Development: On 2 November a World Bank tribunal ordered Ecuador to pay US$1.06bn plus interest in compensation to the US oil company Occidental Petroleum (Oxy) for an assets seizure dating to 2006.
Significance: Ecuador had appealed to the World Bank tribunal over a case taken by Oxy to the International Centre for Settlement of Investment Disputes (ICSID) over the seizure in 2006 of its assets. The ICSID in 2012 said the seizure was “tantamount to expropriation” and ordered compensation totalling US$2.3bn. Ecuador appealed, questioning the ICSID’s jurisdiction over the case. The tribunal has now reduced the award by more than half.
- In May 2006 Ecuador terminated Oxy's operating contract on the grounds that the company had sold part of its local assets (the Block 15 oil field) to the Chinese-owned company Andes Petroleum without prior government consent. At the time, Oxy was the largest producer in the country, with an operating contract for the extraction of 100,000 barrels of oil a day from the Amazon basin — about 20% of Ecuador’s output. Oxy immediately sued Ecuador for $3.37bn.
- The tribunal cut the 2012 ICSID award arguing that it had “manifestly exceeded its powers by wrongly assuming jurisdiction with regard to the investment now beneficially owned by the Chinese investor Andes”.
- President Correa yesterday tweeted that the government, which is desperately cash-strapped amidst the oil price crisis, had ‘made an offer’ to Oxy and would continue negotiating, presumably in the hope of getting a further reduction, perhaps in return for an early payment (ahead of the ruling Correa said the government had provisioned for the full amount of US$1.7bn plus US$500m in interest), or in order to hammer out a deal on a repayment plan. It now owes Oxy about US$1.8bn in total, interest included.
Looking Ahead: This is the second piece of good news for the Correa government in its battles with various foreign oil companies. In late October, the star witness for in the US oil company Chevron in its long-running multi billion dollar case against Ecuador, former Ecuadorean judge Alberto Guerra, admitted that he had lied in the case. His latest testimony, according to some observers, could significantly weaken Chevron’s case.
End of preview - This article contains approximately 373 words.
Subscribers: Log in now to read the full article
Not a Subscriber?
Choose from one of the following options
