The Ecuadorian Ministry of Economy and Finance ratified the country’s commitment to comply with the arbitration award in the Perenco case, and stressed that it will do so defending “the interests of the Ecuadorian State.”
French oil company Perenco has debts with the Internal Revenue Service (SRI) and this has made it difficult to pay the award, the ministry said in a statement.
“An agreement is expected to be reached with this company, which no longer operates in the country, to establish an adequate payment mechanism until a legal definition of tax obligations is reached, an aspect that is being processed in judicial instances in the United States” , he added.
And he pointed out that the Ecuadorian State is acting responsibly in order to ensure the recovery of what is owed for taxes.
“At no time has there been the country’s intention not to comply with this award, which is the result of decisions adopted by the government of Rafael Correa” (2007-2017), reads the letter.
Started in 2008
The arbitration process of the Perenco case began on April 30, 2008, in which the oil company originally demanded the payment of US$ 1,423 million as reparation for the damage it claimed to have suffered as a result of the adoption of Law No. 42 of the April 25, 2006.
In this legal body, a minimum participation of the State was established, equivalent to 50% of the surplus of oil sales prices not agreed upon or not foreseen; percentage that by executive decree of 2007, issued during the Correa government, was increased to 99%, he explained.
In June 2021, after the arrival to the Presidency of the conservative Guillermo Lasso, the government expressed its commitment to respect the arbitration award, after the Attorney General’s Office requested the annulment of the ruling in 2019.
Amount of the award in favor of Perenco
The Ad-Hoc Committee of the Arbitral Tribunal, within the framework of the Bilateral Treaty for the Promotion and Protection of Investments between Ecuador and France, established compensation for Perenco for US$ 374 million, after discounting compensation for environmental damage in favor of Ecuador.
On the date on which the payment of the award is made, the corresponding interest settlement must also be made, he clarified.
Registration of the obligation to Perenco
According to the Ministry, the obligation to Perenco was accrued last year, so it is part of the 2021 deficit. In 2022, it is recorded as an account payable from previous years and is part of the financial plan that allows covering all of the Debt.
In the public debt bulletins, US$ 190 million appear as contingent liabilities from other lawsuits that the country is facing and that are pending resolution. In the case of Perenco, there is already an award, so it is not a contingent obligation but a firm one.
Payments to holders of Ecuadorian debt
The Ministry of Economy and Finance ratifies that there has been no problem in the payment to holders of Ecuadorian debt. Ecuador has punctually complied with the payment of the amortization and interest coupon of its international bonds, which corresponds to the last day of July, for an amount of US$ 185.7 million.
The ability to make foreign debt payments has not been affected by the judicial decision adopted in Luxembourg on the Perenco case, he concluded.