.
3 MR. GRANÉ: Ms. Torres, do you have an
4 estimate of how long it will take to determine whether
5 we just continue and then we fill the gap or we pause?
6 SECRETARY: The transcript is working right
7 now for the room, and it will take me a minute to go
8 and circulate the link to you.
9 MR. GRANÉ: We don't want to interrupt
10 Claimant's presentation, so I think that we can
11 continue.
12 MR. FODEN: Thank you, Patricio.
13 So the Claimant's ability to meet its
14 fundraising goals make sense. Investors in TSX
15 companies are practically salivating to invest in
16 projects that are on the verge of production, as was
17 the case with Invicta.
18 Now, Perú takes--makes like two further
19 attempts to dismiss the reliability of the geological
20 data and the production forecasts, and these are
21 equally baseless.
22 You're going to hear AlixPartners question
[Page 137]
1 the reliability of the average gold grade assumed in
2 the 2018 PEA, given the low gold grade observed in
3 some of the predevelopment material that the Claimant
4 obtained in October of 2018, but this criticism is
5 very misplaced.
6 In the first instance, it lacks credibility.
7 AlixPartners are just unqualified to opine on matters
8 of gold grade. Had Perú gone to the trouble, as the
9 Claimant did, of appointing a mining expert to provide
10 such input, perhaps that criticism would bear some
11 weight. But Perú chose not to do so, and this
12 Tribunal has to be pretty leery of a testifying
13 valuation expert getting out ahead of their skis on
14 issues of metallurgy.
15 Alix Partners' lack of expertise in this
16 area is particularly laid bare by the rather simple
17 explanation, untested explanation, that Mr. Ellis
18 provides in his witness statement, where he states
19 that there's nothing surprising about the fact that
20 the anticipated gold grade under the 2018 PEA was
21 higher than the one found during the preproduction
22 phase.
[Page 138]
1 That's because the 2018 PEA was derived from
2 ore samples that were representative of the entire
3 deposit to be mined; whereas those samples in October
4 2018 relate to pre-development material that wasn't
5 necessarily extracted from the stopes that SRK had set
6 out to be mined.
7 Put simply, Perú points to grades based on
8 ore that was pulled out of the mine when they were
9 digging tunnels rather than ore from the actual ore
10 body. Now, a resource geologist would be fired for
11 making such a schoolboy error.
12 Now, you're also going to hear Perú say that
13 Micon's extended production period was never
14 considered before and, in any case, it was beyond the
15 approved mining plan. But Perú, again, misses the
16 point here.
17 As explained earlier, Micon's extended
18 production schedule is actually based on the measured
19 and indicated resources defined in SRK's geological
20 block model and contemporaneous reports.
21 By contrast, the SRK and Red Cloud studies
22 had no bearing on the optimal mine plan that the known
[Page 139]
1 resource could actually support.
2 Now, compared with the 2018 PEA, the higher
3 production rate in Micon's report results a lower cost
4 per unit, allowing for the application of a lower
5 cut-off grade, which then consequently leads to
6 greater volumes of economically profitable material.
7 The net result is a 10-year lifespan of the mine.
8 Now, put simply, absent the blockade, the
9 Claimant could have continued to explore and expand
10 the mineral resource base, which would have likely
11 resulted in even longer mine life.
12 This, of course, is relevant to determining
13 the fair market value of the project.
14 Now, Perú doesn't contest the project's
15 mining potential or the technical possibility to
16 extend the life of the mine as per Micon's report, and
17 it can't contest those findings because it didn't
18 appoint an expert to do so.
19 It's with that, I'm going to hand it over to
20 Dr. Veit to discuss the Claimant's case on quantum,
21 but I did notice that it seemed like there might be a
22 suggestion that we need a five-minute break.
[Page 140]
1 PRESIDENT CROOK: Yeah, I think that would
2 be appropriate. And then when we come back, if we
3 could have just a very brief indication from the
4 Claimant of what they say we should do about the
5 Dufour report. We were told in an earlier
6 presentation that we should disregard it.
7 Is that the position, or is it--I detected a
8 slightly more nuanced position recently. So if you
9 can just clarify that for us when we come back.
10 MR. FODEN: We'll happily address that, sir.
11 PRESIDENT CROOK: All right. It's 12:28.
12 Let's be back at--12:29, let's be back at 12:34. And
13 I'd invite you not to leave the room for this short
14 break, unless you need to.
15 (Whereupon, there was a recess in the
16 proceedings, 12:29 p.m. - 12:34 p.m.)
17 PRESIDENT CROOK: Are we ready to resume,
18 Respondent?
19 MR. FODEN: Yes, Mr. President. We would
20 ask this Tribunal to disregard Ms. Dufour's report.
21 And should it issue a ruling to that effect, we will
22 opt not to cross-examine Ms. Dufour.
[Page 141]
1 MR. GRANÉ: Mr. President, may I?
2 We would, of course--it comes as no
3 surprise--object to that request, and if what Claimant
4 is asking the Tribunal to do is make a ruling in the
5 context of this arbitration, we would like to be heard
6 about that--I'm sorry, in the context of this hearing,
7 we would like an opportunity to be heard about that.
8 We would object to that request, and also,
9 we would make submissions in regard to the
10 introduction of the Micon report with a Reply.
11 Thank you.
12 PRESIDENT CROOK: Understood. We
13 don't--wouldn't propose to make any ruling right now.
14 I'm simply trying to clarify what the situation is.
15 It's been clarified, and the Tribunal will consult and
16 determine how to go forward.
17 All right, back to Claimant's presentation.
18 Just to check with the secretary, how much
19 do they have remaining of their three hours?
20 SECRETARY: About 37 minutes.
21 PRESIDENT CROOK: Okay. Thank you.
22 SECRETARY: 36-and-a-half.
[Page 142]
1 DR. VEIT: Thank you.
2 We'll now turn to quantum, but before
3 getting into the actual quantum of losses, let me deal
4 with the question whether or not Perú's acts and
5 omissions caused the Claimant's loss and whether
6 Claimant contributed to its losses.
7 You will hear Perú say this afternoon that
8 it has not caused the Claimant's loss for various
9 reasons, but a quick look at the legal standards for
10 causation resolves this issue in favor of the
11 Claimant.
12 As you know, under Article 31, ILC, the
13 responsible State is under an obligation to make full
14 reparation for the injury caused by their wrongful
15 act.
16 The commentary to this Article 31 explains
17 that there needs to be a finding of factual and legal
18 causation.
19 To establish factual causation, the Tribunal
20 should use a but-for test. The question the Tribunal
21 needs to answer is whether Lupaka would have lost its
22 investment but-for Perú's wrongful conduct.
[Page 143]
1 To establish legal causation, the loss must
2 not be too remote. It must be proximate to the
3 State's conduct. Simply put, the Tribunal needs to
4 decide whether the Claimant's loss was a normal and
5 foreseeable consequence of Perú's wrongful conduct.
6 Lupaka established that loss--that the loss
7 was proximate, caused by Perú's breaches. Now, this
8 creates the rebuttable presumption that causation is
9 established. This then shifts the burden of proof to
10 the Respondent to prove that intervening event which
11 could break the cause of--the chain of causation;
12 however, Perú failed to do so.
13 The chain of causation in this case is very
14 simple: Lupaka lost access to its mine due to Parán's
15 blockade and Perú's failure to reinstate Lupaka's
16 possession of its mine. This was the factual cause of
17 the Claimant's loss: But-for the blockade and Perú's
18 failure to act, Lupaka would have been able to access
19 the mine and to extract ore. However, it was--as it
20 was not able to do so, the Claimant defaulted on the
21 repayments under the PPF Agreement, and PLI Huaura
22 foreclosed on the IMC shares.
[Page 144]
1 Now, Lupaka's loss of its investment was a
2 normal, foreseeable and proximate consequence of
3 Perú's wrongful conduct.
4 Perú failed to establish that any of its
5 alleged intervening events broke the chain of
6 causation. We'll get into those in a moment because
7 you will hear Perú argue that those were all
8 attributable to Lupaka and, hence, Lupaka contributed
9 to its loss.
10 But first, let us briefly go over the legal
11 standards for finding contributory fault.
12 To establish the investor's contributory
13 fault, the investor's conduct needs to be willful and
14 negligent, and there needs to be a material and
15 significant contribution to the loss.
16 The parties agree on the first limb of this
17 test.
18 Perú, however, denies that the contribution
19 needs to be material even though it acknowledges that
20 this requirement is stipulated in the ILC articles as
21 well as in case law.
22 Now, to the facts of the case.
[Page 145]
1 Perú asserts that five causal circumstances
2 have either broken the chain of causation or they
3 amount to contributory fault by the Claimant. Neither
4 of the assertions are correct, and we'll now look at
5 them in turn.
6 First, Perú argues that the Claimant is to
7 blame for the loss of its investment because it did
8 not obtain a social license. According to Perú, it is
9 Lupaka's fault that the Parán Community acted
10 illegally, and that Perú did not reinstate law and
11 order.
12 First, Perú says that it was the Claimant's
13 breaches of its own obligations under the Social
14 Management Plan that incited Parán's illegal behavior.
15 This is wrong.
16 However, even if the Claimant had breached
17 the previously approved Social Management Plan, it
18 could have been sanctioned by OEFA, according to the
19 laws, and not left by itself in the face of Parán's
20 criminal behavior.
21 Second, as you have already heard, the
22 Claimant was under no obligation to obtain Parán's
[Page 146]
1 agreement to continue with the exploitation of the
2 mine because the project was not on Parán's land.
3 Peruvian law only required the Claimant to reach an
4 agreement with the communities of Lacsanga and Santo
5 Domingo, which it did.
6 Third, even though the Claimant was not
7 obliged to reach an agreement with the Parán
8 Community, it did conduct negotiations in good faith.
9 Alas, the negotiations were futile because Parán
10 continuously demanded more from the Claimant seemingly
11 being uninterested in a reasonable outcome from the
12 parties. The unsuccessful negotiations with Parán
13 were not the Claimant's fault and cannot amount to
14 contributory fault or an intervening event breaking
15 the chain of causation.
16 Perú's second argument is that the
17 Claimant's pledge of its investment as loan collateral
18 amounted to an intervening event which broke the chain
19 of causation. Again, this is not true.
20 First, the Claimant's investment lost the
21 entirety of its value as a result of Parán's blockade
22 and Perú's failure to restore the Claimant's access to
[Page 147]
1 the mine.
2 Even if Lupaka had not pledged its
3 investment as a collateral two years before the
4 blockade, the fact that the Claimant was unable to
5 access it, its project, extract ore and process it,
6 rendered the investment worthless.
7 Once Pandion realized that there was no hope
8 for the Claimant to regain possession and make gold
9 repayments, it sold PLI Huaura to Lonely Mountain.
10 And Lonely Mountain then foreclosed on Lupaka's IMC
11 shares.
12 Perú compares the present case with
13 Inversión y Gestión de Bienes versus Spain. However,
14 in Inversión, the Claimants willfully stopped making
15 mortgage payments knowing what the consequence will
16 be. In Lupaka's case, the pledge of its investment as
17 a loan collateral is standard practice in the mining
18 industry and, more importantly, Lupaka did not
19 willfully default on repayments, it simply could not
20 make repayments as Perú destroyed the investment.
21 As we just discussed, PLI Huaura's
22 foreclosure was a foreseeable consequence of Perú's
[Page 148]
1 wrongful acts. It occurred after and, more
2 importantly, because the Claimant lost the entire
3 value of its investment.
4 Even the Respondent acknowledges that the
5 default events listed in PLI Huaura's Notice of
6 Acceleration primarily related to the blockade. Perú,
7 nonetheless, continues to argue that even in the
8 but-for scenario, Lupaka would have defaulted under
9 the PPF Agreement.
10 Fantastically, it makes this argument for
11 two of the events which occurred directly due to the
12 blockade.
13 As Mr. Ellis explains, PLI Huaura would not
14 have foreclosed because of the remaining events of
15 default, which contained mainly reporting obligations
16 with which Lupaka materially complied at all relevant
17 times, and then previously waived requirements to have
18 a mineral offtake agreement in place.
19 Mr. Ellis is here with us today, but Perú
20 doesn't cross-examine him on these and other material
21 facts.
22 Now, the next argument that you will hear
[Page 149]
1 from Perú is that outstanding regulatory approvals in
2 October 2018 were the Claimant's fault, and that this
3 contributed to or even caused the Claimant's loss.
4 Perú bases these arguments on the expert
5 report of Ms. Dufour, but even if Ms. Dufour's opinion
6 were correct, the outstanding approvals would not
7 destroy the entirety of the investment. At worst,
8 they would have slightly delayed production.
9 However, as Mr. Foden explained, the
10 optimistic scenario set out by Ms. Dufour would allow
11 the Claimant to start making repayments in January
12 2020, which is the date when the first repayments were
13 due under the Third Amendment and Waiver of the PPF
14 Agreement.
15 The Third Amendment allowed for a
16 nine-months grace period for repayments after the
17 Mallay Purchase Agreement was signed. Had the deal
18 closed in March 2019, Lupaka would only have been
19 obliged to start with the repayment obligations in
20 January 2020.
21 Perú's last argument on causation is that
22 Lupaka did not have satisfactory ore processing
[Page 150]
1 capacity to make its repayments under the PPF
2 Agreement. Again, this allegation is not true.
3 Even taking at its highest, Perú's argument
4 would only affect quantum, rather than causation. The
5 alleged lack of processing capacity is not an
6 intervening event even capable of destroying the
7 entire investment.
8 As Mr. Foden has explained, the Claimant had
9 a number of very good options for processing ore, the
10 Mallay plant or the third-party ore processors with
11 whom the Claimant already contracted.
12 Instead, but for the blockade, Lupaka would
13 have proceeded to extract the ore, processed it at its
14 Mallay plant under Buenaventura's ownership or the
15 third-party processors and continued processing the
16 estimated tonnages itself once it had fully acquired
17 Mallay.
18 But even if using the Mallay plant and the
19 third-party processors were not possible during the
20 relevant period before Lupaka acquired the Mallay
21 plant, Lupaka would have easily been able to repay any
22 shortfall in cash.
[Page 151]
1 Lupaka could have made the initial
2 repayments by processing only 30 to a day of ore, or
3 less than three days of full production, or by raising
4 funds, which it had previously done successfully, as
5 Mr. Foden has shown.
6 As Mr. Ellis has explained, Pandion would
7 have been willing to reschedule the repayments until
8 the Claimant was able to meet them because it
9 supported the project. Perú's assertion that the
10 actual turn of events proves otherwise is without
11 base. Pandion only sold its interest in PLI Huaura
12 when it no longer saw any hope for the occupied and
13 inaccessible project.
14 To conclude on causation and contributory
15 fault, none of the five alleged intervening causes
16 broke the chain of causation or constitute
17 contributory fault; therefore, the Claimant needs to
18 be compensated for its losses in full.
19 Next, you will hear Perú argue that the
20 Claimant is claiming compensation for its business
21 plan, which is not a covered investment according to
22 the FTA. This is a position that Perú developed in
[Page 152]
1 its Rejoinder after alleging that Lupaka is claiming
2 compensation for the Mallay plant as a prospective
3 investment.
4 Now, with all due respect, this is
5 nonsensical. Lupaka is not asking to be compensated
6 for the expropriation of the Mallay plant or for the
7 business plan itself. The Mallay plant acquisition
8 simply supports the Claimant's business plan in which
9 the Claimant was able to process ore at 590 tons a
10 day, which is the basis for the but-far scenario put
11 forward by the Claimant.
12 To assess the damages, the Tribunal will
13 have to decide which business plan to consider as the
14 basis for the Claimant's counterfactual scenario. For
15 that, the Tribunal should use the but-for test
16 supported by contemporaneous evidence before the
17 breaches of the FTA, consistent with the Lemire and
18 Tethyan jurisprudence.
19 As you will see over the course of the next
20 few days, but for Perú's failure to remove Parán's
21 blockade and reinstate the Claimant's possession,
22 Lupaka would have acquired the Mallay plant and
[Page 153]
1 processed ore at 590 tons a day.
2 Now, let's turn to the actual valuation of
3 Lupaka's investment.
4 Accuracy assessed the Claimant's damages at
5 41 million for the 590 tons a day scenario as at the
6 valuation date plus interest. Alternatively, the
7 damages for the 355 tons a day scenario amount to $32
8 million US plus interest.
9 The parties agreed that the DCF approach is
10 the appropriate valuation method for preproduction
11 mines such as the one at hand; however, they disagree
12 on a number of input variables and assumptions.
13 AlixPartners identifies what it calls four
14 fundamental flaws in Accuracy's analysis. The four
15 flaws advocated by AlixPartners, however, are mostly
16 another iteration of Perú's ill-formed causation
17 arguments. Most importantly, the four fundamental
18 flaws are instructions on which Ms. Kunsman relies,
19 not facts or opinions within her own expertise.
20 The first two relate to the dispute with
21 Parán, namely whether the police intervention would
22 have resolved the problem, and whether the Claimant
[Page 154]
1 needed to obtain a social license.
2 We have been through that and Mr. Gallego
3 has explained how Perú would have gotten rid of the
4 bandits and criminals from Parán, and should have
5 restored law and order.
6 The project was not on Parán land, so there
7 was no need for Lupaka to reach an agreement with the
8 Parán Community even though it did negotiate in good
9 faith, as Mr. Velarde has explained.
10 The third alleged fundamental flaw is that
11 but for Perú's breaches, the Claimant would still have
12 defaulted on the PPF Agreement due to a poor
13 performance of operations. As we discussed earlier,
14 this is not the case.
15 Finally, Perú's alleged fourth fundamental
16 flaw is that Accuracy disregarded financing risk.
17 Now, as Accuracy explained, this financing would not
18 be needed to settle debts owed to PLI Huaura, because
19 in the but-for scenario and absent the blockade, the
20 Claimant would have been able to start production in
21 time, and thus repay the PPF Agreement in installments
22 based on the agreed schedule.
[Page 155]
1 Now, in relation to the financing of the
2 Mallay plant, the Claimant's intention was clear. It
3 would have obtained through additional financing from
4 PLI Huaura needed for the acquisition and indeed, it
5 had already finalized the third amendment to the PPF
6 Agreement to that effect in October 2018.
7 Now, Accuracy updated its valuation for both
8 scenarios based on Micon's analysis and AlixPartners'
9 comments on the operational and technical assumptions.
10 First, Accuracy adopted Micon's revised
11 start date for commercial production, which Micon
12 confirmed to be November 2018. This revised start
13 date, regardless of Perú's allegations, is realistic
14 as contemporaneous evidence shows. The Claimant was
15 operationally ready to start production immediately
16 before the blockade and had various options for
17 processing its ore.
18 Accuracy further adjusted its valuation on
19 Micon's review of the relevant data that showed that
20 the Claimant would have operated the mine for ten
21 years. Perú's quantum expert claimed that Micon was
22 wrong, but as Mr. Foden highlighted, Perú did not
[Page 156]
1 provide a technical mining expert that would have been
2 able to review the data and opine on the extended
3 production schedule.
4 Accuracy further adjusted the ore rates
5 using Micon's input. Now, Micon explains in their
6 report the reasons for the anomaly in gold grades
7 experienced during the 2018 ramp-up period, and that
8 it is likely that the grade shortfalls would have been
9 overcome in early 2019.
10 In addition, supervising the ore processing
11 would allow for higher recovery. This would not have
12 been a--had a financial impact on the Claimant, as the
13 processing would be done in-house, at the Mallay
14 plant, which the Claimant would own but-for Perú's
15 breaches.
16 Accuracy then increased average operating
17 costs to account for various additional expenses
18 identified by Micon, AlixPartners, and it also adopted
19 its model to Micon's estimate for capital expenditure.
20 Finally, Accuracy decreased the discount
21 rate in line with the lower project-specific premium
22 that it applied in light of Micon's report.
[Page 157]
1 Accuracy and Micon both consider the project
2 to be at the feasibility stage. Even though the
3 Claimant never obtained a formal feasibility study, it
4 did not need to do so because it accessed--its access
5 to mineralization largely reduced a key geological
6 risk. Additionally, feasibility studies are necessary
7 for financing, which the Claimant already secured. So
8 the Claimant also materially completed all development
9 works and was ready to start production before the
10 blockade.
11 However, as explained and due to the
12 uncertainties in the Red Cloud model for the
13 590-day--ton-a-day scenario, Accuracy initially
14 adopted a higher project-specific premium in the first
15 report. Accuracy then reduced this premium on the
16 basis of Micon's mine plan. Micon concluded that the
17 certainty of the 590-ton-a-day scenario equals that of
18 the 355-tons-a-day scenario, and that the same
19 discount rate was appropriate. As a result, Accuracy
20 decreased the project-specific premium in line with
21 the appropriate premium for projects at feasibility
22 level.
[Page 158]
1 Now, AlixPartners further complain why--or
2 that Accuracy did not account for social license risk,
3 explicitly. Again, there was no need to obtain
4 Parán's agreement to continue and exploit the mine,
5 but if AlixPartners was referring to a general social
6 license risk, which Perú alleges has not been
7 accounted for, then this general risk--general risk
8 for social license is included in the Perú-specific
9 country-risk premium. This country-risk premium
10 accounts for additional risks of conducting business
11 in Perú when compared to other risk-free
12 jurisdictions.
13 PRESIDENT CROOK: Excuse me, counsel, can
14 you recall off the top of your head, what was the risk
15 premium they used? If not, we'll look it up.
16 DR. VEIT: The country risk premium, I'm
17 sorry, I can't recall that.
18 PRESIDENT CROOK: That's all right. We'll
19 look it up. Thanks.
20 DR. VEIT: The project specific risk
21 premium, however, was 3.3 percent.
22 Perú claims that the--that any compensation
[Page 159]
1 owed to the Claimant should be reduced by the 13.3
2 million, which was the residual value of the
3 Claimant's investment. Now, this is incorrect.
4 PWC in August 2019 valued IMC at $13.4
5 million US, but excluding the debt owed to PLI Huaura.
6 This valuation was made by PWC to determine whether
7 the value of IMC's pledged shares exceeded the 15.9
8 million US dollar debt, which the Claimant owed to PLI
9 Huaura, which was not the case.
10 ARBITRATOR GARIBALDI: Counsel, would you
11 please remind us if this loan was with or without
12 recourse, the loan--the loan to--
13 DR. VEIT: The PLI Huaura loan, well, that
14 was the loan-that- was the loan that--
15 ARBITRATOR GARIBALDI: The loan that was
16 given on the pledge of the shares, was it with or
17 without recourse?
18 DR. VEIT: Recourse in what sense?
19 ARBITRATOR GARIBALDI: Well, in the sense
20 that if the value of the shares is not enough to pay
21 the debt, if the loan is without recourse, that ends
22 the transaction, and so the debtor doesn't owe
[Page 160]
1 anything else.
2 If it is with recourse, then the debtor is
3 still obligated to pay the difference.
4 DR. VEIT: Yes, there was a dispute on that.
5 And to the extent I understand, that question was
6 settled between Pandion and Lupaka after the-after the
7 pledge was foreclosed and sold-.
8 ARBITRATOR GARIBALDI: And there was no
9 further recourse as a result of that.
10 DR. VEIT: Exactly, there was no further
11 recourse.
12 ARBITRATOR GARIBALDI: Okay, thank you.
13 DR. VEIT: Now, ignoring the net value of
14 the Claimant's investment-or to put it the other way,
15 just to finish that off, -the-comparing the 15.9
16 million of debt with the value at that time of 13.4
17 million, the value of the Claimant's investment was
18 nil, because it was without recourse, or negative-.
19 But ignoring the net value of the Claimant's
20 investment, you will hear Perú argue that PLI Huaura's
21 foreclosure means that the investment held value.
22 This is wrong. Lonely Mountain wanted to operate the
[Page 161]
mine itself, hiring Mr. Goyuzeta, who believed himself to be the best placed person to operate and extract value from the project. However, as we heard this morning, Parán continues to illegally mine the Claimant's project, and Lonely Mountain was ultimately proven wrong, as it is still not able to access the mine.
To test the damages assessment at the valuation date, Accuracy compares its DCF-based valuation to four different indicators of value.
First, Accuracy finds that using a market capitalization approach leads to an illustrative valuation in the but-for scenario of $33.4 million US.
Accuracy simply extrapolated Lupaka's market cap from 25 October 2018 onwards, using a junior gold miners index plus a control premium.
As you can see in the chart before you, Lupaka's share price and the index showed a significant correlation, at least until late 2017.
And even if one were to assume that an underperformance of Lupaka's share price compared to the index from March 2018 onwards when Lupaka
[Page 162]
announced that it no longer held the Josnitoro project to October was permanent, and you see that in the--I've highlighted this period in green on your chart in front of you.
Even if one were to assume that this underperformance was permanent, the indicative market cap would still amount to some $28 million US at the valuation date.
Now, this market valuation is in line with Accuracy's estimate of the fair market value of the Invicta project in the 355-tons-a-day scenario, and quite a bit below the 590-tons-a-day scenario.
Why is this? It is because the Claimant's share price at the time would not have reflected the additional value of the project, which would have resulted from the Mallay transaction that was not announced to the market at that time.
Second, Accuracy looked at Lupaka's sunk costs incurred between the acquisition date and the valuation date, and applying interest as a proxy for the expected minimum return on the basis of the implied interest rate in the PLI loan. Accuracy's
[Page 163]
sunk cost assessment resulted in a value of $43 million US. After deducting the debt under the PLI loan of 15.9 million, Accuracy finds a benchmark for the project at $27 million US. This is, again, lower than Accuracy's assessment of the 590-tons-a-day scenario. And while sunk costs may not be an appropriate valuation for preproduction properties, sunk costs can certainly serve as a minimum floor for the valuation.
Now, the third cross-check is based on transaction multiples. Accuracy used 26 transactions valued at over a million US dollars for a controlling stake for companies in the gold industry, and which closed within five years before the valuation date.
Based on the transaction multiples, Accuracy arrived at post-tax NPV of 33.3 million under the lower scenario, and some $47 million US under the 590-tons-a-day scenario.
Excuse me.
Which is very close to Accuracy's primary valuation.
Finally, Accuracy looks at other
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contemporaneous evidence of valuation; specifically, the Red Cloud model and the SRK PEA mine plan for the 355-tons-a-day scenario, and the Red Cloud for the higher scenario at 590 tons a day, which both produce significantly higher values.
Let's just reflect for a moment. What if Lupaka had kept the mine, taking into account actual metal prices over the last three years, and taking into account hindsight. The fair market value of the project as of today would have been over $85 million US. Again, we are not claiming the 85 million, but it shows how conservative Accuracy's assessment of Lupaka's loss is at $41 million US, plus interest, and the Tribunal should have no hesitation to award this amount to the Claimant.
Now, lastly, let's look at pre-award interest. I know that Tribunals think interest is not the most interesting of topics. So in the interest of time, I'll keep this brief.
Under Article 812, Paragraph 3 of the FTA, interest needs to be paid at the commercially reasonable rate. The Claimant in its Memorial put
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forward LIBOR plus a margin of 2 percent, compounded annually, as commercially reasonable, and the Respondents' experts seem to agree.
However, as LIBOR will no longer be used from June '23 onwards, AlixPartners presented two alternatives: A one-year US Treasury Bill, UST, or a 180-day moving average based on the secured overnight financing rates, the SOFR rates, both with a 2 percent premium.
Now, UST and SOFR are not comparable with LIBOR, nor are they commercially reasonable rates, as required by the FTA. The two interest rates, unlike LIBOR, are risk-free rates. One therefore needs to apply a credit spread of at least 1 percent to account for the additional credit risk that you would compensate in LIBOR.
In addition, the current market conditions have significantly changed over the last two years, with inflation rates hitting a 40-year high. For the last 20 years, these rates offered in--the rates offered in the interbank market, in LIBOR, closely follow the low inflation rates. However, as you can
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see in the chart before you, LIBOR has become decoupled from inflation since 2020. As a result, even LIBOR plus 2 percent would be significantly below the current inflation rate.
The same is true for the two interest rates that Perú relies on. Applying LIBOR plus 2 percent, or even more so SOFR plus 2 and UST plus 2, would result in a negative real interest rate which incentivizes Perú to delay any payment of the award, as the value of the amount owed to the Claimant would decrease over time in real terms.
Therefore, the Claimant has instructed Accuracy to recalculate pre-award interest rates--pre-award interest based on LIBOR plus 4 percent, which is more in line with the current inflation rate. And if LIBOR is discontinued whilst compensation to the Claimant is still outstanding, an interest rate based on UST plus 5 percent should be used. As shown in the slide before you, both these rates closely follow the inflation rate.
Additionally, LIBOR plus 4, or an equivalent UST plus 5 percent, is consistent with the past
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Arbitral practice even in a low-inflation environment. You can see this from the examples on your slide.
And that, Members of the Tribunal, concludes our opening statement.
PRESIDENT CROOK: Thank you, counsel.
Let me ask, do my colleagues have any questions?
ARBITRATOR GARIBALDI: No.
PRESIDENT CROOK: I'm not seeking an answer now, but I would invite you to reflect. I'm wondering how this hypothetical, well-informed, future borrower of the--the basis on which that well-informed, future--future purchaser, rather, should assume that they would be able to carry forward the business free of any social interruption.
Is the premise that Perú would, going forward in the future, do whatever is required whenever is required to assure that result; is that the premise?
DR. VEIT: Yes, Mr. President, that's the premise. The premise is that Perú would reinstate law and order and see to it that law and order can be
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maintained, as any government would do.
PRESIDENT CROOK: In that case, if there are no further questions, any administration we need to tend to?
SECRETARY: No, sir.
PRESIDENT CROOK: All right. We're scheduled for 40 minutes, so we're running just a bit ahead of schedule. So let's resume at--I have to do the math here.
SECRETARY: 1:48.
PRESIDENT CROOK: I was going to do 1:47, but 1:48. Let's resume at 1:48. Okay. See you then.
(Whereupon, there was a recess in the proceedings, 1:08 p.m. - 1:49 p.m.)
PRESIDENT CROOK: Okay. Good afternoon, Ladies and Gentlemen.
Are we ready? Good? Claimant's ready? Respondent is ready?
Okay. We very much appreciate all of the cooperation so far. We will now hear the Respondent's opening.
And at some point, I hope there will be some
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brief mention of the Rejoinder, because the Tribunal was sort of struck, but the Rejoinder did appear to raise some issues that had not--that varied from the positions previously taken, and raised some new issues and at a point where, just as a procedural matter, Claimants did not have a written opportunity to Respondent to that, and I just wonder, is that something that should concern us, or do we regard that as quite appropriate?
I see a nodding head, and you'll explain to us why that's so.
All right, over to Respondent.
MR. GRANÉ: Thank you, Mr. Chairman, for that question, and we can certainly address that more at length.
I think the preliminary reaction, Mr. Chairman--the preliminary reaction, Mr. Chairman, that this is perfectly normal. It's the dynamic in any arbitration where each side will respond to the arguments that are being made by the other party in its previous submission.
We have heard Claimant argue in the skeleton
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that Perú has submitted new arguments. We disagree with that. We have been responsive--
PRESIDENT CROOK: I don't want to argue the thing with you now.
But it used to be the case that there are only two or three regulatory requirements left to be addressed. That was the state of play after the Memorial, Counter-Memorial, Rejoinder, and then we get to the final pleading, and suddenly, we have a whole raft of new regulatory requirements that had not been previously been discussed.
And you will tell us why you think that's appropriate.
MR. GRANÉ: Okay, thank you.
OPENING STATEMENT BY COUNSEL FOR THE RESPONDENT
MR. DI ROSA: Good afternoon, Mr. President and Members of the Tribunal. My name is Paolo Di Rosa, and I will be introducing Perú's opening argument by giving a brief overview of the reasons why Claimant's case must be dismissed.
Claimant's claims revolve around two main sets of actions. The first is the actions of the
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Parán Community, a--the poor, rural community that we've been talking about that was in the direct area of influence of Claimant's mine in Perú.
The second set of actions relates to the Peruvian Government's response to the social conflict between Claimant and the Parán Community.
That social conflict culminated in a series of incidents, including at the mine in June of 2018, and the--at the main access road to the mine in October 2018.
Claimant ultimately was unable to reach commercial exploitation, leading it to default on its financial obligations to its lender. As a result of that default, Claimant forfeited its project company, Invicta, to Claimant's lender.
At its core, this case centers on the issue of what constitutes an appropriate government response when a social conflict has erupted between a foreign investor and local communities.
As events in Perú and other countries have shown, such conflicts are delicate and often volatile. A State's response to such a situation involves a
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careful balancing of public policy considerations of the sort that are classically within the realm of a State's sovereign prerogatives.
Perú submits, very respectfully, that the Tribunal should not second-guess Perú's decision to forego the use of force against the Parán Community members. Equally, the Tribunal should not second-guess Perú's decision, instead, to favor dialogue as a way to achieve a peaceful and definitive resolution of the social conflict.
Perú had already resorted to force in prior mining projects, in many instances with disastrous and long-lasting consequences.
By contrast, dialogue had been productive at different times, even in the Parán conflict itself, such that a negotiated--successful negotiated outcome was entirely within the realm of the possible.
Perú has demonstrated in its pleadings, and we will recall in this presentation, the various fundamental flaws that warrant dismissal of Claimant's claims and arguments. Specifically, Perú has shown that the Tribunal lacks jurisdiction, that the
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Claimant's claims lack merit, and that, in any event, no damages would be due.
My colleagues will discuss each of these grounds for dismissal in more detail, but by way of introduction, I will provide a high-level overview, starting with jurisdiction.
The first of Perú's objections is that the Tribunal lacks jurisdiction ratione personae. The basis for this objection is that when it transferred its shares in Invicta to its creditor, PLI Huaura, in August 2019, Claimant failed to retain the corresponding claim rights.
As a result, Claimant no longer qualifies as a, quote/unquote, investor under Treaty Article 847.
The case law establishes certain key principles that are relevant here.
First, an investor standing must be assessed as of the time that the relevant Arbitral proceedings were instituted. Second, and subject only to two exceptions that I will discuss, the general rule is that tribunals lack jurisdiction if an investor has already disposed of its investment before the relevant
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Arbitral proceedings are commenced.
The two exceptions are, first, when the investor has expressly retained its right to pursue claims, and second, when there are special circumstances such as when it is precisely the State's actions that cause the investor to dispose of the investment in the first place. However, neither of those exceptions applies here.
Perú's second jurisdictional objection is that the Tribunal lacks jurisdiction ratione voluntatis because it is an undisputed fact that Claimant failed to provide a waiver from Invicta as required under Article 823.1(e) of the Treaty.
Turning now to the merits, Claimant's claims fail for several reasons.
As Claimant itself has acknowledged, it could not commence commercial production without resolving its social conflict with the Parán Community. A fatal problem for Claimant's merits case is that the social conflict was caused by Claimant's own actions, not by any actions or omissions by Perú. Not only did Claimant create the problem itself, but
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it was also within the Claimant's power and ability to resolve that social conflict.
Instead, Claimant opted to resort to the use of force, and insisted that the State clean up the mess that Claimant itself had created.
Ultimately, Claimant's failure to reach commercial exploitation by the contractual deadline established under its financing agreement led it to forfeit its investment.
Now, Claimant has openly acknowledged, including in its pleadings in this arbitration, the significant and sustained efforts that were undertaken by various Peruvian State organs to find a resolution to the social conflict. Multiple agencies and government officials of Perú bent over backwards over a prolonged period of time to broker an agreement between Claimant and the Parán Community.
The evidence shows that Perú acted diligently and reasonably at all times. Cognizant of the fact that Perú did not create the conflict and that, to the contrary, Perú had strenuously attempted resolve it, Claimant attempts to impute the actions of
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the Parán Community to the State.
But the Parán's community's actions are not attributable to Perú under either domestic or international law, and therefore, cannot form the basis for responsibility under the treaty.
Finally, much of Claimant's merits case is founded on baseless, made-for-arbitration conspiracy theories, including new ones that they advanced for the first time in their Reply.
We will briefly address each of these issues in turn.
It is not in dispute between the parties that unless and until the social conflict with the Parán Community was resolved, Claimant would not have been able to commence commercial exploitation of the Invicta mine.
The conflict in turn caused the Claimant to default on its financing agreement, as I mentioned, and given that, and since the Parán Community's actions are not attributable to Perú, there is no basis to impose responsibility under the Treaty on Perú.
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Claimant failed to design and implement an adequate community relations strategy. They simply failed to obtain what is known in the mining industry as a social license to operate. Under relevant international law principles, worldwide industry standards, and Peruvian law, mining companies are required to develop relationships of trust with the local communities.
They are required to obtain adequate support from those communities both before and during the lifetime of the mining project. Importantly, and contrary to Claimant's apparent position, this entails more than just meeting minimum legal requirements.
Without with a social license, a mining project simply cannot succeed.
In this case, Claimant failed to obtain sufficient community acceptance of the Invicta mine. They mismanaged the relations with all three of the rural communities that were in the area of direct influence of the project. And its failures were especially acute with respect to the Parán Community, especially after, at some point, Claimant erroneously
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concluded that it no longer needed the acceptance of the Parán Community, and therefore, progressively began to marginalize that community.
Now, given the Invicta mine's location, the buy-in of the local communities was critical. It was critical because of the potential environmental, social and economic impact of the project, particularly on the Parán Community, given its proximity, as well as the ongoing territorial disputes between the various communities.
A key threshold problem in Claimant's handling of its investment in Perú, as well as in its pleadings and in its presentation this morning, is that the Claimant has consistently dismissed this concept of the social license.
ARBITRATOR GARIBALDI: Counsel, I'd like to ask a couple of questions about that, but this is an overview, right, there will be more detail?
MR. DI ROSA: Yes. We'll come back to this. Yes.
ARBITRATOR GARIBALDI: All right. Thanks.
MR. DI ROSA: The social license was an
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affirmative requirement, and the reality is that Claimant's community relations strategy was insufficient for the purpose. It's engagement was particularly inadequate with the Parán Community, and it progressively began to marginalize that community in favor of the other two communities.
Claimant had inherited certain agreements with the Parán Community when it took over the project, but it then discarded them as unnecessary, refusing to abide by prior commitments that it had made to the community, or to honor community expectations.
In the end, as you know, they chose to resort to the use of force by deploying the War Dogs to expel the community members forcibly from the mine site. That was what caused this confrontation that yielded the fatality that the Claimants referred to earlier today. That aggressive step and the ensuing violent confrontation with the Parán members destroyed any prospect of an amicable resolution to the social conflict.
As a result of that unresolved conflict,
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Claimant was unable to commence commercial exploitation of the mine. As a result of the violation that that entailed of the PPF Agreement, Claimant forfeited its shares in Invicta and lost its investment in Perú.
Now, as you can see on the screen, Claimant itself has acknowledged in its Reply at Paragraph 351 that, "Lupaka lost its investment on 26 August 2019, when Lonely Mountain," which was PLI Huaura's owner, "seized IMC's shares following Lupaka's failure to service its obligations under the PPF Agreement."
One of the fatal flaws in Claimant's legal position is its hypothesis that the actions of the Parán Community are attributable to Perú for purposes of State responsibility under international law. That hypothesis is entirely wrong under the principles of attribution under the ILC articles, as we will discuss in more detail later in this presentation.
Now, tellingly, the contemporary documentation shows that at the time of the Parán Community conflicts, even Claimant itself did not consider the community to be a State organ or to be
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empowered with State functions or to be acting in the exercise of government functions or State authority.
To the contrary, Claimants consistently viewed and characterized the Parán Community protesters as private actors who were acting illegally. That inconsistency between the evidence and Claimant's position reveals the made-for-arbitration nature of Claimant's attribution arguments.
Now, turning now to Perú's response to the social conflict. None of Perú's actions violated any obligation under the Treaty.
First, Article 805 of the treaty provides that the fair and equitable treatment and full protection and security obligations are limited to the minimum standard of treatment under customary international law. And it is well-established that a Claimant alleging a breach of the minimum standard must meet quite a high threshold.
With respect to full protection and security, which lies at the core of Claimant's claim, Professors Dolzer and Schreuer have noted that the
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relevant standard requires that a State "exercised due diligence and...take such measures to protect the foreign investment as are reasonable under the circumstances."
Claimant has not challenged that this is the applicable standard, although there are certain differences in the parties' interpretation of that standard.
With respect to fair and equitable treatment, we have placed on the screen the well-known articulation of the minimum standard threshold that was offered by the Tribunal in Waste Management II. According to that formulation, State conduct will only breach the minimum standard if it is "arbitrary, grossly unfair, unjust or idiosyncratic" or "discriminatory," or if it involves "a lack of due process leading to an outcome which offends judicial propriety." Claimant has accepted this as the relevant standard, and that's at Claimant's Prehearing Skeleton Paragraph 90.
The core allegation in Claimant's merits case is that the Peruvian Government should have used
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force to resolve Claimant's social conflict with the Parán Community. But Perú's decision not to use force and instead to try to mediate a peaceful and durable resolution to the dispute was entirely reasonable under the circumstances. It did not breach the minimum standard of treatment.
The Tribunal's analysis of Perú's actions must take into account the relevant circumstances, which in this case included:
The history of social conflict in the Peruvian mining sector.
The catastrophic consequences of the use of force by the State in Perú and elsewhere in prior mining projects.
And the success that had already been achieved in negotiations between these particular conflicting parties. For example, the negotiations yielded the 26 February 2019 Agreement, which is Exhibit C-0200.
All of these circumstances weighed heavily against the use of force to address this particular social conflict.
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The Claimant argues, however, that Peruvian law obligated the authorities to use force against the Parán Community. They repeated that again this morning.
But Peruvian law imposes no such requirement, as we have shown, including on the basis of an independent expert report.
But perhaps more importantly, there were good reasons not to use force in this case.
First of all, a forceful eviction of the protesters who were involved in the Access Road Protest would have succeeded only in ending that particular protest. It would not have resolved the dispute for good, and it would not have prevented similar protests in the future. Those were bound to continue until the underlying issues were adequately addressed.
Second, dialogue appeared to be the most promising avenue for a lasting resolution to the social conflict, given the prior successes that the parties had already achieved through negotiations.
The bottom line is that Perú's actions in
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seeking a negotiated solution to the social conflict were reasonable and justified under the circumstances, and there was, therefore, no breach by Perú of its FET or FPS obligations under the treaty.
Claimant's expropriation claims similarly fail.
First, there was no direct expropriation in this case. Not only because the Access Road Protest was not attributable to Perú, but also because there was no transfer of title or outright seizure by the State of Claimant's investment.
Nor was there an indirect expropriation. Treaty Annex 812 expressly identifies the elements of an indirect expropriation, but none of those are present here.
For these reasons, the Tribunal should honor the presumption established under Treaty Annex 812 that good faith, nondiscriminatory measures in the public interest are nonexpropriatory.
Our final observation on the merits issues is that Claimant attempts to distract from the defects in its case by conjuring up a series of fanciful
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conspiracy theories. These include, for example, that the community actions were motivated by a desire to protect an alleged community-wide marijuana business, that the Parán Community staged its protests to steal the mine for itself, and that a government official, Mr. Román Retuerto, had spearheaded the June 2018 protest and had generally fueled opposition to the project, and you will hear from Mr. Retuerto later this week.
However, as Perú has demonstrated, and will recall again today, there is zero credible evidence to support any of these conspiracy theories.
We turn now to the final prong, which is damages.
Even if Claimant had established jurisdiction and liability, which it has not, its damages claim would fail for several reasons. Those are summarized on the screen just for reference, but in the interest of time, we will not read them since we will address them briefly sequentially.
The first reason is that there's no causal link between Perú's conduct and the loss of Claimant's
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investment. Claimant lost its investment because the social conflict, which Claimant itself precipitated, prevented Claimant from reaching commercial exploitation in the time required under its financing agreement. That, in turn, caused it to forfeit its investment to its creditor, and none of that had anything to do with Perú.
Claimant, for its part, argues that it was Perú's decision not to use force that caused the loss of the investment, as I mentioned. Claimant has focused heavily on this throughout the arbitration, including in the presentation this morning; however, as we have stated, an operation by the Peruvian police to terminate the protest by force would not have resolved the conflict permanently.
This is something that even Claimant's own witness, Mr. Julio Castañeda, acknowledges at Paragraph 74 of his witness statement, which we have on the screen, where he said, "We knew that the Parán representatives would not be deterred for long and that once the police had left, the site would again be at risk of invasion. For this reason, we persisted in
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our efforts to secure an agreement with the Parán Community."
So the bottom line is that having the police forcefully quash the protest would not have enabled Claimant to resolve the social conflict or otherwise to reach commercial exploitation any sooner.
In any event, even absent the Access Road Protest, Claimant would not have avoided a fatal violation of its financing agreement with its creditor and the resulting loss of its investment.
The PPF Agreement required commercial exploitation by December 2018, which was only two months after the Access Road Protest. That means that even if the Access Road Protest had been quashed by force by the State, or indeed, even if the Access Road Protest hadn't happened at all, Claimant would still not have been able to reach commercial exploitation in time, and that's because at that point, Claimant still lacked key permits and adequate ore processing facilities to commence exploitation.
And another reason why Claimant's damages fail is that their damages model is defective and
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unreliable. It includes a number of flawed assumptions and defective calculations, and we've listed those on the slide. We'll discuss them later in this--in presentation.
Now, even if Claimant did not face the causation, contractual and methodological problems that I just alluded to, any damages awarded in this case would need to be reduced sharply to account for Claimant's contributory fault. Claimant contributed to the loss of its investment with numerous failings of its own, including defective due diligence, failure to obtain the social license, acceptance of risky financing arrangements, failure to obtain requisite permits, failure to obtain adequate ore processing facility, and its own breaches of the PPF Agreement with its creditor.
Mr. President, Members of the Tribunal, this concludes our introductory overview. I will now yield the floor to my colleagues to present the remainder of Perú's opening arguments, starting with my colleague, Patricio Grané, who will identify the key disputed and undisputed factual issues.
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Then my colleague to my left, Timothy Smyth, will explain why the Tribunal lacks jurisdiction and why the Parán Community actions are not attribute to Perú.
Then Mr. Grané Labat will return to explain why Claimant's claims fail on the merits. My colleague, Brian Bombassaro will demonstrate that no damages should be awarded in any event. And finally, Mrs. Vanessa Rivas Plata Saldarriaga, the President of Perú's Special Commission for International Disputes, will conclude our presentation with a few closing remarks.
Thank you very much for your consideration.
MR. GRANÉ: Members of the Tribunal, the parties agree that much of the factual record in this arbitration is undisputed, but they disagree about the characterization, the significance, and the legal implications of certain key facts, particularly in relation to the following key issues.
One is the context surrounding the Claimant's investment. Second is the Claimant's mismanagement of its community relations. The third
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is Perú's reasonable response to the conflict, the social conflict, between Claimant and the Parán Community.
The fourth is the breakdown of Claimant's relationship with the Parán Community due to Claimant's own conduct. And the fifth is the Claimant's loss of its investment to its creditor, PLI Huaura.
In the present segment of this opening, I will address the key facts pertaining to those issues.
Now, I do not anticipate raising any confidential information, but following the hearing, Perú will work with the Claimant to confirm that any reference to such confidential information, in particular that referring to one specific witness, is redacted in conformity with Section 476 of Procedural Order Number 6.
I will begin by addressing the context surrounding Claimant's investment, which is the first issue that I identified.
Now, mining in Perú, as in much--as much in Latin America has often given rise to social conflict
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between mining companies and the local communities. This is not new. Communities located in remote, impoverished rural areas of Perú often feel harmed by the environmental impact of mining activity, and the fact that they are denied the opportunity to share in the economic benefit of such activity.
Where forceful police intervention has been used to try to quell community opposition or protests, devastating consequences have followed, including the intervention in Bagua in 2009 where scores of local residents and police officers died and hundreds were wounded.
Now, given that reality, Perú has developed practices, regulations, and standards that call for community engagement by mining companies with the local communities, and to prioritize dialogue over the use of force.
Now, contrary to what you have heard from Claimant, the social license is acknowledged by the mining community as a critical requirement for mining projects. At its core, it consists of a mining company's need to obtain acceptance and trust of
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relevant communities and stakeholders even before commencing mining activity.
Without a social license, mining projects are exposed to high risk and often violent opposition from local communities.
Now, Perú and Canada, parties to the Treaty invoked by the Claimant, jointly published a communities and--I'm sorry, communications and community relations toolkit for responsible mining exploration. This is in R-0028.
Now, this toolkit expressly contemplates the consequences of a mining company's failure to manage its community relationships, including blockades, as you see on your screen, which is an excerpt, a graph that's contained in this toolkit.
And you'll see--and we will revisit this graph throughout our presentation because it largely tracks the facts of the present case.
Now, contrary to Claimant's argument in this arbitration, including in its opening statement today, the concept of social license is also reflected in Perú's legal framework. Now, some examples are
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highlighted on the screen and described in more detail in Section II.A.1 of Perú's Rejoinder.
Now, as the record--
ARBITRATOR GARIBALDI: I think that this is the appropriate time to ask a couple of questions on social licensing.
As I understand your briefs, the assertion is made that a mining company like--as in the position of Invicta, has an obligation to obtain and maintain social licensing from the communities in the area of influence of the project beyond the specific obligations imposed by the law in connection with the environmental impact statement. Right. That's the way I understand your argument to be.
Let's put aside the question of what the origin of that obligation is, but you have asserted that there is an obligation of the mining company.
So my first question is: Is this an obligation of result or is this an obligation of means?
MR. GRANÉ: Thank you, Mr. Garibaldi, for that question. It is an obligation of result in the
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sense that the lack of that social license will have consequences.
ARBITRATOR GARIBALDI: Okay. So it is an obligation of result, fine.
MR. GRANÉ: I'm sorry, if I may, it is an obligation of result in the sense that the failure to obtain that will have the consequences that have been identified by the mining industry and this toolkit.
Now, as to means, the Peruvian regulations, including the ones that you have on the screen, are created precisely to determine the ways in which mining companies should try to obtain that social license.
So we cannot divorce the result aspect from the means.
ARBITRATOR GARIBALDI: No, I understand that, but we are talking about an obligation of result, which goes beyond the means expressly established by Peruvian law; is that right?
MR. GRANÉ: No, Professor Garibaldi, again, if I may, it's very tempting to try to reduce the social license to a single provision, and that's,
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indeed, what Claimant has tried to do in this arbitration by saying, you cannot point to any specific law that has the term "social license."
Social license asks of the evidence--
ARBITRATOR GARIBALDI: I'm not talking about that. I'm not talking about that.
I'm trying to understand your own argument.
Your argument is that there is--there are certain specific obligations imposed by the law--let's put them aside. But you also say that beyond those obligations, there is social license, which goes--which is more than that, and there is an obligation to obtain and maintain that social license, from the affected communities.
So with regard to that, I am asking: Is that an obligation of result or an obligation of means?
MR. GRANÉ: I couldn't answer that question, Mr. Garibaldi, without providing the explanation about the concept of social license and how it is reflected.
It's not a simple concept that has a single reflection in any provision. It is a complex, broad
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concept that has different manifestations at different times, both in the exploration and exploitation. So I'm afraid that I cannot provide an answer that chooses between--
ARBITRATOR GARIBALDI: So you cannot tell me if--you cannot tell me if the obligation that you call--so this obligation to obtain and maintain a social license is an obligation of means or an obligation of result.
MR. GRANÉ: I would say that it's both. If I am forced to provide an answer, I would say that it's both, because of this conflict's broad concept of social license.
ARBITRATOR GARIBALDI: Okay. All right. Fine.
So you maintain that it is an obligation of result, at least?
MR. GRANÉ: In the sense that the consequences of not obtaining that social license will have the consequences that we have seen in this case of the mining industry warrants companies would result from not obtaining the social license.
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ARBITRATOR GARIBALDI: Fine.
Second question: This is an obligation of the mining company; is that right?
MR. GRANÉ: It is an obligation of the mining company, yes.
ARBITRATOR GARIBALDI: There is--there is not--there isn't a reciprocal obligation of the local communities; is that right?
MR. GRANÉ: There is no--no, there is no reciprocal obligation by the local communities.
ARBITRATOR GARIBALDI: So in other words--
MR. GRANÉ: To grant--when you say obligation, do you mean to grant the social license?
ARBITRATOR GARIBALDI: Exactly.
MR. GRANÉ: No, there's no reciprocal obligation to grant the social license.
ARBITRATOR GARIBALDI: All right. Well, that will do for the time being. I wanted to clarify your own opinion about this obligation.
Okay. Go ahead.
MR. GRANÉ: Thank you. And I restate that it's not a binary option of saying results or means
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because of the nature of the social license.
PRESIDENT CROOK: Let me just briefly follow up with a question.
I mean, I'm struck by the sort of geographic breadth of what we're talking about. We had the testimony of one witness that 55 percent of the mountain areas of Perú were covered by rural communities or indigenous communities, so we're talking about a great deal of real estate here. So it seems to have quite broad consequences.
Would it be acceptable, in your view, if a social license could not be obtained because, for example, a community didn't like Canadians?
MR. GRANÉ: No, Mr. President.
PRESIDENT CROOK: But, you know, you told us there's no obligation on their part. Presumably, whatever factors they regard relevant to--can go into their decision.
MR. GRANÉ: Well, there's no obligation by the communities to grant the social license, but I understood your question to refer to the justification that a community may have to reject a project.
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PRESIDENT CROOK: Right.
MR. GRANÉ: And, of course, it wouldn't be justified to, you know, reject the project on the basis merely of discrimination.
PRESIDENT CROOK: Well, but on the other hand, we are told that it is entirely up to the community to determine whether to grant social license.
MR. GRANÉ: It's entirely up to the community to decide whether the factors are in place for the project to be acceptable to that community, which does not mean that any opposition can be simply disregarded.
You have to look at the nature behind--
PRESIDENT CROOK: Let us--I mean, humor me here.
Let's suppose that the objection of a community was that, we don't like Canadians and we, therefore, do not think your project should go forward.
What consequence in the real world then happens, if any?
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MR. GRANÉ: Well, I think that in that case, the mining company would understand that the rejection of the mining project has, at its core, something that cannot be addressed; and therefore, the engagement with the community has to be such that the local community understands that it's not in the interest of that community to simply resort to nationality, for instance, as a reason to reject the project.
And this is where the communication comes in. The mining company--
PRESIDENT CROOK: So it's incumbent upon--it's incumbent upon them to somehow go in and persuade the community that Canadians are very nice people and they should not persist in this objection?
MR. GRANÉ: To engage the community to persuade them that Canadians are very nice people, which indeed they are, but all--but more importantly, Mr. Chairman, that the mining project does not pose a threat to their well-being, the environment, and that it could contribute to the social and economic development. And this is where the engagement of the communication is--
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PRESIDENT CROOK: All right. And at the end of the day, the engagement and communication does not succeed; what then?
MR. GRANÉ: Well, what then, you find the consequences that you see in this case.
Now, how you deal with that--
PRESIDENT CROOK: All right. At that point, then the investor--the investment fails because they're Canadians, to use my hypothesis.
MR. GRANÉ: It's a hypothesis, Mr. President, that, you know, unfortunately, is one that is not quite so simple in the real world. I don't think that there can be a mining project that can simply be dismissed because, you know, the community considers that the originality of the--
PRESIDENT CROOK: But I'm just a little concerned because we have representations by the Claimants. I know you don't accept them and you regard them as ill-founded, but they are representing that at least certain people, influential in the community, worked to block agreement for what we'll call improper reasons.
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MR. GRANÉ: We dispute the facts and the implications that they're trying to draw from that.
PRESIDENT CROOK: All right. But let us assume that the facts are as they assert; what consequence then?
MR. GRANÉ: Well, the consequence is what you have seen where the insistence of the Claimant to find a quick solution ignores the concept of social license that requires a long-term engagement to gain that acceptance by the local community.
PRESIDENT CROOK: Okay. Thank you very much.
MR. GRANÉ: And I think that this should show us, again, that the risk of having this very narrow understanding or interpretation of social license, it is not a box-ticking exercise, as Claimant has attempted to argue before this Tribunal.
And at the end of the day, the ignorance behind the concept of social license leads to the consequences that we have seen and that are identified in that toolkit that you saw on screen.
Now, to obtain the social license to
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operate, the Claimant needed to obtain and maintain, as Mr. Garibaldi has said, the acceptance and trust of each of the three rural communities in Invicta's area of the direct influence; and as you know, those three communities are Parán, Lacsanga and Santo Domingo.
Now, originally, Claimant admitted--and this is important. Originally, it admitted that it needed the Parán Community's support, but later, it wrongly concluded that it did not. And it reached that conclusion on the basis of a change in the Invicta's project scope in 2004. That is what they have said.
But it--I'm sorry, 2014, not 2004.
But that 2014 change neither significantly altered the physical location of the mine's infrastructure, nor rendered the Parán Community immune from the mine's negative impact.
Now, this morning, opposing counsel said that's, and I quote, "Significant reduction in the social footprint of the project."
Now, that is untrue. There was no significant reduction in the social footprint of the project in 2014. When Perú approved a supplement to
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the Invicta's mine Environmental Impact Assessment in 2015, after that scope change, it noted that, and I quote, "The mining components will be located within the area of direct and indirect environmental influence approved in 2009 without any modification." This is in C-0040, page 4.
Further, Claimant's dismissal of the Parán Community's support is formalistic and wrong for at least three primary reasons.
First, the Parán Community's crops and villages lay within the mine's area of direct influence, mostly downstream and downhill of the mine where they would be more exposed to the effects of water pollution.
Second, several of Claimant's water management facilities and an access road to the Invicta mine were located on Parán territory.
And third, the rural communities disputed the ownership of the territory where the Invicta's mine infrastructure was located.
And contrary to Claimant's argument in the skeleton, such argument was not new when it was raised
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in the Rejoinder; rather, it was responsive to Claimant's argument that an agreement with the Parán Community was not needed because the mine was not located in the Parán territory, according to Claimant.
And this is a Memorial. If you want to track the evolution of that particular argument, you can look at Memorial Paragraph 72, Counter-Memorial Paragraphs 133 to 138, and Reply Section 3.2.2.
Now, for these and several other reasons, obtaining acceptance by the Parán Community was essential to the successful development of the mine, as later events have confirmed.
ARBITRATOR GARIBALDI: Counsel, are you going to come back to the question of this disputed ownership of the land?
MR. GRANÉ: We certainly will, Mr. Garibaldi, and I believe that it will be--I believe not--I am sure that it will be the subject of cross-examination in the questioning.
ARBITRATOR GARIBALDI: No, no, in your opening, are you going to come back?
MR. GRANÉ: Not in great detail.
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ARBITRATOR GARIBALDI: Okay. I'm going to have a question then. I want to go quickly because I don't want to take a lot of time, and time is golden here.
The question is this: There is a dispute, you say, between Parán and Lacsanga and Santo Domingo about the ownership of--about a claim by Parán that it owned the area where the mine is located.
Okay. And how is that dispute to be solved under Peruvian law?
MR. GRANÉ: There's a process of registration of the Parán communities and its boundaries.
Now, at the time--at this moment, that dispute has not been resolved. But, for instance, and we will see the evidence, and evidence is on the record, about, for instance, agreements between the communities that have settled part of that dispute, but not entirely.
Now, again, it's a process under Peruvian laws and regulation that takes time and leads to the registration of boundaries in a public--
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ARBITRATOR GARIBALDI: All right. In the case, then, the dispute continues, what is the agency of the Peruvian State with authority to resolve that dispute?
MR. GRANÉ: I will have to come back to you on that question, Mr. Garibaldi.
ARBITRATOR GARIBALDI: All right, thank you.
MR. GRANÉ: Now, as I was saying--now, obtaining the--this acceptance by the Parán Community was essential; but however, Claimant didn't obtain that. And, in fact, it mismanaged its relationship with the Parán Community.
Throughout its engagement with the rural communities, Claimant outsourced its community relations to a company that lacked the necessary experience and resources.
Now, most of the project cited by Claimant as evidence that it had a qualified and experienced team referred to projects not yet in their exploitation stages, and nearly every relevant project involved significant social conflict and protests by the local communities.
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In any event, Claimant dismissed this community relations team in November of 2018, which is shortly before the start of the Access Road Protest in October of that same year.
Now, this left Claimant without its allegedly experienced team during the most critical point of its conflict with the Parán Community.
Now, Claimant had a poor communications relations strategy from the outset. It delayed engaging with the Parán Community about the project until four years after it acquired the project. In fact, it was only after Claimant was approached by the Parán Community that it began to negotiate with them.
And even then, such engagement was focused primarily on Claimant's attempt to secure the community's permission to use an access road through its territory, which it later abandoned, and in the process planted yet another seed of the conflict that came later.
Now, meanwhile, as Perú first addressed in the Counter-Memorial, and it reemphasized in the Rejoinder in Section II.B.2.b, Claimant prioritized
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relationships with the other two neighboring communities.
Now, Claimant consistently ignored the Parán Community's request for an agreement. It failed to keep the Parán Community informed of the process of--of the progress of the project, and contributed only nominally to that community, to the Parán Community.
But in contrast, the Claimant reached agreements with--and continuously engaged and make contributions to Lacsanga and Santo Domingo, the neighboring communities.
And as noted in the toolkit, that graph that I presented earlier, adopting selective relationships with local communities leads to blockades that result in the shutdown of operations.
PRESIDENT CROOK: Counsel, a quick question. How do you relate your argument that they had a wholly inadequate outreach capacity with the fact that they seem to have reached rather substantial agreements with at least two of the communities?
MR. GRANÉ: Those agreements with those
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other communities were reached at a different moment in time. And the conflict with those communities, because there were certain conflicts with those communities that we will address, and we have addressed in the record, are nowhere near the complexity of the conflict that they had with the Parán Community, which called for an experienced team that were--that would be able to deal with the situation at that moment.
It's very different to engage with the communities at an early stage and offer something. It's very different to deal with communities much later when there's already distrust and lack of communication and resentment towards the company.
At that stage of a conflict, you need an experienced team as opposed to simply putting something on the table and waiting for acceptance.
PRESIDENT CROOK: Now, when you say, "at that stage," chronologically, what period are you talking about?
MR. GRANÉ: Well, the conflict with the Parán Community started early, but it was in 2018 that
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you start to see the conflict escalating.
In early 2018--
PRESIDENT CROOK: Thank you. We're talking 2018, essentially?
MR. GRANÉ: Yes.
PRESIDENT CROOK: Okay. Thank you.
ARBITRATOR GRIFFITH: Is it Perú's position that the discriminatory treatment of Parán compared with the other two communities was based on the fact that it wasn't sought to engage in the mining activities on the Parán land?
MR. GRANÉ: I knew that discrimination, Mr. Griffith, has different manifestations. And again, we have to track this, and we will through the chronology, that engagement had at different moments different components.
They have to comply with the social obligations that by law are required. Now, those social obligations, which are part of the environmental impact assessment, have different components.
There's employment, there's social, there
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are economic contributions that need to be made.
Now, throughout this relationship, the company and the community engage in a dialogue, and different offers are made to that community about how that community can become a stakeholder in the project.
So there are different aspects to that relationship, that communication, that later will lead to Parán feeling that they had been cheated, that the things that were offered to them early on later did not materialize, and they're seeing their neighbors obtaining some of the benefits.
So, for instance, the access road is one example. Early on in the conflict, Parán was told that they would be given an access road. Later, they discovered that the access road had been given to Lacsanga, to their neighbors, which led Parán at some point to tell Claimant, when the conflict had erupted, to say, I want the access road, but Claimant reacted late and rejecting that offer because they already had the Lacsanga access road.
So that's an example of how this engagement
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has different components. And in this case, that engagement with Parán was poor in comparison to Santo Domingo and Lacsanga, which led to this conflict.
But it cannot be reduced to only one item.
Water pollution was another concern. Again, the engagement has to take into account social and economic development, but also, you know, health/environmental issues.
Now, you heard--and now that we are on the issue of the different things that the company said to the communities and that I mentioned environmental concern, that's an important part of the conflict that later on erupted.
And you heard Claimant's counsel this morning state that at no point did Parán flag concerns about environmental degradation. That is patently false, as shown by evidence on the record, including Claimant's own witnesses.
As one of the many examples of the evidence on the record about Parán's raising water contamination as a concern is Exhibit R-0077 from April 2018.
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And here, you go back to your question, Mr. President, here's an indication early in 2018 that the Parán Community was concerned about what the company was doing and the lack of engagement and the lack of information.
Again, this is not a simple conflict where, at one given moment, it suddenly erupts. It's a buildup. It's an escalation. And here, we see the seeds of that conflict.
Early in 2018, April 2018, the community is telling the company, we are concerned about what we're seeing in the water, about water contamination.
And later on, this is something that was continued to be raised and was the object of inspections by the regulatory agency that did find contamination, and I will get to that issue.
So the Parán Community did raise environmental concerns repeatedly, but Claimant simply dismissed the Parán Community's environmental concerns over the adverse impact that water contamination from the Invicta mine could have on its Ministry of Agriculture, which is the community's main source of
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livelihood.
Now, Claimant initially disregarded these concerns, and continues to do so today as you heard, including in this arbitration, arguing that they are unfounded because, according to Claimant, the Invicta mine was not located in the territory of the Parán Community, as if water contamination knew boundaries.
Now, Claimant's arguments ignore the undisputed fact that the Parán Community's villages and agricultural zones are closer to the mine than any other community, and they're downhill and downstream from its infrastructure, from the mine infrastructure, and within the area of the environmental impact of the project.
And they are within that area, as recognized by the Environmental Impact Assessment.
And it is also undisputed, as I mentioned a few minutes ago, that Claimant was contaminating the water and was duly sanctioned by OEFA, which is the Peruvian environmental authority. And this is in Exhibit R-0074. It's a resolution from OEFA dated 27 September 2018 where OEFA confirmed that the Invicta
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mine was discharging toxic chemicals above permissible limits into the ground and water sources.
And you can see the percentages on the screen of how much they were exceeding the tolerable levels of some of these chemicals.
So this is-remember, Parán in April 2018 was saying we're concerned about the water. Claimant brushes aside that concern. And then in September, the regulator comes in and confirms the concerns that the community had-.
And it is hardly surprising that the Parán Community had a legitimate and well-founded environmental concern, which, again, Claimant has dismissed offhandedly.
Now, Claimant also boldly asserts that, and I quote, it did not breach its social commitments.
And this is covered in the Reply Section 4.3.3.
Again, that is patently false. It is undisputed that Claimant did not satisfy several of its social commitments to the communities and, accordingly, was sanctioned by the regulator. And we address this in Reply including--or starting in
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Paragraph 182, and I refer you to Exhibit R-0061.
Now, a nonexhaustive list of Claimant's breaches are listed on this slide.
Perhaps they're not. We'll find the correct slide.
I'm sorry, here it is. That's R-0061. I had moved too quickly.
So essentially, Claimant has fostered the perfect incubation conditions for a social conflict leading to the blockade and the shutdown of the operations, which, again, is the consequences of what you see on the left, the blockade, and ultimately what the blockade causes.
And recalling from that--from this graph, from the toolkit, now, Claimant created unclear communication channels by outsourcing its community relationships, allowing its community relations team--contract to lapse, failing to consistently engage with the communities, and deliberately misleading the Parán Community, saying, for instance, that there was no water contamination, promising things that it later did not deliver but delivered to
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its neighbors.
Claimant and Parán Community also held different agendas, which is another of the causes of the opposition and the blockade. The Parán Community wanted its environmental grievances addressed and to reach an agreement with the Claimant on terms that were similar to those secured by the neighboring communities.
Now, Claimant, on the other hand, saw Parán as a nuisance, as a problem to either ignore or neutralize.
It thought that simply saying, your water is not being contaminated because it's not in the area or that your territory does not include the infrastructure of the mine means that there are no--there is no water contamination. That is simply not an acceptable explanation from the perspective of the community who is seeing the color of its water being unnatural because of the presence of the chemicals that were later confirmed by OEFA to be present in the ground and water sources.
Now, Claimant also engaged in selective
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relationships by prioritizing Lacsanga and Santo Domingo over the Parán Community.
PRESIDENT CROOK: Sorry, counsel.
So if we go back and dig in the record, we will find evidence to support the statement you just made, that the discoloration of the water--
MR. GRANÉ: Yes, sir.
PRESIDENT CROOK: --was attributable to these excessive discharges of heavy metals?
MR. GRANÉ: Yes, sir. It's the--the only possible source of that discoloration of the water was--
PRESIDENT CROOK: I'm asking, is there evidence in the record to support your argument?
MR. GRANÉ: Yes, R-0074 is one such piece of evidence.
PRESIDENT CROOK: R-0074, okay.
MR. GRANÉ: Now, finally, the Claimant failed to address the community grievances, as I said, by not reaching an agreement with the Parán Community, disregarding its legitimate environmental concerns, delay the settlement of its debt to the community and
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blatantly failing to satisfy other social and monetary commitments.
Another exhibit in addition to the one I mentioned would be C-0408.
So the Parán Community's opposition was hardly surprising. In fact, it was entirely foreseeable and it led to the blockade, but while it was foreseeable, it was not inevitable. Claimant could and should have averted the opposition that led to the blockade if it had not completely ignored the concept of social license.
Instead, and to this day, it has treated that fundamental concept with utter contempt.
ARBITRATOR GARIBALDI: I find something very strange here.
You seem to be treating the blockade, which is an act of force against the law--against Peruvian law, as something inevitable, something like an act of God, something that is caused by certain actions and inactions of the mining company, but it's something that is inevitable.
MR. GRANÉ: Quite the contrary. We are not
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treating it as an act of God, Mr. Garibaldi. We're saying that the blockade is the result of the conduct of the Claimant that could and should have been avoided.
ARBITRATOR GARIBALDI: Okay. Let me rephrase that.
The blockade is an act of a group of people, right?
MR. GRANÉ: Correct.
ARBITRATOR GARIBALDI: Which is against the law; isn't that right?
MR. GRANÉ: Correct.
ARBITRATOR GARIBALDI: So isn't there something in--isn't there an agency in between this causal relationship that you're talking about?
MR. GRANÉ: If what you mean by that is agency from the State, absolutely not--
ARBITRATOR GARIBALDI: No, no, no, not State. I'm talking about the Community of Parán. I'm not addressing now the question of whether the Community of Parán is the State or not.
MR. GRANÉ: Mr. Garibaldi, there's no
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submission from Perú that the Parán Community was not directly responsible for the blockade. It is the members of the Parán Community that erected the blockade.
ARBITRATOR GARIBALDI: All right.
MR. GRANÉ: Now, what we are addressing, Mr. Garibaldi, are the causes that led to that blockade. And what I have just stated about the inevitability of that goes to the conduct of Claimant, and it goes to the concept of the social license.
And social license is recognized by mining communities because if it's not--the community is not engaged in a positive, constructive way, it leads to these situations.
ARBITRATOR GARIBALDI: Okay, let me--one final question.
Would it be possible--assuming everything else is the same, same conduct from the mining company, would it have been possible for the Parán Community to refrain from an act of force?
MR. GRANÉ: It would have been possible, yes.
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ARBITRATOR GARIBALDI: Thank you.
MR. GRANÉ: Now, we have established that the mismanagement of the community relations by the mining company led to the blockade. But what's important--and we will get to the issue of attribution. What's important is what the Peruvian authorities did to address that social conflict, of which it was not a party and which it had not created.
Now, the evidence shows that Perú's authorities acted reasonably and in accordance with Peruvian law in attempting to mediate a lasting solution to Claimant's conflicts with the Parán Community. And this notion of the lasting solution is critical to understand the measures that can be taken in that type of situation where there is a forceful opposition by the local community.
Now, in the months before the first Parán Community protest in 19 June 2018, Claimant had ceased dialogue with that community and was not performing its social obligations under the Social Management Plan; again, which is a formal document that is required by Peruvian law, and for which it
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was--sanctioned the company for not complying with that Social Management Plan.
Now, these actions were in direct violation of the company's obligations under Peruvian law.
Now, two months before the June protest, the Parán Community once again explicitly expressed to Claimant its desire to reach an agreement with the mining company that would recognize that community as a stakeholder in the development of the project.
Now, the community made it clear that it was open to receiving any proposal from Invicta, and this is Exhibit C-0430.
In May, the Parán Community sent Claimant another letter explicitly expressing its alarm that Claimant had stopped dialogue with the community and was pushing ahead with its plans to develop the mine.
And in particular, the Parán Community was concerned about the possible activity at the mine that was already causing this contamination of water and land. And again, this is--the second letter in May is Exhibit C-0121.
But Claimant made no attempt to engage in a
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constructive dialogue, as I said, and build community relations.
In a three-letter paragraph dated 30 March 2018, which is C-0122, Claimant callously dismissed the community's concerns as misinformed and its territorial claims as lies.
Now, that's hardly a constructive and forward-looking response to a community that is expressing concerns about what they're seeing the company do in what they consider to be their territory.
But Claimant sits here today and they spin a different story, but the evidence demonstrates that the Parán Community felt ignored and marginalized by Claimant, and decided to express its discontent, its repudiation of that conduct by Claimant.
Now, in the absence of that positive engagement by Claimant, the Parán Community's concerns intensified, and particularly based on what its members were witnessing, which included a visible discoloration of the water, especially after heavy rainfalls; the use of explosives due to the general
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works at the mine; the presence of heavy equipment to--again, to the general works; and the sight of trucks filled with ore leaving the Invicta mine, which is the result of the testing that was being conducted by the mining company.
Now, mind you, the testing resulted in at least seven tons of ore being extracted from the site, and the Parán Community was witnessing this. And they were, of course, you know, rightly concerned, and understandably concluded that the mine was being exploited at that point by the mining company.
Now, on 19 June 2018, approximately 215 members of the Parán Community appeared at the mine to conduct an inspection. And in the course of that inspection, tempers flared and some property was destroyed, and--but Claimant here grossly exaggerates what happened that day. And this also will be the subject of further discussion this week.
But in any event, Perú responded diligently and appropriately to this protest by leading a police patrol. And throughout our presentation, we will refer to the police sometimes as the PNP, the Peruvian
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National Police.
So a PNP patrol inspected the site following that protest of 19 June 2018, and Claimant was grateful for this response by the PNP, and this is discussed in the pleadings.
But unable to deny those facts, Claimant offered several new theories in the Reply to attempt to recast blame on Perú, even though, again, contemporaneously, they were grateful for the PNP's intervention that day.
Now, first and here we start with conspiracy theories. Claimant introduces a new and baseless conspiracy theory here in relation to the June 2019 protest.
According to Claimant, a low-level regional government official, Mr. Román Retuerto, conspired and led the community's opposition against the project that day. Claimant's new argument was introduced after Perú demonstrated that its original claim that is based on the Parán Community's actions being attributable to Perú was hopeless and failed at the threshold.
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So Claimant sought to plug that gaping hole in its case theory, and it desperately sought a government official on which it could pin the blame.
And this is where Claimant falsely accuses Mr. Román Retuerto of participating in and leading the 19 June 2018 protest.
When Mr. Román Retuerto learned of the planned 19 June protest, he alerted the proper authorities, and he requested their action be taken to prevent the conflict from escalating, and he called dialogue, and this is in C-0550.
Notwithstanding this letter, Claimant asserts that Mr. Román Retuerto led the protest, but there's no evidence to support that allegation.
And you heard this morning Claimant says--saying that it relies on an internal report and the fact that someone saw Mr. Retuerto present at the site on 19 June 2018, just as police went to the site on the date of the protest.
And yet, Claimant does not accuse the police of leading the protest because the police was present, because it knows that it would be absurd to do so.
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And yet, that's exactly what it argues Mr. Retuerto was doing. The presence of Mr. Retuerto on the site on that day, Claimant says that it's evidence of him leading the protest. That is not what the evidence shows.
Far from leading the protest, with the Parán Community's opposition to the project, Mr. Retuerto was considered a persona non grata by the Parán Community, because the community believed that he was biased against the community, and thus was turned away twice from participating in any dialogue or mediation efforts between members of the Parán Community and the Claimant's representatives.
Claimant's second accusation against Mr. Román Retuerto is that he engaged in a defamatory campaign against Invicta, but that, too, is unsupported.
And Claimant bases this argument on a series of letters that Mr. Román Retuerto sent in his capacity as Subprefect to various Peruvian authorities.
An examination of the letters show that
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Mr. Retuerto was dutifully informing the agencies of information he had received, including reports of suspected contamination of the Parán Community's water resources.
And I urge the Tribunal to look again at that evidence. R-0076, R-0081, and R-0165.
Instead of welcoming Mr. Román Retuerto's solution or seek--pursuit for a solution through State supervised dialogue, Invicta attempted silence Mr. Román Retuerto from carrying out his duties as a public official, as is evidenced by a letter that Claimants sent to authorities, which is C-0455.
But at no point did Mr. Román Retuerto state or insinuate that the Parán Community should carry out protests or that Invicta should be shut down or that Claimant should stop its operations. There's not a shred of evidence in the record of this arbitration that would establish that, Members of the Tribunal.
And you will have an opportunity this week to hear from Mr. Román Retuerto. You will see that he is an honest, a humble, and a soft-spoken man who was simply doing his job, and now stands accused by
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Claimant because he dared to report to other State agencies what he was seeing.
Claimant's argument in this respect is nothing short of frivolous.
But let us return to Claimant's mismanagement of community relations, and the State's efforts to clean up Claimant's mess.
After Peruvian law enforcement authorities intervened to avoid a potentially violent confrontation between the parties in September 2018, Claimant had an opportunity to reassess the way it had managed its relationship with the Parán Community and to address the community's grievances.
But Claimant deliberately squandered this opportunity, because it believed that the Parán Community's grievances and demands stood in the way of its own goal of moving quickly towards exploitation of the mine.
So this was in September 2018. Weeks later, on 14 October 2018, approximately 90 members of the Parán Community established the Access Road Protest, which is a civilian blockade roughly 300 meters from
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the entrance to the Invicta mine, the bocamina, on the Lacsanga access road.
The authorities responded immediately and deescalated a tense situation. The Peruvian authorities also brokered an initial agreement between the parties to bring them closer towards dialogue.
Over the months that followed, Perú actively--I'm sorry, activated a panoply of State agencies and resources to proactively and diligently mediate Claimant's conflict with the Parán Community.
Perú's efforts in mediating constructive dialogue yielded the 26 February 2019 Agreement, which is C-0200.
At the time that this agreement was signed, Claimant's CEO publicly celebrated it, and explicitly manifested Claimant's gratitude to the Peruvian authorities for their assistance in brokering the agreement. And this is in R-0071 and R-0132.
Claimant also highlighted the OGGS--
PRESIDENT CROOK: Counsel, on that point, I'm looking at R-0132, and the gravamen of their press release was that they were happy because the blockade
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had been lifted, and of course, it hadn't.
So what do we make of that?
MR. GRANÉ: We will hear, Mr. President, that the blockade was lifted from the Parán sector, and their internal communications that evidence the fact that there's a recognition that the Parán blockade was lifted through the Parán.
PRESIDENT CROOK: So they could go up the Parán road, but not the Lacsanga road.
MR. GRANÉ: Correct.
And, in fact, we'll also see that they couldn't even go up the Lacsanga road if they wanted because of the heavy rainfalls had damaged--
PRESIDENT CROOK: I know. I'm familiar with all of that, okay. Thank you.
MR. GRANÉ: But unfortunately, after this agreement of February 2019 was signed, it became evident that the Claimant and the Parán Community had different interpretations of what they had agreed to, and each accused the other of breaching that agreement.
Now, Claimant seeks to portray the Parán
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Community's interpretation as being preposterous or in bad faith, but it was not. But it has demonstrated the Parán Community's interpretation was reasonable and consistent with the needs and expectations that it had--that the community had expressed to Claimant from the outset, and repeatedly, which is, I want an access road through the Parán territory, and we will get to the topographical survey and what was behind that.
And indeed, let's go there now. The agreement reflected two key demands of the community.
One was that Invicta invest in a mine access road through the Parán territory, which, remember, it was something that the company had promised the Parán Community early on, but later abandoned.
And second, that a topographical survey be carried out, which the community believed would confirm that certain components of the mine were located within its territory.
Now, Claimant, on the other hand, argues that the text of the agreement provides that the Parán Community would lift the blockade of the Lacsanga access road, and perhaps this goes also to your
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question, Mr. President.
While Claimant wishes for this, the plain text of the agreement makes no explicit mention of access through Lacsanga.
In fact, Lacsanga is not mentioned at all in that agreement. Parán is. The Parán access road is mentioned in that agreement.
PRESIDENT CROOK: No, I take that point, counsel, and I don't have the agreement in front of me, but there is also language to the effect that all coercive measures would be ended.
Is that relevant?
MR. GRANÉ: It is relevant, Mr. Chairman, in the sense that Claimant has taken that phrase and has taken the phrase out of context to suggest that the agreement was to lift the blockade both from Parán and from Lacsanga.
Now, the reading of the community was that the lifting of the coercive measures would cover the Parán access road or access to the mine through the Parán access road, but not through Lacsanga, and the reason is evident. At that stage, they were also at
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that moment waiting for the topographical study to be conducted, and Parán felt that it was a compromise that had been reached where they would cede by giving access through the Parán; meanwhile, they would carry out the topographical study or survey on 20 March to determine how that road could be enhanced to provide a more permanent access to the mine.
ARBITRATOR GARIBALDI: Counsel, okay, you are interpreting from the standpoint of the Parán Community.
Now, does Perú have an interpretation of the agreement or not? Because Perú has adopted the interpretation of Parán; is that right?
MR. GRANÉ: No, Mr. Garibaldi, we haven't adopted the interpretation of Parán in the sense that we are--Perú is not a party to an agreement.
What we are saying is that the interpretation of the Parán Community is not preposterous, it's not in bad faith, which is the Claimant's position.
We are saying that there's reasons in that agreement to believe--to believe that the community's
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interpretation of the agreement is reasonable from the perspective of the community, and the history that had led to that agreement.
ARBITRATOR GARIBALDI: All right, let me ask you: The reference in the agreement to the medidas de fuerza, I think that was the term used, what does it refer to?
MR. GRANÉ: From the community's perspective, it's the lifting of access to the mine.
From the community's perspective, that access to the mine has to be provided to through the Parán.
ARBITRATOR GARIBALDI: Well, there was no blockade on the Parán road.
MR. GRANÉ: There was no blockade through the--
ARBITRATOR GARIBALDI: There was no blockade on the Parán road. The only blockade was the blockade on the Lacsanga road.
So the reference to lifting the medidas de fuerza was to what, in your interpretation? How do you see that?
MR. GRANÉ: My interpretation is to
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provide--well, my interpretation.
The interpretation of the community that we argue is reasonable is to grant access to the mine, which is what the company wanted.
ARBITRATOR GARIBALDI: And where is--what--what are the medidas de fuerza to be lifted?
MR. GRANÉ: Access to the mine.
ARBITRATOR GARIBALDI: Only from Parán?
MR. GRANÉ: Yes.
ARBITRATOR GARIBALDI: There was no--
MR. GRANÉ: That was the interpretation of the--
ARBITRATOR GARIBALDI: But there was nothing. I mean, it's not a question of interpretation. It's a question of what are the facts. We cannot deal with interpretations. We have to deal with the facts, you see?
MR. GRANÉ: Mr. Garibaldi, there was no access to the mine at that moment because of the blockade on the Lacsanga road. The Parán Community was saying, you can access the mine and continue the work, provided that you access the mine through the
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Parán, and we're facilitating that. We are allowing you to go through our territory into the mine.
ARBITRATOR GARIBALDI: And you have no opinion about that?
MR. GRANÉ: My--again, I cannot speak in the first person.
The opinion of the Republic of Perú that it's a reasonable interpretation on the part of the community.
ARBITRATOR GARIBALDI: All right. Thanks.
MR. GRANÉ: Now, going back to the issue, Claimant does not dispute the fact that the community did, in fact, lift the blockade. The evidence shows that the company knew what it was agreeing to through the agreement, and that is in C-0353, C-0576, R-0132.
It agreed--the Community did, in fact, lift the blockade through the Parán's territory, and thus complied with the agreement from the interpretation of the community of what it had committed to under that agreement.
Now, the second disagreement between the parties concerned the 26 February 2019 Agreement,
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provision for a topographical survey.
The text of that agreement states that the "Invicta mining company, together with the Rural Community of Parán, will identify and locate the affected land (the rural Community of Parán) through a topographical survey; and such survey will take place on 20 March 2019." (As read.)
Claimant contends in this arbitration that the purpose of that study or that survey was to assess alleged environmental damage to the Parán Community's lands.
The Parán Community, by contrast, argued that the topographical study was meant to analyze whether any mine components were located on land that the community considered to be part of its territory, and for assessing necessary improvements to the access road to the mine.
Now, this was consistent with the community's territorial claims and its desire to have a road through its territory to service the mine.
And that evidence is on C-0344, C--now, I'll just say this quickly so that the transcript reflects it: C-0344, C-0213, C-0264, and C-0121.
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And the drafting history of the relevant provision of the agreement contradicts Claimant's interpretation of environmental assessment being the scope, or what had been agreed in February 2019, and that is reflected in C-0344.
And to be specific, an earlier version did reference OEFA and environmental assessment, but that was not agreed--it did not make it into the final version of the agreement because it was rejected, because that was not what the community meant when it said that it wanted a topographical survey.
And so, it is hardly surprising that the Parán Community accused the Claimant of breaching that agreement when it later flatly refused the company to pay for the topographer.
In any event, Claimant's argument that an access road through Parán was off the table, again, exposes Claimant's contradictory positions and the duplicity in engaging with the Parán Community from the very beginning.
Because as a reminder, Claimant alleges that
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Invicta had remained open and interested in an alternative access road to the site through the Parán territory, but the Parán Community refused to give Claimant such an access road in earlier negotiations.
And this is something that's addressed in Castañeda, Paragraph 19.
But in the Reply, Claimant alleges that it had--had no use for the access road through Parán, earlier saying access road, and now in the Reply they're saying it had no use for access road through Parán, arguing that it was inadequate. But to its shareholders, Claimants celebrated that it had gained partial access to the mine that was possible from Parán, Mr. Garibaldi, thanks to this February 2019 agreement that had just been reached by the parties.
And this is in R-0171.
So the company was hailing that agreement as a way to gain partial access to the mine through Parán, and it was saying that to its shareholders.
But Claimant's conduct following the agreement's execution shows that it only saw such agreement as a means of lifting the blockade, and no
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intention of following through its commitments. And true to form, Claimant said one thing and then did another.
But under such circumstances, it is impossible not to appreciate why the Claimant [sic] felt cheated by Claimant yet again.
And you may disagree about the interpretation that the community had of the agreement, but we have to put ourselves in the shoes of the community, and the discussions that had been had previously about access through Parán and what was signed on that day, which references only lifting of the blockade through the Parán Community.
Now, Mr. Garibaldi, you're a sophisticated lawyer. You have an interpretation of the agreement, but here we're talking about the Parán Community negotiating what they thought was the first step in the resolution of the dispute.
Remember, the 26 February 2018 agreement was the first step in a process of dialogue between the parties. It was called the mesa de diálogo, the negotiating table, that it was formally launched that
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day through the efforts of the State to bring the parties together. And as a sign of good faith, that's where the community says, I will lift access to the mine through Parán. You conduct topographical study.
Again, it is not the permanent resolution of the dispute, but it's the first step to reaching that resolution of the dispute.
PRESIDENT CROOK: Counsel, we are scheduled for a break right about now. I don't know if this is a time that's convenient for you; or if not, can you identify a time in the near future?
MR. GRANÉ: Mr. President, we will take the break whenever the Tribunal tells us that the break is necessary.
PRESIDENT CROOK: Well, we're not that authoritarian, really.
MR. GRANÉ: We're happy to take the break now.
PRESIDENT CROOK: Okay. The schedule decrees a break right now, so let's do a 10-minute break, please.
(Whereupon, there was a recess in the
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proceedings, 3:17 p.m. - 3:27 p.m.)
PRESIDENT CROOK: All right. Let's resume. Thank you all for being so punctual. We're being a bit compulsive about timing here today for very good reasons, we're trying to keep these hearings from extending unduly into the evening, so forgive me if I seem a little bit compulsive, but we have a good reason for it.
Luisa, can you give us a rundown on where we stand on the Respondent's use of time.
SECRETARY: Yes. Respondent has used one hour and three minutes of their time.
PRESIDENT CROOK: Okay. So they have essentially two hours to go.
Okay. Well, we--the Tribunal will promise not to ask lengthy questions.
All right. Back to you.
MR. GRANÉ: Thank you, Mr. President.
Can I have one minute to check how--what that means in terms of our planning?
PRESIDENT CROOK: Of course.
MR. GRANÉ: Because I understand that--Ms.
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Torres, that means that the responses given to the Tribunal's questions are being deducted from our time?
SECRETARY: That is the time already--your time that you've used. The time that you have invested in questions and answers to the Tribunal is on a different clock, so the time I read is your time.
MR. GRANÉ: Thank you. So if I could just have one minute, please.
(Pause in the proceedings.)
MR. GRANÉ: Thank you, Mr. President.
So let's move on to a different stage of the conflict. We've established that there was disagreement about the February 2019 agreement and its implementation, both parties accusing each other of not having complied with that agreement.
And so, this brings us to the 14 May 2019 incident where Claimant took matters into its own hands, this time with fatal consequences.
Claimant does not dispute that it hired this obscure and inexperienced private security company, War Dogs, whose armed intervention produced a violent confrontation with the community on 14th May 2019, and
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that intervention tragically resulted in one fatality.
Now, Claimant desperately tries to downplay the actions of the War Dogs, and the disastrous impact that it had on the dispute.
Now, Claimant asserts that the War Dogs peacefully entered the site. Now, that account is false, and it's directly contradicted by the contemporaneous police reports that indicate that five members of the Parán Community were forcibly removed by the War Dogs and that--
PRESIDENT CROOK: Counsel, just to be clear, that document did not reflect firsthand observation by the police, but rather what they were told by the Parán Community; is that correct?
MR. GRANÉ: I believe that's correct, because the police were not present at the moment that--
PRESIDENT CROOK: All right. So they were reporting what they were told in that document?
MR. GRANÉ: Yes, sir.
This is R-0262 in the record.
And Claimant's own internal records further
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confirm that it had actively sought out a "powerful" and intimidating security company, well beyond any old "regular security company." This is R-0259. That is precisely what it got when it hired the War Dogs.
Now, Claimant knows this, but is now embarrassed to admit it. It even refuses to call that outfit by its name, War Dogs, and instead, it hides behind a bland acronym, WDS. I'm sorry.
But they were War Dogs. They wanted a powerful security company. That's what they got.
They entered the site guns blazing on 14 May 2019.
PRESIDENT CROOK: Excuse me. Your evidence for the proposition they entered the site guns blazing is what?
MR. GRANÉ: The police report saying that the War Dogs fired shots when they went into the property to remove those protesters.
PRESIDENT CROOK: Okay. Well, you will give me the cite to that because I don't remember having seen that exhibit.
MR. GRANÉ: Yes. We'll give you the cite to
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the exhibit where, again, it's indicated that the War Dogs fired first, not--
PRESIDENT CROOK: Again, that's reflecting what they were told by Parán?
MR. GRANÉ: Yes, sir.
PRESIDENT CROOK: Okay.
ARBITRATOR GRIFFITH: So you accept the police were not there?
MR. GRANÉ: The police were not there. The police were supposed to be there in coordination with the War Dogs. This is something that Mr. Bravo said in his witness statement. The police were going to accompany the security company going to the site. But the security company did not wait for the police. It went ahead without the police, resulting in that event.
Now, you heard Claimant's counsel today earlier say that the police weren't there, but it's not because the police were not prepared to go, it's because the War Dogs did not wait for the police to accompany them up to the site.
There was a call that was placed by the War
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Dogs security to Mr. Bravo on that day, and Mr. Bravo asked, is the police with you? And the security company said, no. They said that they would follow, but we went ahead without them.
ARBITRATOR GRIFFITH: Counsel, it would seem from that we know that the police weren't there, but wouldn't it be the only direct evidence that should come to us would be someone who was there?
It's not much help saying that the police say that they were told no one was there. That doesn't establish it, does it? It's called hearsay in common law.
MR. GRANÉ: Correct. It's the same hearsay that Claimant uses in respect of Mr. Retuerto, when they say that someone saw him being there in a meeting.
ARBITRATOR GRIFFITH: And that must be right. It's not like a negative and a negative makes a positive. It's two negatives, and there's nothing there.
MR. GRANÉ: So Claimant alleges that the entry of the War Dogs to the mine on 14 May had been
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coordinated with the PNP. Again, this is what we are discussing.
But again, we know that the War Dogs entered the mine unilaterally without the PNP escort, and without allowing the police to execute the operational plan that was prepared for that day. Those rash actions eroded that already frailed relationship with the community.
Now, the evidence that is described in detail in Perú's pleadings shows that from the start, the conflict with the Parán Community, Claimant was never seriously about pursuing dialogue or a long-term agreement with the community because those efforts required both willingness and time, but Claimant had neither, given that it cared only about meeting the ambitious PPF Agreement repayment schedule, which we'll come to.
The only real quick fix solution that Claimant ever seriously considered was to lobby the Peruvian authorities to use force, no matter the cost or the risk to the human life, public safety, or even and importantly, the long-term viability of a project
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that was openly rejected by the community that was in closest proximity to the mine.
So let's turn now to that PPF Agreement that was putting that time pressure on Claimant that led it to simply seek that quick fix.
It's the PPF Agreement that required Claimant to begin commercial exploitation before December 2018, and thereafter, Claimant owed PLI Huaura the following repayments that you see. But Claimant did not satisfy these commitments on the PPF Agreement.
On 2 July 2019, PLI accelerated Claimant's PPF Agreement obligations citing 14 instances where Claimant has defaulted. Due to such defaults, in August 2019, PLI initiated foreclosure proceedings to seize Claimant's Invicta shares which would be used to satisfy Claimant's unpaid debt. Again, PLI seized those shares on 26 August 2019.
ARBITRATOR GARIBALDI: Please remind us, PLI is a mining company; right?
MR. GRANÉ: I believe that PLI is only a special vehicle for investing in the Invicta mine, PLI
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Huaura.
ARBITRATOR GARIBALDI: But it is in the mining business or in the banking business?
MR. GRANÉ: I will come back to that point. My understanding, Mr. Garibaldi, subject to confirmation, is that PLI was not in the mining business, it was not an active mining company, it's a special investment vehicle for the purpose of purchasing.
And then Pandion owned the PLI, and then Pandion sold that.
ARBITRATOR GARIBALDI: To? To someone in the mining business or someone in the banking business?
MR. GRANÉ: I will come back to that question, Mr. Garibaldi.
ARBITRATOR GARIBALDI: Thank you.
MR. GRANÉ: The relationship--this is, again, reflected in the pleadings. Lonely Mountain, Pandion, PLI, that was the chain that reached Invicta, but I'll come back to the question about the nature of Pandion and Lonely Mountain.
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So the special purpose vehicle of Pandion created to hold Pandion's interests is PLI, and Lonely Mountain is a Peruvian mining company.
Now, you--so we know that Claimant blames Perú for its loss, and the reality is that even in the absence of the alleged measures or omissions, Claimant would not have reached commercial exploitation of the mine in time to meet its contractual obligations to PLI, and therefore, would have lost its shares in any event.
Now, this morning, you heard Claimant tell you that Lupaka had the permits, that was what they said, they had the permits, but that is not true.
Contrary to what you heard, in its own submissions in this arbitration, Claimant conceded, as it should, that it required additional permits to commercially exploit the mine.
Instead of saying that it had all the permits, Claimant argued that the missing permits could have been obtained in a matter of weeks, but Claimant is incorrect.
July 2020 is the earliest date by which
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Claimant could have obtained the approvals needed to begin full commercial exploitation of the mine.
According to the legal mining expert, Ms. Miyanou Dufour, Claimant needed to complete at least four additional regulatory steps before it could legally exploit the mine:
Claimant needed to obtain authorization to purchase and store hydrocarbons at the Invicta mine.
It needed an environmental certification of an alternative water management system.
It needed a MINEM authorization to begin commercial exploitation.
And it needed licenses to use water from sources not contemplated in Claimant's 2009 EIA, Environmental Impact Assessment.
Now, Ms. Dufour is the only independent legal mining expert in this arbitration, and she will address each of these issues or requirements in more detail during her presentation.
Now, Claimant has incorrectly suggested in its skeleton, and again today, that Perú's assertions based on Ms. Dufour's conclusion represents new
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arguments, but Claimant first alleged that this mine was on the, and I quote, "cusp of the exploitation stage" at Paragraph 5 of the Memorial.
Now, Perú responded in Subsection II.F.1 of the Counter-Memorial citing evidence that the mine could not have begun exploitation before Claimant's PPF Agreement obligations began.
Claimant then reintroduced a new mining expert report in the Reply with Micon, which expounded Claimant's position on the Invicta mine's permitting status.
Now, I can, Mr. Chairman, respond to the question about some of the permits that addressed and the sequence. I'm concerned about the time. I'm happy to go through that table now, and I would seek the Tribunal's indulgence if this can be treated part of a response to the question that you asked earlier.
PRESIDENT CROOK: I think our own time has about elapsed, so perhaps you should just drive on.
MR. GRANÉ: Okay. Can we come back to this point because it seems, Mr. Chairman, based on the question, that there is a concern on the part of the
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Tribunal? I'll bow to the basis for us saying that we are responding to Claimant's arguments and submissions in the Reply with Ms. Dufour's expert report.
If you're satisfied that we have done so, we can move on. If not...
PRESIDENT CROOK: I can't tell you we're satisfied. We haven't really had the opportunity to deliberate on this question, but if we feel we need to hear more, we'll get back to you.
MR. GRANÉ: Thank you very much, Mr. President.
Therefore, I will not address the table, but I will just make an observation based on what we heard today, and the request that Claimant has made.
Now, again, Perú engaged Ms. Dufour to evaluate the conclusions of that new evidence submitted by the Claimant in the Reply.
Ms. Dufour also addressed the issue of social license, as you know, as part of her report based on her ample experience in the mining sector in representation of mining companies. And surely, Claimant cannot argue that a social license is a new
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argument. It was one of the central arguments raised by Perú, including on the basis of other expert evidence.
But yet, Claimant has doubled down in the Reply on its argument that the--doubled down on its argument in the Counter-Memorial saying that the social license is a hollow defense, were the words that were used today by the Claimant's counsel.
But yet, Claimant is now asking you for the first time this morning to make an interim ruling to disregard Ms. Dufour's expert testimony. And Perú has objected to that request. It's baseless. There's no procedural rule, you know, why the expert evidence submitted by Ms. Dufour should be disregarded.
But second, Claimant's request is improper and untimely. Claimant has had Ms. Dufour's report since 25 January 2023; yet, it has chosen to ambush Perú and this Tribunal by making that request today.
And Claimant's counsel unwittingly revealed why they have made that request.
It stated that they would consider--or they would decline to cross-examine Ms. Dufour if the
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Tribunal grants Claimant's request. Claimant doesn't want you to hear from Ms. Dufour, and that's why it's asking you to disregard that expert evidence, because it knows that it's fatal to its case on causation.
But as I stated, Perú firmly objects to Claimant's request.
In any event, if the Tribunal is prepared to even entertain Claimant's extemporaneous request, Perú requests that the Micon report, which was introduced in the Reply, be disregarded.
PRESIDENT CROOK: Counsel, perhaps this isn't really the time to argue this issue. I mean, our concern is just whether what's being done here is consistent with Procedural Order Number 1, 14-4, where we say, in the second round of submissions, the parties will limit themselves to responding to facts and legal arguments made in the first round, and whether we're falling within that ambit, but I don't think it's really a good investment of anybody's time for us to argue the issue now on the basis of the position we have got now.
MR. GRANÉ: Understood. Thank you,
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Mr. Chairman, for that guidance.
If the Tribunal decides we can, then I'll make submissions at that point in the interest of your order, but we will move on pursuant to your instructions, Mr. President.
So in addition to the above permits, Claimant needed to secure a reliable ore processing plant capacity to meet its repayment obligations, but as of October 2018, Claimant did not have such capacity, either at offsite plants or at the plant operated by Claimant.
Now, Claimant witnesses, including Mr. Castañeda, acknowledge that the three plants at which Claimant conducted preproduction testing provided it with, and I quote, "unsatisfactory results and experiences." This is Castañeda first witness statement, Paragraph 89. Now, the processing plants lacked the capacity to meet Claimant's needs, were unreliable, and/or lacked the permit needed to lawfully process ore.
I'm coming to the end of my presentation, Mr. President, my portion.
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Now, in October 2018, Will Ansley, Claimant's CEO, summarized the impact of these issues to Claimant's co-founder, Gordon Ellis, present in the room, saying--or declaring that, and I quote, "As a result of milling being significantly behind the mine development, I have suspended all development activities and sent the contractors away."
This is Exhibit MI-0007.
ARBITRATOR GRIFFITH: Can you remind us of the date of that?
MR. GRANÉ: I will in a minute, Mr. Griffith.
PRESIDENT CROOK: You say October 2018.
MR. GRANÉ: 19 October 2018, Mr. Griffith.
So these issues were not, as Claimant now argues, and I quote, "easy to remedy," end of quote.
Now, Claimant also asserts that its acquisition of the Mallay Plant would have enabled it to meet its commitments to PLI. That, too, is incorrect.
And Ms. Dufour will explain in her presentation that even if Claimant had executed the
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draft agreement with PLI and closed on the Mallay plant transaction with Buenaventura, which it did not, significant time was needed before ore processing could begin at such a plant.
And so, Ms. Dufour demonstrates that Claimant could not have begun such processing before July 2020, which would have been way past the commercial exploitation deadline of December 2018 under the PPF Agreement and even Claimant's most optimistic prediction of its PPF Agreement delivery scheduled of January 2020.
I will, in the interest of time, move forward and skip certain parts.
Mr. President, with your indulgence, I will now cede the floor to Mr. Tim Smyth, who will recall Perú's jurisdictional objections and then issues on attribution.
I thank you for your patience, and unfortunately, you will hear again from me later on in this presentation. Thank you.
PRESIDENT CROOK: Thank you.
Mr. Smyth.
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MR. SMYTH: Thank you, Mr. President. Good afternoon, Mr. President, and Members of the Tribunal.
My name is Tim Smyth, and I will be addressing Perú's jurisdictional objections in this case, as well as the attribution issues.
Now, Perú has demonstrated in its pleadings that the Tribunal lacks jurisdiction to hear Claimant's claims for two reasons.
The first reason is that Claimant disposed of its investment along with its right to bring a treaty claim prior to instituting proceedings. It did so when it transferred its shares in Invicta to PLI Huaura on 26th of August 2019. Consequently, the Tribunal lacks jurisdiction ratione personae.
The second reason is that Claimant has failed to provide a waiver on behalf of Invicta, the enterprise to whom its claims relate, as was required under the Treaty. As a result, the Tribunal lacks jurisdiction ratione voluntatis.
Starting with the first objection, I'll begin by summarizing the applicable legal principles.
The relevant jurisprudence, including that
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of the International Court of Justice, instructs that the critical date for assessing the Tribunal's jurisdiction is when proceedings were instituted.
This is confirmed, for example, in the Arrest Warrant case in the extract that appears on the slide, and that's RLA-159, Paragraph 26.
Second, there is a general rule that an investor must hold a qualifying investment at the time proceedings are instituted; otherwise, the Tribunal will lack jurisdiction. This was confirmed by the Tribunal in the case of Aven v. Costa Rica, a case which is directly on point for two reasons. First, the claimant in that case had disposed of certain investments prior to instituting proceedings. And second, the treaty in that case, the DR-CAFTA, has almost identical definitions of investor and investment to the Treaty in this case.
PRESIDENT CROOK: Counsel, let me--I know I promised not to ask questions. I read Aven, and I was struck that the language they used to describe the circumstances that might justify the exception was a little broader than has been used in some settings
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here.
It was not confined to actions by the State.
It suggested that actions by third parties might be sufficient. And they quoted a celebrated case, which doesn't seem to be of record here, that would seem to support that proposition.
I wonder if you have a thought on that.
MR. SMYTH: Sure, Mr. President.
The Aven Tribunal, indeed, did refer to the Mondev case, which I think is the one that you're referring to. And the Tribunal distinguished that case on the basis that in the Aven case, there was no direct causation between the actions of the State and the loss of--and the disposal of the claimant's investments.
Whereas in that case, while it's correct that they referred to third parties in one of the paragraphs, if you look more closely, the basis of the distinction is this issue of direct causation between State actions and the disposal of the investment.
And actually, the Tribunal notes that in the Mondev case, that the disposal of the investment
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resulted from a foreclosure on the part of the City of Boston, which, of course, would be a local municipality of State agency.
PRESIDENT CROOK: Thank you.
MR. SMYTH: So the Aven Tribunal examined the relevant case law and concluded that there was "a general rule that an investor must own the investment at the date of the Notice of Arbitration to benefit from treaty protection." And that's RLA-17, Paragraph 298.
And the justification for that general rule is quite simple.
PRESIDENT CROOK: Counsel, I wonder if it would be acceptable to the parties to put Mondev into the record. Would that be agreeable?
MR. SMYTH: Sure, yeah.
PRESIDENT CROOK: We don't need to have yet another drive, but in due course, if you could put that in, please.
MR. SMYTH: Yeah. Of course, Mr. President. I'm sure that won't be a problem.
But standing back for a second to focus on
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the justification for this general rule that was expressed by the Aven Tribunal, it's really that it avoids the State facing a proliferation of claims from successive owners of an investment.
And now, moving on, the general rule elucidated by the Aven Tribunal is subject to only two exceptions, which also emerge from the case law.
The first is where an investor retains the right to bring a claim against the State in the contract through which it disposes of the investment.
This was the case, for example, in the cases of National Grid v. Argentina, and Gemplus v. Mexico, which are in the record as RLA-12 and RLA-18.
The second exception was directly referenced for the Aven Tribunal, and this is what we were referring to in our discussion just now, which is where special circumstances are present. And as I said, if you take a close reading of the Aven Tribunal's ruling, it's clear that the Tribunal was talking about direct causation between the State's actions and the loss of the investment. And I'd refer the Tribunal to RLA-17, Paragraphs 299 and 301.
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When those principles are applied to the facts of this case, the conclusion that must be drawn is that this Tribunal lacks jurisdiction.
There is no dispute that the proceedings were instituted on the 30th of October 2020, when ICSID registered Claimant's request for arbitration.
There is also no dispute that the disposal of Claimant's shares in Invicta was prior to that, on 26th of August 2019. And so, the general rule in Aven applies.
The facts likewise show that neither of the two exceptions to the general rule apply.
So turning to the first exception, it is an undisputed fact that Claimant transferred its shares to PLI Huaura under the Share Allocation Agreement, and that's in the record at R-0193. And there is no provision in that agreement retaining Claimant's right to bring a claim in relation to the Invicta project.
Far from it, the Share Allocation Agreement actually disposes of those same rights.
Clause 2.2 of that agreement provided that Andean American, the subsidiary through which Claimant
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held its shares in Invicta, transferred not only its shares in Invicta, but also a broad, unlimited suite of matters and rights comprising "all matters of fact or of law pertaining to the encumbered shares, [i.e., the shares in Invicta, without reservation or limitation, and these included, but were not limited to, all economic, ownership and information rights related to the incumbent shares without limitation of any nature." (As read.)
And that's at Clause 2.2 of Exhibit R-0193.
The rights--sorry--
ARBITRATOR GARIBALDI: Excuse me, is that an outright transfer or a pledge?
MR. SMYTH: That's in the Share Allocation Agreement, but there is similar language in the pledge agreement which shows that --the wording isn't exactly the same, but a similar suite of rights was pledged to PLI Huaura under the pledge agreement.
ARBITRATOR GARIBALDI: Can you give me the reference in the record to both agreements?
MR. SMYTH: Share Allocation Agreement is R-0193.
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And if you indulge me with one minute, I should be able to find the reference for the other.
PRESIDENT CROOK: Mr. Smyth, because of the time, perhaps you could provide it after the--
MR. SMYTH: Understood. Apologies for the slow retrieval of the reference.
PRESIDENT CROOK: No, that's fine. Get it to us later.
MR. SMYTH: One of my colleagues has piped up and told me it's R-0097.
ARBITRATOR GRIFFITH: This is Tribunal time, but I'm just trying to follow your argument about the exceptions. Is it basically the case that if the Claimant makes out its case on causation, then at the same time, it would have come within the second exception; and if it's unsuccessful on that, it would seem it might fall on the second exception, as well.
So it's a chicken and egg somewhat, but if the Claimant is right on its case on its merits, it would seem to overcome the exceptions. If it fails on the merits, it will fail on the exception, as well.
MR. SMYTH: Yes. I understand the question,
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sir. There is--clearly, there is some overlap between the jurisdiction and merits issues when it comes to this particular type of--
ARBITRATOR GRIFFITH: I'm just trying to sort out the logical order. If there's two hurdles, and if it falls on the first, on jurisdiction, you don't have to go to the second. Perhaps we can't see it clearing the first hurdle until we answer the second one.
MR. SMYTH: As I say, there's certainly overlap, but it's not--that's sort of--if you play out the consequences of a finding of the Tribunal, that there was no deprivation or no direct causation, that would lead to a lack of jurisdiction, of course.
And then the same is true, obviously, that the Tribunal could dismiss the expropriation claims on the same basis because that's an expropriation--that's an element of the expropriation.
ARBITRATOR GRIFFITH: Basically, you either clear both hurdles or you clear neither.
MR. SMYTH: It's sort of--yeah, it's sort of an all-or-nothing situation. So if the Tribunal finds
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there's no direct causation, it lacks jurisdiction, it would also lead to the dismissal of the expropriation claims.
The claims that do not require direct causation, which would probably--potentially include FET or FPS, would perhaps fall into a different category, but I will proceed unless you have further questions on that point.
So turning to the second exception, which I think we've already discussed to some extent, so perhaps we can go through it quite quickly.
Perú has demonstrated that there is no direct causation between actions of Perú and the loss of the investment. Instead, such loss resulted from Claimant's own actions, both in failing to achieve amicable community relations, and in entering into overly ambitious repayment terms under the PPF Agreement that it could not meet, and would not have met even in the absence of local opposition from the Parán Community.
Claimant has not substantively challenged the existence of the above general rule or the two
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exceptions that I have mentioned. Nor has Claimant cited any case law, examined a Share Allocation Agreement, or indeed the pledge agreements, or refuted Perú's interpretation of those agreements.
Instead, Claimant focuses on the definition of an investor under Treaty Article 847, which includes a "national or an enterprise of Canada that seeks to make, is making or has made an investment."
And Claimant argues that the words "has made" in such definition demonstrates that the definition encompasses an investor who no longer holds their investment.
But that Treaty language actually supports Perú's position, not Claimant's.
Now, I don't want to give the Tribunal too much of a grammar lesson here, but the text uses the present perfect "has made." It thus refers to an investment that was made in the past, but has continued through to the present time. And this is confirmed by Sidney Greenbaum's seminal work on English grammar, which notes that "the state present perfect refers to a state that began before the
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present time of speaking or writing and continues until that time, perhaps including it." And that's RLA-170, page 270.
ARBITRATOR GRIFFITH: Counsel, does that include the past pluperfect and future imperfect?
MR. SMYTH: Pluperfect is "had," right? So that's--the past perfect would be "I had," "had an investment." Whereas this is sort of, "I have an investment" or "I have made an investment." "Had made" would be the past perfect.
ARBITRATOR GARIBALDI: One other thing, you know, I learned English as a second language, but one of the things I learned, and I learned from good teachers, is that the--is that the present perfect can refer also to actions that happened in the past, but that have an importance in the present.
So is that something that Greenbaum refers to and is not quoted here, or not.
MR. SMYTH: I mean, I'd have to look in detail at the page from the grammar in question, but as I recall, the examples that are used by Greenbaum focus on an action that is started in the past and
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continues through to the present.
So to take an example, if I say, I have bought a house in Washington, DC, it means I still hold--I still own that house, right?
ARBITRATOR GARIBALDI: But I tell you--
MR. SMYTH: Whereas, if I say, I bought--if I just use the simple past, I bought a house in Washington, DC--
ARBITRATOR GARIBALDI: I know, but if I take--that's fine. That's correct usage, but if I tell you I have studied Latin, it doesn't mean that I am still studying Latin. It means that I have studied it in the past, and it is relevant for the--to the present.
MR. SMYTH: It has to have some connection through to the present, so you've studied Latin and you still retain that knowledge from your studies, I think is how I would look at it.
But also, I think the primary use of the present perfect would be an action that starts in the past, then continues through to the present. And if the parties--if I could just add one thing--if the
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parties had wanted to make it clear that it included a completed action, they could have just used the simple past. They could have just said an investor who made an investment, they wouldn't have used the present perfect. That would have been their purpose.
ARBITRATOR GARIBALDI: I think that we should not debate this anymore. Okay.
MR. SMYTH: Understood. Thank you, Mr. Garibaldi.
So I think in the interest of time, I will conclude on that first objection and move to the second, just very briefly, which is based on Article 823.1(e) of the Treaty, which requires that where a claim is brought with respect to an interest in an enterprise that is owned by a Claimant, that a waiver must be provided, not just on behalf of the Claimants, but also on behalf of that enterprise, and there's no dispute that Claimant failed to provide that waiver in this case, and the Claimant instead relies on an exception under Article 823.5, which provides that there is no waiver requirement where the State has deprived the investor of the relevant enterprise.
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And so, with this exception, the reliance on this exception fails for quite similar reasons to those discussed in the first jurisdictional objection; namely, Perú has not deprived Claimant of its investment; rather, Claimant lost its investment as a result of its own failings and contractual breach.
Accordingly, due to Claimant's failure to provide a waiver from Invicta, the Tribunal lacks jurisdiction to hear Claimant's claims.
And so, unless the Tribunal has any further questions, I will now move to the attribution issues.
Yes, and if I could just refer the Tribunal, in the response to Mr. Griffith's question, in the Rejoinder of Paragraph 474, we address the issue of the overlapping jurisdiction and merits issues, and the consequences of that.
ARBITRATOR GRIFFITH: Thank you.
MR. SMYTH: So, turning to the attribution issues, Claimant has argued in this arbitration that the actions of the Parán Community are attributable to Perú under customary international law. Before moving to the specifics of Claimant's arguments, there are
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two important threshold considerations that bear emphasis at the outset.
The first is the outlandish and unprecedented nature of the proposition that Claimant advances: That the actions of a rural or indigenous community should be attributable to a State under public international law.
Claimant had two opportunities, in its Memorial and its Reply, to provide precedent to support its hypothesis on attribution, but it did not do so. The reason for this is simple, there is no such precedent. In fact, the only comparable findings of investment Tribunals indicate that rural and indigenous communities cannot be assimilated with the State.
In Bear Creek v. Perú, for example, a case under the same treaty as the present one and also involving the actions of rural communities, the Tribunal distinguished between the actions of such communities and the State.
It noted that, "The indigenous communities, irrespective whether they were in favor of or against
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the project, are not Respondent party in this arbitration. Rather, the State of Perú and its government are Respondent, and it is their conduct which the Tribunal has to decide upon."
And that is at CLA-86, Paragraph 666.
Perú submits that exactly the same conclusions should apply in this case in relation to that issue.
The second overarching point is that were Claimant's argument to be upheld, this would have far-reaching consequences for the international community. States all over the world will be deemed responsible and potentially liable under international law for any actions of rural communities deemed to have damaged foreign investors. Not only that, but as we shall see, Claimant's arguments are based on the very same legal instruments that Perú has put into effect in order to respect the rights, autonomy and traditions of rural communities. If a state were to be held liable as a result of such instruments, this would provide a powerful incentive to cease recognizing rural and indigenous rights.
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So moving now to the specific arguments, Claimant bases its attribution theory on ILC Articles 4, 5 and 7, but none of the principles of customary international law enshrined in those articles supports Claimant's contention. I'll address each in turn.
Claimant argued, for the first time in its Reply, that the Parán Community's actions are attributable to Perú under ILC Article 4. This Article embodies what is often referred to as the structural test for attribution. We've shown the wording this article on the slide. For the sake of brevity, I won't read it, but this article connotes two requirements: First, that the entity is an organ; and second, as the commentaries to the ILC Articles confirm, that the actions in question were carried out in an official capacity.
And that's at CLA-18, page 41, Paragraph 7.
Neither requirement is met in respect of the Parán Community.
Regarding the first requirement, Claimant latches on to the final part of Subparagraph 1 of Article 4 to argue that rural communities are
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territorial units of the Peruvian State. But that argument is simply wrong.
The concept of a territorial unit under international law refers to the political subdivisions of the State; in other words, the constituent, provincial, regional or geographical administrations of which a State is comprised.
Indeed, all of the cases cited in the ILC commentaries in relation to territorial units which we have listed on the slide relate to such decentralized administrations. That's at CLA-18, page 41, Paragraph 9.
Rural communities in Perú, which are communal organizations with separate legal personality from the State, do not fall within this category.
And Peruvian law does not support Claimant's proposition. This is important. As confirmed by the Tribunal in Jan de Nul v. Egypt, "To determine whether an entity is a State organ, one must first look to domestic law." That's at RLA-25, Paragraph 160.
Rural communities under Peruvian law are not included within the structure of the State under
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Title IV of the Constitution. And that's important given that Article 4 is the structural test for attribution. Nor are they included under Chapter 14 of the Constitution which relates to decentralized regions and municipalities. And this really puts pain to Claimant's argument which it repeated in the presentation this morning, that the Parán Community is a municipality. Rural communities are simply not included in any of those provisions, which you can find at Exhibit C-23, Articles 189 to 199.
Even if Claimant had established that the Parán Community was a territorial unit, and therefore, an organ of Perú, it would still have failed to establish that the actions of the community were carried out in an official capacity.
Claimant has thus failed to meet the second requirement of ILC Article 4. In fact, Claimant has not even tried to demonstrate that the Parán Community as a whole acted in an official capacity; in any event, the facts and evidence demonstrate otherwise. And notably, at the time, Claimant never believed that the Parán Community acted in an official capacity. I
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will come back to this point when addressing ILC Article 7.
Now, importantly, Claimant has not cited a single legal authority that even remotely supports its contention that rural communities in Perú should be treated as an organ of the Peruvian State. The fact is that not a single legal source or lawyer would seriously argue that rural communities in Perú are organs of the State.
This explains why the Claimant did not submit an independent expert opinion in support of its attribution theory.
It is also telling that Claimant decided not to call Mr. Vela, the independent legal expert offered by Perú, who, in his expert reports, addressed the standing of rural communities in Perú.
Unfortunately, I didn't have time to create an empty chair slide for Mr. Vela, but we can imagine it.
So I move now to ILC Article 5.
There are two requirements under this principle of attribution: First, the relevant person
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or entity must be "empowered by the law of that State to exercise elements of the governmental authority," and second, as with Article 4, the person or entity must be "acting in that capacity in the particular instance."
Regarding the first requirement, the ILC commentaries emphasize that the analysis "depends on the particular society, its history and tradition," which in this case, would include the historical existence of indigenous and rural communities since pre-colonial times in Perú.
The commentaries also set out the following four non-exhaustive factors to consider: The content of the relevant powers, the manner of their conferral, the purpose of the conferral, and the level of accountability the person or entity has to the State. You can find this at CLA-18, page 43, Paragraph 6.
Now, in Claimant's presentation earlier, you heard a lot about the Rondas Campesinas on whom Claimant's ILC Article 5 arguments focus almost exclusively. Contrary to Claimant's arguments, the Rondas Campesinas are not empowered with governmental
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authority.
Under Peruvian law, rural communities have the right to establish Rondas Campesinas to exercise those communities' traditional rights of self-defense over their territory and property, and also cooperate with the authorities of the Peruvian Government, where necessary. And this much is clear from the law on the Rondas Campesinas, which is at Exhibit R-0116, Article 1.
Applying the four factors I just mentioned to the Rondas Campesinas, all of these weigh against attribution in the instant case.
First, regarding the content of the relevant powers, the Claimant makes much of the fact that the Rondas Campesinas exercise certain conciliation functions pursuant to Article 149 of the Constitution and related laws. And you can find that article at Exhibit C-23, Article 149.
However, such functions are not governmental in nature. Article 1 of the Rural Patrols law expressly states that Rondas Campesinas carry out "extrajudicial conciliation functions." That's
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Exhibit R-0116, Article 1.
The Rondas only have power to apply customary law of rural communities, not Peruvian law. That's at Exhibit C-23, Article 149.
The right to establish Rondas Campesinas does not reflect an extension of State power. As the Supreme Court has confirmed in its decision of 3 November 2009, which Claimant also cited this morning, they "constitute a form of communal authority in the places or rural areas of the country where they exist." That's at Exhibit C-599, page 4, Paragraph 7.
That's communal authority, not State authority.
Regarding the second factor, the manner of conferral, such powers are not conferred as such; rather, they constitute a recognition of the inherent and historical rights and prerogatives of rural communities. This was, again, confirmed by the Supreme Court in its decision. That's at Exhibit 599, page 5, Paragraph 7.
Similarly, in relation to the third factor, the purpose of the relevant powers is not to further
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the exercise or extend the reach of the State, but to recognize the inherent rights of rural communities. This is consistent with various international law instruments regarding the recognition of indigenous rights such as the ILO Convention 169, to which Perú is a party.
Article 2.2(b) of that Convention provides that States must take "measures for...promoting the full realization of the social, economic and cultural rights of these peoples with respect for their social and cultural identity, their customs and traditions, and their institutions." That's at RLA-28, Article 2.2(b).
Now, Claimant mentioned in passing during its presentation this morning a MINEM determination that the Parán Community did not meet the requirements for qualifying as an indigenous people for the purposes of the prior consultation requirements under Law 29785. That was the law that looked to implement that same prior consultation requirement under ILO Convention 169.
Really, this is a red herring, in our
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submission. It doesn't change the fact that rural communities can be considered to be indigenous people under Peruvian law, and the fact that, really, when you take a step back, their legal status and the protections afforded to them and their treatment under Peruvian law is analogous to indigenous communities, regardless of the, you know, precise modalities that were cited in the document cited by Claimants this morning.
So the international conventions that Perú has cited in its submissions continue to be relevant for the Tribunal's consideration.
With respect to the last factor, namely, the level of accountability, pursuant to Article 89 of the Peruvian Constitution, the rural communities are autonomous in their organization. In fact, much like indigenous communities, as they're defined under international law.
In fact, as Professor Meini confirms in his unchallenged testimony, empty chair slide again, were Perú to interfere with rural communities' internal affairs, the State could face liability. That's at
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the Meini report at Paragraph 50.
Oddly, Claimant seems to dismiss the relevance of this evidence, despite accepting the fact that accountability is indeed one of the factors for consideration under ILC Article 5.
Now, even if the Rondas Campesinas were imbued with governmental authority, which is not the case, Claimant has not satisfied the second limb of the test, namely, that the relevant acts were carried out in exercise of governmental authority. The Claimant has not satisfied that criteria.
Claimant, again, relies heavily on the conciliatory role or jurisdictional function of the Rondas Campesinas under Article 149 of the Constitution; however, a closer look at that rule--at the role under that article is strictly limited by subject matter and territorial scope.
Article 149 provides that, "The authorities of the Rural and Native Communities, with the support of the [Rural Patrols]," that's the Rondas Campesinas, "may exercise jurisdictional functions within their territorial scope in accordance with customary law,
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provided that they do not violate the fundamental rights of the individual." That's C-23, Article 149.
So this provision implies at least three limitations on the powers of Rondas Campesinas. The relevant functions must be exercised (1) in the rural community's territory; (2) in accordance with customary law; and (3) in conformity with fundamental rights.
Supreme Decree Number 25-2003 then imposes a further limit on the disputes in relation to which Rondas Campesinas may act as conciliators.
Those disputes are limited to only disputes related to the possession, use of rights of communal property, and the use of different communal resources. That's at R-103, Article 13.
The actions of which Claimant complains, the forceable entry to the mine site, detention of individuals, destruction of property and obstruction of an access road, fall well outside the scope of those limits.
The Claimant itself stresses that such actions took place outside the community territory,
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including in its presentation this morning where they said, and I quote, "Parán were on Lacsanga's land continuously."
Such actions did not concern use of rights or communal property, and would have violated any one of a number of several fundamental rights, including the right to physical integrity, property, liberty and security of the person. Again, that's from the Constitution, Exhibit C-23, Article 2.
The actions of the Parán Community ultimately were the actions of private individuals acting in a private capacity. The principle of attribution under ILC Article 5 is, therefore, simply not met.
Lastly, the Claimant belatedly relied on ILC Article 7 in its Reply, which provides that: "The conduct of an organ of a State or of a personal entity empowered to exercise elements of the governmental authority shall be considered an act of the State under international law if the organ, person, or entity acts in that capacity, even if it exceeds its authority or contravenes instructions."
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Confusingly, Claimant seemed to allege in its skeleton at Paragraph 77, and indeed in its presentation this morning, that this Article provides a separate ground of attribution to ILC Articles 4 and 5. That is not the case.
The wording of the article plainly references ILC Articles 4 and 5, and it still requires that the relevant person or entity act in an official capacity. However, the article simply clarifies that those acts were not per se fall outside such capacity just because they are ultra vires.
The key issue here that Claimant still fails to grasp is that, for Article 7 to apply, the relevant acts must be carried out in exercise of ostensible authority; that is, under cloak of authority. As Judge Crawford explains, "A State is not responsible for every act done by an individual in its service, but only when the individual purports to act on behalf of the State." And that's at RLA-24, page 137.
There is, therefore, a distinction between, on the one hand, official but ultra vires acts, which are attributable, and on the other hand, acts that are
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not carried out in exercise of any ostensible authority, which are not attributable.
And there's a consistent line of jurisprudence to this effect, which was cited by Perú in its pleadings. And I would respectfully refer the Tribunal to the discussion of such jurisprudence at Paragraphs 461 to 466 of Perú's Counter-Memorial, and the cases of Mallen, Caire, and Yeager addressed therein, which are at RLA-31, 32, and 33.
And just briefly on an issue that Claimant referred to this morning in its presentation, which was the use of weapons by the Parán Community that were allegedly provided by the Peruvian State, in the context of combatting terrorism, just one point that I'll highlight in relation to this for the purpose of attribution is that there's never been a suggestion at any point that those weapons were used for the purpose for which they were, they were provided, which ultimately was historical, around 30 years ago, and is effectively obsolete.
So even if you got to the point where you considered that the provision of those weapons is some
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sort of conferral of State authority, it has no relevance for the--or it has no bearing on the ultimate conclusion in relation to attribution.
Claimant has provided no credible evidence that the Parán Community was acting or even purporting to act in exercise of official authority.
In fact, Claimant's position is belied by its own contemporaneous correspondence, which shows that it did not consider that the Parán Community or its Ronda Campesina were organs, or that they were empowered with governmental authority, or that they were acting in an official capacity.
In fact, in a letter to MINEM dated 6 February 2019, Claimant described the Parán Community members as, and I quote, "terrorists."
That's at Exhibit C-15, page 2. It's a classic non-State actors.
And in all of its contemporaneous discussions with State organs, including MINEM, Claimant not once argued or even suggested that the Parán Community had exercised elements of governmental authority.
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Moreover, in its letter to its creditor, PLI Huaura, dated the 19th of August 2019, Claimant argued that a provision in the PPF Agreement obliged PLI Huaura to negotiate to resolve repayment obligations in the event of force majeure or an act of State.
And that's at R-218, page 3.
Had Claimant genuinely believed that the actions of the Parán Community were imbued with official authority, it surely would have relied on such wording in relation to act of State to argue that these actions qualified as an act of State.
However, it did not, and instead, argued that such actions constituted continuing force majeure.
And the inconsistencies that I've just identified really are emblematic of Claimant's attribution arguments in general. Such arguments ignore the legal standard, are formulated on the hoof out of expediency, and are entirely contradicted by the evidence. The Tribunal should therefore have no difficulty dismissing them and concluding that the actions of the Parán Community are not attributable to
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Perú under international law.
And with that, I pass to my colleague, Patricio Grané Labat, to discuss Claimant's merits claims.
MR. GRANÉ: Mr. President, should we proceed or is this time for a break? We're in your hands.
PRESIDENT CROOK: Let's do five minutes.
MR. GRANÉ: And before we break, may we ask Ms. Torres to give us an update on time?
SECRETARY: You are up to one hour and 48 minutes.
MR. GRANÉ: Thank you.
(Whereupon, there was a recess in the proceedings, 4:27 p.m. - 4:31 p.m.)
PRESIDENT CROOK: All right. An hour and 12 minutes remaining; is that right?
SECRETARY: Yes, sir.
PRESIDENT CROOK: Okay. All right. To the Respondent.
MR. GRANÉ: Thank you, Mr. President. I will now address the three substantive claims raised by Claimant under the Treaty.
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And I begin by noting that for the most part, there is no disagreement between the parties concerning the applicable legal standard under the Treaty. However, Claimant fails to apply those standards to the facts.
And Claimant's briefs are mostly devoted to presenting a self-serving and partial accounting of the facts and then slapping a label on such facts, and it did the same thing this morning. It is telling that this morning Claimant spent five minutes of its three-hour-long presentation addressing the merits.
And I had to check that fact with my team.
And I did so because when the facts are properly assessed under the relevant and well-established legal standards, the conclusion is that Perú did not breach its obligations under international law.
And I will begin by addressing the first and the main claim advanced by Claimant concerning full protection and security.
Now, Article 805 of the Treaty provides that each party shall accord to covered investment
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treatment in accordance with the customary international law minimum standard of treatment of aliens, including... full protection and security.
And then that same provision further specifies that the concept of FPS and FET does not require treatment in addition to or beyond that which is required by customary international law minimum standard of treatment.
Now, Claimant acknowledges, as it must, that the applicable standard of FPS is that under customary international law MST.
Now, the parties are also in agreement that the FPS standard requires a host State to exercise a reasonable due diligence.
And you have the quotes, and you find the sources for all of these in our Reply 626 to 627, and then 682.
Now, the parties also are in agreement that that FPS standard does not impose strict liability on the host State to prevent physical or legal infringement of the investment or provide any guarantee or warranty.
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And in general terms, Claimant also agrees with Perú that the State is expected to take, and I quote, "such measures to protect the foreign investment as are reasonable under the circumstances." And also that the Tribunal, and I quote, "must take into account the circumstances of the particular case." And finally, that the FPS standard is an objective one, one that does not vary from State to state or investor to investor.
Now, despite Claimant agreeing that the reasonability of the State's measures to protect investment must take into account circumstances of the case, Claimant incorrectly argues that any consideration of the particular circumstances of the case would render the FPS obligation less objective and therefore inappropriate.
But Claimant's position is inconsistent with the case law. The jurisprudence, some of which is accepted by Claimant itself, demonstrate the following points: One, that the FPS obligation under customary international law is an obligation of means rather than of results.
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Claimant concedes this point in its Reply Paragraph 626, but fails to respect it. Claimant also recognizes that the State undertook affirmative steps to protect the investment, but nonetheless demands compensation because such steps did not achieve Claimant's desired result of quashing the Parán Community's opposition to the Invicta project.
The jurisprudence also demonstrates that the due diligence standard requires a State to take such measures to protect the foreign investment as are reasonable, again, under the circumstances.
And Claimant concedes this point in Reply Paragraph 626, but argues that Perú's decision not to use force against the rural community when Claimant demanded it was unreasonable. And it is established by case law, including by the Tribunal in Strabag v. Libya, that the FPS duty of due diligence cannot be viewed in the abstract and in isolation from the conditions prevailing in the host State.
This is RLA-84, Paragraph 234.
Thus, in contrary to Claimant's argument, in assessing Claimant's claim of violation by Perú of the
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FPS obligation, the Tribunal is indeed required to consider whether the State's conduct was reasonable under the relevant circumstances and conditions prevailing in this particular case.
Now, the legal authorities cited by the parties recognize that the circumstances found to have been relevant include, inter alia, the general situation within the State, that's CLA-an authority submitted by Claimant 25, Paragraph 406; the State's development, means and resources, also circumstances relevant, same authority, CLA-25; and the existence of civil strife, RLA-0008, Paragraph 310.
Now, Perú explained in the Counter-Memorial and again in the Rejoinder that the circumstances giving rise to and surrounding the conflict included the following:
Both within and outside of Perú, there is a long history of social conflict between mining companies and the local communities.
These conflicts are multidimensional because they implicate a balancing of rights that the State must carefully manage between the territorial and
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human rights of certain--I'm sorry, between the territories and the human rights of certain protected communities and the rights of investors.
Both within and outside of Perú, free and democratic societies permit the use of force by law enforcement, but only under limited and exceptional circumstances. And the competent authority bears ultimate responsibility and discretion to decide if, when and how to deploy those resources, mindful of the potential consequences of doing so.
Both within and outside of Perú, law enforcement agencies are not designed or equipped to serve as private security forces for companies and their investments.
When force has been used by State actors in the context of social conflicts, it has proved counterproductive to long-term solutions in this context of social conflict between mining companies and rural communities.
And notably, Claimant distorts, not for the first time, Perú's explanation and ignores many of these circumstances, dismissing them as aggravating
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factors or excuses, and therefore not relevant. That's what they said at the skeleton prehearing brief in Paragraphs 98 to 99.
Now, like many other democratic States with this history of social conflict with rural and indigenous communities in the extractive sector, Perú developed a legal and policy framework that reflects both international treaty law and the protected status of certain communities; establish corporate social responsibility norms, ESG standards, and industry-imposed practices.
The law and policy of other democratic states, including Canada, which directly assisted Perú in developing the applicable framework for both prevention and management of social conflict and the lessons learned from Perú's own history of social conflict in the mining sector.
Now, on the whole, Perú's legal framework and institutions aim to ensure the active and constructive participation of local communities, encouraging mining companies to obtain the acceptance of their mining projects by local communities, and
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promote a dialogue as the best means of resolving any disputes that may arise with the view to obtaining a long-lasting, durable, sustainable resolution to that conflict.
And all of what I have mentioned are circumstances that must be taken into consideration when assessing Perú's conduct in the present case.
Now, the Tribunal will recall that Claimant began this arbitration alleging that Perú took no action, and I quote, "in relation to Claimant's social conflict with the Parán Community."
In the Counter-Memorial, Perú provided a detailed account of Perú's--can we go back one slide, please. Thank you.
These are some examples of Claimant arguing in its memorial that Perú took no action, but in the Counter-Memorial, Perú provided a detailed account of Perú's consistent, affirmative and multi-pronged effort throughout the course of the conflict to help Claimant find a lasting resolution. As illustrated in this slide with some concrete examples, Perú activated a panoply of State agencies, including--and I'll give
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some acronyms. In the interest of time, I will not spell them out, but they're all included in the glossary to our submissions.
The OGGS, the office within the Ministry of Energy and Mines that deals with social conflicts, the Office of the Ministry and Vice Ministry, again, of Energy and Mines, the Peruvian National Police, the Ministry of the Interior, the PCM, which is the president, council, or the cabinet, the Ombudsman Office, the General Directorate of Internal Government, the Public Prosecutor's Office, the Huaura Subprefecture, Leoncio Prado Subprefecture, and the OEFA, the regulator on environmental issues.
Perú took immediate action to investigate the relevant facts and potentially legal actions after the June 2018 protest, and prevented the September 2018 protest.
In total, Perú held nearly 30, 3-0, meetings with Claimant and the Parán Community, and conducted seven mediations between the parties.
Perú's efforts proved fruitful and led to the February 2019 agreement.
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Perú continued efforts to bring the parties together to resolve their differences even after Claimant aggravated the conflict when it unleashed the War Dogs.
These actions were designed to encourage dialogue and to grant Claimant an opening to try to rehabilitate its reputation and relationship with the Parán Community and rebuild that trust that is a critical ingredient for resolving the dispute, obtaining that acceptance of the mining project.
When these actions taken by Perú are assessed under the applicable legal standard, including in the light of the circumstances prevailing at the time, and the conditions and this long history that I have alluded to, the conclusion must be drawn--that must be drawn is that Perú exercised reasonable due diligence, and thus complied with obligations of FPS under customary international law.
But seeing its original case theory debunked, Claimant no longer argues that Perú took no action. Instead, it now insists that the action that Perú took was insufficient and inadequate because Perú
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did not quash local opposition and forcibly put an end to the Parán Community's protests in opposition to the project.
Claimant is thus arguing before this Tribunal that anything short of use of force against the rural community in late 2018 and early 2019 was unreasonable and constitutes an international wrongful act. And in the process, Claimant has made clear that it does not agree with Perú's public policy of prioritizing dialogue over the use of force to resolve social conflict in its mining sector, such as the one that is the subject of this arbitration.
In an attempt to offer some legal support for its new theory, Claimant invents a set of alleged obligations that it posits are contained or subsumed within the FPS standard.
Claimant argues that Perú, through the PNP, should have preemptively used force against the Parán Community and provided the equivalent of a private security service thereafter.
And Claimant's position is wrong for many reasons.
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First, FPS, under customary international law, does not include an obligation to take, and I quote--obligation to, and I quote, "take all necessary measures to prevent harm," end of quote. The standard is one, as we saw, due diligence by taking measures to protect Claimant's investment that are reasonable under the circumstances; not take all necessary measures to prevent harm, which is Claimant's submission.
The second, FPS, under customary international law, does not include a guarantee or warranty against all possible harm. Thus, Claimant's incessant position that Perú should have prevented all possible harm to its investment does not satisfy its burden, showing that Perú failed to take reasonable action.
And third--in the circumstances.
And third, it would not have been reasonable or even legal under Peruvian law for Perú to preemptively use force against the Parán Community as Claimant has suggested on a number of occasions.
For example, Claimant has not bothered to
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explain why, when or how Perú should have singled out the Parán Community from all the rural communities in the country to forcibly confiscate the weapons that remained in circulation as part of a--of this historical counter-insurgency fight against terrorism and the Shining Path.
But even this is another red herring argument, because Claimant has not demonstrated that confiscation of weapons held by certain members of the community would have prevented any of the Parán Community's protests or opposition to the project.
Neither has--and I'll come back to this point and the relevance for the legal analysis and standard that must be applied.
Neither has Claimant proven that Perú had an obligation to use force. Perú and Mr. Meini have demonstrated that Claimant's arguments on Peruvian law concerning the use of force are simply wrong. The arguments submitted by Claimant are simply wrong. In fact, they are so far-fetched that Claimant was evidently unable to find any legal expert in Perú that would agree with this interpretation of Peruvian law
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on this issue. Instead, Claimant relies solely on the legal interpretation advanced by its international counsel.
Members of the Tribunal, Claimant's claims are based mainly on the decision of Perú not to use force. Mr. Meini is the only Peruvian criminal law expert in this arbitration that addresses the issue of the use of force under Peruvian law.
And the Claimant decided not to call him for cross-examination. Another empty chair. Another slide. We can put up Claimant's slide with the empty chair. In my 20 years of practicing investment arbitration, I have never seen an opposing party that has not offered a single independent legal expert on the law of the host State, particularly on an issue that is central to its case theory. Nor have I seen that party not call the only independent legal expert that addresses a central legal issue.
Not only has Claimant not been able to find a criminal law expert that could challenge Mr. Meini's explanations and expert evidence, and that it chose not to call Mr. Meini, but clearly now resorts to a
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grossly--a gross distortion of what Mr. Meini says.
And you heard counsel say this morning that Mr. Meini stated that the police has no discretion under Article 8.2 of Legislative Decree 1186. That is not what Mr. Meini has said in his expert report.
And we respectfully invite the Tribunal to read again Mr. Meini's report, including Paragraph 134, which is the paragraph that Claimant's counsel has knowingly misrepresented this morning.
What Mr. Meini explained is that the use of police force is regulated, not arbitrary or entirely discretionary. And he explains the situations in which that use of force can be deployed. There is an element of discretion within the regulation that is provided by the provisions that we have cited, including Article 8.2 of Legislative Decree 1186.
But stripped to its core, Claimant's claim is that Perú's decision not to use force against a poor, rural community constitutes an internationally wrongful act for which Perú must be ordered to pay tens of millions of US dollars.
In the process, Claimant is asking the
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Tribunal to second-guess the decision by the national police that using force against that community at that time in the prevailing circumstances was neither required nor advisable. And specifically, Claimant is asking each of you to condemn the State's decision to promote a peaceful and long-lasting resolution of the conflict. Neither the FPS nor any other standard under customary international law could possibly support that finding.
International law stresses the deference to be afforded to States regarding decisions taken based on the weighing of sensitive public policy factors, including in matters of security.
And this morning, Claimant unwittingly recognized that it is not for International Tribunal to dictate to a sovereign State how to use its force.
Claimant's counsel said that how Perú uses force is not for the Tribunal to decide. Perú agrees.
Now, concerning the operational plan to which Claimant devotes so much attention, Claimant focuses obsessively on who decided not to execute an operation--a police operation plan in mid-February
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2019, and surely there will be many questions about this in the cross-examination of Mr. Saavedra.
Now, Mr. President, you asked what is the relevance--you asked Claimant's counsel, what is the relevance as a matter of international law of all we have heard about who did or did not block the performance of the intervention plan.
Now, Claimant said in response that it is not for us--and I--I--maybe this is not verbatim, but it's fairly close.
Claimant said in response that it is not for us to say who blocked the Police Operational Plan.
Now, there are two problems with that answer.
First, it is yet another change of position by Claimant. Because in the Reply in Paragraph 29, it did purport to say who blocked the operational plan. It said, I quote, "The facts show that the police were ready to implement the operational plan on 19 February 2019 at 9:00 a.m., but the MININTER, the Ministry of the Interior, blocked its implementation," end of quote. So it did purport to tell you who blocked it.
But in any event, that theory is baseless.
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It is sheer and unsupported speculation by Claimant and its witnesses. And Mr. Saavedra has explained this in his witness statement and no doubt you will hear from him again this week in response to the questions that the Claimant's counsel will ask on this issue.
The second problem with that answer is that it does not answer the question that Mr. President posed.
The answer is that it does not matter. What matters is that, contrary to Claimant's contention, the police decided not to implement that operational plan, and it did so for good reason, which Perú has spent much time explaining in its submissions, but which Claimant continues to ignore.
But in any case, Claimant's allegation that the use of force would have prevented the loss of its investment is simply not true; again, speculation.
This is legally relevant and material to the outcome of this case because the Claimant concedes that to establish a breach of the FPS obligation, it must demonstrate that if the State had acted with due
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diligence, it would, and I quote, "in fact have prevented the Claimant's alleged losses." Reply Paragraph 626, Counter-Memorial 494, which is citing RLA-0007, Paragraph 166.
Consistent with the previous conduct and practice, it is all but certain that even if the PNP, the police, had violently crossed the Access Road Protest, the Parán Community would simply have returned not long after their forceful removal, and reestablished its civilian blockade because that forceful removal did not solve the underlying social conflict, and we've seen this time and again in Perú and elsewhere, and we will again look at the copious amounts of evidence on the record that demonstrates that. That's not something that Claimant can challenge.
As you will recall, even Claimant's witness, Mr. Castañeda, admits this in Paragraph 74 of his first witness statement, which you have on the screen.
Now, examples of police intervention that Claimant invokes prove this point. For instance, Claimant invokes Las Bambas as a success. That's how
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Claimant presents Las Bambas, a success, and proffers it as evidence that forceful removal of protesters is the correct response to such conflicts.
Claimant is wrong and the facts demonstrate that, including those that are evidenced on the annexes, the exhibits, in the record.
Now, the timeline that you have on your screen, unfortunately, because of timing constraints, we'll not be able to go back to discuss this timeline today, but this timeline shows a series of confrontations between police and local community at Las Bambas nearly every year starting in September 2015 through July 2022.
After each police intervention to remove a blockade, the local community restored the blockade in greater numbers at a later point, and with each forceful intervention, additional violence, injuries and deaths were reported.
Now, this is important: The mining company in Las Bambas belatedly recognized that the use of force had been counterproductive after all, and did not address the underlying social conflict, and the
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rejection by the local community of that mining project.
In November 2022, after four deaths and 97 injuries, and after the police's repeated interventions failed to resolve the dispute, the mining company itself requested that the State help to, and I quote, "solve the problem through dialogue." Exhibit R-0227.
The situation with fair and equitable treatment is not dissimilar.
The Claimant's FET claim largely overlaps with the FPS claim and fails for similar reasons. And as a threshold matter, we recall that Claimant's alleges that Perú breached the FET obligation through a composite act.
Now, that means the Claimant recognizes that the individual actions of which it complains do not, in and of themselves, constitute a breach of the FET standard.
Also, Claimant's FET claim has narrowed significantly throughout this arbitration. Now, Claimant's accusation rests on the assertion that Perú
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failed to apply its own legal framework.
Not only is that accusation baseless as a matter of fact, but it is also manifestly insufficient to meet the legal standard. As I mentioned earlier, the parties in this case agree that the treaty prescribes the minimum standard of treatment under customary international law. And the applicable standard under customary international law was articulated, as the Tribunal well knows, by Waste Management II, which reflects a high threshold under which a breach occurs only where State measures are, and you have the quote which the Tribunal, experienced as it is, has seen many times.
Claimant has agreed that this is the relevant standard or that it reflects the standard under customary international law minimum standard of treatment. The Claimant has not and cannot demonstrate that Perú's conduct breached this standard as articulated by Waste Management II.
Among other things, a mere breach of domestic law is insufficient to meet the high threshold contemplated by the treaty, and articulated
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by the Waste Management II standard.
So the Claimant seeks to circumvent this by arguing that Perú's alleged noncompliance amounted to a repudiation of its laws. So it seems to be recognizing that a mere noncompliance with domestic law would not be sufficient to meet the standard, and so it tries to characterize that alleged nonimplementation of Peruvian law as a repudiation of Peruvian law. Another label.
Claimant bases its composite FET claim on five alleged acts or omissions.
First, the Claimant alleges that Perú's decision to not forcefully intervene in the Access Road Protest violates Article 920 of the Peruvian Civil Code or Article 8.2 of Legislative Decree 1186, which I mentioned earlier.
Claimant is incorrect on both accounts as demonstrated by Perú, including on the basis of the expert report of Mr. Meini, the only legal expert on this issue in this arbitration.
Perú demonstrated that Article 920 of the Peruvian Civil Code does not require forceful police
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intervention. This is in R-0005. Rather, it requires only that the law enforcement play a supporting and supervisory role with respect to a dispossessed property owner's own efforts to regain their property. It is a different situation.
Likewise, Article 8.2 of Legislative Decree 1186 does not require forceful police intervention; instead, it provides that "the personnel of the National Police of Perú may use force" in a series of narrow circumstances, none of which apply in this case. That is R-0060.
In particular, under Article 8.2(c), the PNP, the police, may forcefully intervene to prevent a crime.
Under 8.2(e), may forcefully intervene to control any person resisting authority.
Claimant's position that Perú's response to the Access Road Protest was unlawful is incorrect because it rests on the premise that the police were obligated or required to use force, but it has not demonstrated that to be the case.
Claimant alleges that Perú should have
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brought charges for contempt--this is the second, by the way.
So one of the bases on which they say that there's been a repudiation of Peruvian law is the one that I just addressed. I'll address the second one.
They say that Perú should have brought charges for contempt of authority against the Parán Community for its breach of the September 2018 commitment, which you find on C-0139, and the interference with attempted mine inspections.
But as the Tribunal may recall, on 18 September 2018, the Subprefect of Huaura, Ms. Bertila González, convened a mediation hearing with Claimant's representatives and the Parán Community. During that meeting, both sides committed to, and I quote, "reach[ing] a long-term agreement that would allow them to resolve their disagreements."
However, Claimant failed to address the Parán Community's concerns, and the latter undertook the Access Road Protest several weeks later on the 14th of October 2018.
But Claimant argues on that basis in the
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Reply that the Subprefect violated Peruvian law by failing to file criminal complaint against the Parán Community for contempt of authority, is what they're arguing, based upon all of the--on the alleged breach of the 18 September 2000 commitment by the Parán Community.
But Perú explained in the Rejoinder that Claimant is wrong for at least four reasons, including the fact that under the directive that governs such process, this process that led to the commitment, which is the Protective Measures Directive, Exhibit 566, proceedings for contempt of authority may only be filed in the event of a breach of a government resolution.
But here, there was no government resolution in connection with the September 2018 commitment that was not complied with by the Parán Community.
Third basis: Claimant argues that Perú's approach to the Parán Community's firearms possession shows Perú's repudiation of its loss. And to dispel the confusion created by Claimant this morning, what we are talking about are 16 shotguns, 12-gauge. This
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is clear from C-0193, page 30. They are not long-range weapons, as Claimant states in its Reply.
Now, the approach concerning these 16 shotguns shows that Perú adhered to the legal framework for reclaiming the firearms that the State had provided, the Rondas Campesinas, in the context of the countermeasures against the Shining Path, the terrorist movement in the 1990s.
That legal framework that Perú has and implements follows the UN recommended approach of incentivizing the voluntary surrender of arms. This is RLA-184.
As explained by Perú in the Rejoinder, the PNP had good reason, including for the long-term resolution of the social conflict, not to act on the margins of that legal framework.
Claimant's position is shortsighted and ignores the history and legal framework that Perú has enacted to address this issue. We refer the Tribunal to Exhibits R-0264 and 265 that are relevant for this issue.
Finally, Claimant asserts that Perú breached
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its FET obligation because it failed to intervene to stop alleged marijuana cultivation in the region, and after Claimant forfeited its shares in Invicta to its creditor, to stop the illegal mining operation or exploitation by the Parán Community.
Now, this is important, Members of the Tribunal. After.
Barely referencing these issues in the Memorial, Claimant dedicated the first full section of the Reply to its baseless conspiracy theory that the community opposed the Invicta mine because with of its alleged desire to protect what Claimant presents as a community-wide marijuana business from increased attention by the authorities and to steal the mine.
Now, this morning, Claimant again stated that the reason why Parán opposed the project was to protect "its thriving marijuana business."
As explained previously, the theory of marijuana business not only lacks factual support, but it's also nonsensical. And by me--let me be clear. The marijuana business, as a community-wide thriving business, lacks support. The evidence does show that
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there are or there were marijuana cultivations. I don't know whether they have been completely eradicated, but there is evidence on the record that there were some marijuana cultivations in the region.
But even Claimant's own evidence shows that it was not community-wide, as it now argues.
But that theory is also nonsensical, as we've explained. The opposition of the Parán Community was designed to have the opposite effect, and that is to attract attention to the Invicta project, and that is exactly what it did. And this theory which counsel now argues is--or this business, the thriving business, which is nothing but sophistry is irresponsible and reckless, and we've said this in our submissions, and they still today insisted on presenting that reckless theory.
Because in addition to being false, it shows that Claimant has no reservation about accusing an entire rural community of criminal conduct.
The tone that you heard this morning from Claimant shows the contempt and disrespect with which it holds and always held the Parán Community as a
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whole.
As for the legal exploitation of the mine by local residents after Claimant lost its investment, it is simply irrelevant and immaterial, and like the marijuana conspiracy theory, was barely mentioned in the Reply. In fact, it was buried in two paragraphs in that submission.
And yet, this morning, you heard Claimant state that its entire case theory is that Parán took the Invicta project to mine it for itself. Again, I think it's perhaps not verbatim but very close to what we heard this morning.
Claimant's case theory is being made up as Claimant goes.
Those two paragraphs are Memorial 191 and 192.
And the fact that these conspiracy theories are made for arbitration is evidenced by the fact that contemporaneously, Claimant never argued that the illegal crops, which were known to exist at the time, or the threat to legally exploit the mine were the reasons behind the Parán Community's opposition to the
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mining project. They were not.
The evidence shows and Claimant acknowledges that the opposition was motivated instead by concerns for the environment, the territorial dispute with Lacsanga and the desire to obtain the same benefits that Claimant had offered to neighboring communities. This is reflected in the evidence, not the conspiracy theory.
Claimant has simply fabricated that theory in attempt to distract from the fact that it was Claimant's own actions that prompted that opposition from the community, based on that mismanagement of community relations that we discussed earlier today.
But in any event, the evidence shows that Perú intervened by seizing and destroying marijuana plants, making arrests and planning and executing an operational plan to end the exploitation of the Invicta mine.
Now, that evidence acknowledged and unrebutted by Claimants shows that law enforcement authorities in Perú did, in fact, take action against that illegal activity.
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In sum, the evidence and expert opinion on the record shows that it is manifestly false that Perú's conduct constitutes a repudiation of its laws.
There simply was no breach of customary international law or of the Treaty by Perú.
But Perú's actions are also not arbitrary by component of the FET standard. As demonstrated by Perú in this arbitration, including on the basis of Mr. Meini's expert report, under Peruvian law, the Peruvian National Police has discretion to decide whether force is necessary under the circumstances.
Its decision not to use force in this case was justified and reasonable as the PNP was concerned about the violent confrontations, the loss of life and the durability of the resolution to the conflict.
The results of the police December 2021 intervention to remove members of the Parán Community from the mine shows that such concern was justified.
The Peruvian authorities justifiably concluded that force was not justified, and that dialogue should be favored to secure a peaceful and lasting resolution to the social conflict. Far from
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arbitrary, this is reasonable and prudent.
In addition to the above--and I'll try to be brief with respect to this component of their theory.
In addition to the above--and the above amply justifies dismissal of Claimant's FET claim, but if more reasons were needed to dismiss that claim, there's another reason why such claim must be dismissed, and it's the following:
Claimant has failed to establish the existence of a composite act. As explained by Professor Crawford, and I quote, "A composite act is more than a simple series of the repeated actions, but rather, a legal entity, the whole of which represents more than the sum of its parts."
Claimant has not established the existence of a legal entity, nor has Claimant demonstrated that each of the individual acts constituted the alleged composite act were, and I quote, "sufficiently numerous and interconnected to amount to a pattern or a system."
The Claimant has not met this standard for several reasons expounded in Perú's briefs, which, in
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the interest of time, I will not repeat, but instead, I respectfully refer the Tribunal to Sections IV.C of the Counter-Memorial and also IV.C of its Rejoinder.
And likewise, Claimant has not demonstrated that each of the individual acts constituting this alleged composite act had an adverse effect on the investment, which is a relevant factor. And for that, I refer to the Tribunal to the CLA-71, Paragraph 263, and CLA-82, Paragraph 670.
Thus, Claimant has failed to meet its burden of proving a composite act under international law.
And accordingly, we respectfully submit that the Claimant--Tribunal must reject Claimant's FET claim.
Now, I will go into the last claim on expropriation, but before I do so, let me turn to my team to see if we are doing okay with time.
I'm advised that I may not have time to go over the entirety of the presentation that we had about expropriation. I will be brief. Before I do so, I again respectfully refer the Tribunal to our pleadings. The fact that we're not able to address them today does not mean that we have in any way lost
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confidence in the submissions that we have made in those pleadings.
Now, Claimant's expropriation case is unusual. It rests entirely on the actions of the third parties; namely, the Parán Community and PLI Huaura, its creditor.
Now, Claimant does not argue that any affirmative action by Perú expropriated Claimant's investment; rather, Claimant alleges that Perú's decision not to use force to try to remove the Access Road Protest and silence the Parán Community protesters affected a direct and indirect expropriation. And Claimant, of course, is wrong on both counts.
For its direct expropriation, it argues that Perú's--that the Parán Community's Access Road Protest was attributable to Perú, and that this protest led PLI to seize Claimant's investment. And according to the Claimant, Perú therefore directly expropriated its investment, but that claim is based on wrong premises and flawed logic.
And, you know, first and foremost, the
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direct expropriation claim rests on this Claimant's outlandish theory that the Parán Community committed an outright seizure of the investment through the protest, and that the action of that rural community is attributable to Perú under international law. But we've demonstrated that the actions of the members of that rural community cannot--are not attributable to Perú under international or even domestic law.
And in addition, that claim fails because the forfeiture of Claimant's shares in Invicta does not constitute a direct expropriation.
I will, in the interest of time, skip over the discussion of formal seizure of title and how that is understood in international law.
I will emphasize again that the only conduct that--by Perú that Claimant invokes for its direct expropriation claim is Perú's alleged omissions, specifically that Perú did not forcefully remove the Access Road Protest.
And here I mention that, according to Claimant, when a State knowingly allows by its omissions a third party to take possession of that
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property, such State can be liable for direct expropriation, and they rely on Wena Hotels and Amco.
And I was surprised to hear this morning that Claimant's counsel, in passing, again, relied on those two legal authorities because we explained in our Rejoinder why those legal authorities were in opposite and did not support their case.
Because in those cases, the States played a much more active role. They affirmatively enabled the expropriations; and of course, that's not the case in the present arbitration.
And Perú demonstrated this in Rejoinder, including in Paragraph 743 and 474.
But Claimant simply ignored that argument and that distinction of those cases from the present case, but they still relied on those authorities this morning.
In any event, we demonstrated that Perú did not knowingly allow any third party to take possession.
And here, I refer the Tribunal to--and if we can skip ahead to the Rejoinder, Table 6, it's a table
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that spans ten pages of our submission, of our Rejoinder. You will not find it in the slides because it's such a long table, but that Table 6 in our Rejoinder includes the numerous affirmative steps that Perú took to support, to support Claimant and broker a resolution to the social conflict, repeatedly urging the Parán Community to lift the Access Road Protest.
Okay, in the very few minutes that I have left, on direct expropriation, Claimant argues that it's a composite act and a creeping expropriation and alleges that a clear pattern of acts by Perú, which Claimant never specifies, it says that that unspecified pattern amounts to creeping expropriation that Perú--I'm sorry, that Claimant characterizes as Perú letting the Parán Community act with impunity.
But however, similar to its FET claim, Claimant has not even proven the existence of a composite act by Perú. And also, Claimant treats composite act and creeping expropriation as one and the same.
I've already addressed the composite act and how it's understood and defined by Professor Crawford.
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Let me, in the interest of time, skip ahead.
Once again, and I've explained this, the record contradicts Claimant's allegations that Perú consistently took no action. In fact, Perú intervened early on and often to mediate Claimant's social conflict. And again, we respectfully refer you to Table 6 of the Rejoinder. And this was not only by one entity or a State organ, but by many, including the police.
The Claimant's indirect expropriation claim fails for so many reasons, including that it does not meet the fundamental and decisive effects test that is widely recognized by international law, and that jurisprudence, again, as being, you know, decisive in determining whether an expropriation has occurred.
And this is also reflected under Treaty Annex 812, which is very important when assessing whether an indirect expropriation has been committed.
Claimant must prove that Perú's measures had an expropriatory economic impact on its investment.
And to be expropriatory, the economic impact must amount to the complete or near complete deprivation of
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Claimant's investment. But that factor is simply not met in this case, including for two basic reasons.
And I will go quickly over these reasons, and then I will cede the floor to my colleague, Mr. Brian Bombassaro.
First, the measures that Claimant attributes to Perú did not result in a complete or near-complete deprivation of the value of Claimant's investment.
And to recall, PLI, Claimant's creditor, seized the investment as a direct result of Claimant's decision to pledge its shares as collateral in the PPF agreement. Claimant's failure to secure a social license from the Parán Community. Claimant's failure to secure the necessary regulatory approvals to commercially exploit the Invicta mine in time to meet its PPF obligations. Claimant's failure to secure reliable ore processing. And Claimant's 14 events of default under the PPF Agreement, including failure to achieve commercial exploitation by the contractual deadline. And even Claimant admits that not all of those 14 instances of default are related or can be linked to the blockade.
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And second, far from having suffered a complete or near-complete loss of value, Claimant investment held significant value at the time Claimant lost its PLI--it's investment to PLI.
And with this, this is the last comment that I make, shortly before PLI Huaura seized Invicta shares, PWC conducted an independent appraisal of the investment and valued it at 13.4 million US dollars, far from zero or even negative, as Claimant alleges.
Further, a mining consortium--and this goes, Mr. Garibaldi, to your question about the corporate chain.
A mining consortium called Lonely Mountain indirectly acquired PLI Huaura's right to seize the Invicta mine, thereby demonstrating that the mine did have value as an investment.
And this is C-0053, and C-0055.
In STEAG v. Spain, the Tribunal held that, and I quote, "when an investor from the same market is willing to invest in a project, it is clear that the economic value of that project has not been eliminated," end of quote. This is RLA-0192.
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ARBITRATOR GARIBALDI: How much did they pay?
MR. GRANÉ: Is it the--I'm confirming whether it's on the record, Mr. Garibaldi. It's not on the record.
It's not on the record, but again, we know that shortly before the shares were seized by PLI, PWC valued the investment at $13.4 million. And this is in C-0055, page 2, and R-0193, Clause 3.
And with that, Mr. President, and with your indulgence, I cede the floor to my colleague, Mr. Brian Bombassaro, to address the Tribunal on the issue of damages.
MR. BOMBASSARO: Okay.
Good afternoon, Mr. President, and Members of the Tribunal. My name is Brian Bombassaro, and I will address Claimant's damages claim.
As Perú showed in the pleadings, Claimant is not entitled to any compensation from Perú. Any damages Claimant may have suffered based on its investment in Invicta were not caused by Perú. In any event, Claimant's claim for $41 million, and the
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calculations by Accuracy that produced that sum, are flawed and grossly overstated.
To calculate its alleged damages, Claimant set the valuation date as 26 August 2019. The significance of this date, according to Claimant, is that it is the date on which "Lonely Mountain seized the Claimant's shares in IMC." That's in Memorial Paragraph 325.
Claimant's selected valuation date is not a date on which Claimant alleges any wrongful action by Perú. It's not even a date on which Claimant alleges any wrongful omission by Perú.
Nevertheless, Claimant argues that on 26 August 2019, Perú became responsible for $41 million of alleged damages.
The fact that Claimant has not even alleged wrongful conduct by Perú on the date when Claimant asserts that Perú became responsible for the lost investment is emblematic of a broader disconnect between Claimant's alleged damages and the alleged causes of those damages.
Claimant's alleged damages were not caused
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by Perú.
As Perú has demonstrated, Claimant's alleged damages were caused by the actions of Lonely Mountain, or more accurately, by the actions of PLI Huaura, which Lonely Mountain eventually owned.
Claimant also bears responsibility for any damages caused by the Parán Community and for any damages caused by Claimant's own decisions and Claimant's own actions.
The lack of a causal link between Claimant's alleged damages and any alleged wrongful conduct by Perú should be dispositive and result in an award for zero damages. If, however, the Tribunal were to ascribe any damages to Perú, such damages would need to account for Claimant's contributions to its own injury.
Furthermore, in no circumstance should Claimant be awarded or otherwise credited with any alleged damages that are based on a merely future or prospective investment, and Claimant has requested such damages in this case. Claimant's request for those damages should be denied, because the Treaty
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explicitly applies only to investments made or acquired in Perú.
Lastly, any damages award would need deductions to account for the errors and unfounded assumptions in the calculations that generated the amount of Claimant's damages claim.
I will discuss in turn each of these defects in Claimant's damages case, starting with causation and then Claimant's contributory fault, Claimant's merely prospective investment in the Mallay plant, and lastly, quantum.
First, as the Tribunal knows, Claimant is not entitled to any damages unless Claimant proves it had an injury that was caused by the internationally wrongful act. The ILC commentary explains that this condition requires a Claimant to prove both causality and fact, as well as proximate causation.
In the damages context, factual causation means that if the wrongful act had not occurred, then the alleged injury would not have occurred. At least conceptually, causality and fact is relatively straightforward and uncontroversial.
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With respect to proximate causation, Claimant wrongly argues that Claimant simply must show that damages were "a normal, foreseeable or intended consequence of the State's wrongful act." That's from Claimant's skeleton argument at Paragraph 101 and Reply Paragraph 892.
This attempt by Claimant to reduce proximate causation to attest for any one of those three criteria is squarely refuted by the ILC commentary.
Where the ILC discusses proximate causation in Comment 10 to Article 31, the ILC expressly warns that "in international as in national law, the question of remoteness of damage is not part of the law, which can be satisfactorily solved by search for a single, verbal formula."
In fact, the source that Claimant cited for its proposed three-prong test, which is the Ripinsky and Williams treatise, itself indicates that the ILC rejected that same three-prong test in favor of a "more cautious approach." That's at pages 136 to 138 of CLA-151.
In addition to the ILC commentary,
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international jurisprudence has examined and explained proximate causation. Perú presented this in Rejoinder Section 5.A.1. The legal analyses in those decisions identified the following criteria for proving proximate causation:
These are the benchmarks for identifying proximate causation, and Claimant has not met them.
In fact, in the Memorial, Claimant did not submit any analysis at all on damages causation.
Then, in the Reply, Claimant ignored the vast, factual record in this case, arguing
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superficially that the causal chain from the alleged Treaty breach to the alleged damages comprises just two simple links: The Parán Community's Access Road Protest and Perú's decision not to use force to annihilate that protest. Claimant even says in Reply Paragraph 918 that, "No other factors contributed to the Claimant's loss of its investment."
Claimant deliberately omits from its purported causal chain the genesis of the Access Road Protest, essentially treating that protest as if it had originated spontaneously, through no fault of Claimant's own. Claimant wants you to ignore its responsibility for its broken relationship with the Parán Community. Claimant also wants to you ignore the contract in which Claimant signed away its ownership rights to the Invicta mine as loan collateral, and Claimant's 14 breaches of that same contract, and the outstanding regulatory requirements for operation of the Invicta mine, and Claimant's failed pursuit of reliable ore processing, which Claimant needed to convert any raw ore into marketable minerals.
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Claimant wants you to ignore all these facts because each one reveals Claimant's superficial causal chain to be removed from reality and insufficient to establish proximate causation or even causality-in-fact. Perú demonstrated those failures in Counter-Memorial Section 5.B.1 and Rejoinder Sections 2.D and 5.A.2.
Nevertheless, Claimant insinuates that its two-link causal chain should suffice to flip the burden of proof over to Perú to prove an intervening or superseding cause. That's in Reply Paragraph 927.
Claimant is incorrect given that Claimant failed to make a credible case on but-for causation or on proximate causation.
But in any event, Perú has satisfied any such burden of proof through the evidence and the analyses that Perú presented in the pleadings I just mentioned, Counter-Memorial Section 5.B.1 and Rejoinder Sections 2.D and 5.A.2.
To recall, the causes of Claimant's alleged damages under any of the relevant legal standards, such as the initial cause, the underlying cause, the
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operative cause, the proximate cause, the but-for cause, the underlying cause, the intervening or supervening causes are those facts that I just referred to moments ago, and which Claimant wants you to ignore.
In the pleadings, besides simply ignoring these facts when Claimant posits a two-link causal chain, Claimant also relabels these facts as "concurrent causes" and criticizes Perú for not "making any references in its Counter-Memorial to the principles on concurrent causes." That's Reply Paragraph 899. However, this relabeling maneuver by Claimant distorts Perú's causation analysis.
In fact, Perú never referred to concurrent
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causation principles because they are not relevant to this case. Because no alleged breach by Perú was a proximate cause of any alleged damages, Perú simply is not responsible for any damages.
Whether acts by Claimant, by PLI Huaura or by the Parán Community might be concurrent causes would have no bearing on Claimant's claims against Perú.
Moreover, even if a Treaty breach were deemed a proximate cause of any alleged damages, contributory fault principles would apply, as Claimant has acknowledged in Reply Paragraph 901 in the first sentence.
Specifically, in a scenario where the Tribunal deems an alleged Treaty breach to be the but-for and proximate cause of any alleged damages, the Tribunal would need to make deductions from those damages for Claimant's contributory fault.
As summarized in Rejoinder Paragraphs 822, 858 and 860, this is a case where the Claimant was hoisted by its own petard. Claimant's entire case is an attempt to deflect became onto the government for
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not doing even more to try to save Claimant from the results of Claimant's own mistakes and Claimant's duplicitous conduct toward the rural communities.
That's a textbook case for applying contributory fault and for doing so with 100 percent of any damages. Perú explained this in Counter-Memorial Section 5.B.2 and Rejoinder Section 5.B.
Based on the foregoing, Claimant's damages claim should be rejected entirely based on causation or alternatively based on contributory fault. A portion of Claimant's damages claim, $8.9 million of it, should be rejected for a third reason, which is that this portion is impermissibly based on a prospective or future investment in the Mallay plant that Claimant never made.
As shown in Section 5.C of both the Counter-Memorial and the Rejoinder, the Treaty applies only to covered investments. To be a covered investment, the text of Treaty Article 847 requires that an investment must have been made or acquired in Perú. Claimant admits it never made or required any
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investment in the Mallay plant. That's in Reply Paragraph 1020.
Yet, Claimant's claim for $41 million is expressly based on Claimant hypothetically investing in the Mallay plant. Without an investment in the Mallay plant, Claimant's own experts calculate Claimant's damages to be a maximum of only $32.1 million.
The difference between those two alleged amounts, $41 million with the Mallay plant and $32.1 million without the Mallay plant, is $8.9 million. As a matter of law, Claimant cannot be awarded this extra $8.9 million that is based on an investment in the Mallay plant that Claimant never made or acquired.
Furthermore, even if any damages were due to Claimant, the Tribunal should not rely on the $41 million amount or even the $32.1 million amount that Claimant's experts estimated as damages. Those estimates are overstated for many reasons that are summarized in Rejoinder Section 5.D and which are explained in details in the AlixPartners second report.
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AlixPartners will present its reports next Monday, but for now, I wish to emphasize two points.
First, those corrected amounts proposed by AlixPartners, which are $20.5 million and $22.5 million under the alternative ore production scenarios posed by Claimant, reflect only the corrections that AlixPartners could quantify based on available information. But there are several additional errors in Accuracy's damages calculations, such that the two corrected amounts by AlixPartners require further downward adjustments.
Second, AlixPartners' corrected calculations are without prejudice to the legal barriers to any damages award that I have summarized today, such as Claimant's failure to prove causation and Claimant's contributory fault. Those legal barriers to Claimant's claims should be dispositive and result in zero damages. Thank you.
PRESIDENT CROOK: Thank you.
Thank you very much, counsel. Does that conclude or--I'm sorry. Does--we have an important speaker.
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MS. RIVAS PLATA: Thank you, Mr. President.
Good afternoon, Mr. President and members of the Tribunal.
I respectfully request your indulgence to make some initial remarks on behalf of the Republic of Perú.
"Water is like gold in the Parán Community," is a common phrase chanted by locals in Parán, a Peruvian rural community located in the direct area of influence of the mining project at stake in this investment arbitration. In Perú, Parán is known for two things: Nearly 75 percent of its population is blind due to retinitis pigmentosa, a genetic mutation inherited across generations, and the reputation as home of the sweetest peaches in the country. It is said that "despite blindness, peaches are sweet in Parán." It may sound contradictory, but blindness and sweetness coexist in Parán.
Perú is a global leader in the mining industry and is recognized as having one of the largest and most diversified mineral reserves on the planet. It is among the world's top producers of
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copper, silver, lead, zinc, gold and other precious metals. Perú's mining industry is one of the most important sectors of its economy, and views foreign investment in that sector as a key driver to advance the development of the country.
Perú's mining industry accounts for 8.3 percent of GDP, while mineral exports represent 58.9 percent of the country's total exports. The country is among the major producers of mineral commodities in the world.
The mining tradition in Perú dates to the pre-Inca times, and continues through the Inca, colonial and republica periods. In each of those historical stages, mining has been one of the major activities in the country's development.
Hand in hand with the need to provide a stable and predictable framework conducive to attract foreign investment in the mining industry to its shores, Perú has recognized the need to strike a balance between two policy objectives: Advancing the development of its extractive industries; and ensuring that the social and environmental impacts of such
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industries are appropriately addressed.
The Canada-Perú Free Trade Agreement can be considered as pioneer in pursuit of the goal of achieving the right balance between the protection of foreign investments on one hand and the recognition of the right to regulate in the public interest on the other hand. These two policy objectives enshrined in the Canada-Perú Free Trade Agreement are equally compelling and urgent, equally legitimate and genuine, equally essential and inescapable. It would be erroneous to consider investment treaties as mere texts in a vacuum, ignoring the fact that they are shaped and influenced by the political, economic and social context in which they are anchored.
This balance is reflected in the provisions on corporate social responsibility of the Canada-Perú Free Trade Agreement. Paradoxically, the investment treaty Claimant has invoked to bring a multimillionaire claim against the Republic, is the same investment treaty that reminds investors like Claimant in this present arbitration of the importance of incorporating internationally recognized standards
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of corporate social responsibility in their internal policies.
Through international corporate social responsibility norms, the extractive industry widely recognizes the vital need for private companies to obtain community support before commencing mining or other extractive industries.
In accordance with the OECD Guidelines for Multinational Enterprises, and the OECD Due Diligence Guidance for Responsible Business Conduct, a stakeholder engagement with the communities that investors interact with is characterized by a two-way communication. It involves the timely sharing of relevant information needed for stakeholders to make informed decisions in a format that they can understand and access.
To be meaningful, engagement involves the good faith of all parties. Meaningful engagement with the relevant stakeholders is important throughout the life of an investment project in the mining sector; in particular, when the enterprise may cause or contribute to or has caused or contributed to an
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adverse impact in the area of influence in which it plans to operate.
As counsel for the Republic has explained over the course of this investment arbitration, in light of relevant, customary international law, Peruvian law, and in those two principles, Claimant should have been aware that it was required to obtain community support before developing the Invicta mine.
The constitutional rights of rural communities in Perú are enshrined in Articles 2 and 89 of the Constitution. Article 2 includes amongst the list of fundamental freedoms the right to ethnic and cultural identity. Article 89 for its part specifically relates to rural native communities and provides that the State respects the cultural identity of rural and native communities.
That same article establishes protection for the rights of rural communities to autonomy and free disposition of their lands. Mandating that such commitments are autonomous in their organization, in communal work, and in the use and free disposal of their lands, as well as in economic and administrative
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matters within the framework established by law.
Members of the Tribunal, Claimant had the opportunity to engage in a meaningful dialogue with all the stakeholders in the area of influence of its mining project, including the Parán Community, and to seek to prevent any adverse impacts directly linked to its operations.
It failed to do so.
Like blindness and sweetness that cohabit in the Community of Parán, like gold and water that cross paths, mining industry and rural communities can coexist if measures adopted to address environmental, health and community concerns are appropriately implemented with due diligence.
Perú forcefully advocates for policies to further advance its mining--
PRESIDENT CROOK: Ma'am, excuse me, but we're past our appointed ending time, and I don't want to cut off an important statement, but do you have a sense of how much longer you will need?
MS. RIVAS PLATA: Probably less than one minute.
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PRESIDENT CROOK: Okay.
MS. RIVAS PLATA: Forcefully--Perú forcefully advocates for policies to further advance its mining industry as an engine to economic growth, and it incessantly urges mining companies to engage in a constructive dialogue with all the relevant stakeholders in the area of influence in which they operate.
The seeming dichotomy between two apparent opposite interests vanishes if one considers that the twofold policy objectives at the heart of this investment dispute coexist as two sides of the same coin: Perú's path towards its own development.
In summing up, Members of the Tribunal, "it is the Constitution of it Perú, it is customary international law, and it is justice."
Having said that, I would like to conclude my remarks by extending the deepest respect and appreciation to the Members of the Tribunal on behalf of the Republic of Perú.
PRESIDENT CROOK: Thank you very much for that, ma'am, and we thank the Respondents for a very
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interesting and wide-ranging introductory presentation. I take it we're now done, okay.
Is there any last administrative business, anything we need to tend to? If not, we will see you--wish you a pleasant evening, and we'll see you tomorrow at the same time.
Thank you.
This session is adjourned.
(Whereupon, at 5:49 p.m. the Hearing on the Merits was adjourned until 9:30 a.m. the following day.)
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I, Marjorie Peters, FAPR, RMR-CRR, Court Reporter, do hereby attest that the foregoing English-speaking proceedings, after agreed- upon revisions submitted to me by the Parties, were revised and re-submitted to the Parties per their instructions.
I further certify that I am neither counsel for, related to, nor employed by any of the Parties to this action in this proceeding, nor financially or otherwise interested in the outcome of this litigation.
Signature
MARJORIE PETERS