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Ecuador defaults on debt to Perenco

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Oilfield Technology,

Perenco Ecuador Ltd. has said that the Ecuadorian government has failed to pay the amount it owes to Perenco for having expropriated Perenco’s investment more than a decade ago.

Over 10 years ago, Ecuador imposed a law to take an additional participation in Perenco’s oil production from Blocks 7 and 21, seized Perenco’s oil production and took over the blocks. On 27 September 2019, an international arbitration tribunal constituted under the France-Ecuador Bilateral Investment Treaty and the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID) issued a Final Award holding that Ecuador had violated international law and its participation contracts with Perenco. The tribunal awarded Perenco substantial compensation. In May 2021, an ICSID annulment committee rejected Ecuador’s attempt to annul the entire award and confirmed that Ecuador owes Perenco a net amount of US$391 million.

Under Article 53 of the ICSID Convention, the award is immediately enforceable in more than 150 countries. Ecuador’s Minister of Economy and Finance made a specific undertaking to the ICSID committee on behalf of the State that Ecuador would pay the Award “unconditionally, voluntarily and in full, within 60 days” of the issuance of the ICSID annulment committee’s decision.

That 60-day period has now expired, meaning that Ecuador is therefore now in full default on its obligations under the Award, the ICSID Convention and its own undertaking.

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