Contract analysis

I. Executive Summary The purpose of this memorandum is to identify, analyze, and assess the material risks arising from the prolonged dormancy of ICSID Case No. ARB/22/11 (Dunmore Energy Holdings Ltd. v. Republic of Valderia), and to recommend strategic options for the client's consideration. This memorandum is prepared for the internal files of Calderwood & Harkness LLP and is intended to inform a forthcoming discus

II. Background and Procedural History A. The Investment and the Expropriation Dunmore Energy Holdings Ltd. ("DEH") is an exempted company incorporated under the laws of the Cayman Islands, with its registered office at 4th Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman KY1-1002, and its principal business office at 27 Curzon Street, London W1J 5HT, United Kingdom. DEH is the ultimate parent

1. First renewal: December 15, 2022.

2. Second renewal: June 14, 2023.

3. Third renewal: December 13, 2023.

4. Fourth renewal: June 12, 2024. The next dormancy review date, at which the parties will be required to advise ICSID of their intentions regarding the continued suspension or reactivation of the proceedings, is December 12, 2024. Respondent's Legal Representation. The Republic of Valderia is represented in this matter by: • International counsel: Harcastle Fenton LLP, a 600-lawyer international disputes boutique wi

III. Risk Analysis This section identifies and assesses the principal categories of risk arising from the prolonged dormancy of the ICSID proceedings. Each risk category is analyzed in turn, with specific recommendations for mitigation. A. Litigation Funding Risk — Beaufort Litigation Capital LLP

1. Terms of the Funding Agreement The ICSID proceedings are funded by Beaufort Litigation Capital LLP ("Beaufort"), a specialist litigation funder based at 14 St. James's Square, London SW1Y 4LG. The primary contact at Beaufort is Jonathan Hargreaves, Managing Partner. The relationship between DEH and Beaufort is governed by the Litigation Funding Agreement dated February 28, 2022 (the "Funding Agreement"). Under the

2. Termination Right — The 24-Month Threshold The Funding Agreement contains a termination provision that is now of acute relevance. Under clause 11.3(b) of the Funding Agreement, Beaufort may terminate the funding arrangement upon ninety (90) days' written notice to DEH if the ICSID proceedings remain dormant — defined as being subject to a stay, suspension, or other agreed cessation of active procedural steps — for

3. Consequences of Funder Withdrawal The consequences of Beaufort's withdrawal from the matter would be severe and potentially case-ending. The most significant implications are as follows: Self-funding burden. In the absence of litigation funding, DEH would be required to bear all legal costs and disbursements from its own resources or to source alternative funding from a third-party funder. The estimated remaining

4. Recommendation Regarding Beaufort We recommend the following steps in relation to the Beaufort funding risk: (a) Proactive engagement. Vivienne St. Claire should contact Jonathan Hargreaves at Beaufort at the earliest opportunity — ideally within the next two weeks — to discuss Beaufort's current posture and appetite for the matter. The purpose of this engagement should be to understand whether Beaufort has any pr

1. Background on the Facility DEH's Valderian subsidiary, DVU, is the borrower under a senior secured project finance facility extended by Commonwealth Capital Bank plc ("CCB"), a UK-domiciled bank with offices at 1 Broadgate, London EC2M 2QS. The relationship manager at CCB for the Dunmore account is Helen Okafor, Director, Energy & Resources. The facility was established pursuant to a Facility Agreement dated March

2. Technical Default and Standstill On November 1, 2021, CCB formally declared a technical default under Section 9.1(k) of the Facility Agreement. Section 9.1(k) provides that it is an event of default if any material asset of the Borrower is subject to compulsory acquisition, expropriation, nationalisation, or seizure by any governmental authority, and such event is not remedied or compensated within sixty (60) days

3. Risk of Standstill Expiry or Non-Renewal The March 31, 2025 expiry of the CCB Standstill Agreement represents a critical risk for DEH. The potential consequences of non-renewal are significant and merit careful analysis. If CCB declines to extend the standstill beyond March 31, 2025, it will be entitled to exercise the full range of creditor remedies available to it under the Facility Agreement and the Standstill

4. Recommendation Regarding CCB We recommend the following approach in respect of the CCB lender risk: (a) Formal extension request. DEH should write to CCB (Helen Okafor, Director, Energy & Resources) in the autumn of 2024 — ideally in October 2024 — requesting a further twelve-month extension of the standstill to March 31, 2026. This timing allows sufficient lead time for CCB's credit committee to consider the requ

1. Status of UK-Valderia Consultations The dormancy of the ICSID proceedings was originally predicated on the expectation that state-to-state diplomatic consultations between the United Kingdom and the Republic of Valderia would produce a negotiated resolution of the dispute, or at minimum create conditions conducive to a settlement. These consultations have been conducted at the governmental level between the UK For

2. Risk Assessment The risks associated with the diplomatic track are multi-dimensional and significant: (a) No indication of progress. There is no formal or informal indication, from any source available to us, that the diplomatic consultations are making progress toward a resolution that would be acceptable to DEH. The absence of any concrete output after twenty-five months — no framework agreement, no term sheet,

3. Recommendation. We recommend the following steps to address the diplomatic consultation risk: (a) FCDO briefing. DEH should seek an informal briefing from the UK FCDO on the status and realistic prospects of the diplomatic consultations. Sir Malcolm Dunmore, KBE, may be best positioned to make this approach, given his personal connections within the UK government and his standing as a prominent British investor. A

1. Document Preservation The integrity and completeness of the documentary record is a matter of significant concern. The physical records and local IT systems of DVU, which were housed at the CPF Orinoco Sur and at DVU's registered office in Puerto Valdés, were seized or rendered inaccessible following the physical occupation of the CPF by Valderian military and PetroValderia personnel on May 3, 2021. DVU's bank rec

2. Witness Availability The passage of time since the expropriatory events of 2021 — now over three years — creates progressively greater risks to the availability and reliability of witness testimony. Key fact witnesses include DEH and DVU personnel who were present in Valderia at the time of the expropriation, including the country manager, the operations manager, the finance director, and engineering staff who wit

3. Data Staleness The passage of over three and a half years since the relevant valuation date has created a significant data staleness problem that must be addressed before the claim can be presented at a merits hearing. The principal areas of concern are: (a) Reserves certification. The proved reserves certification of 87.4 mmboe, and the probable reserves estimate of 42.1 mmboe, are both based on the Ridgewell Sub

4. Recommendation. We recommend the following steps to address the evidentiary and data staleness risks: (a) Witness declarations. Commission updated witness declarations from key fact witnesses as soon as practicable, while their memories are as fresh as they can be. The priority witnesses are the DVU country manager, the operations manager, and any expatriate staff who witnessed the physical occupation of the CPF o

1. Discontinuance Under ICSID Rules Under the ICSID Arbitration Rules (as amended, effective July 1, 2022), provisions exist for the discontinuance of proceedings in cases of extended inactivity. Rule 44, which addresses the discontinuance of proceedings, provides that if a case remains inactive for a specified period, the Secretary-General or either party may raise the question of whether the proceedings should be d

2. Tribunal Constitution Delays As noted in Section II.D above, the Tribunal in this matter has not yet been constituted. Only the Claimant's arbitrator, Professor Ingrid Svensson, has been nominated and has accepted appointment. The Respondent has not nominated its party-appointed arbitrator, and the presiding arbitrator has not been appointed. Upon reactivation of the proceedings, the following steps would need to

3. Recommendation. We recommend the following steps to address the ICSID procedural risks: (a) Professor Svensson's availability. Contact Professor Svensson's chambers or university office to confirm her ongoing availability and willingness to serve as Claimant's arbitrator in the event that proceedings are reactivated. This inquiry should be made discreetly, so as not to signal a definitive decision to reactivate be

IV. Strategic Options Based on the risk analysis set out in Section III above, we have identified five strategic options for the client's consideration. Each option is assessed in terms of its advantages, disadvantages, key dependencies, and overall viability. Option 1: Continue Dormancy and Monitor Description. Under this option, DEH would consent to a further dormancy renewal at the December 12, 2024 review date, m