Summary

Source: icsid.worldbank.org

1. The Republic of Perú, Respondent in the arbitration and in this annulment proceeding, submits this Rejoinder on Partial Annulment pursuant to the updated procedural timetable established by the ad hoc Committee in Annex B of Procedural Order No. 1, in response to the Reply on Partial Annulment submitted by Freeport-McMoRan Inc. on its own behalf and on behalf of Sociedad Minera Cerro Verde S.A.A. ("Freeport" or "Claimant").

I. INTRODUCTION

2. Claimant's application for partial annulment remains what it has been from the outset: an appeal in disguise, where Claimant seeks to relitigate issues that the Tribunal decided in the Award. In its Reply on Partial Annulment, far from discharging its burden under Article 52 of the ICSID Convention, Claimant merely reiterates the same arguments advanced in its Memorial on Partial Annulment, while (i) selectively disregarding the jurisprudence cited by Respondent in its Counter-Memorial on Partial Annulment that does not support Claimant's position, and (ii) ignoring the express terms of the Award, which confirm that no ground for annulment exists. Claimant's partial annulment application should, for these reasons alone, be dismissed in its entirety.

3. As Respondent explained in its Counter-Memorial on Partial Annulment, the Award, read as a whole--as ad hoc committees consistently require--makes clear that claims relating to penalties and interest, including those concerning Royalty Assessments, fell within the TPA's "taxation measures" exclusion in Article 22.3.1 and, therefore, were outside the Tribunal's jurisdiction. There was nothing left to decide on the merits regarding Claimant's penalties and interest claims. Paragraph 986 of the Award expressly memorializes that jurisdictional conclusion. Claimant's disagreement with that conclusion does not transform it into an annullable defect.

4. In its Reply on Partial Annulment, Claimant's three argued grounds for annulment once again fall short. First, there was no "manifest excess of powers" under Article 52(1)(b): the Tribunal exercised its competence-competence by interpreting and applying the TPA's tax carve- out and declining jurisdiction over Claimant's penalties and interest claims. This is exactly the kind of jurisdictional judgment annulment committees may not and do not second-guess. Claimant's Article 52(1)(b) argument is built on a fundamental misreading of the Award. Plainly and properly understood, the Tribunal did not affirm jurisdiction over penalties and interest on Royalty Assessments and then omit a merits decision; it concluded that Claimant's penalties and interest claims were excluded from the Tribunal's jurisdiction as "taxation measures."

5. Second, there was no "failure to state reasons" within the meaning of Article 52(1)(e). As ad hoc committees have consistently held, in assessing an alleged breach of Article 52(1)(e), an ad hoc committee should read the award as a whole; determine whether it can follow the tribunal's chain of reasoning (even if, at certain points, that reasoning must be explained or supplemented); and recognize that annulment is not warranted where the alleged deficiency neither affected nor could have affected the outcome of the dispute. In the present case, there can be no doubt that, when the Award is read as a whole, the Tribunal's reasoning with respect to Claimant's penalties and interest claims on Royalty Assessments can readily be followed. In any event, even assuming arguendo that the reasoning was somehow incomplete (it was not), it is apparent from the Award that those claims would necessarily have been dismissed in any event.

6. Third, there was no "serious departure" from a fundamental rule of procedure under Article 52(1)(d): the Tribunal did not violate Claimant's right to be heard and thus did not depart from a fundamental rule of procedure, and, in any event, the alleged departure did not rise to the level of "seriousness" mandated by Article52(1)(d) of the ICSID Convention.

7. In essence, Claimant cannot satisfy the demanding thresholds embedded in Article 52(1) of the ICSID Convention. The terms "manifest," "serious," and "fundamental" are not surplusage; they reflect the ICSID Convention's object and purpose and the finality it protects.

Annulment is reserved for outcome-determinative defects--not for incidental disagreements with a tribunal's reasoning or conclusions.

8. Indeed, even assuming arguendo that an annullable error existed (it does not), the Committee should preserve the Award's finality. Article 52(3) of the ICSID Convention and ICSID jurisprudence confirm that ad hoc committees have discretion to decide whether or not to annul an award, taking into consideration other factors that may weigh against annulment in a particular case--such as whether the alleged defect was outcome-determinative. Had the Tribunal proceeded to address the merits of Claimant's penalties and interest claims relating to Royalty Assessments, it would necessarily have rejected them. The record demonstrates that Respondent was under no obligation to waive penalties and interest on the basis of alleged "reasonable doubt" and therefore did not breach its obligations under the TPA for failing to do so.

9. To annul the Award under these circumstances would serve no corrective purpose; it would merely prolong a dispute that has already been fully litigated and definitively resolved. The Award was issued by a distinguished Tribunal after almost four years of exchanges of extensive submissions and a two-week hearing. This is not the sort of case the drafters contemplated should be annulled when they created Article 52's exceptional remedy. Granting annulment on Claimant's theory would undermine the finality that the ICSID system is designed to protect and would impermissibly transform annulment into an appeal process--precisely the outcome that ICSID jurisprudence consistently cautions against.

10. Furthermore, Claimant's decision not to seek clarification or supplementation of the Award under Article 49(2) of the ICSID Convention instead of seeking annulment further confirms the absence of any genuine omission by the Tribunal. While Article 49(2) is not a formal prerequisite, it is the specific remedy for alleged omissions. Claimant's decision to bypass that mechanism and proceed directly to annulment was strategic and underscores that what it seeks is not a correction of the Award but, rather, its reconsideration by a new tribunal.

11. Finally, in its Reply on Partial Annulment, Claimant no longer pursues the so-called "other errors" it had advanced in Section IV of its Memorial on Partial Annulment as independent, stand-alone grounds for annulment, such as, allegedly, the Tribunal ignoring evidence, misapplying Peruvian law, or failing to properly treat SUNAT materials, among other allegations. Presented as distinct annullable defects, those allegations required a full response by Respondent in its Counter-Memorial on Partial Annulment. Freeport has now retreated from those heads of annulment, stating instead that it does not seek annulment on the basis of those alleged additional errors--even while suggesting that they could themselves constitute annulment grounds--and invokes them only as background. This reversal confirms that Claimant's auxiliary theories were unsubstantiated and misplaced, and it further supports an adverse decision on costs.

12. For these reasons, and those further developed below, the Committee should reject Claimant's application in its entirety and award Respondent its costs in this proceeding. Such a result would uphold the integrity of the arbitral process and give effect to the principle of finality that lies at the core of the ICSID system.

13. In the sections that follow, Perú addresses the arguments made by Claimant in its Reply on Partial Annulment. Sections II, III, and IV rebut Claimant's three annulment arguments under Articles 52(1)(b) (manifest excess of powers), 52(1)(e) (failure to state reasons), and 52(1)(d) (serious departure from a fundamental rule of procedure) of the ICSID Convention, respectively, and demonstrate why partial annulment should not be granted in this case. Section V explains why, even assuming an annullable error existed (it does not), the Committee should nevertheless preserve the Award's finality and deny annulment. Section VI shows that Claimant should bear all costs of this annulment proceeding. Section VII states Perú's request for relief.

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