Ecuador loses litigation against Perenco; will pay 374 million dollars

Ecuador will pay an award of 374 million dollars to the Anglo-French oil company Perencoafter losing a lawsuit for the increase in its participation in the extra profits due to the rise in the price of oil.

The Ministry of Economy and Finance together with the State Attorney General’s Office “will continue with the establishment of the payment mechanism with the Perenco company,” the ministry said.

He added that once the payments to the firm have been made, the Attorney General’s Office will be in charge of carrying out lawsuits “against the officials responsible for the acts for which the State was condemned internationally” to pay compensation of 374 million dollars by the arbitral tribunal of the International Center for Settlement of Investment Disputes (ICSID, part of the World Bank).

Perenco originally demanded the payment of $1.42 billion.

Quito issued the clarification on the payment after media reports that Luxembourg ordered the freezing of Ecuador’s assets in that country.

So far, no official notification has been received from the Luxembourg judicial authorities, nor is there any known impact on the country’s assets abroad,” the portfolio said.

Ecuador lost the arbitration requested by the oil company in 2008, after the government increased from 50% to 99% the part that Quito kept of the extraordinary profits due to the increase in the price of oil over that fixed in the contracts.

The measure taken by the former socialist president Rafael Correa (2007-2017) cornered foreign oil companies by cutting their profits and changing their model to operate in the nation, benefiting the State.

In 2017, the ICSID also ordered Quito to pay compensation of 337 million dollars to the American Burlington, which exploited two blocks jointly with Perenco.

Both companies were accused by Quito in 2009 of abandoning their operations in the country and in 2010 the expiration of their contracts in the country was declared.

Ecuador has been taken to international courts mainly by oil companies such as the American Chevron and Oxy. Quito had to pay some 1,000 million dollars to the latter as compensation because its contract was canceled in 2006 by the government alleging the illegal sale of shares.