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PCA Case No. 2016-39/AA641 Glencore Finance (Bermuda) Ltd. (Claimant) - VS - The Plurinational State of Bolivia (Respondent) BOLIVIA’S REPLY ON PRELIMINARY OBJECTIONS AND REJOINDER ON THE MERITS 24 October 2018 Members of the Tribunal: Prof. Ricardo Ramírez Hernández Prof. John Y. Gotanda Prof. Philippe Sands Dechert (Paris) 32 rue de Monceau 75008 Paris, France TABLE OF CONTENTS Page INTRODUCTION .1 2. GLENCORE NTERNATIONAL'S IRREGULAR ACQUISITION OF THE ASSETS AND THE UNSUSTAINABLE VIOLENCE IN THE REGION OF COLQUIRI FORCED BOLIVIA TO REVERT THE ASSETS ..............................................4 2.1 Prior To The Privatization, Bolivia Successfully Operated The Smelters And Mine Lease Through COMIBOL And Its Affiliates....................................................6 2.1.1 Claimant Does Not Dispute That COMIBOL Smoothly Operated The Colquiri Mine And Maintained Good Relations With The Independent Mining Workers Of The Region ................................................7 2.1.2 Claimant Mischaracterizes The Investments That Bolivia Made In The Smelters During The 1970-1990s..........................................................10 2.2 It Is Undisputed That, Between 1994 and 1997, Former President Sanchez De Lozada Played A Key Role In Paving The Way For The Privatization Of The 2.3 Claimant Fails To Disprove That Sanchez De Lozada Took Advantage Of Policies Put In Place While In Office In Order To Acquire The Colquiri Mine Lease And The Antimony Smelter ............................................................................22 2.3.1 Sanchez De Lozada, Through Comsur, Bid For And Acquired The Colquiri Mine Lease In 1999-2000...............................................................22 2.3.2 Sanchez De Lozada, Through Comsur, Bid For And Acquired The Antimony Smelter In 2000-200 1 ..................................................................29 2.4 The Tin Smelter Was Acquired By Allied Deals In Highly liregular Circumstances And Subsequently Transfened To Sanchez De Lozada....................33 2.4.1 Allied Deals Acquired The Tin Smelter In Highly Inegular Circumstances...............................................................................................33 2.4.2 The Bankruptcy And Fraud Scandal Involving Allied Deals In 2002 Set The Stage For The Acquisition Of The Tin Smelter By Comsur ...........36 2.5 Claimant Is Unable To Rebut That, In 2005, When Glencore International Acquired The Assets From Sanchez De Lozada, Their Reversion Was Foreseeable................................................................................................................38 2.5.1 Comsur's Operation Of The Coiquiri Mine Lease Created Tensions With The Mining Cooperativas And The Unions At Colquiri......................39 2.5.2 Claimant's Portrayal Of The Facts Intentionally Omits The Historic Social Changes That Made The Reversions Foreseeable .............................44 2.5.3 The Reply Confirms That Glencore International (Not Claimant) Purchased The Assets From Sanchez De Lozada When It Was Highly Likely That The State Would Take Action Against The Assets...................50 2.5.4 Immediately After It Had Acquired The Assets, Glencore International Assigned Them To Glencore Bermuda...................................58 2.6 Despite The Acquisition Of The Smelters And The Mine Lease, Glencore International Did Not Make Any Substantial Investment During Its Operation OfThese Assets .........................................................................................................63 -1- TABLE OF CONTENTS (continued) Page 2.7 Contrary to Claimant's Assertion, Bolivia Reverted The Assets For Public Purposes.....................................................................................................................68 2.7.1 Bolivia Reverted The Tin Smelter Due To The frregularities In The Privatization Process.....................................................................................68 2.7.2 Bolivia Reverted The Antimony Smelter Due To Its Inactivity...................72 2.7.3 Due To The Social Crisis Created By Sinchi Wayra At The Colquiri Mine, The State Was Left With No Other Choice But To Revert The MineLease....................................................................................................76 2.8 After The Reversions, Bolivia Has Negotiated With Glencore International In GoodFaith ...............................................................................................................106 2.9 Claimant Does Not Dispute That The State Made Significant Investments After The Reversion Of The Smelters And The Mine Lease ..................................110 3. THELAW APPLICABLE TO THE DISPUTE...................................................................111 4. THECLAIMS ARE NOT SUBJECT TO JURISDICTION AND ARE 4.1 Claimant Failed To Prove That Its Claims Are Subject To Jurisdiction And AreAdmissible ........................................................................................................116 4.2 The Tribunal Lacks Jurisdiction Because Claimant Has Failed To Show That Its Acquisition Of The Assets Was Not An Abuse Of Process ...............................118 4.2.1 Structuring An Investment To Obtain Treaty Protection When A Dispute Is Foreseeable Constitutes An Abuse of Process...........................119 4.2.2 Glencore International Rerouted Its Investment Through Bermuda When A Dispute With Bolivia Was Foreseeable........................................122 4.3 The Tribunal Lacks Jurisdiction Because Claimant Has Failed To Show That It Actively Invested In Bolivia.................................................................................128 4.3.1 The Treaty Extends Protection Only To Companies That Actively Invest...........................................................................................................129 4.3.2 Glencore Bermuda Made No Active Investment In Bolivia.......................134 4.4 The Tribunal Lacks Jurisdiction Because The Claimant Is, In Reality, A Swiss Company Not Subject To Treaty Protection And, Alternatively, Because It Cannot Bring Claims Based On Indirectly Held Rights.........................137 4.4.1 The Treaty Excludes Jurisdiction Asserted On The Basis Of Corporate Formalities When The Real Party In Interest Is Not Protected.....................................................................................................137 4.4.2 The Corporate Veil Must Be Pierced Because Glencore Bermuda Is A Shell Company Hiding The True Party In Interest .................................140 4.4.3 Even If (Quod Non) The Corporate Veil Protects Glencore Bermuda, International Law Does Not Allow It To Bring Claims For Its Indirect Investment.....................................................................................143 4.5 The Tribunal Lacks Jurisdiction Because The Assets Subject To Dispute Were Illegally Privatized .........................................................................................146 -11- TABLE OF CONTENTS (continued) Page 4.5.1 The Privatization Of The Assets Was Illegal Under Bolivian Law And Contrary To International Public Policy.............................................147 4.5.2 Claimant Brings Its Claims With Unclean Hands Because The Privatizations Were Illegal..........................................................................160 4.6 The Tribunal Lacks Jurisdiction Because, As Claimant Cannot Reasonably Deny, The Dispute Relates Directly Or Indirectly To Contracts Requiring Mandatory ICC Arbitration......................................................................................164 4.7 4.8 The Tribunal Lacks Jurisdiction Over The Tin Stock Claim Because Claimant Is Unable To Show It Was Ever Notified To Bolivia..............................................175 5. BOLIVIA'S CONDUCT WAS CONSISTENT WITH THE TREATY AND INTERNATIONAL LAW....................................................................................................180 5.1 Bolivia Did Not Unlawfully Expropriate The Assets But Instead Exercised Its PolicePowers...........................................................................................................180 5.1.1 Claimant Has Not Disproven That The Reversions Were Legitimate Exercises Of Police Powers........................................................................180 5.1.2 If The Reversions Were Expropriations(Quod Non),They Were Lawful.........................................................................................................192 5.2 Bolivia Provided Full Protection And Security To The Colquiri Mine At All Times.......................................................................................................................208 5.2.1 Claimant Cannot Coherently Deny That Full Protection And Security Requires Only Lawful And Reasonable Measures.....................................209 5.2.2 Contrary To Claimant's Argument, Bolivia Took All Actions That Were Reasonably Available In Light Of The Severe Social Conflict And Constraints From Human Rights Law ................................................212 5.2.3 Claimant Effectively Concedes That The Colquiri Mine Lease Adds Nothing To The Full Protection And Security Standard.............................219 5.3 Although Its Allegations Are Redundant, Claimant Is Unable To Demonstrate That Bolivia Denied It Fair And Equitable Treatment At Any Times.....................220 5.3.1 Bolivia Acted In Good Faith, Transparently, And With Respect For Due Process During

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