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  • ICSID RENDERED AN AWARD IN THE DISPUTE BETWEEN DUKE ENERGY & ELECTROQUIL AND THE REPUBLIC OF ECUADOR

    On August 18, 2008, a Tribunal constituted under the ICSID Convention rendered its award in the dispute between the Republic of Ecuador and the companies DukeEnergy Electroquil Partners and Electroquil S.A.

ICSID RENDERED AN AWARD IN THE DISPUTE BETWEEN DUKE ENERGY & ELECTROQUIL AND THE REPUBLIC OF ECUADOR

On August 18, 2008, a Tribunal constituted under the ICSID Convention rendered its award in the dispute between the Republic of Ecuador and the companies DukeEnergy Electroquil Partners and Electroquil S.A.

 

On April 24, 2004, the Republic of Ecuador entered into an arbitration agreement with the claimant companies to submit to the jurisdiction of ICSID certain disputes arising out of two power purchase agreements. The contracts– the first one signed on October 31, 1995, and the second one signed on August 8, 1996 – were entered into during the energycrisis in the early 1990s. At that time Ecuador was facing a national power shortage which resulted in a state of emergency being imposed by the Ecuadorian government, which authorized the execution of power purchase agreements with private power generator companies. Both contracts were aimed at meeting the demand for electricity of the city of Guayaquil.

 

The claimant companies alleged breach of contract due to inappropriate implementation of the trusts under which payments of invoices were to be made; outstanding interest on late payments; and the wrongful imposition of fines and penalties. They also alleged that Ecuador breached the Bilateral Investment Treaty (BIT) between Ecuador and the United States by disregarding certain customs rules and failing to entertain their claims in local arbitration.

 

The claimant companies sought a compensation of twenty five million dollars plus compound interest. The Tribunal determined that the Republic of Ecuador had incurred in certain breaches of the contracts supported also by the terms of the BIT and on this basis awarded compensation in the amount of five and a half million dollars plus simple interest and simple interest calculated over a sum already recognized by the Republic of Ecuador (that is, approximately a twenty percent of the amountoriginally claimed). The Tribunal accepted the Ecuadorian thesis that the applicable law for appropriate items of compensation is Ecuadorian law and that compensation is payable only to the Ecuadorian company Electroquil S.A.

 

The Tribunal rejected the claimant companies’ allegations that Ecuador had breached the BIT through arbitrary treatment, through denial of justice, or by actingin bad faith. The Tribunal clarified that the claim related to customs duties was not contemplated either by the BIT or by the arbitration agreement, and was therefore outside the Tribunal’sjurisdiction.

 

The Tribunal divided the cost of the arbitration proceeding in equal shares between parties and ordered that each party shall bear its own costs and legal fees.

 

Currently, the Attorney’sGeneral Office is analyzing the Tribunal’s award in order to takean appropriate decision on behalf of the interests of the Republic of Ecuador.

COMUNICACIÓN SOCIAL Y RELACIONES PÚBLICAS

 

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