* ICSID says Ecuador expropriated Occidental's oil block
* President Correa says Ecuador will appeal ruling
By Eduardo Garcia
Oct 5 The World Bank's arbitration center
(ICSID) has ordered Ecuador to pay nearly $1.77 billion in
damages to U.S.-based Occidental Petroleum for seizing
the company's assets in 2006, but the Andean country said it
would appeal the decision.
It also ordered Ecuador to pay pre-award interest on the
amount at the rate of 4.188 percent per annum, compounded
annually from 16 May 2006 until the date of the award.
The ruling was posted on the International Center for
Settlement of Investment Disputes (ICSID) website.
The Ecuadorean government decided to terminate Occidental
Petroleum's contract in May 2006, arguing that the company had
sold a stake in its operations without government consent.
Occidental Petroleum, also known as Oxy, filed a request for
arbitration in July 2006.
The ruling said that Ecuador's seizure of an oil block
operated by Occidental was "tantamount to expropriation".
Ecuador's leftist President Rafael Correa, who took office
in 2007, said the country would appeal the decision.
"We'll ask for it to be declared null and void. We're used
to confronting these abuses, these obstacles, and we'll continue
defending the integrity of the country," Correa told reporters.
Correa has had tumultuous relations with foreign investors
since revising oil contracts in 2010 to favor the government and
defaulting on the country's debt two years earlier.
Ecuador's Attorney General Diego Garcia said this week that
Occidental was seeking nearly $3.4 billion in damages from the
OPEC-member country. He said Ecuador was only willing to pay up
to $417 million to Occidental.
Ecuador is OPEC's smallest member and produces around
500,000 barrels of crude oil a day. Ecuador's withdrawal from
the ICSID in 2009 does not make the country exempt from the
ruling because it was filed in 2006.
At the time, Occidental was Ecuador's largest oil investor,
extracting around 100,000 barrels of oil per day. The company's
operations are now controlled by state-run Petroamazonas.
South America has been a tricky region this year for
Occidental, the fourth-largest U.S. oil company, with insurgent
attacks in Colombia leading to reduced production of 7,000
barrels per day in the first quarter.
A U.S. appeals court also ruled in May that Oxy must defend
against a class-action lawsuit brought by Peruvians accusing the
company of polluting the rainforest there.
California oil company Chevron Corp has been
embroiled for two decades in similar litigation with indigenous
Ecuadoreans over pollution in the Amazon.
ICSID AND LATIN AMERICA
Ecuador has two other cases pending at the ICSID: one filed
by Burlington Resources, a subsidiary of U.S. energy company
ConocoPhillips, and another by French oil company
Perenco. The companies are seeking compensation related to
confiscation of assets by the Ecuadorean government in 2009.
Investors often see arbitration as the only way to ensure
fair legal proceedings in disputes with foreign countries where
courts are often under the control of political leaders.
Venezuela and Bolivia, whose leftist governments have
nationalized foreign assets in recent years, have renounced the
The arbitration tribunal is still considering claims filed
by foreign investors seeking large awards from other Latin
American countries, including Mexico and Argentina.
Occidental shares rose as much as 0.4 percent to $85.32
after hours on Friday following the ruling. The award is well
above the $1.3 billion in profits earned by the Los
Angeles-based company in the second quarter.