Arbitration Award

On May 24, 2022, an international arbitral tribunal constituted under the Arbitration Rules of the United Nations Commission on International Trade Law (“Arbitral Tribunal”) issued its final award, confirming that Ecuador’s actions violated the Contract for the Provision of Services for the Exploration and/or Exploitation of Hydrocarbons in the Singue Block of the Ecuadorian Amazon Region entered into with Gente Oil (the “Contract”). The Arbitral Tribunal ordered Ecuador to pay Gente Oil compensatory and non-compensatory damages, plus interest and a portion of the costs of the proceedings and Gente Oil’s attorneys’ fees.

The Final Award is available below.

Highlights of the Final Award

  • The Arbitration Tribunal confirmed the legality of the Contract.
  • Ecuador acknowledges that the Contract is highly beneficial to Ecuador by opposing its termination.
  • Ecuador breached the Contract. [para. 1451 (e) and (g)]
  • Ecuador “failed to fulfill its obligation to perform [the Contract] in good faith and caused non-pecuniary damages” to Gente Oil. [para. 1187]
  • The grounds for the Comptroller General’s Recommendation in General Report DASE-045-2017 to reduce the rate are “erroneously analyzed and [are] contrary to the economic balance of the Contract.” [para. 1017]
  • The private indictment filed by the Attorney General’s Office on behalf of the Ecuadorian State in the criminal proceedings includes “charges that contradict what the Secretariat—prior to 2018—and the Sectoral Ministry had unequivocally asserted.” [para. 1277]
  • In the criminal proceedings, the Attorney General’s Office “distorted the terms of the Contract and the calculation of the alleged damages suffered by the [Ecuadorian] State.” [para. 1187]
  • Ecuador’s conduct “must be considered willful.” [para. 1277]
  • The Arbitral Tribunal ordered Ecuador to pay compensation of more than $10 million for its breaches of contract. [para. 1452 (a), (b), and (c)]
  • In addition, the Arbitral Tribunal ordered Ecuador to pay compensatory damages for harm to Gente Oil’s reputation and good name. [paras. 1278–1281 and 1452 (d)]

Judgment in an Action to Set Aside the Arbitration Award

As a result of the Final Award, the Republic of Ecuador filed a motion to set aside the Arbitral Award with the Court of Appeals of Santiago, Chile—the seat of the arbitration. Among other things, the Republic of Ecuador alleged that the Final Award violated public policy. In a ruling dated October 18, 2024, the Court rejected the appeal in its entirety and upheld the validity of the Final Award.

Highlights of the Judgment Annulling the Arbitration Award

  • The Tribunal found that the Final Award did not violate public policy in the sense that it did not violate the principles of legality and good faith or the duty to provide a rationale (page 33).
  • With regard to the award against the Republic of Ecuador for contractual non-pecuniary damages set forth in the Final Award, the Court confirmed that it was consistent with public policy. Specifically, the Court found that the Arbitral Award was consistent with public policy because, “after evaluating the evidence, [it considered] that the respondent’s conduct must be deemed fraudulent, at least in the form of constructive fraud.” The Court also held that the arbitral tribunal had “prudently” assessed the amount of compensation, noting that “the arbitral tribunal did provide reasons in its award for the award and assessment of the non-pecuniary damages it awarded; therefore, the defect alleged in the appeal is not found” (page 33). 
  • With regard to the principle of legality, the Tribunal found that “there is no indication […] of a violation of the principle of legality, as understood under our domestic law. Indeed, as already stated, the award held the Republic of Ecuador liable for the actions it deemed attributable to it” (page 33).
  • With regard to the principle of good faith, the Court found that this was not a matter subject to review through an action for annulment, as that would amount to a review of the merits of the award.
  • Regarding the duty to provide reasoning. The Court noted “that, upon review of the award, it contains an extensive assessment of the evidence and considerations regarding the reasons why the tribunal partially granted the claim and ordered the Republic of Ecuador to pay some of the relief sought” (page 33).

As a result of the foregoing, the Final Award is mandatory and binding. Furthermore, there is no other remedy available under local or international law; therefore, it must be understood as a final decision.