Weekly Report - 11 October 2012 (WR-12-40)

ECUADOR | Oil sector disputes. On 5 October the World Bank’s International Centre for Settlement of Investment Disputes (Icsid) ruled that Ecuador must pay US$1.77bn plus interest in compensation to the US oil firm, Occidental Petroleum Corporation (Oxy), for the cancelling of a contract conferring exploitation rights on Amazonian oil wells in 2006. Ecuador refused to pay Oxy any compensation arguing that the fact that Oxy sold 40% of its exploitation rights to Canadian firm, AEC, without notifying the Ecuadorean authorities violated Ecuadorean law and invalidated the contract. However, the Icsid tribunal, in a split decision, ruled that the cancellation of the contract had been “equivalent to an expropriation” and in clear violation of a bilateral investment protection agreement (TBI) signed by Ecuador and the US. The Ecuadorean government rejected Icsid’s ruling, with President Rafael Correa describing it as “another blow” to his country, adding that his government was preparing a challenge. On 8 October Ecuador’s attorney general, Diego García, said that Ecuador will seek to annul the ruling on the grounds that the Icsid tribunal lacks the “jurisdictional competence” to rule on the validity of the contract signed between the two parties.

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