QUITO, Ecuador - Ecuador has officially requested the annulment of an international court ruling that ordered it to pay $1.77 billion, plus pre- and post-award interest, to Occidental Petroleum Corp.
"The request for the annulment was filed yesterday," a spokesperson from the Attorney General's office said Wednesday.
Ecuador canceled Occidental's operating contract in May 2006 during the administration of President Alfredo Palacio, alleging that the company broke its terms by transferring a 40% stake to Encana Corp. without obtaining approval from the country's energy ministry.
Occidental filed for arbitration with the Washington D.C.-based International Center for Settlement of Investment Disputes, or Icsid, under the U.S.-Ecuador bilateral investment treaty.
The ruling, released last week by Icsid, said that Ecuador breached the treaty by "failing to accord fair and equitable treatment to the claimants' investment and to accord the claimants treatment no less than that required by international law."
The tribunal also said that Ecuador's decision to terminate Occidental's contract for Block 15 was "tantamount to expropriation."
The tribunal said, however, that Occidental did fail to get approval for its transfer agreement. As a result, the $1.77 billion award is a 25% reduction from what the court would have awarded.
President Rafael Correa has said the Icsid award is equivalent to Ecuador's education budget for a year. "I'm not going to leave the country without education for a year to deliver these resources to a transnational company," he said.
According to the Ecuadorean government, the process to try overturn the Icsid ruling could take one to two years.
In early 2010, Ecuador withdrew from Icsid, but the withdrawal doesn't annul pending lawsuits.
Currently, Ecuador faces at least 12 arbitration claims at Icsid.
On Monday, Attorney General Diego Garcia said that it is too soon to say if the country will honor Icsid's final decision, which should be discussed by the next government.
Ecuadoreans go to the polls in February to elect a president and members of the National Assembly.
Mr. Correa, who took office early in 2007, is expected to run for another term. He has said that his decision on whether to run for reelection depends on his family and his ruling Alianza Pais party.
Mr. Correa said late Tuesday that his family would support him if he runs for reelection.
Copyright (c) 2012 Dow Jones & Company, Inc.
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