Identifier
Created
Classification
Origin
08QUITO314
2008-04-03 11:46:00
CONFIDENTIAL
Embassy Quito
how-toVZCZCXYZ0009 PP RUEHWEB DE RUEHQT #0314 0941146 ZNY CCCCC ZZH P 031146Z APR 08 FM AMEMBASSY QUITO TO RUEHC/SECSTATE WASHDC PRIORITY 8703 INFO RUEHBO/AMEMBASSY BOGOTA PRIORITY 7476 RUEHCV/AMEMBASSY CARACAS PRIORITY 2969 RUEHLP/AMEMBASSY LA PAZ APR 0996 RUEHPE/AMEMBASSY LIMA PRIORITY 2522 RUEHGL/AMCONSUL GUAYAQUIL PRIORITY 3463
C O N F I D E N T I A L QUITO 000314
SIPDIS
SIPDIS
E.O. 12958: DECL: 04/02/2018
TAGS: EINV EPET EC
SUBJECT: ECUADOR PAYS OXY VAT AWARD
REF: A. 07 QUITO 2626
B. 06 QUITO 1216
C. 06 QUITO 588
Classified By: Classified by Ambassador Linda Jewell. Reason: 1.4 B a
nd D.
C O N F I D E N T I A L QUITO 000314
SIPDIS
SIPDIS
E.O. 12958: DECL: 04/02/2018
TAGS: EINV EPET EC
SUBJECT: ECUADOR PAYS OXY VAT AWARD
REF: A. 07 QUITO 2626
B. 06 QUITO 1216
C. 06 QUITO 588
Classified By: Classified by Ambassador Linda Jewell. Reason: 1.4 B a
nd D.
1. (SBU) Summary. Ecuador paid Occidental Petroleum $100
million to settle an arbitration ruling that the GOE has to
refund Oxy for value-added taxes that Oxy had paid. In
addition, the GOE placed $32 million into escrow pending the
outcome of a second arbitration case filed by Oxy. End
summary.
2. (SBU) Occidental Petroleum (Oxy) informed the Embassy
that the Government of Ecuador paid it $100 million on March
31 to settle an arbitral ruling that the GOE had to rebate
Oxy for value-added taxes (VAT) that Oxy had paid when it was
operating in Ecuador (reftel c). In addition, the GOE placed
another $32 million in escrow; the GOE maintains that this
amount of the VAT rebate should be withheld to offset Oxy,s
failure to pay the oil windfall tax that was implemented
shortly before Oxy,s contact was cancelled in 2006 (reftel
b). The status of the amount in escrow will be addressed in
a second arbitration case regarding the cancellation of
Oxy,s contract and seizure of its assets in Ecuador. Oxy
said that it considers the VAT arbitration award closed.
3. (SBU) Oxy,s General Counsel was complimentary of the way
the GOE handled the award payment in the end. He added that
Oxy is discussing whether it would be useful to sit down with
the GOE and see if there is any possibility of coming up with
a negotiated solution to the second arbitration.
4. (U) As of April 2, the GOE had not announced publicly
that it had paid Oxy, although it had earlier announced to
the media its intent to pay without specifying how much it
would pay.
5. (C) Comment. In a December meeting, President Correa
told the Ambassador that since Ecuador lost the case, it
would honor this international arbitral award (reftel a).
After some delays as the GOE addressed internal issues and
arrived at an agreement with Oxy, the GOE carried through
with Correa's instructions. Facilitating this payment is the
fact that the GOE is running a sizeable budget surplus.
Hopefully the payment of the arbitration award will be a
precedent for future arbitral awards or encourage the GOE to
settle disputes through negotiations rather than wait for an
arbitral decision.
Jewell
SIPDIS
SIPDIS
E.O. 12958: DECL: 04/02/2018
TAGS: EINV EPET EC
SUBJECT: ECUADOR PAYS OXY VAT AWARD
REF: A. 07 QUITO 2626
B. 06 QUITO 1216
C. 06 QUITO 588
Classified By: Classified by Ambassador Linda Jewell. Reason: 1.4 B a
nd D.
1. (SBU) Summary. Ecuador paid Occidental Petroleum $100
million to settle an arbitration ruling that the GOE has to
refund Oxy for value-added taxes that Oxy had paid. In
addition, the GOE placed $32 million into escrow pending the
outcome of a second arbitration case filed by Oxy. End
summary.
2. (SBU) Occidental Petroleum (Oxy) informed the Embassy
that the Government of Ecuador paid it $100 million on March
31 to settle an arbitral ruling that the GOE had to rebate
Oxy for value-added taxes (VAT) that Oxy had paid when it was
operating in Ecuador (reftel c). In addition, the GOE placed
another $32 million in escrow; the GOE maintains that this
amount of the VAT rebate should be withheld to offset Oxy,s
failure to pay the oil windfall tax that was implemented
shortly before Oxy,s contact was cancelled in 2006 (reftel
b). The status of the amount in escrow will be addressed in
a second arbitration case regarding the cancellation of
Oxy,s contract and seizure of its assets in Ecuador. Oxy
said that it considers the VAT arbitration award closed.
3. (SBU) Oxy,s General Counsel was complimentary of the way
the GOE handled the award payment in the end. He added that
Oxy is discussing whether it would be useful to sit down with
the GOE and see if there is any possibility of coming up with
a negotiated solution to the second arbitration.
4. (U) As of April 2, the GOE had not announced publicly
that it had paid Oxy, although it had earlier announced to
the media its intent to pay without specifying how much it
would pay.
5. (C) Comment. In a December meeting, President Correa
told the Ambassador that since Ecuador lost the case, it
would honor this international arbitral award (reftel a).
After some delays as the GOE addressed internal issues and
arrived at an agreement with Oxy, the GOE carried through
with Correa's instructions. Facilitating this payment is the
fact that the GOE is running a sizeable budget surplus.
Hopefully the payment of the arbitration award will be a
precedent for future arbitral awards or encourage the GOE to
settle disputes through negotiations rather than wait for an
arbitral decision.
Jewell