Quito, December 04, 2017
End to oil dispute:
ECUADOR AND BURLINGTON REACH A SETTLEMENT AGREEMENT
Today, the State of Ecuador’s Attorney General, Dr. Diego García Carrión, announced that the Republic of Ecuador (represented by the Ministry of Economy and Finance and the State Attorney General’s Office) and Burlington (a subsidiary of ConocoPhillips) reached a complete and final agreement to the dispute held by the parties for almost a decade.
On April 21, 2008, Burlington filed an arbitral complaint against the Republic of Ecuador, among other reasons, due to the application of Law 42/2006, which provided a fairer distribution of windfall revenues produced by an increase in the price of oil in international markets. The application of Law 42/2006 and the company’s noncompliance with the payments provided in this Law led this company to abandon, in July 2009, the operation of the blocks that were in the charge of the Consortium comprised by oil companies Perenco and Burlington and, as a result of this abandonment, termination of the revenue sharing contracts in 2010 through the penalty of “caducidad” (the State’s unilateral cancellation of the contracts). In the arbitration proceedings, Burlington requested compensation in the approximate amount of US$ 1.5 billion plus interest.
On February 7, 2017, the Arbitral Tribunal issued a final award, discounting the company’s original claim by approximately 78% and setting an amount of US$379,802,267 plus interest as compensation in favor of Burlington. Furthermore, in a historic decision and creating fundamental precedent for other investment arbitration cases involving the resolution of environmental damage claims, the Tribunal accepted Ecuador’s counterclaim against the company for environmental damages and declared Burlington liable for the costs related to environmental restoration and remediation of the infrastructure at Blocks 7 and 21, the damages caused, and ordering it to pay US$ 41,776,492.77.
The State Attorney General mentioned that, despite the fact that we did not agree with the award, once the legal avenues to challenge it had been exercised and it became enforceable, the agreement between Ecuador and Burlington allows us to solve a dispute and ratify the State of Ecuador’s commitment to comply with its international obligations. Furthermore, this agreement would allow the State to use significant resources saved by the treasury with the discount in the payable amount achieved in the agreement and, additionally, invest the amounts recognized by the countersuits to benefit the area affected by the Consortium’s operation. It is important to remember that this remediation will continue to pend until the Tribunal in the arbitration proceedings filed by Perenco – the other party to the Consortium in charge of operating blocks 7 and 21— issues its final award and rules definitively on the scope of the damages caused by the Consortium.
Telephone: (02) 2941300 Ext. 2321