issued by : bankruptcy proceedings commission of …

PERU Presidency of the Council of Ministers INDECOPI

ANTITRUST AND INTELLECTUAL PROPERTY PROTECTION COURT

Antitrust Division No.1

RESOLUTION No. 1743-2011/SC1-INDECOPI

FILE No. 33-2010/CCO-INDECOPI-03-11

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NATIONAL ANTITRUST AND INTELLECTUAL PROPERTY PROTECTION INSTITUTE

Calle De La Prosa 104, San Borja, Lima 41, Peru - Tel.: 224 7800 / Fax: 224 0348 E-mail: [email protected] / Web: www.indecopi.gob.pe

ISSUED BY : BANKRUPTCY PROCEEDINGS COMMISSION OF LIMA SUR DEBTOR : DOE RUN PERÚ S.R.L CREDITOR : MINISTRY OF ENERGY AND MINING SUBJECT MATTER : ACKNOWLEDGMENT OF CLAIMS SOURCE AND ASSESSMENT OF CLAIMS ACTIVITY : NON-FERROUS METAL SMELTER OPERATION SUMMARY: Resolution No. 1105-2011/CCO-INDECOPI, dated February 23, 2011, is hereby REVOKED inasmuch as it determined that the request for acknowledgment of claims filed by the Ministry of Energy and Mining against Doe Run Perú S.R.L. is ungrounded, and AMENDED to acknowledge the existence of claims in favor of said public entity against Doe Run Perú S.R.L. for a total principal amount of USD 163,046,495.00, which shall rank fifth in the order of preference. It is hereby further established that the Ministry of Energy and Mining is a non-related creditor of Doe Run Perú S.R.L. pursuant to section 12 of the General Bankruptcy Law. After analyzing the case, this Division concludes that, contrary to the decision issued by the court of first instance, the evidence included in the case file, the relevant environmental laws and the provisions of the Peruvian Civil Code supplementarily applicable hereto, demonstrate the existence, source, ownership, and amount of the claims asserted by the Ministry of Energy and Mining, resulting from the compensation owed to such public entity by Doe Run Perú S.R.L due to said company’s failure to finance and commission the “Sulfuric Acid Plant and Modification of the Copper Circuit of the La Oroya Metallurgical Complex” project, as undertaken under the Environmental Management and Enhancement Program (PAMA, for its acronym in Spanish) approved by Supreme Decree No. 016-93-EM and its regulatory and supplementary provisions.

Further, it is hereby established that Resolution No. 1105-2011/CCO-INDECOPI, dated February 23, 2011, is NULL AND VOID inasmuch as it stated that the request for additional prayer for relief submitted by the Ministry of Energy and Mining on December 7, 2010, was inadmissible. Said resolution is hereby amended to classify such request as a request for claim acknowledgment extension, and the Bankruptcy Proceedings Commission of Lima Sur is hereby requested to initiate the applicable proceedings in that regards. M-SC1-02/1A.






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Lima, November 18, 2011 I. BACKGROUND 1. By means of a written request dated September 14, 2010, as supplemented on December 7,

2010, the Ministry of Energy and Mining (hereinafter, MEM) demanded the acknowledgment of environmental claims against Doe Run Perú S.R.L. (hereinafter, DRP)1 for an amount of USD 163,046,495.00 (principal) and USD 87,699.29 (interest) to rank fifth in the order of preference, resulting from the investment DRP failed to make for the performance of the project for the final stage of the Environmental Management and Enhancement Program (hereinafter, PAMA), crated under Supreme Decree No. 016-93-EM2 and undertaken by the debtor upon the signing of Empresa Metalúrgica La Oroya S.A. Share Transfer, Capital Increase and Share Subscription Contract (hereinafter, the privatization contract) on October 23, 1997.

2. In its request, the MEM pointed out that, following a series of successive extensions granted under various industry regulations3, DRP failed to finance the project named “Sulfuric Acid Plant and Modification of the Copper Circuit of the La Oroya Metallurgical Complex” (hereinafter, the project), which, according to the MEM, had been valued by the debtor itself in USD 163,046,495.00, as stated in the document entitled “Official Cash Flow – MEM,” attached to the document entitled “PAMA Project Construction Plan Remainders/Modification of the Copper Circuit/Copper Sulfuric Acid Plant,” filed by the debtor on January 27, 2010 with MEM’s General Mining Office.

3. In a written communication issued on November 12, 2010, as supplemented on November 17,

2010, DRP opposed the acknowledgment of the claims asserted by the MEM on the following grounds:

1 Doe Run’s bankruptcy was made public by means of an article published in El Peruano Official Gazette on August 16,

2010. 2 Environmental Protection Regulations for the Mining and Metallurgical Industry. 3 By means of Supreme Decree No. 046-2004-EM, dated December 29, 2004, the MEM established a series of provisions

to allow mining companies to request, on or before December 31, 2005, an extension of the performance term for one or more of the specific projects listed in the approved PAMA, which extension could in no case exceed a total of three years, unless an additional year was granted by the MEM’s Office of Mining Environmental Issues, for exceptional reasons.

Following the submission of a request by DRP on December 20, 2005, by means of Ministerial Resolution No. 257-2006- MEM/DM, dated May 29, 2006, the MEM partially approved the exceptional extension request for all of the stages of the “Sulfuric Acid Plants” Project of the PAMA for the La Oroya Metallurgical Complex until October 31, 2009.

Law No. 29410, published on September 26, 2009, granted a new extension for the financing and completion of the “Sulfuric Acid Plant and Modification of the Copper Circuit” Project of the La Oroya Metallurgical Complex Project, fixing a non-extendable term of 10 (ten) months for the financing of the project and of 20 (twenty) months for the construction and commissioning stage. Supreme Decree No. 075-2009-EM, published on October 29, 2009, provided inter alia that the extended terms should commence as of the effective date of the aforementioned law, and the term for the construction and commissioning of the project would commence as of the expiration of the term for the financing stage.






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(i) the obligation undertaken by DRP in favor of the MEM is not that of completing the

project, but merely that of abiding by a “legal duty” that is the means through which the company seeks to perform the actual obligation undertaken by it, that of protecting (or, according to the debtor, preventing the development of any activities that may damage) the environment;

(ii) even assuming that DRP undertook to complete the PAMA project, said obligation could be enforced in bankruptcy proceedings, since DRP’s obligation consists in performing the PAMA by completing the project to achieve the environmental goal of reducing polluting emissions to the maximum levels allowed by the environmental laws in force. Therefore, DRP’s obligation does not consist in investing a specific amount of money in the project, because the environmental protection sought by the obligations under the PAMA cannot be estimated in monetary terms on the ground that they are public order imprescriptible inalienable duties that may not be disposed of, waived, offset and terminate..Neither the duty to complete the project may be estimated in monetary terms, since compliance with the maximum environmental pollution levels allowed could be achieved with an investment greater or lower than the debtor’s projections, which are only an estimation of the total cost of the works necessary for such purpose.

(iii) to support the allegations in the previous paragraph, DRP mentioned two cases in which

the achievement of the environmental goals in the PAMA did not depend on the amount invested by the mining companies under the control of the Supervisory Organism for Energy and Mining Investment (OSINERGMIN);

(iv) given that the rule of law must govern all acts of the Public Administration, in the event

of DRP’s failure to achieve the maximum pollution levels allowed specified in the PAMA, the MEM is only empowered by law to impose the fines set forth in the applicable laws and regulations, and, if such failure is not cured, to order the temporary or definite suspension of the company’s activities. However, in no case is the MEM allowed under environmental laws to collect from the debtor the estimated investment amount required for the project;

(v) therefore, DRP’s obligation to comply with the PAMA does not fall within the definition of

“claim” in Section 1 of the General Bankruptcy Law (hereinafter, the “LGSC”, after its acronym in Spanish), since a creditor’s right to demand performance of an obligation resulting from a legal relationship necessarily presupposes that said obligation be patrimonial in nature, i.e., susceptible of having an economic value, and that the breach thereof entitle the creditor to take any such measures as may be necessary to seek specific performance or otherwise the relevant compensation; which characteristics are not present in the “claims” invoked by the MEM, since such Ministry is not legally entitled to demand enforcement of a patrimonial obligation;






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(vi) The MEM lacks standing to seek acknowledgment of the alleged claim invoked since, as the State’s powers regarding compliance with the PAMA are limited to the supervision and control of the achievement of the environmental goals fixed in the applicable program, the body now entitled under the applicable laws to make any such demand is the Environmental Assessment and Control Commission (hereinafter, the OEFA after its acronym in Spanish), and not the MEM;.

(vii) allowing the alleged “claim” invoked by the MEM, following its acknowledgment, to be part of DRP’s meeting of creditors would constitute a legal absurdity, as it would entail, on the one hand, to somehow allow the State to intervene in the private decisions of the meeting, given the high percentage of DRP’s total debt represented by the aforementioned claims; and, on the other hand, to condition the powers of the State on environmental law matters to the will of a group of individuals comprising the meeting, something entirely unacceptable given the undeniably national interest the State seeks to protect with the achievement of the goals established in the environmental policies through the PAMA;

(viii) even if MEM’s claims were acknowledged, their order of priority would still remain uncertain given the impossibility to determine whether, due to the nature of the legal interest protected by the PAMA, they should be rank above employees’ wages and social security contributions or otherwise rank fifth in the order of priority as they lack the special nature required to rank among the top four claims, which would give rise to the absurd notion that the environmental interests represented by said claims can be set aside by the financial interests of a group of individuals.

(ix) should the meeting of creditors decide to put DRP into liquidation, the debtor company would definitely cease to operate, which would result in the automatic termination of its obligations under the PAMA. However, the Peruvian State, through the MEM, would still have a claim thereunder, which would amount to unjust enrichment as provided by in section 1954 of the Civil Code; and

(x) DRP has already made payments to and undertaken obligations with several suppliers for over USD 16,000,000.00 for the purpose of commencing the project. Therefore, the acknowledgment of the claims invoked by the MEM would also force DRP to pay the amount of such claims twice.

4. By means of a written communication dated December 7, 2010, the MEM addressed the challenges raised by DRP alleging that: (i) section 4.5(a) of the privatization contract defines “investment” as the amounts

effectively disbursed for feasibility, technical and/or financial studies, including environmental studies and the disbursements required for DRP to fulfill its obligations under the PAMA, as expressly undertaken by the debtor in section 5.1 of the






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aforementioned contract, which shows that DRP not only made a generic commitment to protect the environment, but also, and mainly, the express commitment to make the agreed environmental investments to perform the PAMA by means of the construction and commissioning of the project;

(ii) in this line, the performance of a project developed for the protection of the environment is, undoubtedly, quantifiable, as shown by the fact that the debtor itself quantified it in the amount of USD 163,046,495.00 in the report filed with the General Mining Office on January 27, 2010, and in the MEM’s foreclosure on two letters of guarantee following DRP’s breach;

(iii) the PAMA performance supervision and control is in no way limited to the inspection of the environmental goals fixed by said program and the imposition of penalties in case of the failure to achieve them, but includes the procurement of the investments committed by the debtor under the privatization contract, as irrefutably demonstrated by the administrative resolutions through which the MEM rejected the project financing plan submitted by DRP, declared that said company had breached the obligations undertaken under section 2 of Law No. 29410, and sections 3.1 and 5.1 of Supreme Decree No. 075-2009-EM, and finally declared that DRP had breached the PAMA in Resolution No. 289-2010-MEM-DGM/DTM;

(iv) DRP seeks to show that the sole consequence of its breaching the PAMA is the imposition of the applicable penalties by the Osinergmin and the OEFA, disregarding the fact that, notwithstanding the imposition of such penalties, the Peruvian State is also entitled to demand, through the MEM, the reimbursement of the value of the project as the result of the breach of an obligation to act, so that the MEM can undertake, through the applicable legal mechanisms, the completion of the final stage of the PAMA;

(v) the consequences of the breach of the commitment to invest made by DRP to achieve the goals of the PAMA must be governed by the applicable provisions of the Civil Code, as said investment commitment results from the privatization contract.

(vi) contrary to the debtor’s allegations, the environmental investment commitment undertaken by DRP before the MEM is entirely quantifiable, as it constitutes an obligation to act that can be financially assessed, a case acknowledged in the bankruptcy law and Indecopi’s case law on the subject matter;

(vii) the privatization contract and the laws and regulations issued thereafter to supervise the fulfillment of the obligations undertaken thereunder by DRP show that the MEM is entitled to enforce the invoked claims;

(viii) the State’s participation in meetings of creditors as the owner of claims acknowledged by the Commission in bankruptcy proceedings can in no way constitute a legal






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absurdity; it is rather a legitimate enforcement of the State’s right to participate in the decisions to be made on the new terms and conditions for the payment of claims, which is a common and undisputed practice when the State participates in a meeting as the owner of tax claims, in which case it is impossible to assert that the administration’s tax policy is in any way subordinated to the decisions made by the meeting;

(ix) the invoked claims should rank third in the order of preference, as the State has a duty to guarantee their full payment pursuant to Supreme Decree No. 075-2009-EM;

(x) the unjust enrichment alleged by DRP can in no way take place, since the amount of the invoked claims will be destined to the completion of the applicable project for the last stage of the PAMA; and

(xi) should any other creditors exist whose claims result from the partial performance of the project, the amounts owed to them shall be offset from the amount claimed by the MEM for the purpose of preventing the double payment alleged by the debtor.

5. By means of a written request dated December 7, 2010, the MEM requested the expansion of the claims invoked in its request dated September 14, 2010, stating that the total amount of the claims invoked against DRP ascends to USD 181,287,921.00, in capital, and USD 77,650,260.71, in interests. The remaining claims invoked by the MEM in its expansion request include the following items: (i) USD 4,000,000.00 for the failure to renew a letter of guarantee that expired on November 10, 2009; (ii) USD 14,241,426.00 for the failure to renew a letter of guarantee that expired on January 8, 2010; and (iii) USD 77,737,960.00 in interests accrued between January 17, 2010 and the date of publication of commencement of the bankruptcy proceedings.

6. In that same request, the MEM further stated that: (i) it reiterated its claim that the performance of the project should be governed by the

provisions of the Civil Code, pointing out that the privatization contract, having law status under section 62 of the Political Constitution of Peru and section 1357 of the Civil Code, is governed by private law, despite being a public law contract; and

(ii) DRP’s failure to fulfill its obligation to finance the project within the ten-month term

resulting from the last extension granted by Law No. 29410, immediately caused the impossibility to commence the second stage of the project, which constitutes a quantifiable obligation to act;

7. On December 15, 2010, DRP submitted a written answer to the MEM’s request, stating as

follows:






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(i) none of the obligations undertaken by DRP under the privatization contract were expressly governed by private law- Said contract merely contains a declaration of equivalence between the environmental obligations undertaken by the previous owner of Metaloroya and the ones undertaken by DRP by operation of law. On the contrary, sections 4.1 and 4.5 of the privatization contract state the total amount of the investment, equal to USD 120,000,000.00, can include all amounts resulting from the PAMA, given the total amount of the environmental investments made by DRP as of the date thereof exceed the sum of USD 300,000,000.00, wherefore, even in the scenario proposed by the MEM, the debtor would have already fulfilled its obligations;

(ii) sections five and six of the privatization contract merely describe a distribution of environmental responsibilities between the parties regarding commitments, requirements and legal duties, but in no case establish patrimonial obligations;

(iii) DRP denies having breached the PAMA, because it considers that, by virtue of the last extension granted by Law No. 29410, the term for the completion of the project would expire in April, 2012, wherefore it denies having acknowledged, in the report submitted by it to the General Mining Office on January 27, 2010, to have an outstanding debt with the MEM for a total of USD 163,046,495.00 and, especially, to have breached any undertaken obligations;

(iv) it is not true that Resolution 289-2010-MEM-DGM/DTM definitively declared that DRP breached the PAMA since, despite the fact that Resolution No. 447-2010-MEM/CM, issued by the Mining Council dismissed the application for review filed against said decision, DRP commenced litigious-administrative proceedings against it that remains outstanding as of the date hereof;

(v) it reiterated that the environmental enhancement programs imposed by law (and not contract) upon DRP cannot be quantified because the fulfillment thereof can only be determined depending on the results of the applicable programs in terms of the reduction of polluting emissions; and

(vi) even accepting the MEM’s contention that the performance of the project by DRP is an obligation to act governed by the provisions of the Civil Code, it would be impossible to demand fulfillment of any obligation whatsoever in this case, since, given that the obligations are obligations to act, the fulfillment thereof cannot be legally enforced, or could otherwise only be performed by a “third party” at the debtor’s expense or compensated by the payment of damages.

8. On December 20, 2010, DRP submitted a written communication reiterating the statements made in its prior communications and opposing the claim acknowledgment expansion and the modifications to the order of preference requested by MEM.






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9. By means of Resolution No. 1105-2011/CCO-INDECOPI, dated February 23, 2011, the Bankruptcy Proceedings Commission (hereinafter the Commission) dismissed the request submitted by the MEM on the following grounds: (i) the analysis of the laws and regulations governing the PAMA shows that the goal of said

program is the reduction or elimination of the emissions and/or leakages resulting from mining and metallurgical activities until reaching the maximum environmental pollution values allowed by the competent authorities, for which purpose the mining companies must make investments towards the achievement of said goal;

(ii) notwithstanding the foregoing, the applicable environmental laws and regulations only allow the administrative authorities in charge of supervising abidance by the PAMA to impose administrative penalties such as fines, temporary suspensions, or the temporary or permanent interruption of the company’s activities, and do not purport the existence, upon the total or partial breach of the PAMA, of an obligation to act in favor of the applicable authority as the result failure to complete the applicable project within the aforementioned program, or the possibility that said authority undertake the performance of the last stage of the PAMA;

(iii) in any event, the breach of the PAMA can give rise to other kinds of liabilities, such as the obligation to pay damages to the State or any third parties;

(iv) the privatization contract was entered into by Centromin Perú and DRP, and the MEM is not mentioned in it as the holder of any right whatsoever or the representative of any of the contracting parties;

(v) section four of the privatization contract details an investment commitment made by DRP that differs from the goals established in the PAMA. Nevertheless, the analysis of a letter sent by Centromin Perú to DRP on February 14, 2003, shows that Centromin Perú reported that the debtor indeed honored the aforementioned investment commitment;

(vi) DRP’s liability on environmental matters stems from the law, not the privatization contract, since the obligations imposed by the PAMA of Metaloroya preexisted the execution of said contract;

(vii) DRP’s declaration in the report submitted to the General Mining Office on January 27, 2010 did not entail the recognition of any debt whatsoever or the quantification thereof, but merely an estimation of the approximate value of the investment needed for the performance of the project;

(viii) the criteria governing previous decisions by Indecopi’s Tribunal regarding the quantification of obligations to act are not applicable to this case, since the MEM has failed to prove the existence, source or ownership of the alleged credits; and






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(ix) the claim acknowledgment expansion and the modification of the order of preference

requested by the MEM on December 7, 2010 are inadmissible for having been submitted following the expiration of the applicable term, given that the applicable request was filed after DRP was notified of the credit acknowledgment request, in breach of the provisions of section 428 of the Code of Civil Procedure, which applies to these administrative proceedings in a supplementary manner.

10. On March 7, 2011, the MEM filed an appeal against Resolution No. 1105-2011/CCO-INDECOPI, on the following grounds: (i) pursuant to the express provisions of the laws and regulations applicable on the subject

matter and the privatization contract itself, the performance of the PAMA necessarily entails the mandatory abidance by the investment process approved by the MEM in its capacity as competent authority, which, in turn, entails the performance of obligations undertaken by the debtor. However, the Commission erroneously assimilates the goals of the PAMA to the duty to perform said obligations in furtherance of such goals;

(ii) the powers granted to the State are not limited to the imposition of the administrative penalties set forth in the applicable laws upon the breach of the PAMA, but include the right to demand the fulfillment of DRP’s obligations under the applicable laws and the contract by exercising its ius imperium, which power has been vested on the MEM;

(iii) the Commission failed to take into account the fact that the pollution reduction goals established by the PAMA can only be achieved by means of the performance of the obligations to act (investments) imposed upon the debtor under the privatization contract and the applicable laws, which obligations are entirely different and independent from any such compensatory obligations as may result in favor of the State or any third parties for the breach of the PAMA, pursuant to the provisions of the appealed resolution;

(iv) the legal source of the credit invoked by the MEM is Supreme Decree No. 016-93-EM, which governs the creation and performance of the PAMAs and undoubtedly establishes MEM’s rights over the aforementioned claims; and

(v) reiterated the allegations made before the court of first instance.

11. By means of Resolution No. 2164-2011/CCO-INDECOPI, dated March 14, 2011, the Commission granted the appeal filed by the MEM and elevated the proceedings to Antitrust Division No. 1 (hereinafter the Division).






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12. By means of a communication submitted on April 24, 2011, the representative of the MEM requested a meeting with the Division’s Technical Secretary to explain its position regarding the appeal:

13. On May 23, 2011, DRP acknowledged receipt of the appeal filed by the MEM and pointed out that:

(i) throughout the proceedings, the MEM has contradictorily modified the source which, in

its opinion, gives rise to the invoked credits, since it originally alleged that the supposed obligation to act breached by DRP resulted from the law and then stated that it resulted from the privatization contract, to finally claim, in its appeal, that its claims were grounded on both sources. However, none of these allegations undermines the terms of the appealed decision regarding the fact that DRP’s actual obligation to perform the PAMA consists in reducing the maximum allowed pollution levels resulting from its activities, i.e., safeguarding an interest in the protection of the environment which, due to its very nature, is governed by public law and therefore, among other things, inalienable, which makes it impossible to quantify it;

(ii) therefore, making the investments required to complete the project constitutes an administrative duty, not an obligation governed by the Civil Code. To understand the difference between both legal devices, we must take into account that the duty is only the “formal vehicle”, without patrimonial content, that allows citizens to fulfill an administrative obligation that may or may not be necessary, enforceable or punishable, depending on whether or not it is actually fulfilled;

(iii) we can therefore conclude that the obligation to fulfill the PAMA results from the law, the breach of which can only give rise to liabilities and sanctions under the applicable laws on the matter, and the fulfillment of which can only be achieved in such a way that allows the attainment of the goal thereof, the beneficiary of which is not a specific creditor but rather the Nation as a whole; and

(iv) it reiterated its claims on the “debt acknowledgment” scenarios proposed by DRP in the report filed with the General Mining Office on January 27, 2010, the possibility to quantify the alleged obligation, and the appellant’s standing to act in these proceedings.

14. By means of written communications filed with the Division on July 5 and 13, 2011, the MEM expanded the grounds of its appeal on the following terms: (i) the origin and enforceability of the invoked claims can only be fully understood in the

context of the privatization contract, by which the Peruvian State transferred ownership of its mining company to a private company in order to allow said economic activity to remain feasible, a goal that required, as an essential condition, that the private company abide by the environmental obligations imposed to protect the environmental interests






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affected by mining activities. Therefore, the State retains a duty of care as the previous holder of the company’s shares, which is to remain in full force until the satisfactory achievement of all of the transference conditions;

(ii) within the aforementioned context, the fulfillment of the environmental obligations resulting from the PAMA were an intrinsic part of the execution of the privatization contract itself, which proves that the MEM is entitled to directly demand the completion of the project, given that said contract, with the status of law, was amended by a special legal regime granting such right to the MEM, since the State is a single and indivisible legal entity, which fact was erroneously disregarded in the appealed decision;

(iii) the appealed decision makes no sense inasmuch as it states that the quantification of the financing and construction of the project is not an obligation enforceable against DRP, as it would otherwise be impossible to explain why the debtor itself requested the State to extend the terms for the performance of the aforementioned project and quantified it;

(iv) the fulfillment of the obligations resulting from the MAPA is an essential condition for the continuation of DRP’s mining activities, which fact justifies, on its own, the inclusion of the claims invoked by the MEM in the bankruptcy proceedings;

(v) the fact that the environmental obligations are imposed by law in no way affects the right to demand the completion of the projects resulting from the PAMA for the achievement of the environmental commitments expressly undertaken by DRP upon the execution of the privatization contract, which case is similar, for example, to those in which the contracting parties divide among themselves the payment of the applicable taxes levied on their economic transaction;

(vi) taking into account the fact that the fulfillment of the PAMA has an undeniably significant social impact, it constitutes a joint and severable obligation of the State, which, in order to prevent environmental pollution, forces the State to complete the project, through the MEM, once the invoked claims are acknowledged and paid as part of the bankruptcy proceedings, for the purpose of safeguarding a higher interest as is that of public health and the environment, taking into account that, despite the fact that, as of the date hereof, DRP has interrupted all of its activities, the emissions produced by it during the time it carried out such activities continue to pollute the environment to this date; and

(vii) it had a legal right to increase the amount of the invoked claims, despite the fact that it was duly notified to DRP, because the commission had failed to assess the admissibility of its original request pursuant to section 1428 of the Civil Code.

15. As the result of the request filed on April 24, 2011, a meeting was held on September 23, 2011 with the members of the Office of the Division’s Technical Secretary and the representatives of






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both parties, for the purpose of the latter presenting the former with their views on the appealed matter.

16. By means of a communication dated November 8, 2011, DRP reiterated the claims made during the proceedings regarding the existence, source, and amount of the claims invoked by the MEM, an added that, even if said claims could be deemed a compensation, the amount and payment thereof should necessarily be decided by a court of law.

17. On November 9, 2011, the representatives of the MEM and DRP participated in an oral hearing. There, the representatives of both parties reiterated the claims made during the proceedings, and the representative of the MEM stated as follows: (i) the invoked claims consist in the financial quantification of the obligation to complete the project undertaken by DRP, and not a compensation; and (ii) despite the fact that DRP’s obligation was, originally, a statutory one, it was “contractualized” by the execution of the privatization contract, and became a claim enforceable under section 1 of the General Bankruptcy Law.

18. By means of a written communication submitted on November 17, 2011, DRP reiterated its claims questioning MEM’s right to the applicable claims.

II CONTENTIOUS ISSUES

II.1 Determining whether the amounts invoked by the MEM against DRP qualify as “claims” under section 1 of the General Bankruptcy Law.

II.2 Determining whether, should such amounts qualify as claims admissible under bankruptcy proceedings, the administrative authority can prove the existence, source, ownership, and amount thereof by means of the verification of the following facts: II.2.1. The partial breach of Metaloroya’s PAMA as the result of the failure to complete the

project.

II.2.2. Whether or not such breach, once verified, can be attributed to DRP.

II.2.3. The consequences of the breach of DRP’s obligations: the consideration that can be demanded from the debtor as the result of its breach.

II.2.4. The quantification of the consideration owed by DRP.

II.2.5. The entity entitled to demand delivery of the consideration form DRP.

II.3 Determining the ranking of the claims invoked by the MEM within the order of preference, if applicable.






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II.4 Determining whether the Commission was right in dismissing the claim extension request filed by the MEM by means of its request dated December 7, 2010.

III ANALYSIS OF THE CONTENTIOUS ISSUES

III.1 The definition of “claim” in the General Bankruptcy Law

1. Section 1 of the General Bankruptcy Law defines the subjects, elements and institutions participating in or comprising the Peruvian bankruptcy system. Subsection (e) defines “claim” as “a creditor’s right to obtain a given consideration promised by the debtor as the consequence of an obligation relationship”.

2. DRP has questioned whether the amounts invoked by the MEM qualify as “claims” in the terms

of the previous paragraph, pointing out that they are merely a legal “duty” representing a vehicle for the achievement of the true purpose of its obligation: the protection of the environment by reaching the maximum environmental pollution levels allowed. The debtor further claims that this “environmental care” obligation cannot be financially valued or, therefore, quantified, considering that the protection of the environment is an unwaivable, inalienable, imprescriptible, and public interest. The debtor further claims that, in reality, its obligation is not an obligation to act (the PAMA project), but rather a negative obligation, or one “not to act”, i.e., not to pollute the environment in excess of the maximum levels allowed.

3. This Tribunal believes it is essential, to begin the analysis of the subject matter, to clarify the

scope of each one of the elements mentioned by DRP. Given that the concepts of “consideration”, “interest” and “obligation relationship” used in or resulting from section 1 of the General Bankruptcy Law are governed by Civil Law, they must be applied hereto as defined by said branch of the legal system4.

4. “Obligation relationship” is the complex legal relationship that links two or more parties for the

achievement of social or economic goals revolving around certain lawful ends protected by law. Such relationship results from the coexistence of one or more legal power relationships -duties between the creditor and the debtor: on the one hand, the creditor’s power to compel -i.e., to use the means granted to him by the law in a coercive manner- the debtor to deliver the consideration owed; on the other hand, the debtor’s obligation - and eventually the attachment of his assets - to deliver such consideration to satisfy the creditor’s interests5.

4 The Civil Code does not define these concepts in any way whatsoever. However, they are mentioned in several sections

of the Books on the Law of Obligations and the Sources of Obligations, and it is mainly legal scholars that have undertaken the task of defining their scope.

5 See Diaz Picazo, Luis, Fundamentos del Derecho Civil Patrimonial. Editorial Civitas, volume 2, fifth edition. Madrid 1996, page 127; Palacios Martines Eric y Núñez Sáenz Ismael. Teoría General de las Obligaciones. Jurista Editores, first edition, pages 47 and 48.






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5. The “consideration” is the specific action the debtor must complete to satisfy the creditor’s interest, which makes it the subject matter of the obligation relationship inasmuch as it constitutes the “projected action” the future completion of which will allow the achievement of the intended goals that gave rise to the legal relationship6. Pursuant to the Peruvian Civil Code, it can consist of an obligation to give (assets), to act (services), or not to act (avoiding acting in a given manner).

6. The “interest” or “goal” is generally the economic benefit the creditor expects from the delivery

of the consideration owed by the debtor, though the relationship can, in some cases, answer to goals that are not necessarily lucrative or patrimonial in nature. Such is the case, for example, of a non-for-profit civil association obtaining a loan for the expansion and conditioning of facilities destined to strictly charitable services.

7. Establishing the creditor’s interest is important for three reasons: a) the source of any

obligation must be a lawful interest capable of being protected by the law; b) it is only once such interest is known that we can actually verify whether the consideration owed is conducive thereto; and c) in the event the consideration is not duly given, it is possible to assess the damages resulting from the failure to satisfy the interest previously known to the debtor7.

8. As results from the previous paragraphs, even if we acknowledge the value of defining and

using the concept of creditor’s “interest” or “goal” for the emergence and effectiveness of the obligation relationship, we cannot assimilate that concept to the purpose of the obligation, which, as mentioned before, is the consideration owed, which is indeed essential in identifying a claim under section 1 of the General Bankruptcy Law.

9. In this case, the alleged “purpose” of the obligation (the obligation relationship), as stated by

DRP, is none other than the interest or goal sought with the performance of the project’s PAMA: the protection of the environment, which can indeed not be valued from an economic point of view and is clearly a public need, as it concerns the life, health and integrity of the population affected by the debtor’s mining activities.

10. However, as mentioned above, the “interest” is entirely different from the “consideration”.

Despite the fact that the “interest” may not be patrimonial in nature (as in this case), the structure of the obligation relationship, as defined above, demands that the “consideration” always be patrimonial in nature, accounting for the “goal” of the relationship. It is precisely in this kind of legal relationships that the “patrimonial vehicle” the parties or the law establish to satisfy the interests affected by the obligation relationship become essential.

6 Diez Picazo. Luis, Op. cit. page 236. 7 Ibid., pages 237-238.






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11. And it is precisely the identification of that “patrimonial vehicle” (consideration), as subject matter of the obligation relationship, that allows the creditor to lawfully use the mechanisms granted to him by the law to satisfy his credit interests in the event of breach by the debtor: once the consideration is clearly identified, the creditor may enforce it or, where this is not possible, demand an economic redress (compensation), which is only possible where the applicable consideration can be financially quantified.

12. Now that the elements comprising or related to the definition of claim under section 1 of the

General Bankruptcy Law have been duly clarified, we must determine the source of the invoked claims, as resulting from the statements of the MEM.

III.2 Source: The law or the contract?

13. During the proceedings and the oral hearing, the representative of the MEM has insisted in

that, despite the fact that DRP’s environmental obligations resulted from Supreme Decree No. 016-93-EM, the specific obligation to finance and construct the “Sulfuric Acid Plant and Modification of the Copper Circuit of the La Oroya Metallurgical Complex” project has its source in the privatization contract entered into by Centromín Perú and DRP in 1997, which “contractualized” the environmental obligations that were originally statutory in nature.

14. In turn, DRP holds that the environmental obligations resulting from Supreme Decree No. 016-93-EM and its regulations are only administrative in nature - they allow the imposition of penalties but in no case empower the State to collect the amount of any unmade investments as the result of the alleged breach of the PAMA. DRP further adds that, by executing the privatization contract, it merely undertook such obligations - initially undertaken by Centromín - but in no way created a financially quantifiable civil obligation.

15. Book VII of the Peruvian Civil Code (entitled Sources of Obligation) lists the following sources of legal obligation relationships: (i) Contracts. (ii) Business management relationships. (iii) Unjust enrichment. (iv) Unilateral promises. (v) Tortious liability.

16. It is this Division’s opinion that the sources of civil obligations are not limited to the ones listed in the previous paragraph. Said list mentions those sources which, commonly, give rise to most obligation relationships -such as contracts and tortious liability-, but merely as an example, as it does not include the source which, though exceptionally, also indirectly gives rise to patrimonial obligations: the law.

17. It is perfectly possible to impose upon individuals, by means of a statutory provision, the obligation to deliver a patrimonial consideration -either to give, to act, or not to act- to the State






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itself or to other individuals, as is the case, for example, with tax or child-support obligations. Note that in none of the aforementioned examples the obligation relationship is based on a consideration representing any kind of financial benefit to the debtor, but rather answers to public or social interests.

18. Supreme Decree No. 016-93-EM, governing the PAMA, and any successive regulations on the

matter, are aimed at effectively protecting the environment against the high pollution risks resulting from the development of mining activities, by means of the implementation of measures aimed at controlling and preventing the environmental impacts thereof through the inclusion of any such techniques and processes as may be deemed adequate for the attainment of such goal8.

19. Among the measures to be implemented for the achievement of the aforementioned goal, DRP’s PAMA (originally undertaken by Centromín and later by the debtor by virtue of the privatization contract) included a series of investment and commissioning stages for the technologies required for the treatment of hazardous effluents and wastes generated by mining activities, the last of which stages consists in the financing and construction of the “Sulfuric Acid Plant and Modification of the Copper Circuit of the La Oroya Metallurgical Complex” project.

20. This Division agrees with DRP in that the source of the obligation resulting from the PAMA is the law regulating such environmental enhancement program, and not the privatization contract entered into between the bankrupt company and Centromín, since, through the latter, DRP merely undertook the preexisting environmental obligations originally undertaken by Centromín pursuant to Supreme Decree No. 016-93-EM. However, this does not alter the fact that the obligation to build the sulfuric acid treatment plant stems from the aforementioned Supreme Decree and any regulations and amendments thereof.

21. The MEM has noted that sections four and five of the privatization contract9 undoubtedly create a financially quantifiable obligation to act to be fulfilled by DRP. Regarding the environmental commitments of the bankrupt company, said provisions state as follows: “(...)SECTION FOUR ----------- INVESTMENT COMMITMENT

8 SUPREME DECREE No. 016-93-EM, ENVIRONMENTAL PROTECTION REGULATIONS FOR THE MINING AND

METALLURGICAL INDUSTRY

Section 3.- Purpose. The purpose of these regulations is:

a) To set forth the prevention and control measures to be implemented in order to harmonize the development of mining and metallurgical activities, and the protection of the environment.

b) To protect the environment against the risks resulting from any such dangerous agents as may be released by mining and metallurgical activities, preventing them from exceeding the maximum levels allowed.

c) To encourage the adoption of new techniques and processes for the enhancement of the environment. 9 See pages 178 to 215 of the case file.






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4.1 THE COMPANY (DRP) hereby undertakes to invest, within a term of five (5) years following the execution of this contract, the amount of USD 120,000,000.00 (one hundred and twenty million United States Dollars) for the achievement of the goals listed in section 4.5 hereof in its Metallurgical Complex of La Oroya, as described in the background of this contract. It is understood that THE COMPANY shall have a maximum of five (5) years to complete such investment and that no annual requirements have been agreed upon. (...) 4.5 For all purposes under this section, investment shall mean any and all amounts disbursed for: A) Feasibility studies, technical and/or financial studies, including environmental studies, and any disbursements necessary to fulfill THE COMPANY’S obligations under the Environmental Management and Enhancement Program (Metaloroya’s PAMA), described in section five, and any other environmental requirements resulting from the applicable laws. (...) SECTION FIVE ----------- COMPANY’S LIABILITY ON ENVIRONMENTAL MATTERS (...) THE COMPANY hereby assumes liability only for the following environmental matters: 5.1 The fulfillment of the obligations resulting from the Metaloroya’s PAMA and any such amendments as may be or have been issued by the competent authorities pursuant to the applicable laws in force, regarding the effluents, emissions and wastes generated by: A) THE COMPANY’S smelting and refining facilities. B) THE COMPANY’S service and lodging facilities. C) The zinc ferrite deposits existing as of the date of execution hereof, including all such zinc ferrites as may be added by THE COMPANY should it fail to return them within three (3) years following the date of execution hereof, or to pay the amount set forth in section 5.6. (...)” (emphasis added).

22. The cited text shows that, regardless of the fact that the relevant sections expressly mention

the obligations undertaken by DRP for the fulfillment of the PAMA, this does not mean that the source of such obligations is the privatization contract, or, even less, that Centromín or any State body other than the MEM who has executed said contract is entitled to collect the invoked amounts.

23. The sections cited above merely reflect the declaration whereby DRP acknowledges and defines its environmental obligations and liabilities as the new company in charge of the mining activities of the La Oroya Metallurgical Complex, which preexisted the privatization contract by law, for the purpose of differentiating them from other environmental obligations for which Centromín remained liable.

24. For that same reason, it is also impossible to hold, as claimed by DRP during the proceedings, that, in any event, the investment commitment resulting from section 4.1 of the privatization






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contract - including the environmental issue - has been more than fulfilled because the total value of the company’s investments since the commencement of its activities in the La Oroya Metallurgical Complex largely exceeds the aforementioned amount. At least when it comes to environmental commitments, the liquidation of the investment necessary for the fulfillment thereof cannot be subject to an amount established in the privatization contract - which was also generic, as it included not only environmental investments, but also all investments required for mining activities -, since certain laws and regulations governing the PAMA were issued precisely to facilitate the expansion of the originally estimated environmental investments in the event the parties discovered, during the performance of the program, that the environmental impact of mining activities justified the expansion of such investment and the extension of the term for their effective disbursement, which motivated the enactment of Supreme Decree No. 046-2004-EM and its complementary provisions.

25. Now, the fact that the obligation to complete the project is not based on the privatization contract but on the law, in no way diminishes the importance DRP’s declaration in sections four and five of the contract cited above has for the development of mining activities and the remaining commitments undertaken by said company under the privatization contract. As can be seen in the analysis to be made in the following sections, it is clear that, regardless of the distribution of liabilities before third parties that expressly results from the contract, the fulfillment of the environmental investment commitments undertaken by DRP within the stipulated terms was essential for the effective performance of the privatization contract itself by the debtor, and it is precisely because it constitutes an “essential condition” that it was mentioned in such instrument.

26. Pursuant to the document entitled “Remainder Construction Project Plan: Modernization of the Copper Circuit - Copper Sulfuric Acid Plant”, filed by DRP with the MEM’s General Mining Office on January 27, 201010, the completion of the project entailed DRP: (i) financing the project by the creation of an environmental trust depending on the company’s income, and the delivery of letters of guaranty to ensure such financing in case of breach; and (ii) constructing and commissioning the project.

27. The aforementioned document was drafted based on the provisions of sections 2 and 3 of Law No. 2941011, as well as the provisions of section 2 and subsequent sections of its Regulations,

10 See pages 87 to 97 of the case file. 11 LAW No. 29410, extending the term for the financing and completion of the sulfuric acid plant and Modification

of the Copper Circuit of the La Oroya metallurgical complex project.

Section 1.- Purpose of the law

The purpose of this Law is to declare the decontamination of the environment in the city of La Oroya, department of Junin, a public need of preferred social interest.

Section 2.- Extension of the project completion term

The term for the financing and completion of the “Sulfuric Acid Plant and Modification of the Copper Circuit” of the La Oroya Metallurgical Complex Project is hereby extended, as suggested by the La Oroya Technical Commission, created






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approved by Supreme Decree No. 075-2009-EM12. The analysis of those rules shows that the project was to be completed on the following terms and conditions:

by Supreme Resolution No. 209-2009-PCM, to the non-extendable maximum term of ten (10) months for the financing of the project and commissioning of the metallurgical complex, and an additional non-extendable maximum term of twenty (20) months for the completion and commissioning of the project.

Section 3.- Guarantees

Doe Run Perú S.R.L. shall submit guarantees to ensure its complete abidance by and fulfillment of the terms, commitments and investments mentioned in the previous section, pursuant to the terms and conditions established by the Ministry of Energy and Mining. (...)

12 Supreme Decree No. 075-2009-EM, Supreme Decree regulating Law No. 29410.

(...)

Section 2.- Term for the performance of the “Sulfuric Acid Plant and Modernization of the Copper Circuit” Environmental Project

2.1 The extension of the term granted by Law No. 29410 shall become effective as of the effective date of such law and shall only apply to the obligations resulting from the Project. The terms and the fulfillment of all remaining obligations within the applicable legal framework shall remain fully effective and enforceable. OSINERGMIN shall, in exercising the powers granted to it, supervise the project and impose all such penalties as may be necessary in case of breach. (...)

Section 3.- Term for the financing and completion of the Environmental Project

3.1 Within the non-extendable maximum term of ten (10) months for the procurement of financing for the project and the resumption of the activities in the La Oroya Metallurgical Complex, set forth in section 2 of Law No. 29410, and the specific terms fixed for each commitment in sections 4, 5 and 6 hereof, Doe Run Perú S.R.L. must deliver enough evidence to the General Mining Office of the Ministry of Energy and Mining to prove that it has procured the applicable financing for the completion and commissioning of the Project, notify the resumption of its activities, and deliver the applicable guarantees and amend the Trust mentioned in section 4 hereof.

3.2 Upon expiration of the maximum term of ten (10) months set forth in section 3.1, above, Doe Run Perú S.R.L. shall have a maximum of two (02) months to negotiate and procure the resumption of the works of its contractors, and a maximum of twelve (12) months to complete the project. Upon expiration of the aforementioned term of fourteen (14) months, the company shall have a non-extendable maximum term of up to six (06) months to commission the Project pursuant to the recommendations of the Technical Commission appointed by Supreme Resolution No. 209-2009-PCM.

Section 4.- Trust for the performance of the “Sulfuric Acid Plant and Modification of the Copper Circuit” Project

4.1 The resources for the performance of the Project shall be solely and exclusively channeled through the Trust that Doe Run Perú S.R.L. created pursuant to Ministerial Resolution No. 257-2006-MEM/DM. Such Trust shall be managed pursuant to the provisions of this section 4. (...)

Section 5.- Guarantees

5.1 To guarantee the fulfillment of all of the obligations, commitments and investments required for the Project, Doe Run Perú S.R.L hereby expressly undertakes to:

(i) Maintain and renew the existing Letters of Guarantee delivered to the Ministry of Energy and Mining, pursuant to Supreme Decree No. 046-2004-EM and Ministerial Resolution No. 257-2006-MEM/DM, in accordance with any such terms and conditions as the General Mining Office may impose.

(ii) To grant the Ministry of Energy and Mining, within the first six months of the term mentioned in section 3.1 hereof, guarantees covering no less than one hundred percent (100%) of the total cost of the Project. Such guarantees shall be granted to the full satisfaction of the Ministry of Energy and Mining, and may comprise any combination of the following elements:

An unconditional, joint, irrevocable, automatically enforceable Letter of Guarantee without benefit of excussio, valid within Peru at the request of the Mining Authority and enforceable against the issuing companies, which must be within the supervisory scope of the Bank, Insurance and Pension Fund Management Superintendence, or included in the latest list of first class foreign banks periodically published by the Central Reserve Bank of Peru; and/or an Assignment of rights over securities or credits; and/or Collateral Guarantees over shares, rights or interests in the company; and/or the






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- Financing and commissioning of the metallurgical complex: 10 (ten) months following the effective date of Law No. 29410.

- Renegotiation with and resumption of the works of contractors: 2 (two) months following expiration of the previous term.

- Construction of the project: 12 (twelve) months following expiration of the previous term. - Commissioning of the project: 6 (six) months following expiration of the previous term. - Pursuant to section 2 of Law No. 29410, all of the aforementioned terms shall be non-

extendable. - The letters of guarantee to be delivered as financial surety must cover at least the total cost

of the project, and DRP may, eventually, grant additional personal or real collaterals to back the fulfillment of the obligations undertaken by it.

28. On this regards, DRP has claimed that the financing and construction of the project undertaken

by it constitutes a merely administrative legal duty, a “formal vehicle”, without patrimonial content, that allows citizens to fulfill an administrative obligation that may or may not be necessary, enforceable or punishable, depending on whether or not it is actually fulfilled. In DRP’s words, the sole obligation imposed upon it by the PAMA was that of reducing the pollution levels generated by its mining activities to the maximum levels allowed by environmental laws and regulations.

29. However, this division believes that the mere use of expressions such as “formal vehicle

without patrimonial content” and “legal duty” by the debtor not only fails to provide a clear and precise explanation of the nature of such legal devices, but also disregards the true nature and importance the completion of the project has for the achievement of the environmental goals described in the PAMA.

30. The goal of the PAMA, as expressly set forth in section 3 of Supreme Decree No. 016-93-EM,

is reducing environmental pollution to the maximum levels allowed, and the attainment of such goal necessarily requires investments on techniques and processes allowing the achievement of said levels. It is in this context that the idea of “vehicle” for the achievement of a goal that DRP associated to the financing and construction of the project must be understood, but, contrary to the debtor’s allegations, not as a simple “formal” vehicle, but rather as “the means” allowing the achievement of such goal, with an undoubtedly patrimonial content that is fully enforceable against the bankrupt company upon the breaching of its obligations.

Attachment of minerals, concentrates, metals, machinery, assets or movables in general; as well as any other security right legally acceptable by the Ministry of Energy and Mining under the applicable laws in force.

Notwithstanding the foregoing, the Ministry of Energy and Mining may accept additional personal guarantees not mentioned in the previous paragraph issued by the company itself, its parent company, or any third party company with a commercial link therewith, which, in the opinion of the Ministry of Energy and Mining is solvent enough to back the obligations undertaken by Doe Run Perú S.R.L. under Law No. 29410 to its satisfaction and agreement.

5.2 The guarantees shall remain in force until the final fulfillment of the obligations undertaken by Doe Run Perú S.R.L. regarding the construction and commissioning of the Project, and the issuance of the applicable certificate of conformance by the mining authority. (...)






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31. Conversely, accepting the debtor’s allegations that the cost of financing and constructing the

sulfuric acid plant is a mere “estimate” of the larger or smaller investment DRP can make for the achievement of the established environmental goals would entail, for the most part, nullifying the content of the PAMA, which, as mentioned before, consisted mainly in the completion, within a fixed term, of all of the investment projects for the acquisition of processes and technologies needed to reduce environmental pollution to the maximum levels allowed. If DRP could achieve the aforementioned environmental goals in a way other than the one described in the PAMA, then the regulatory framework resulting from said program would be entirely unnecessary.

32. During the proceedings, DRP pointed out that, in cases opened by the competent

administrative environmental authority against other mining companies, the environmental goals of the PAMA were deemed fulfilled or not, depending only on whether such companies had reached the maximum pollution levels allowed, regardless of the total investment made by them. However, said claim must be disregarded because such cases were only aimed at establishing the companies’ administrative liability, notwithstanding the fact that, in this case, DRP has failed to produce any evidence showing that it has made any kind of investment whatsoever to complete the last project of the PAMA, and allowing, based on such investment - either larger or smaller than the one officially reported to the competent authorities -, to verify whether or not the proposed environmental goals were actually reached.

33. This Tribunal further believes that the absence of express legal provisions allowing the MEM to demand the enforcement of the obligation to finance and complete the project, or a compensation in the absence thereof, does not preclude the existence of a financially quantifiable civil obligation to act by violating the rule of law that governs all State actions. This is so precisely because, given that the breach of this obligation not only has administrative consequences, but also civil ones, the only requirement to prove its existence is demonstrating that it has been expressly mentioned in the law - in this case, Supreme Decree No. 016-93-EM and its regulations and amendments - and, where the applicable law does not state the civil consequences in case of breach of said obligation, the provisions on the breach of obligations to act in section 1150 and subsequent sections of the Civil Code are applicable in a supplementary manner.

34. The fact that the laws and regulations governing the PAMA only expressly impose upon DRP administrative penalties in the event of failure to abide by the program is no obstacle for such breach to have, at the same time, all civil effects common to cases of breach of patrimonial obligations. On this regards, it is worth referencing once again the laws and regulations governing such environmental enhancement program in order to note, in a more clear manner, the aforementioned difference.






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35. Both Supreme Decree No. 016-93-EM13 and the remaining laws and regulations that subsequently modified the terms and conditions for the fulfillment of the PAMA14 clearly safeguarded and guaranteed the State’s rights to commence any such civil and criminal actions as may be necessary to establish the liability of the bankrupt company in the event of breach of its obligations, without the need to expressly determine for such purpose the legal means to impose the penalties resulting from such kinds of liability. This legal choice is entirely coherent with the logic of the legal system in environmental matters, which, as the result of its very nature, aimed at the protection of a public interest, must have, as a priority, the implementation of any such mechanisms as may allow the achievement of its goals (penalizing and, in general, regulatory powers), notwithstanding the fact that, as already explained, all public or private persons have the right to commence any and all such actions as may be supplementary provided for under Common Law for the protection of their patrimonial interests affected by the breach of the environmental obligations.

36. It must be noted that the term “civil liability”, as used in the aforementioned regulations, not only refers to the tortious civil liability the mining company may have towards any third parties who may see their lives, physical integrity and health affected by the environmental damages that may result from the breach of the PAMA - which are not under discussion in this appeal -, but also the civil liability attaching the company as the result of the failure to abide by the patrimonial obligations expressly imposed upon it by the laws and regulations governing the PAMA.

37. Another evidence of the patrimonial nature of the obligation to act resulting from the claims invoked by the MEM and which, in the opinion of this Division, also shows that the laws and regulations governing the PAMA can give rise to a claim under section 1 of the General Bankruptcy Law, is the fact that the MEM itself was empowered to foreclose on the letters of guarantee granted to secure not only the payment of fines for the failure to achieve the environmental goals imposed by the law, but also the failure to comply with the obligation to act, as resulting from the aforementioned laws and regulations15.

13 SUPREME DECREE No. 016-93-EM. Section 48.- Should any mining companies unjustifiably breach the commitments

made under the Environmental Management and Enhancement Program mentioned in section 10 of these Regulations, and notwithstanding any such legal actions as may be applicable, the General Mining Office shall apply the applicable penalties on the following terms: (...) (emphasis added).

14 SUPREME DECREE No. 046-2004-EM. Section 12.- COMPLEMENTARY REGULATIONS

12.1 The penalties imposed as the result of the breach of environmental obligations or the PAMA shall not release the mining company from any such civil and criminal liabilities as may result from the environmental damages caused under the applicable laws in force. (...) (emphasis added)

SUPREME DECREE No. 075-2009-EM, Regulating Law No. 29410. First Supplementary Provision.- The penalties resulting from the breach of the obligations imposed by this Decree shall in no way release Doa Run Perú S.R.L from any such civil and criminal liabilities as may result from the environmental damages caused under the applicable laws in force. (...) (emphasis added)

15 See footnote in page 12.






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38. Contrary to DRP’s claims, the fact that the laws and regulations governing the PAMA only expressly provide for the possibility of foreclosing on the letters of guarantee delivered by the debtor in the event of breach of the obligations expressly provided for in said environmental enhancement program, in no way precludes the MEM’s alternative power to directly demand, as creditor of a civil obligation to act, the delivery of the consideration agreed upon or, failing that, to commence all such civil actions as may be conferred to it by the applicable laws.

39. The letter of guarantee is a personal guarantee which, as is the case with most guarantees -

both personal and real -, is given to back the payment of an obligation that is patrimonial in nature (understood as the possibility to financially quantify the consideration). Once such guarantee has been granted, its holder acquires the right to foreclose on it in the event the grantor breaches its obligations, but, like any other right, the exercise thereof is always discretionary, and its holder may choose not to exercise it and opt for other mechanisms provided to him by the law to collect on his credit.

40. On the abovementioned grounds, it is this Divisoin’s opinion that the duty to deliver letters of

guarantee to the MEM, as imposed upon DRP by the laws and regulations governing the PAMA, evidence the patrimonial nature of the obligation to complete the project because: (i) as a personal guarantee, it backs the payment of a consideration that is patrimonial in nature; and (ii) its inclusion within the statutory regime of the PAMA entails, rather than an exclusive option, one that is discretionary and additional to the ones already granted to the MEM in the event of breach of the applicable obligation.

41. It must also be kept in mind that cases such as this have been filed with and solved by this Tribunal in many occasions, where it analyzed and decided that the breach of legal and contractual obligations imposed upon the parties or subjects of bankruptcy proceedings - such as, for example, liquidating entities - gave rise to both administrative (penalizing) and civil or other consequences.

42. Finally, to the extent that the consideration owed by DRP included the financing and construction of the project - the goal of which was precisely the protection of the environment -, like in any infrastructure investment and construction project, such obligations “to act” (financing and constructing) can indeed be fully quantified in money for the purpose of allowing them being included in the meeting of creditors, given that the MEM would own a claim under section 1 of the General Bankruptcy Law, pursuant to a criterion previously endorsed by this Division in earlier decisions16.

43. In accordance with the aforementioned criterion, the definition of claim in section 1 of the

General Bankruptcy Law not only includes the obligations to deliver sums of money, but also those of delivering goods other than money or to act in a certain specified way, as long as they

16 See Resolutions No. 902-2003/SCO-INDECOPI and 189-2004/SCO-INDECOPI.






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can be translated into a financial equivalent, since excluding them from the bankruptcy would entail granting them a discriminatory and unjustified treatment, ignoring their patrimonial nature.

44. In summary, the amounts invoked by the MEM do indeed qualify as claims under section 1 of

the General Bankruptcy Law, given that they are the result of an obligation relationship stemming from environmental law, consisting in the MEM’s right to obtain from DRP the fulfillment of the obligation to act provided for under the PAMA, comprising the financing and construction of the project, which is financially quantifiable. The following section analyzes whether, in this particular case the MEM has sufficiently proved the source, existence, ownership and value of the invoked credits.

III.3 Analysis of claims invoked by MEM III.3.1 Origin and existence Breach of PAMA

45. DRP denied to have breached PAMA so far due to the fact that, according to the last extension granted by Law No. 29,410, DRP is allowed to complete the construction of the project in 2012. DRP adds that, even though MEM has declared said breach by Resolution 289-2010-MEM-DGM/DTM, DRP challenged that decision, firstly through procurement proceedings, and currently through administrative court action. Therefore, in any case, the determination of said breach is not backed by a final decision.

46. This Court has developed in previous decisions17 the requirement that, in order to prove the existence, origin, property and amount of a claim based on an obligation relationship, it is essential to analyze the fact (origin) of the right to a claim, for which the administrative authority is empowered to prove the contractual or legal breach (depending on the source of the obligation claimed) that gives rise to the right claimed. This is because the law expressly regards the bankruptcy proceedings authority as the competent authority to verify the existence, origin, property, and amount of the claims invoked. For this purpose, said authority must evaluate if the documents and titles in which the request is based prove the reality of said claims.

47. In this case, the breach by DRP can be verified by taking into account the terms established by the regulatory rules of PAMA. With regard to the explanation of DRP about an alleged ongoing conflict as regards the administrative determination of said breach, it is worth to note that, in any case, the procurement proceedings’ decision by MEM (if it can be considered as full proof of the breach) is final, so that the decision through administrative court action is not in itself enough to invalidate its efficacy, as established by Sections 8 and

17 For example, see Resolution 0881-2004/TDC-INDECOPI, issued on December 6, 2004.






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9 of Peruvian General Administrative Procedure Law, and Section 23 of Peruvian Administrative Proceedings Law18.

48. As regards the underlying affair, as pointed out by paragraph 27 of this Resolution, it is shown that regulations by PAMA have established two sequential terms to comply with the project: the first term was established to obtain the necessary financing for the start-up of the project; the second term was established to carry out the construction and completion of said project. The documents on file prove that DRP failed to comply with the financing of the project within the first term above-mentioned.

49. This Court believes that complying with the first term (financing of the project) was essential to also comply with the second term (construction), due to the fact that, if the required funds were not available, then the construction phase of the project could not begin. This leads us to conclude that, in effect, DRP breached PAMA since showing the breach of the first phase of the project makes it impossible for the second phase to be complied with.

50. As far as this particular topic is concerned, it is important to notice the importance of the fixed terms for each phase of the project to fully comply with the obligation of DRP, taking into consideration that said terms were expressly regarded as “non-renewable” by the above-mentioned regulations by PAMA. This means that, as each one of said terms is essential to comply in an integral form with the obligation given that these terms cannot be renewed, failure to comply with one of said terms inevitably implies the breach of said obligation.

51. To fully understand the essential character of the terms for complying with the obligation of carrying out the project, it is vital to be located within the context and purpose for which the renewals were granted for the carrying-out of the project. Supreme Decree 046-2004-EM and subsequent regulations issued to extend the terms for performance of PAMA had the purpose of granting an exceptional and final solution to the problem of environmental pollution caused by mining activities, in order to halt as immediately as possible the adverse effects caused by said pollution to the population and to communities adjacent to the mining area.

52. Taking into account this purpose of urgent and unavoidable protection to the environment surrounding La Oroya Metallurgical Complex, expressly highlighted in some of the amendments to the development of PAMA19, it is inevitable to conclude that every term of every phase of the obligation to carry out the project should be non-renewable, so as to achieve the desired environmental purpose by complying with the monetary obligation within the term prescribed by law.

18 Peruvian General Administrative Procedure Law 27444, Section 8: Validity of the administrative act: An administrative act issued in accordance to the law. Section 9: Presumption of validity: Every administrative act is deemed valid if its alleged nullity is not declared by an administrative or jurisdictional authority, where applicable. Peruvian Administrative Proceedings Law 27584, Section 23: Effect of admitting the claim. Admitting the claim does not obstruct the execution of the administrative act, notwithstanding what has been established by this Law about precautionary measures. 19As indicated by Section 1 of Law No. 29,410. See footnote 11.






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Attributable breach 53. Section 1329 of Peruvian Civil Code20 prescribes that any breach of an obligation, in whole

or in part, or late or defective performance, is presumed to imply minor negligence on the part of the debtor.

54. In this case, DRP has not proven to have had any valid reason to breach its obligation to finance the project within the term fixed by PAMA rules. Thus, as the above-mentioned presumption states, it is also proven that the breach is attributable to the debtor.

55. DRP may have only been legitimately exempted from performing the financing of the project if it had proven to be unable to perform said obligation for reasons not attributable to it, such as an act of God or a force majeure event, as established by Section 1315 of Peruvian Civil Code21, said causes being on their own nature unavoidable within the legal scope of action of the debtor, breaking the causation link between proper conduct and breach. However, said situation has not been proven in this case. Effects of the breach

56. Section 1152 of Peruvian Civil Code prescribes that, in addition to other alternatives granted by Sections 1150 and 115122, in the event of breach attributable to the debtor, the creditor may demand payment of the applicable compensation.

57. At the oral hearing, MEM’s representative denied that the claims invoked served as compensation for the breach of PAMA, but that they served as monetary valuation of the obligation to conduct the project undertaken by DRP before the Peruvian government.

58. Taking into consideration that, in spite of the specific regard said representative had about the claims invoked, their origin and existence are determined by the breach of the obligation to conduct the project, which constitutes grounds for this request for adjudication of claims, it must be noted that, as will be addressed in the following paragraph, the monetary valuation of such obligation is only one element to take into account in order to estimate the

20 Peruvian Civil Code, Section 1329: Any breach of an obligation, in whole or in part, or late or defective performance, is presumed to imply minor negligence on the part of debtor. 21 Peruvian Civil Code, Section 1315: Act of God or force majeure refers to the non-attributable cause consisting in an extraordinary, unforeseen and irresistible event which makes it impossible for the obligation to be carried out or determines its performance in part, or late or defective performance. 22 Peruvian Civil Code, Section 1150: Failure to comply with obligations of action attributable to debtor entitles creditor to resort to any of the following measures:

1. Seek specific performance, unless violence against debtor should be necessary to that end. 2. Request that obligation be conducted by a person other than debtor, on their behalf. 3. Render the obligation null and void.

Section 1151: Performance in part, or late or defective performance of the obligation of action attributable to debtor entitles creditor to resort to any of the following measures:

1. Measures prescribed by Section 1150, subsection 1 and 2. 2. Regard the obligation as if it had not been performed, if it was no use for creditor. 3. Require debtor to destroy what has already been done, or destroy it on behalf of debtor if it were

dangerous for creditor. 4. Accept the obligation performed, requesting a reduction in price, where applicable.

Section 1152: In the cases established by Sections 1150 and 1151, creditor shall be entitled to request the applicable compensation.






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value of said claims. Therefore, prior to said estimation, it must be determined which action the creditor who had suffered from the breach may resort to under the applicable laws, so as to make a determination on the existence of the claims.

59. Failure by DRP to finance the project within the term established by PAMA regulations has necessarily led to the impossibility to comply with the next phase of the project (construction), since, as the debtor cannot obtain the funds needed to finance said phase, the debtor company is unable to perform it within the terms established by law. As a consequence, the only action under the Peruvian Civil Code available to MEM for DRP’s breach is to seek damages from the debtor for the loss caused by said breach.

60. At this juncture, it is relevant to note that the above-described action for damages is only limited to the damage directly suffered, in this case, by MEM because of DRP’s inability to comply with its obligation to carry out the project, represented by the monetary value of said project. In other words, the action for damages does not include the damage that the failure to perform said project could have caused third parties due to any potential environmental implications. Not only have these facts not been proved in this case, but they have also not been included in MEM’s request for recognition of its claim.

61. With regard to the allegation by DRP that, if it is established that the claim filed by MEM derives from compensation, such compensation may only be determined by the Peruvian Judiciary, this Court considers that the administrative authority’s impossibility to estimate the value of the claim derived from compensation is not the result of such compensation being within the exclusive jurisdiction of the judiciary, but a consequence (as it has frequently been the case during other bankruptcy proceedings) of the Commission’s lack of the necessary evidence to determine the quantum of the claim. In these cases, it is essential for the judicial authority to carry out said task in the particular proceeding.

62. Notwithstanding the foregoing, whenever the amount of compensation may be fully assessed by the administrative authority under a law, contract or declaration of the parties allowing for said determination, there is no obstacle to proceed with the assessment and, as a result, with the recognition. Such has been the frequent opinion of the bankruptcy authority when it comes to recognizing claims derived from compensation arising from liquidated damages, and in other instances, under labor law, in the case of compensation for wrongful dismissal.

63. Therefore, the origin and existence of the claims by MEM having been verified, it is relevant to verify next if MEM is the legitimate owner of said claims, and if such claims can be estimated in order to be brought to the bankruptcy proceedings.

III.3.2 Ownership

64. As regards the ownership of the claims invoked, the argument introduced by DRP about MEM’s alleged lack of standing to take legal action, since it did not execute the privatization agreement, must be disregarded due to the fact that, as stated in paragraph III.2 of this resolution, the source from which said claims arise is the law and not the agreement.

65. Supreme Decree 016-93-EM and other related sector regulations on the creation and development of PAMA prescribe that MEM is the public entity responsible for supervising






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and controlling the performance of the obligations related to said program. This proves that MEM holds title to the claims invoked.

66. DRP alleges that, as provided by Law No. 28,964, Law No. 29,325, and Supreme Decree 001-2010-MINAM, the controlling and penalizing roles of the mining sector as regards environmental matters were transferred first to OSINERGMIN, and then to OEFA. Therefore, even if the claim invoked by MEM had a legal origin, it could only be filed by OEFA since, pursuant to the above-mentioned rules, such entity is the current competent authority to supervise the performance of the obligations contained in PAMA.

67. However, it is worth noting that the above-quoted rules established that entities such as OSINERGMIN and OEFA are only competent to supervise and determine the administrative responsibility of controlled companies, such responsibility being different from the civil responsibility for the breach of the monetary obligations of the debtor, as explained in previous paragraphs. On the contrary, the contents of Law No. 29,410 and its regulations approved by Supreme Decree 075-2009-EM (that is, the rules that specifically regulate the performance of the obligation to finance and construct the project) not only confirm the transfer of only the administrative and penalizing role to the above-mentioned entities, but they also establish the following powers of MEM, all of them directly related to the obligation to carry out the project for which DRP is responsible23:

(i) Receiving from the company a plan for the resumption of operations. Said plan should have detailed the source of the required working capital to resume operations, the agreements with suppliers as to the method of payment of the overdue debt and for concentrate supply, and the cash flow planned on a monthly basis for thirty (30) months of operation;

(ii) Receiving from the company a complete scheme of the sureties (asset-backed securities) issued in favor of MEM;

(iii) Receiving the plan for the financing necessary for the construction and start-up of the project;

(iv) Receiving from the company the plan for works and construction of the project; and, (v) Enforcing the asset-backed securities issued in favor of MEM in the event of a breach of the

obligation to finance the project within the term prescribed by law. 68. Therefore, the allegation introduced by DRP in this sense should also be disregarded.

III.3.3 Amount 69. As indicated in previous paragraphs, in order to estimate the value of an obligation to

perform a specific act, an unavoidable reference is the monetary value of said act. 70. In this case, even though the obligation on which the claims invoked by MEM are grounded

is the compensation derived from the breach of the obligation to perform the project, since said breach caused a direct and immediate damage consisting in the failure to perform such act, the required evidence to estimate the compensation amount due is the valuation of said obligation to perform the project.

71. The case file includes a copy of the report filed on January 27, 2010 by DRP with the General Direction of Mining of MEM, in which the debtor informed such state-owned entity

23 See Section 3 of Law No. 29,410, and Sections 6 and 8 of Supreme Decree 075-2009-EM.






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that the amount necessary to finance and construct the project was of USD 163,046,495.00.

72. Even though DRP has alleged that this amount is just an (approximate) estimate of the cost of the investment required to construct the project, it must be considered that this is an amount that, in addition to being required to be estimated by environmental rules, is technically supported by the feasibility studies and other financial analyses carried out by the company itself to determine the viability of the project. Therefore, the assessment of the amount constitutes the reference necessary to establish the monetary equivalent of the damage caused by the breach of PAMA, insofar as this will allow the Government or third parties to complete the project in order to conclude the implementation of said environmental adaptation program, which is essential to continue with the conduct of mining activities by the corporate debtor.

73. The corporate debtor having estimated the amount of the obligation to carry out the project of PAMA in its report dated January 27, 2010; this Court believes that the declaration contained in said report is evidence of the amount of the claims invoked.

74. Regarding DRP’s argument of an alleged impossibility to determine the amount of said claims due to the fact that third party suppliers have simultaneously been acknowledged as creditors on account of services rendered to start to implement the project, it must be noted that, as stated in paragraph III.3.1, the failure to finance the project within the term established in the PAMA has led to the impossibility to carry on with the next phase of the project (construction). Thus, the obligations that DRP could have assumed with said suppliers cannot be construed as a case of duplicate claims. In any case, the corporate debtor would have to previously prove the payment of the services rendered by said suppliers in order to make it clear that the project is being partially financed and performed, and make the relevant discount from the claims invoked by MEM.

75. Therefore, it has been proved that the principal amount of the claims invoked by MEM is of USD 163,046,495.00. Other arguments by DRP

76. In addition to challenging the existence, origin, ownership and amount of the claims invoked by MEM based on the arguments already analyzed in the previous paragraphs, throughout the proceedings, and at the oral hearing, DRP questioned such claims regarding their final use in the event they were incorporated to the rest of the creditors’ claims as follows:

(i) The recognition of the claims invoked by MEM would imply some kind of interventionism of the Government in the private decisions at the meeting due to the high percentage of participation that its claims would represent; and, on the other hand, it would imply that the authority of the Government to supervise compliance with environmental rules would be subject to the will of the private parties at the meeting, which is unacceptable considering the undeniable national interest meant to be protected by the achievement of the goals pursued by the environmental policy through PAMA ; and,

(ii) In the event that the meeting of creditors should decide the liquidation of DRP, the corporate debtor would definitely cease its operations, and all obligations to comply






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with PAMA would therefore be automatically terminated. Nonetheless, the Peruvian Government through MEM would continue to hold a claim in that respect, which would lead to unjust enrichment in the terms of Section 1954 of the Peruvian Civil Code.

77. Notwithstanding the fact that said arguments bear no direct relation to the analysis of the existence, origin, ownership and amount of the claims invoked by MEM, this Court considers it relevant to make some clarifications to decide such questions.

78. First of all, the mere participation of the Government as creditor in bankruptcy proceedings cannot be construed as interventionism in private decisions, much less in view of the percentage that its credits represent at the meeting, since the General Bankruptcy Law gives any creditor who holds a claim in the terms of Section 1 of such Law (regardless of its legal personality under public or private law) the possibility of being incorporated to the meeting of creditors, precisely because it holds a monetary right capable of being paid in the bankruptcy proceedings, as has been proved in this case.

79. Secondly, it also cannot be argued, that simply because of the recognition of claims derived from the obligation to perform an act contained in PAMA, the Government’s environmental policy will be subject to the decisions of the private parties who are members of the meeting of creditors. As analyzed in previous paragraphs, a difference should be drawn between, on the one hand, the solely monetary right of MEM based on the failure to comply with the project provided for in PAMA, and, on the other hand, the regulatory authority of the Government as regards environmental affairs, which may be exercised by the Government under its ius imperium, irrespective of the agreements reached at the meeting of creditors regarding the above-mentioned monetary interest, as is the case, for instance, in each bankruptcy proceeding in which the Government takes part through its tax collection and administration entities.

80. Finally, the validity of the claim allowed in favor of MEM cannot be subject to unknown and future events, such as an order for relief ordering the liquidation of the corporate debtor after the Creditor’s Meeting took place. Even considering that the possibility of the company being orderly forced out of the market is one of the alternatives that can be agreed on at a Creditor’s Meeting as provided for by the General Bankruptcy Law, MEM’s claim, and any claim in general when duly allowed by the competent authority, has the unavoidable and mandatory effect of being paid pursuant to the plan proposed in the bankruptcy proceeding, regardless of what creditors collectively decide on the company’s future activities. The reason why this occurs is that since this type of claims carry a monetary value regardless of the nature of the activity giving rise to them, it is the debtor who is responsible for paying the claims.

81. Notwithstanding the foregoing, in this case the claim allowed in favor of MEM does not derive from a quantifiable obligation to do something—which, as already stated, is one of the essential elements giving rise to a claim—which would become impossible to comply with in the event that an order for relief was entered for DRP’s liquidation; it rather derives






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from the amount of compensation resulting from a failure to comply with the relevant obligation, according to the foregoing discussion; therefore, there is no such unjust enrichment as alleged by the corporate debtor.

III.4 Conclusion

82. It therefore follows from the analysis above that MEM has proven to own a claim for the principal amount of US$ 163,046,495.00 against DRP, so that the appealed decision should be reversed and amended to recognize such claim in favor of the public entity.

III.5 Interest claims

83. In its proof of claim, MEM required the acknowledgement of interest claims amounting to US$ 87,699.29.

84. In the appealed decision, the acknowledgement of such claims was denied by the Commission given the dismissal of principal amount claims. However, considering that this administrative act has allowed claims in favor of MEM adding up to a principal amount of US$163,046,495.00, the first instance decision should also be reversed on this point and amended to order that the Commission calculate such interest taking into consideration the expiration date established for the obligation to finance the project based on the extensions granted by Law No. 29,410 and its regulations approved by Supreme Decree No. 075-2009-EM.

III.5 Priority order

85. DRP alleged that the priority order of such claims is uncertain since, given PAMA’s legally protected interest, they may have a priority over employee remuneration and social benefits, or they may be fifth in priority for failing to fall into any of the first four groups because of its special nature. This would absurdly mean that the environmental interests safeguarded would be set aside by the monetary interests of a group of private parties.

86. In this respect it must be mentioned that, in accordance with paragraph 78 of this Resolution, the acknowledgement and payment under the appeal in these bankruptcy proceedings are in no way against the accomplishment of the environmental objectives pursued by the State through environmental regulations, since the State remains in its regulatory authority to protect such public interest goal, irrespective of the outcome of the pecuniary claim’s collection. For this reason, DRP’s argument in relation to this issue must be dismissed.

87. Therefore, contrary to DRP’s allegations, it is perfectly possible to determine the priority order of the claims invoked by MEM. Since Section 42.1 of the General Bankruptcy Law establishes a restricted order of priority for claims and the facts that determine the






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classification of those claims into each priority group, MEM’s claims are fifth in priority for failing to fall into any of the previous priority groups.

88. Furthermore, MEM asserts that its claims are third in priority based on the asset-backed securities granted by DRP, but that is not what the law requires for a claim to fall into that priority group. To be third in priority, the owner of the claim must have been granted collateral, a precautionary measure or other lien or encumbrance on the corporate debtor’s property, “property” being a specific piece of property and not the corporate debtor’s assets as a whole.

89. Accordingly, this court decides that MEM’s allowed claims against DRP are fifth in priority, pursuant to Section 42.1 of the General Bankruptcy Law24.

III.6 Relation

90. The case file shows that MEM and DRP neither have one of the relationships restrictively listed in Section 12 of the General Bankruptcy Law, nor the significant proximity of interests described in such section. Thus, this court declares that MEM is a non-related creditor of DRP.

III.7 MEM’s motion to claim a greater amount

91. In the appealed decision, the Commission denied MEM’s motion to claim a greater amount on the grounds that it was filed after the expiration of the time period provided by Section 428 of the Peruvian Civil Code, which also applies to administrative proceedings on a supplementary basis.

92. In this respect it must be mentioned that, irrespective of the fact that any amendment made to the initial proof of claim is improper after the debtor has been notified, this is so only when the amendment involves the same claims invoked in the initial proof of claim. However, when the motion is not aimed at claiming a greater amount of the same previously-invoked claims, but is rather aimed at requiring the acknowledgement of different claims, that motion must be treated in relation to its actual nature, regardless of the title given to it by the creditor itself.

93. This Chamber considers that, although MEM’s motion to amend the initial proof of claim should not have been allowed, neither should it have been immediately dismissed since the Commission, by virtue of the powers to determine the nature of petitions pursuant to the Law on General Administrative Procedure, should have regarded it as a motion to claim a

24 27809 Act, General Bankruptcy Law, Section 42.- Priority order. 42.1 Upon a dissolution and liquidation process, the priority order of the claims is as follows: (...) Fifth: claims that do not fall into the preceding groups.






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greater amount based on the fact that the claims invoked are distinct from the originally invoked claims (interest claims and claims derived from a failure to renew two asset-backed securities)

94. Therefore, since the motion filed by MEM on December 7, 2010 was incorrectly considered, this court declares the annulment of the appealed decision dismissing the motion to amend the proof of claim, and it is hereby ordered that said decision be amended to regard such motion as one that claims a greater amount of new claims, and that the Commission should grant a proper treatment to the motion.

IV DECISIONS

FIRST: Resolution 1105-2011/CCO-INDECOPI filed on February 23, 2011 is reversed on the grounds that it denied the acknowledgement of principal amount claims invoked by the Ministry of Energy and Mining against Doe Run Perú SRL, and is amended to acknowledge such claims for the principal amount of US$163,046,495.00, which are fifth in priority.

SECOND: Resolution 1105-2011/CCO-INDECOPI filed on February 23, 2011 is reversed on the grounds that it denied the acknowledgement of interest claims invoked by the Ministry of Energy and Mining against Doe Run Perú SRL, and is amended to order that the Commission of Bankruptcy Proceedings Lima Sur determine the amount of claims through the appropriate calculation.

THIRD: this court declares that the Ministry of Energy and Mining is a non-related creditor of Doe Run Perú SRL, pursuant to Section 12 of the General Bankruptcy Law.

FOURTH: this court declares the annulment of Resolution 1105-2011/CCO-INDECOPI filed on February 23, 2011 on the grounds that it dismissed the motion to claim a greater amount of the claims invoked on December 7, 2010 by the Ministry of Energy and Mining, and amends it to consider such motion as a motion to acknowledge a greater amount of claims, and to establish that the Commission of Bankruptcy Proceedings Lima Sur grant a proper treatment to the motion.

Opinion of Judges Héctor Tapia Cano, Juan Ángel Candela Gómez de la Torre, Raúl Francisco Andrade Ciudad and Teresa Mera Gómez.

[Signature:] Héctor Tapia Cano. Vice president.

Dissenting opinion of Judge María Soledad Ferreyros Castañeda:

In my opinion, Resolution 1105-2011/CCO-INDECOPI filed on February 23, 2011 must be CONFIRMED, given the impossibility to determine the existence and nature of any of MEM’S claims against DRP which could be acknowledged in this bankruptcy proceeding, for the following reasons:






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It follows from the review of this file that the matter at issue in this case is to determine if DRP’s failure to comply with the PAMA gives rise to a claim in favor of MEM, which would allow it to be part of DRP’s bankruptcy proceedings.

Environmental Management and Enhancement Program’s (PAMA’s) implementation during the 1990s was aimed at harmonizing the mining industry’s growth through the promotion of the private sector’s investment in such economic field, making it necessary to take all precautionary measures as may be deemed necessary in the processes and technology employed to perform the mining activity, so that the proliferation of said activity does not cause environmental pollution above permitted standards.

On that basis, and with the purpose of reducing the negative impact that mining activities may have on the environment, the State introduced legal measures to meet such needs.

In that context, Supreme Decree No. 016-93-EM regulating the PAMA was issued, as well as a set of regulations which, as stated in paragraph 18 of the majority decision “are aimed at effectively protecting the environment against the high pollution risks resulting from the development of mining activities, by means of the implementation of measures aimed at controlling and preventing the environmental impacts thereof through the inclusion of any such techniques and processes as may be deemed adequate for the attainment of such goal”.

PAMA’s purpose, as prescribed in Section 3 of Supreme Decree No. 016-93-EM, is the reduction of environmental pollution to the permitted standards and, for that purpose, it is necessary to comply with the investment projects on techniques and processes, whose implementation would allow pollution to reach such standards.

Among the measures to be taken to accomplish these goals, DRP’s PAMA (first under Centromín’s supervision and subsequently under the corporate debtor’s supervision by virtue of the privatization agreement) provided a series of stages for the investment and the development of technology needed to deal with mining activities’ effluent and toxic waste, the last step being the financing and construction of the project named “Sulfuric Acid Plant and Modernization of the Copper Circuit of the La Oroya Metallurgical Complex”.

The review of the above-mentioned regulations shows, among other issues, that every natural or legal person willing to carry out mining activities must have a PAMA, which must be approved by the relevant authority, so as to reduce the environmental pollution that its economic activity may cause.

In this case, DRP’s PAMA (first under Centromín’s supervision and subsequently under the corporate debtor’s supervision by virtue of the privatization agreement) provided a series of stages for the investment and the development of technology needed to deal with mining activities’ effluent and toxic waste, the last step being the financing and construction of the project named “Sulfuric Acid Plant and Modernization of the Copper Circuit of the La Oroya Metallurgical Complex”.






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In order to conduct said project, DRP was required to: (i) finance the project through the structuring of an environmental financial trust collateralized by its own flow of income, as well as issuing two asset-backed securities to support the financing in case of a breach of the obligation to finance said project; and (ii) construct the project.

Although DRP’s environmental commitments were included in the privatization agreement entered into by DRP and Centromín Perú (initially responsible for complying with PAMA) in 1997, I agree with the other Judges in that the actual source of its commitments is the law.

In relation to the foregoing, it must be evaluated if every legal provision requiring a person to behave in a particular way or to perform a particular obligation (either an obligation to do, not to do, or to give) gives rise to a claim in favor of a third party (including the authority in charge of enforcing the law).

Indeed, as stated in the majority decision, there are legal provisions that provide for “particular legal duties”, the breach of which gives rise to a claim in favor of a third party, as it occurs with taxation. However, that does not occur in every situation, since in some cases the consequence of a breach of duty or obligation is a sanction and not a claim.

Among those cases there is a wide variety of situations. For example, we all have to abide by traffic signs. A breach of such duty by a citizen results in a sanction (fine); however, that does not mean that the breach itself gives rise to a claim in favor of the local government, unless the obligation of paying the fine is breached, but in that case a different situation gives rise to the claim.

Free competitive market’s regulations impose sanctions on the abuse of market power or price fixing, the consequence of those types of conduct being the imposition of a sanction or the implementation of remedial measures by the authority, among others; but in no case would such conduct give rise to a claim in favor of the authority.

Similarly, a planner of massive artistic or sports events must have an authorization issued by the National Institute of Civil Defense (INDECI) so as to ensure the safety of those attending the event. For that purpose, the event planner must take a series of actions (such as hiring security personnel) which require expenditures. In those cases in which the event is conducted without the INDECI’s authorization, sanctions are again those established by legislation on this issue.

A last example that can be mentioned is the case of places open to the public, such as pubs and discos. Until a few months ago, smoking was allowed in those premises, so long as they had an area suited for that purpose, so that non-smokers are not affected by cigarette smoking. To comply with such regulation, the owner of such premises had to build special smoking areas, which sometimes required expenditures. Local governments imposed fines, temporary closures, license cancellations, etc. on those premises that did not abide by the law.

In the above-mentioned examples, the commercial activity is subject to the compliance with certain duties imposed by law, so that a greater interest is protected or safeguarded. The imposition of sanctions upon the breach of such duties is the legal effect prescribed in the law, but in no case does such breach give rise to a claim for an amount equal to what was not spent in order to perform






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such duty (safety of those who attend an event, construction of special smoking areas) in favor of a third party.

Taking the above into consideration, it must be evaluated in each case whether the debtor’s breach of duty imposed by law gives rise to a claim in favor of a third party, since, as previously stated, this does not occur in every case.

In this particular case, I agree with the arguments presented in the appealed decision and the arguments presented by DRP in that, since the investment commitment made by the corporate debtor is a particular legal duty, which seeks to preserve the public interest of protecting the environment, in the context of a set of rules that are exclusively regulatory, the breach of such duty can only result in the regulated corporation being imposed a sanction expressly provided by the law for that purpose, which is the only consequence under the rule of law regulating public entities development, which in their role of Public Administration exercise imperium in its legal relationships with the administered.

Neither Supreme Decree No. 016-93-EM, as amended, nor the privatization agreement through which DRP undertook part of the environmental obligations originally owed by Centromín, prescribe that the breach of the PAMA would consequently give rise to a claim in favor of MEM, or any other public or private entity, which is quantifiable according to the monetary value of the investment commitment made by the corporate debtor to meet the goals included in said program of environmental adaptation. This is so because, as there is no monetary compensation owed to MEM given the nature of the investment, the only way to supervise the compliance with said commitment is by taking the actions provided by law to the administrative authority in charge of supervising the attainment of the environmental goals included in the PAMA.

Supreme Decree No. 016-93-EM, as amended, only empowers MEM (or the appropriate state body in compliance with the current regulations) to take the following actions in case of a breach of the environmental investment commitment made by DRP: (i) the imposition of fines on the mining company and/or the enforcement of the asset-backed securities issued to ensure the actual compliance with the project included in the PAMA; and (ii) if the breach continues to exist, the temporary and, eventually, permanent closure of the mining deposits. As it can be noted, none of those actions derive from a monetary right quantifiable in relation to the pecuniary value of the investment project, but they rather derive from the administrative authority’s sovereign powers, which is in charge of supervising and controlling the attainment of the environmental goals through said program’s implementation.

Similarly, as a logical consequence of the previous analysis, I also believe that, since there is no express legal provision allowing MEM to demand payment of an amount of money equal to the value of PAMA’s investment project, provisions on failure to perform obligations to do provided by Section 1150 and following of the Civil Code should not apply on a supplementary basis, since in the present case, the breach of the particular legal duty provided by law does not give rise to a claim (civil obligation) in favor of the State.






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For the foregoing reasons, it is not possible for the State, through any of its bodies under public law, to be able to demand payment of an amount of money equal to the value of such investment in case the investment is not made. Otherwise, in accordance with DRP’s allegations, the payment of such claim made to MEM would amount to an unjust enrichment since there is no legal or contractual basis to said payment.

It would be a different case if the State were allowed to claim payment of a compensation for the environmental damage caused by DRP’s mining activities, when performed in breach of the PAMA. In this case, the claim’s origin is not the breach of a legal duty but rather the court decree that sets such compensation based on the environmental damage caused.

Finally, in accordance with the analysis above, I consider that DRP’s statement included in the report filed on January 27, 2010 before the MEM’s General Department of Mines can in no way be considered to be a proof of claim in favor of said Ministry, nor a “quantification” of a civil obligation to do, not yet performed.

In a context of an environmental regulation in which MEM and DRP have a legal relationship of Administration-administered respectively, the information contained in said statement can only be considered to be the amount of money that the corporate debtor estimated to be necessary for the carry-out of the investment project provided by the PAMA, a breach of such project having the above-described effects.

Since “a mandatory legal relationship” cannot be proven under the terms of Section 1 of the General Bankruptcy Law, the origin and existence of the claim invoked by MEM cannot be proven for the amount claimed in its proof of claim. Therefore, I vote to confirm the first instance decision which denied the acknowledgement of claims invoked by MEM against DRP.

[Signature:] María Soledad Ferreyros Castañeda. Judge.

issued by : bankruptcy proceedings commission of …

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