International Centre for Settlement of Investment Disputes
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INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES ICSID Case No. ARB/14/21 In the Matter of BEAR CREEK MINING CORPORATION Claimant, v. THE REPUBLIC OF PERU Respondent. CLAIMANT’S REPLY ON THE MERITS AND COUNTER-MEMORIAL ON JURISDICTION KING & Spalding LLP Henry G. Burnett Craig S. Miles Caline Mouawad Jorge M. Mattamouros Aloysius P. Llamzon Cedric Soule Fernando Rodriguez-Cortina Eldy Quintanilla Roché Jessica Beess und Chrostin MIRANDA & AMADO ABOGADOS Luis G. Miranda Cristina Ferraro Luis Alonso Navarro On behalf of Claimant Bear Creek Mining Company TABLE OF CONTENTS I. INTRODUCTION .............................................................................................................. 1 II. FACTUAL BACKGROUND ............................................................................................. 4 A. BEAR CREEK HAS EXTENSIVE MINING EXPERIENCE ............................................... 4 B. BEAR CREEK LAWFULLY ACQUIRED THE SANTA ANA MINING CONCESSIONS ...... 10 1. Bear Creek Did Not Engage in an UnlawFul Scheme to Acquire the Santa Ana Mining Concessions .......................................................................... 12 2. The Declaration of Public Necessity Issued by the Council of Ministers Is Not a Discretionary Decision .................................................................... 22 3. Numerous Foreign Investors Acquired Mining Concessions Within 50 Km of the Peruvian Border by Using Structures that Were Similar to Bear Creek’s ...................................................................................................... 25 a. Authoritative Supreme Decrees Issued After the Foreign Investor Had Already Acquired Mining Rights .......................................... 26 b. Authoritative Supreme Decrees Issued in Cases with Structures Similar to that Executed by Bear Creek in the Acquisition of the Santa Ana Mining Concessions .................................................... 32 C. BEAR CREEK DEVELOPED THE SANTA ANA PROJECT WITH THE SUPPORT OF THE NEIGHBORING COMMUNITIES AND THE APPROVAL OF PERU ................................. 35 1. Bear Creek Developed Close Relationships with the Santa Ana Communities Prior to the Preparation of Its ESIA ................................... 38 2. Bear Creek Pursued Its Successful Community Relations Program During the Preparation of the ESIA ...................................................................... 41 3. The DGAAM Approved the Executive Summary of Bear Creek’s ESIA as well as Its PPC .......................................................................................... 43 4. Community Support for Bear Creek and the Santa Ana Project Continued After the Public Hearing ........................................................................... 52 D. THE EVENTS IN PUNO DID NOT JUSTIFY THE SUSPENSION OF THE ESIA EVALUATION PROCESS OR THE ENACTMENT OF SUPREME DECREE 032 ................ 57 1. Bear Creek Did Not Cause the Protests in the Department of Puno ......... 57 2. Even Though Bear Creek was not Responsible for the Protests in Puno, Peru Summarily Suspended Bear Creek’s ESIA Evaluation Process ....... 63 3. Peru’s Claim that it Received New Information in June 2011 Allegedy Demonstrating that Bear Creek Had Breached Article 71 of the Peruvian Constitution Is Implausible ....................................................................... 65 E. PERU’S ENACTMENT OF SUPREME DECREE 032 WAS UNLAWFUL ......................... 68 1. Peru Violated Basic and Universal Norms of Due Process and Transparency when it Enacted Supreme Decree 032 ............................... 68 2. Peru Enacted Supreme Decree 032 in Violation of Peruvian Law ........... 72 i F. PERU’S NUMEROUS MEETINGS WITH BEAR CREEK SHORTLY AFTER ENACTING SUPREME DECREE 032 ARE AN ADMISSION OF LIABILITY ..................................... 75 G. BUT FOR PERU’S UNLAWFUL ACTS, PRODUCTION AT SANTA ANA WOULD HAVE COMMENCED IN THE FOURTH QUARTER OF 2012 .................................................. 77 1. Bear Creek’s ESIA Complied with All Applicable Legal Requirements and MINEM Likely Would Have Approved It ......................................... 78 2. The Remaining Permits that Bear Creek Needed for the Construction and Operation of the Santa Ana Project Were Routine and Not Difficult to Obtain ........................................................................................................ 84 3. Bear Creek’s Construction and Production Schedule Was Reasonable, Even Conservative .................................................................................... 90 4. The Santa Ana Communities Would Not Have Impeded the Further Development of the Santa Ana Project ..................................................... 94 III. PERU’S ATTEMPT TO DEPRIVE THE TRIBUNAL OF JURISDICTION OVER BEAR CREEK’S CLAIMS ON THE GROUND OF SUPPOSED “ILLEGALITY” FAILS ............................................................................................................................... 97 A. BEAR CREEK IS THE RIGHTFUL OWNER OF A PROTECTED INVESTMENT ................ 97 1. Bear Creek Acquired Its Investment Legally and in Good Faith .............. 99 2. Respondent Is Estopped from Asserting Illegality or Bad Faith ............ 104 3. Neither Legality of the Investment nor Good Faith Is a Prerequisite for Access to International Arbitration Dispute Resolution Under the Canada- Peru FTA, the ICSID System, or International Law ............................... 110 B. THERE IS AN INVESTMENT UPON WHICH THE TRIBUNAL CAN BASE ITS JURISDICTION ....................................................................................................... 119 C. CLAIMANT HELD THE RIGHTS UPON WHICH IT BASES ITS CLAIM ....................... 122 IV. PERU UNLAWFULLY EXPROPRIATED BEAR CREEK’S MINING RIGHTS ...... 126 A. PERU INDIRECTLY EXPROPRIATED BEAR CREEK’S MINING CONCESSIONS IN VIOLATION OF THE CANADA-PERU FTA .............................................................. 129 1. Supreme Decree 032 Constitutes an Indirect Expropriation ................... 130 2. Annex 812(c) of the Canada-Peru FTA Does Not Exonerate Peru from Liability for Indirect Expropriation ........................................................ 134 a. Annex 812.1(c) of the FTA Does Not Impose a New “Very High Bar” on Indirect Expropriation Claims ....................................... 135 b. The Language in Annex 812.1(c) of the Canada-Peru FTA Requires Proportionality Between the Severity of the State Measure and Its Purpose ............................................................. 137 c. Supreme Decree 032 Is A Discriminatory Measure That Was Not Designed and Applied to Protect Legitimate Public Welfare Objectives ................................................................................... 139 ii d. The Circumstances Under Which Supreme Decree 032 Was Issued Warrant a Finding of Indirect Expropriation .............................. 141 B. PERU’S EXPROPRIATORY MEASURES WERE NOT TAKEN AGAINST PROMPT, ADEQUATE AND EFFECTIVE COMPENSATION ....................................................... 142 C. PERU’S EXPROPRIATORY MEASURES WERE NOT FOR A PUBLIC PURPOSE .......... 143 D. THE EXPROPRIATION WAS NOT CONDUCTED IN ACCORDANCE WITH DUE PROCESS OF LAW AND WAS ARBITRARY AND DISCRIMINATORY........................................ 156 E. THE DOCTRINE OF SOVEREIGN POLICE POWERS IS NOT A DEFENSE AGAINST AN UNLAWFUL EXPROPRIATION UNDER THE TERMS OF THE FTA ............................ 158 1. The Police Powers Doctrine Is Not Applicable to Article 812 of the Canada-Peru FTA ................................................................................... 159 2. Supreme Decree 032 Is A Specifically-Targeted Measure Designed to Divest Bear Creek of its Investment that Falls Outside the Scope of the Police Powers Doctrine ........................................................................... 161 3. Supreme Decree 032 Was Arbitrary, Not Proportional, and Issued Without Regard for Due Process .......................................................................... 170 F. PERU DIRECTLY EXPROPRIATED BEAR CREEK’S MINING RIGHTS ....................... 172 1. Supreme Decree 083 Constitutes an Essential Component of Bear Creek’s Property Rights ....................................................................................... 176 2. Supreme Decree 083 Granted Bear Creek Specific Mining Rights ........ 178 3. Supreme Decree 032 Openly and Unequivocally Revoked Bear Creek’s Rights to Own, Operate, or Benefit from the Concessions ..................... 179 4. Supreme Decree 032 Constitutes An Unlawful Direct Expropriation .... 181 V. PERU FAILED TO ACCORD CLAIMANT AND ITS INVESTMENT FAIR AND EQUITABLE TREATMENT ......................................................................................... 182 A. PERU FAILED TO ACCORD CLAIMANT AND ITS INVESTMENT THE MINIMUM STANDARD OF TREATMENT UNDER INTERNATIONAL LAW ................................... 182 1. MST Has Evolved Since Neer ................................................................ 183 2. The Contemporary International Minimum Standard of Treatment Includes a Broader Set of Protections Than Neer ................................... 191 3. Peru’s Treatment of Claimant and Its Investment Has Breached the Minimum Standard of Treatment ............................................................ 195 4. Even if the Neer Standard Were an Accurate Statement of MST, Peru’s Actions Would Constitute a Breach Thereof .........................................