logo logo

US oil firm files arbitration claim against Ecuador for ’expropriation’

Antara News | Indonesia | May 19, 2006

US oil firm files arbitration claim against Ecuador for ’expropriation’

Quito (ANTARA News) - The US-based Occidental Petroleum Company has
filed an arbitration claim against Quito for canceling its exploration rights, a move that resulted in a suspension of free trade talks with Washington.

The claim, filed Wednesday with the International Centre for Settlement of
Investment Disputes in Washington, calls on protections the company says are included in the US-Ecuador Bilateral Investment Treaty, AFP reported.

It follows Ecuador’s move on Monday to cancel the California-based
company’s rights to an oil field in the Amazon basin region and take control of its production infrastructure.

The firm, also known as Oxy, said in a statement that it wants the
arbitration panel to "order interim relief by restoring its rights in Ecuador and preventing Ecuador from replacing Occidental with another third-party operator ... until its claims can be decided, a process that could take well over a year."

Oxy, the country’s largest foreign investor, said Ecuador’s move on Monday
was an "unlawful act of expropriation."

The bad blood began in 2004, when Oxy "prevailed, by unanimous decision of
an international arbitration panel, in a legal dispute over tax refunds" that Ecuador had "wrongfully withheld."

The energy company "intends to vigorously pursue redress for damages
resulting from Ecuador’s illegal seizure of its ... assets," the statement

A foreign ministry statement on Wednesday said the move against Oxy was
strictly a legal matter, "not a conflict between two states."

"At no time ... were bilateral or multilateral treaty provisions violated,"
nor did the move involve "expropriation or nationalization of Occidental’s
investments," the statement said.

It said it was "certain" the United States would not let the matter disrupt
trade talks or affect "cordial" relations between the two sides.

Interior Minister Felipe de la Vega was more blunt.

"This is a sanction, unacceptable blackmail," he told the Uno television
network, referring to the suspension of trade talks.

"We are a sovereign nation, and if gentlemen want to halt the free-trade
talks, which is sad, then we will look to Europe," he said.

De la Vega spoke as the dispute between the two countries over oil and
trade appeared to worsen, as have relations between the administration of US President George W. Bush and Venezuela and Bolivia, two other key South
American energy producers.

In Washington, a US government spokeswoman raised the prospect of
compensation for Occidental.

"We are very disappointed at the decision of Ecuador, which appears to
constitute a seizure of the assets of a US company," said Neena Moorjani, a
spokeswoman for US Trade Representative Rob Portman.

"We will seek an immediate clarification from the government of Ecuador,
including whether it intends to fully compensate the company as required under our bilateral investment treaty," Moorjani told AFP.

Quito’s decision followed a prolonged dispute over Occidental’s 2004 sale
of a 40 percent share in its Ecuador operations to EnCana Corp. of Canada,
without first consulting Ecuadoran authorities. Last year, EnCana sold the
stake to a Chinese consortium called Andes Petroleum.

State-owned Petroecuador is to take over the Occidental operations in the
Amazon jungle, where the US firm extracted 100,000 barrels of oil per day.

A group of Ecuadoran industrial firms blamed President Alfredo Palacio for
the breakdown in the trade talks, saying Palacio had caved into pressure from indigenous groups.

Native groups here — which make up about a quarter of the country’s
population — oppose the free-trade pact with Washington. Demonstrations in
March led to clashes with government troops and the declaration of a state of emergency. (*)

 source: ANTARA