Ecuador Fights Injunctions Sought By Occidental in Suit

QUITO Oct 9, 2006 (Dow Jones Newswires)

Ecuador Attorney General Jose Maria Borja has asked the World Bank's arbitration tribunal, the International Center for the Settlement of Investment Disputes, to reject a number injunctions filed against the state by U.S.-based Occidental Petroleum Company (OXY).

Borja officially notified ICSID of his request on Thursday. In doing so, Ecuador also affirmed its opposition to the tribunal's Wednesday request for the government to establish a calendar for discussing the injunctions.

Among Occidental's requests are that the government return the oilfields it took over from the company, and that it be barred from transferring those assets to third parties during the arbitration. Ecuador assumed control of Occidental's oilfields and assets in the country on May 15, when the government canceled the company's operating agreement, alleging contract violations.

In the communique to ICSID Secretary General Ana Palacio, which was shown to Dow Jones Newswires, Borja also reiterated the government's position that the company has no grounds for pursuing an arbitration and that the tribunal has no jurisdiction for hearing the case.

The letter also notifies ICSID that Ecuador has appointed Martha Escobar, an official in Borja's office, to head up the country's defense. She replaces lawyers from the firm of Cabezas & Wray, whose team representing Ecuador recently resigned.

Escobar told Dow Jones Newswires in an interview that government officials expect an immediate response from ICSID that will notify Occidental of the state's answer and give the company 15 days to respond.

Escobar also said the country's defense strategy will be more clearly defined after first-round presidential elections on Oct. 15.

"The current government is finishing its term," she said. "In fewer than 10 days, we'll already have different administration officials, so we think the most appropriate thing is for them to be directly involved in the matter and give the directives for the defense."

Left-leaning Rafael Correa, who is currently leading the presidential polls, has said Ecuador will refuse to participate in any arbitration. If Correa is elected to office, "he will have to assume the negative consequences for Ecuador of not appointing a representative in this case."

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