Dow Jones | September 10, 2008
Ecuador: Icsid Panel Claims It Has Jurisdiction In OXY Case
By Mercedes Alvaro, Dow Jones Newswires
QUITO -(Dow Jones)- A panel from the World Bank’s International Center for Settlement of Investment Disputes, or Icsid, said late Tuesday that it has jurisdiction for the claim of the U.S.-based oil company Occidental Petroleum Corp. (OXY) against Ecuador.
"This is a problem in the Ecuadorian defense," a high official from the Attorney General Office told Dow Jones Newswires on Wednesday.
Ecuador has said several times the Icsid does not have "any jurisdiction for this issue". The Ecuadorian government has been trying to prove that Occidental broke the terms of its contract in Ecuador.
Ecuador canceled Occidental’s operating contract in May 2006, claiming the company broke several terms, particularly by transferring a 40% stake in its Ecuadorian projects to Canada’s EnCana Corp. (ECA) without Energy Ministry approval.
OXY is seeking about $3.2 billion in damages from the cancellation of the contract and the loss of projected earnings until 2019, when its contract was set to expire. Before it left the country, the Los Angeles-based oil company produced about 100,000 barrels a day in its Block 15, which is now operated by state oil company Petroecuador.
The block currently produces around 96,000 barrels a day.
After its contract was canceled, Occidental turned to Icsid and asked the institution to return control of its operations, assets and investments in Ecuador, valued around $1 billion, alleging that the Ecuadorian government violated the U.S.-Ecuador bilateral investment treaty by illegally nullifying its exploration rights and expropriating its assets.
Last May OXY increased the damage claim from $1 billion.