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GLOSSARY OF TERMS AND ABBREVIATIONS

Additional Royalty Additional royalty agreed upon in the Third Amendment to the Mining Contract
ANDJE Agencia Nacional de Defensa Jurídica del Estado
ANM Agencia Nacional de Minería
Annex A Documents List of documents accompanying Respondent's communication of 11 May 2018
Annual PTI Programa de Trabajos e Inversiones for each year of the production phase, which follows the exploitation sequence defined in the main PTI and contains a production forecast for the next 10 years
Annulment Procedure Proceso de nulidad started by Prodeco before the Tribunal Administrativo de Cundinamarca seeking annulment of the Contraloría 's Decision
Appeal Decision Decision of the Contralor General de la República of 21 August 2015 regarding Prodeco's recurso de apelación, by which it confirmed the Contraloría 's Decision
Arbitration Rules ICSID Rules of Procedure for Arbitration Proceedings
Art. Article
Assignment Contract Agreement of 4 May 2009 by which Mr. Maldonado and Mr. García assigned the 3ha Contract to CDJ, for a consideration of USD 1.75 M
Auto de imputación Auto de imputación de responsabilidad fiscal, issued by the Contraloría on 30 August 2013
Base Royalty Royalty provided for in the Mining Contract, which consisted of a 5% base royalty for each tonne of coal sold, which progressively increased up to 7.6% for the fifth year of production and beyond
Blended Coal Coal from the Calenturitas Mine blended with coal from other mines, namely La Jagua
Bn Billion
Brattle I First expert report by Colombia's damages expert, the Brattle Group, of 17 July 2017
Brattle II Second expert report by Colombia's damages expert, the Brattle Group, of 2 April 2018
C I Claimants' Memorial, dated 16 December 2016
C II Claimants' Reply Memorial, dated 29 January 2018
C III Claimants' Rejoinder on Preliminary Objections, dated 4 May 2018
C IV Claimants' submission on costs, dated 24 September 2018
Calenturitas Mine or Mine Open-pit mine of over 6,600 hectares known as Calenturitas, located in the municipalities of La Jagua de Ibirico, El Paso and Becerril
Carbocol Carbones de Colombia, S.A., a state-owned company with whom Prodeco entered into the Mining Contract
CDJ Carbones de la Jagua, S.A., one of the Prodeco Affiliates
CEO Chief Executive Officer
CET Carbones El Tesoro, S.A., one of the Prodeco Affiliates
Claimants Glencore International A.G. and C.I. Prodeco S.A.
Claimants' FirstApplication Claimants' letter of 22 August 2017
Claimants' SecondApplication Claimants' letter of 20 September 2017
CMU Consorcio Minero Unido, S.A., one of the Prodeco Affiliates
Coal Reference Price Coal price for calculating compensation under the Mining Contract
Conciliation Oral conciliation meeting, held on 28 March 2016
Commitment toNegotiate Acuerdo de Compromiso executed on 21 May 2009, pursuant to which Prodeco and Ingeominas agreed to formally negotiate an eighth amendment to the Mining Contract
Compass Lexecon I First expert report by Claimants' damages expert, Compass Lexecon, of 16 December 2016
Compass Lexecon II Second expert report by Claimants' damages expert, Compass Lexecon, of 29 January 2018
Compensation Scheme General compensation scheme that would be applied under the Mining Contract
Contracting Committee Ingeominas' Comité de Contratación Minera
Contraloría Contraloría General de la República
Contraloría's Decision Fallo no. 00482 de 30 de abril de 2015, por medio del cual se falla con responsabilidad fiscal respecto de unos implicados y sin responsabilidad fiscal en relación con otro dentro del proceso de responsabilidad fiscal CD-000244 (Doc. C-32) - decision by which the Contraloría found Prodeco liable for the Fiscal Liability Amount
COP Colombian peso
Cooperation Agreement Agreement to exchange information between SIC and ANDJE, signed on 13 June 2017
Costs of the Proceeding Lodging fee and advance on costs paid to ICSID by the Parties
CPHB Claimants' Post-Hearing Brief, of 8 August 2018
Criminal Complaint "Denuncia penal en averiguación de responsables por la presunta comisión de delitos contra la administración pública," filed by the ANDJE on 10 September 2017 against Prodeco and Glencore
Defense Expenses Expenses incurred by the Parties to further their position in the arbitration
Definitive Price Term employed in the Seventh Amendment to the Mining Contract, in relation to the payment of Royalties and GIC
Disputed Documents 41 exhibits accompanying Respondent's Counter-Memorial
Doc. C-# Claimants' exhibit
Doc. CL-# Claimants' legal authority
Doc. H-1 Claimants' Opening Statement of 28 May 2018
Doc. R-# Respondent's exhibit
Doc. R-100 Respondent's exhibit R-100 among the Disputed Documents
Doc. RL-# Respondent's legal authority
Ecocarbon Empresa Colombiana de Carbón Ltda. - Ecocarbón
Eighth Amendment Eighth amendment to the Mining Contract, executed by Prodeco and Ingeominas on 22 January 2010
Fenoco Ferrocarriles del Norte de Colombia S.A.
FET Fair and equitable treatment
FGN Fiscalía General de la Nación
FGN Documents Documents gathered from FGN
Fifth Amendment Fifth amendment to the Mining Contract, executed by Prodeco and Ingeominas on 15 December 2004
FIR Clause Fork in the road clause contained in Article 11(4) of the Treaty.
First Session First session and procedural consultation held by the Tribunal with the Parties on 28 September 2016
Fiscal Liability Amount Amount of COP 60 Bn (approximately USD 25 M at the exchange rate of the time) which Prodeco was ordered to pay pursuant to the Contraloría 's Decision
Fiscal Liability Proceeding Administrative proceedings initiated by the Contraloría against Prodeco and other individuals
Fn. Footnote
FOB Free on board
FOB Price The FOB Colombian port price for Colombian steam coal for the respective week as published in the ICR, adjusted for calorific value
Fork in the RoadObjection Respondent's objection to jurisdiction based on the FIR Clause
GIC Gross income compensation (Compensación por Ingresos Brutos)
Glencore Glencore International A.G.
Hearing Hearing on Jurisdiction and the Merits, held on 28 May - 2 June 2018
HT, Day #, p. #, l. # Hearing Transcript, volume, page and line
ICJ International Court of Justice
ICR Platts "International Coal Report"
ICSID or Centre International Centre for Settlement of Investment Disputes
ICSID Convention Convention on the Settlement of Investment Disputes between States and Nationals of Other States, of 14 October 1966
IFE Informe Final de Exploración
ILC Articles International Law Commission Articles on Responsibility of States for Internationally Wrongful Acts, with Commentaries (2001) (Doc. CL-24)
Illegality Objection Respondent's objection to jurisdiction in relation to the legality of the Eighth Amendment
Immediate Reaction Team Equipo Especial de Reacción Inmediata created by the Contralora General de la República, Ms. Sandra Morelli, on 8 October 2010
InadmissibilityObjection Respondent's objection to jurisdiction based on the alleged inadmissibility of Claimants' claims
Ingeominas Instituto Colombiano de Geología y Minería
Initial Version of the Eighth Amendment First version of the eighth amendment to the Mining Contract, executed between Prodeco and Ingeominas on 9 December 2009
Integrated UseAgreement Acuerdo de Uso Integrado de Infraestructura Minera executed by the Prodeco Affiliates in January 2008, for the integrated use of mining infrastructure in the La Jagua project
Investment Dispute Letter from Claimants to the President of Colombia, formally notifying a dispute under the Treaty, dated 28 August 2015
M Million
McManus I First Witness Statement of Mr. Mark McManus of 16 December 2016
McManus II Second witness statement of Mr. Mark McManus of 29 January 2018
Minercol Empresa Nacional Minera Ltda., Minercol Ltda.
Mining Contract Contract 044/89, executed between Prodeco and Carbocol, on 21 February 1989, for the exploration, construction and exploitation of a coal project in the Calenturitas Mine
Mr. Ballesteros Mr. Mario Ballesteros, Director General of Ingeominas between 2 March 2007 and 7 September 2010
Mr. Maldonado Mr. Jorge Maldonado, ex-employee of the Ministry of Mines and of Ingeominas' predecessors
Mr. McManus Mr. Mark McManus, Prodeco's President and CEO since April 2013
Mr. Nagle Mr. Gary Nagle, Prodeco's Director from May 2005 to July 2013 and CEO from January 2008 to April 2013
MT Million tonnes
MTA Million tonnes per annum
Nagle I First witness statement of Mr. Nagle of 16 December 2016
Nagle II Second witness statement of Mr. Nagle of 29 January 2018
Nagle III Third witness statement of Mr. Nagle of 4 May 2018
NPV Net present value
Para. Paragraph
Paredes I First witness statement of Mr. Paredes of 15 June 2017
Paredes II Second witness statement of Mr. Paredes of 28 March 2018
Parties Claimants and Respondent
PO No. 2 Procedural Order No. 2, dated 4 November 2017
PO No. 3 Procedural Order No. 3, dated 4 January 2018
PO No. 4 Procedural Order No. 4, dated 24 April 2018
PO No. 5 Procedural Order No. 5, dated 17 May 2018
PO No. 6 Procedural Order No. 6, dated 31 July 2018
Preliminary Investigation Indagación preliminar into Ingeominas, opened by the Contraloría on 19 October 2010
Privilege Log Privilege log accompanying Claimants' letter of 5 February 2018
Privilege LogDocuments Documents which were subject to legal or settlement privilege
Privileged Documents Privilege Log Documents and Redacted Documents
Procedure for Contractual Annulment Judicial procedure started by the ANM for the annulment of the Eighth Amendment
Prodeco C.I. Prodeco S.A.
Prodeco Affiliates Companies which are owned by Prodeco (CDJ, CMU, and CET)
Prodeco's Port Prodeco's port facilities for the export of coal, located in Santa Marta
Protocol Protocol to the Treaty
PTI Programa de Trabajos e Inversiones (work and investment plan)
R I Colombia's Objections to Jurisdiction and Admissibility and Counter-Memorial, dated 16 November 2017
R II Colombia's Reply on Preliminary Objections and Rejoinder on the Merits, dated 2 April 2018
R III Colombia's submission on costs, dated 24 September 2018.
Reasonable DefenseExpenses Defense Expenses which a standard claimant has to incur in order to properly present and defend its claim
Reconsideration Decision Contralora Delegada 's decision of July 2015 to reject Prodeco's recurso de reposición against the Contraloría 's Decision
Redacted Documents Redacted documents submitted by Claimants on 5 February 2018
Report Technical Report on the Jerritt Canyon Mine, prepared for Queenstake Resources Ltd., dated 20 April 2017
Request for Conciliation Conciliation Request filed by Prodeco on 30 December 2015
Respondent or the Republic or Colombia The Republic of Colombia
Respondent's FGN Request Respondent's letter of 15 May 2018
Respondent's PrivilegeLog Request Respondent's request for Claimants to produce Privileged Documents, dated 23 February 2018
RfA or the Request Claimants' Request for Arbitration, dated 4 March 2016
RPHB Respondent's Post-Hearing Brief of 8 August 2018
Seized Emails Emails seized by SIC from Prodeco computers
Seventh Amendment Seventh amendment to the Mining Contract, executed by Prodeco and Ingeominas on 15 February 2007
SGC Servicio Geológico Colombiano
SIC Superintendencia de Industria y Comercio
Sixth Amendment Sixth amendment to the Mining Contract, executed by Prodeco and Ingeominas on 15 December 2005
Supplementary Compensation Supplementary compensation provided for under the original Mining Contract, applicable when the price of coal rose above USD 40 per tonne
Technical Support Report Report by Contraloría 's technical support team, dated 20 May 2013
Third Amendment Third amendment to the Mining Contract, executed by Prodeco and Minercol on 6 March 2001
Tovar Silva Report Technical report on Prodeco, issued by one of the members of the Contraloría 's Immediate Reaction Team, Ms. Johanna Tovar Silva, on 2 March 2011
Transition Period Período de transición provided for in Clause 3 of the Eighth Amendment
Treaty/BIT Agreement between the Swiss Confederation and the Republic of Colombia on the Promotion and Reciprocal Protection of Investments, signed on 17 May 2006, which entered into force on 6 October 2009 (Doc. C-6)
Tribunal Witnesses Persons called by the Tribunal to testify as witnesses at the Hearing
TRM Tasa Representativa del Mercado
Umbrella Clause Umbrella clause contained in Art. 10(2) of the Treaty
Umbrella Clause Objection Respondent's objection to jurisdiction based on the Umbrella Clause
USD United States dollar
Vargas I First witness statement of Dr. Soraya Vargas, Respondent's witness
VCLT Vienna Convention on the Law of Treaties of 1969
Viability Study Study of the "Viabilidad para la suscripción del Otrosí No. 8 modificatorio del Contrato 044-89" prepared by Ingeominas in January 2010
1988 Mining Code 1988 Colombian Código de Minas
2003 PTI Long-term Programa de Trabajos e Inversiones delivered by Prodeco in December 2003
2006 PTI Long-term Programa de Trabajos e Inversiones delivered by Prodeco in November 2006
2010 PTI Long-term Programa de Trabajos e Inversiones delivered by Prodeco in June 2010
3ha Contract Contract for 3 hectares of land, granted to Messrs. Jorge Isaac Maldonado Mestre and César Augusto García Varga

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AES AES Summit Generation Limited and AES- Tisza Eromu Kft. v. Republic of Hungary, ICSID Case No. ARB/07/22, Award of 23 September 2010 (Doc. RL-68).
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Al Warraq Hesham Talaat M. Al-Warraq v. Indonesia, UNCITRAL, Award of 15 December 2014 (Doc. RL-41).
Ampal-AmericanIsrael Corp Ampal-American Israel Corp. and others v. Arab Republic of Egypt, ICSID Case No. ARB/12/11, Decision on Liability and Heads of Loss of 21 February 2017 (Doc. RL-158).
Apotex Apotex Holdings Inc. and Apotex Inc. v. United States of America, ICSID Case No. ARB(AF)/12/1, Award of 25 August 2014 (Doc. CL-140).
Arif Mr. Franck Charles Arif v. Republic of Moldova, ICSID Case No. ARB/11/23), Award of 8 April 2013 (Doc. CL-93).
Azinian Robert Azinian, Kenneth Davitian, & Ellen Baca v. United Mexican States, ICSID Case No. ARB (AF)/97/2, Award of 1 November 1999 (Doc. RL-60).
Azurix Azurix Corp. v. Argentine Republic, ICSID Case No. ARB/01/12, Award of 14 July 2006 (Doc. CL-44).
Bayindir Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/29, Award of 27 August 2009 (Doc. RL-52).
Bureau Veritas Bureau Veritas, Inspection, Valuation, Assessment and Control, BIVAC B.V. v. Republic of Paraguay, ICSID Case No. ARB/07/9, Decision on Objections to Jurisdiction of 29 May 2009 (Doc. RL-8).
Cargill Cargill, Incorporated v. United Mexican States, ICSID Case No. ARB(AF)/05/2, Award of 18 September 2009 (Doc. RL-65).
Cervin Cervin Investissements S.A. and Rhone Investissements S.A. v. Republic of Costa Rica, ICSID Case No. ARB/13/2, Award of 7 March 2017 (Doc. RL-177).
Chorzow Factory Factory at Chorzow (Germany v. Poland), PCIJ, Claim for Indemnity (Jurisdiction), 26 July 1927, Series A, No. 9 (1927).
CMS CMS Gas Transmission Company v. Republic of Argentina, ICSID Case No ARB/01/8, Award of 12 May 2005 (Doc. CL-41).
Clayton et al. William Ralph Clayton and others v. Government of Canada, PCA Case No. 2009-04, Award on Jurisdiction and Liability of 17 March 2015 (Doc. CL-141).
Convial Callao Convial Callao S.A. and CCI - Compañía de Concesiones de Infraestructura S.A. v. Republic of Peru, ICSID Case No. ARB/10/2, Award of 21 May 2013 (Doc. CL-135).
Crystallex Crystallex International Corporation v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/11/2), Award of 4 April 2016 (Doc. CL-95).
Deutsche Bank Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/09/02, Award of 31 October 2012 (Doc. CL-92).
ECE ECE Projektmanagement International GmbH and Kommanditgesellschaft PANTA Achtundsechzigste Grundstücksgesellschaft mbH & Co v. Czech Republic, PCA Case No. 2010-5, Award of 19 September 2013 (Doc. RL-59).
EDF EDF (Services) Limited v. Romania, ICSID Case No. ARB/05/13, Award of 8 October 2009 (Doc. CL-113).
Eli Lilly and Co. Eli Lilly and Company v. Government of Canada, ICSID Case No. UNCT/14/2, Final Award of 16 March 2017 (Doc. RL-62).
ELSI Elettronica Sicula S.p.A. (ELSI), Judgment of 20 July 1989, I.C.J. Reports 1989 (Doc. CL-10).
EnCana EnCana Corporation v. Republic of Ecuador, LCIA Case No. UN3481, UNCITRAL, Award of 3 February 2006, para. 194 (Doc. CL-131).
Feldman Marvin Roy Feldman Karpa v. United Mexican States (ICSID Case No. ARB(AF)/99/1), Award of 16 December 2002, para. 197 (Doc. CL-30).
Flughafen Flughafen Zurich A.G. and Gestión e Ingeniería IDC S.A. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/10/19, Award of 18 November 2014 (Doc. RL-42).
Frontier Petroleum Frontier Petroleum Services Ltd. v. Czech Republic, UNCITRAL, Final Award of 12 November 2010 (Doc. CL-134).
Gabčíkovo-Nagymaros Project Gabčíkovo-Nagymaros Project (Hungary v. Slovakia), ICJ, Decision, ICJ Reports 1997 of 25 September 1997, para. 79 (Doc. RL-17).
Garanti Koza Garanti Koza LLP v. Turkmenistan, ICSID Case No. ARB/11/20, Award, 19 December 2016 (Doc. RL-73).
Generation Ukraine Generation Ukraine Inc. v. Ukraine, ICSID Case No. ARB/00/9, Award of 16 September 2003, para. 20.30 (Doc. RL-172).
Glamis Glamis Gold Ltd. v. United States of America, UNICITRAL, Award of 8 June 2009 (Doc. RL-18).
Grynberg et al. Rachel S. Grynberg and others v. Grenada, ICSID Case No. ARB/10/6, Award of 10 December 2010 (Doc. RL-159).
Hamester Gustav F W Hamester GmbH & Co KG v. Republic of Ghana, ICSID Case No. ARB/07/24, Award of 18 June 2010 (Doc. RL-9).
H&H Enterprises H&H Enterprises Investment Inc. v. Arab Republic of Egypt, ICSID Case No. ARB/09/15, Award of 6 May 2014 (Doc. RL-2).
Impregilo Impregilo S.p.A. v. Argentine Republic, ICSID Case No. ARB/07/17, Award of 21 June 2011 (Doc. CL-84).
Inceysa Inceysa Vallisoletana S.L. v. Republic of El Salvador, ICSID Case No. ARB/03/26, Award of 2 August 2006 (Doc. RL-13)
Invesmart, B.V. Invesmart, B.V. v. Czech Republic, UNCITRAL case, Award of 26 June 2009 (Doc. CL-150)
Jan de Nul Jan de Nul N.V. and Dredging International N.V. v. Arab Republic of Egypt, ICSID Case No. ARB/04/13, Award of 6 November 2008. (Doc. RL-70).
Lauder Ronald S. Lauder v. Czech Republic, UNCITRAL, Award of 3 September 2001.
Lemire Joseph Charles Lemire v. Ukraine, ICSID Case No. ARB/06/18, Decision on Jurisdiction and Liability of 14 January 2010 (Doc. CL-74).
Lemire (Award) Joseph Charles Lemire v. Ukraine, ICSID Case No. ARB/06/18, Award of 28 March 2011 (Doc. CL-83).
LG&E LG&E Energy Corp, LG&E Capital Corp., and LG&E International, Inc. v. Argentine Republic (ICSID Case No. ARB/02/1), Decision on Liability of 3 October 2006 (Doc. CL-46).
Loewen Loewen Group Inc and Raymons L. Loewen v. United States of America, ICSID Case No. ARB(AF)98/3, Award of 26 June 2003.
Mamidoil JetoilGreek Petroleum Mamidoil Jetoil Greek Petroleum Products Société Anonyme S.A. v. Republic of Albania, ICSID Case No. ARB/11/24, Award of 30 March 2015 (Doc. CL-125).
Metalclad Metaclad Corporation v. United Mexican States, ICSID Case No. ARB(AF)/97/1, Award of 30 August 2000 (Doc. CL-19).
Metal-Tech Metal-Tech Ltd. v. Republic of Uzbekistan, ICSID Case No. ARB/10/3, Award of 4 October 2013 (Doc. RL-122).
Methanex Methanex Corporation v. United States of America, NAFTA-UNCITRAL, Final Award on Jurisdiction and the Merits of 3 August 2005 (RL-126).
Mondev Mondev International Ltd v. United States of America, ICSID Additional Facility Case No. ARB(AF)/99/2), Award of 11 October 2002 (Doc. CL-28).
MTD MTD Equity Sdn. Bhd. And MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7, Award of 25 May 2004 (Doc. CL-36).
Murphy II Murphy Exploration and Production Company International v. Republic of Ecuador [II], PCA Case No. 2012-16 (formerly AA 434), Partial Final Award of 6 May 2016 (Doc. CL-145).
Noble Ventures Noble Ventures, Inc. v. Romania, ICSID Case No. ARB/01/11, Award of 12 October 2005 (Doc. CL-130).
Occidental Occidental Exploration and Production Company v. Republic of Ecuador (UNCITRAL), Final Award of 1 July 2004 (Doc. CL-37).
OI European OI European Group B.V. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/11/25, Award dated 10 March 2015 (Doc. RL-61).
Pantechniki Pantechniki S.A. Contractors & Engineers v. Republic of Albania, ICSID Case No. ARB/07/21, Award of 30 July 2009, (Doc. RL-3).
Parkerings Parkerings-Compagniet AS v. Republic of Lithuania, ICSID Case No. ARB/05/8, Award of 11 September 2007 (Doc. RL-57).
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PSEG PSEG Global Inc. Et al. v. Republic of Turkey, ICSID Case No. ARB/02/5, Award of 19 January 2007 (Doc. CL-48).
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Suez (Separate opinion by Judge Nikken) Suez, Sociedad General de Aguas de Barcelona, S.A.and Vivendi Universal, S.A. v. Argentine Republic, ICSID Case No. ARB/03/19, Separate Opinion of Arbitrator Pedro Nikken of 30 July 2010 (Doc. RL-55).
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Swisslion Swisslion DOO Skopje v. Former Yugoslav Republic of Macedonia, ICSID Case No. ARB/09/16, Award of 6 July 2012 (Doc. RL-74).
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Thunderbird International Thunderbird Gaming Corporation v. Mexico, NAFTA, Award of 26 January 2006 (Doc. CL-107).
Tokios Tokeles Tokios Tokeles v. Ukraine, ICSID Case No. ARB/02/18, Award of 26 July 2007 (Doc. RL-69).
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Unglaube Marion and Reinhard Unglaube v. Republic of Costa Rica, ICSID Case Nos. ARB/08/1 and ARB/09/20, Award of 16 May 2012 (Doc. CL-87).
Urbaser Urbaser S.A. and others v. Argentine Republic, ICSID Case No. ARB/07/26, Award of 8 December 2016 (Doc. RL-175).
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I. INTRODUCTION

1.
This case concerns a dispute submitted to the International Centre for Settlement of Investment Disputes ["ICSID" or the "Centre"] on the basis of (i) the Agreement between the Swiss Confederation and the Republic of Colombia on the Promotion and Reciprocal Protection of Investments, signed on 17 May 2006, which entered into force on 6 October 2009 [the "Treaty" or the "BIT"], and (ii) the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, dated 14 October 1966 [the "ICSID Convention"], which entered into force for Switzerland and for Colombia on 6 October 2009.

(1) The Parties

A. Claimants - Glencore International A.G. and C.I. Prodeco S.A.

2.
The Claimants are (i) Glencore International A.G. ["Glencore"], a company constituted under the laws of and having its seat in the Swiss Confederation, and (ii) C.I. Prodeco S.A. ["Prodeco"], a wholly-owned subsidiary of Glencore, incorporated under the laws of the Republic of Colombia. Glencore and Prodeco are jointly referred to as "Claimants". Glencore is one of the largest global diversified natural resource companies, engaged in the trade and mining of commodities.1
3.
Claimants are represented in this arbitration by:

Mr. Nigel Blackaby
Ms. Caroline Richard
Mr. Alex Wilbraham
Mr. Gustavo Topalian
Ms. Jessica Moscoso
Ms. Ankita Ritwik
Ms. Amy Cattle
Mr. Diego Rueda
FRESHFIELDS BRUCKHAUS DERINGER US LLP
700 13th Street, NW
10th Floor
Washington, D.C. 20005-3960
United States of America
Tel.: +1 202 777 4500
Fax: +1 202 777 4555
E-mail: nigel.blackaby@freshfields.com
caroline.richard@freshfields.com
alex.wilbraham@freshfields.com
gustavo.topalian@freshfields.com
ankita.ritwik@freshfields.com
jessica.moscoso@freshfields.com
amy.cattle@freshfields.com
diego.rueda@freshfields.com

Mr. Jose Manuel Alvarez Zárate
ALVAREZ ZÁRATE & ASOCIADOS
Calle 82 No. 11-37, Oficina 501
Bogotá D.C.
Colombia
Tel.: +57 1 691 5110
Fax: +57 1 1617 0299
E-mail: josealvarez.zarate@hotmail.com

B. Respondent - The Republic of Colombia

4.
The Respondent is the Republic of Colombia ["Colombia", the "Republic" or "Respondent"].
5.
Respondent is represented in this arbitration by:

Mr. Nicolás Palau Van Hissenhoven
DIRECCIÓN DE INVERSIÓN EXTRANJERA, SERVICIOS,
MINISTERIO DE COMERCIO, INDUSTRIA Y TURISMO
Calle 28 No.13A-15, piso 5
Bogota D.C.
Colombia
Tel.: +57 1 606 7676
Fax: +57 1 606 7676 / ext. 1323
E-mail: npalau@mincit.gov.co

Ms. Ana María Ordóñez Puentes
Mr. César Augusto Méndez Becerra
AGENCIA NACIONAL DE DEFENSA
JURÍDICA DEL ESTADO
Carrera 7 No. 75-66, pisos 2 y 3
Bogota D.C.
Colombia
Tel.: +57 1 255 8955 / ext. 777
Fax: +57 1 255 8933
E-mail: ana.ordonez@defensajuridica.gov.co
cesar.mendez@defensajuridica.gov.co

Prof. Eduardo Silva Romero
Mr. José Manuel García Represa
DECHERT (PARIS) LLP
32 rue de Monceau
Paris, 75008
France
Tel.: +33 1 5757 8014
Fax: +33 1 5757 8081
E-mail: eduardo.silvaromero@dechert.com
jose-manuel.garciarepresa@dechert.com

Mr. Alvaro Galindo Cardona
Mr. Juan Felipe Merizalde
DECHERT LLP
1900 K Street, NW
Washington, D.C. 20006-1110
United States of America
Tel.: +1 202 261 3396
Fax: +1 202 261 3333
E-mail: alvaro.galindo@dechert.com
juanfelipe.merizalde@dechert.com

Prof. Pierre Mayer
20 rue des Pyramides
Paris, 75001
France
Tel.: +33 1 8509 0158
Fax: +33 1 0871 5178
E-mail: mayer@pierremayer.com

6.
The Claimants and the Respondent shall be jointly referred to as the "Parties".

(2) The Treaty

7.
Art. 11 of the Treaty regulates the settlement of disputes between a Party and an investor of the other Party to the Treaty:2

"(1) If an investor of a Party considers that a measure applied by the other Party is inconsistent with an obligation of this Agreement, thus causing loss or damage to him or his investment, he may request consultations with a view to resolving the matter amicably.

(2) Any such matter which has not been settled within a period of six months from the date of the written request for consultations may be referred to the courts or administrative tribunals of the Party concerned or to international arbitration. In the latter event the investor has the choice between either of the following:

(a) the International Centre for Settlement of Investment Disputes (ICSID) provided for by the Convention on the Settlement of Investment Disputes between States and Nationals of other States, opened for signature at Washington on March 18, 1965; and

(b) an ad-hoc arbitral tribunal which, unless otherwise agreed upon by the parties to the dispute, shall be established under the arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL).

(3) Each Party hereby gives its unconditional and irrevocable consent to the submission of an investment dispute to international arbitration in accordance with paragraph 2 above, except for disputes with regard to Article 10 paragraph 2 of this Agreement.

(4) Once the investor has referred the dispute to either a national tribunal or any of the international arbitration mechanisms provided for in paragraph 2 above, the choice of the procedure shall be final.

(5) An investor may not submit a dispute for resolution according to this Article if more than five years have elapsed from the date the investor first acquired or should have acquired knowledge of the events giving rise to the dispute.

(6) The Party which is party to the dispute shall at no time whatsoever during the process assert as a defence its immunity or the fact that the investor has received, by virtue of an insurance contract, a compensation covering the whole or part of the incurred damage.

(7) Neither Party shall pursue through diplomatic channels a dispute submitted to international arbitration unless the other Party does not abide by and comply with the arbitral award.

(8) The arbitral award shall be final and binding for the parties to the dispute and shall be executed without delay according to the law of the Party concerned."

II. PROCEDURAL HISTORY

8.
This proceeding has been riddled with procedural incidents. In order to present a proper account of the history of this arbitration the Tribunal will first present a chronology of the procedure (1.) and will then recount in detail the main procedural incidents (2.).

(1) Chronology of the Procedure

9.
On 4 March 2016, ICSID received a request for arbitration of the same date from Glencore International A.G. and C.I. Prodeco S.A. against the Republic of Colombia, together with Exhibits C-1 through C-66 ["Request"].
10.
On 16 March 2016, the Secretary-General of ICSID registered the Request in accordance with Art. 36(3) of the ICSID Convention and notified the Parties of the registration. In the Notice of Registration, the Secretary-General invited the Parties to proceed to constitute an arbitral tribunal as soon as possible in accordance with Rule 7(d) of ICSID's Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings.
11.
The Parties agreed to constitute the Tribunal in accordance with Art. 37(2)(a) of the ICSID Convention as follows: the Tribunal would consist of three arbitrators, one to be appointed by each Party and the third, presiding arbitrator to be appointed by agreement of the Parties.
12.
On 4 May 2016, Claimants appointed Mr. Oscar M. Garibaldi, a national of the United States of America as well as a national of the Argentine Republic, as arbitrator in this case. Mr. Garibaldi accepted his appointment on 6 May 2016.
13.
On 3 June 2016, Respondent appointed Mr. Christopher Thomas, a national of Canada, as arbitrator in this case. Mr. Thomas accepted his appointment on 7 June 2016.
14.
On 29 July 2016, the Parties appointed Prof. Juan Fernandez-Armesto, a national of the Kingdom of Spain, as President of the Tribunal. Prof. Fernandez-Armesto accepted his appointment on 3 August 2016.
15.
On 4 August 2016, the Secretary-General, in accordance with Rule 6(1) of the ICSID Rules of Procedure for Arbitration Proceedings ["Arbitration Rules"], notified the Parties that all three arbitrators had accepted their appointments and that the Tribunal was therefore deemed to have been constituted on that date. Ms. Alicia Martín Blanco, ICSID Legal Counsel, was designated to serve as Secretary of the Tribunal.
16.
On 28 September 2016, in accordance with ICSID Arbitration Rule 13(1), the Tribunal held a first session and preliminary procedural consultation with the Parties by teleconference ["First Session"].
17.
On 4 November 2016, following the First Session, the Tribunal issued Procedural Order No. 1 recording the agreement of the Parties on procedural matters and the decisions of the Tribunal on disputed issues. Procedural Order No. 1 provides, inter alia, that the applicable Arbitration Rules would be those in effect from 10 April 2006, that the procedural languages would be English and Spanish, that the place of proceeding would be Washington, D.C., and that Mrs. Krystle M. Baptista would act as Assistant to the Tribunal. Procedural Order No. 1 also sets out three procedural calendars envisaging three different scenarios for the written phase.
18.
On 16 December 2016, Claimants filed their Memorial on the Merits, together with:

- Witness Statements of:
o Mr. Gary Nagle
o Mr. Mark McManus
- Expert Report of Compass Lexecon
- Exhibits C-67 through C-184
- Legal Authorities CL-1 through CL-95

19.
The submission was transmitted to Respondent and the Tribunal on 2 January 2017, in accordance with paragraph 15.2 of Procedural Order No. 1.
20.
On 2 February 2017, Respondent filed its Request for Bifurcation, together with Exhibits R-1 through R-25, and Legal Authorities RL-1 through RL-34.
21.
On 2 March 2017, Claimants filed their Response to Respondent's Request for Bifurcation, together with Exhibits C-185 through C-194, and Legal Authorities CL-96 through CL-127.
22.
On 3 April 2017, the Tribunal issued its decision on Respondent's Request for Bifurcation. The Tribunal decided not to bifurcate the proceedings, and to address the jurisdictional objections raised by Respondent together with the merits, following the procedural calendar established as Scenario 3 in Procedural Order No. 1.
23.
On 17 July 2017, Respondent filed its Objections to Jurisdiction and Admissibility and Counter-Memorial, together with:

- Witness Statements of:
o Mr. Oscar Paredes
o Ms. Soraya Vargas
- Expert Report of Messrs. Frank Graves and John Dean of the Brattle Group, together with Exhibits BR-1 through BR-124
- Exhibits R-26 through R-203
- Legal Authorities RL-35 through RL-114

24.
By letter of 26 July 2017, Claimants noted that 41 of the exhibits accompanying Respondent's Counter-Memorial were private and internal email chains exchanged internally between Claimants' management and their in-house and external counsel ["Disputed Documents"]. Claimants requested inter alia that the Tribunal order Colombia to provide information regarding the time and manner in which these documents had been obtained, as well as a full log of Prodeco's private communications, documents and data in possession of Colombia, its internal and external counsel, and its witnesses and experts, indicating the chain of custody as well as the dates of access. Claimants further requested an order "declaring inadmissible all documents irregularly obtained or produced by Colombia in breach of its duty of good faith and rules of privilege, and an order striking out any statements in Colombia's Counter-Memorial and/or witness statements and expert report that rely on such documents."
25.
On 3 August 2017, Respondent submitted its response, together with Exhibits R-204 through R-214, and Legal Authorities RL-115 through RL-120. Respondent(i) explained that the Disputed Documents had been legally obtained by the Superintendencia de Industria y Comercio ["SIC"] in the context of a preliminary investigation into unfair practices by Prodeco and its affiliates and (ii) requested that the Tribunal declare the Disputed Documents admissible.
26.
By letter of 22 August 2017, Claimants' submitted their reply to Respondent's letter, together with Exhibits C-195 through C-228, and slightly amended their request for relief ["Claimants' First Application"]. On 11 September 2017, Respondent filed a rejoinder letter, reiterating its initial request.
27.
On 20 September 2017, Claimants submitted a new letter ["Claimants' Second Application"] addressing the following issues:

- the filing on 11 September 2017 of a criminal complaint by the Agencia Nacional de Defensa Jurídica del Estado ["ANDJE"] with the office of the Fiscalía General de la Nación requesting inter alia de deposition of two of Claimants' employees;

- the apparent leaking of the Disputed Documents to the Colombian press; and Colombia's intention to seek orders from the Tribunal for the production of communications between Prodeco and its former external counsel as well as an order compelling the latter to appear as a witness at the hearing.

Pending the Tribunal's consideration of their first application, in Claimants' Second Application, they requested an urgent measure to protect the status quo.

28.
On 2 October 2017, Respondent submitted its response to Claimants' Second Application, together with Exhibits R-214 through R-230, and Legal Authorities RL-121 through RL-143, requesting that the Tribunal reject it.
29.
On 26 September 2017, following exchanges between the Parties, the Centre transmitted the Parties' respective requests for production of documents. On 11 October 2017, the Tribunal postponed its decision on the disputed document production requests, pending the full review and deliberations on Claimants' applications.
30.
On 4 November 2017, the Tribunal issued Procedural Order No. 2, deciding inter alia that the Disputed Documents should be excluded from the record of this arbitration, directing Respondent to re-submit its Objections to Jurisdiction and Admissibility and Counter-Memorial without attaching or referring to the Disputed Documents, giving the Parties an opportunity to file new requests for document production that would supersede and replace the original requests still pending before the Tribunal, and proposing a new procedural calendar. The new procedural calendar was agreed to by the Parties on 10 November 2017.
31.
By letter of 14 November 2017, Respondent filed observations on Procedural Order No. 2, together with Exhibits R-231 through R-235, and Legal Authorities RL-145 through RL-147. The Tribunal invited Claimants to comment on Respondent's letter in their Reply Memorial.
32.
On 16 November 2017, Respondent filed its Amended Counter-Memorial on the Merits and Memorial on Jurisdiction, together with:

- Amended Witness Statement of Mr. Oscar Paredes
- Amended Expert Report of Messrs. Frank Graves and John Dean of the Brattle Group, together with Amended Exhibit BR-118
- New Exhibits R-236 and R-237

33.
In accordance with the revised procedural calendar, on 14 December 2017, the Parties submitted their respective requests for production of documents for decision by the Tribunal, including the corresponding responses and replies thereto.
34.
On 4 January 2018, the Tribunal issued Procedural Order No. 3 concerning its decision on the Parties' request for production of documents in their respective Redfern Schedules. On 11 January 2018, following a request by Claimants and Respondent's comments, the Tribunal granted Claimants an extension of time to submit the documents subject to a production order under Procedural Order No. 3.
35.
On 30 January 2018, Claimants filed their Reply on the Merits, together with:

- Second Witness Statements of:
o Mr. Gary Nagle
o Mr. Mark McManus
- Second Expert Report of Compass Lexecon
- Exhibits C-229 through C-294, and resubmitted Exhibits C-50, C-56, and C-103
- Legal Authorities CL-127.1 through CL-149

36.
On 23 February 2018, Respondent submitted a letter, together with Exhibits R-238 through R-240, asking the Tribunal inter alia :

- to order Claimants to produce unredacted copies of the documents that had been produced in redacted form,

- to produce the documents included in the privilege log submitted by Claimants with redactions only in the documents exchanged with external counsel in the relevant portions where legal advice had been sought or given,

- to complete their production of documents in accordance with Procedural Order No. 3 and to confirm as much.

37.
On 2 March 2018, Claimants submitted their response to Respondent's letter, in which they requested that the Tribunal dismiss Respondent's request of 23 February 2018, and confirmed that they had produced and/or logged all the documents in their possession, custody or control responsive to the Tribunal's orders and that they would produce any other documents that might subsequently come into their possession, custody or control.
38.
On 6 March 2018, the Tribunal replied to the Parties' communications of 23 February and 2 March 2018, stating that the challenge to the relevant documents had to be done on a document-by-document basis and that the Tribunal could not entertain Colombia's general request for relief. In order to solve this incident in the most efficient manner, the Tribunal suggested that the Parties confer and try to reach an agreement on any disputed document. If an agreement could not be reached, the Tribunal would resolve any requests on a document-by-document basis.
39.
By letter of 9 March 2018, Respondent submitted comments on the Tribunal's decision and requested the Tribunal's instructions to gather and marshal into the record evidence collected from the SIC by the General Prosecutor in the context of a domestic criminal investigation into the illegalities surrounding the Eighth Amendment. By letter of 12 March 2018, Claimants submitted observations on the Respondent's letter, and asked the Tribunal to decline Respondent's proposed procedure to address its request.
40.
On 17 March 2018, the Tribunal wrote to the Parties instructing Respondent on the steps to follow in order to gather the evidence collected by the General Prosecutor and marshal it into the record, and recommending that the Parties try to reach an agreement on the marshalling of all or a part of the documents before any application was presented to the Tribunal.
41.
On 26 March 2018, following communications from the Parties, the Tribunal notified them of its decision to grant a 4-day extension to Respondent to submit its Reply on Preliminary Objections and Rejoinder on the Merits, and stated that Claimants would also be granted a 4-day extension of their deadline to present their Rejoinder on Preliminary Objections.
42.
By letter of 27 March 2018, Respondent informed the Tribunal of the Parties' inability to reach an agreement with regard to the production of the unredacted documents and privilege log documents and, according to the Tribunal's communications of 6 and 17 March 2018, requested that the Tribunal order Claimants to produce the documents included in its document-by-document request, sent to Claimants on 12 March 2018.
43.
On 2 April 2018, Respondent submitted its Rejoinder on the Merits and Reply on Jurisdiction, together with:

- Second Witness Statements of:
o Mr. Oscar Paredes
o Ms. Soraya Vargas
- Second Expert Report of Messrs. Frank Graves of The Brattle Group, John Dean of JD Energy and Landy Stinnet of FGM Consulting Group, Inc., together with Exhibits BR-125 through BR-190
- Exhibits R-241 through R-348
- Legal Authorities RL-148 through RL-186

44.
By letter of 3 April 2018, Claimants submitted their observations on Respondent's letter of 27 March 2018 asking the Tribunal to reject Respondent's request.
45.
By letter of 20 April 2018, Claimants requested the Tribunal's intervention regarding a notice that Prodeco had received from the National Mining Agency ["ANM"] stating that a commission composed of Colombia's international external counsel in this arbitration, Colombia's economic experts, Colombia's internal counsel for this arbitration (ANDJE) and several ANM officers would visit the Calenturitas mine between 30 April and 2 May 2018. Claimants alleged that the visit had no bona fide regulatory purpose but was rather aimed at gathering additional information for this arbitration, and requested that the Tribunal order Colombia to refrain from imposing a unilateral site visit for the purposes of this arbitration and to refrain from visiting the mine site without the Tribunal's authorization.
46.
On 24 April 2018, the Tribunal issued Procedural Order No. 4 concerning the production of the redacted documents and the privilege log documents initially requested by Respondent in its communication of 23 February 2018. The Tribunal determined inter alia that while Claimants had not strictly complied with the Tribunal's instructions in Procedural Order No. 2 concerning privilege-based objections, this departure from the established procedure had not caused Respondent irreparable harm. As a consequence, the Tribunal decided not to dismiss Claimants' objections based on privilege in limine. As to the merits of the objections, the Tribunal found that legal privilege extends not only to outside counsel, but also to in-house lawyers and found no evidence suggesting that Claimants had waived legal or, to the extent relevant, settlement privilege. The Tribunal also directed Claimants' lead counsel to submit an affidavit confirming that each of the relevant documents met all of the privilege requirements identified by the Tribunal in the order and to produce all the relevant documents that did not. In light of the proximity of the hearing, the Tribunal also took the opportunity to call a number of persons to testify as witnesses at the hearing.
47.
On 25 April 2018, Respondent submitted its comments on Claimants' letter regarding the site visit and requested that the Tribunal reject Claimants' allegations and not to intervene in any way in relation to the visit planned to the Calenturitas mine.
48.
On 27 April 2018, the Tribunal issued its decision regarding the site visit. The Tribunal found no reason to deny the visit, so long as the precise dates were properly agreed between the Parties in order to facilitate Respondent's access and minimize the inconvenience to Claimants.
49.
On 30 April 2018, and further to the Tribunal having called certain persons to testify as witnesses at the hearing ["Tribunal Witnesses"] in Procedural Order No. 4, the Parties submitted an agreed proposal concerning those witnesses.
50.
On 30 April 2018, Claimants' lead counsel submitted a certification and affidavit in accordance with Procedural Order No. 4 and produced, in unredacted form, the documents that did not meet the privilege requirements established by the Tribunal in the order. On 1 May 2018, the Parties agreed that Mr. Blackaby's affidavit of 30 April 2018 should be submitted to the Tribunal without its annexes, pursuant to Procedural Order No. 2.
51.
On 4 May 2018, Claimants submitted their Rejoinder on Jurisdiction, together with:

- Third Witness Statement of Mr. Gary Nagle
- Exhibits C-295 through C-327, and resubmitted Exhibits C-90 and C-260
- Legal Authority CL-150

52.
On 9 and 10 May 2018, respectively, the Parties confirmed the witnesses and experts that they wished to cross-examine at the hearing.
53.
On 11 May 2018, Claimants sought leave to include a technical report as a new document into the record.
54.
On 11 May 2018, Respondent requested that the documents that had been gathered from the Fiscalía General de la Nación ["FGN"] and filtered by Mr. Camilo Enciso in accordance with the Tribunal's directions be admitted into the record ["FGN Documents"]. Respondent further referred to a list of documents in Annex A to said communication ["Annex A Documents"] as responsive to Colombia's document production requests and not protected by either legal or settlement privilege, and asked that the Tribunal review these documents, order Claimants to produce them and admit them into the record. In the alternative, Respondent indicated that it would not object to the Tribunal appointing a conflicts counsel to analyse said documents.
55.
On 14 May 2018, Claimants filed its response to Respondent's 11 May request and asked the Tribunal to deny the application to admit the FGN Documents as they did not amount to evidence garnered by the Colombian criminal courts and/or because Colombia had failed to demonstrate their relevance and materiality to the outcome of the dispute. Claimants further requested that the Tribunal reject Colombia's request to admit the Annex A Documents as they were not responsive to its document requests or were subject to legal or settlement privilege.
56.
On 15 May 2018, Respondent wrote to the Tribunal elaborating on its 11 May request concerning the FGN Documents and Annex A Documents and requesting that the Tribunal reject Claimants' 11 May application to include a new document into the record. Claimants responded to this communication on 18 May 2018. On the same day, Respondent submitted the memorandum sent to Mr. Enciso on 5 April 2018 in connection with the FGN Documents as well as Colombia's communication to Mr. Enciso of 3 May 2018.
57.
On 14 May 2018, the Tribunal held a pre-hearing organizational meeting with the Parties by telephone conference.
58.
On 17 May 2018, the Tribunal issued Procedural Order No. 5 concerning the organization of the hearing.
59.
On 18 May 2018, the Tribunal notified the Parties regarding its decision not to admit into the record any of the documents requested by the Parties and indicated that a full decision would follow. In particular, the Tribunal declined to admit the following documents: (i) the technical report identified by Claimants in their email of 11 May 2018; (ii) the FGN Documents; and (iii) the Annex A Documents.
60.
A hearing on jurisdiction and the merits was held in Washington, D.C. from 28 May to 2 June 2018 [the "Hearing"]. The following persons were present at the Hearing:
Tribunal :
Prof. Juan Fernandez-Armesto President
Mr. Oscar M. Garibaldi Arbitrator
Mr. J. Christopher Thomas QC Arbitrator
Assistant to the Tribunal : Ms. Krystle M. Baptista Assistant to the Tribunal
ICSID Secretariat :
Ms. Alicia Martín Blanco Secretary of the Tribunal
For Claimants :
Counsel:
Mr. Nigel Blackaby Freshfields Bruckhaus Deringer US LLP
Ms. Caroline Richard Freshfields Bruckhaus Deringer US LLP
Mr. Alex Wilbraham Freshfields Bruckhaus Deringer US LLP
Mr. Gustavo Topalian Freshfields Bruckhaus Deringer US LLP
Ms. Ankita Ritwik Freshfields Bruckhaus Deringer US LLP
Ms. Jessica Moscoso Freshfields Bruckhaus Deringer US LLP
Ms. Amy Cattle Freshfields Bruckhaus Deringer US LLP
Mr. Diego Rueda Freshfields Bruckhaus Deringer US LLP
Ms. Brianna Gorence Freshfields Bruckhaus Deringer US LLP
Ms. Roopa Mathews Freshfields Bruckhaus Deringer US LLP
Ms. Sandra Diaz Freshfields Bruckhaus Deringer US LLP
Mr. Israel Guerrero Freshfields Bruckhaus Deringer US LLP
Mr. Joe Arias Tapia Freshfields Bruckhaus Deringer US LLP
Mr. Reynaldo Pastor Freshfields Bruckhaus Deringer US LLP
Mr. Jose Manuel Alvarez Zárate Alvarez Zárate & Asociados
Parties:
Mr. Jonathan Vanderkar Glencore International A.G.
Mr. Oscar Gómez C.I. Prodeco S.A.
Ms. Natalia Anaya C.I. Prodeco S.A.
Mr. Jader Yubrán C.I. Prodeco S.A.
For Respondent :
Counsel:
Prof. Eduardo Silva Romero Dechert (Paris) LLP
Prof. Pierre Mayer Pierre Mayer
Mr. José Manuel García Represa Dechert (Paris) LLP
Mr. Juan Felipe Merizalde Dechert LLP
Mr. David Attanasio Dechert LLP
Mr. Luis Miguel Velarde Saffer Dechert (Paris) LLP
Mr. Javier Echeverri Díaz Dechert (Paris) LLP
Ms. Ana María Duran Dechert LLP
Ms. Clara Francisca Peroni Dechert (Paris) LLP
Parties:
Mr. Luis Guillermo Vélez CabreraAgencia Nacional de Defensa Jurídica del Estado
Ms. Ana María Ordóñez PuentesAgencia Nacional de Defensa Jurídica del Estado
Ms. María Camila Rincón EscobarAgencia Nacional de Defensa Jurídica del Estado
Ms. Angélica PerdomoAgencia Nacional de Defensa Jurídica del Estado
Mr. Nicolás Palau van HissenhovenMinisterio de Comercio, Industria y Turismo
Mr. Juan Diego Díaz EcheverriMinisterio de Comercio, Industria y Turismo
Mr. Javier GarcíaAgencia Nacional de Minería

Court Reporters :
Mr. Dante Rinaldi D-R Esteno
Mr. David Kasdan Worldwide Reporting, LLP
Mr. Randy Salzman Worldwide Reporting, LLP
Interpreters :
Mr. Daniel Giglio
Mr. Charles Roberts
Mr. Luis Eduardo Arango

61.
During the Hearing, the following persons were examined:

On behalf of the Claimants :
Witnesses:
Mr. Gary Nagle Glencore International A.G.
Mr. Mark McManus C.I. Prodeco S.A.
Experts:
Mr. Pablo T. Spiller Compass Lexecon
Mr. Santiago Dellepiane Compass Lexecon
Mr. Mark Sheiness Compass Lexecon
Mr. Arun Parmar Compass Lexecon
On behalf of the Respondent :
Witnesses:
Mr. Oscar Paredes ZapataServicio Geológico Colombiano
Ms. Soraya Vargas PulidoContraloría General de la República de Colombia
Experts:
Mr. Frank Graves The Brattle Group
Mr. Florin Dorobantu The Brattle Group
Mr. Marty Turrin The Brattle Group
Mr. Peter Cahill The Brattle Group
Mr. John Dean JD Energy, Inc.
Mr. Landy Stinnet FGM Consulting Group, Inc.
Tribunal witnesses :
Mr. Hernán Martínez Torres Former Minister of Mines

62.
On 8 June 2018, the Tribunal circulated a number of questions to the Parties and invited them to indicate any agreements that they might have reached concerning the submission of the post-hearing briefs. The Parties informed the Tribunal of their agreements concerning post-hearing briefs and costs submissions on 26 June 2018. In the same communication, the Parties further agreed that "the Award may be issued only in English, provided that an official Spanish translation is delivered to the parties a few months later."
63.
On 31 July 2018, the Tribunal issued Procedural Order No. 6 containing its full decision and reasoning on the admissibility of (i) the technical report identified by Claimants in their email of 11 May 2018; (ii) the FGN Documents and (iii) the Annex A Documents, as advanced in the Tribunal's communication to the Parties of 18 May 2018.
64.
On 8 August 2018, the Parties filed a single round of simultaneous post-hearing briefs together with their respective Legal Authorities RL-187 through RL-236 and CL-151 through CL-173.
65.
Further to the Tribunal's confirmation of its costs instructions, the Parties submitted a new agreement on the parameters of the costs submissions on 18 and 19 September 2018, and filed their respective costs submissions on 24 September 2018.
66.
On 7 March 2019, the Tribunal asked Claimants to provide further information in the interest of completeness and indicated when Respondent should file any comments it might have to the data provided by Claimants. Claimants filed the requested information on 14 March 2019.
67.
Further to the Parties' agreement of 26 June 2018 concerning, inter alia, the language of the Award and to the Parties' respective communications of 16 July 2019 noting their diverging interpretations thereof, on 30 July 2019, the Tribunal decided that the Parties' agreement of 26 June 2018 had superseded the relevant provision in Procedural Order No. 1, such that the Award would be rendered in English only and the Tribunal would request that the Centre prepare and deliver to the Parties an official Spanish translation. The Tribunal clarified that "[f]or all intents and purposes under the ICSID Convention and Rules, the date of dispatch of the certified copies of the Award in English shall be the date when the Award is deemed to have been rendered." On 15 August 2019, the Tribunal declared the proceeding closed pursuant to ICSID Arbitration Rule 38(1).

(2) Certain Procedural Incidents

68.
The following sections of the award summarize and provide context to certain procedural incidents:

- PO No. 2 (2.1);
- PO No. 3 (2.2);
- PO No. 4 (2.3);
- PO No. 6 (2.4).

(2.1) PROCEDURAL ORDER NO. 2

69.
In order to understand the context of PO No. 2, the Tribunal will first recount the procedural and factual history that led to its issuance (A.), will then briefly summarize the decision (B.) and will explain its consequences (C.). The Tribunal will add a final section on the Parties' comments to PO No. 2 (D.).

A. The Road to PO No. 2

70.
The road to PO No. 2 began with Respondent's request for an extension of the deadline for filing its Counter-Memorial. Respondent's Counter-Memorial was scheduled to be filed not later than 3 July 2017.
71.
On 7 June 2017, Respondent requested a one-month extension of the time limit to submit the Counter-Memorial on account of:

- an administrative reorganization of Colombia's State Attorney Office (ANDJE), and

- health issues affecting counsel for Colombia.

72.
After hearing Claimants, on 12 June 2017 the Arbitral Tribunal granted Respondent a two-week extension to file its Counter-Memorial.
73.
One day thereafter, on 13 June 2017, Colombia's Antitrust Agency (SIC), the administrative agency that enforces antitrust law in Colombia3 and ANDJE, the public agency in charge of the legal defense of the State and its agencies, signed an agreement to exchange information [the "Cooperation Agreement"]:4

"PRIMERA. - OBJETO DEL CONVENIO: Aunar esfuerzos técnicos, administrativos y de apoyo logístico entre la Agencia Nacional de Defensa Jurídica del Estado y la Superintendencia de Industria y Comercio para contribuir de manera eficaz y oportuna en el intercambio de información relacionada con la defensa jurídica de Colombia, de conformidad con las competencias de cada entidad". [Emphasis added]

74.
In compliance with the Cooperation Agreement, at some unspecified date in June or July 2017 the SIC delivered to ANDJE certain documents it had seized from Prodeco three years earlier, in August 2014. At that time the SIC had raided Prodeco's premises in the context of a preliminary antitrust investigation relating to Puerto Nuevo. Using its regulatory powers, the SIC seized certain documents5 and downloaded in bulk all the emails lodged in the computers of certain Prodeco managers [the "Seized Emails"].
75.
After delivery of the Seized Emails, ANDJE and/or counsel to the Republic reviewed such documents, and identified certain documents unrelated to antitrust matters, but allegedly relevant to the adjudication of the present dispute.

Submission of Respondent's Counter-Memorial

76.
On 17 July 2017, Respondent filed its Counter-Memorial. Included amongst the attached exhibits were some of the Seized Emails.
77.
Ten days thereafter, on 26 July 2017, Claimants filed a submission in which they averred that 41 of the exhibits were private and internal email chains exchanged internally between Claimants' management and their in-house and external counsel [previously defined as the "Disputed Documents"]. In that submission, Claimants requested inter alia that the Tribunal:

- Order Colombia to provide:
o information regarding the time and manner in which these documents had been obtained,
o a full log of Prodeco's private communications, documents and data in possession of Colombia, its internal and external counsel, and its witnesses and experts, indicating the chain of custody as well as the dates of access.

- Issue an order declaring inadmissible all documents irregularly obtained or produced by Colombia in breach of its duty of good faith and rules of privilege, and striking out any statements in Colombia's Counter-Memorial and/or witness statements and expert reports that rely on such documents.

78.
On 3 August 2017, Respondent submitted its response. Respondent explained that the Disputed Documents had been legally obtained by SIC in the context of a preliminary investigation into unfair practices by Prodeco and its affiliates and requested that the Tribunal declare the Disputed Documents admissible.
79.
By letter of 22 August 2017, Claimants submitted their reply to Respondent's response and slightly amended their request for relief [previously defined as "Claimants' First Application"].

Criminal Complaint

80.
On Sunday, 10 September 2017, ANDJE filed a criminal complaint with the office of the Fiscalía General de la Nación, based on the Disputed Documents [the "Criminal Complaint"].
81.
The Criminal Complaint, which was registered by the Fiscalía the following day, reported that certain named persons related to the execution of the Eighth Amendment may have committed the following crimes:

- bribery,

- conclusion of a contract lacking legal requirements,

- conspiracy to commit a crime, and

- undue interest of a public servant in the conclusion of contracts.6

82.
The Criminal Complaint included a request that the Fiscal depose (inter alia):

- Mr. Nagle, Prodeco's CEO from 2008 to 2013, and Claimants' witness in this arbitration, and

- Ms. Anaya, one of Claimants' in-house counsel.

B. The Decisions in PO No. 2

83.
On 4 November 2017, the Tribunal issued Procedural Order No. 2, in which it made the following decisions:
84.
First, that the Disputed Documents should be excluded from the record of this arbitration.7 Consequently, the Tribunal directed Respondent to re-submit its Counter-Memorial without attaching or referring to the Disputed Documents.8
85.
Second, the Tribunal gave the Parties the opportunity to file new requests for document production that would supersede and replace the original requests still pending before the Tribunal.9
86.
Third, as regards the filing of the Criminal Complaint by ANDJE, the Tribunal refused to take any actions, but:

- Clarified that decisions adopted by Colombian criminal courts, which could potentially have an impact on the present procedure, could be freely marshalled by the Parties, subject to the rule established in para. 17(3) of Procedural Order No. 1;10

- On the issue of marshalling of criminal evidence, the Tribunal found that it had not been sufficiently briefed but, as a precautionary measure, instructed the Parties to ask permission from the Tribunal before submitting any evidence gathered in a criminal procedure in Colombia;11 and

- Instructed Colombia to implement appropriate measures to guarantee that Colombia's counsel in this arbitration (including ANDJE's officials) did not have access to confidential attorney communications emanating from the criminal investigations.12

87.
Finally, the Tribunal proposed a new procedural calendar, which was agreed by the Parties on 10 November 2017.

The Tribunal's Rationale for Excluding the Disputed Documents

88.
The Arbitral Tribunal decided the incident based on international law, and only turned to municipal law to confirm its findings.13 This is consistent with the Parties' arguments,14 the BIT and the ICSID Convention.15
89.
The Tribunal found that the obligation to arbitrate fairly and in good faith and the principle of equality of arms precluded Respondent from coercing evidence from Claimants through its administrative powers, and to marshal it thereafter in an investment arbitration.16 The Tribunal made reference to the general imbalance between claimants, which are normally private companies, and respondent States and explained that if States were allowed to use their wide powers to coerce evidence from claimants, it would create a perverse incentive: States would initiate all types of administrative proceedings against potential claimants in order to improve their litigation positions.17
90.
Under Colombian law, the Tribunal confirmed that SIC was authorized to seize the Disputed Documents for the sole purpose of an antitrust/unfair competition investigation - but not for any other purpose, including the use of the Disputed Documents as evidence in these proceedings. The Tribunal found that SIC had failed to prove that the delivery of the Disputed Documents to ANDJE was done for the sole purpose for which they had been obtained: to ensure compliance with antitrust or unfair competition law:18 by handing over the Disputed Documents to ANDJE, even if in compliance with the Cooperation Agreement, the SIC could have incurred in an administrative irregularity known as desviación de poder.19

C. The Consequences of PO No. 2

91.
PO No. 2 had two major consequences for the procedure.
92.
The first consequence was that on 16 November 2017, Respondent filed its Amended Counter-Memorial, eliminating all references to the Disputed Documents. It also resubmitted all its evidence and eliminated the Disputed Documents from the record.
93.
The second consequence of PO No. 2 was that the Parties were provided with a new opportunity to obtain and submit evidence through a new document production process. In particular, Respondent was allowed to request that Claimants deliver the Disputed Documents in a context which preserved the equality of arms.
94.
The Parties exercised this right extensively: Respondent made 39 requests for production of documents and Claimants seven.

D. Parties' Observations on PO No. 2

95.
By letter of 14 November 2017, Respondent made observations on PO No. 2 and submitted that the Tribunal was:

- Exceeding its powers;20

- Failing to state the reasons for its decisions;21

- Seriously departing from a fundamental rule of procedure, by infringing Colombia's due process rights.22

96.
Claimants answered Respondent's letter in their Reply Memorial. Claimants disagreed with Respondent's allegations and submitted the following main arguments:

- First, that in issuing PO No. 2 the Tribunal acted fully within its powers under Arts. 44 and 46 of the ICSID Convention and 19 and 34(1) of the Rules to protect the integrity of the proceedings;23

- Second, that even if the Tribunal's decision was flawed as a matter of Colombian law (quod non), Respondent did not and could not argue that the Tribunal's reasoning based on the international principles of fairness and equality of arms was erroneous;24

- Finally, that the exclusion of documents obtained in violation of international law by Colombia could not violate the rights of the party which had acted unlawfully; and, in any case, PO No. 2 provided Respondent with the means to obtain and present evidence in accordance with international law through the document production exercise.25

(2.2) PROCEDURAL ORDER NO. 3

97.
In PO No. 3, the Arbitral Tribunal decided on the Parties' contested document production requests.
98.
The Tribunal analysed each of the requests:26

- The Tribunal first analysed whether each request complied with the ordinary requirements of:
o identification of each document or description of a narrow and specific category of documents;
o relevance and materiality; and
o not in possession of the requesting party;

- The Tribunal then reviewed whether each request was affected by one of the following objections, if raised by the Parties:
o legal or settlement privilege;
o production results in unreasonable burden;
o loss or destruction;
o technical or commercial confidentiality;
o political or institutional sensitivity;
o production would affect the fairness and equality of the procedure.

99.
The Tribunal accepted (wholly or partially)27 23 out of Respondent's 39 requests and four out of Claimants' seven requests.

(2.3) PROCEDURAL ORDER NO. 4

100.
PO No. 4 was prompted by Respondent's failure to obtain through document production all of the Disputed Documents. The Tribunal will first explain the road that led to the decision (A.), will briefly summarize it (B.), and finally explain its consequences (C.).

A. The Road to PO No. 4

101.
A few days after the issuance of PO No. 3, which ruled on the Parties' document production requests, Claimants requested that the Tribunal extend the deadline for production of documents responsive to Colombia's requests. The Tribunal granted the extension, ordering that delivery be performed as the documents became available and, in any case, no later than 5 February 2018.
102.
On 5 February 2018, Claimants produced to Respondent:

- 366 documents, comprising more than 1GB of information in response to Colombia's document requests; and

- a letter accompanied by a privilege log [the "Privilege Log"], identifying documents responsive to Respondent's requests which were subject to legal or settlement privilege ["Privilege Log Documents"], as well as

- redacted documents ["Redacted Documents"],

- [the Privilege Log Documents and the Redacted Documents will be jointly referred to as the "Privileged Documents"].

103.
On 23 February 2018, Respondent requested ["Respondent's Privilege Log Request"] that the Tribunal order Claimants to produce the Privileged Documents in the following terms:

"To order Claimants to produce, within 48 hours, un-redacted copies of the Redacted Documents;

To order Claimants to produce, within 48 hours, the Privilege Log Documents, redacting only in those documents exchanged with external counsel the relevant portions where legal advice was sought or given;

Should any of the Documents be available in a native format (such as.msg for email communications), to order production in such format;

To complete their production of documents in accordance with Procedural Order No. 3 and to confirm that they have completed production of all documents responsive to Colombia's requests; and

To order Claimants to reimburse Colombia for the costs and expenses incurred because of this incident (as quantified when this incident is resolved)."

104.
On 2 March 2018, Claimants answered Respondent's Privilege Log Request:

- explaining that they had produced 366 documents, comprising more than 1GB of information in response to Colombia's document requests, and

- confirming that they had "produced and/or logged all documents responsive to the Tribunal's orders in Claimant's possession, custody and control".28

Claimants requested that the Tribunal dismiss Respondent's Privilege Log Request.29

105.
On 6 March 2018, the Arbitral Tribunal provided guidance as to how to proceed:

"[...] The challenge to any Redacted Document or to any Privilege Log Documents must be done on a document-by-document basis. Thus, the Tribunal cannot entertain Colombia's general Request for Relief either for all the Redacted Documents or for all the Privilege Log Documents.

In order to solve this incident in the quickest and most efficient way possible, the Tribunal suggests that the Parties confer and try to reach an agreement on any disputed document. If, having made the appropriate good faith efforts to find a solution, it cannot be reached, the Tribunal will gladly solve any requests on a document-by-document basis. [...]."

106.
On 9 March 2018, Respondent submitted a letter to the Arbitral Tribunal noting that at least two of Colombia's arguments in its communication of 2 March 2018 did not require the Tribunal to rule on a "document-by-document basis". In particular, according to Colombia, a decision on a document-by-document basis was not required in order to rule that:

- Claimants openly disregarded the Tribunal's directions in PO No. 2, and

- Documents sent or received by in-house counsel are not privileged.

107.
Colombia reserved all of its rights.30 It stated that, notwithstanding the foregoing, it undertook to comply with the Tribunal's directions and confer, in good faith, with Claimants in regard to their Privilege Log. Nevertheless, on the basis that it was likely that it would not obtain the Privileged Documents before the submission of its Rejoinder, Colombia reserved its rights to submit the evidence as soon as it came into its possession, custody or control.31
108.
Claimants presented a letter on 12 March 2018 inter alia denouncing:

- Respondent's new attempt to reintroduce in the record the Disputed Documents through Respondent's Privilege Log Request;

- Respondent's mischaracterization of the Tribunal's email of 6 March 2018.

109.
In its communication of 17 March 2018, the Tribunal thanked the Parties for their efforts in trying to reach an agreement and clarified that it had not taken any decision with regard to the admissibility of the Privileged Documents:

"The Arbitral Tribunal appreciates the Parties' good faith efforts to reach an agreement on the production of the Documents (as defined in Respondent's letter dated March 9, 2018). Should the Parties prove unable to reach an agreement with regard to the production of some (or the totality) of such Documents, the Tribunal repeats its willingness to adjudicate the issue on a document-by-document basis. For the avoidance of doubt, the Tribunal reiterates that it has not taken any decision with regard to the admissibility of such Documents."

110.
After approximately two weeks, on 27 March 2018, Respondent presented a new letter to the Tribunal explaining the steps taken to comply with the Tribunal's guidance. Colombia requested that the Tribunal order Claimants to produce the Privileged Documents without delay, and in any event, by 2 April 2018.32
111.
On 2 April 2018, Claimants responded, arguing that Colombia's comments simply reiterated the same two allegations already set forth in its letter of 23 February 2018, namely that:

- Claimants' assertions of privilege were belated, and

- Privilege does not attach to communications sent or received by Prodeco's in-house counsel.

B. The Decision in PO No. 4

112.
On 24 April 2018, the Tribunal issued PO No. 4.
113.
There were three main issues before the Tribunal:

- Whether Claimants had failed to follow the appropriate proceedings for filing their Privilege Log;

- Whether the attorney-client privilege extended to in-house counsel; and

- Whether Claimants properly asserted settlement privilege over the Privileged Documents.

114.
To decide such issues, the Arbitral Tribunal applied international law and, alternatively municipal law, as pleaded by the Parties.33
115.
The Tribunal adopted the following decisions:
116.
First, it decided that while Claimants had not strictly complied with the Tribunal's instructions in PO No. 2 concerning privilege-based objections, this departure from the established procedure had not caused Respondent irreparable harm.34 The Tribunal found that Respondent had been given ample opportunity to contest Claimants' objections by submitting comments on Claimants' Privilege Log, which the Tribunal had analysed in order to reach its decision.35 As a consequence, the Tribunal decided not to dismiss in limine Claimants' objections based on privilege.36
117.
Second, as to the merits of the objections, the Tribunal found that legal privilege extended not only to communications with outside counsel, but also to communications with in-house lawyers and found no evidence suggesting that Claimants had waived legal or, to the extent relevant, settlement privilege.37
118.
Third, the Tribunal directed Claimants' lead counsel (i) to submit an affidavit confirming that each of the Privileged Documents met all of the privilege requirements identified by the Tribunal and (ii) immediately to produce all the relevant documents that did not.38

C. The Consequences of PO No. 4

119.
On 30 April 2018, Claimants' lead counsel submitted an affidavit declaring that:

- He had reviewed all of the documents over which Claimants had asserted privilege, as identified in the Privilege Log;

- He confirmed that all of the documents over which Claimants had asserted privilege fulfilled the requirements provided for in para. 54 of PO No. 4, except for two;

- He attached the two documents that did not comply with the requirements.

120.
Summing up, Claimants delivered to Respondent all documents identified in Respondent's requests, except for certain documents which met the requirements for claiming privilege as set forth in para. 54 of PO No. 4. Compliance with these requirements was proven by an affidavit signed, under his personal responsibility, by Claimants' lead counsel.

(2.4) PROCEDURAL ORDER NO. 6

121.
Respondent made further attempts to marshal certain Disputed Documents and certain Seized Emails attached to the Criminal Complaint.
122.
The Tribunal will first explain the road that led to PO No. 6 (A.), will briefly summarize it (B.), and finally explain its consequences (C.).

A. The Road to PO No. 6

123.
In PO No. 4, the Arbitral Tribunal established a cut-off date for introducing further evidence or filing further submissions in this proceeding:

"98. After May 11, 2018 no new submissions and no additional evidence shall be admitted into the file, except as provided in the following paragraph.

99. If in exceptional circumstances and for unexpected reasons any of the Parties considers that it is of paramount importance that an exception to the rule be made, it shall file a motion, asking for authorization, stating the grounds therefor, and without attaching the new submission or evidence. After hearing the other Party the Tribunal will decide. Any submission made or evidence marshalled in breach of this provision will be disregarded."

124.
On 11 May 2018, Claimants requested that a new document be introduced in the record: NI 43-101 Technical Report on the Jerritt Canyon Mine prepared for Queenstake Resources Ltd., dated 20 April 2007 [the "Report"].
125.
On the same day, Respondent presented a letter requesting that the following documents be included in the file:

- Two sets of documents specified in Annex A of the letter: (i) Documents which Colombia claimed to be responsive to its requests for production ordered in PO No. 3 and (ii) Documents which Colombia alleged do not meet the cumulative requirements set forth in PO No. 4 for legal privilege, and are not protected by settlement privilege [the "Annex A Documents"]39; both sets of documents (i) and (ii) were part of the documents excluded by PO No. 2, i. e. the Disputed Documents;

- Certain documents [the "FGN Documents"], specified in Annex C of the letter, which had been gathered by the Fiscalía General de la Nación (and filtered by Mr. Camilo Enciso, Colombia's designated special counsel, in accordance with the Tribunal's directions).

126.
On 14 May 2018, Claimants submitted a letter to the Arbitral Tribunal requesting that the Tribunal reject Respondent's request, and in the alternative order Colombia to provide Claimants with copies of the FGN Documents for Claimants properly to comment on Respondent's request.
127.
On the same day, the Tribunal and the Parties held the pre-hearing conference call, in which Respondent agreed to provide Claimants with the FGN Documents. The Tribunal and the Parties further agreed that:

- Respondent would submit its comments on Claimants' request by 15 May 2018;
- Claimants would submit their comments on Respondent's request to include the FGN Documents by 17 May 2018;
- Given the time sensitive nature of the Parties' requests, the Tribunal would issue

a decision by Friday, 18 May, and communicate the full decision and reasoning to the Parties afterwards.

128.
Hence, on 15 May 2018, Respondent submitted a letter ["Respondent's FGN Request"]:

- Reiterating its request of 11 May 2018; and
- Requesting that the Tribunal dismiss Claimants' request.

129.
On 17 May 2018, Claimants submitted a letter to the Tribunal requesting that the Tribunal reject Respondent's FGN Request.

B. The Decision in PO No. 6

130.
The Tribunal deliberated and decided to reject the Parties' applications to introduce further documents into the file. This decision was communicated by letter dated 18 May 2018:

"The Arbitral Tribunal has decided not to admit into the record any of the documents requested by the Parties for the following reasons:

1. Claimants' petition to admit the technical report identified in its email of May 11, 2018 is belated since Claimants were the last to file a main submission.

2. Respondent's petition to admit the FGN Documents: the FGN Documents did not make it into the record through Document Production and are not part of a formal acusación in a Colombian criminal court proceeding. Thus, the Tribunal sees no reason to admit them into the record.

3. Respondent's petition to admit Annex A Documents: there are two types of documents that Respondent wishes the Tribunal to admit into the record:

a. documents that Claimants' counsel has confirmed are subject to privilege and

b. documents which - according to Claimants' counsel - are not responsive to the Tribunal's decisions in PO3.

It falls within the responsibility of Claimants' counsel to determine which documents are responsive to Respondent's petitions (as narrowed down by the Tribunal) and which are subject to privilege. The Tribunal has no reason to second guess these decisions.

A full decision will follow in the next days".

131.
On 31 July 2018, the Tribunal issued PO No. 6 containing its full decision and reasoning.

C. The Consequences of PO No. 6

132.
In PO No. 6, the Arbitral Tribunal directed the Parties to make allegations if they wished the Tribunal to draw adverse inferences based on the counterparty's decisions regarding responsiveness and privilege of ordered documents.
133.
In its Rejoinder,40 Respondent asked the Arbitral Tribunal to draw adverse inferences from Claimants' failure to produce responsive evidence. In particular, Respondent requested that the Tribunal draw eight specific adverse inferences from Claimants' conduct. To the extent that such requests are relevant, the Tribunal will address them in later sections of this Award.
134.
In the course of the Hearing, Respondent made one further request to marshal certain Disputed Documents into the record. That request led to the filing of Doc. R-100. The procedural incident is analysed in detail in section V.1.(3.3).Cinfra.

III. CHRONOLOGY OF FACTS

135.
The dispute between the Parties stems from the execution of the eighth amendment to the Mining Contract [the "Eighth Amendment"] and the facts that surrounded such execution.
136.
The Tribunal will start by describing the execution of the Mining Contract and the ensuing period, during which the parties made seven amendments to the Mining Contract (1).
137.
The Tribunal will then turn to the negotiations that surrounded the Eighth and most relevant amendment to the Mining Contract ((2), (4) and (5)). The Tribunal will also describe the facts concerning Prodeco's acquisition of a mining concession, which, according to Respondent's version of the facts, served as a bribe for the State's execution of the Eighth Amendment (3).
138.
Finally, the Tribunal will examine the events that occurred after the execution of the Eighth Amendment, namely the parties' performance of the Eighth Amendment ((6) and (11)) and the proceedings which form the basis of Claimants' claims in this arbitration:

- The investigation by the Contraloría General de la República ["Contraloría"] into whether the Eighth Amendment was detrimental to the Colombian State, which led to a decision holding Prodeco liable for damages to the State's finances [the "Fiscal Liability Proceeding"] (7) ; and

- The claim filed by the mining agency responsible for the Mining Contract before the Colombian administrative courts seeking to have the Eighth Amendment declared null and void [the "Procedure for Contractual Annulment"] (8).

139.
After the failure of amicable consultations, Claimants started the present arbitration against Colombia (9). The Tribunal will also briefly address the criminal complaint filed by Colombia after the start of this arbitration (10).

(1) The Mining Contract : Execution, Performance and Amendments

140.
Colombia is one of the world's largest coal producers. As Colombia's second largest export, coal is a major source of revenues and employment for the country.41
141.
In the late 1970s, Colombia's Ministry of Mines and Energy granted Carbones de Colombia, S.A. ["Carbocol"], a state-owned company,42 mineral rights over a large area,43 which comprised an open-pit mine of over 6,600 hectares known as Calenturitas,44 located in the municipalities of La Jagua de Ibirico, El Paso, and Becerril45 [the "Calenturitas Mine" or the "Mine"].
142.
At present, the Mine is one of the largest thermal coal mines in Colombia. It is traversed by the Calenturitas River and is divided into four sectors, A to D:46

A. 1989: Execution of the Mining Contract

143.
In 1988, Colombia adopted Decree 2655 by which it enacted the Código de Minas ["1988 Mining Code"].47 Pursuant to Art. 3 of said Code, and in accordance with Colombia's Constitución Política, all non-renewable natural resources belong, inalienably and indefeasibly, to the Colombian Nation; in the exercise of its property right, Colombia may explore and exploit these resources through decentralized agencies, or grant private individuals or entities the right to do so.48

Geología y Minería - Ingeominas. The latter was eventually liquidated and transformed into the Servicio Geológico Colombiano and the Agencia Nacional de Minería (R I, fn. 15).

144.
In accordance with Art. 3 of the 1988 Mining Code, the Respondent, through Carbocol, chose to explore and exploit the resources in the Calenturitas area by means of a contract with a private entity. Prodeco, a Colombian mining company incorporated in 1974,49 was chosen for that purpose.
145.
To this effect, on 21 February 1989, Prodeco and Carbocol executed a contract for the exploration, construction, and exploitation of a coal project in the Calenturitas Mine [defined as the "Mining Contract"]. 50
146.
The Mining Contract was initially entered into for a period of 30 years 51 comprising three stages: exploration, construction, and exploitation of the Calenturitas Mine.
147.
In the exploration phase, Prodeco had to produce geological and engineering studies, at its own cost and risk, to evaluate the potential of the Calenturitas Mine, and submit a feasibility study for a coal-mining project. 52 Once Carbocol approved this feasibility study, Prodeco could start construction53 and, subsequently, operation of the Mine.54
148.
From the beginning of the production phase and until the expiration of the Mining Contract, Prodeco had the right to carry out activities of extraction, processing, transport, and commercialization of the coal from the Mine.55 Prodeco could produce up to three million tonnes ["MT"] of coal per year ["MTA"], which would become its exclusive property. Prodeco could dispose of such coal as it deemed fit, subject to the Colombian laws and regulations on the commercialization and transformation of minerals.56
149.
As consideration for the granting of production and commercialization rights, Prodeco had to pay a defined compensation to Carbocol. The terms agreed in 1989 were as follows:

- A 5% base royalty for each tonne of coal sold, which progressively increased up to 7.6% for the fifth year of production and beyond57 ["Base Royalty"];

- A supplementary compensation58 amounting to a percentage of revenue and a fixed amount per tonne of coal sold, if the price of coal rose above USD 40 per tonne.59 At that time, the price of Colombian thermal coal was approximately USD 25 per tonne;60 if this price rose above USD 40 per tonne, Prodeco would receive extraordinary profits, and would have to pay the supplementary compensation.61

150.
Other considerations included Prodeco's obligation to contribute to the social-economic development of the region of the Calenturitas Mine62 and to grant Carbocol access to Prodeco's port facilities ["Prodeco's Port"]63 for the export of coal.64
151.
Between 1991 and 2007, the parties to the Mining Contract executed seven "Otrosíes", or amendments, to the Mining Contract, which altered the initial basis of this agreement.

B. 1991-2002: First, Second, Third and Fourth Amendment

First Amendment

152.
In July 1989, Prodeco began to explore the Mine and to work on the preparation of a feasibility study.65
153.
Two years later, in 1991, Prodeco and Carbocol executed the First Amendment to the Mining Contract, which increased the size of the area of the Calenturitas Mine and defined the rules for trial production.66
154.
In 1992, Carbocol approved the feasibility study prepared by Prodeco. That same year Prodeco started construction at the Mine.67

Second Amendment

155.
In 1993, Carbocol became the Empresa Colombiana de Carbón Ltda. - Ecocarbón ["Ecocarbón"]. On 6 December 1995, Ecocarbón and Prodeco executed the Second Amendment to the Mining Contract,68 which established new rules regarding Prodeco's right to hire subcontractors.69
156.
The exploitation phase of the Mine officially started in October 1995, but in reality, the mining activities were halted for several years,70 in part because of a lack of sufficient infrastructure to transport coal from the Mine to Prodeco's Port, in part because of low coal prices in the international market.71

Third Amendment

157.
In 1995, Prodeco was acquired by Glencore,72 a multinational commodity trading and mining company.73
158.
Three years later Prodeco submitted to Ecocarbón a revised feasibility study, which envisioned a production of 5 MTA, and a new timeline for the project. Ecocarbón found that the revised feasibility study did not comply with the terms of the Mining Contract, and gave Prodeco two alternatives: either to comply with the Contract and the already approved feasibility study, or to negotiate a further amendment.74
159.
Accordingly, in 1999, the parties started negotiations,75 which led to the third amendment to the Mining Contract ["Third Amendment"] 76 being executed two years later, on 6 March 2001. The Third Amendment was signed by the new Empresa Nacional Minera Ltda., Minercol Ltda. ["Minercol"], which in the meantime had succeeded Ecocarbón.77
160.
Importantly, the Third Amendment:

- Created new obligations for Prodeco regarding the production phase (i), and
- Modified the existing compensation regime (ii).

161.
(i) Within a term of six months, Prodeco was required to submit to Minercol's approval a final report on exploration (Informe Final de Exploración ["IFE"]).78 Following Minercol's approval of the IFE, Prodeco had to prepare and deliver a long-term work and investment plan (Programa de Trabajos e Inversiones ["PTI"]), concerning exploitation of the Mine.79 In addition, Prodeco agreed to submit a PTI for each year of the production phase ["Annual PTI"]. Each Annual PTI had to follow the exploitation sequence defined in the main PTI and contain a production forecast for the next 10 years.80
162.
(ii) The Third Amendment envisaged a production of between "5 or 6 MTA" of coal per year.81 This expansion led to changes in the compensation regime.
163.
The Base Royalty continued to apply, as defined in the original Mining Contract, as long as production did not exceed 3 MTA. Once production exceeded that threshold, a newly defined "Additional Royalty" became applicable: the royalty rate would increase by 1% for every 1 MTA increase in production. In effect, this implied that after the fifth year of production - which was when the Base Royalty attained 7.6% - if annual production was, for instance, 4, 5, or 6 MTA, Prodeco would pay Royalties at a rate of 8.6%, 9.6%, and 10.6% on the entire price of the coal sold.82 For each 1 MTA of additional coal production, the rate of Royalties would increase by 1%.83
164.
The Third Amendment also created a Compensación por Ingresos Brutos (Gross Income Compensation ["GIC"]), derived from the Supplementary Compensation initially provided for in Clause 22.1 of the Mining Contract. The GIC was an additional compensation, based on a sliding scale according to coal prices, which became applicable if the coal price exceeded USD 40 per tonne.84
165.
Thus, after the execution of the Third Amendment, Prodeco had to pay three types of compensation depending upon the amount of production of the Mine and the price of coal:

- A Base Royalty of 7.6%, which applied irrespectively of the amount of coal produced;

- An Additional Royalty, when coal production exceeded 3 MTA, calculated applying an increasing percentage scale;

- A GIC, which applied when the price of coal exceeded USD 40 per tonne.

166.
The Third Amendment also defined the reference price which should be used to calculate the amount of Royalties and GIC, as the higher of:85

- The weighted average free on board ["FOB"] Colombian port price for the current quarter for coal exported from the Calenturitas Mine, as published in the "Coal Week International" magazine; and

- The weighted average FOB Colombian port price for Colombian steam coal exported during the same quarter, proportionally adjusted by calorific value, as published in "Coal Week International" magazine.

Fourth Amendment

167.
Later that same year (2001), Prodeco and Minercol executed the Fourth Amendment to the Mining Contract,86 which clarified certain aspects of the Third Amendment, namely:87

- The duration of each of the stages of the Mining Contract;

- The terms for Prodeco's social-economic investments in the Calenturitas region; and

- The start date for the 30-year duration of the Mining Contract, which was set at 3 July 1990.

C. 2002-2004: The 2003 PTI and start of production

168.
On 16 December 2002, Minercol approved Prodeco's IFE.88 One year later,89 Prodeco submitted to Minercol a long-term PTI, in which it laid out its plan to produce up to 4 MTA, for a total life-of-mine production of approximately 55 MT of coal ["2003 PTI"]. According to Prodeco, maximum production was capped by transport restrictions: coal had to be trucked to the Port and Prodeco stated that this was the maximum quantity which could be transported given the poor condition of roads and the limited availability of trucks.90
169.
In January 2004, the Colombian Ministry of Mines and Energy designated the Instituto Colombiano de Geología y Minería, INGEOMINAS ["Ingeominas"], an institute created in 1916 for geoscientific research,91 as Minercol's successor, and delegated the functions of mining authority to this agency. 92
170.
It was Ingeominas that on 6 April 2004 approved the 2003 PTI.93
171.
In July 2004, the Calenturitas Mine finally entered into production.94 By the end of that year the Mine had produced 0.6 MT of coal; production increased to 1.5 MTA in the following year, 2005.95

D. 2004: Fifth Amendment

The Contracting Committee

172.
In June 2004, Ingeominas created by internal resolution a Comité de Contratación Minera ["Contracting Committee"], comprising Ingeominas' Secretario General, the Director del Servicio Minero, the Subdirectores de Contratación y Titulación Minera and Fiscalización y Ordenamiento Minero, and an Asesor de la Dirección General.
173.
This Committee was responsible for advising the Director del Servicio Minero inter alia on contracts of gran minería for areas historically granted to Ecocarbón. In particular, the Contracting Committee had the following function:96

"Recomendar al Director del Servicio Minero la aprobación o desaprobación de las solicitudes presentadas por los concesionarios relacionadas con modificación, prórroga, cesión, subcontratación, suspensión y renuncia de los contratos".

174.
The Contracting Committee thus became responsible for evaluating and making any recommendation to the Director del Servicio Minero regarding Prodeco's requests to modify the Mining Contract.
175.
In September 2004, the scope of the Contracting Committee's functions was slightly altered by another resolution of Ingeominas:97

"Recomendar a la Dirección del Servicio Minero o a las Subdirecciones de Contratación y Titulación Minera y Fiscalización y Ordenamiento Minero la aprobación o rechazo de las peticiones presentadas por los beneficiarios de los títulos mineros, relacionadas entre otros, con la modificación, prórroga, suspensión, integración de operaciones mineras y renuncia de los contratos de concesión y demás títulos mineros".

Fifth Amendment

176.
On 15 December 2004, following the recommendation of the Contracting Committee,98 Prodeco and Ingeominas executed a fifth amendment to the Mining Contract,99 which clarified the calculation of the Base and Additional Royalties ["Fifth Amendment"].

E. 2005: Sixth Amendment

177.
It will be recalled that, in 1995, through the acquisition of Prodeco,100 Glencore became the indirect owner of concession rights over the Calenturitas Mine and Prodeco's Port.101

Acquisition of Carbones de la Jagua S.A.

178.
In 2005, Glencore acquired Carbones de la Jagua S.A. ["CDJ"], a company that held rights over some mining properties within the La Jagua coal mining project, located approximately 20 kilometres east of the Calenturitas Mine. Glencore was later able to consolidate ownership of the La Jagua coal project by acquiring Consorcio Minero Unido S.A. ["CMU"] in 2006 and Carbones El Tesoro ["CET"] in 2007.102 The Tribunal shall refer to CDJ, CMU, and CET jointly as the "Prodeco Affiliates".

Sixth Amendment

179.
One of the advantages of this acquisition was the blending of coal from the Calenturitas and La Jagua Mines-103 a procedure which called for an amendment of the Mining Contract.104 Accordingly, on 15 December 2005, Prodeco and Ingeominas executed the sixth amendment to the Mining Contract ["Sixth Amendment"]. This Amendment clarified how the Royalties and GIC payments should be calculated when the coal volume exported consisted of coal from the Calenturitas Mine blended with coal from other mines ["Blended Coal"].105
180.
The Sixth Amendment also changed the reference price for calculating Royalties and GIC, from the "Coal Week International" price to the price of Colombian thermal coal published by the Platts "International Coal Report" ["ICR"], adjusted for calorific value. The Amendment specified that:106

- If the coal exported by Prodeco came exclusively from the Mine, the reference price would be the higher of (i) the FOB Colombian port price for Colombian steam coal for the respective week as published in the ICR, adjusted for calorific value, and (ii) the shipment price estimated by Prodeco;

- If the coal exported by Prodeco was Blended Coal, the reference price would simply be the FOB Colombian port price for Colombian steam coal, for the respective week as published in the ICR, adjusted for calorific value.

Railway

181.
In March 2006, Prodeco, CDJ and CMU, the two mining companies recently acquired by Glencore, entered into an association contract with other coal producers, with the aim of sharing the use of a railway under concession to Ferrocarriles del Norte de Colombia S.A. ["Fenoco"]. Prodeco eventually indirectly acquired a 39.76% ownership interest in Fenoco.107
182.
This railway linked the Mine region with ports situated in the Atlantic coast, specifically with Prodeco's Port, and solved Prodeco's transport difficulties: rail transport permitted the shipping of higher quantities of coal, at lower costs, and an increase in the capacity of the Calenturitas Mine.

F. 2006: The 2006 PTI

183.
Production at the Calenturitas Mine continued to grow in 2006. In that year the Mine produced 2.9 MTA, almost twice the 2005 production.108
184.
In addition, in 2006, Prodeco realized that it was possible to divert a section of the Calenturitas River that ran through the Mine, thereby increasing the amount of exploitable resources.109
185.
Consequently, in November 2006, Prodeco submitted a revised long-term PTI to Ingeominas, with new coal production objectives ["2006 PTI"]. Prodeco proposed to expand total coal production from the Mine to 116 MT between 2007 to 2019 (more than doubling the 55 MT envisioned in the 2003 PTI), initially at a rate of 4.4 MTA starting in 2007, and gradually increasing to 10 MTA from 2010 onwards:110
186.
The 2006 PTI also foresaw an investment of USD 500.1 million ["M"] being made in the years 2007-2010 (broken down as USD 196.4 M for equipment, USD 114.6 M for railway, USD 85.2 M for infrastructure, and USD 103.9 M for port and sundry investments), and an additional investment of USD 684.4 M for the remaining life of the project.111
187.
The net present value of the project was estimated at USD 98 M (applying a discount rate of 15%), assuming costs of USD 24.79 per tonne of coal 111 112 and a coal sales price of USD 42.58 per tonne.113
188.
Mine-life Royalties to be paid to Ingeominas were estimated at USD 671 M.114
189.
The 2006 PTI also provided for additional exploratory drilling in Sectors B and D of the Mine.115
190.
On 7 February 2007, Ingeominas approved the 2006 PTI, finding that this plan was more favourable than the original PTI, taking into account that it would generate a significantly higher compensation for the State. Ingeominas demanded, however, that in 2009 Prodeco submit an updated PTI, incorporating the results of the additional exploratory drilling in Sectors B and D.116

G. 2007: Seventh Amendment

191.
While Prodeco awaited the approval of the 2006 PTI, it consulted Ingeominas regarding the potential execution of a seventh amendment to the Mining Contract, with the goal of increasing the duration of the Contract and changing the existing Royalties regime, in particular for sales of coal in the Colombian domestic market. Prodeco explained that in order to be able to extract the maximum amount of coal resources and to profit from the significant investments it would make in the Calenturitas project - estimated at USD 1,184 M - the exploitation phase would need to be extended for a period of 20 years. 117
192.
After lengthy negotiations and upon the Contracting Committee's recommendation, on 15 February 2007, Prodeco and Ingeominas executed the Seventh Amendment to the Mining Contract ["Seventh Amendment"].118
193.
The main thrust of the Seventh Amendment was to extend the duration of the Mining Contract by 15 years, until 3 July 2035.119 The justification given was that the 2006 PTI provided for the mining of an additional 60 MT of coal, and an increase of the capacity of the Mine to 10 MTA. The Considerando 6 of the Seventh Amendment concludes:120

"En consecuencia los recursos que generará el proyecto por contraprestaciones económicas a favor del Estado se incrementan sustancialmente frente a lo previsto en el PTI original [...]".

194.
The Seventh Amendment also allowed Prodeco to allocate up to 15% of its annual coal production to local sales; in such a case, Royalties would be calculated pursuant to the base price defined by the Unidad de Planeación Minero Energética.121
195.
The basic system for quantifying Royalties and GIC was not changed, but a few clarifications and amendments were added. The Seventh Amendment provided:

- That if the coal exported by Prodeco came exclusively from the Mine, the reference price for payment of Royalties and GIC would be the higher of (i) the FOB Colombian port price for Colombian steam coal for the respective week as published in the ICR, adjusted for calorific value ["FOB Price"], and (ii) the actual sale price;122

- That Royalties and GIC would be calculated and paid within ten days of the shipment of coal, but would be subject to a quarterly readjustment "based on the definitive prices"123 (as will be explained later, the interpretation of this provision would become the subject of a debate between the Parties).

196.
Finally, the Seventh Amendment required Prodeco to submit a revised long-term PTI in January 2009, detailing its plans to exploit the Mine until 2035 and incorporating the results of the additional exploration conducted in Sectors B and D.124

(2) The Eighth Amendment : Preliminary Steps

197.
Claimants argue that by signing the Eighth Amendment:

- Ingeominas agreed to amend the Mining Contract and to change the system for calculating the Royalties and the GIC, and

- In exchange, Prodeco undertook a massive additional program of investment, increasing the productive capacity of the Mine.

198.
The result was a 'win-win' situation: Ingeominas would earn a higher remuneration (albeit by applying lower Royalties and GIC to a much higher production) and Prodeco would be able to make the necessary investments and develop the Mine to its full capacity.
199.
Respondent contests Claimants' version of the facts and argues that Claimants concealed and misrepresented crucial information in order to mislead the State into accepting an unjustifiable renegotiation of the Mining Contract, to the sole benefit of Claimants and to the detriment of the State. According to Respondent, Claimants made wilful misrepresentations, colluded with public servants, and engaged in corrupt practices, all in order to execute the Eighth Amendment.125
200.
The Tribunal will carefully analyse the evidence and establish the proven facts, starting with the preliminary steps which eventually led to the execution of the Eighth Amendment.

A. May 2008: Prodeco's First Approach

201.
In February 2007, Prodeco and Ingeominas executed the Seventh Amendment, and in October 2007 Prodeco delivered an Annual PTI for the year 2008. This PTI detailed the operations planned for 2008 and envisioned a production of 5 MTA.126
202.
The Seventh Agreement did not change the basic structure of the remuneration which Prodeco had to pay to Ingeominas:

- On the one side, progressive Royalties were calculated on the basis of an increasing scale, which added a 1% for every additional MTA produced by the Mine above; if the estimated production of 10 MTA was reached, the applicable Royalties rate would amount to 14.6%, to be applied to the totality of the coal sold; should production reach 11 MTA, the rate would rise to 15.6%, again to be applied to the totality of production;

- On the other side, the GIC reference price of USD 40 per tonne had not been changed since 1989; and as a result of inflationary increases in Prodeco's mining costs, Prodeco had to pay Colombia a share of its gross revenues at price levels that barely covered its production costs.

203.
Six months after executing the Seventh Amendment, Prodeco decided to approach Ingeominas regarding a potential new amendment to the Mining Contract.127
204.
On 23 May 2008, Prodeco's representatives met with Ingeominas' Director General, Mr. Mario Ballesteros ["Mr. Ballesteros"], and made a presentation, based on an extensive PowerPoint, suggesting a revision of the economic conditions of the Mining Contract.128 A few days thereafter, on 28 May, Prodeco submitted a 9-page formal request.129 Prodeco argued that the existing compensation arrangement compromised the potential expansion and even the viability of the Calenturitas mining project.130
205.
Accordingly, Prodeco proposed that, in order to guarantee the sustainability of Colombia's returns and the viability of the mining project, certain conditions agreed upon in the Mining Contract should be amended:131

- Replacing the ICR index by the API2-BCI7 indexes;132

- Calculating Royalties and GIC based on the value of coal at the pithead of the Mine;

- Capping Royalties at 10%;

- Updating the value of the GIC and introducing a formula for indexation.

206.
Prodeco proposed the creation of a committee to analyse these potential modifications and, in the meantime, the execution of a memorandum of understanding.133

Ingeominas' reaction

207.
A few days thereafter,134 Ingeominas' Subdirector de Fiscalización y Ordenamiento Minero, Mr. Edward Franco, prepared an extensive legal and economic report, analysing Prodeco's proposal. The report was delivered to Mr. Ballesteros, for submission to Ingeominas' Consejo Directivo.135 Mr. Franco's proposal to the Consejo Directivo was the following:136

"En cuanto a la modificación propuesta se recomienda no acceder a la misma por ser poco favorable para los intereses de la Nación".

208.
Despite this initial analysis, Prodeco and Ingeominas held further meetings to discuss the changes proposed by Prodeco.137

B. July 2008: Prodeco's second approach

209.
On 15 July 2008, Prodeco sent to Ingeominas a second formal request for the revision of the economic conditions of the Mining Contract and the reduction of Royalties and GIC. That extensive request further developed Prodeco's original proposal and added a new supporting argument: if Ingeominas were prepared to reduce the compensation, Prodeco would increase its investments and increase the capacity of the Mine. 137 138
210.
Prodeco submitted a precise calculation of two scenarios - one, if the Mining Contract was not amended, and the other, if Prodeco's proposals were accepted.139
211.
In essence, Prodeco was proposing to Ingeominas what Prodeco considered to be a 'win-win' deal: if Ingeominas agreed to a reduction of its Royalties, Prodeco would commit to making additional investments, production of the Mine would increase, costs would be cut, sales would be higher, and at the end of the life of the Mine, Prodeco would have earned higher profits and Colombia would have received significantly higher Royalties and taxes.

C. July 2008 - April 2009: The Dispute over the Definitive Price

212.
In its letter dated 15 July 2008, Prodeco also raised for the first time an interpretative issue regarding the definition of the so-called "Definitive Price" provision in the Seventh Amendment to the Mining Contract.140
213.
Pro memoria, the Seventh Amendment had established that the reference price for payment of Royalties and GIC would be the higher of (i) the FOB Price141and (ii) the actual sale price. Royalties and GIC would initially be calculated and paid within ten days of the shipment of coal, but they would be subject to a quarterly readjustment - upward or downward - "based on the definitive prices."142
214.
In the letter Prodeco asserted that there were two possible interpretations of the term "Definitive Price:"143

- The first interpretation would equal Definitive Price with the actual sale price received by Prodeco, evidenced in the invoices issued to the buyers;

- Under an alternative interpretation, Definitive Price would be the higher of (i) the FOB Price in the week when the coal was shipped and (ii) the actual sale price obtained by Prodeco.

215.
Prodeco acknowledged that hitherto it had calculated the Definitive Price on the basis of the second alternative; but Prodeco now submitted that this interpretation failed to take into account that the market situation had drastically changed.
216.
Prodeco proposed to Ingeominas that the Mining Contract be modified, so that Royalties and GIC be calculated on the basis of Prodeco's actual sale price.144
217.
In late August and early September 2008, Prodeco held meetings with the Ministro de Minas y Energía, Mr. Hernán Martínez Torres, and with Mr. Ballesteros to discuss the revision of the Mining Contract.145 The evidence shows that the Minister agreed that it would be fair and reasonable for the Royalties to be calculated using the actual price received by Prodeco.146

No negative inference

218.
Respondent says that given Claimants' failure to produce documents responsive to Colombia's request, the Tribunal must conclude that Prodeco actively sought to fabricate a dispute over payment of royalties to force Ingeominas into negotiating what would become the Eighth Amendment.147
219.
The Tribunal disagrees.
220.
There is no evidence that Prodeco "fabricated" a dispute, i.e. that it pursued a request knowing that it was not entitled to the rights claimed. To the contrary: the Minister of Mines agreed with the reasonableness of Prodeco's position, which proves that Prodeco at least had a prima facie case.

Prodeco unilaterally construes the Mining Contract

221.
On 8 September 2008, Prodeco sent a letter to Ingeominas, stating that as of 30 September 2008 it would start readjusting the amount of Royalties and GIC based on a Definitive Price equal to that paid by the end consumer.148
222.
One month later, Prodeco did as it had anticipated: it paid the adjustment amount corresponding to the Royalties and GIC of the third quarter of 2008, applying the new interpretation of Definitive Prices. This led to an underpayment of USD 6 M in favour of Prodeco.
223.
This interpretation, and consequent adjustment, was not accepted by Ingeominas. On 17 October 2008, Ingeominas replied to Prodeco saying that it was still evaluating the viability of the proposed contractual modification. According to Ingeominas, the reference price for the calculation of Royalties and GIC was the one published by the ICR, and any unilateral modification was without effect. Hence, Ingeominas demanded that Prodeco comply with the terms of the Mining Contract.149
224.
Prodeco responded ten days later, stating that it was aware that any modification of the Mining Contract had to be bilaterally agreed, but that it was not seeking an amendment of the Definitive Price clause, given that its meaning was clear. 150

Ingeominas' Requerimiento bajo apremio de caducidad

225.
On 23 January 2009, Ingeominas formally demanded payment of the amount in dispute through a Requerimiento bajo apremio de caducidad. Ingeominas asserted that Prodeco's unilateral interpretation of the Mining Contract amounted to a contractual breach. Through the Requerimiento, Ingeominas threatened Prodeco with a declaration of caducidad of the Contract if payment was not effected or an appropriate justification provided within one month.151
226.
Prodeco replied to the Requerimiento on 13 February 2009, restating the reasons for its interpretation of the Definitive Price term used in the Contract, and pointing out that Ingeominas had not explained why it disagreed with such interpretation.152
227.
In April 2009, Prodeco approached Ingeominas regarding the outstanding royalty payments and proposed paying all the disputed amounts into an escrow account, until the dispute on the proper interpretation of the term Definitive Price had been settled.153 Ingeominas ultimately rejected this proposal, insisting that Prodeco pay the disputed amounts directly to Ingeominas in cash, before negotiations could progress.154

D. November 2008: Annual PTI for 2009

228.
In November 2008, Prodeco delivered to Ingeominas the Annual PTI for the year 2009, which envisaged a production of almost 7.2 MTA, and the start of the works for diverting the Calenturitas River, which would lead to an increase in the total Mine production of 80 MT of coal.155
229.
Pursuant to the Seventh Amendment, in January 2009, Prodeco was due to submit its revised long-term PTI, detailing its plans to exploit the Mine until 2035 and accounting for the results of the additional exploration in Sectors B and D.156 Nevertheless, since Prodeco had not completed its exploration program, it requested that the time to submit the PTI be extended until 30 May 2009,157 a request which Ingeominas granted.158 In fact, because of the parties' parallel negotiations, Prodeco would not submit such PTI until June 2010.159

E. March 2009: Sale of Prodeco to Xstrata

230.
In March 2009, Glencore sold Prodeco to the Australian mining company Xstrata, for a net consideration of USD 2 Bn; Glencore, however, retained a call option to repurchase Prodeco - which it eventually exercised.160

(3) The 3ha Contract

231.
Before continuing with its description of the negotiation and execution of the Eighth Amendment, the Tribunal must address a highly relevant averment of Colombia: namely, that Claimants obtained the Eighth Amendment through corruption. This is the factual predicate of Colombia's argument that the Tribunal lacks jurisdiction to decide this case.
232.
Respondent alleges that Claimants bribed Mr. Ballesteros, Ingeominas' Director General, in order to secure his support for the execution of the Eighth Amendment, and that it paid the bribe through a complex scheme: Prodeco bought for a price of USD 1.75 M a concession contract [the "3ha Contract"] for the exploration and production of coal in a parcel of three hectares located in the middle of the La Jagua mine from a former employee of the Ministry of Mines and his partner.161 Respondent says that these individuals were strawmen of Mr. Ballesteros, who ultimately benefitted from the consideration paid by Prodeco, and the payment was the quid pro quo for the execution of the Eighth Amendment.
233.
The Tribunal will establish the proven facts, and in order to do so it will recount the full story of the 3ha Contract, starting in 2006.

A. November 2006: A Coveted Concession Contract

234.
On 29 November 2006, Mr. Jorge Maldonado ["Mr. Maldonado"] - a former employee of the Ministry of Mines and of Ingeominas' predecessors - and his partner, Mr. César García, filed a request with Ingeominas to obtain a concession contract for the exploration and production of coal in a parcel of 3 hectares.162
235.
These 3 hectares were located in the middle of several concessions which formed part of the La Jagua project and were exploited by Glencore through the Prodeco Affiliates (at the time only CDJ and CMU, since CET would be acquired in 2007).163
236.
Four months after Mr. Maldonado’s application, Ingeominas issued on 2 March 2007 a technical report concluding that the 3ha Contract would partially overlap with other nearby concessions and that it was too small for a stand-alone mining operation.164 A week thereafter, on 17 March 2007, Ingeominas formally rejected Mr. Maldonado’s application for the 3ha Contract.165
237.
In January 2008, after Glencore’s acquisition of CET, the Prodeco Affiliates submitted an agreement for the integrated use of mining infrastructure (Acuerdo de Uso Integrado de Infraestructura Minera) to Ingeominas, in order to conduct joint operations in the mining areas of the La Jagua project ["Integrated Use Agreement"].166 Ingeominas approved this Agreement on 28 January 2008.167
238.
On 10 March 2008, the Prodeco Affiliates submitted to Ingeominas a formal opposition to the 3ha Contract, requesting that Ingeominas:168

- Correct the errors in the coordinates of the titles granted to the Prodeco Affiliates, which had created the three-hectare gap; or

- Alternatively, reject the request for the 3ha Contract, because it would be technically impractical to exploit such a small area.

Ingeominas backtracks and awards the 3ha Contract

239.
In June 2008, Ingeominas backtracked on its original decision, finding that the 3ha Contract area did not overlap with other mining concessions, and rejecting the objections of the Prodeco Affiliates.169 In July 2008, the Prodeco Affiliates filed a request for reconsideration,170 which Ingeominas rejected on 19 August 2008.171

B. August 2008 - November 2008: Prodeco Complains to Authorities

240.
Prodeco was now faced with the situation that Ingeominas was about to grant the 3ha Contract to Mr. Maldonado and his partner - a concession which threatened to disrupt the development of the La Jagua mine. In this situation, Prodeco decided to complain in writing to various Colombian authorities - including the Ministro de Presidencia.
241.
First, on 26 August 2008, Ms. Margarita Zuleta, a lawyer acting on behalf of the Prodeco Affiliates, filed a formal complaint regarding the anomalies surrounding the 3ha Contract with Colombia’s Procurador General de la Nación.172 Ms. Zuleta also forwarded this complaint to the Ministro de Minas y Energía, to the Ministro de la Presidencia, to Mr. Ballesteros (Ingeominas’ General Director), and to the Contraloría,173 the Republic’s supervisory agency.
242.
Second, on 22 September 2008, Ms. Zuleta approached the Procurador General again, saying that Ingeominas’ rejection of the Prodeco Affiliates’ request for reconsideration constituted a violation of due process and of the applicable mining provisions. Ms. Zuleta emphasised that the Procurador General should investigate the fact that the 3ha Contract had been awarded to an ex-employee of the agency, since there had been clear irregularities and an undue use of insider information.174 This letter was, once again, forwarded to the Ministro de Minas y Energía, to the Ministro de la Presidencia, and to the Contraloría.175
243.
Third, on 6 October 2008, the Prodeco Affiliates sent a complaint to Mr. Ballesteros and Mr. Edward Franco (with a copy to the Procurador General, the Ministro de Minas y Energía, the Ministro de la Presidencia and the Contraloría), asking Ingeominas to review the 3ha Contract and to refrain from granting, or at least from registering, the 3ha Contract.176
244.
Fourth, on 10 October 2008, the Prodeco Affiliates asked the Jefe del Registro Minero Nacional (with a copy to the Procurador General, the Contraloría, the Ministro de Minas y Energía and the Ministro de la Presidencia) to refrain from registering the 3ha Contract, claiming that he had a duty to the defend the national interest.177

Execution of the 3ha Contract

245.
Notwithstanding the Prodeco Affiliates’ appeals and complaints, on 16 October 2008, Ingeominas (represented by Mr. Franco Gamboa) and Mr. Maldonado and his partner executed the 3ha Contract, and the latter thus became owners of the 3ha mining concession.178
246.
Prodeco quickly reacted: on 21 November 2008, Ms. Zuleta asked Ingeominas’ Coordinador del Grupo de Control Interno Disciplinario to open a disciplinary investigation against the employees involved in awarding the 3ha Contract (with a copy to the Procurador General, the Ministro de Minas y Energía, the Ministro de Presidencia, the Director del Programa Presidencial de Lucha contra la Corrupción, and the Contraloría).179 And in February 2009 Prodeco’s external counsel filed a citizen’s suit (acción popular) against Ingeominas and Messrs. Maldonado and García based on the irregularities surrounding the 3ha Contract.180

C. May 2009: CDJ Buys the 3ha Contract

247.
In the meantime, in December 2008, Messrs. Maldonado and García approached Prodeco through an intermediary, offering to sell the 3ha Contract for USD 11 M.181
248.
At the end of March 2009,182 the Prodeco Affiliates made a last complaint to the Ministro de Presidencia about the irregularities surrounding the 3ha Contract. Prodeco warned that the lack of a solution to the 3ha Contract situation would leave Prodeco with no option other than to engage in direct negotiations with Messrs. Maldonado and García.183
249.
Once again faced with the silence and inaction of the Colombian authorities, Prodeco decided to pursue the option of buying the 3ha Contract from Messrs. Maldonado and García.
250.
The transaction took place on 4 May 2009:184 Ms. Elsa Aragón Barrera, acting on behalf and in representation of Mr. Maldonado, and Mr. García signed an agreement assigning the 3ha Contract to CDJ, one of the Prodeco Affiliates, which paid USD 1.75 M as consideration [the "Assignment Contract"].185

Approval by Ingeominas

251.
Prodeco and Messrs. Maldonado and García submitted the Assignment Contract to Ingeominas for approval.186 In that version of the Contract, the price paid was unspecified: .187

3. Precio y Forma de Pago. El CESIONARIO deberá pagar al CEDENTE la suma de US$ pagaderos en pesos colombianos a la tasa representativa del mercado vigente el día del pago. Este pago deberá hacerse el día hábil siguiente a aquel en el cual la cesión del CONTRATO sea inscrita en el Registro Minero y en consecuencia haya constancia de que el CONTRATO está en cabeza del CESIONARIO.

252.
Ingeominas approved the Assignment Contract on 8 May 2009, and the transaction was registered on 27 May 2009.188

Payment of the purchase price

253.
The Assignment Contract provided that CDJ should make the payments due in Colombian Pesos, in two designated accounts opened in two Colombian banks (Banco Davivienda and Banco Occidente.): .189
254.
CDJ made the payments by transferring funds to the accounts located in Colombia and identified in the Contract, as evidenced by these transfer receipts:190
255.
There is also evidence in the file that, once payment had been made, CDJ made the appropriate tax withholding required under Colombian tax law:191
256.
The transaction was also reflected in CDJ’s audited financial statements of February 2010.192 On 1 February 2010, CDJ informed Ingeominas that it had acquired the 3ha Contract from Messrs. Maldonado and García, this time disclosing the consideration of USD 1.75 M:193

D. May 2011: Further Developments

257.
There is evidence that even after the Assignment Contract had been executed, Prodeco continued to complain about the irregular character of the grant of the three-hectare concession to Messrs. Maldonado and García.
258.
Mr. Paredes, Respondent’s witness in this arbitration, who replaced Mr. Ballesteros as Director General of Ingeominas, recalls that Dra. Zuleta personally raised the issue with him.194
259.
In a press conference of May 2011, the newly, appointed Ministro de Minas y Energía, Mr. Carlos Rodado, acknowledged the irregularities behind the 3ha Contract.195 In June 2011, Mr. Rodado asked the Procuraduría General de la Nación, the Contraloría, and the Fiscalía General de la Nación to start formal investigations into irregularities within Ingeominas.196

(4) The Eighth Amendment: Negotiations

260.
Pro memoria: while the facts concerning the 3ha Contract were developing, Prodeco was involved in a dispute with Ingeominas, regarding the proper interpretation of the term "Definitive Price" as used in the Mining Contract.
261.
The dispute, which had arisen in 2008, had escalated because Prodeco had unilaterally applied its own interpretation, and had failed to pay to Ingeominas an amount of more than USD 6 M. Ingeominas had reacted by requiring Prodeco to pay within one month bajo apremio de caducidad, and had rejected Prodeco’s conciliatory proposal of depositing the disputed amounts in an escrow account.

A. May 2009: The Commitment to Negotiate

262.
The negotiations between Prodeco and Ingeominas continued, and on 21 May 2009 (a few days after CDJ’s purchase of the 3ha Contract from Mr. Maldonado), both parties finally executed an Acuerdo de Compromiso ["Commitment to Negotiate"], in an attempt to solve their dispute.

B. June - November 2009: Negotiations

263.
Once the Commitment to Negotiate was signed, Ingeominas and Prodeco started formal negotiations. The negotiation period was extended three times, in September, October, and November 2009, before finally expiring on 9 December 2009.197
264.
The negotiations revolved around two main issues:

- The general compensation scheme that would be applied under the Mining Contract ["Compensation Scheme"];

- The coal price to be used for calculating the compensation ["Coal Reference Price"].

a. The Meeting of the Consejo Directivo of 1 June 2009

265.
On 1 June 2009, Mr. Ballesteros, Ingeominas’ Director General, informed its Consejo Directivo of the latest developments in the Prodeco negotiation: he explained that Ingeominas had notified Prodeco that it was in contractual breach, and that Prodeco had offered to pay USD 6 M into an escrow account while discussions were pending. He added that Ingeominas had rejected this proposal, and in order to move forward, Ingeominas and Prodeco had executed a document, in which Prodeco agreed to pay the disputed sum by 4 June 2009. The Ministro de Minas, Mr. Hernán Martínez Torres, then stated that holders of mining titles must comply with the terms of their concession agreements, and that it was Ingeominas’ task to guarantee that this happened.198

b. Negotiations Start

266.
On 3 June 2009, Prodeco made the agreed payment of more than USD 6 M, and consequently the 90-day negotiation period started to run.199 Ingeominas scheduled a kick-off meeting for 12 June 2009 and sent a letter to Prodeco in preparation for that meeting.200
267.
The kick-off meeting took place on 12 June 2009. Prodeco submitted an extensive PowerPoint presentation explaining its position.201 Claimants proposed to replace the existing Compensation Scheme (Royalties and GIC) with a single flat royalty rate based on Prodeco’s actual sale prices. According to Prodeco, this modification would ultimately generate higher revenues for the State, without impairing the net present value ["NPV"] of the project for Claimants.202
268.
In response, on 23 June 2009, Ingeominas requested that Prodeco provide a numerical, detailed and concrete proposal of the requested changes to the Compensation Scheme, and the analyses, valuations and commitments with respect to future investments, expansion, and production.203
269.
Prodeco presented its proposal at a meeting scheduled for 2 July 2009.204 Prodeco used a PowerPoint presentation,205 in which it offered a single compensation payment of 10% based on the higher of:

- the actual coal sales price, and

- USD 42.43 per tonne (which was the base price of the 2006 PTI).

270.
According to Prodeco, the proposal, by guaranteeing a minimum price per tonne, shielded Ingeominas from the risk of potential decreases in coal prices. In a letter sent two days thereafter, Prodeco again represented to Ingeominas that the proposal would permit a further expansion of the Mine and would also be advantageous for Ingeominas and for the Nation.206
271.
On 13 July 2009, Ingeominas acknowledged receipt and declared that it was evaluating Prodeco’s proposal "bajo la salva guarda [sic] de los intereses de la Nación y por ende de todos los Colombianos".207

c. The Meeting of the Consejo Directivo of 27 July 2009

272.
On 27 July 2009, Adolfo Enrique Alvarez González, Technical Director of Ingeominas briefly informed its Consejo Directivo that it was studying a review of the remuneration owed under the Prodeco Mining Contract.208
273.
It is noteworthy that the minutes of the meeting do not properly reflect the scope of the negotiations. The Tribunal considers it established that in fact Prodeco and Ingeominas were discussing not only the Coal Reference Price, but a much wider range of topics affecting the Compensation Scheme.

d. Continuation of the Negotiations

274.
The next meeting took place on 31 July 2009.209 Mr. Gary Nagle ["Mr. Nagle"], Prodeco’s Chief Executive Officer at the time,210 has testified as his recollection of the topics that were discussed at that meeting: Ingeominas had in the meantime analysed the proposal submitted by Prodeco, and accepted the application of a flat rate, albeit at a higher rate of 13%, with the possibility of increasing it to 15% if prices rose and Prodeco made windfall profits.211
275.
Since Mr. Nagle’s "main takeaway" from the meeting was that Ingeominas expected an improved offer, on 10 August 2009, Prodeco submitted a revised proposal.
276.
On 27 August 2009, Ingeominas replied to Prodeco’s revised proposal. Ingeominas explained that its officials were assessing Prodeco’s revised proposal and hoped to come back with a response at the following meeting.212
277.
Prodeco answered on 1 September 2009, explaining that its improved offer was simply aimed at reflecting the parties’ latest discussions. Prodeco declared that it was open to discussing Ingeominas’ proposals at the following meeting, which should also address the fact that the Commitment to Negotiate was about to expire.213
278.
As foreseen by Prodeco, the 90-day agreed period for negotiations expired, and on 3 September 2009, Ingeominas officially notified Prodeco that it would resort to mediation, as envisaged in the Commitment to Negotiate.214 But on that same day Prodeco and Ingeominas reached an agreement to extend the negotiation period until 30 October 2009, and no mediation was initiated.215
279.
On 1 October 2009, the Consejo Directivo met again. The minutes show that the Prodeco negotiation was discussed in detail, and that Ingeominas’ letter dated 23 September 2009 had in fact been issued at the suggestion of the Consejeros.216

e. Prodeco Submits an NPV Model

280.
Ingeominas and Prodeco held a further meeting on 5 October 2009,217 and a few days thereafter, on 9 October, Prodeco submitted a new letter, with additional explanations.218
281.
Prodeco started by justifying why, under the existing Compensation Scheme, it was not economically feasible to expand the Mine, in terms of NPV. Applying the then current system, the maximum NPV was achieved at 8 MTA, and for higher production, the NPV started to decrease, as a result of the progressive Compensation Scheme agreed upon in the Mining Contract.219 Prodeco thus averred that beyond 8 MTA it would be uneconomical further to increase the capacity of the Mine.
282.
In the letter, Prodeco then submitted its alternative proposal, which it said had been discussed at the meeting with Ingeominas held on 5 October.
283.
Under this proposal, the then current Compensation Scheme would be retained for production up to 8 MTA; but for higher production a unified compensation rate of 13% would be applied.
284.
In that case an annual production of 15 MTA would become economical, even if the increase in production required a capital investment of USD 1.6 Bn. Prodeco would be prepared to assume such investment, since the NPV of the project increased to slightly more than USD 200 M. And Ingeominas would also benefit: the NPV of its take would increase to USD 600 M (again at 12% discount rate).220

Analysis by Ingeominas

285.
Ingeominas asked two of its officers - Mr. Giovanny Balcero and Ms. Luz Mireya Gómez, to analyse Prodeco's latest proposal.
286.
Mr. Balcero and Ms. Gómez prepared a three-page memorandum, dated 20 October 2009, which reached the following conclusions:221

- NPV was a proper financial tool to evaluate long term investment projects; if the NPV was higher than the required investment, the investment was feasible;

- The model submitted by Prodeco had a positive NPV for annual production between 8 and 15 MTA and consequently a project foreseeing production in that range would be financially viable;

- Certain aspects of Prodeco's model required further clarification;

- Prodeco should submit a sensitivity analysis to confirm the financial viability of the project.

287.
The report did not address Prodeco’s argument that the NPV of the project was maximized at a production of 8 MTA, and that for higher production (which required higher investments) the NPV decreased - and that for Prodeco the best alternative, with the existing Compensation Scheme, was to limit production at 8 MTA.
288.
On 26 October 2009, Ms. Gómez met with Mr. Johnny Campo, Prodeco’s Projects Financial Analyst, to discuss her memorandum. On that same day, as requested, Mr. Campo sent to Mr. Balcero of Ingeominas a sensitivity analysis,222 reflecting the impact of the variation of certain factors (discount rate, coal prices, labour costs, fuel costs, explosive costs) on the NPV of the project at different production levels,223 supporting the conclusion that "a partir de 8Mtpy la expansión es inviable ya que el VPN del proyecto se reduce a partir de este nivel de producción".
289.
Thereafter, officers from Prodeco and Ingeominas met several times and jointly ran different sensitivity models.224

f. The Meeting of the Consejo Directivo of 26 October 2009

290.
On 26 October 2009, Ingeominas’ Consejo Directivo held a meeting, at which Prodeco’s proposal was discussed. Ms. Luz Aristizábal, an officer of Ingeominas, who would later be involved in the Contraloría proceeding, submitted a report and gave a detailed explanation of the ongoing negotiations between Prodeco and Ingeominas. In essence,225

- She acknowledged that under the existing Compensation Scheme an expansion of the mine beyond 8 MTA was not viable, because if production was geared up to (say) 12 MTA the Base Royalty of 7.6% would increase by an Additional Royalty of 9%, making the expansion not feasible;

- She proposed a new deal, whereby the percentage of Royalties should progressively increase, until the Mine reached its optimum production level; if production exceeded that level, the percentage of Royalties should remain fixed;

- She added that if this amendment were not accepted, the Nation would lose the additional royalties deriving from the expansion of the Mine;

- Finally, she discussed various alternative methods of calculating the Coal Reference Price on which the Royalties were to be applied.

291.
The Ministro de Minas y Energía, who was present at the meeting, suggested using the price of sale to the final consumer, instead of indexes, as the Coal Reference Price for the calculation of royalties. He further questioned why some projects applied a royalty rate based on FOB Prices, while others used pithead prices. The Minister concluded that there was a need to conduct a comparative analysis of prices and levels of production for each contract of Gran Minería.226

g. Second Extension of the Commitment to Negotiate

292.
On 29 October 2009, Prodeco and Ingeominas agreed to a new extension of the Commitment to Negotiate until 30 November 2009.227

Additional NPV Information

293.
On that same day, Prodeco’s Mr. Campo sent further information to Ingeominas’ official Mr. Balcero, at the latter’s request. The information took the form of a graph indicating the impact of an expansion of the project on its NPV.228 The graph confirms that the NPV is maximized at a production of 8 MTA, and that at higher production rates expenses rise faster than income, resulting in lower NPVs.

Prodeco’s Revised Proposal

294.
On 4 November 2009, Prodeco presented yet another revised proposal to Ingeominas, on the basis of the information and projections reviewed jointly by Ingeominas and Prodeco.229
295.
On 11 November 2009, Prodeco submitted two proposed formulae to calculate the GIC payments. Prodeco also drew Ingeominas’ attention to the fact that it had been almost six months since the execution of the Commitment to Negotiate, and that despite Prodeco’s repeated proposals, Ingeominas had not yet presented any counter-proposals.230

The Meeting of 17 November 2009

296.
Prodeco and Ingeominas representatives met again on 17 November 2009 and Ingeominas provided Prodeco with some feedback:231

- Ingeominas recognised the need to update the GIC threshold;

- But insisted on using the ICR index as the Coal Reference Price to calculate Royalties and GIC - a point which Prodeco accepted;

- It proposed that a flat 12.6% royalty rate apply to all production when production exceeded 8 MTA.

Further Analyses

297.
On 25 November 2009, Prodeco's Mr. Campo sent Ingeominas two charts showing the impact of Ingeominas' proposals on NPV.

h. The Meeting of the Consejo Directivo of 23 November 2009

298.
Ingeominas held a further meeting of its Consejo Directivo on 23 November 2009. Ms. Aristizábal again made a presentation to the Consejo232 and summarized the status of the negotiations with Prodeco:

- Ingeominas was proposing to keep the present Compensation Scheme for production of up to 8 MTA and to apply a fixed rate of 12.6% for production above that threshold;

- Ingeominas acknowledged that the costs on which the GIC was based had to be updated, to take into account inflation; there was however no agreement on the identification of the proper indexes.233

299.
The Directors did not express any opposition to these proposals; they simply asked to be kept informed of the progress in the negotiations.234

i. Third Extension of the Commitment to Negotiate

300.
On 27 November 2009, Prodeco and Ingeominas executed a third, and last, extension of the Commitment to Negotiate, until 9 December 2009.235

(5) The Eighth Amendment : Execution

A. December 2009: Execution of the Initial Version

301.
The negotiations continued at a meeting held on 3 December 2009. In the course of that meeting, agreement seemed within reach. Prodeco accepted Ingeominas' proposals:236

- A 12.6% flat royalty rate would apply on all production in excess of 8 MTA;

- The ICR reference prices should be weighted to determine a Coal Reference Price to calculate Royalties and GIC;

- The GIC tables should be indexed to the Colombian consumer price index and not to international indexes;

- Prodeco’s proposal that GIC payments be due only where production costs exceed 75% of sales prices was rejected.

302.
Having apparently reached an accord, on 9 December 2009 - the last day of validity of the Commitment to Negotiate - Prodeco and Ingeominas met and executed an eighth amendment to the Mining Contract ["Initial Version of the Eighth Amendment"], which:237

- Maintained the existing Compensation Scheme for production volumes up to 8 MTA;

- Established a 12.6% flat royalty rate on all coal produced in excess of 8 MTA, applied on the FOB reference price at the Colombian port;

- Determined that the FOB reference price was to be calculated applying a formula which consisted of the weighted average of ICR prices in force 3, 6, 9, 12, 15, and 18 months before the date of each shipment (the so-called lags), adjusted by calorific power;

- Set a table with updated thresholds to calculate GIC payments based on the FOB reference prices; these thresholds would be updated according to Colombian inflation.

303.
The Initial Version of the Eighth Amendment also provided that Prodeco had to pay approximately USD 20.8 M to Ingeominas, to settle outstanding payments derived from the Definitive Price provision, but that such payment should not be understood as Prodeco’s acknowledgement of Ingeominas’ interpretation.238
304.
The Initial Version would enter into force upon its registration at the National Mining Registry, and would be deemed to take effect on 1 January 2010.239
305.
Prodeco and Ingeominas initialled and signed three copies of the Initial Version of the Eighth Amendment.240 Mr. Ballesteros requested, however, that Prodeco leave its signed copy with Ingeominas, so that, as a courtesy, he could explain the contents of the agreement at the Consejo Directivo meeting scheduled for the following day, and Prodeco complied with that request.241

B. The Meeting of the Consejo Directivo of 10 December 2009

306.
On 10 December 2009, Ingeominas held a meeting of its Consejo Directivo,242 and Ms. Aristizabal again appeared and submitted a report summarizing the terms of the Initial Version of the Eighth Amendment.243 She attached a chart, which compared the level of Royalties in an 8 MTA and in an expansion scenario, assuming a USD 70 coal price:244
307.
In accordance with this chart, in the 8 MTA scenario the Royalties collected by Ingeominas would remain stable at USD 80 M per year between 2009 and 2015. In the alternative expansion scenario, applying the new Royalties foreseen in the Initial Version of the Eighth Amendment, Ingeominas’ income would dip in 2009 (to approximately USD 70 M) and in 2010 (to approximately USD 75 M), but would then rise to USD 105 M in 2011 and to more than USD 120 M in 2012-2015.
308.
It is unclear what exactly happened next at the meeting of the Consejo Directivo.
309.
Minister Hernán Martínez Torres has testified in the Contraloría proceeding that he disagreed with the signed Initial Version of the Eighth Amendment, that he asked that his disagreement be included in the minutes of the meeting, and that it was agreed to create a task force to analyse whether the changes were in the interest of the Nation.245 The official minutes simply say that the Minister and the remaining members requested that the issue be re-examined with more detail taking into account the national interest.246
310.
Summing up, what seems to have happened is that, although legally speaking the authorization of the Consejo Directivo was not necessary for the execution of an amendment to the Mining Contract, Director Ballesteros did not feel comfortable going forward without the support of his Board, and consequently agreed to review the Initial Version of the Eighth Amendment, to satisfy the Board that the amendment was in the best interest of the Nation.

C. December 2009: Ingeominas Denies Registration at the Mining Registry

311.
Faced with Ingeominas’ silence for a week, on 16 December 2009 Prodeco sent a letter demanding that Ingeominas return Prodeco’s signed copy of the Initial Version of the Eighth Amendment.247
312.
Ingeominas replied to Prodeco on 21 December 2009, saying that, in coordination with the Ministro de Minas y Energía, Ingeominas was making a final review of the Initial Version of the Eighth Amendment. Ingeominas noted that the Consejo Directivo was the entity in charge of running and managing Ingeominas, and of defining its policies, plans and programs, together with the Director General. Hence, Ingeominas informed that it would communicate its decision regarding the Initial Version of the Eighth Amendment in the second half of January 2010.248
313.
On 30 December 2009, Prodeco paid Ingeominas USD 20.8 M, as required under the Initial Version of the Eighth Amendment.249 A few days later, Prodeco once again requested its signed copy of the Initial Version of the Eighth Amendment.250
314.
On 18 January 2010, Ingeominas finally delivered to Prodeco a signed copy of the Initial Version of the Eighth Amendment, but with multiple stamps stating:251

"SIN VIGENCIA POR FALTA DE INSCRIPCIÓN EN EL REGISTRO MINERO NACIONAL AL CONSIDERARSE LESIVO PARA EL ESTADO".

315.
In the cover letter, Ingeominas explained that the Initial Version of the Eighth Amendment was contrary to the interests of the Nation and that registration at the Mining Registry had been denied.252
316.
Ingeominas added that it would promptly reimburse Prodeco the USD 20.8 M already paid.
317.
Finally, Ingeominas invited Prodeco to an immediate and joint review of the pending aspects of the negotiations.253

D. January 2010: Execution of the Eighth Amendment

318.
Upon receipt of Ingeominas' letter dated 18 January 2010, negotiations between the parties resumed.
319.
Ingeominas suggested minor adjustments to the royalty scheme. Namely, Ingeominas proposed maintaining the existing Royalty rate up to 8 MTA (i.e., a maximum flat 12.6% rate at 8 MTA), but that each additional MTA be subject to an additional 1% rate (i.e. the 9th MTA only would be subject to a 13.6% royalty rate, the 10th MTA only to a 14.6% royalty rate, and so on).254
320.
Prodeco acquiesced to Ingeominas' proposed modifications.255
321.
Hence, four days later, on 22 January 2010, Prodeco and Ingeominas executed the final version of the Eighth Amendment,256 which was registered with the National Mining Registry three days later.
322.
The Parties agree that, save for the change to the new Royalty schedule suggested by Ingeominas, the Initial and final versions of the Eighth Amendment are practically identical.257

E. Content of the Eighth Amendment

323.
The Eighth Amendment changed the Compensation Scheme and the Coal Reference Price.

Considerandos

324.
The Eighth Amendment starts with six extensive Considerandos.
325.
Considerando 3 explains that on 21 May 2009 Prodeco and Ingeominas signed the Commitment to Negotiate regarding the Definitive Price dispute and "otros temas mencionados en dicho acuerdo de compromiso".
326.
Considerando 5 then describes the negotiations which took place and itemises the five areas where agreement had been reached:258

- The first agreement was the decision not to change the Compensation Scheme in the Mining Contract for production, up to 8 MTA;

- The second was to establish a limit on the percentage of Royalties to be applied for production above 8 MTA "de manera que sea factible la expansión del proyecto";

- The third was to update the values used to calculate GIC payments;

- The fourth was to clarify the formula used in the determination of the Additional Royalty;

- And the fifth was to determine the Coal Reference Price using ICR, with a formula to introduce time lags reflecting Prodeco's actual sales price.

327.
The final Considerando sets out the goals of the Eighth Amendment: .259

"6. Que con el presente acuerdo se garantizan los intereses del Estado y la viabilidad de la expansión del proyecto minero, lo cual ha sido el fundamento de la negociación entre las partes".

Clauses260

328.
Clause 1 of the Eighth Amendment modifies clause 14.1 of the Mining Contract regarding the calculation of Royalties.
329.
Under the Eighth Amendment, Prodeco undertakes to pay a Base Royalty of 7.6% for production up to 3 MTA, and an Additional Royalty of 1% for every 1 MTA increase in production, up to 8 MTA (i.e. 12.6%), on the totality of the coal sold.261 This was the scheme originally agreed upon in the Mining Contract.
330.
Once production exceeds 8 MTA, the Additional Royalty ceases to be levied on all the annual production. Instead, the 1% incremental royalty is applied only to the incremental MTA of production:

- an additional 1% for production between 8 and 9 MTA,

- an additional 2% for production between 9 and 10 MTA,

- an additional 3% for production between 10 and 11 MTA, and so on.

331.
This means that if total production is 9 MTA, a 12.6% royalty rate applies to the first 8 MTA and a 13.6% royalty rate applies to the 9th MTA only.
332.
Although the parties did not establish a limit on production, no production beyond 15 MTA was envisaged.
333.
In addition, the Eighth Amendment also slightly modifies the provision of clause 14.1 related to the royalties applicable to the coal sold in the Colombian national market.
334.
Clause 2 of the Eighth Amendment modifies clause 14.2 of the Mining Contract. It provides that the Base Royalty shall be paid monthly, within ten days of the end of the month, at the applicable exchange rate. As to the Additional Royalty, applicable when production exceeds both 3 MTA and 8 MTA, it shall be paid annually, within one month of the end of each year.
335.
Clause 3 modifies clause 14.3 of the Mining Contract, which relates to the Coal Reference Price for the payment of royalties.
336.
Pro memoria: The Seventh Amendment had established that if the coal exported by Prodeco came exclusively from the Mine, the Coal Reference Price for payment of Royalties and GIC would be the higher of (i) the FOB Colombian port price for Colombian steam coal for the respective week as published in the ICR, adjusted for calorific value [defined as the "FOB Price"], and (ii) the actual sale price.262
337.
The Eighth Amendment introduces two relevant changes:

- First, it does away with the "higher of’; consequently the Coal Reference Price is based only on the FOB Price in Colombian Port;

- Second, it creates a new formula, which introduces a time lag; in essence the formula takes into account the FOB Prices in the 18 months preceding the calculation date, weighted by Prodeco’s sales in the respective periods, on the basis of annual weighing coefficients, established ex ante (before 15 January of each year) by an independent auditor appointed by Ingeominas on 31 October of each year; these same coefficients are then also used to correct the compensation paid in the year in question.

Transition Period

338.
Under the new pricing formula, on each given date the Coal Reference Price is established by taking in consideration not only the FOB Price on such date, but also the FOB Prices which were applicable in the previous 18 months. This system of calculation creates a difficulty: how to calculate the weighing coefficient for the first year of application of the Eighth Amendment? Indeed, no independent auditor had yet been appointed who could have established the coefficients ex ante.
339.
Just as in the Initial Version, the Eighth Amendment came up with a solution called the período de transición ["Transition Period"]: during the first year of application of the Eighth Amendment, the weighing coefficients were already set by Prodeco and Ingeominas at 0,333. These coefficients were to be applied to the FOB Price which was applicable three, six, and nine months before each determination date.
340.
This transitory regime was to be applied in the period between 1 January 2010 and 31 December 2010; for this reason, this period was defined as the Transition Period.
341.
As will be explained below, the Transition Period would become highly relevant, because in the Contraloría 's Fiscal Liability Proceeding the damage caused to the State is calculated using the Transition Period as the yardstick.
342.
Clause 4 modifies clause 14.4 of the Mining Contract and defines the information regarding the payment of royalties that Prodeco has to provide to Ingeominas on a monthly basis.
343.
Clause 5 modifies clause 43 of the Third Amendment to the Mining Contract, and eliminates Annexes 9 and 9A, which had been included in the Mining Contract by virtue of the Sixth Amendment.
344.
Clause 6 modifies clauses 15.1.1 of the Mining Contract:

- Clause 15.1.1 establishes new FOB price thresholds to calculate the GIC payments, as follows:

A Precio FOB US$/t B Precio Base US$/t C % Aplicable a diferencia D Monto Fijo US$/t
59.94 < FOB < 67.43 59.94 1.0% $0.00
67.43 < FOB < 74.93 67.43 1.5% $0.10
74.93 < FOB < 82.42 74.93 7.5% $0.25
82.42 < FOB < 89.91 82.42 11.0% $0.55
FOB > 89.91 89.91 12.5% $1.05

- Clause 15.1.2 provides that Prodeco and Ingeominas agree that these thresholds shall be adjusted quarterly by indexing to the Colombian consumer price index, as published by the DANE, the Colombian State entity in charge of statistics-263 even though the GIC thresholds are expressed in USD;264

- Clause 15.1.3 establishes that the GIC shall be paid quarterly, within ten days of the end of the quarter;

- Clause 15.4 determines that the GIC shall be paid on the basis of the Coal Reference Price set out in the new clause 14.3.

345.
Pursuant to Clause 7, Prodeco agrees to pay approximately USD 20.8 M265 to Ingeominas to settle the outstanding amounts resulting from Ingeominas' interpretation of the Definitive Price term - without agreeing to such interpretation.