SIXTH CONTENTIOUS-ADMINISTRATIVE COURT

SPECIALIZED IN TAX- AND CUSTOMS MATTERS

OF THE SUPERIOR COURT OF JUSTICE OF LIMA
Case File:

7650-2013

Claimant:

SOCIEDAD MINERA CERRO VERDE

Respondent:

TAX COURT AND SUNAT

Matter:

NULLITY OF ADMINISTRATIVE RESOLUTION

Resolution No. 51
Lima, January 29, 2016
SUMMARY: In this case, it has been established
that the "Primary Sulfide Project" is not covered by
the guarantees granted by the Stability Agreement
entered into between the Peruvian State and the
appellant in 1998, since that project was
implemented after concluding the Stability
Agreement. Hence, the Tax Court did not incur a
defect of nullity by issuing the contested RTF (Tax
Court Resolution), which affirms the resolution
rendered by the Tax Administration; thus the
judgment under appeal that declares the Claim
substantiated in part should be reversed and, after
amended, the Claim should be declared
unsubstantiated in every respect.

IN SUM: The Court heard the above cause and examined the four
supporting volumes of the administrative case record; and Mr. Cueva
Chauca drafted the opinion. The judgment rendered by Resolution No. 31,
of December 17, 2014, on page 1065, is a matter of appeal on the point in
which it declares the Claim substantiated in part.
ASSIGNMENT OF ERROR:
SUNAT.- In a brief on page 1104, it appeals the judgment in holding
that the judgment was not on the merits of the proceedings and the law,
because of the following: i) It failed to show cause why it has not
applied the precepts of Article 83 of the Consolidated Uniform Text
(TUO) of the General Mining Law, specifically the fourth paragraph and
also the provisions of Article 22 of the Regulations of Title Nine of that
Law; ii) it is clear that the contractual benefits from concluding a
Stability

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Agreement inure to the benefit of the holder of the mining activity

exclusively on the investment made at a specific mining concession,
which allows us to establish that a future investment, after the date of
conclusion of the contract, will not be covered by the benefits of the
Stability Agreement signed before this latest investment; iii) the Court
through the judgment is modifying the law and the Stability Agreement,
in that the twenty-third recital wrongly states that no point of the law or
the regulations provides that the benefit of stability attaches solely to the
activities that the holder developed in the project in which it invested; iv)
one errs in stating that the benefits of legal Stability Agreements must
be applied broadly to the activities of mining holders; v) the Court errs
in stating that the benefit of the Stability Agreement was first restricted
to lie exclusively with the activity for which the investment is made since
the recent passing of Law No. 30230, whereas such limitation always
existed, specifically in the fourth paragraph of Article 83 of the General
Mining Law, article that remains unaltered; vi) it has not answered about
the existence of other holders of mining concessions that have more than
one Stability Agreement signed within a single concession, which
demonstrates that what the claimant argues does not adhere to the
provisions of the law and the regulations; vii) the Primary Sulfide Project
is not covered by the guarantees provided by the aforementioned
Contract for Promotion and Guarantee of Investment, since the project
was implemented after concluding the Stability Agreement signed with
the State; thus the judgment under appeal should be reversed.
TAX COURT.- In a brief on page 1144, it appeals the judgment in
holding that the judgment was not on the merits of the proceedings and
the law, because of the following: i) The Primary Sulfide Project entailed
a new investment program that was established against the profits from
the "Cerro Verde Leaching Project"; thus it cannot be argued that the
former was part of the latter, or that it was

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included in the Stability Agreement between the Peruvian State and the
claimant; ii) Law No. 30230 does not aim to restrict or limit the benefits to
investors, but quite the opposite, it aims to promote and encourage
investment, which is clear not only from the title of the Law itself, but from
the content therein, as all its provisions seek to promote investment, an
aim that would not be met if benefits are cut back as claimed in the
judgment; iii) it can be discerned from Article 83-B of Law No. 30230 that
this recently-enacted rule provides a broader stability benefit, as it states
that the stability lies not only with activities related to investment, but with
additional investments, provided they are carried out within the same
concession; being that this article did not exist, one must conclude that
before the articles existence, the stability benefit lay solely with the
investment subject of the contract, as was examined in the resolution of
the Tax Court, subject of the Claim; iv) the resolution under appeal
makes it impossible that the State fulfill its purpose of offering
administrative justice and effective protection from the courts; even more
so if one is incorrectly interpreting the tax laws that inform our legal
system.
GROUNDS:
FIRST.- In the case at bar, the claimant submits as the Principal Petition
of its Claim that Tax Court Resolution No. 8252-1-2013 be declared null
and void, by which it was decided to affirm Intendance Resolution No.
055-014-0001394/SUNAT. As its First Accessory Petition: that
Intendance Resolution No. 055-014-0001394/SUNAT be declared totally
null and void, as well as Assessment Resolutions No. 052-003-0005092
through 052-003-0006103, issued in relation to the Mining Royalties for
January-December 2008, and Penalty Resolutions No. 052-002-0004037
through 052-002-0004057. As its Second Accessory Petition: that
SUNAT be ordered i) to reimburse SMCV any sum that the latter may
have paid to the former in performance of the resolutions

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being challenged, including any interest accruing thereon; and/or return to

SMCV any comfort letter or other security the latter may have offered
and/or furnished in favor of said entity to secure payment of the debt
indicated in Assessment Resolutions No. 052-003-0005092 through 052003-0006103, issued in relation to the Mining Royalties for JanuaryDecember 2008 and Penalty Resolutions No. 052-002-0004037 through
052-002-0004057. The above interest must be calculated upon
enforcement of judgment and until the effective date of repayment by
SUNAT. As its Subordinate Petition to the Principal Petition, the
claimant requests that Court Resolution No. 08252-1-2013 be declared
partially null and void, in the sense that Tax Court Resolution No.
11669-1-2013 (an integral part of the first resolution) rejects the petition
to expand the scope of the proceedings, filed by Sociedad Minera
Cerro Verde against Tax Court Resolution No. 08252-1-2013, which
requested the waiver of interest and penalties as provided in Article 170
of the Tax Code.
SECOND.- The Court hearing the case when rendering the judgment
under appeal, declared it substantiated in part, concluding that the benefit
for whoever contracts with the Peruvian State, in this case, tax stability, is
granted to the holder for the activities this conducts in the mining
concessions or economic-administrative units that it holds, as indicated in
the fourth paragraph of Article 85 of the General Mining Law, as well as in
Article 22 or the Regulations to Title Nine of the General Mining Law, the
norm making no distinction on the benefit, which is broad in nature.
THIRD.- The focus of the dispute concerns whether the Stability
Agreement entered into between the Peruvian State and the claimant
applies only to the so-called "Cerro Verde Leaching Project" or whether it
includes the subsequent development of the so-called "Primary Sulfide
Project," which according to the respondents, the TAX COURT and
SUNAT, required a new

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investment program that was established against the profits from the
"Cerro Verde Leaching Project"; thus it cannot be argued that the former
was part of the latter, or that it was included in the Stability Agreement
between the Peruvian State and the claimant; while the plaintiff argues
that investment in the original project was just a requirement to accede
to the Stability Agreement and that this is made extensive to all
subsequent investments of the company.
FOURTH.- The claimant bases its petition on the content of the so-called
contract-law and submits, then, that the Mining Royalty Law No. 28258
that was enacted on June 3, 2004, as subsequent to concluding the
Stability Agreement, would not apply it contends to the mining
concession, by having concluded a Stability Agreement before the entry
into force of such law. In this regard, this calls for analyzing the legal
nature of this concept and for this most scholar works favor the thesis of
the contract-law as a civil contract; indeed, Baldo Kresalja notes: "This
thesis has received greater acceptance in the national law. It is based
primarily on the historical interpretation of Article 1357 of the Civil Code and
the choice of the legislature to define the contract-law as a private law
contract, as detailed in the Framework Law for Private Investment Growth,
approved by Legislative Decree 757, with regard to legal Stability
Agreements. It so states that:
The legal Stability Agreements are concluded under Article 1357 of
the Civil Code and have the status of contracts having force of law;
as such they cannot be unilaterally amended or terminated by the
State. Such contracts have a civil and non-administrative nature
and may only be amended or cancelled by agreement between the
parties.
In the same vein, the historical interpretation of Article 1357 of the Civil
Code is said to clarify this controversy; at the same time an important
sector also supports the thesis of the contract-law as

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an administrative contract in saying: "It can be said beforehand that the

notion of administrative contract is in crisis, to the point that in the
national law an innovative view exists that this must be replaced with a
unitary State contract regime contrary to the dualistic worldview that
divides State contracts into administrative contracts and private contracts
of the Administration.
Thus, De la Puente takes up the notion of the administrative contract in
quoting Argentine author Marienhoff, who argues that the contract is "the
concurrence of wills, a generator of obligations, concluded between an
agency of the State, which performs the administrative duties entrusted to
it, and another administrative body or an individual, to serve public needs."
He then affirms that about the subject, it is stated that, if there is an
important public interest about it, this is administrative, and it consequently
benefits from a special regime. This argument is particularly interesting
because the contract-law, as defined in Article 1357 of the Civil Code, has
the legal framework of a law underpinned by reasons of social, national or
public interest. The multi-judge court takes the view that in this case, and
considering that the subject of the contract-law concluded between the
parties is aimed at public purposes particular to the State tax, exchangerate and administrative stability it is valid to argue that this is a contractlaw of an administrative nature on the basis of its subject. This trend is
reinforced, according to the quoted authors by the allegations that "Along
these same lines, Pinilla says that in principle the contract-law should be
considered an administrative contract because the benefits granted by the
State fall outside the trade of individuals."1
FIFTH.-Said nature of the contract-law entered into between the parties
is relevant in view of the discussion, which incidentally was introduced
in this instance, but that it is relevant with respect to the

Baldo Kresalja/Csar Ochoa. Derecho Constitucional Econmico. Fondo Edit. PUCP.

Pages 288-289
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legal nature of the mining royalties regime; in fact, counsel for SUNAT
said in his oral argument, that the Stability Agreement was only limited
to aspects of tax, exchange-rate and administrative nature; and
considering that mining royalties have a content of economic
contribution foreign thus to the Stability Agreement, the Claim becomes
unsubstantiated as the aforementioned agreement did not expressly
cover or shield it for later regulations that have no tax, exchange-rate or
administrative nature; that reasoning is relevant; if proven, analyzing
the terms of the contract and the rules of the General Mining Law and
other related and applicable ones to the case at hand would serve no
purpose; however the multi-judge court does not share this view,
because in having determined that the nature of the contract-law is (at
least evident in this case) administrative in nature, there can be no
doubt that the Mining Royalty Law could not be applied to the present
case because the Law is an administrative contract; thus immunity
would apply to all that the State subsequently issues in exercise of its
"ius imperium" that can directly affect the guaranteed investment.
SIXTH.- In that regard, we must analyze whether or not the new project
already mentioned, is within the scope of the contract-law and with that in
mind, we should in principle set off from the contract itself under the legal
principle or maxim PACTA SUND SERVANDA in the sense that the
contract is law between the parties that have agreed to it and whoever
denies the concurrence of wills expressed therein must prove it; therefore
in this case, after examining the document, one can see that the contract
concluded only applies to the investment of the Cerro Verde Leaching
Project and this follows from the joint interpretation of the clauses
contained therein, which expressly state that the contract concluded
intended to protect the investments that the mining company undertook to
make in that project; in fact Clause One so states: In brief of January 25,
1996, the holder invoking the provisions of Article 82 of the Consolidated

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Text of the General Mining Law, Supreme Decree No. 014-92-EM, which
will be called hereinafter "Consolidated Uniform Text," submitted to the
Ministry of Energy and Mines an application to be guaranteed under
contract the benefits set forth in articles 72, 80 and 84 of that legal text,
in regard to the investment in its concession Cerro Verde No. 1, No. 2
and No. 3, hereinafter "the Cerro Verde Leaching Project." Note that
from the beginning the application for benefits expressly asked for such
investment; on the other hand, in 1.3 it was stated that "The objective of
the study is to evaluate the feasibility to expand the production capacity
from 72,000,000 to 105,000,000 pounds (48 MT) of copper cathode per
year from heap leaching of copper ore with 65% recovery, also installing
the necessary equipment to improve the leaching of secondary sulfides
and increasing production." In this section, as can be seen, that
particular investment is also expressly mentioned. Mention is also
made in the contract of the "Development of a new geological model,
part of the basis of the feasibility study, which has created a computer
model of the mining sites of Santa Rosa and Cerro Verde. Estimation of
mineral reserves and two pits, one for Santa Rosa and another for
Cerro Verde that were designed for mined levels on a large scale,
preparation of mining plans, and copper production forecasts are also
listed. Description of all operations for a new treatment capacity,
including those part of the Leaching Project and support facilities, as
well as of the results of the leaching pilot test in secondary sulfur
stockpiles are also included." There is no doubt that in the light of those
contract clauses, the Stability Benefit had been expressly agreed for
such investment.
SEVENTH.- Likewise, one can see that Clause Two states: "On May 6,
1996, by Executive Resolution 158-96-EM/DGM, the General Mining

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Bureau approved the Technical-Economic Feasibility Study, pursuant to

Article 85 of the Consolidated Uniform Text," while Clause Three states:
"The provisions of the above paragraph do not preclude the holder from
enjoying other mining rights in the Cerro Verde Leaching Project upon
approval from the General Mining Bureau. It should also be noted that the
addition of new mining rights is referred to that project," while Clause
Four expressly states: "The investment plan included in the feasibility
study mentioned in Article 85 of the Consolidated Uniform Text includes a
detailed account of the works, labor and acquisitions needed for the startup or initiation of the actual operation of the Cerro Verde Leaching
Project, and further sets forth the approximate volume of additional
production to be achieved.
4.3 The main works and tasks covered in the Investment Plan include
the following:
4.3.1 Leaching System.
4.3.2 Mine installation and infrastructure.
4.3.3 Installation of infrastructure to increase the capacity of crushingscreening and transportation.
4.3.4 Expansion of the Processing Plant."
In turn, Clause Five says: "5.2 explicitly stated that the final amount of
the investment will be determined upon completion of the work, in
accordance with the provisions of Article 30 of the Regulations to Title
Nine of the Consolidated Uniform Text, approved by Supreme Decree
No. 024-93-EM, hereinafter the Regulations." Clause Seven reads: "7.2
Within 120 days of the submission and making available of the
documentation indicated in 7.1.1, 7.1.2 and 7.1.3, the General Mining
Bureau may make observations only in regard to the inclusion of
investments and expenses not covered in the Investment Plan or its
duly-approved

amendments

or

concerning

numerical

errors,

observations must also be reasoned out; if appropriate, the holder will

have a period of thirty days to answer the observations; after this period
has elapsed, the proceedings

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will commence for a test period of thirty additional days, upon expiry the
General Mining Bureau will decide within sixty days. Under the
responsibility of the General Director, if the observations have not been
remedied by the time limit, the benefits of this contract shall be
automatically suspended; if failure continues for sixty additional days, the
contract shall terminate." Clause Eight reads as follows: "8.1 The term
of the guarantees agreed upon in this contract shall extend for fifteen
years, starting from the fiscal year in which the investment is verified
and the latter shall be approved by the General Mining Bureau." As can
be inferred from such clauses, the parties explicitly indicated the
subject of the contract and therefore submitting the feasibility project for
such investment was not only a requirement for access to the Stability
Benefit as the claimant contends, but the underpinning for approval and
subsequent project development, as expressly stated in the latter."
EIGHTH.- In this regard, it is in principle noteworthy that Article 62 of the
Constitution states in its first paragraph that the freedom to contract
guarantees that the parties will be able to validly agree, in accordance
with the rules in force at the time the contract is executed. Accordingly,
this freedom must respect the limits provided by the law. Baldo Kresalja
and Csar Ochoa argue that "In our view, in principle and with
qualifications, the essential content of the freedom of contract has the
following indications: the right to decide whether to conclude or not a
contract, the right to choose with whom to conclude a contract; the right
to regulate the content of the contracts, i.e., the rights and obligations
of the parties, which in fact constitute the contractual freedom or the
contractual arrangements."2. In this sense, when considering the latter
meaning of the right to freedom of contract, both parties freely
expressed their willingness to enter into a contract and clearly
expressed the content and scope of that contract transaction; thus one

Baldo Kresalja/Csar Ochoa. Derecho Constitucional Econmico. Fondo Edit. PUCP. Page 280

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cannot go beyond the actual declarations of intent expressed thereon as

the claimant intends to do.
NINTH.- On the other hand, as laid down by Article 83 of the TUO of the
General Mining Law, specifically the fourth paragraph and the provisions
of Article 22 of the Regulations of Title Nine of the General Mining Law, it
is necessary that the contractual benefits from concluding a Stability
Agreement lie solely with the holder of the mining company and in
exclusive and excluding fashion on the investment made at a specific
mining concession, which allows to establish by logical inference that a
future investment, subsequent to the date of conclusion of the contract,
will not be covered by the benefits of the Stability Agreement signed
before this latest investment; therefore, the benefits of legal Stability
Agreements should not be applied broadly to the other activities of the
holders of mining activities; consequently, the so-called Primary Sulfide
Project is not covered by the guarantees granted by such contract for
promotion and guarantee of investment, since the project was
implemented after having concluding the Stability Agreement with the
State in 1998.
TENTH.- On the other hand, the judgment under appeal states that the
benefit of the Stability Agreement was first restricted to lie exclusively with
the activity for which the investment is made since the recent passing of
Law No. 30230; however it cannot be interpreted to mean that before
modified, the contract might cover activities beyond that expressly stated
in the contract in accordance with the express will of the parties; let us
bear in mind as well that this limitation always existed, particularly in the
fourth paragraph of Article 83 of the General Mining Law, article that
remains unaltered; One must bear in mind that Law No. 30230 does not
aim to restrict or limit the benefits to investors, but quite the opposite, it
aims to promote and encourage investment, which is clear not only from
the title of the Law itself, but from the content therein,

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as all its provisions seek to promote investment, an aim that would not be
met if benefits are cut back as claimed in the judgment; in this regard, it
can be discerned from Article 83-B of Law No. 30230 that this recentlyenacted rule provides a broader Stability Benefit, as it states that the
stability lies not only with the activities related to the investment, but
with additional investments, provided they are carried out within the
same concession; being that this article did not exist, one must
conclude that before the article existed, the Stability Benefit lay solely
with the investment subject of the contract, as was examined in the
resolution of the Tax Court, subject of the Claim.
ELEVENTH.- On the other hand, it is noted that the claimant and the
respondents alike support their allegations in various reports, pointing
out the following:
1. In a brief of January 7, 2016, SUNAT submitted the Technical Report,
prepared by Dr. Francisco Javier Ruiz de Castillo Ponce de Len, of
September 11, 2015, which leads from a logical interpretation of Article
83 of the TUO of the General Mining Law to assert that the content of
each tax Stability Agreement comprises a specific investment program;
thus concluding that only the mining activity covered by that program
benefits from the guarantee consisting in the release of the payment of
mining royalties and in that sense, the mining activity relating to the
development of the "Primary Sulfide Project" was subject to the
payment of mining royalties for the period October-December 2006 and
January-December 2007.
2. On January 7, 2016, the company Sociedad Minera Cerro Verde
presented the reports, of Doctors Csar Landa Arroyo and Jorge W.
Pevrano, which indicated that the judgment under appeal properly
focused on the dispute at issue, being consistent between what was
raised by the parties and the final decision, besides its grounds being

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sufficiently stated, along with the findings of fact and the conclusions of
law underlying the decision of the court below.
3. On January 7, 2016, the claimant presented the report, issued by Dr.
Csar Garca Novoa, which expounds the vision of the Tax Court on
the legal nature of the Stability Agreements as distorted, carrying a
concept of the Stability Agreements from the unique perspective of
private law. The report also indicates that the literal interpretation that
the State has given to the contract is inaccurate, since the content of
the Stability Agreement is never the initial investment; adding that
given its regulatory nature, commensurate with its status as a
contract-law, the contract should be interpreted not only on the basis
of its text, but mainly through a teleological approach and,
subsequently, by following a principlist hermeneutical tenet.
4. On January 12, 2016 SUNAT presented the Technical Report from
Auditor Efran Flores Torres on the same date; it indicates that the
benefits of stability are defenses to the common legal treatment, the
scope of which should be restricted to the field of objective application,
clearly given by the General Mining Law and its Regulations, and the
terms of the legal Stability Agreements themselves in mining. It further
notes that the described benefits cannot be made extensive to
activities, operations and investments not covered by the subject or
object of such contracts, which are the investment programs and the
feasibility studies; thus concluding that the exploitation of minerals
through the Primary Sulfide Plant, which is an investment not stabilized
by being neither the subject nor the object of the contract signed in
1998, is within the scope of mining royalties.

5. On January 15, 2016, SUNAT examined the Technical Report written

by Doctor Revnaldo Bustamante Alarcn, which indicates that from a
procedural point of view the grounds for the judgment being appealed
are insufficiently stated and the judgment is manifestly arbitrary as it
has not analyzed

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or refuted any of the defense arguments put forward by SUNAT and

the Tax Court along the Proceedings.
It follows from such antagonistic positions, very respectable indeed as
they come from eminent and renowned jurists, that they underpin the
arguments of the claimant and the respondent alike; however the multijudge court considers that these reports in principle are not binding on it
and also, as they adhere to the grounds described in the recitals that
underpin this decision, it does not fully embrace them, except for the
general considerations on contracts-law and procedural matters on the
proper statement of grounds of decisions; however it is to note that the
analysis of the distinguished Spanish jurist, Doctor Garca Novoa,
underscores that the State would rely on a literal interpretation in this
case regarding the contract, but that it would be inaccurate because the
content of the Stability Agreement is never the initial investment; adding
that given its regulatory nature commensurate with its status as a

contract-law, the contract should be interpreted not only on the basis

of its text, but mainly through a teleological approach and,
subsequently, by following a principlist hermeneutical tenet ; however
these forms of interpretation must be used if the literal interpretation
leaves no doubt that there is no impediment for a State to enter into a
Stability Agreement for an initial investment that can later be the subject
of a new agreement in order to protect new and future investments;
although it is clear that the ideal is that investment be protected globally,
but this depends on the will of the contracting parties and the bargaining
power of the parties in concluding the contract.
TWELFTH.- For the above considerations, the grounds of the Claim
must be rejected in the main petition and the accessory petitions alike,
the latter under the provisions of Article 87 of the Code of Civil
Procedure, which apply in subsidiary fashion to the present case; thus
the judgment under appeal

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that declares the Claim substantiated in part should be reversed and, after
amended, the Claim should be declared unsubstantiated; since it stems
from the foregoing, the resolution rendered by the Tax Court did not incur
a defect that under Subsections 1) and 2) of Article 10 of Law No. 27444
entails the declaration of nullity of an administrative decision.
With regard to the Subordinate Petition of the Claim, whereby the
appellant requests that Tax Court Resolution No. 08252-1-2013 be
declared partially null and void in the sense that through Tax Court
Resolution No. 1166 9-1-2013 (an integral part of the first resolution) it
rejects the petition to expand the scope of the proceedings, filed by
Sociedad Minera Cerro Verde against Tax Court Resolution No. 082521-2013, which requested the waiver of interest and penalties as provided
in article 170 of the Tax Code; it should be noted that the review of the
appeal on page 1913 of the administrative record did not lead to that
argument being raised by the applicant during the appeal; being thus
fitting that the above petition be declared inadmissible.
THIRTEENTH.- What has been stated in this resolution is sufficient to
rebut the opinion voiced in the tax report on page 1197, which is
reflected in the requirements of Article 142 of the Consolidated Uniform
Text of the Organic Law of the Judicial Branch. For these reasons, the
Sixth Contentious-Administrative Court Specialized in Tax- and
Customs Matters of the Superior Court of Justice of Lima:
REVERSES the judgment rendered by Resolution No. 31, of December
17, 2014, on page 1065, which declares the Claim substantiated in part
and, AFTER AMENDED, it declares the Claim unsubstantiated with
respect to the principal petition and the accessory petitions; and
inadmissible with respect to the subordinated petition of the Claim. In the
proceedings brought by Sociedad Minera Cerro Verde, against

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the Tax Court and the Superintendancy of the National Customs and
Tax Administration, on nullity of administrative resolution.
So Ordered.

ODRIA ODRIA

LVANO VERGARA

CUEVA CHAUCA
BLCCH

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