On October 5th, 2012, a split ICSID tribunal awarded Occidental Petroleum $1.8 billion ($2.3 billion with interest) for the assets the Ecuadorean government expropriated in 2006.
The Correa administration did not just take Oxy’s stuff for the hell of it. Or even necessarily for the money. (Although that probably was a factor.) Rather, the ostensible reason was that Oxy had sold a 40% stake in it operations to a Canadian company (Encana) in contravention of Ecuadorean law, which clearly stipulated that all such sales required ministerial approval. The ICSID tribunal decided that expropriation was disproportionate to the offense (Ecuadorean law being mum as to the penalty) but knocked 25% off of Oxy’s interest in determining compensation.
Ecuador, understandably, has filed to annul the decision. Oxy asked to be allowed to enforce the decision (i.e., go after Ecuadorean assets and income streams in foreign courts) while the annulment proceeded. They said that they earned 12.6% on their assets while the tribunal granted then only 4.2% interest, and so they were losing money.
And here it gets interesting: the Ecuadorean attorney general stated that Ecuador “does not adopt the same controversial position as the Argentine Republic in ICSID proceedings – i.e. that the enforcement obligations under Article 53 of the ICSID Convention are conditioned upon an award-creditor having recourse to a domestic enforcement procedure in the host-country. Rather, Ecuador’s position as a matter of law, is that ICSID awards are not subject to judicial review by local courts and that the obligation of Ecuador to comply with an award is not conditional upon recourse to a domestic enforcement procedures.” Moreover, the government acknowledged that the award was binding even though the country’s Constitutional Court has declared the Ecuador-U.S. bilateral investment treaty to be unconstitutional. Finally, ICSID pointed out, in somewhat annoyed terms, that Oxy was just making stuff up when they claimed that Ecuador had failed to pay past judgments. Rather, it had only lost two: in one with Duke energy it paid and with another with Oxy it placed part of the award in escrow while a further arbitration determines if the award was too large.
In short, ICSID found that Ecuador has a track record of paying in the past and has promised to pay in the future.
From a putatively Bolivarian government, this is rather interesting.
It also puts that Ecuadorean debt default and buyback of 2009 in a rather different light. Was it a sign of an irresponsible government defaulting for the hell of it ... or a sensible decision for a country locked into a currency union to rid itself of foreign debt when it was still cheap to do so?
Comments