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  HOME | Ecuador (Click here for more)

Ecuador Counting on Latin America Support in Wake of World Bank Judgment

QUITO – Ecuadorian Foreign Minister Ricardo Patińo said Wednesday his nation is counting on regional solidarity after a World Bank panel ordered Quito to pay more than $1.7 billion in damages to U.S. oil company Occidental Petroleum for terminating its contract in 2006.

The bank’s International Center for Settlement of Investment Disputes, or ICSID, said Ecuador’s decision to terminate Oxy’s contract for an oil block in the Amazon region violated the country’s bilateral investment treaty with the United States.

“What they’re doing with Ecuador is a flagrant violation of national and international law. It’s unjust and unethical and we’re not going to allow it,” Patińo said in inaugurating a meeting of the Community of Latin American and Caribbean States.

“We trust we can count on the solidarity, the backing of the Latin American and Caribbean countries,” the foreign minister said.

On Saturday, Ecuadorian President Rafael Correa said the unfavorable ICSID ruling was a “new abuse” leveled against his country and vowed to appeal it.

Ecuador canceled Oxy’s contract for Block 15 in May 2006 because the firm had allegedly sold a 40 percent stake to AEC, a unit of Canada’s Encana, without government authorization.

Quito said Oxy illegally “created a consortium to operate the block in secret,” while the U.S. company maintains that AEC had no control over the block’s operations and merely provided financing.

AEC eventually sold its interest in Block 15 to China’s Andes Petroleum.

ICSID concluded that Ecuador’s termination of the contract was “tantamount to expropriation.”

The damages award imposed by the ICSID, Correa said Saturday, is a consequence “of having handed the country’s sovereignty over to these (arbitration) tribunals” that “always rule in favor of capital, in favor of companies, never in favor of the state.”

He said Oxy “shamefully” violated the terms of its contract to operate in the Ecuadorian Amazon, even though it knew those types of actions were punishable by contract termination under Ecuadorian law.

“The ruling doesn’t state that Ecuador didn’t apply the measures in the law” and has not denied that Occidental committed an infraction; “it says the law is very severe,” Correa added.

“This is an absolute abuse,” the president said, while noting that one of the ICSID arbiters who heard the case dissented from the decision. EFE


 

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