Summary

Reproduced from www.worldbank.org/icsid with permission of ICSID.

TABLE OF CONTENTS

I. INTRODUCTION AND PARTIES
II. PROCEDURAL HISTORY
III. THE APPLICABLE LEGAL FRAMEWORK

A. ANNULMENT UNDER THE ICSID CONVENTION
(1) The Parties' Positions
a. Applicant's Position
b. Perenco's Position
(2) The Committee's Analysis

B. MANIFEST EXCESS OF POWERS
(1) The Parties' Positions
a. Applicant's Position
b. Perenco's Position
(2) The Committee's Analysis

C. SERIOUS DEPARTURE FROM A FUNDAMENTAL RULE OF PROCEDURE
(1) The Parties' Positions
a. Applicant's Position
b. Perenco's Position
(2) The Committee's Analysis

D. FAILURE TO STATE REASONS
(1) The Parties' Positions
a. Applicant's Position
b. Perenco's Position
(2) The Committee's Analysis

IV. THE SPECIFIC GROUNDS ON ANNULMENT

A. GROUNDS RELATED TO THE TRIBUNAL'S FINDINGS ON JURISDICTION
(1) Grounds on the Tribunal's finding that the Treaty extends jurisdiction to a company only indirectly controlled by French nationals
a. The Parties' Position
b. The Committee's Analysis
(2) Grounds on the Tribunal's finding that Perenco was controlled by French nationals
a. The Parties' Position
b. The Committee's Analysis
(3) Grounds on the Tribunal's finding that it had jurisdiction over Perenco's claims that caducidad breached the Block 21 Participation Contract
a. The Parties' Position
b. The Committee's Analysis

B. GROUNDS ON THE TRIBUNAL'S FINDINGS ON THE MERITS
(1) Grounds on the Tribunal's finding that Ecuador's non-compliance with the Provisional Measures amounted to a breach of contract
a. The Parties' Position
b. The Committee's Analysis
(2) Grounds on the Tribunal's finding that Perenco was entitled to suspend operations under the exceptio non adimpleti contractus principle
a. The Parties' Position
b. The Committee's Analysis
(3) Grounds on the Tribunal's finding that Decree 662 breached the Participation Contracts and that the enactment of Decree 662 and the ensuing measures breached Article 4 of the Treaty
a. The Parties' Position
b. The Committee's Analysis
(4) Grounds on the Tribunal's finding that Ecuador's declaration of caducidad breached the Block 21 Participation Contract and expropriated Perenco's contractual rights
a. The Parties' Position
b. The Committee's Analysis

C. GROUNDS ON THE TRIBUNAL'S FINDINGS ON DAMAGES
(1) Grounds on the Tribunal's finding that the Parties would have agreed to Law 42 being stabilized at 33% as of October 5, 2008
a. The Parties' Position
b. The Committee's Analysis
(2) Grounds on the Tribunal's decision to award value to Perenco's loss of
opportunity to extend the Block 7 Participation Contract
a. The Parties' Position
b. The Committee's Analysis
(3) Grounds on the Tribunal's finding that Perenco would have drilled 23 new wells on Block 7
a. The Parties' Position
b. The Committee's Analysis
(4) Grounds on the Tribunal's decision to award Perenco damages amounting to US$448,820,400
a. The Parties' Position
b. The Committee's Analysis
(5) Grounds on the Tribunal's decision to apply a post-award interest rate equivalent to LIBOR for three-month borrowings plus two percent, compounded annually, until the date of payment
a. The Parties' Position
b. The Committee's Analysis
(6) Grounds on the Tribunal's finding that the OCP ship-or-pay costs were fully tax-deductible
a. The Parties' Position
b. The Committee's Analysis
(7) Grounds on the Tribunal's finding that Perenco's decision to suspend operations did not contribute to its own losses
a. The Parties' Position
b. The Committee's Analysis

D. GROUNDS ON THE TRIBUNAL'S FINDINGS ON COUNTERCLAIMS
(1) Grounds on the Tribunal's finding that the strict liability regime of the 2008 Constitution does not have retroactive effect
a. The Parties' Position
b. The Committee's Analysis
(2) Grounds on the Tribunal's finding that Perenco is only liable for the mud pits it built or used
a. The Parties' Position
b. The Committee's Analysis
(3) Grounds on the Tribunal's decision to allocate liability between Perenco and other operators of Blocks 7 and 21
a. The Parties' Position
b. The Committee's Analysis
(4) Grounds on the Tribunal's decision to apportion liability for environmental remediation between Perenco, Petroamazonas, and prior operators
a. The Parties' Position
b. The Committee's Analysis
(5) Grounds on the Tribunal's decision to treat the amount paid by Burlington to Ecuador as a down payment on the counterclaims
a. The Parties' Position
b. The Committee's Analysis

E. COMMITTEE'S CONCLUSIONS

V. COSTS
A. APPLICANT'S COSTS SCHEDULE
B. PERENCO'S COSTS SCHEDULE
C. THE COMMITTEE'S DECISION ON COSTS

VI. DECISION

I. INTRODUCTION AND PARTIES

1. This case concerns an application for annulment by the Republic of Ecuador (the "Application for Annulment") of the award rendered on September 27, 2019 (the "Award") by the Arbitral Tribunal composed of H.E. Judge Peter Tomka, President, Mr.

Neil Kaplan, C.B.E., QC, SBS, and Mr. J. Christopher Thomas, QC (the "Tribunal") in the arbitration proceeding between Perenco Ecuador Limited and the Republic of Ecuador, ICSID Case No. ARB/08/6 (the "Underlying Arbitration").

2. The Tribunal incorporated by reference into its Award (a) the Decision on Jurisdiction dated June 30, 2011 ("Decision on Jurisdiction"), (b) the Decision on Remaining Issues of Jurisdiction and on Liability dated September 12, 2014 ("Decision on Jurisdiction and Liability"), (c) the Decision on Ecuador's Reconsideration Motion dated April 10, ("Decision on Reconsideration"), (d) the Interim Decision on the Environmental Counterclaim dated August 11, 2015 ("Decision on the Environmental Counterclaim"), and (e) the decisions on Perenco's two requests for dismissal of the Respondent's counterclaims dated August 18, 2017 ("First Decision on Counterclaims") and July 30, 2018 ("Second Decision on Counterclaims"). Furthermore, in the Award, the Tribunal referred to the Decision on Provisional Measures of May 8, 2008 ("Decision on Provisional Measures") (together, the Decision on Jurisdiction, Decision on Jurisdiction and Liability, Decision on Reconsideration, Decision on the Environmental Counterclaim, First Decision on Counterclaims, Second Decision on Counterclaims, Decision on Provisional Measures, the "Decisions").

3. The Applicant is the Republic of Ecuador (the "Applicant" or "Ecuador").

4. The party opposing Ecuador's Application is Perenco Ecuador Limited ("Perenco" or "Claimant").

5. The Applicant and Perenco are hereinafter collectively referred to as the "Parties", and individually referred to as a "Party." The Parties' representatives and their addresses are listed above on page (i).

6. Ecuador seeks the annulment of the Award under Article 52(1) (b) (the Tribunal manifestly exceeded its powers); (d) (there was a serious departure from a fundamental rule of procedure), and (e) (the Award failed to state the reasons on which it was based) of the ICSID Convention.

...

VI. DECISION

744. For the reasons set forth above, the ad hoc Committee decides, unanimously, as follows:

a. To partially annul the Award rendered on September 27, 2019 by the Arbitral Tribunal in the arbitration proceedings between Perenco Ecuador Limited and the Republic of Ecuador, ICSID Case No. ARB/08/6, solely and exclusively as regards the Tribunal's decision to award US$25 million to Perenco's loss of opportunity to extend the Block 7 Participation Contract,647 and the Tribunal's finding that the OCP ship-or-pay costs were fully tax-deductible.648

b. The rest of the Award remains unaffected, but as a result of the partial annulment the amount awarded to Perenco Ecuador Limited at paragraph 1023(a) of the Award is US$412,182,000.

c. Applicant shall bear 90% and Claimant 10% of the arbitration costs in relation to these proceedings, and each side shall bear its own litigation costs and other expenses.

Claimant shall therefore reimburse Applicant the amount of US$43,545 corresponding to 10% of the arbitration costs in relation to these annulment proceedings.

d. The stay of enforcement of the Award is lifted.

Footnotes omitted