Minera Las Bambas SA v Glencore Queensland Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Moulder |
| Judgment Date | 29 June 2018 |
| Neutral Citation | [2018] EWHC 1658 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 29 June 2018 |
| Docket Number | Case No: CL-2016-000344 |
[2018] EWHC 1658 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Moulder DBE
Case No: CL-2016-000344
Fionn Pilbrow & Charlotte Thomas (instructed by White & Case LLP) for the Claimants
Conall Patton (instructed by Linklaters LLP) for the Defendants
Hearing dates: 23rd, 24th, 25th, 26th April and 1st May 2018
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This is a claim arising out of a share purchase agreement (the “SPA”) entered into on 13 April 2014 between the claimants as Purchasers and the defendants as Sellers and Sellers' Guarantor for the sale of 100% of the shares in Xstrata Peru S.A. (later renamed Las Bambas Holdings S.A.). The dispute centres on the construction of certain tax indemnities in the SPA and related provisions.
Background
Xstrata Peru S.A., defined in the SPA as the “Company”, indirectly owned the Las Bambas mining project, a large copper development project located in southern-central Peru (the “Project”) through its wholly-owned subsidiary, then called Xstrata Las Bambas S.A. (“XLBSA”). Closing under the SPA took place on 31 July 2014.
The first claimant, Minera Las Bambas S.A. (“MLBSA”), is a company incorporated in Peru which now owns the Project. MLBSA is the successor to Minera Las Bambas S.A.C (“MLBSAC”). The second claimant, MMG Swiss Finance AG (“MMG Switzerland”), is a company incorporated in Switzerland. Both MLBSAC and the second claimant are together defined as the “Purchasers” under the SPA. MMG Limited (“MMG”), a company incorporated in Hong Kong with its principal place of business in Australia, was also a party to the SPA as the “Purchasers' Guarantor”.
The first defendant, Glencore Queensland Limited (“GQL”), is a company incorporated in Australia. The second defendant, Glencore South America Limited (“GSAL”), is a company incorporated in the Cayman Islands. Both the first and second defendants are together defined as the “Sellers” under the SPA. The third defendant, Glencore International AG (“Glencore AG”), is a company incorporated in Switzerland. Glencore AG is a party to the SPA as the “Sellers' Guarantor”.
I will deal below with the detailed factual background in relation to the various issues as it arises and to the extent relevant.
Issues for the court
The parties have raised numerous issues of law and fact for determination by the court, including issues of Peruvian law. In this judgment I propose to deal only with those matters which in my view require determination in order to resolve the issues between the parties. In that regard, whilst I have had the benefit of written opening and closing submissions from both counsel as well as oral opening and closing submissions, in this judgment I shall deal with only those submissions which are relevant to the issues which need to be resolved, having regard to my findings. Further, to the extent that a particular submission is not expressly dealt with in this judgment, it should be noted that all submissions have been considered in arriving at a conclusion.
I propose to deal with the issues under the following headings:
i) NFB VAT – clause 3 of the Deed of Indemnity and clause 10.1.1 of the SPA;
ii) Conduct of the NFB VAT proceedings; and
iii) Third Party VAT – clauses 10.1.1 and 10.1.2 of the SPA. Evidence
For the claimants I heard evidence from Mr Heng and Mr Ossio as factual witnesses. For the defendants I heard evidence from Mr Weber and Mr Shimamoto as factual witnesses.
I also heard evidence from four foreign law experts: experts in Peruvian tax law and in Peruvian civil law. In relation to Peruvian tax law, the claimants called César Talledo Mazú and the defendants called Cecilia Delgado Ratto. Each expert produced a report and a joint memorandum summarising the points of agreement and disagreement. In relation to civil law I heard evidence from Professor Eduardo Barboza Beraún and Dr Enrique Ghersi Silva.
I state at the outset that I do not consider that Mr Talledo's evidence was anything other than impartial. Mr Talledo acknowledged in cross examination that his son works for Estudio Rodrigo, the law firm retained by the claimants in Peru. Although he did not originally disclose that he had sought factual information from Estudio Rodrigo in connection with the preparation of his report, in my view this was not as a result of any intention to mislead and in my view this did not affect the weight which I give to his evidence on tax matters. Further, on the evidence, the mere existence of the relationship of father and adult son in no way affected his impartiality or the weight which I attach to his evidence.
NFB VAT – clause 3 of the Deed of Indemnity and clause 10.1.1 of the SPA
Background to NFB VAT
The Project involved the resettlement of the Fuerabamba rural community (the “Community”) from the Las Bambas site to the town of Nueva Fuerabamba (referred to as “NFB”), a new town which was to be built by MLBSA specifically for that purpose. In connection with the resettlement, XLBSA entered into an agreement on 23 November 2011 under which the Community agreed to vacate the land in question and to transfer such land to MLBSA and MLBSA agreed to transfer different land to the Community and to build a new town on part of the land (the “Swap Agreement”).
No VAT was paid by MLBSA in Peru at the time the Swap Agreement was entered into. Following closing under the SPA, MLBSA received a number of requests for information (“Requirements”) from the Peruvian tax authority (referred to in this judgment by its initials, “SUNAT”) relating to VAT which SUNAT said was payable by MLBSA in connection with the relocation of the community to the NFB town (the “NFB VAT”).
By way of a letter dated 21 November 2014 the Sellers and Glencore AG gave notice to the Purchasers and the Purchasers' Guarantor that the Sellers wished to exercise their right under clause 12.5.1(iv) of the SPA to take conduct of the claim made by SUNAT in relation to the NFB VAT.
On 24 November 2014, the parties to the SPA entered into a Deed of Indemnity, pursuant to which the Sellers took conduct of the claims in relation to the NFB VAT.
On 30 October 2015 SUNAT issued a Requirement asking MLBSA to explain why no VAT was declared or paid in connection with the Swap Agreement in June 2014.
MLBSA submitted a response to SUNAT's Requirement on 9 November 2015, prepared by and on the instruction of the defendants. The response argued that the VAT obligation only arose on 15 August 2014 (rather than in June 2014 as previously determined by SUNAT) i.e. after the closing date of the SPA.
Further Requirements and responses followed culminating on 29 January 2016 with SUNAT issuing a tax assessment (the “Tax Assessment”), comprising Assessment Resolutions and Penalty Resolutions. The Tax Assessment determined that MLBSA had an obligation to pay the NFB VAT on the date that the town of NFB effectively existed, which SUNAT determined was 27 June 2014. Payment was due on 17 July 2014 and penalties and interest on such penalties were also payable.
On 1 March 2016, MLBSA appealed to SUNAT against the Tax Assessment. SUNAT confirmed its determination by a resolution (the “Intendancy Resolution”) dated 1 December 2016 (received by MLBSA on 6 February 2017).
On 27 February 2017 MLBSA lodged an appeal before the Peruvian tax court challenging the Intendancy Resolution in relation to the NFB VAT (which remains to be determined and which, it is common ground, is unlikely to be resolved until 2019).
SUNAT had reduced MLBSA's accumulated VAT credit balance by the principal amount of the NFB VAT and (by resolution 9510 on 8 February 2016) had set off the liability in respect of NFB VAT penalties and interest against a VAT refund due to MLBSA. However the Intendancy Resolution also concluded that there was no legal basis for the steps taken by SUNAT to offset MLBSA's liabilities to SUNAT under the Tax Assessment (i.e. including penalties and interest due in relation to the NFB VAT). MLBSA sought the return of the funds and a refund was paid, refunding the offset amounts plus interest.
In relation to penalties SUNAT issued further penalty resolutions (the “New Penalty Resolutions”) in May 2017 (to replace the resolutions which had been nullified). One of those resolutions (“Resolution 251”) imposed a fine of PEN 14,355,887 (before the application of any discount). Almost all of this was attributable to the NFB VAT, but a small amount was attributable to Third Party VAT. The balance of the penalties/interest in relation to Third Party VAT were dealt with by other resolutions issued the same day.
MLBSA appealed the New Penalty Resolutions in July 2017. SUNAT rejected the appeal by way of further Intendancy resolutions in December 2017. MLBSA then appealed to the Peruvian tax court and that appeal is continuing.
By way of letter from Linklaters LLP (“Linklaters”), solicitors acting for the defendants, to White & Case LLP (“White & Case”), solicitors acting for the claimants, dated 17 January 2018 the defendants directed MLBSA to pay the NFB VAT component of Resolution 251 in the sum of PEN 8,520,198 plus any interest payable. The payment was made on 22 January 2018 thereby securing a 40% discount of its liability to SUNAT for penalties and interest in respect of NFB VAT....
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Minera Las Bambas S.A. v Glencore Queensland Ltd
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