1016-00002 · Dunmore Energy Holdings · Arbitration Pleadings

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CALDERWOOD & HARKNESS LLP Barristers & Solicitors — International Arbitration 55 Bishopsgate London EC2N 3AH United Kingdom

Tel: +44 (0)20 7496 8200

Fax: +44 (0)20 7496 8201

www.calderwoodharkness.com

October 14, 2021

By International Courier and Email

Ref: DEH/Valderia — Notice of Investment Dispute

His Excellency Ambassador Diego Fuentes Castillo Minister of Foreign Affairs Republic of Valderia Ministry of Foreign Affairs Avenida de la República 500 Puerto Valdés, Valderia

Copy to:

Dr. Renata Villamizar Ochoa Attorney General of the Republic of Valderia Office of the Attorney General Calle Constitución 120 Puerto Valdés, Valderia

Claudia Ríos Salazar Minister of Energy and Natural Resources Ministry of Energy and Natural Resources Avenida Bolívar 980 Puerto Valdés, Valderia

Re: Notice of Investment Dispute Pursuant to Article 8 of the Agreement Between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Valderia for the Promotion and Protection of Investments, signed May 22, 2006, entered into force November 1, 2006 (the "UK-Valderia BIT" or the "Treaty")

*Dunmore Energy Holdings Ltd. v. The Republic of Valderia*

Your Excellency,

1. INTRODUCTION AND PURPOSE OF THIS NOTICE

1.1. Calderwood & Harkness LLP ("Calderwood & Harkness") acts on behalf of Dunmore Energy Holdings Ltd. ("DEH" or the "Investor"), an exempted company duly incorporated and existing 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, Cayman Islands, and its principal business office at 27 Curzon Street, London W1J 5HT, United Kingdom. Calderwood & Harkness is duly authorized by DEH to act on its behalf in connection with the matters set forth herein, as evidenced by the Power of Attorney attached hereto as Annex B.

1.2. This letter constitutes formal written notice of an investment dispute (the "Dispute") between DEH, on the one hand, and the Republic of Valderia (the "Respondent" or "Valderia"), on the other hand, pursuant to Article 8 of the Agreement Between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Valderia for the Promotion and Protection of Investments, signed on May 22, 2006, and entered into force on November 1, 2006 (the "UK-Valderia BIT" or the "Treaty"). A copy of the Treaty, together with the United Kingdom's territorial extension declaration of February 14, 2007, is attached hereto as Annex C.

1.3. The purpose of this Notice is to trigger the six-month cooling-off period prescribed by Article 8 of the Treaty, during which the parties shall endeavour to resolve the Dispute through amicable consultation and negotiation. DEH genuinely hopes that the Dispute can be resolved in this manner and is prepared to engage in good-faith discussions with the Respondent to that end.

1.4. Should the Dispute not be amicably resolved within the six-month cooling-off period, DEH hereby gives notice that it reserves all rights to submit the Dispute to international arbitration before the International Centre for Settlement of Investment Disputes ("ICSID") under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, dated March 18, 1965 (the "ICSID Convention"), in accordance with Article 8 of the Treaty and the ICSID Convention. Both the United Kingdom and the Republic of Valderia are Contracting States to the ICSID Convention.

1.5. This Notice is issued without prejudice to any of DEH's rights, claims, or remedies under the Treaty, the ICSID Convention, applicable rules of international law, or any other applicable legal instruments, all of which are expressly reserved.

2. THE INVESTOR AND THE INVESTMENT

2.1. The Investor — Dunmore Energy Holdings Ltd.

2.1.1. DEH is an exempted company incorporated under the laws of the Cayman Islands, a British Overseas Territory of the United Kingdom of Great Britain and Northern Ireland. DEH was incorporated on June 18, 2012, under registration number MC-291847. A certified copy of the Certificate of Incorporation is attached hereto as Annex A.

2.1.2. The Cayman Islands falls within the scope of the UK-Valderia BIT by virtue of the United Kingdom's territorial extension declaration dated February 14, 2007, whereby the Government of the United Kingdom notified the Government of the Republic of Valderia that the Treaty's application was extended to its British Overseas Territories, including the Cayman Islands, in accordance with the provisions of the Treaty concerning territorial extension. As a consequence, DEH, as a company incorporated in the Cayman Islands, qualifies as a protected investor — being a company incorporated in the territory of a Contracting Party — within the meaning of the Treaty.

2.1.3. DEH's key principals and shareholders are as follows:

(a) Sir Malcolm Dunmore, KBE — Founder and Chairman of DEH; British national; holder of approximately 62% of the equity interest in DEH through the Dunmore Family Trust (a trust governed by the laws of Jersey, Channel Islands, of which Sir Malcolm is the settlor and primary beneficiary);

(b) Priya Nandakumar — Chief Executive Officer of DEH; dual British-Indian national; holder of approximately 8% of the equity interest in DEH;

(c) Thomas Rearden — Chief Financial Officer of DEH; British national; holder of approximately 4% of the equity interest in DEH; and

(d) Meridian Growth Partners Fund III, L.P. — a limited partnership organized under the laws of the Cayman Islands; holder of approximately 26% of the equity interest in DEH. Meridian Growth Partners Fund III, L.P. is managed by Meridian Capital Advisors Ltd., a company incorporated in the United Kingdom.

2.1.4. Accordingly, DEH's ultimate beneficial owners are British nationals, and DEH is controlled by persons who are nationals of the United Kingdom. DEH thus satisfies all applicable requirements for standing as a protected investor under the Treaty.

2.2. The Investment — Concession No. HYD-2012-047 (Bloque Orinoco Sur)

2.2.1. DEH holds its investment in the Republic of Valderia through its wholly-owned subsidiary, Dunmore Valderia upstream S.A. ("DVU"), a sociedad anónima incorporated under Valderian law on October 3, 2012, with its registered office at Avenida Libertador 1480, Piso 12, Puerto Valdés, Valderia. DVU is a 100% directly-owned subsidiary of DEH.

2.2.2. DVU is the named concessionaire under Concession No. HYD-2012-047 (the "Concession"), granted on September 12, 2013 by the Ministry of Energy and Natural Resources of the Republic of Valderia pursuant to the Valderian Hydrocarbons Law of 2009 (Ley de Hidrocarburos de 2009). The Concession was awarded following a competitive bidding process conducted by the Valderian Ministry of Energy and Natural Resources in the second licensing round of 2012. A copy of the Concession, redacted as necessary for commercial confidentiality, is attached hereto as Annex D.

2.2.3. The Concession covers Bloque Orinoco Sur, an onshore exploration and production block of approximately 1,240 km² located in the Valderian Orinoco Basin, in the southern lowlands of the Republic of Valderia. The Concession was granted for a term of thirty (30) years, commencing on September 12, 2013 and expiring on September 12, 2043, subject to the terms and conditions set forth therein.

2.2.4. The fiscal terms of the Concession, as originally agreed between DVU and the Republic of Valderia, include the following:

(a) A royalty of 12.5% on the gross production value of hydrocarbons produced from Bloque Orinoco Sur, payable to the Valderian Treasury;

(b) Corporate income tax at the rate of 34%, as provided under the Valderian Tax Code applicable to hydrocarbon activities;

(c) A 10% carried interest held by PetroValderia S.A. (Petróleos de Valderia, Sociedad Anónima), the 100% state-owned national oil company of the Republic of Valderia, under the original terms of the Concession.

2.2.5. DEH's investment in Valderia, comprising its equity interest in DVU, its rights under the Concession, the physical assets developed under the Concession, and all associated rights and entitlements, constitutes a protected "investment" within the meaning of the Treaty.

2.3. Capital Invested and Operations

2.3.1. Between 2014 and 2021, DEH invested approximately USD 347 million in total capital expenditure in connection with the Valderian Concession. This substantial investment was made in reliance upon the regulatory and contractual framework established by the Republic of Valderia, including the terms of the Concession, the protections afforded under Valderian law, and the protections of the UK-Valderia BIT. The capital expenditure was deployed as follows:

(a) USD 211 million in exploration and development drilling, including the drilling of seven (7) exploration wells during the exploration phase and twenty-two (22) development wells during the development phase;

(b) USD 89 million in surface infrastructure and pipeline construction, including the construction of a 68-kilometre gathering pipeline connecting the Bloque Orinoco Sur wellheads to the central processing facility, and the construction and commissioning of the central processing facility known as "CPF Orinoco Sur", a state-of-the-art oil processing and separation facility with a nameplate capacity of 35,000 barrels of oil per day; and

(c) USD 47 million in seismic acquisition and geological studies, including the acquisition of approximately 800 km² of 3D seismic data and associated subsurface analysis and reservoir modelling.

2.3.2. The operational history of the Concession is summarized as follows:

(a) Exploration Phase (2013–2016): During this phase, DVU drilled seven (7) exploration wells within Bloque Orinoco Sur. Of these, five (5) wells were determined to be commercially viable, demonstrating the presence of significant hydrocarbon reserves in the concession area. The success ratio exceeded initial projections and validated DEH's technical assessment of the block's potential.

(b) Development Phase (2016–2019): Based upon the successful exploration results, DVU proceeded to the development phase, during which twenty-two (22) development wells were drilled and completed. The CPF Orinoco Sur central processing facility was designed, constructed, and commissioned during this period, along with the 68-kilometre gathering pipeline and associated surface infrastructure, including tank farms, water treatment facilities, power generation equipment, and access roads.

(c) Production Phase (2019–2021): Commercial production from Bloque Orinoco Sur commenced in early 2019 and rapidly ramped up. Peak production of 24,800 barrels of oil per day was achieved in September 2020. Average production for fiscal year 2020 was approximately 21,200 barrels of oil per day. At the time of the measures described in Section 3 below, the concession was producing approximately 18,600 barrels of oil per day.

2.3.3. The proved reserves attributable to Bloque Orinoco Sur as of December 31, 2020 were independently certified at 87.4 million barrels of oil equivalent (mmboe) by Ridgewell Subsurface Consultants Ltd., an internationally recognized independent petroleum engineering firm based in London, United Kingdom. In addition, probable reserves were estimated at an additional 42.1 mmboe, for total proved and probable (2P) reserves of approximately 129.5 mmboe.

2.3.4. In fiscal year 2020, gross revenue from the Valderian operations was approximately USD 128.6 million, and EBITDA was approximately USD 41.3 million. These figures demonstrate the substantial economic value of the investment and its importance to DEH's business.

2.3.5. In addition to the producing hydrocarbon operations, DEH had commenced pre-development work on a Phase II renewable energy component associated with the Concession, involving preliminary feasibility studies and environmental assessments for a solar power generation facility intended to supply electricity to the CPF Orinoco Sur and reduce the concession's carbon footprint. Significant expenditure had been incurred in connection with this initiative prior to the Respondent's measures.

2.3.6. DEH financed part of its investment through a USD 175 million senior secured project finance facility provided by Commonwealth Capital Bank plc (London), pursuant to a facility agreement dated March 20, 2016 (the "Facility Agreement"). As of the date of the measures described in Section 3 below, approximately USD 112.4 million in principal remained outstanding under the Facility Agreement. The expropriation of DEH's investment has placed DVU in default under the Facility Agreement and has caused substantial collateral financial consequences for DEH.

3. THE MEASURES AT ISSUE — FACTUAL BASIS OF THE DISPUTE

3.1. The Dispute arises out of a series of measures adopted by the Republic of Valderia in 2021 which, individually and cumulatively, have resulted in the complete deprivation of DEH's investment. The relevant measures are set out below in chronological order.

3.1. Background — Election of President Montalvo and "Resource Sovereignty" Agenda

3.1.1. On January 15, 2020, President Héctor Luján Montalvo was inaugurated as Head of State of the Republic of Valderia following his election in the general elections of November 2019. President Montalvo's election campaign prominently featured a platform of so-called "resource sovereignty" (soberanía de los recursos) over the country's hydrocarbon assets. Throughout his campaign, President Montalvo repeatedly expressed his intention to reverse what he characterized as the "excessive" participation of foreign investors in Valderia's oil and gas sector and to "return the nation's natural wealth to the Valderian people."

3.1.2. Following his inauguration, President Montalvo began implementing his resource sovereignty agenda through a series of legislative, executive, and administrative measures that progressively and dramatically altered the regulatory environment for foreign investment in the Valderian hydrocarbons sector.

3.2. Notice of Review (March 2, 2021)

3.2.1. On March 2, 2021, the Ministry of Energy and Natural Resources of the Republic of Valderia, acting under the direction of Minister Claudia Ríos Salazar, issued a public "Notice of Review" (Aviso de Revisión) announcing that all hydrocarbon concessions held by foreign investors in Valderia would be subject to a comprehensive review for the purpose of assessing their compliance with "national strategic interests."

3.2.2. The Notice of Review was issued unilaterally and without prior consultation with any of the affected concessionaires, including DEH and DVU. Neither DEH nor DVU was consulted, notified, or afforded any opportunity to be heard prior to or in connection with the issuance of the Notice of Review. No criteria for the review were disclosed, and no procedure for submissions or participation by the affected concessionaires was established.

3.2.3. The Notice of Review created immediate uncertainty regarding the future of DEH's investment and signalled the commencement of an orchestrated campaign against foreign-held hydrocarbon concessions in Valderia.

3.3. Presidential Decree No. 2021-0417 — Nationalization of Strategic Hydrocarbon Assets (April 17, 2021)

3.3.1. On April 17, 2021, barely six weeks after the issuance of the Notice of Review and without any intervening consultation or review process, President Montalvo issued Presidential Decree No. 2021-0417, entitled "Decreto sobre la Nacionalización de Activos Hidrocarburíferos Estratégicos" ("Decree on the Nationalization of Strategic Hydrocarbon Assets").

3.3.2. Presidential Decree No. 2021-0417 declared that all hydrocarbon concessions held by foreign investors in the Republic of Valderia constituted "strategic assets" (activos estratégicos) subject to immediate nationalization in the interest of national sovereignty and the economic welfare of the Valderian people. The Decree purported to authorize the Government of Valderia to assume control over all such concessions and their associated assets, including all surface infrastructure, subsurface rights, production equipment, and related contractual rights.

3.3.3. Critically, Presidential Decree No. 2021-0417 made no provision whatsoever for the payment of prompt, adequate, and effective compensation to the affected concessionaires, including DVU and DEH. The Decree contained no mechanism for valuation of the affected assets, no timeline for the payment of compensation, and no right of appeal or judicial review. The Decree was published in the Gaceta Oficial de Valderia (Valderian Official Gazette) on April 18, 2021. A copy of the Decree as published in the Official Gazette is attached hereto as part of Annex E.

3.4. Physical Occupation of CPF Orinoco Sur (May 3, 2021)

3.4.1. On May 3, 2021, personnel of the Valderian military (Fuerzas Armadas de Valderia), acting in concert with operatives and employees of PetroValderia S.A. (the 100% state-owned national oil company of the Republic of Valderia), physically occupied the central processing facility CPF Orinoco Sur and all associated surface installations within the Bloque Orinoco Sur concession area.

3.4.2. DEH and DVU personnel, including the field operations manager and approximately seventy-three (73) local and expatriate staff then present at the facility, were denied access to the CPF Orinoco Sur facility, their offices, and all operational sites within the Bloque Orinoco Sur concession area. DEH's staff were given no prior notice of the occupation and were physically escorted off the premises by armed military personnel. Personal effects and certain proprietary documents and equipment belonging to DVU's employees were not returned.

3.4.3. Following the physical occupation, PetroValderia S.A. assumed operational control of all production and infrastructure assets within Bloque Orinoco Sur, including the CPF Orinoco Sur central processing facility, the 68-kilometre gathering pipeline, all producing wells, and all associated surface installations and equipment.

3.4.4. The forced physical takeover of CPF Orinoco Sur was carried out without any form of legal process, without any court order or authorization other than the Presidential Decree, and without any advance notice to DEH, DVU, or their legal representatives.

3.5. Presidential Decree No. 2021-0623 — Transfer of Concession Rights to PetroValderia (June 23, 2021)

3.5.1. On June 23, 2021, President Montalvo issued a further decree, Presidential Decree No. 2021-0623, entitled "Decreto sobre la Transferencia de Derechos de Concesión a PetroValderia S.A." ("Decree on the Transfer of Concession Rights to PetroValderia S.A.").

3.5.2. This Decree formally and purportedly transferred all rights, title, and interest under Concession No. HYD-2012-047 from DVU to PetroValderia S.A. The transfer encompassed all exploration rights, production rights, subsurface mineral rights, surface easements, pipeline rights of way, and all other contractual and regulatory entitlements arising under or in connection with the Concession.

3.5.3. The transfer was effected without DEH's or DVU's consent and without the payment of any compensation whatsoever. No independent valuation of the transferred rights was conducted. No offer of compensation was made at any time before, during, or after the issuance of the Decree. The Decree was published in the Gaceta Oficial de Valderia on June 24, 2021, and a copy is included in Annex E.

3.6. Ministerial Resolution No. MEN-2021-089 — Revocation of Operating Licenses (August 5, 2021)

3.6.1. On August 5, 2021, the Ministry of Energy and Natural Resources of the Republic of Valderia issued Ministerial Resolution No. MEN-2021-089, which purported to revoke all operating licenses held by DVU in the Republic of Valderia, including its exploration license, its production license, and its environmental permits.

3.6.2. The effect of this Resolution was to strip DVU of its legal capacity to conduct any hydrocarbon activities whatsoever in Valderia and to eliminate the possibility of any continued operation or future exercise of its concession rights, even if those rights were notionally restored.

3.6.3. Once again, no compensation of any kind was offered or paid to DVU or DEH in connection with the revocation of these licenses. No administrative hearing was held, no opportunity to respond was afforded, and no grounds for revocation were provided other than a reference to Presidential Decree No. 2021-0417 and the purported "national strategic interest." A copy of the Resolution is included in Annex E.

3.7. Freezing of DVU Bank Accounts (September 1, 2021)

3.7.1. On September 1, 2021, by order of the Attorney General of the Republic of Valderia, Dr. Renata Villamizar Ochoa, all bank accounts held by DVU at the Banco Nacional de Valderia were frozen. The freezing order affected DVU's operating accounts and reserve accounts, which together held approximately USD 14.7 million in funds at the time of the freeze.

3.7.2. The freezing of DVU's bank accounts deprived DVU of access to its remaining in-country financial resources, preventing DVU from meeting its obligations to local employees, creditors, and suppliers, and from funding legal and administrative proceedings in Valderia. No justification was provided for the freezing order beyond a general reference to an "ongoing investigation into the financial activities of foreign-controlled entities in the hydrocarbons sector."

3.8. Cumulative Effect of the Measures

3.8.1. The cumulative effect of the foregoing measures — the Notice of Review, the Nationalization Decree, the physical occupation, the transfer of concession rights, the revocation of operating licenses, and the freezing of bank accounts — has been to deprive DEH entirely and irreversibly of the value and benefit of its investment in the Republic of Valderia. Specifically, DEH has been deprived of:

(a) its concession rights under Concession No. HYD-2012-047;

(b) its physical assets, including the CPF Orinoco Sur, the 68-kilometre gathering pipeline, all producing and exploration wells, and all associated surface infrastructure and equipment;

(c) its production revenues, including ongoing production at approximately 18,600 barrels of oil per day at the time of the expropriation;

(d) its in-country financial resources, including approximately USD 14.7 million held in frozen bank accounts;

(e) its contractual entitlements under the Concession, including the right to produce hydrocarbons for the remaining approximately twenty-three (23) years of the Concession term (expiring September 12, 2043); and

(f) the value of its pre-development work on the Phase II renewable energy component.

3.8.2. No compensation of any kind has been offered or paid by the Republic of Valderia to DEH, DVU, or any party on their behalf, at any time before, during, or after the adoption of any of the measures described above.

4. LEGAL BASIS OF THE DISPUTE — TREATY PROVISIONS VIOLATED

4.1. Applicable Treaty

4.1.1. The applicable treaty is the UK-Valderia BIT, signed on May 22, 2006, and entered into force on November 1, 2006. The Treaty was extended to the Cayman Islands by the United Kingdom's territorial extension declaration of February 14, 2007. The Treaty establishes a comprehensive framework for the promotion and reciprocal protection of investments made by investors of one Contracting Party in the territory of the other Contracting Party.

4.1.2. DEH, as a company incorporated in the Cayman Islands, is a protected investor under the Treaty. Its investment in the Republic of Valderia, as described in Section 2 above, constitutes a protected investment under the Treaty. The measures adopted by the Republic of Valderia, as described in Section 3 above, constitute breaches of the Respondent's obligations under the Treaty, as set forth below.

4.2. Article 5 — Expropriation

4.2.1. DEH contends that the measures described in Section 3 above constitute a direct expropriation of its investment in breach of Article 5 of the Treaty. Article 5 of the Treaty provides, inter alia, that investments of investors of either Contracting Party shall not be nationalized, expropriated, or subjected to measures having effect equivalent to nationalization or expropriation, except where such measures are taken:

(a) for a public purpose related to the internal needs of the expropriating Party;

(b) on a non-discriminatory basis;

(d) upon the payment of prompt, adequate, and effective compensation at fair market value.

4.2.2. The Respondent's measures fail to satisfy any of the conditions prescribed by Article 5. In particular:

(a) The measures were discriminatory in nature, having been directed specifically and exclusively at foreign-held hydrocarbon concessions while leaving domestically-held concessions unaffected;

(b) The measures were adopted without due process of law, in that DVU and DEH were afforded no advance notice, no opportunity to be heard, no administrative hearing, and no right of judicial review or appeal prior to or following the adoption of any of the measures;

(c) No compensation of any kind has been offered or paid by the Republic of Valderia, notwithstanding the clear and unambiguous requirement under the Treaty for the payment of prompt, adequate, and effective compensation at fair market value.

4.2.3. Alternatively or in addition, DEH contends that the cumulative effect of the measures described in Section 3 constitutes an indirect expropriation or "creeping" expropriation in breach of Article 5 of the Treaty. The measures, taken individually and together, progressively and systematically deprived DEH of the totality of its investment, such that the investment has been rendered wholly without value.

4.2.4. DEH emphasizes that, as of the date of this Notice, no compensation of any kind has been offered or paid by the Republic of Valderia in connection with the expropriation of DEH's investment.

4.3. Article 3 — Fair and Equitable Treatment; Full Protection and Security

4.3.1. DEH further contends that the Republic of Valderia has breached its obligation under Article 3 of the Treaty to accord fair and equitable treatment to DEH's investment. The obligation to provide fair and equitable treatment encompasses, inter alia, the duty to act in good faith, to respect the investor's legitimate expectations, to refrain from arbitrary or discriminatory conduct, to observe due process, and to maintain a stable and predictable legal and regulatory framework. The Respondent has breached this obligation by, among other things:

(a) Frustrating DEH's legitimate expectations that its concession rights would be respected for the full 30-year term of the Concession. DEH made its investment in reliance upon the stability of the regulatory framework established by the Valderian Hydrocarbons Law of 2009, the terms and conditions of the Concession, and the protections afforded by the Treaty. The Respondent's wholesale abrogation of the Concession has fundamentally undermined those expectations;

(b) Acting arbitrarily and without due process in issuing Presidential Decree No. 2021-0417, Presidential Decree No. 2021-0623, and Ministerial Resolution No. MEN-2021-089. The decrees and resolutions were issued without any consultation with DEH or DVU, without any administrative hearing, without any opportunity for the affected investor to present its case, and without any explanation of the legal or factual grounds for the measures beyond generic invocations of "national sovereignty" and "strategic interest";

(c) Failing to afford DEH any meaningful opportunity to be heard or to challenge the measures through administrative or judicial proceedings. The measures were imposed by executive decree and ministerial resolution without any recourse to independent review, and the simultaneous freezing of DVU's bank accounts effectively precluded DVU from retaining counsel or pursuing domestic remedies.

4.3.2. DEH further contends that the Republic of Valderia has breached its obligation under Article 3 of the Treaty to accord full protection and security to DEH's investment. This obligation requires the host State to exercise due diligence in protecting foreign investments against interference, including interference by the State's own organs, agents, and instrumentalities. The Respondent has breached this obligation by, among other things:

(a) Deploying military forces to physically seize the CPF Orinoco Sur central processing facility and all associated installations within the Bloque Orinoco Sur concession area;

(b) Denying DEH and DVU personnel access to the concession area, the CPF Orinoco Sur facility, and their offices, and physically escorting DEH's employees off the premises by armed military personnel; and

(c) Failing to take any steps to protect DEH's investment, assets, or personnel from the actions of PetroValderia S.A. or other state instrumentalities.

4.4. Other Treaty Protections

4.4.1. In addition to the claims identified above, DEH reserves the right to assert additional claims under other provisions of the Treaty as may be warranted by the facts and circumstances of the case. Without limitation, such additional claims may include claims under the Treaty's provisions relating to:

(a) Non-discrimination and national treatment — to the extent that the Respondent's measures targeted foreign-held concessions while leaving domestically-held concessions unaffected;

(b) Most-favoured-nation treatment — to the extent that the Respondent has accorded more favourable treatment to investors of third States;

(c) Free transfer of funds — in light of the freezing of DVU's bank accounts and the prevention of repatriation of DEH's investment returns; and

(d) Observance of undertakings (or "umbrella clause") — to the extent that the Respondent's measures constitute a breach of specific undertakings given to DEH or DVU in connection with the Concession.

4.4.2. DEH further reserves the right to invoke any applicable principles of customary international law, including the principles of State responsibility, as codified in the International Law Commission's Articles on Responsibility of States for Internationally Wrongful Acts (2001), as may be relevant to the Dispute.

5. PRELIMINARY QUANTIFICATION OF LOSSES

5.1. While a detailed quantification of damages will be provided in due course, and in particular in the context of any arbitration proceedings, DEH's losses arising from the Respondent's measures are substantial and include, without limitation, the following categories:

(a) Sunk capital expenditure of approximately USD 347 million, representing the total capital investment made by DEH in the Valderian concession between 2014 and 2021, as described in Section 2.3 above;

(b) Lost future profits over the remaining approximately twenty-three (23) years of the Concession term (September 2021 to September 2043), calculated on the basis of the proved and probable reserves attributable to Bloque Orinoco Sur, projected production profiles, and market pricing forecasts;

(i) financing costs incurred under the USD 175 million senior secured project finance facility provided by Commonwealth Capital Bank plc, including default interest and accelerated repayment obligations triggered by the expropriation;

(ii) reputational harm suffered by DEH as a consequence of the Respondent's measures, including impairment of DEH's ability to secure financing and develop projects in other jurisdictions;

(iii) pre-development expenditure incurred in connection with the Phase II renewable energy component associated with the Concession; and

(iv) costs and losses associated with the freezing of DVU's in-country financial resources.

5.2. On a preliminary basis, DEH estimates its total claim to be in excess of USD 800 million (eight hundred million United States dollars), subject to detailed expert valuation applying recognized methodologies, including discounted cash flow analysis and comparable transactions analysis. This preliminary estimate is provided for informational purposes only and is without prejudice to DEH's right to present a more detailed and potentially higher quantification in subsequent proceedings.

5.3. DEH reserves all rights to claim pre-award and post-award interest at commercially reasonable rates, compounded as appropriate, as well as full costs of the proceedings, including legal fees, expert fees, and arbitration costs.

6. COOLING-OFF PERIOD AND ATTEMPTED AMICABLE RESOLUTION

6.1. Article 8 of the UK-Valderia BIT provides that, where a dispute arises between an investor of one Contracting Party and the other Contracting Party in connection with an investment, the parties to the dispute shall first seek to resolve the dispute amicably through consultation and negotiation. The Treaty prescribes a six-month period from the date of written notice of the dispute within which the parties shall endeavour to reach an amicable resolution.

6.2. This letter constitutes the written notice triggering the six-month cooling-off period prescribed by Article 8 of the Treaty. Accordingly, the cooling-off period will expire on or about April 14, 2022.

6.3. DEH is willing and prepared to engage in good-faith consultations with the Republic of Valderia during the cooling-off period with a view to exploring whether the Dispute can be resolved amicably and without recourse to international arbitration. DEH genuinely hopes that a fair and equitable resolution can be achieved through negotiation.

6.4. To facilitate such consultations, DEH respectfully invites the Republic of Valderia to designate an authorized representative to participate in discussions on behalf of the Respondent and to propose a time and venue for an initial meeting. DEH suggests that such a meeting take place within sixty (60) days of the date of this Notice.

6.5. All correspondence and communications in connection with the Dispute should be directed to the following:

Lead Counsel for DEH: Vivienne St. Claire Partner Calderwood & Harkness LLP 55 Bishopsgate London EC2N 3AH United Kingdom Tel: +44 (0)20 7496 8217

Email: v.stclaire@calderwoodharkness.com

Local Valderian Counsel for DEH: Dr. Gabriel Castaño Herrera Castaño Herrera & Asociados Calle Bolívar 742, Torre Empresarial, Piso 8 Puerto Valdés, Valderia Tel: +58 212 945 3300

Email: g.castano@castanoyasociados.com.ve

7. RESERVATION OF RIGHTS

7.1. If the Dispute is not resolved amicably within the six-month cooling-off period prescribed by Article 8 of the Treaty, DEH reserves the right to submit the Dispute to international arbitration before the International Centre for Settlement of Investment Disputes (ICSID) pursuant to Article 8 of the Treaty and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention), dated March 18, 1965. Both the United Kingdom of Great Britain and Northern Ireland and the Republic of Valderia are Contracting States to the ICSID Convention.

7.2. DEH reserves all rights and remedies available to it under the Treaty, the ICSID Convention, applicable rules of international law, and any other applicable legal instruments, including without limitation the right to claim full reparation for all losses and damages suffered as a result of the Respondent's measures.

7.3. Nothing in this Notice, or in any subsequent consultations, negotiations, correspondence, or discussions between the parties, shall constitute or be construed as a waiver by DEH of any right, claim, remedy, or defence, whether under the Treaty, the ICSID Convention, applicable rules of international law, or otherwise.

7.4. DEH also reserves the right to seek provisional measures from an arbitral tribunal constituted under the ICSID Convention, or from any other competent authority, including measures to:

(a) preserve the status quo of the assets and operations at issue;

(b) prevent the dissipation, degradation, or transfer of the assets, installations, equipment, and records associated with Concession No. HYD-2012-047 and Bloque Orinoco Sur;

(d) obtain any other relief necessary to protect DEH's rights pending the final resolution of the Dispute.

8. REQUEST FOR DOCUMENT PRESERVATION

8.1. DEH hereby formally requests that the Republic of Valderia, including all ministries, agencies, instrumentalities, and state-owned enterprises (including without limitation PetroValderia S.A. and Banco Nacional de Valderia), take immediate steps to identify, collect, and preserve all documents, records, data, and communications relating to the following subjects:

(a) Concession No. HYD-2012-047 and Bloque Orinoco Sur, including all contractual, regulatory, financial, operational, geological, and environmental records;

(b) Presidential Decree No. 2021-0417 ("Decree on the Nationalization of Strategic Hydrocarbon Assets"), including all internal deliberations, drafts, memoranda, legal opinions, policy papers, and communications relating to the preparation, issuance, and implementation of the Decree;

(c) Presidential Decree No. 2021-0623 ("Decree on the Transfer of Concession Rights to PetroValderia S.A."), including all internal deliberations, drafts, memoranda, legal opinions, and communications relating to the preparation, issuance, and implementation of the Decree;

(d) Ministerial Resolution No. MEN-2021-089, including all internal deliberations, drafts, memoranda, legal opinions, and communications relating to the preparation, issuance, and implementation of the Resolution;

(e) the operations, assets, production records, and financial records of DVU, including all records that were in DVU's possession or control at the time of the physical occupation of CPF Orinoco Sur on May 3, 2021 and which were seized or retained by the Respondent or its instrumentalities;

(f) any internal deliberations, correspondence, reports, memoranda, minutes of meetings, presidential briefings, cabinet discussions, or other records concerning the nationalization measures and their impact on foreign investors, including DEH and DVU; and

(g) all records relating to the operations conducted by PetroValderia S.A. at the Bloque Orinoco Sur concession area and CPF Orinoco Sur facility since May 3, 2021, including production data, revenue records, maintenance logs, and capital expenditure.

8.2. DEH wishes to emphasize that the destruction, alteration, concealment, or failure to preserve relevant documents, records, data, or communications may give rise to adverse inferences in any subsequent arbitration or other proceedings. DEH respectfully but firmly urges the Republic of Valderia and all of its organs, agencies, and instrumentalities to take this request with the utmost seriousness and to implement appropriate document preservation protocols without delay.

8.3. This request for document preservation extends to all documents in whatever form or medium, including paper documents, electronic records, emails, text messages, instant messages, databases, audio recordings, video recordings, and any other form of stored information.

CLOSING

Your Excellency, DEH and its counsel genuinely hope that this Dispute can be resolved amicably through good-faith consultation and negotiation during the cooling-off period. However, DEH wishes to make clear that the claims described in this Notice are of the utmost seriousness and that DEH has suffered substantial and irreparable harm as a result of the Respondent's measures. DEH is fully prepared to pursue all available remedies, including international arbitration before ICSID, should the Dispute not be resolved.

We look forward to hearing from the Republic of Valderia's designated representative at the earliest opportunity so that consultations may commence promptly.

Yours faithfully,

CALDERWOOD & HARKNESS LLP

By: ________

Vivienne St. Claire Partner Calderwood & Harkness LLP 55 Bishopsgate, London EC2N 3AH United Kingdom

On behalf of Dunmore Energy Holdings Ltd.

Enclosures:

Annex A: Certified copy of the Certificate of Incorporation of Dunmore Energy Holdings Ltd. (Cayman Islands), dated June 18, 2012

Annex B: Power of Attorney from Dunmore Energy Holdings Ltd. authorizing Calderwood & Harkness LLP to act on its behalf in connection with this Dispute, dated October 8, 2021

Annex C: Copy of the Agreement Between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Valderia for the Promotion and Protection of Investments, signed May 22, 2006, entered into force November 1, 2006, together with the United Kingdom's territorial extension declaration of February 14, 2007

Annex D: Copy of Concession No. HYD-2012-047, granted by the Ministry of Energy and Natural Resources of the Republic of Valderia on September 12, 2013 (redacted as necessary for commercial confidentiality)

Annex E: Copies of Presidential Decree No. 2021-0417 (dated April 17, 2021), Presidential Decree No. 2021-0623 (dated June 23, 2021), and Ministerial Resolution No. MEN-2021-089 (dated August 5, 2021), as published in the Gaceta Oficial de la República de Valderia (Valderian Official Gazette)

Distribution / Copies:

cc: Dr. Renata Villamizar Ochoa, Attorney General of the Republic of Valderia, Office of the Attorney General, Calle Constitución 120, Puerto Valdés, Valderia

cc: Claudia Ríos Salazar, Minister of Energy and Natural Resources, Ministry of Energy and Natural Resources, Avenida Bolívar 980, Puerto Valdés, Valderia

cc: Dr. Gabriel Castaño Herrera, Castaño Herrera & Asociados, Calle Bolívar 742, Torre Empresarial, Piso 8, Puerto Valdés, Valderia (local counsel for DEH)

cc: Sir Malcolm Dunmore, KBE, Chairman, Dunmore Energy Holdings Ltd., 27 Curzon Street, London W1J 5HT, United Kingdom

cc: Priya Nandakumar, Chief Executive Officer, Dunmore Energy Holdings Ltd., 27 Curzon Street, London W1J 5HT, United Kingdom

This Notice and all attached Annexes are confidential and without prejudice. This Notice is delivered in accordance with Article 8 of the UK-Valderia BIT and does not constitute a submission to the jurisdiction of any domestic court or tribunal of the Republic of Valderia.

CALDERWOOD & HARKNESS LLP Barristers & Solicitors — International Arbitration 55 Bishopsgate London EC2N 3AH United Kingdom
Tel: +44 (0)20 7496 8200
Fax: +44 (0)20 7496 8201
www.calderwoodharkness.com
October 14, 2021
By International Courier and Email
Ref: DEH/Valderia — Notice of Investment Dispute
His Excellency Ambassador Diego Fuentes Castillo Minister of Foreign Affairs Republic of Valderia Ministry of Foreign Affairs Avenida de la República 500 Puerto Valdés, Valderia
Copy to:
Dr. Renata Villamizar Ochoa Attorney General of the Republic of Valderia Office of the Attorney General Calle Constitución 120 Puerto Valdés, Valderia
Claudia Ríos Salazar Minister of Energy and Natural Resources Ministry of Energy and Natural Resources Avenida Bolívar 980 Puerto Valdés, Valderia
Re: Notice of Investment Dispute Pursuant to Article 8 of the Agreement Between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Valderia for the Promotion and Protection of Investments, signed May 22, 2006, entered into force November 1, 2006 (the "UK-Valderia BIT" or the "Treaty")
*Dunmore Energy Holdings Ltd. v. The Republic of Valderia*
Your Excellency,
1. INTRODUCTION AND PURPOSE OF THIS NOTICE
1.1. Calderwood & Harkness LLP ("Calderwood & Harkness") acts on behalf of Dunmore Energy Holdings Ltd. ("DEH" or the "Investor"), an exempted company duly incorporated and existing 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, Cayman Islands, and its principal business office at 27 Curzon Street, London W1J 5HT, United Kingdom. Calderwood & Harkness is duly authorized by DEH to act on its behalf in connection with the matters set forth herein, as evidenced by the Power of Attorney attached hereto as Annex B.
1.2. This letter constitutes formal written notice of an investment dispute (the "Dispute") between DEH, on the one hand, and the Republic of Valderia (the "Respondent" or "Valderia"), on the other hand, pursuant to Article 8 of the Agreement Between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Valderia for the Promotion and Protection of Investments, signed on May 22, 2006, and entered into force on November 1, 2006 (the "UK-Valderia BIT" or the "Treaty"). A copy of the Treaty, together with the United Kingdom's territorial extension declaration of February 14, 2007, is attached hereto as Annex C.
1.3. The purpose of this Notice is to trigger the six-month cooling-off period prescribed by Article 8 of the Treaty, during which the parties shall endeavour to resolve the Dispute through amicable consultation and negotiation. DEH genuinely hopes that the Dispute can be resolved in this manner and is prepared to engage in good-faith discussions with the Respondent to that end.
1.4. Should the Dispute not be amicably resolved within the six-month cooling-off period, DEH hereby gives notice that it reserves all rights to submit the Dispute to international arbitration before the International Centre for Settlement of Investment Disputes ("ICSID") under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, dated March 18, 1965 (the "ICSID Convention"), in accordance with Article 8 of the Treaty and the ICSID Convention. Both the United Kingdom and the Republic of Valderia are Contracting States to the ICSID Convention.
1.5. This Notice is issued without prejudice to any of DEH's rights, claims, or remedies under the Treaty, the ICSID Convention, applicable rules of international law, or any other applicable legal instruments, all of which are expressly reserved.
2. THE INVESTOR AND THE INVESTMENT
2.1. The Investor — Dunmore Energy Holdings Ltd.
2.1.1. DEH is an exempted company incorporated under the laws of the Cayman Islands, a British Overseas Territory of the United Kingdom of Great Britain and Northern Ireland. DEH was incorporated on June 18, 2012, under registration number MC-291847. A certified copy of the Certificate of Incorporation is attached hereto as Annex A.
2.1.2. The Cayman Islands falls within the scope of the UK-Valderia BIT by virtue of the United Kingdom's territorial extension declaration dated February 14, 2007, whereby the Government of the United Kingdom notified the Government of the Republic of Valderia that the Treaty's application was extended to its British Overseas Territories, including the Cayman Islands, in accordance with the provisions of the Treaty concerning territorial extension. As a consequence, DEH, as a company incorporated in the Cayman Islands, qualifies as a protected investor — being a company incorporated in the territory of a Contracting Party — within the meaning of the Treaty.
2.1.3. DEH's key principals and shareholders are as follows:
(a) Sir Malcolm Dunmore, KBE — Founder and Chairman of DEH; British national; holder of approximately 62% of the equity interest in DEH through the Dunmore Family Trust (a trust governed by the laws of Jersey, Channel Islands, of which Sir Malcolm is the settlor and primary beneficiary);
(b) Priya Nandakumar — Chief Executive Officer of DEH; dual British-Indian national; holder of approximately 8% of the equity interest in DEH;
(c) Thomas Rearden — Chief Financial Officer of DEH; British national; holder of approximately 4% of the equity interest in DEH; and
(d) Meridian Growth Partners Fund III, L.P. — a limited partnership organized under the laws of the Cayman Islands; holder of approximately 26% of the equity interest in DEH. Meridian Growth Partners Fund III, L.P. is managed by Meridian Capital Advisors Ltd., a company incorporated in the United Kingdom.
2.1.4. Accordingly, DEH's ultimate beneficial owners are British nationals, and DEH is controlled by persons who are nationals of the United Kingdom. DEH thus satisfies all applicable requirements for standing as a protected investor under the Treaty.
2.2. The Investment — Concession No. HYD-2012-047 (Bloque Orinoco Sur)
2.2.1. DEH holds its investment in the Republic of Valderia through its wholly-owned subsidiary, Dunmore Valderia upstream S.A. ("DVU"), a sociedad anónima incorporated under Valderian law on October 3, 2012, with its registered office at Avenida Libertador 1480, Piso 12, Puerto Valdés, Valderia. DVU is a 100% directly-owned subsidiary of DEH.
2.2.2. DVU is the named concessionaire under Concession No. HYD-2012-047 (the "Concession"), granted on September 12, 2013 by the Ministry of Energy and Natural Resources of the Republic of Valderia pursuant to the Valderian Hydrocarbons Law of 2009 (Ley de Hidrocarburos de 2009). The Concession was awarded following a competitive bidding process conducted by the Valderian Ministry of Energy and Natural Resources in the second licensing round of 2012. A copy of the Concession, redacted as necessary for commercial confidentiality, is attached hereto as Annex D.
2.2.3. The Concession covers Bloque Orinoco Sur, an onshore exploration and production block of approximately 1,240 km² located in the Valderian Orinoco Basin, in the southern lowlands of the Republic of Valderia. The Concession was granted for a term of thirty (30) years, commencing on September 12, 2013 and expiring on September 12, 2043, subject to the terms and conditions set forth therein.
2.2.4. The fiscal terms of the Concession, as originally agreed between DVU and the Republic of Valderia, include the following:
(a) A royalty of 12.5% on the gross production value of hydrocarbons produced from Bloque Orinoco Sur, payable to the Valderian Treasury;
(b) Corporate income tax at the rate of 34%, as provided under the Valderian Tax Code applicable to hydrocarbon activities;
(c) A 10% carried interest held by PetroValderia S.A. (Petróleos de Valderia, Sociedad Anónima), the 100% state-owned national oil company of the Republic of Valderia, under the original terms of the Concession.
2.2.5. DEH's investment in Valderia, comprising its equity interest in DVU, its rights under the Concession, the physical assets developed under the Concession, and all associated rights and entitlements, constitutes a protected "investment" within the meaning of the Treaty.
2.3. Capital Invested and Operations
2.3.1. Between 2014 and 2021, DEH invested approximately USD 347 million in total capital expenditure in connection with the Valderian Concession. This substantial investment was made in reliance upon the regulatory and contractual framework established by the Republic of Valderia, including the terms of the Concession, the protections afforded under Valderian law, and the protections of the UK-Valderia BIT. The capital expenditure was deployed as follows:
(a) USD 211 million in exploration and development drilling, including the drilling of seven (7) exploration wells during the exploration phase and twenty-two (22) development wells during the development phase;
(b) USD 89 million in surface infrastructure and pipeline construction, including the construction of a 68-kilometre gathering pipeline connecting the Bloque Orinoco Sur wellheads to the central processing facility, and the construction and commissioning of the central processing facility known as "CPF Orinoco Sur", a state-of-the-art oil processing and separation facility with a nameplate capacity of 35,000 barrels of oil per day; and
(c) USD 47 million in seismic acquisition and geological studies, including the acquisition of approximately 800 km² of 3D seismic data and associated subsurface analysis and reservoir modelling.
2.3.2. The operational history of the Concession is summarized as follows:
(a) Exploration Phase (2013–2016): During this phase, DVU drilled seven (7) exploration wells within Bloque Orinoco Sur. Of these, five (5) wells were determined to be commercially viable, demonstrating the presence of significant hydrocarbon reserves in the concession area. The success ratio exceeded initial projections and validated DEH's technical assessment of the block's potential.
(b) Development Phase (2016–2019): Based upon the successful exploration results, DVU proceeded to the development phase, during which twenty-two (22) development wells were drilled and completed. The CPF Orinoco Sur central processing facility was designed, constructed, and commissioned during this period, along with the 68-kilometre gathering pipeline and associated surface infrastructure, including tank farms, water treatment facilities, power generation equipment, and access roads.
(c) Production Phase (2019–2021): Commercial production from Bloque Orinoco Sur commenced in early 2019 and rapidly ramped up. Peak production of 24,800 barrels of oil per day was achieved in September 2020. Average production for fiscal year 2020 was approximately 21,200 barrels of oil per day. At the time of the measures described in Section 3 below, the concession was producing approximately 18,600 barrels of oil per day.
2.3.3. The proved reserves attributable to Bloque Orinoco Sur as of December 31, 2020 were independently certified at 87.4 million barrels of oil equivalent (mmboe) by Ridgewell Subsurface Consultants Ltd., an internationally recognized independent petroleum engineering firm based in London, United Kingdom. In addition, probable reserves were estimated at an additional 42.1 mmboe, for total proved and probable (2P) reserves of approximately 129.5 mmboe.
2.3.4. In fiscal year 2020, gross revenue from the Valderian operations was approximately USD 128.6 million, and EBITDA was approximately USD 41.3 million. These figures demonstrate the substantial economic value of the investment and its importance to DEH's business.
2.3.5. In addition to the producing hydrocarbon operations, DEH had commenced pre-development work on a Phase II renewable energy component associated with the Concession, involving preliminary feasibility studies and environmental assessments for a solar power generation facility intended to supply electricity to the CPF Orinoco Sur and reduce the concession's carbon footprint. Significant expenditure had been incurred in connection with this initiative prior to the Respondent's measures.
2.3.6. DEH financed part of its investment through a USD 175 million senior secured project finance facility provided by Commonwealth Capital Bank plc (London), pursuant to a facility agreement dated March 20, 2016 (the "Facility Agreement"). As of the date of the measures described in Section 3 below, approximately USD 112.4 million in principal remained outstanding under the Facility Agreement. The expropriation of DEH's investment has placed DVU in default under the Facility Agreement and has caused substantial collateral financial consequences for DEH.
3. THE MEASURES AT ISSUE — FACTUAL BASIS OF THE DISPUTE
3.1. The Dispute arises out of a series of measures adopted by the Republic of Valderia in 2021 which, individually and cumulatively, have resulted in the complete deprivation of DEH's investment. The relevant measures are set out below in chronological order.
3.1. Background — Election of President Montalvo and "Resource Sovereignty" Agenda
3.1.1. On January 15, 2020, President Héctor Luján Montalvo was inaugurated as Head of State of the Republic of Valderia following his election in the general elections of November 2019. President Montalvo's election campaign prominently featured a platform of so-called "resource sovereignty" (soberanía de los recursos) over the country's hydrocarbon assets. Throughout his campaign, President Montalvo repeatedly expressed his intention to reverse what he characterized as the "excessive" participation of foreign investors in Valderia's oil and gas sector and to "return the nation's natural wealth to the Valderian people."
3.1.2. Following his inauguration, President Montalvo began implementing his resource sovereignty agenda through a series of legislative, executive, and administrative measures that progressively and dramatically altered the regulatory environment for foreign investment in the Valderian hydrocarbons sector.
3.2. Notice of Review (March 2, 2021)
3.2.1. On March 2, 2021, the Ministry of Energy and Natural Resources of the Republic of Valderia, acting under the direction of Minister Claudia Ríos Salazar, issued a public "Notice of Review" (Aviso de Revisión) announcing that all hydrocarbon concessions held by foreign investors in Valderia would be subject to a comprehensive review for the purpose of assessing their compliance with "national strategic interests."
3.2.2. The Notice of Review was issued unilaterally and without prior consultation with any of the affected concessionaires, including DEH and DVU. Neither DEH nor DVU was consulted, notified, or afforded any opportunity to be heard prior to or in connection with the issuance of the Notice of Review. No criteria for the review were disclosed, and no procedure for submissions or participation by the affected concessionaires was established.
3.2.3. The Notice of Review created immediate uncertainty regarding the future of DEH's investment and signalled the commencement of an orchestrated campaign against foreign-held hydrocarbon concessions in Valderia.
3.3. Presidential Decree No. 2021-0417 — Nationalization of Strategic Hydrocarbon Assets (April 17, 2021)
3.3.1. On April 17, 2021, barely six weeks after the issuance of the Notice of Review and without any intervening consultation or review process, President Montalvo issued Presidential Decree No. 2021-0417, entitled "Decreto sobre la Nacionalización de Activos Hidrocarburíferos Estratégicos" ("Decree on the Nationalization of Strategic Hydrocarbon Assets").
3.3.2. Presidential Decree No. 2021-0417 declared that all hydrocarbon concessions held by foreign investors in the Republic of Valderia constituted "strategic assets" (activos estratégicos) subject to immediate nationalization in the interest of national sovereignty and the economic welfare of the Valderian people. The Decree purported to authorize the Government of Valderia to assume control over all such concessions and their associated assets, including all surface infrastructure, subsurface rights, production equipment, and related contractual rights.
3.3.3. Critically, Presidential Decree No. 2021-0417 made no provision whatsoever for the payment of prompt, adequate, and effective compensation to the affected concessionaires, including DVU and DEH. The Decree contained no mechanism for valuation of the affected assets, no timeline for the payment of compensation, and no right of appeal or judicial review. The Decree was published in the Gaceta Oficial de Valderia (Valderian Official Gazette) on April 18, 2021. A copy of the Decree as published in the Official Gazette is attached hereto as part of Annex E.
3.4. Physical Occupation of CPF Orinoco Sur (May 3, 2021)
3.4.1. On May 3, 2021, personnel of the Valderian military (Fuerzas Armadas de Valderia), acting in concert with operatives and employees of PetroValderia S.A. (the 100% state-owned national oil company of the Republic of Valderia), physically occupied the central processing facility CPF Orinoco Sur and all associated surface installations within the Bloque Orinoco Sur concession area.
3.4.2. DEH and DVU personnel, including the field operations manager and approximately seventy-three (73) local and expatriate staff then present at the facility, were denied access to the CPF Orinoco Sur facility, their offices, and all operational sites within the Bloque Orinoco Sur concession area. DEH's staff were given no prior notice of the occupation and were physically escorted off the premises by armed military personnel. Personal effects and certain proprietary documents and equipment belonging to DVU's employees were not returned.
3.4.3. Following the physical occupation, PetroValderia S.A. assumed operational control of all production and infrastructure assets within Bloque Orinoco Sur, including the CPF Orinoco Sur central processing facility, the 68-kilometre gathering pipeline, all producing wells, and all associated surface installations and equipment.
3.4.4. The forced physical takeover of CPF Orinoco Sur was carried out without any form of legal process, without any court order or authorization other than the Presidential Decree, and without any advance notice to DEH, DVU, or their legal representatives.
3.5. Presidential Decree No. 2021-0623 — Transfer of Concession Rights to PetroValderia (June 23, 2021)
3.5.1. On June 23, 2021, President Montalvo issued a further decree, Presidential Decree No. 2021-0623, entitled "Decreto sobre la Transferencia de Derechos de Concesión a PetroValderia S.A." ("Decree on the Transfer of Concession Rights to PetroValderia S.A.").
3.5.2. This Decree formally and purportedly transferred all rights, title, and interest under Concession No. HYD-2012-047 from DVU to PetroValderia S.A. The transfer encompassed all exploration rights, production rights, subsurface mineral rights, surface easements, pipeline rights of way, and all other contractual and regulatory entitlements arising under or in connection with the Concession.
3.5.3. The transfer was effected without DEH's or DVU's consent and without the payment of any compensation whatsoever. No independent valuation of the transferred rights was conducted. No offer of compensation was made at any time before, during, or after the issuance of the Decree. The Decree was published in the Gaceta Oficial de Valderia on June 24, 2021, and a copy is included in Annex E.
3.6. Ministerial Resolution No. MEN-2021-089 — Revocation of Operating Licenses (August 5, 2021)
3.6.1. On August 5, 2021, the Ministry of Energy and Natural Resources of the Republic of Valderia issued Ministerial Resolution No. MEN-2021-089, which purported to revoke all operating licenses held by DVU in the Republic of Valderia, including its exploration license, its production license, and its environmental permits.
3.6.2. The effect of this Resolution was to strip DVU of its legal capacity to conduct any hydrocarbon activities whatsoever in Valderia and to eliminate the possibility of any continued operation or future exercise of its concession rights, even if those rights were notionally restored.
3.6.3. Once again, no compensation of any kind was offered or paid to DVU or DEH in connection with the revocation of these licenses. No administrative hearing was held, no opportunity to respond was afforded, and no grounds for revocation were provided other than a reference to Presidential Decree No. 2021-0417 and the purported "national strategic interest." A copy of the Resolution is included in Annex E.
3.7. Freezing of DVU Bank Accounts (September 1, 2021)
3.7.1. On September 1, 2021, by order of the Attorney General of the Republic of Valderia, Dr. Renata Villamizar Ochoa, all bank accounts held by DVU at the Banco Nacional de Valderia were frozen. The freezing order affected DVU's operating accounts and reserve accounts, which together held approximately USD 14.7 million in funds at the time of the freeze.
3.7.2. The freezing of DVU's bank accounts deprived DVU of access to its remaining in-country financial resources, preventing DVU from meeting its obligations to local employees, creditors, and suppliers, and from funding legal and administrative proceedings in Valderia. No justification was provided for the freezing order beyond a general reference to an "ongoing investigation into the financial activities of foreign-controlled entities in the hydrocarbons sector."
3.8. Cumulative Effect of the Measures
3.8.1. The cumulative effect of the foregoing measures — the Notice of Review, the Nationalization Decree, the physical occupation, the transfer of concession rights, the revocation of operating licenses, and the freezing of bank accounts — has been to deprive DEH entirely and irreversibly of the value and benefit of its investment in the Republic of Valderia. Specifically, DEH has been deprived of:
(a) its concession rights under Concession No. HYD-2012-047;
(b) its physical assets, including the CPF Orinoco Sur, the 68-kilometre gathering pipeline, all producing and exploration wells, and all associated surface infrastructure and equipment;
(c) its production revenues, including ongoing production at approximately 18,600 barrels of oil per day at the time of the expropriation;
(d) its in-country financial resources, including approximately USD 14.7 million held in frozen bank accounts;
(e) its contractual entitlements under the Concession, including the right to produce hydrocarbons for the remaining approximately twenty-three (23) years of the Concession term (expiring September 12, 2043); and
(f) the value of its pre-development work on the Phase II renewable energy component.
3.8.2. No compensation of any kind has been offered or paid by the Republic of Valderia to DEH, DVU, or any party on their behalf, at any time before, during, or after the adoption of any of the measures described above.
4. LEGAL BASIS OF THE DISPUTE — TREATY PROVISIONS VIOLATED
4.1. Applicable Treaty
4.1.1. The applicable treaty is the UK-Valderia BIT, signed on May 22, 2006, and entered into force on November 1, 2006. The Treaty was extended to the Cayman Islands by the United Kingdom's territorial extension declaration of February 14, 2007. The Treaty establishes a comprehensive framework for the promotion and reciprocal protection of investments made by investors of one Contracting Party in the territory of the other Contracting Party.
4.1.2. DEH, as a company incorporated in the Cayman Islands, is a protected investor under the Treaty. Its investment in the Republic of Valderia, as described in Section 2 above, constitutes a protected investment under the Treaty. The measures adopted by the Republic of Valderia, as described in Section 3 above, constitute breaches of the Respondent's obligations under the Treaty, as set forth below.
4.2. Article 5 — Expropriation
4.2.1. DEH contends that the measures described in Section 3 above constitute a direct expropriation of its investment in breach of Article 5 of the Treaty. Article 5 of the Treaty provides, inter alia, that investments of investors of either Contracting Party shall not be nationalized, expropriated, or subjected to measures having effect equivalent to nationalization or expropriation, except where such measures are taken:
(a) for a public purpose related to the internal needs of the expropriating Party;
(b) on a non-discriminatory basis;
(c) in accordance with due process of law; and
(d) upon the payment of prompt, adequate, and effective compensation at fair market value.
4.2.2. The Respondent's measures fail to satisfy any of the conditions prescribed by Article 5. In particular:
(a) The measures were discriminatory in nature, having been directed specifically and exclusively at foreign-held hydrocarbon concessions while leaving domestically-held concessions unaffected;
(b) The measures were adopted without due process of law, in that DVU and DEH were afforded no advance notice, no opportunity to be heard, no administrative hearing, and no right of judicial review or appeal prior to or following the adoption of any of the measures;
(c) No compensation of any kind has been offered or paid by the Republic of Valderia, notwithstanding the clear and unambiguous requirement under the Treaty for the payment of prompt, adequate, and effective compensation at fair market value.
4.2.3. Alternatively or in addition, DEH contends that the cumulative effect of the measures described in Section 3 constitutes an indirect expropriation or "creeping" expropriation in breach of Article 5 of the Treaty. The measures, taken individually and together, progressively and systematically deprived DEH of the totality of its investment, such that the investment has been rendered wholly without value.
4.2.4. DEH emphasizes that, as of the date of this Notice, no compensation of any kind has been offered or paid by the Republic of Valderia in connection with the expropriation of DEH's investment.
4.3. Article 3 — Fair and Equitable Treatment; Full Protection and Security
4.3.1. DEH further contends that the Republic of Valderia has breached its obligation under Article 3 of the Treaty to accord fair and equitable treatment to DEH's investment. The obligation to provide fair and equitable treatment encompasses, inter alia, the duty to act in good faith, to respect the investor's legitimate expectations, to refrain from arbitrary or discriminatory conduct, to observe due process, and to maintain a stable and predictable legal and regulatory framework. The Respondent has breached this obligation by, among other things:
(a) Frustrating DEH's legitimate expectations that its concession rights would be respected for the full 30-year term of the Concession. DEH made its investment in reliance upon the stability of the regulatory framework established by the Valderian Hydrocarbons Law of 2009, the terms and conditions of the Concession, and the protections afforded by the Treaty. The Respondent's wholesale abrogation of the Concession has fundamentally undermined those expectations;
(b) Acting arbitrarily and without due process in issuing Presidential Decree No. 2021-0417, Presidential Decree No. 2021-0623, and Ministerial Resolution No. MEN-2021-089. The decrees and resolutions were issued without any consultation with DEH or DVU, without any administrative hearing, without any opportunity for the affected investor to present its case, and without any explanation of the legal or factual grounds for the measures beyond generic invocations of "national sovereignty" and "strategic interest";
(c) Failing to afford DEH any meaningful opportunity to be heard or to challenge the measures through administrative or judicial proceedings. The measures were imposed by executive decree and ministerial resolution without any recourse to independent review, and the simultaneous freezing of DVU's bank accounts effectively precluded DVU from retaining counsel or pursuing domestic remedies.
4.3.2. DEH further contends that the Republic of Valderia has breached its obligation under Article 3 of the Treaty to accord full protection and security to DEH's investment. This obligation requires the host State to exercise due diligence in protecting foreign investments against interference, including interference by the State's own organs, agents, and instrumentalities. The Respondent has breached this obligation by, among other things:
(a) Deploying military forces to physically seize the CPF Orinoco Sur central processing facility and all associated installations within the Bloque Orinoco Sur concession area;
(b) Denying DEH and DVU personnel access to the concession area, the CPF Orinoco Sur facility, and their offices, and physically escorting DEH's employees off the premises by armed military personnel; and
(c) Failing to take any steps to protect DEH's investment, assets, or personnel from the actions of PetroValderia S.A. or other state instrumentalities.
4.4. Other Treaty Protections
4.4.1. In addition to the claims identified above, DEH reserves the right to assert additional claims under other provisions of the Treaty as may be warranted by the facts and circumstances of the case. Without limitation, such additional claims may include claims under the Treaty's provisions relating to:
(a) Non-discrimination and national treatment — to the extent that the Respondent's measures targeted foreign-held concessions while leaving domestically-held concessions unaffected;
(b) Most-favoured-nation treatment — to the extent that the Respondent has accorded more favourable treatment to investors of third States;
(c) Free transfer of funds — in light of the freezing of DVU's bank accounts and the prevention of repatriation of DEH's investment returns; and
(d) Observance of undertakings (or "umbrella clause") — to the extent that the Respondent's measures constitute a breach of specific undertakings given to DEH or DVU in connection with the Concession.
4.4.2. DEH further reserves the right to invoke any applicable principles of customary international law, including the principles of State responsibility, as codified in the International Law Commission's Articles on Responsibility of States for Internationally Wrongful Acts (2001), as may be relevant to the Dispute.
5. PRELIMINARY QUANTIFICATION OF LOSSES
5.1. While a detailed quantification of damages will be provided in due course, and in particular in the context of any arbitration proceedings, DEH's losses arising from the Respondent's measures are substantial and include, without limitation, the following categories:
(a) Sunk capital expenditure of approximately USD 347 million, representing the total capital investment made by DEH in the Valderian concession between 2014 and 2021, as described in Section 2.3 above;
(b) Lost future profits over the remaining approximately twenty-three (23) years of the Concession term (September 2021 to September 2043), calculated on the basis of the proved and probable reserves attributable to Bloque Orinoco Sur, projected production profiles, and market pricing forecasts;
(c) Consequential damages, including:
(i) financing costs incurred under the USD 175 million senior secured project finance facility provided by Commonwealth Capital Bank plc, including default interest and accelerated repayment obligations triggered by the expropriation;
(ii) reputational harm suffered by DEH as a consequence of the Respondent's measures, including impairment of DEH's ability to secure financing and develop projects in other jurisdictions;
(iii) pre-development expenditure incurred in connection with the Phase II renewable energy component associated with the Concession; and
(iv) costs and losses associated with the freezing of DVU's in-country financial resources.
5.2. On a preliminary basis, DEH estimates its total claim to be in excess of USD 800 million (eight hundred million United States dollars), subject to detailed expert valuation applying recognized methodologies, including discounted cash flow analysis and comparable transactions analysis. This preliminary estimate is provided for informational purposes only and is without prejudice to DEH's right to present a more detailed and potentially higher quantification in subsequent proceedings.
5.3. DEH reserves all rights to claim pre-award and post-award interest at commercially reasonable rates, compounded as appropriate, as well as full costs of the proceedings, including legal fees, expert fees, and arbitration costs.
6. COOLING-OFF PERIOD AND ATTEMPTED AMICABLE RESOLUTION
6.1. Article 8 of the UK-Valderia BIT provides that, where a dispute arises between an investor of one Contracting Party and the other Contracting Party in connection with an investment, the parties to the dispute shall first seek to resolve the dispute amicably through consultation and negotiation. The Treaty prescribes a six-month period from the date of written notice of the dispute within which the parties shall endeavour to reach an amicable resolution.
6.2. This letter constitutes the written notice triggering the six-month cooling-off period prescribed by Article 8 of the Treaty. Accordingly, the cooling-off period will expire on or about April 14, 2022.
6.3. DEH is willing and prepared to engage in good-faith consultations with the Republic of Valderia during the cooling-off period with a view to exploring whether the Dispute can be resolved amicably and without recourse to international arbitration. DEH genuinely hopes that a fair and equitable resolution can be achieved through negotiation.
6.4. To facilitate such consultations, DEH respectfully invites the Republic of Valderia to designate an authorized representative to participate in discussions on behalf of the Respondent and to propose a time and venue for an initial meeting. DEH suggests that such a meeting take place within sixty (60) days of the date of this Notice.
6.5. All correspondence and communications in connection with the Dispute should be directed to the following:
Lead Counsel for DEH: Vivienne St. Claire Partner Calderwood & Harkness LLP 55 Bishopsgate London EC2N 3AH United Kingdom Tel: +44 (0)20 7496 8217
Email: v.stclaire@calderwoodharkness.com
Local Valderian Counsel for DEH: Dr. Gabriel Castaño Herrera Castaño Herrera & Asociados Calle Bolívar 742, Torre Empresarial, Piso 8 Puerto Valdés, Valderia Tel: +58 212 945 3300
Email: g.castano@castanoyasociados.com.ve
7. RESERVATION OF RIGHTS
7.1. If the Dispute is not resolved amicably within the six-month cooling-off period prescribed by Article 8 of the Treaty, DEH reserves the right to submit the Dispute to international arbitration before the International Centre for Settlement of Investment Disputes (ICSID) pursuant to Article 8 of the Treaty and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention), dated March 18, 1965. Both the United Kingdom of Great Britain and Northern Ireland and the Republic of Valderia are Contracting States to the ICSID Convention.
7.2. DEH reserves all rights and remedies available to it under the Treaty, the ICSID Convention, applicable rules of international law, and any other applicable legal instruments, including without limitation the right to claim full reparation for all losses and damages suffered as a result of the Respondent's measures.
7.3. Nothing in this Notice, or in any subsequent consultations, negotiations, correspondence, or discussions between the parties, shall constitute or be construed as a waiver by DEH of any right, claim, remedy, or defence, whether under the Treaty, the ICSID Convention, applicable rules of international law, or otherwise.
7.4. DEH also reserves the right to seek provisional measures from an arbitral tribunal constituted under the ICSID Convention, or from any other competent authority, including measures to:
(a) preserve the status quo of the assets and operations at issue;
(b) prevent the dissipation, degradation, or transfer of the assets, installations, equipment, and records associated with Concession No. HYD-2012-047 and Bloque Orinoco Sur;
(c) ensure the preservation of evidence and documents relevant to the Dispute; and
(d) obtain any other relief necessary to protect DEH's rights pending the final resolution of the Dispute.
8. REQUEST FOR DOCUMENT PRESERVATION
8.1. DEH hereby formally requests that the Republic of Valderia, including all ministries, agencies, instrumentalities, and state-owned enterprises (including without limitation PetroValderia S.A. and Banco Nacional de Valderia), take immediate steps to identify, collect, and preserve all documents, records, data, and communications relating to the following subjects:
(a) Concession No. HYD-2012-047 and Bloque Orinoco Sur, including all contractual, regulatory, financial, operational, geological, and environmental records;
(b) Presidential Decree No. 2021-0417 ("Decree on the Nationalization of Strategic Hydrocarbon Assets"), including all internal deliberations, drafts, memoranda, legal opinions, policy papers, and communications relating to the preparation, issuance, and implementation of the Decree;
(c) Presidential Decree No. 2021-0623 ("Decree on the Transfer of Concession Rights to PetroValderia S.A."), including all internal deliberations, drafts, memoranda, legal opinions, and communications relating to the preparation, issuance, and implementation of the Decree;
(d) Ministerial Resolution No. MEN-2021-089, including all internal deliberations, drafts, memoranda, legal opinions, and communications relating to the preparation, issuance, and implementation of the Resolution;
(e) the operations, assets, production records, and financial records of DVU, including all records that were in DVU's possession or control at the time of the physical occupation of CPF Orinoco Sur on May 3, 2021 and which were seized or retained by the Respondent or its instrumentalities;
(f) any internal deliberations, correspondence, reports, memoranda, minutes of meetings, presidential briefings, cabinet discussions, or other records concerning the nationalization measures and their impact on foreign investors, including DEH and DVU; and
(g) all records relating to the operations conducted by PetroValderia S.A. at the Bloque Orinoco Sur concession area and CPF Orinoco Sur facility since May 3, 2021, including production data, revenue records, maintenance logs, and capital expenditure.
8.2. DEH wishes to emphasize that the destruction, alteration, concealment, or failure to preserve relevant documents, records, data, or communications may give rise to adverse inferences in any subsequent arbitration or other proceedings. DEH respectfully but firmly urges the Republic of Valderia and all of its organs, agencies, and instrumentalities to take this request with the utmost seriousness and to implement appropriate document preservation protocols without delay.
8.3. This request for document preservation extends to all documents in whatever form or medium, including paper documents, electronic records, emails, text messages, instant messages, databases, audio recordings, video recordings, and any other form of stored information.
CLOSING
Your Excellency, DEH and its counsel genuinely hope that this Dispute can be resolved amicably through good-faith consultation and negotiation during the cooling-off period. However, DEH wishes to make clear that the claims described in this Notice are of the utmost seriousness and that DEH has suffered substantial and irreparable harm as a result of the Respondent's measures. DEH is fully prepared to pursue all available remedies, including international arbitration before ICSID, should the Dispute not be resolved.
We look forward to hearing from the Republic of Valderia's designated representative at the earliest opportunity so that consultations may commence promptly.
Yours faithfully,
CALDERWOOD & HARKNESS LLP
By: ________
Vivienne St. Claire Partner Calderwood & Harkness LLP 55 Bishopsgate, London EC2N 3AH United Kingdom
On behalf of Dunmore Energy Holdings Ltd.
Enclosures:
Annex A: Certified copy of the Certificate of Incorporation of Dunmore Energy Holdings Ltd. (Cayman Islands), dated June 18, 2012
Annex B: Power of Attorney from Dunmore Energy Holdings Ltd. authorizing Calderwood & Harkness LLP to act on its behalf in connection with this Dispute, dated October 8, 2021
Annex C: Copy of the Agreement Between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Valderia for the Promotion and Protection of Investments, signed May 22, 2006, entered into force November 1, 2006, together with the United Kingdom's territorial extension declaration of February 14, 2007
Annex D: Copy of Concession No. HYD-2012-047, granted by the Ministry of Energy and Natural Resources of the Republic of Valderia on September 12, 2013 (redacted as necessary for commercial confidentiality)
Annex E: Copies of Presidential Decree No. 2021-0417 (dated April 17, 2021), Presidential Decree No. 2021-0623 (dated June 23, 2021), and Ministerial Resolution No. MEN-2021-089 (dated August 5, 2021), as published in the Gaceta Oficial de la República de Valderia (Valderian Official Gazette)
Distribution / Copies:
cc: Dr. Renata Villamizar Ochoa, Attorney General of the Republic of Valderia, Office of the Attorney General, Calle Constitución 120, Puerto Valdés, Valderia
cc: Claudia Ríos Salazar, Minister of Energy and Natural Resources, Ministry of Energy and Natural Resources, Avenida Bolívar 980, Puerto Valdés, Valderia
cc: Dr. Gabriel Castaño Herrera, Castaño Herrera & Asociados, Calle Bolívar 742, Torre Empresarial, Piso 8, Puerto Valdés, Valderia (local counsel for DEH)
cc: Sir Malcolm Dunmore, KBE, Chairman, Dunmore Energy Holdings Ltd., 27 Curzon Street, London W1J 5HT, United Kingdom
cc: Priya Nandakumar, Chief Executive Officer, Dunmore Energy Holdings Ltd., 27 Curzon Street, London W1J 5HT, United Kingdom
This Notice and all attached Annexes are confidential and without prejudice. This Notice is delivered in accordance with Article 8 of the UK-Valderia BIT and does not constitute a submission to the jurisdiction of any domestic court or tribunal of the Republic of Valderia.

CALDERWOOD & HARKNESS LLP Barristers & Solicitors — International Arbitration 55 Bishopsgate London EC2N 3AH United Kingdom

CLOSING

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