Peru Wins Arbitration Dispute With Renco on Smelter Cleanup

  • Renco asked $800 million, said unit was pushed into bankruptcy
  • Case focused debate over international investor arbitrations

Peru won an arbitration case over Renco Group Inc.’s claim that the government overstepped its authority by ordering an affiliate, Doe Run Peru, to clean up pollution linked to lead and zinc smelting in the mountain town of La Oroya and forcing it into bankruptcy.

An arbitration panel issued a partial award for Peru on July 15, the Ministry of Economy and Finance said Monday in a statement. New York-based Renco, owned by billionaire Ira Rennert, sought $800 million in compensation.

In a statement, Renco described the decision as “an insignificant victory for Peru” based on “technical legal grounds.”

“Renco plans to immediately refile the same claims in a manner that cures the technical legal defect that was the basis for the dismissal,” it said, voicing confidence that a tribunal ultimately will “render a substantial award in Renco’s favor.”

The case illustrated the complexities of allowing private investors to file arbitration claims against sovereign nations, and it became a lighting rod for the debate over remediation claims allowed under trade agreements.

Smelter Operations

The La Oroya smelter was started in 1922 and produced copper, zinc, lead and gold, among other metals, in the process polluting the surrounding area. Several studies found elevated levels of lead in children in the town.

Renco acquired the facility in 1997 and agreed to a 10-year pollution-reduction plan. The Peruvian government was to clean up contaminated soil. Each side accused the other of failing to comply with the agreement.

Renco brought the case in 2011 under a trade agreement between Peru and the U.S. The arbitration panel found that Renco hadn’t complied with the treaty and dismissed its claims for lack of jurisdiction, according to the statement. A decision on costs for the proceedings will be decided later, the Peruvian government said.

For more on the pollution at Doe Run Peru, click here.
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