The legal dispute over the payment of an arbitration award amounting to $435 million, between the French company Perenco and Ecuador, is extended. The French private company requested before a US court of law that the arbitration award that it already won against Ecuador be executed “and tax claims are not used to reduce compensation that approaches $400 million“, He said. The news was reported in the international arbitration magazine CIAR on January 27 last.
The answer of Perenco is given after, on October 18, 2021, Ecuador filed with a US district court (District of Columbia District Court) a request for the fiscal (tax) debts that Perenco maintains compensate the amount of the award which he must face in order to have an option and recover the debts. This is because Perenco does not have sufficient assets to pay these taxes.
For Ecuador, the debts that the oil company Perenco maintains referring to different taxes should be subtracted from the amount of the arbitration award that both have maintained for more than a decade, in relation to two contracts for the exploration and exploitation of hydrocarbons in two oil blocks of the Amazon.
Instead, Perenco argues that the alleged tax debts it maintains in the Andean country cannot be used to reduce the amount of the award.
Perenco’s lawsuit against Ecuador and before the ICSID occurred after changes were made in the oil contracts, first in the government of Alfredo Palacio and then in that of Rafael Correa. The percentages of variation changed until reaching a 99% for the benefit of the State and 1% for private companies in terms of incremental production.
Thus, in April 2008, Perenco sued Ecuador for $1,423 million for the damages resulting from the adoption of new legislation in 2006 and 2007, which established the participation of the State in the surplus of oil sales prices that were not agreed upon or not foreseen.
In September 2019, Ecuador was ordered to pay $471.8 million, amount to which they should be subtract Perenco payments to Ecuador of $54.4 million, as compensation for environmental damage caused, and $6.3 million corresponding to arbitration costs and expenses.
Due to this type of contractual changes, several foreign oil companies filed lawsuits against Ecuador. Repsol, Perenco, Burlington, Murphy, City Oriente filed their claims with the ICSID. Ecuador already had to pay Burlinton $338 million. As for City Oriente and Murphy, the lawsuits were withdrawn, but the government had to recognize the companies’ losses due to the change in contracts. Only in the case of Repsol, said company withdrew the demands and continued in the country, after reaching agreements.