PERU - DUE DILIGENCE ROADBLOCKS IN MINING TRANSACTIONS
| Jurisdiction | Derecho Internacional |
PERU - DUE DILIGENCE ROADBLOCKS IN MINING TRANSACTIONS
Rio Tinto Peru
Lima
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MARIA ALEJANDRA DELGADO (MARIALE) has been with Rio Tinto for more than 13 years, working in Peru and one year on Secondment in the London Headquarters office. She has more than 23 years of experience doing commercial and mining law, as well as general management, having worked as both an in-house lawyer and external counsel. Prior to her appointment as CEO of Rio Tinto Minera Peru, Mariale has been managing all legal affairs of the company in Peru, since the beginning of La Granja, and leading all support functions acting as Business Services Director. Currently, she is also President of the Australia Peru Chamber of Commerce Inc., Board Member of the Canada Perú Chamber of Commerce and Member of the Board of Governors of Markham College. For 3 years she was a professor of Mining Law at Universidad Peruana de Ciencias Aplicadas - UPC. She has a Law Degree from the University of Lima, Peru, a Master in Law in Development from the University of Warwick (UK) and a post graduate degree in General Management from the Uni. of Piura (Peru).
(1) Introduction
Conducting a due diligence is the first step towards making an informed decision on making (or not) an investment.
Due diligence is all about information obtaining it, processing it and understanding it.
This paper is an attempt to create awareness on the challenges that exist when doing a Due Diligence in Peru as the level of certainty of the information available nor the level of assurance that it should give, are ideal all the time. Therefore due diligence in Peru should rely on all public and private information but also on the knowledge of "locals" on how to deal with the uncertainties that reality pose in order to identify the measures to mitigate the risks of not having "ideal" information.
(2) Quality and availability/timely delivery of information
A due diligence is all about information. Not just plain information; but accessible, useful, reliable, accurate, and understandable information enough to provide comfort for an investment decision.
Availability. The first difficulties investors face when dealing with a due diligence process in Peru is the availability of information required to be gathered. Most of it may need to be gathered from alternative sources or reconstructed by either the legal or technical team, instead of being delivered by the governmental entities that hold such information.
This is why "corporations (...) complain that while they are held to the highest standard of accountability and performance with regard to disclosure of information, the same does not apply to some of their critics."1
A circumstance to consider is that not all information relevant for mining projects is held by the same level of governmental entities. While information regarding mining concessions can be gathered form the central government and is normally accessible (even by digital means); information managed by regional authorities is not normally available (digitally) and therefore cannot be delivered within reasonable terms. This is the case of information from the local water authorities, the regional governments and also in some cases of the public registries.
Quality. Another thing to consider is the quality of information. Accuracy of the information and accountability of the issuer of the information builds mistrust, which breeds uncertainty and translates into potential risk in the market-place.2 Of course this situation shall not be addressed lightly, investors shall seek the best possible advice as to build information around the most suitable pieces of documentation that become available.
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In this regard, the State must balance its dual role. In one hand it is the regulator of the mining activity and it conducts itself having the best interest of the Peruvian nation in mind; in the other hand it shall be the facilitator of investment, which shall not be interpreted in a detrimental way of the national interest, but as a catalyzer of development.
Elements required to facilitate investment3 rely on the provision and exchange of information.4
Investors, most likely from abroad where many of the information that is being sought is obtained via digital means and access, may proceed under the false assumption that a print-out from a computer at a governmental entity is sufficient to guarantee title and that a property is free from liens or encumbrances. But that is not the case, investors shall employ much more care and exercise extra due diligence and run their own review process, sometimes to confirm what print-outs or even official certificates state.5
Sometimes this extra due diligence comes from the advice of your local counsel, sometimes it is the result of limited liability of the information provider. This is the case of several governmental entities that have developed a series of disclaimers for the official information they provide, such as:
| Entity | Type of Document | Disclaimer |
| Geological, Mining and Metallurgical Institute | ||
| In charge of administering mining claims and mining concessions on behalf of the State. | Certificate of License Fees and Penalty Payment | The online copy has not |
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