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Oil companies force Ecuador to take another step forward in Audits
by Stéphanie Jacquemont , Mike Krolikowski
23 March 2013

President Raphael Correa of Ecuador has decided that the arrogance of Chevron and Occidental Petroleum has gone far enough. These two North American oil companies are pursuing the Ecuadorian government by all the means possible in order to achieve international court rulings that sovereign decisions, unfavorable to their interests, be judged illegal and subject to compensation. In reaction Raphael Correa is planning to take a leaf out of his own book by applying the previous debt audit experience to bilateral investment treaties and international investment arbitration.

When Chevron took over Texaco in 2001 it found a claim in the basket from the Ecuadorian people for environemental damages to its Amazon region amounting to $19 billion, and is still, as Texaco before, refusing this compensation. The Hague’s international Arbitration Tribunal has recently created a ’legal aberration’. Texaco left Ecuador in 1992, but on the basis of investment treaties completed in 1997, five years afterwards, the court ruled that although Texaco had departed their investments had remained and so were protected by these treaties. It was thus illegal on the part of Ecuador to have permitted the enforcement of previous judgements, issued by this same court, against Texaco and Chevron.

In 2012, Occidental won damages of $1.77 billion in a case brought before the International Centre for Settlement of Investment Disputes (ICSID), the World Bank tribunal. Ecuador had, in 2006, abrogated Occidental’s operating contract after it unilaterally transferred 40% of its interests to another company ’Encana Corporation’ without authorisation from the energy ministry. The judgement considered that the annulment was no less than “tantamount to expropriation”, and violated the Ecuador – US Bilateral Investment Treaty. Ecuador is appealing against this decision.

Either one of these procedures could ruin the country

After the succes of the debt audit in and around 2008, which brought to light illegal and illegitimate practices, proceedures and engagements, Raphael Correa intends to apply the same processus to challenge a number of International Investment Treaties. The debt audit was carried out by a team of experts, national and international, and representants of the civil society. They found that much of the debt was illegitimate and/or illegal and thus should not be repaid. Based on these results, President Correa decided to suspend payment on some bonds, and saved some 7 billion dollars, resources that were then used for social programmes.

Raphael Correa is reported as saying, “Individually, these multinational corporations can trample our countries, can impose their abuses. Regionally, we impose our conditions to multinationals,” and “There will be a response from Unasur, from ALBA.”

Mutual support, exchange of information and strategies in the face of legal attacks by multinational organisations will be on the agenda of the April meeting of the ALBA members.

Ecuador has already abrogated several bilateral investment treaties at the same time as it has left the ISCID.


Stéphanie Jacquemont
Mike Krolikowski

Membre du CADTM France et de l’équipe ’traduction english’.