QUITO (Reuters) - Ecuador’s socialist president Rafael Correa presented a bill on Monday asking lawmakers to annul an investment protection treaty with the United States, which would prevent U.S. companies from filing for arbitration against the Andean country.
Correa, who won a sweeping re-election victory in mid-February, said over the weekend that the OPEC-member country could go bankrupt because arbitration tribunals always rule that Ecuador should pay damages to foreign investors when there is a dispute.
“These (investment) treaties favor foreign investors over human beings. Anyone can take us to an arbitration tribunal without first going to a national court,” he said on Saturday.
Since first taking office in 2007, Correa has alienated investors by defaulting on $3.2 billion of debt, rewriting contracts with oil companies to squeeze more revenue from them, pushing through a new constitution that gave him more power and making frequent outbursts against capitalism.
Days after his re-election victory, Correa said arbitration tribunals were “pimps” whose main role was to protect foreign investors.
The ruling party currently needs support from opposition lawmakers to approve laws, but a new legislative assembly will be inaugurated in mid-May in which Correa’s party will have a majority of seats.
Ecuador has signed 23 investment protection treaties, which has allowed foreign companies to file 39 arbitration requests at the World Bank’s International Center for the Settlement of Investment Disputes (ICSID), state-run media said on Monday.
The ICSID last year ordered Ecuador to pay $1.77 billion to Occidental Petroleum Corp (OXY.N), the fourth largest U.S. oil company, as compensation for taking over its assets in 2006.
Ecuador’s withdrawal from the ICSID in 2009 does not make the country exempt from the ruling because it was filed in 2006, but the government has filed an appeal.
Ecuador has two other cases pending at the ICSID: one filed by Burlington Resources COPBR.UL, 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.
Meanwhile, a panel acting under the Hague’s Permanent Court of Arbitration in February said Ecuador had not done enough to prevent enforcement of a $19 billion ruling against Chevron (CVX.N) for polluting the Amazon.
Chevron said the tribunal could order Ecuador to pay the company compensation.
An Ecuadorean court ruled in February 2011 that Chevron should pay billions of dollars to plaintiffs living in the region around Ecuador’s Lago Agrio, who had sued the company over pollution in the country’s rain forest.
The second-largest U.S. oil company filed for arbitration in 2009, charging that Ecuador had breached a trade agreement with the United States by not ensuring a fair trial.
But Ecuador’s attorney general has long argued that the tribunal has no jurisdiction because Quito’s bilateral trade agreement with Washington came into effect five years after Chevron ended operations in Ecuador in 1992.
Editing by Eric Walsh