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Peru’s efforts to require La Oroya clean up should not be chilled by investment arbitration
San Francisco, CA – The following is a statement from the international organizations Earthjustice, the Inter-American Association for Environmental Defense (AIDA), the Peruvian Society for Environmental Law (SPDA), and Public Citizen:
In 1997, Doe Run Peru (DRP), an American company, bought from the government of Peru a metallurgical complex located in La Oroya, Peru. As a condition of the purchase, DRP agreed to comply with a number of environmental requirements aimed at protecting the environment and health of the local population. For 15 years, Doe Run has failed to fulfill these commitments. Now, rather than live up to its responsibilities, DRP and its parent company, the Renco Group, are using questionable legal and political tactics to continue to avoid its commitments—most prominently through an international arbitration case against the State of Peru. In 2011, the Renco Group brought a claim in an international arbitration tribunal for US $800 million against the State of Peru, alleging Peru’s non-compliance with and failure to honor its legal obligations.
However, Peru should not be deterred from its efforts to require the company to clean up La Oroya. Here are just a few of the reasons why:
1. Even if the Peruvian Congress were to grant DRP another PAMA extension, the liability claims in Renco’s arbitration case against Peru would remain because Doe Run’s case against Peru involves more than the PAMA extension contemplated in the proposed law. The Peruvian legislature is currently debating a bill to extend Doe Run’s environmental remediation obligations (known by its Spanish acronym, PAMA) for a third time. The legislature’s Energy and Mining Committee quickly approved the bill. However, policymakers should not presume that Doe Run will drop its arbitration case against Peru if the legislature grants the extension. Indeed, the company is likely to find it advantageous to keep the investment case going (or launch new ones) in order to pressure the government through the international arbitration proceedings.
2. The company is using the investment arbitration to insulate itself from penalties in a case in Missouri courts. In 2007, attorneys filed lawsuits in Missouri (where Doe Run is headquartered) on behalf of children in La Oroya alleged to have experienced serious health problems from exposure to toxic pollution from the smelter in Peru. In a similar case resolved last year regarding harms to 16 children from Missouri, the Missouri court awarded the children US $358 million. In the aforementioned 2007 case about La Oroya in Missouri, DRP has insisted that the Peruvian government—not the company—should be held liable for these tort claims (even though the children are only claiming damages that occurred after Doe Run purchased the smelter). Therefore, the company will likely attempt to keep its international investment arbitration case alive until the Missouri case is resolved, so the Renco Group can use the arbitration to force Peruvian taxpayers to pay any penalty awarded against DRP.
3. The Renco Group is using the arbitration case to move the Missouri case to federal court and evade liability. Doe Run has aggressively tried to derail the Missouri case by insisting that the La Oroyan children’s claims be heard in US federal courts, where it appears Doe Run believes it is more likely to win the case. Twice, the Missouri judge refused to allow the company to do so. After launching the international investment arbitration against Peru, however, Doe Run made a new argument, and convinced the judge to move the La Oroyan children’s case to US federal court, which has jurisdiction over treaty-related claims. The Renco Group has an incentive to keep the international arbitration pending against Peru—regardless of whether the Peruvian legislature extends the PAMA—in order to maintain its argument that the case belongs in federal court
4. Giving in to the threat of the international investment arbitration would set a bad precedent for Peru and the world. As explained above, DRP is using the investment arbitration to serve many different interests. In each case, the common factor is that the arbitration threatens to make Peru—and Peruvian citizens—responsible for the contamination in La Oroya and any resulting penalties. If Peru responds to this threat by giving DRP special treatment at the expense of the children of La Oroya, it will send a message to DRP and multinational companies around the world that such threats are effective. This will weaken Peru’s ability to protect its interests, including the environment and human rights, in the face of corporate misbehavior.
5. DRP is using false arguments to try to shift the blame to others. In addition to the arbitration claims, DRP has long argued that Activos Mineros—a state-owned firm—should complete its PAMA obligations to remediate soils around the complex. Now DRP is claiming unfair treatment because Activos Mineros has not yet been required to do so. This argument makes no sense. It is well known that cleaned soils will quickly become re-contaminated if nearby smelter pollution continues. In Missouri, the authorities calculated that soils near the Doe Run smelter would be re-contaminated only a few years after Doe Run had remediated them at a cost of millions of dollars. Doe Run is well aware of this, yet argues that Peruvian taxpayers should spend millions of dollars cleaning soils in La Oroya that would be re-contaminated in mere months if the smelter were to reopen without first installing all necessary pollution controls. This would be a waste of resources and would not solve La Oroya’s health problems. Activos Mineros should indeed remediate the soils. But it makes no sense to do so until either DRP completes installing the control technology it has promised yet failed to deliver for 15 years, or after a decision is made to permanently close.
The government of Peru should take these facts into account and make sure that it does NOT allow Doe Run to pressure it into reopening the complex in La Oroya. The government of Peru needs to ensure it is considering and protecting not only the rights of the workers, the economy of the region, and the health and human rights of the citizens in La Oroya that would be harmed by reopening the complex, but also protecting the national economic interests. Reopening the complex without clarifying the responsibilities for third party claims from cases such as the case pending in Missouri, would be folly and pose a significant economic risk for the nation. This could even result in economic costs for the people of Peru that exceed the benefits obtained from operating the complex.
If the Peruvian legislature believes that it can or should extend the PAMA, it should insist on at least three non-negotiable positions. First, that the Renco Group drop its international arbitration claim. Second, that Doe Run agree that it will assume any liability in Missouri related to contamination stemming from the smelter in La Oroya. Third, that DRP complete all of its environmental requirements—before starting any operation—so that Peru can begin its soil remediation efforts and protect the health and human rights of the children of La Oroya.
Every day that the fate of the La Oroya metallurgical complex remains undecided without a final solution to the contamination, the citizens of La Oroya suffer grave health risks which in turn increase the harms for which both DRP and the government of Peru could be held liable.