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June 2, 2021

Perenco to receive $374m in compensation from Ecuador

Perenco initially demanded $1.4bn over a row with Ecuador over a decree that imposed 99% windfall levy on foreign oil revenues.

By Archana Rani

French oil firm Perenco will receive $374m in damages from the Ecuador Government to settle a long-standing dispute over two crude oil participation contracts.

The arbitration is related to a row over the 2006 decree enacted by then-President Rafael Correa that imposed a 99% windfall levy on foreign oil revenues.

Perenco claims that the decree, Law No 42, resulted in the investment expropriation in Blocks 7 and 21 situated in the Ecuadorian Amazon region.

It alleges that the decree also deprived the company’s contractual right to an agreed participation percentage of the production from the blocks.

Perenco challenged the validity of the rule at the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) in April 2008.

The French company, which initially demanded $1.4bn in claims, argued that the law violated the investment treaty signed in 1994 between Ecuador and France.

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A subsequent counterclaim was brought by Ecuador for environmental and infrastructure damages due to the operations of the blocks under the Participation Contracts.

In 2019, the arbitrators asked Ecuador to pay $449m to Perenco under the BIT and the participation contracts, and Perenco to pay $54m to Ecuador under the counterclaims.

Ecuador President Guillermo Lasso was cited by Reuters as saying: “The Ecuadorean state will respect and pay its international commitments.

“We will be in touch with the company to find options for resolution.”

Reuters cited the country’s solicitor general’s office as saying that the ruling is definitive and it will not challenge the order.

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