CLAIMANTS' STATEMENT OF CLAIM
II FACTUAL BACKGROUND
A. From 1922 to 1997, Peru Created One of the World's Most Polluted Sites: The La Oroya Complex
B. During the Early 1990s, Peru Failed to Privatize Centromin because of the La Oroya Complex's Environmental Legacy and Obsolete Condition
C. Peru's Privatization Efforts were Hampered by its Adoption of New Environmental Standards Aimed at Remediating Decades of Contamination
D. Peru and Centromin Revised their Privatization Strategy in the Second Bidding Process by Making Clear that They Would Retain and Assume Liability for Third-Party Claims Relating to Environmental Contamination and Remediate the Areas around the La Oroya Complex
E. The Renco Consortium Purchased the La Oroya Complex from Centromin on October 23, 1997, with a Guaranty Agreement from Peru for All of Centromin's Contractual Obligations
F. Under the STA and the Guaranty Agreement, Centromin and Peru Retained and Assumed Liability for Third-Party Claims and Damages relating to Environmental Contamination and Committed to Perform Centromin's PAMA Obligations and Remediate the Areas Around the Complex
1. Key Language of the STA related to Liability for Third-Party Claims and Damages
2. Key Language of the STA related to Centromin and Peru's Obligations to Remediate and Perform Centromin's PAMA Obligations
G. Peru and Centromin Failed to Comply with Their Obligation to Retain and Assume Liability for Third-Party Claims and Damages relating to Environmental Contamination
1. Over 3,700 Peruvian Residents Have Filed Third-Party Claims for Personal Injury against Renco and Its Affiliates, Officers, and Directors for Harm Alleged to Have Been Suffered from the La Oroya Complex's Operations
2. Peru and Activos Mineros Have Refused to Assume Any Liability for Third-Party Claims Asserted against the Renco Defendants
H. Peru and Centromin Failed to Comply with their Obligation to Remediate Areas Contaminated by the Complex's Operations
1. Remediation of the Soil Was Important to the Health of the Population
2. The MEM Allowed Centromin to Defer Its Remediation Obligations
3. Peru's and Centromin's Failure to Remediate Has Impacted Both the Health of the Citizens of La Oroya and the Interests of the Renco Defendants, Including Renco and DRR
III THIS TRIBUNAL HAS JURISDICTION OVER CLAIMANTS' CLAIMS
A. Renco and DRR Are Parties to the STA
B. Alternatively, Renco and DRR are Parties to the STA's Arbitration Clause
C. Peru is a Party to the STA's Arbitration Clause
D. The STA's Arbitration Clause is Broad and Covers Claimants' Non- Contractual Claims under Peruvian and Customary International Law
1. The STA's arbitration clause is broad
2. The STA's arbitration clause covers Claimants' claims under Peruvian and customary international law
IV LEGAL ARGUMENT
A. Respondents' Refusal to Accept Liability for the Claims in the St. Louis Lawsuits Breaches the STA and the Guaranty Agreement
1. The Law Applicable to Renco's Claims for Breach of the STA and the Guaranty Agreement
2. Centromin and Peru Are Liable for Third-Party Claims Relating to Environmental Contamination
a. Pursuant to Clauses 5 and 6 of the STA, Centromin and Peru (through the Guaranty Agreement) Retained and Assumed Liability for the Lion's Share of Third-Party Claims Relating to Environmental Contamination
b. Renco Would Not Have Invested in DRP and the Complex without the Broad Commitment from Centromin and Peru to Retain and Assume Liability for Third-Party Environmental Contamination Claims
3. Peru and Centromin Have Breached the STA and the Guaranty Agreement by Failing to Assume Liability for the Claims Asserted in the St. Louis Lawsuits
a. The Claims Asserted in the St. Louis Lawsuits Fall within the Scope of Centromin's Assumption of Liability
b. Activos Mineros' Arguments in Refusing to Assume Liability for the Claims Asserted in the St. Louis Lawsuits Are Meritless
B. Respondents' Failure to Remediate the Soil in and around La Oroya Breaches the STA and the Guaranty Agreement
C. In the Alternative to their Breach-of-Contract Claims, Claimants Assert Claims under the Peruvian Civil Code for Pre-Contractual Liability, Subrogation, Contribution, and Unjust Enrichment
D. Peru Breached its Obligations to Renco and DRR under Customary International Law by Failing to Honor its Promises that it Would Retain and Assume All Liability for Third-Party Claims
1. This dispute arises from the Republic of Peru's ("Peru" or the "Government") sale in 1997 of its State-owned smelting and refining complex in La Oroya, Peru (the "La Oroya Complex", "CMLO" or the "Complex") to a consortium led by Claimant The Renco Group, Inc.
("Renco"), and Respondents Peru's and Activos Mineros S.A.C.'s ("Activos Mineros" or "AMSAC") subsequent refusal to honor their contractual and legal commitment to retain past responsibility and assume future liability for third-party claims of injury from environmental contamination at the Complex (including their failure to remediate the soil which would have mitigated these damages).
2. When Peru declared in late 1991 that it would promote private investment and privatize its mining sector, there was little reaction from the investment community. Peru's first effort to sell its State-owned mining operations in 1994 failed--without prospective investors submitting even a single bid--in large part because of the substantial risk of liability associated with third-party claims from injury resulting from 75 years of historical environmental contamination and dilapidated existing infrastructure that continued to pollute. As Peru later reported in an official White Paper, the smelting and mining complex in La Oroya was particularly problematic because of its visually obvious and well-known environmental problems.1
3. Undeterred in its desire to sell the La Oroya Complex and other mining operations held by State-owned Empresa Minera del Centro del Peru ("Centromin," now Activos Mineros), Peru revised its privatization strategy in 1996. The stated goal of this second attempt was that private investors would undertake to modernize the infrastructure at the Complex with projects that would reduce its environmental impact over time pursuant to a Programa de Adecuación y Manejo Ambiental, or Environmental Remediation and Management Program (the "PAMA") while Peru and Centromin would remediate the existing environmental contamination and also would retain and assume broad liability for claims brought by third parties for activities occurring both before and after the sale.2
4. Learning from the unsuccessful first bidding round, Respondents had understood that assuming liability for third-party claims relating to activities in the La Oroya Complex was key to successfully privatizing it. Thus, they made express and consistent representations to that effect throughout the bidding process. For example, Peru advised prospective investors during a written question and answer period conducted prior to the sale that Centromin (and Peru through a guaranty) would accept responsibility for all the contamination and related claims until the end of the period allowed for the investor to modernize the smelting Complex outlined in the PAMA, only with a few limited exceptions. Centromin's and Peru's answers to investors' questions not only constituted formal inducement to enter into a contract, they also were expressly incorporated into the contract that the parties ultimately signed, as set forth below.
5. After Peru held a second public auction for the Complex on April 14, 1997, Renco and its affiliate Doe Run Resources Corporation ("DRR") (together, the "Renco Consortium") were awarded the right to negotiate a Stock Transfer Agreement ("STA") to acquire the La Oroya Complex.3 Peru required that the Renco Consortium create a local Peruvian entity as the acquisition vehicle, which it did in the form of Doe Run Peru S.R. Ltda. ("Doe Run Peru" or "DRP"). The Renco Consortium negotiated the STA with State-owned Centromin, and the parties executed the STA on October 23, 1997, as well as a Guaranty issued by the Republic of Peru on November 21, 1997,4 by which Peru guaranteed all of Centromin's "representations, securities, guaranties and obligations" under the STA.
6. The basic bargain was simple: the Renco Consortium agreed to invest in DRP, for DRP to modernize the La Oroya Complex and improve its condition. In return, Peru and Centromin agreed to retain and assume broad and exclusive liability for third-party claims for historical impacts arising from Centromin's operations, and--recognizing the poor state of the Complex and the enormous work required to upgrade it--for future contamination that the Complex would cause while the Renco Consortium worked to modernize the Complex under the PAMA.5 In addition, Peru and Centromin agreed to remediate the existing soil contamination.6 Moreover, the parties agreed in the STA that after the PAMA period expired, liability for third- party claims would be apportioned between Centromin and DRP depending on the extent to which the claim arose from the operation of the Complex before the period approved for completing the PAMA modernization projects expired (Centromin's/Peru's liability), or from its operation after the PAMA period expired (DRP's liability).7 DRP did not operate the Complex after June 3, 2009.
7. Beginning in 2007, U.S.-based plaintiffs' personal-injury lawyers commenced lawsuits in the United States on behalf of plaintiffs who claim to be Peruvian citizens and residents of the town of La Oroya against Claimant, the other member of the Renco Consortium (DRR), companies associated with the Renco Consortium, and certain of their officers and directors. The initial lawsuits were filed in Missouri state court in St. Louis, but were removed to, and consolidated in, the federal district court for the Eastern District of Missouri (the "St. Louis Lawsuits"). These plaintiffs' lawyers sought out and amassed a large number of plaintiffs seeking to sign up as many clients as possible in La Oroya and across the region. As a result, there are currently more than 3,700 individual plaintiffs with pending lawsuits against Claimants and its affiliates. The claims in each lawsuit are virtually identical. The St. Louis plaintiffs claim various mental and physical health effects from exposure to lead and other potentially toxic substances emitted from the Complex.
8. The third-party claims asserted in the St. Louis Lawsuits (including millions of dollars of legal fees associated with the claims that continue to mount) are exactly the type of third- party claims for which Peru and Centromin assumed liability in the STA. Indeed, the STA's language cannot be clearer. In Clause 6.2 of the STA, Centromin unequivocally committed to "assume liability for any damages and claims by third parties that are attributable to the activities of the Company [DRP], or Centromin and/or its predecessors."8
9. Yet Respondents have refused--and continue to refuse--to comply with their obligations under the STA and the Guaranty Agreement and assume such liability, despite repeated requests by Claimants to do so. This refusal to assume liability for the claims asserted in the St.
Louis Lawsuits constitutes a material breach of their obligations under the STA and the Guaranty Agreement.
10. Respondents' actions (and inactions) regarding the St. Louis Lawsuits shake the core of the deal struck between the parties--that in order for the Renco Consortium to agree to invest and modernize the conditions in La Oroya, Centromin and Peru must bear the risk of third- party claims arising from historical operations, as well as future operations for as long as activities under PAMA continued (except for a narrow set of exceptions). This was a key component of the overall transaction: without Peru's and Centromin's assumption of liability for third-party claims, the Renco Consortium would not have invested in the La Oroya Complex.
11. Yet, once the risk of third-party claims materialized in the St. Louis Lawsuits, Respondents entirely reneged on their contractual and legal obligations and representations, and they refused to assume any responsibility for those Lawsuits--a refusal that continues to this date as the St. Louis Lawsuits advance their course. Thus, Centromin (now Activos Mineros) and Peru are in breach of the STA, the Guaranty Agreement, and Peruvian law.
12. In the alternative, if this Tribunal were to decide that Respondents' actions do not constitute a breach of the STA and the Guaranty Agreement, Claimants assert claims against Respondents for pre-contractual liability, subrogation, contribution, and unjust enrichment under the Peruvian civil code of 1984 (the "Civil Code"). In addition, Peru's inducement of Claimants to make its investment based on the multiple promises and representations by Respondents that Centromin would retain and assume any environmental liability relating to the La Oroya site (with the exceptions provided for in the STA, which do not apply in this case) constitutes a breach of the minimum standard of treatment under customary international law.
13. Claimants' alternative claims for pre-contractual liability, subrogation, contribution and unjust enrichment under the Peruvian Civil Code, and their customary international law claim, fall within the scope of the broad arbitration agreement. Even if this Tribunal were to find that Renco and DRR were not parties to the STA, which they clearly were, they are still parties to the STA's arbitration agreement under the blackletter legal doctrine of separability. Moreover, under the Peruvian Arbitration Act, an arbitration provision extends not only to the formal parties to a contract but also to the parties who played a decisive role in negotiating and executing the arbitration provision, as well as those who derive benefits from the contract to which the arbitration provision belongs. Therefore, because Renco and DRR played a decisive role in negotiating the STA and its arbitration provision, and they are beneficiaries of Centromin's broad assumption of liability for third-party claims as set forth in the STA, they can avail themselves of the STA's arbitration provision. Thus, this Tribunal has jurisdiction over this dispute, and this international arbitration is the proper forum to adjudicate these claims.
14. In conclusion, it would be a travesty of justice to allow Peru and Centromin freely to turn their backs on the claims in the St. Louis Lawsuits and bear no responsibility for them, despite having repeatedly and unambiguously committed to assume precisely that liability, and having received the benefit of the Renco Consortium's investments to modernize the Complex. If that result were allowed to stand, Peru and Centromin would receive an unjustified windfall while the Renco Consortium would ultimately be encumbered with the very environmental liabilities that it so carefully and purposefully allocated to Peru and Centromin in the STA and Guaranty Agreement.
15. To support their claims, Claimants submit the following expert reports with the Memorial:
* Expert Report of Professor José Antonio Payet Puccio, expert on Peruvian Law.
Professor Payet is a preeminent Peruvian law lawyer and scholar. He is one of the founding partners of the law firm Payet, Rey, Cauvi, Pérez in Lima and Law Professor of the Universidad Católica del Perú on Peruvian law. Professor Payet opines on matters of contract interpretation, as well as Claimants' other claims under the Peruvian Civil Code.
* Expert Report prepared by Rosalind A. Schoof. Dr. Schoof is a Principal of Ramboll US Consulting, Inc. and holds a Ph.D. in toxicology from the University of Cincinnati. She has more than 30 years of experience in assessing human health effects and exposures from chemical substances in the natural and built environment, and in products and foods. Dr. Schoof focuses on the 2005 and 2008 human health risk assessments for the Complex and the surrounding communities conducted for DRP and the Peruvian Ministry of Energy and Mines ("MEM").
* Expert Report of Gino Bianchi-Mosquera. Dr. Bianchi is the Vice President and Principal Geochemist at GSI Environmental Inc. A PhD in Environmental Science and Engineering from University of California, Los Angeles, he has more than 30 years of experience directing and conducting environmental projects in the United States, Canada and Latin America. Dr. Bianchi's report evaluates certain conditions, standards and practices associated with the operation of La Oroya Complex prior to, during and after DRP's ownership and operation and their impact in the environment and public health.
* Expert Report of John A. Connor. Mr. Connor has more than 40 years of experience in forensic analysis of environment impacts, human health risk assessment, risk mitigation measures, effects of air emissions and remediation of environmental pollution issues for projects. Mr. Connor obtained an M.S. in Civil Engineering from Stanford University. Mr. Connor's report evaluates the health and environmental benefits of projects completed by DRP at the Complex and in the surrounding communities, the standards and practices employed by DRP and the relevance of the alleged exposures and damages for the third-party claims to the operation of DRP, as well as those of Cerro de Pasco and Centromin.
16. In addition, Claimants submit in support of the facts presented in this Memorial, the following witness statements:
* Witness Statement of José Mogrovejo Castillo, former Director of Environmental Affairs and Vice President of Environmental Affairs of DRP. Mr. Mogrovejo's written statement discusses the environmental practices and regulations applicable to the La Oroya Complex and the facts surrounding his role overseeing the implementation of the La Oroya PAMA projects, environmental policy, community projects and relations, the blood lead levels reduction program at La Oroya, and its receivership of Right Business.
* Witness Statement of Kenneth Buckley, former President and General Manager of DRP. Mr. Buckley's witness statement addresses the facts surrounding the negotiation of the STA and DRP's efforts to address the environmental and public health issues relating to the operation of the La Oroya Complex, including the discussions that DRP had with representatives of Peru and Centromin relating to these issues.
* Witness Statement of Dennis A. Sadlowski, former Vice President of Law for Renco. Mr. Sadlowski's witness statement describes his participation in the negotiations of the STA, and it presents an overview of the representations, assurances, and obligations assumed by Centromin under the STA and its responsibility for third-party claims and remediation of historical environmental problems as a condition for the purchase of the Complex.
246. For the reasons set forth herein, Claimant requests an award, inter alia, granting it the following relief:
* A declaration that Peru and Centromin/Activos Mineros breached the STA and/or the Guaranty Agreement by failing to assume liability for third-party claims and damages for which they are responsible and by refusing to defend and indemnify the Renco Consortium members and related entities and individuals in the personal injury St. Louis Lawsuits.
* A declaration that Peru and Centromin/Activos Mineros breached the STA and/or the Guaranty Agreement by failing to remediate the soil in and around La Oroya.
* In the alternative, a declaration that, if Claimants are found liable and are ordered to pay damages in the St. Louis Lawsuits, Claimants are entitled to recover from Respondents all the amounts that Claimants may, or may be forced to, pay as damages in satisfaction of any judgment in the St. Louis Lawsuits, under the Peruvian legal theories of subrogation, contribution, and/or unjust enrichment.
* A declaration that Peru has violated international law by failing to honor its representations to the Renco Consortium that Centromin would retain and assume liability for third-party claims and entitle Claimants to compensation.
* Awarding Claimants all costs of this proceeding, including Claimants' attorneys' fees, expert fees, and expenses.
* Pursuant to Section 2 of Procedural Order No. 4 dated September 17, 2020, Claimant expressly reserves its right until the damages phase of this proceeding to seek an award of compensation for any and all damages it has suffered and will suffer resulting from Respondents' breaches of contract, any and all damages under Peruvian law and customary international law and an award of pre-and-post award interest until the date of Peru's final satisfaction of the award, compounded quarterly, and any other form of recoverable damages or relief to be developed and quantified in the course of the damages phase.
Dated: New York, New York
February 8, 2021
KING & SPALDING LLP