Identifier
Created
Classification
Origin
07QUITO1816
2007-08-09 21:55:00
CONFIDENTIAL
Embassy Quito
Cable title:
US COMPANIES MCI POWER GROUP AND NEW TURBINE, INC.
how-toVZCZCXYZ0011 OO RUEHWEB DE RUEHQT #1816 2212155 ZNY CCCCC ZZH O 092155Z AUG 07 FM AMEMBASSY QUITO TO RUEHC/SECSTATE WASHDC IMMEDIATE 7536 INFO RUEHBO/AMEMBASSY BOGOTA PRIORITY 6817 RUEHCV/AMEMBASSY CARACAS PRIORITY 2631 RUEHLP/AMEMBASSY LA PAZ AUG 0673 RUEHPE/AMEMBASSY LIMA PRIORITY 1839 RUEHGL/AMCONSUL GUAYAQUIL PRIORITY 2648 RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
C O N F I D E N T I A L QUITO 001816
SIPDIS
SIPDIS
TREASURY FOR MMALLOY AND MEWENS
E.O. 12958: DECL: 08/10/2017
TAGS: ECON EINV EC
SUBJECT: US COMPANIES MCI POWER GROUP AND NEW TURBINE, INC.
LOSE ARBITRATION CASE AGAINST ECUADOR
Classified By: Charge Jefferson T. Brown for reasons 1.4(b&d)
C O N F I D E N T I A L QUITO 001816
SIPDIS
SIPDIS
TREASURY FOR MMALLOY AND MEWENS
E.O. 12958: DECL: 08/10/2017
TAGS: ECON EINV EC
SUBJECT: US COMPANIES MCI POWER GROUP AND NEW TURBINE, INC.
LOSE ARBITRATION CASE AGAINST ECUADOR
Classified By: Charge Jefferson T. Brown for reasons 1.4(b&d)
1. (U) On July 31, the arbitration tribunal established
under the International Center for the Settlement of
Investment Disputes (ICSID) ruled against U.S. firms MCI
Power Group and New Turbine, Inc.(MCI-NT) in their
international arbitration case against Ecuador. It ruled
that ICSID did not have jurisdiction over the case because
the U.S.-Ecuador Bilateral Investment Treaty (BIT) had not
yet entered into force when the alleged events took place.
It also ruled that MCI-NT could not prove violations of fair
and equitable treatment by Ecuador after the BIT came into
force, largely because those actions were continuations of
disputes from before the BIT was in place.
U.S. Companies Bring Arbitration Under the BIT
-------------- -
2. (SBU) MCI-NT now own the company Seacoast which signed a
contract in 1995 to supply electric generating capacity to
the GOE through INECEL, the Ecuadorian national power company
at the time. Seacoast claimed that it invested nearly $40
million to install two power generation plants in 1996. A
dispute arose regarding the duration of the contract, and
Seacoast alleged that INECEL failed to pay $20 million owed
to Seacoast under the contract. Seacoast sold the company in
1997, after being unable renegotiate an acceptable contract
with INECEL.
3. (C) MCI-NT initiated international arbitration against
Ecuador under the BIT in December 2002. Ivor Massey, an
executive of MCI Power Group, told Econoff on August 6 that
the claim had been somewhat of a long shot, because the BIT
entered into force in 1997 but the alleged violations for the
most part took place before that. However, MCI-NT asked the
tribunal to consider events that took place related to the
case both before and after the BIT came into force. Massey
alleged the Ecuadorian liquidation commission that was to
resolve disputes following the termination of Seacoast's
contract exhibited misconduct, some of which took place after
the BIT came into effect.
COMMENT
--------------
4. (C) Although it ruled against MCI-NT's claim, the
tribunal did not order the companies to pay Ecuador's legal
costs, indicating that it considered MCI-NT's claim to have
some merit. MCI-NT's legal counsel noted the firms could
request an annulment, which would allow them to resubmit the
arbitration claim (he did not divulge possible reasons for
this strategy). However, Massey stated that he considers a
"political solution" (seeking support from the U.S. Congress
to pressure Ecuador) as the only remaining option.
Ecuadorian press largely heralded the award as a win on the
merits for Ecuador, although some articles were more
evenhanded and noted the decision was made on jurisdictional
grounds. This award contradicts recent GOE assertions that
ICSID consistently rules in favor of investors, and may
impart confidence to Ecuador to continue with other ongoing
arbitrations.
BROWN
SIPDIS
SIPDIS
TREASURY FOR MMALLOY AND MEWENS
E.O. 12958: DECL: 08/10/2017
TAGS: ECON EINV EC
SUBJECT: US COMPANIES MCI POWER GROUP AND NEW TURBINE, INC.
LOSE ARBITRATION CASE AGAINST ECUADOR
Classified By: Charge Jefferson T. Brown for reasons 1.4(b&d)
1. (U) On July 31, the arbitration tribunal established
under the International Center for the Settlement of
Investment Disputes (ICSID) ruled against U.S. firms MCI
Power Group and New Turbine, Inc.(MCI-NT) in their
international arbitration case against Ecuador. It ruled
that ICSID did not have jurisdiction over the case because
the U.S.-Ecuador Bilateral Investment Treaty (BIT) had not
yet entered into force when the alleged events took place.
It also ruled that MCI-NT could not prove violations of fair
and equitable treatment by Ecuador after the BIT came into
force, largely because those actions were continuations of
disputes from before the BIT was in place.
U.S. Companies Bring Arbitration Under the BIT
-------------- -
2. (SBU) MCI-NT now own the company Seacoast which signed a
contract in 1995 to supply electric generating capacity to
the GOE through INECEL, the Ecuadorian national power company
at the time. Seacoast claimed that it invested nearly $40
million to install two power generation plants in 1996. A
dispute arose regarding the duration of the contract, and
Seacoast alleged that INECEL failed to pay $20 million owed
to Seacoast under the contract. Seacoast sold the company in
1997, after being unable renegotiate an acceptable contract
with INECEL.
3. (C) MCI-NT initiated international arbitration against
Ecuador under the BIT in December 2002. Ivor Massey, an
executive of MCI Power Group, told Econoff on August 6 that
the claim had been somewhat of a long shot, because the BIT
entered into force in 1997 but the alleged violations for the
most part took place before that. However, MCI-NT asked the
tribunal to consider events that took place related to the
case both before and after the BIT came into force. Massey
alleged the Ecuadorian liquidation commission that was to
resolve disputes following the termination of Seacoast's
contract exhibited misconduct, some of which took place after
the BIT came into effect.
COMMENT
--------------
4. (C) Although it ruled against MCI-NT's claim, the
tribunal did not order the companies to pay Ecuador's legal
costs, indicating that it considered MCI-NT's claim to have
some merit. MCI-NT's legal counsel noted the firms could
request an annulment, which would allow them to resubmit the
arbitration claim (he did not divulge possible reasons for
this strategy). However, Massey stated that he considers a
"political solution" (seeking support from the U.S. Congress
to pressure Ecuador) as the only remaining option.
Ecuadorian press largely heralded the award as a win on the
merits for Ecuador, although some articles were more
evenhanded and noted the decision was made on jurisdictional
grounds. This award contradicts recent GOE assertions that
ICSID consistently rules in favor of investors, and may
impart confidence to Ecuador to continue with other ongoing
arbitrations.
BROWN