The World Bank’s International Center for Settlement of Investment Disputes, or ICSID, has ordered Ecuador to pay a sum of $1.77 billion in damages to Occidental Petroleum. The award ruling posted on ICSID’s website reads, “Claimants are awarded the amount of $1.769 billion.” Ecuador has also been ordered to pay a “pre-award interest on the above amount at the rate of 4.188 percent per annum, compounded annually from 16 May 2006 until the date of this award.”
Occidental Petroleum filed a request for arbitration in July 2006, after the Ecuadorean government terminated its contracts on vague grounds, and because the company had sold a stake in its operations without the consent of the Ecuadorean government. In classic leftist government ploy, after Occidental set up operations and was producing about 1/5th of Ecuador’s daily crude oil, the government seized the company’s properties and handed it over to the state-controlled Petromazonas.
The ruling of ICISD said Ecuador’s action was “tantamount to expropriation.” The leftist President Rafael Correa of Ecuador told journalists “We’ll ask for it (the ruling) to be declared null and void. We’re used to confronting these abuses, these obstacles, and we’ll continue to defending the integrity of the country.”
Diego Garcia, the attorney general of Ecuador, said earlier this week that while Occidental was seeking close to $3.4 billion in damages from the smallest member country of the OPEC, Ecuador was ready to pay only $417 million.
However, the ruling comes at an odd time after dragging on for so many years; after the Ecuador embassy in UK provided asylum to WikiLeaks head Julian Assange earning the ire of governments that want Assange’s head.
Prior to termination of its contract, Occidental was the biggest oil investor in Ecuador, producing about 100,000 barrels of crude per day, out of Ecuador’s national average of 500,000 barrels per day.