On 27 September 2019, an ICSID tribunal rendered its award on quantum in an arbitration between Perenco Ecuador Limited (“Perenco”) and the Republic of Ecuador (“Ecuador”) under the France-Ecuador bilateral investment treaty (BIT). The tribunal awarded Perenco damages of approximately US$449 million in respect of Ecuador’s interference with its interests in two Amazonian oil blocks and, at the same time, awarded Ecuador damages of approximately US$54 million pursuant to its counterclaim against Perenco for environmental remediation.
The award on quantum follows the tribunal’s 2014 decision on liability (and remaining issues of jurisdiction). In that decision, the tribunal found that, by imposing a 99% levy on increased oil revenues, Ecuador had violated two concession contracts, as well as the BIT’s fair and equitable treatment and expropriation provisions. The following year, in 2015, the tribunal issued an interim decision on Ecuador’s counterclaim, which found Perenco liable for breaching Ecuadorian environmental law. However, the tribunal said it needed further expert evidence on the assessment of environmental damage, and urged both parties to settle the counterclaim. The parties were unable to reach a settlement. Later, in August 2017, the tribunal issued a decision rejecting Perenco’s application to dismiss Ecuador’s counterclaim as inadmissible, on the basis that the objection had been raised too late. The tribunal went on to say that it agreed in principle with Ecuador’s counterclaim, but that further analysis of the environmental damage by an independent expert was required.
In its recent award on quantum, the tribunal declined to calculate damages using a single valuation date, as Perenco’s experts had proposed. Instead, the tribunal calculated separately the damages from the fair and equitable treatment and expropriation BIT breaches, because the breaches had occurred at different points in time. As regards Ecuador’s counterclaim, the tribunal found that Perenco had caused damage of approximately US$94 million in estimated remedial costs. However, to avoid double-recovery, the tribunal subtracted US$39 million from that amount, to reflect monies paid previously to Ecuador by Burlington, Perenco’s consortium partner. Finally, the tribunal declined Perenco’s request to pay the counterclaim damages into a remediation fund. The tribunal observed that making such an order would be inconsistent with its role under the ICSID Convention because, once an award is issued, a tribunal becomes functus officio.
Ecuador has since applied to ICSID to annul the award, and ICSID has granted a stay of enforcement pending an annulment committee decision.
─ The Award on Quantum dated 27 September 2019 can be found here.
─ The Interim Decision on the Environmental Counterclaim dated 11 August 2015 can be found here.
─ The Decision on Remaining Issues of Jurisdiction and Liability dated 12 September 2014 can be found here.