A World Bank arbitration panel ordered Ecuador to pay Occidental Petroleum Corp. $1.77 billion to settle a contract dispute.
The International Center for Settlement of Investment Disputes, known as ICSID, said Ecuador breached Los Angeles-based Occidental’s contract by failing “to accord fair and equitable treatment.” Ecuador Atty. Gen. Diego Garcia said Friday that the South American country “categorically rejects” the decision and may seek its annulment.
Ecuador stripped Occidental of its oil concession in 2006 over an alleged contract breach, prompting the company’s complaint to the panel. In May 2009, Ecuador’s government said it would refuse to comply with the court if it ruled in favor of the company.
The South American country is studying the panel’s ruling and plans to comment further Oct. 8, Garcia said.
The settlement is “a nice positive” for Occidental, said Leo Mariani, an analyst for RBC Capital Markets in Austin, Texas. The long-term effects will depend on whether Ecuador adheres to the verdict, Mariani said. “That’s the problem — are they really going to honor” the decision?
The settlement would be more than Occidental’s net income for any of the three previous quarters, according to data compiled by Bloomberg.
Melissa Schoeb, vice president of corporate communications at Occidental, confirmed the amount of the award.