Occidental Petroleum Corp. said Friday that its $1.77 billion award from the World Bank's International Centre for Settlement of Investment Disputes could be tied up for more than a year while the tribunal considers an application from Ecuador to annul the ruling.
In 2006, Ecuador canceled Occidental's operating contract to drill on and explore Block 15, alleging that Occidental broke the terms of its agreement by transferring a 40% stake in its interest there to EnCana Corp. without obtaining approval from Ecuador's energy ministry.
Last month, the tribunal ruled that Ecuador's action violated the U.S.-Ecuador bilateral investment treaty. The tribunal agreed that Occidental did not obtain the proper approvals for its agreement with EnCana, so the $1.77 billion judgment is a 25% reduction from what the company would have been awarded. But the tribunal also said in its ruling that Ecuador's action was "tantamount to expropriation."
Occidental said in Friday's securities filing that 40% of what it recovers will go to Andes Petroleum Ecuador Ltd., a Chinese company that bought EnCana's oil and pipeline interests in Ecuador in February of 2006, months before Ecuador's action. Andes Petroleum is a joint venture between two Chinese state-run oil companies.
Days after the ruling was released, Ecuador asked for an annulment, arguing that the tribunal has no jurisdiction.
Ecuador withdrew from ICSID in 2010, but that move did not annul pending lawsuits.
Ecuadorian government officials have said the process of trying to overturn the ICSID ruling could take one to two years, and that it will be up to the country's next government to determine whether to honor the tribunal's final decision.
Copyright (c) 2012 Dow Jones & Company, Inc.
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