PCA CASE NO. 2012-2 IN THE MATTER OF AN ARBITRATION BEFORE A TRIBUNAL CONSTITUTED IN ACCORDANCE WITH THE UNCITRAL ARBITRATION RULES 1976 PURSUANT TO THE AGREEMENT BETWEEN THE GOVERNMENT OF CANADA AND THE GOVERNMENT OF THE REPUBLIC OF ECUADOR FOR THE PROMOTION AND RECIPROCAL PROTECTION OF INVESTMENTS, SIGNED 29 APRIL 1996 BETWEEN:- COPPER MESA MINING CORPORATION (Canada) The Claimant - and - THE REPUBLIC OF ECUADOR The Respondent __________________________________________________________ AWARD __________________________________________________________ 15 March 2016 THE ARBITRATION TRIBUNAL: Dr. Bernardo Cremades Judge Bruno Simma V.V. Veeder QC (President) Administrative Secretary: Mr. Martin Doe TABLE OF CONTENTS TABLE OF ABBREVIATIONS iii DRAMATIS PERSONAE vi TABLE OF LEGAL MATERIALS x PART 1 – THE ARBITRATION 1.01 PART 2 – THE PRINCIPAL ISSUES 2.01 PART 3 – THE PRINCIPAL LEGAL TEXTS 3.01 PART 4 – THE PRINCIPAL FACTS – CHRONOLOGY 4.01 PART 5 – JURISDICTION AND ADMISSIBILITY 5.01 PART 6 – LIABILITY AND CAUSATION 6.01 PART 7 – COMPENSATION 7.01 PART 8 – INTEREST 8.01 PART 9 – LEGAL AND ARBITRATION COSTS 9.01 PART 10 – SUMMARY OF THE TRIBUNAL’S DECISIONS 10.01 PART 11 – THE OPERATIVE PART 11.01 ii TABLE OF ABBREVIATIONS 2000 Mining Law Law No. 126 (Ley de Minería), published in the Supplementary Official Gazette No. 695 of 31 May 1991, and amended in the Supplementary Official Gazette No. 144 of 18 August 2000 (Exhibit C-32) 2009 Mining Law Mining Law (Ley de Minería), published in the Official Gazette (Registro Oficial) No. 517 of 29 January 2009 (Exhibit C-11) AGCD Belgian State Technical Assistance Mission Ascendex Ascendant Exploration S.A. Ascendex Ascendant Ascendant Holdings Ltd. Ascendant Barbados Ascendant Copper (Barbados) Corporation Ascendant Copper Ascendant Copper Corporation; former name of Copper Mesa Mining Corporation; the Claimant in this arbitration Ascendant Ecuador Ascendant Copper S.A. Ascendcopper or AE Biotreat Biotreat S.A. Bishimetal Bishimetal Exploration Co. Ltd., a subsidiary of Mitsubishi CCCC Commission for Civil Control of Corruption CDC Council for the Development of the Community (Consejo de Desarrollo de las Comunidades) Chaucha Concession Chaucha project, consisting of Chaucha (Janeth 1) concession in southern Ecuador Claimant Copper Mesa Mining Corporation; the Claimant in this arbitration CODEGAM García Moreno Development Council (Consejo de Desarrollo de García Moreno) Copper Mesa Copper Mesa Mining Corporation; the Claimant in this arbitration DECOIN Ecological Defence and Conservation of Intag iii DGGM General Direction for Geology and Mines of Ecuador DosRios Compañía Minera DosRíos S.A, Ecuadorian subsidiary of the Claimant Ecuador The Republic of Ecuador; the Respondent in this arbitration Ecuadorgold Ecuador Gold S.A. Ecuadorgold Ecuadorian DosRios, Telimbela, and Compañía Ruta de Cobre S.A. Subsidiaries EIS Environmental Impact Study EMA Environmental Management Law (Ley de Gestión Ambiental) ENAMI National Mining Enterprise (Empresa Nacional Minera) created by Article 12 of the 2009 Mining Law H&L Honor & Laurel Hearing Oral hearing held on 16-21 September 2013 at the World Bank in Washington, DC, USA JICA Japanese International Co-operation Agency Junín Concessions Junín project, consisting of the Golden 1 and Golden 2 concessions in northwestern Ecuador LGA Environmental Management Law (Ley de Gestión Ambiental) MEM Ministry of Energy and Mines of Ecuador Mining Concessions Junín, Chaucha, and Telimbela Concessions Mining Mandate Constituent Mandate No. 6 (Mandato Constituyente No. 6) passed by Ecuador’s Constituent Assembly (Asamblea Constituyente) on 18 April 2008 (Exhibit C-60) Nortec Nortec Ventures Corp. Nullification Resolutions of the Pichincha Regional Mining Office dated 25 January 2008 Resolutions (Exhibit C-9) ODI Organization for the Development of the Intag iv Project Companies Ascendant Ecuador, DosRios, and Telimbela RAAM Environmental Regulation for Mining Activities (Executive Decree) Respondent The Republic of Ecuador; the Respondent in this arbitration Suspension Resolution Resolution of the Pichincha Regional Mining Office dated 25 September 2007 (Exhibit C-57) Telimbela Compañía Minera Telimbela S.A., Ecuadorian subsidiary of the Claimant Telimbela Concession Telimbela project, San Pablo 1 concession for the in Central Ecuador Termination Resolutions of the National Mining Director dated 15 September 2008 Resolutions (Exhibits C-58 and C-59) Treaty Agreement between the Government of Canada and the Government of the Republic of Ecuador for the Promotion and Reciprocal Protection of Investments, signed on 29 April 1996 Tripartite Agreement Commitment Contract Intag Region Cotacachi, entered into among Mr. Polibio Pérez on behalf of the Community Council of the Region of Intag and the Ecuadorian government represented by the Governor of the Province of Imbabura, and witnessed by the Ministry of Energy and Mines and the Commander of the Provincial Police, dated 20 March 2007 (Exhibit C-55), taken together with Commitment Contract Intag Region Cotacachi, entered into among Ascendant Ecuador and the Ecuadorian government represented by the Governor of the Province of Imbabura, and witnessed by the Ministry of Energy and Mines and the Commander of the Provincial Police, dated 20 March 2007 (Exhibit C-56) TULAS Unified Environmental Rules of the Ministry of Environment of Ecuador UNCITRAL Rules UNCITRAL Arbitration Rules 1976 v DRAMATIS PERSONAE Family Name(s), Description First Name(s) Acosta, Alberto Minister of Mining (15 January 2007 – 15 June 2007); President of the Constituent Assembly (30 November 2007 – 27 June 2008) Alba, Fernando Honor & Laurel employee Albán, Jorge Interim Minister of Mining (15 June 2007 – 23 July 2007) Almeida Vaca, Juan Governor of the Province of lmbabura (23 June 2005 – 17 January 2007) Andrade, Ronald President of CODEGAM (2005 – 2006) Barragán Medina, Under-Secretary of Environmental Protection (9 May 2005 – 22 Alfredo Enrique November 2006) Benalcázar, Ciro One of Ascendant Ecuador’s “social promoters” in Intag in 2006 Benalcázar, Leo Honor & Laurel employee Bermeo, Juan Carlos Ascendant Ecuador General Manager (November 2005 – 5 October 2006) Betancourt, Silvia Intag resident, anti-mining activist Bolaños, Patricio Intag resident, anti-mining activist Bustamante, Roque First titleholder to the Junín Concessions Carrasco, Milton Engineer of the Ministry of Mining, Environmental Mining Unit (9 May 1988 – 6 March 2007) Cazar, Edgar Alfonso Ascendex’s employee Cedeño Garcia, Carlos Ascendex’s and then Ascendant Ecuador’s employee until 2005 Alonso Chaplin, Leslie Brooke Plaintiff in a criminal complaint against Carlos Zorrilla in 2006 which was found to have been filed in bad faith Chiriboga, Galo Minister of Mining (23 July 2007 – 8 October 2008) Cordero Heredia, David DECOIN’s legal coordinator (2007) (Respondent’s position, based on evidence: e.g. Exhibit R-338) Correa, Rafael President of the Republic of Ecuador (15 January 2007 – present) Cousin, Guido President of the Parish of Garcia Moreno (2000 – 2004) vi Family Name(s), Description First Name(s) Cueva, José Former DECOIN employee; Intag resident from January 2006 onwards, anti-mining activist; Respondent’s witness in the arbitration Dávalos, Dario Ascendant Ecuador’s employee (2005 – 2007) Davis, Gerald E. Copper Mesa’s shareholder, President and Chief Executive Officer (November 2004 – present); Claimant’s witness in the arbitration Enriquez, Diego Ascendant Ecuador’s employee in 2006 – 2007 Falconi, Diego At Ministry of Government (29 January 2007 – 29 July 2008) Fieweger, Mary Ellen Intag resident, anti-mining activist; Director of Intag Newspaper Figueroa, lsabela DECOIN’s attorney (2006 – 2007) Flores, Hector Intag resident, anti-mining activist Flores, Magdalena One of Ascendant Ecuador’s “social promoters” in Intag Fuertes, Wilmer Honor & Laurel employee Gammon, John Member of the Board of Directors of Copper Mesa; defendant in Ramirez Piedra et at v Copper Mesa, TSX et al. García Pozo, Diego Governor of Imbabura (17 January 2007 – 4 February 2009) Garzón, José President of the Association of Intag Parishes (2006 – 2007) Grist, Paul Co-Founder and General Manager of Ascendex (1999 – 2004) Guevara, Kléber Geological engineer of the Ministry of Mining (National Directorate of Mining and Environmental Mining Unit, 1984 – 2008); Respondent’s witness in arbitration Haigh, John Copper Mesa’s Manager of Investor Relations (2007 – 2009) Herrera, Fausto Ascendant Ecuador employee (company driver) (2005 – 2007) Jacomé, Milton Political Lieutenant of the Parish of Garcia Moreno (23 February 2007 – at least 2010) Jimenez Ruiz, Esvar Police Provincial Chief for the Imbabura rural area (including Junín) (9 May 2006 – 20 November 2007) Jurado, Jorge Under-Secretary of Mining (18 January 2007 – 27 July 2007) vii Family Name(s), Description First Name(s) Jurika, Dana Co-Founder and General Manager of Ascendex (1999 – 2002); Executive Vice-President of Ascendex holdings Ltd. (2002 – 2004) Copper Mesa’s Vice President (June 2006 – July 2009); Copper Mesa’s director (December 2010 – present); Claimant’s witness in the arbitration Jurika, William Former shareholder, former member of the Board of Directors and former Chairman of Copper Mesa (2004 – 2007). Resigned from the Board of Directors and was succeeded as Chairman by Robert Pevenstein from 2008 onwards King, John Former Copper Mesa employee, geologist (2006 – 2009). Retained by Claimant in 2012 as an expert witness on the