Bear Creek Mining holds title to 5,400 hectares of mineral concessions known as the Santa Ana project, located 120 kilometers southeast of the city of Puno, Department of Puno, Peru. In 2014 Bear Creek commenced an international arbitration proceeding (the “Arbitration”) against the Republic of Peru in respect of the Santa Ana project arising from, among other things, the Peruvian Government’s issuance of Supreme Decree 032 in June 2011, which nullified Bear Creek’s rights to operate at the Santa Ana project.The Arbitration, claimed pursuant to the Canada-Peru Free Trade Agreement, was heard at the International Centre for Settlement of Investment Disputes (“ICSID”) in Washington D.C between 2014 and 2017. A comprehensive summary of the history of the Santa Ana dispute is provided below.
On November 30, 2017, the ICSID Tribunal of arbitrators hearing Bear Creek’s Santa Ana Arbitration claim announced their findings and rendered an Award (the “Award”) of approximately US$ 30.4 million in favor of the Company, which Award includes interest and arbitration costs (including attorneys’ fees).
As detailed in the Award, the Tribunal agreed with the vast majority of Bear Creek’s arguments. It concluded that the Government of Peru breached its obligations to the Company under the Canada-Peru Free Trade Agreement. In particular, the Tribunal held that Supreme Decree 032 constituted an unlawful expropriation of the Santa Ana Project. The majority of the Tribunal also concluded that Bear Creek had complied with all legal requirements regarding its outreach activities to the local communities, which Peru approved, supported and endorsed.
The Award, from which there is no appeal, is binding upon the parties and payment is due promptly. Article 52 of the ICSID Convention provides the opportunity, within 120 days and under limited grounds, for either party to request annulment of the Award.
Bear Creek Mining is currently awaiting payment of the Award.
History of Project and Arbitration Claim
Bear Creek acquired the Santa Ana project in 2004, following which the Company conducted surface exploration and drilling programs and completed various economic studies and community engagement initiatives over a 7-year period. In 2007, a Supreme Decree was issued by the Government of Peru granting the Company the right to acquire title to and operate within the mineral concessions covering the Santa Ana project, a requirement stemming from the project’s location within the 50 km border zone of Peru. In June 2011 however, the Company was notified that the Peruvian Government had issued a subsequent Supreme Decree that revoked the Company’s right to operate the Santa Ana project, but did not specifically revoke the Company’s title to the concessions, despite revoking any rights under them. Accordingly, no further development of the Santa Ana project has been conducted since 2011.
As a result of the issuance of the 2011 Supreme Decree (Supreme Decree 032) and, notwithstanding Bear Creek’s best efforts at goodwill negotiations, the failure of the Government of Peru to reinstate the Company’s rights to operate the Santa Ana project (despite their assurances to the contrary), the Company was left with no reasonable choice but to commence the Arbitration. As such, on February 6, 2014, Bear Creek delivered a Notice of Intent to Submit a Claim to Arbitration to the Peruvian Minister of Economy and Finance.
As no amicable settlement was reached in the six-month period following the filing of the Notice of Intent, on August 11, 2014 the Company submitted a Request for Arbitration against the Republic of Peru to ICSID, a branch of the World Bank that oversees numerous international trade treaties.
In accordance with P.O. No. 1, issued by the Arbitration tribunal on January 27, 2015, the Company submitted its Memorial on the Merits on May 29, 2015, wherein factual and legal arguments supporting its claims against the Government of Peru were detailed. The Memorial also includes a calculation of the damages sustained with respect to the expropriation of Santa Ana as the Fair Market Value of the Santa Ana project on the date immediately prior its expropriation by the Government.
The Memorial was followed by the following Arbitration-related submissions and events:
- On October 6, 2015, the Government of Peru filed its Counter-Memorial on the Merits and Memorial on Jurisdiction.
- On January 8, 2016, the Company submitted its Reply on the Merits and a Counter-Memorial on Jurisdiction.
- On April 13, 2016, the Government of Peru submitted its Rejoinder on the Merits and a Reply on Jurisdiction.
- On May 26, 2016, the Company filed a Rejoinder on Jurisdiction.
- On June 9, 2016, the Government of Canada filed a Non-Disputing Party Submission, providing its views on certain questions of interpretation of the Canada-Peru FTA.
- On June 9, 2016, the Asociación de Derechos Humanos y Medio Ambiente-Puno (“DHUMA”), Mr. Carlos López-Hurtado, and the Columbia Center on Sustainable Investment (“CCSI”) all filed applications to file written submissions as “other persons” pursuant to the Canada-Peru FTA, together with the submissions themselves.
- On July 7, 2016, the Company and the Government of Peru each submitted their comments to the “other person” applications.
- On July 21, 2016, the Tribunal decided to accept the submission filed by DHUMA and Mr. López-Hurtado, and deny the submission filed by CCSI.
- On August 18, 2016, the Company and the Government of Peru each submitted their comments to the Government of Canada’s Non-Disputing Party Submission, and to the DHUMA/López-Hurtado “other person” submission.
- Hearings on jurisdiction and the merits before the Arbitration tribunal were held at ICSID headquarters at the World Bank in Washington D.C. from September 7 to 14, 2016.
- On December 21, 2016, the Company and the Government of Peru each submitted post-hearing briefs.
- On February 15, 2017, the Company and the Government of Peru each submitted a reply to the post-hearing briefs filed on December 21, 2016.
- On March 29, 2017, the Company and the Government of Peru each submitted a Statement on Costs, setting forth in a summary fashion their Arbitration-related costs and expenses.
- On April 14, 2017, the Company and the Government of Peru each submitted a Submission on Costs, addressing the basis on which costs should be allocated.
The aforementioned filings are available on ICSID’s website at https://icsid.worldbank.org/en/Pages/cases/casedetail.aspx?CaseNo=ARB/14/21.