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Ecuador atty general expects Occidental dispute ruling in March

Dow Jones News, December 22, 2005

Ecuador Atty General Expects Occidental Dispute Ruling In Mar

QUITO -(Dow Jones)- Ecuador’s attorney general Thursday said he expects a U.K court to rule in March on a dispute between the government and U.S. oil firm Occidental Petroleum Company (OXY).

Jose Maria Borja said he is convinced the government will win the case and avoid repaying some $75 million in taxes collected from Occidental. The U.S. firm claims the money should be returned as part of a tax rebate scheme violated by the government.

Borja was speaking on his return from London, where he participated in a hearing at the U.K court. Ecuador wants the U.K court to overturn a ruling issued by a London-based arbitration panel because it did not have jurisdiction over the dispute with Occidental.

In July 2004, the London arbitration panel ruled in Occidental’s favor, but Ecuador is now arguing that the U.S. firm skipped out proceedings in Ecuadorian courts, and went against terms of a bilateral investment treaty between Ecuador and the U.S.

"It is an abuse that a company that demands legal security has proposed arbitration for a tax matter, violating Ecuadorian laws and the very investment protection treaty between Ecuador and the United States," Borja said.

The dispute arose in August 2001 when Occidental requested a tax rebate under a scheme for exporters. The Ecuadorian government claimed oil companies did not qualify for the export scheme because they had separate tax treatment under their operating contracts.

Meanwhile, Occidental’s vice president for legal affairs, Daniel Almaguer, said he expects the court to rule in Occidental’s favor. Occidental requested the arbitration proceedings under terms of the bilateral investment treaty.

"We are optimistic that the judge in England will rule in favor of Occidental, but beyond that we expect to be able to sit down and talk with the authorities to reach an amicable solution with the Ecuadorian government, not just for the tax issue but for all the problems we have in the country," he said.

Ecuador has threatened to cancel Occidental’s operating contract, claiming the firm illegally transferred a 40% stake in an oil field known as Block 15 to Canada’s EnCana Corp. (ECA). Occidental is expected to present its defense to the Energy Ministry by Jan. 14.

"We are working day and night, compiling all the evidence to establish our innocence," Almaguer said Thursday.

The U.S. government recently said it won’t sign a free trade agreement currently being negotiated with Ecuador until Occidental’s disputes are resolved.

 By Maria Elena Verdezoto, Dow Jones Newswires; 5939-9031-501;

(END) Dow Jones Newswires
14:49 ET (19:49 GMT)

 source: Dow Jones