MAC: Mines and Communities

Doe Run's Latest Move

Published by MAC on 2011-01-25
Source: Inter Press Service (IPS)

The Renco Group announced to the Peruvian government on 5 January 2011 their intention to start an international arbitration invoking the protections to foreign private investments provided by the Free Trade Agreement (FTA) between the United States and Peru.

Is this yet another example of the relative power of corporations?

Peruvian mining analyst Jose de Echave, reminds the public of concerns prior to signing the FTA that mining companies could use the FTA's international arbitration mechanism to force a government (rightly or wrongly) to do what it doesn't want to do. 

These concerns were addressed by former Minister Alfredo Ferrero when he asserted that "the Free Trade Agreement will not protect Doe Run" and that the FTA "will only protect investments that are well done ... even more so if it is an environmental issue".

But, what would have happened had the government not allowed Doe Run to get out of its environmental improvement program obligations under PAMA back in 2004? A decision, by the way, that precedes the FTA. Would it have packed up, actually raised the money to fulfill its obligations or sold out? Obviously, in any of these cases, the company’s relationship with the government would have changed.

Previous article on MAC:- A double exodus for Doe Run?


Doe Run's Latest Move

By Milagros Salazar

Inter Press Service (IPS)

15 January 2011

LIMA - The U.S. mining and metallurgical company Doe Run has once again challenged the Peruvian government. The Renco Group, of which it is a subsidiary, notified the government of its plans to start an international arbitration process, invoking the free trade agreement between this South American country and the United States.

The U.S.-based holding company said the arbitration will be filed in 90 days if no agreement is reached. What is behind this ultimatum?

In ads published Jan. 5 in newspapers in Lima, the Renco Group said it was turning to the mechanisms provided for by the trade promotion agreement because it had received "unfair treatment" at the hands of the Peruvian government and had not been given "protection and security" as an investor, as required by the treaty.

Doe Run began to run the large multi-metal smelter in the central Peruvian highlands city of La Oroya, known as one of the most polluted places on earth, after the plant was privatised and acquired by the Missouri-based firm in 1997.

When it won the concession to operate the plant, Doe Run promised to complete an environmental improvement programme, known by its acronym PAMA, within 10 years. But the Peruvian state also assumed a commitment to clean the soil in and around the town, because the factory, which was built in 1922 by the Cerro de Pasco Corporation, a U.S. firm, was taken over by the state-run Centromin Peru in 1974.

Doe Run now claims that Activos Mineros, the state-run firm that took over Centromin's responsibilities, has refused to clean up the soil in La Oroya, and "has refused to accept responsibility for the legal action brought by the citizens living in and near the town of La Oroya who claim various injuries resulting from alleged lead exposure and environmental contamination" from the smelter complex.

"But it is Doe Run that has failed to fully implement PAMA and has continued to pollute in La Oroya," former deputy minister of mines María Chappuis told IPS. "This communiqué is as if they were telling the government: we pollute and you clean up."

Chappuis resigned from her post in December 2004 to protest an extension of the PAMA deadline that the government granted to Doe Run.

The former official complained that the company wants the government to pay for any damages that a U.S. court could order for the families of more than 100 children with lead poisoning in La Oroya.

In late 2010, a court in St. Louis, Missouri, where Doe Run's corporate offices are based, ruled that 11 lawsuits filed against the Renco Group and Doe Run by a group of citizens from La Oroya could go ahead in that venue. The plaintiffs are suing over injuries from lead exposure and environmental pollution caused by the smelter.

If the court rules in favour of the plaintiffs, the company will have to pay reparations to the families of the children.

Doe Run committed itself, through PAMA, to reaching a target of 95 percent of children under six in La Oroya with a lead level below 10 micrograms of lead per decilitre of blood (mcg/dl), regarded by the World Health Organisation as the maximum safe limit.

But Peru's Health Ministry found that 99 percent of children under six in La Oroya had lead poisoning.

Doe Run also promised to build three sulphuric acid plants for its lead, zinc and copper processing operations. But the copper circuit plant, the most crucial, has not been completed.

As of mid-2009, Doe Run had failed to fulfil 20 percent of the PAMA programme. And since then, no progress has been made, because the company was temporarily shut down in June 2009 after declaring bankruptcy, despite soaring metals prices.

It then missed the July 2010 deadline set by the government of Alan García for proving that it had the necessary financing to restart operations and complete an environmental cleanup.

"The 90 day deadline (that Doe Run gave Peruvian authorities) sounds suspicious," said Chappuis. "What it is trying to do is provide enough time for the emergence of someone who yields to its pressure, as happened before, especially now, during an election year." General elections are due in April.

The former official was referring to a letter sent in October 2007 by then prime minister Jorge del Castillo (2006-2008) to then U.S. ambassador to Peru Michael McKinley, asking the State Department to intervene in a lawsuit that had recently been brought in Missouri against Doe Run Resources Corporation.

In the letter, Del Castillo asked the U.S. government to contact the Department of Justice and the St. Louis court, in order to avoid "setting a disturbing precedent for investors in both countries, which would undermine legal security."

In response to criticism, the former prime minister said he had sent the message "to avoid controversy in the face of the approval of the free trade agreement with the United States," which went into effect in early 2009.

If the international arbitration proceeding goes ahead, the Renco Group would become the first company to turn to the mechanisms for that purpose created by the free trade agreement.

"The Peruvian government must not make another mistake, and has to act cautiously," said economist José de Echave of CooperAcción, a Peruvian NGO working for development.

In response to a query by IPS, the Ministry of Energy and Mines said "The state will only pronounce itself on this matter through the legal routes."

Activos Mineros, for its part, published an insert in a local magazine, stating that it had planned to invest 35 million dollars in a cleanup plan between 2007 and 2015, and that so far 4.8 million dollars have been spent to carry out a study on soil remediation and urban cleanup actions.

IPS was also informed that Activos Mineros has already calculated how much Doe Run would have to pay Peru for the remediation, because it was reported that the contract establishes that if the company that took over the smelter did not have better environmental performance than Centromin, it would have to assume part of the costs.

"If in 2004 the company had not received an extension of the deadline for completing PAMA, the firm would not have invoked the free trade agreement, which did not enter into effect until five years later," de Echave said.

He also questioned claims that "a court like ICSID (International Centre for Settlement of Investment Disputes) has environmental sensibility, when its rulings tend to go in favour of investors."

De Echave pointed out that since the start of the negotiations of the free trade agreement, a number of organisations warned that the chapter on investment made too many concessions. "And today we're seeing the consequences," he said. (END)

Government of Peru's Actions Toward Doe Run Peru Said to Violate Trade Treaty between United States and Peru

Renco Group Files Notice of Intent to Commence International Arbitration


5 January 2011

NEW YORK - On December 29, 2010, The Renco Group, Inc., on its own behalf and on behalf of its affiliate Doe Run Peru S.R.L., served the Republic of Peru with a Notice of Intent to Commence an International Arbitration Proceeding under the Trade Promotion Agreement between the United States of America and the Republic of Peru, which entered into force between the two countries on February 1, 2009 (the "Treaty"). Renco's complaint stems from the government of Peru's failure to honor its legal obligations under international law, the Treaty, and the investment contract between the Republic of Peru, Doe Run Peru, and U.S. investors with respect to the substantial investment that Renco has made in La Oroya, Peru. This includes the government of Peru's refusal to clean the soil in and around La Oroya as it legally committed and promised to do, and the government's improper refusal to assume full responsibility for legal claims brought by certain citizens of La Oroya.

The Treaty is a bilateral free trade agreement. Its general objectives include eliminating obstacles to trade and fostering private investments in Peru by investors from the United States, as well as fostering private investments in the United States by Peruvian investors. To encourage this reciprocal investment, the Treaty provides international protection to the investors from each country. Among the protections that the Treaty guarantees are the rights to receive fair and equitable treatment, full protection and security, and compensation for expropriation. When an investor believes that it is being treated unfairly by the host country, as Renco does, the Treaty allows the investor to bring an international arbitration proceeding directly against the government of the other country to remedy the wrongdoing. And that is what Renco has put in motion by serving the Republic of Peru with the Notice of Intent to Commence an International Arbitration Proceeding. If the government of Peru does not honor its obligations or reach a negotiated settlement with Doe Run Peru and Renco within 90 days, Renco currently intends to commence a formal international arbitration proceeding against the government of Peru under the Treaty pursuant to the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL).

For over two decades, from 1974 to 1997, the government of Peru's State-owned entity Empresa Minera del Centro del Peru S.A. ("Centromin") owned and operated the La Oroya Metallurgical Complex (the "Complex"). During that time, Centromin conducted its operations with little focus on the environment or the concerns of the people of La Oroya, and its operations (together with those of its predecessors) resulted in gaseous and particle emissions that impacted the soil in and around the town of La Oroya with heavy metals, including lead. In 1997, the consortium of U.S. investors purchased the Complex and thereafter transferred it to their affiliate, Doe Run Peru. As a critical inducement to encourage the U.S. investors to purchase the Complex in light of these substantial pre-existing environmental impact issues, Centromin and the Republic of Peru contractually committed themselves to clean up the town of La Oroya, and also accepted and assumed all liability for any and all claims that third parties might bring while the new owners worked to improve the Complex through environmental projects. In other words, under the terms of the investment contract, Doe Run Peru was committed to improving the Complex so that its future environmental impact was reduced, while Centromin and the government of Peru agreed to clean up the town of La Oroya and to accept liability for all potential third-party claims going forward-for the period during which Doe Run Peru would be implementing its environmental projects, and subsequent thereto. This commitment by the government of Peru is reflected in the contract of sale dated October 23, 1997.

Doe Run Peru is in compliance with its obligations to complete various environmental projects. In fact, Doe Run Peru has exceeded its contractual obligations and has made significant additional investments to improve conditions in the La Oroya community. In contrast, Centromin, its successor Activos Mineros, and the government of Peru have refused to remediate the soil in and around the town of La Oroya. They also have refused to accept responsibility for the claims brought by the citizens living in and near the town of La Oroya who claim various injuries resulting from alleged lead exposure and environmental contamination from the Complex.

The government of Peru has subjected Renco and Doe Run Peru to a pattern of unfair and inequitable treatment and has failed to afford them full protection and security, in violation of international law and the government of Peru's obligations under its Treaty with the United States. Dennis Sadlowski, Vice President -- Law, of The Renco Group stated: "We have been working very hard to engage the Peruvian authorities in negotiations to achieve a solution for the benefit of everyone concerned with this important issue. But to this point, the Peruvian authorities have refused to engage in such discussions, forcing Renco and Doe Run Peru to assert their rights by taking the first step toward the commencement of international arbitration proceedings. Nevertheless, both Renco and Doe Run Peru renew their commitment to achieving a solution to this controversy, as well as to continue investing in Peru, and contributing to the welfare of the population of La Oroya, the Central Region and the Country."

SOURCE The Renco Group, Inc. and Doe Run Peru S.R.L.

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