US embassy cable - 05LIMA2017

UNCLAS SECTION 01 OF 02 LIMA 002017 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR WHA/AND, WHA/EPSC, EB/IFD/OFD, EB/CBA, EB/IFD/OIA 
TREASURY FOR OASIA/INL, DO/GCHRISTOPOLUS 
COMMERCE FOR 4331/MAC/WH/MCAMERON 
USTR FOR BHARMAN/DWEINER 
 
E.O. 12958: N/A 
TAGS: EINV, ECON, ETRD, PGOV, PE 
SUBJECT: ANOTHER ATPDEA DISPUTE OVER; LUZ DEL SUR AND 
ENGELHARD ONE STEP CLOSER 
 
REF: Lima 995 
 
1.  (SBU) Summary.  Good news on three commercial disputes. 
Arcadis signed its contract for an environmental remediation 
project, completely resolving that dispute.  In the Luz del 
Sur case, The Tax Court has a new valuation of the U.S. 
company's assets (similar to the firm's initial appraisal) 
and should issue a final resolution by mid-May.  The 
Superior Court last week held an oral hearing to introduce 
the new justice to the Engelhard dispute.  The new justice 
could issue a ruling within a month, perhaps by early June, 
which could be the deciding vote to resolve the 
administrative case.  End Summary. 
 
Arcadis Dispute Resolved 
------------------------ 
 
2.  (U) After several delays, Arcadis finally signed its 
contract with PlusPetrol for the Lot 8 environmental 
remediation project in Loreto Department on April 29. 
According to Herman Barrios, Arcadis legal counsel, Arcadis 
should begin work in the next few weeks. 
 
Luz Del Sur Valuation Complete, 
Final Tax Court Ruling Next 
------------------------------- 
 
3.  (SBU) GOP appraisers in CONATA finished their asset 
valuation of Luz del Sur (owned by U.S. companies PSEG and 
Sempra Energy).  Except for a small discrepancy, the results 
largely coincided with the U.S.-owned company's initial 
appraisal.  With interest and penalties, the company expects 
it will have to pay approximately $1-1.5 million.  The Tax 
Court now has the valuation and is expected to issue a final 
resolution by May 15. 
 
New Judge Hears Engelhard Case 
------------------------------ 
 
4.  (SBU) On March 1, the Superior Court justices issued a 
split decision, 2-1, in favor of Engelhard.  Peruvian law 
dictates that the winning side must have a minimum of three 
votes in its favor.  Because the Superior Court could not 
issue a decisive ruling, an additional justice was brought 
in to issue an opinion on the Engelhard case.  On April 28, 
the new Superior Court justice listened to oral arguments. 
This judge could issue her decision in approximately one 
month, perhaps by early June. 
 
5. (SBU) If the judge sides with the two Superior Court 
judges who voted in favor of Engelhard, the Superior Court 
would return the case to the Tax Court with instructions to 
disregard all the irregular actions of third parties cited 
in the file and drop the IGV tax law article used to justify 
SUNAT's withholding of the company's tax rebate for exported 
gold.  Under this scenario, Engelhard's local attorney 
estimated that the Tax Court could issue a final ruling a 
month after the Judge's vote, perhaps in July to resolve the 
administrative case. 
 
Princeton Dover Waiting for final Judge's Opinion 
--------------------------------------------- ---- 
 
6.  (U) The Superior Court issued a split decision, 2-1, 
against Princeton Dover in early March.  Similar to the 
Engelhard case, the winning side must have a minimum of 
three votes in its favor.  Shortly after the April 14 
hearing, the fourth justice sided with Princeton Dover, 
making the count 2-2.  A hearing is scheduled on May 24 to 
inform a fifth judge about the case.  If Princeton Dover 
prevails, the Tax Court would be instructed to issue a final 
ruling in the case (and not wait until the criminal case 
concludes). 
 
Comment: Making Progress 
------------------------ 
 
7.  (SBU) GOP Disputes Coordinator Aurelio Loret de Mola has 
kept the ATPDEA dispute resolution process on track.  We 
expect the Northrop Grumman and Luz del Sur disputes to be 
fully resolved in May or June.  That leaves us with pending 
judicial decisions for Engelhard and Princeton Dover.  The 
only dispute lacking strong progress is that of LeTourneau, 
which will require more time and a concerted effort on both 
sides at finding an agreeable compensation figure.  We will 
continue work closely with Loret de Mola on the remaining 
cases. 
 
STRUBLE