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The Final Award In Occidental V. Ecuador

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Chapter Summary

In 2004, an UNCITRAL arbitral tribunal unanimously ruled that the Republic of Ecuador violated key provisions of the U.S.-Ecuador Bilateral Investment Treaty (BIT) and awarded over $75 million to Occidental Exploration and Production Company, a U.S. investor. This chapter provides a factual and procedural overview to the dispute. It considers three aspects of the tribunal's reasoning on the jurisdictional issues presented and proceeds to focus on two aspects of the tribunal's reasoning on the substantive issues. The core dispute arose out of differing interpretations by Occidental and Ecuador of Ecuador's value-added tax (VAT) law. As investment tribunals lack effective enforcement power, reliance is placed in large measure on the investor and, more importantly, the host state's acceptance of the award in esse, which can only occur when the reasoning that formed the basis for the decision outcome is objectively persuasive.

Keywords: arbitral tribunal; Bilateral Investment Treaty (BIT); Ecuador; jurisdiction; Occidental; U.S. investor; value-added tax (VAT)



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