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PCA CASE No 2016-39/AA641 ARBITRATION UNDER THE RULES OF ARBITRATION OF THE UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW GLENCORE FINANCE (BERMUDA) LTD Claimant -v- PLURINATIONAL STATE OF BOLIVIA Respondent CLAIMANT'S REPLY ON THE MERITS AND COUNTER-MEMORIAL ON JURISDICTIONAL OBJECTIONS ~ Freshfields Brockhaus Deringer us LLP FERRERE 601 Lexington A venue Avenida San Mrutin. No 155 31st Floor Edificio Ambassador Business Center, Piso 18 New York Equipetrol New York 10022 Santa Cmz de la Sien·a United States of America Bolivia TABLE OF CONTENTS I. INTRODUCTION AND EXECUTIVE SUMMARY ...................................... 1 II. THE FACTS RELEVANT TO THE DISPUTE .............................................. 7 A. THE NEW ECONOMIC POLICY SOUGHT TO ADDRESS THE SEVERE CRISIS THAT AFFECTED THE COUNTRY IN THE 1980S BY ATTRACTING PRIVATE INVESTMENT ................................................................................................. 7 B. THE PUBLIC TENDER AND SALE OF THE ASSETS WERE CARRIED OUT IN ACCORDANCE WITH BOLIVIA’S LEGAL FRAMEWORK ................................. 15 1. Bolivia never challenged or disputed the legal framework for the privatization of the Assets ........................................................................... 15 2. Bolivia was in complete control of the bidding process ............................... 20 3. Bolivia allowed the Assets to operate and change owner following the privatization ................................................................................................ 29 C. GLENCORE BERMUDA ACQUIRED THE ASSETS IN AN ARMS-LENGTH TRANSACTION ............................................................................................. 32 D. BOLIVIA’S PURPORTED REASONS FOR NATIONALIZING GLENCORE BERMUDA’S INVESTMENTS ARE PRETEXTUAL AND UNSUPPORTED BY THE FACTS ......................................................................................................... 43 1. Bolivia’s own documents reveal that the true reason for nationalizing the Tin Smelter was to gain full control over the tin supply chain and improve the financial situation of the Huanuni State-owned mine ............... 43 2. Bolivia’s true reason for nationalizing the Antimony Smelter was to have access to the Tin Stock to supply the State-run Tin Smelter ................. 52 3. Bolivia exacerbated the conflict at the Colquiri Mine in order to execute its planned nationalization .............................................................. 59 4. Despite infinite attempts, Glencore Bermuda did not receive any compensation for the expropriation of its investments ................................. 89 III. THE LAW APPLICABLE TO THIS ARBITRATION IS THE TREATY AND INTERNATIONAL LAW .................................................... 92 IV. THE TRIBUNAL HAS JURISDICTION OVER GLENCORE BERMUDA’S CLAIMS .................................................................................. 96 A. BOLIVIA HAS THE BURDEN OF PROVING ITS OBJECTIONS TO JURISDICTION AND ADMISSIBILITY .................................................................................... 96 B. CONTRARY TO BOLIVIA’S ALLEGATIONS, GLENCORE BERMUDA IS A PROTECTED INVESTOR UNDER THE TREATY ............................................... 98 i 1. Glencore Bermuda is a protected investor pursuant to Article 1 of the Treaty ......................................................................................................... 99 2. There are no grounds for disregarding the nationality requirements of the Treaty in this case ................................................................................ 102 3. Contrary to Bolivia’s allegations, there is no abuse of process in this case ........................................................................................................... 109 C. GLENCORE BERMUDA HAS MADE INVESTMENTS IN BOLIVIA THAT ARE PROTECTED UNDER THE TREATY .............................................................. 129 1. The Treaty does not require an “active” investment in Bolivia................... 130 2. The Treaty does protect indirect investments ............................................. 141 D. BOLIVIA’S ALLEGATIONS OF ILLEGALITY ARE FALSE AND UNSUBSTANTIATED ................................................................................................................. 146 1. Bolivia’s allegations of illegality of the privatization process are devoid of any substance ............................................................................ 147 2. Bolivia cannot rely on the conduct of its own officials to deprive Glencore Bermuda of protection under the Treaty ..................................... 151 3. Bolivia’s characterization of the privatization process does not make Glencore Bermuda’s investment unlawful ................................................. 155 4. Bolivia authorized Glencore Bermuda’s investment and should thus be precluded from invoking illegality as a defense ......................................... 158 E. BOLIVIA WAS DULY NOTIFIED OF ALL DISPUTES AND WAS GIVEN THE OPPORTUNITY TO RESOLVE THEM AMICABLY ........................................... 164 F. GLENCORE BERMUDA’S CLAIMS ARE BASED ON THE TREATY – NOT ON CONTRACT ................................................................................................ 172 V. BOLIVIA BREACHED ITS OBLIGATIONS UNDER THE TREATY AND INTERNATIONAL LAW .................................................. 179 A. BOLIVIA UNLAWFULLY EXPROPRIATED GLENCORE BERMUDA’S INVESTMENTS ........................................................................................... 180 1. Bolivia’s measures constitute an expropriation of Glencore Bermuda’s investments ............................................................................................... 182 2. Contrary to Bolivia’s allegations, the expropriations of Glencore Bermuda’s investments were unlawful ...................................................... 197 B. BOLIVIA FAILED TO PROVIDE FULL PROTECTION AND SECURITY AND TO OBSERVE ITS OBLIGATIONS UNDER THE COLQUIRI LEASE ........................ 223 1. Bolivia’s restrictive view of its full protection and security obligation is erroneous ............................................................................................... 225 ii 2. Bolivia did not exercise due diligence and vigilance in the protection of the Colquiri Mine and its workers ......................................................... 231 3. By failing to protect Glencore Bermuda’s investment from violent interference by the cooperativistas, Bolivia failed to observe its obligations under the Colquiri Lease ......................................................... 238 C. BOLIVIA TREATED GLENCORE BERMUDA’S INVESTMENTS UNFAIRLY AND INEQUITABLY, IMPAIRING THEM THROUGH UNREASONABLE MEASURES .. 240 1. Bolivia failed to treat Glencore Bermuda’s investments fairly and equitably ................................................................................................... 241 2. Bolivia carried out the nationalizations of the Assets in a manner that was arbitrary, non-transparent and in violation of due process ................... 244 3. Bolivia’s measures violated Claimant’s legitimate expectations ................ 255 4. Bolivia did not negotiate in good faith a fair standard of compensation for the expropriated Assets ........................................................................ 263 VI. REQUEST FOR RELIEF ............................................................................ 267 iii GLOSSARY Term Defmition Agreement between the Central Obrera Boliviana, the FSTMB, the Huanuni Union, 10 May 2012 Agreement the Vice President ofBolivia, the Minister ofMining and the Minister ofEconomy, 10 May2012 Political Constitution of the State of 1967 Constitution Bolivia, 2 Febmary 1967, as amended in 1994 and 2004 Political Constitution of the Plurinational 2009 Constitution State of Bolivia, 7 Febmary 2009 Administrative Procedure Law Law No 2,341, 23 April 2002 Antimony Smelter Vinto antimony smelter Antimony Smelter Nationalization Decree Supreme Decree No 499, 1 May 2010 Sale and purchase agreement of the Antimony Smelter between the Trade Antimony Smelter Purchase Agreement Ministry, Cotnibol, Colquiri and Comsur, 11 January 2002 Collectively, the Tin Smelter, the Antimony Assets Smelter and the rights in the Colquiri Mine Bilateral investment treaties, including BITs treaties for the promotion and protection of investments and the like Bolivia I Respondent Plurinational State of Bolivia Colquiri Mine Nationalization Decree Supreme Decree No 1,264, 20 June 2012 Capitalization Law Law No 1,544, 21 March 1994 Central Local de Cooperativas Mineras de Cencomincol Colquiri CDC Commonwealth Development Corporation COB Central Obrera Boliviana Colquiri Campania Minera Colquiri SA Lease agreement for the Colquiri Mine Colquiri Lease between the Trade Ministry, Cotnibol, Colquiri and Comsur, 27 April 2000 Colquiri Mine Tin and zinc mine in Colquiri lV Term Definition Sindicato Mixto de Trabajadores Mineros Colquiri Union de Colquiri State-owned Cotporaci6n Minera de Comibol Bolivia Comsur Campania Minera del Sur SA Concentrator Plant The concentrator plant of the Colquiri Mine Cooperativa 21 de Diciembre Cooperativa Minera 21 de Diciembre Ltda Cooperativa 26 de Febrero Cooperativa Minera 26 de Febrero Ltda ECT The Energy Chruier Treaty EMV Empresa Metahirgica Vinto State-owned Empresa Nacional de ENAF Fundiciones Expropriation Law Law of Expropriation due to Public Utility,

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