INTERNATIONAL CENTRE for SETTLEMENT of INVESTMENT DISPUTES in the Arbitration Proceeding Between PERENCO ECUADOR LIMITED Claiman
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INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES WASHINGTON, D.C. In the arbitration proceeding between PERENCO ECUADOR LIMITED Claimant and THE REPUBLIC OF ECUADOR Respondent (ICSID Case No. ARB/08/6) ________________________________________________________________________ INTERIM DECISION ON THE ENVIRONMENTAL COUNTERCLAIM _______________________________________________________________________ Members of the Tribunal Judge Peter Tomka, President Mr. Neil Kaplan, C.B.E., Q.C., S.B.S., Arbitrator Mr. J. Christopher Thomas, Q.C., Arbitrator Secretary of the Tribunal Mr. Marco Tulio Montañés-Rumayor Date: 11 August 2015 REPRESENTATION OF THE PARTIES Representing Perenco Ecuador Limited: Representing the Republic of Ecuador: Mr.Mark W. Friedman Dr. Diego García Carrión Ms. Ina Popova Procurador General del Estado Mr. Thomas H. Norgaard and Ms. Sonia Farber Dra. Blanca Gómez de la Torre Ms. Terra Gearhart-Serna Procuraduría General del Estado Debevoise & Plimpton LLP Av. Amazonas N39-123 y Arízaga 919 Third Avenue Edificio Amazonas Plaza New York, NY 10022 Quito, Ecuador and Mr. Eduardo Silva Romero Mr. José-Manuel Garcia Represa Dechert LLP 32 rue de Monceau 75008 Paris, France and Professor Pierre Mayer 20 rue des Pyramides 75001 Paris France i FREQUENTLY USED ABBREVIATIONS AND ACRONYMS BP BP Petroleum Development Limited Burlington Perenco’s consortium partner, Burlington Resources Inc. CEPE Corporación Estatal Petrolera Ecuatoriana Claimant’s Counter-Memorial Claimant’s Counter-Memorial on Counterclaims dated 28 September 2012 Claimant’s Reply Post-Hearing Brief Claimant’s Reply Post-Hearing Brief dated 22 November 2013 DINAPA National Environmental Protection Directorate or Dirección Nacional de Protección Ambiental Ecuador’s Counter-Memorial Ecuador’s Counter-Memorial on Liability and Counterclaims dated 5 December 2011 Ecuador’s Reply Post-Hearing Brief Ecuador’s Reply Post-Hearing Brief on Counterclaims dated 22 November 2013 Enviromental Management Law Ley de Gestión Ambiental (Environmental Management Law) enacted on 30 July 1999 Codification 19, published in Supplemental Official Registry No. 418 of September 10, 2004 GSI GSI Environmental, Inc. GSI ER I 1st Expert Report of GSI dated 20 September 2012 GSI ER II 2nd Expert Report of GSI dated 2 July 2013 IEMS Integrated Environmental Management Services S.A. de C.V. IEMS ER I 1st Expert Report of IEMS dated 29 November 2011 IEMS ER II 2nd Expert Report of IEMS dated 26 April 2012 IEMS ER III 3rd Expert Report of IEMS dated 21 February 2013 ii IEMS ER IV 4th Expert Report of IEMS dated 4 September 2013 Perenco or the Claimant Perenco Ecuador Limited PRAS Programa de Remediación Ambiental y Social, an agency within the Ecuadorian Ministry of Environment RAOHE Reglamento Ambiental para las Operaciones Hidrocarburíferas en el Ecuador, published in the Official Register No. 265 on 13 February 2001 Rejoinder Claimant’s Rejoinder on Counterclaims dated 12 July 2013 Reply Ecuador’s Reply Memorial on Counterclaims dated 22 February 2013 ROH Reglamento de Operaciones Hidrocarburíferas (Regulation of Hydrocarbon Operations) enacted on 26 September 2002 Rouhani ER Expert Opinion of Shahrokh Rouhani, Ph.D., P.E. Regarding Calculation of Impacted Soil Volumes in Block 7, Block 21 and the Coca- Payamino United Field, Oriente Region, Ecuador dated 26 June 2013 RPS RPS Group RPS ER I 1st Expert Report of RPS dated 25 November 2011 RPS ER II 2nd Expert Report of RPS dated 25 July 2012 RPS ER III 3rd Expert Report of RPS dated February 2013 SPA Office of the Undersecretary for Environmental Protection or Subsecretaría de Protección Ambiental Supplemented Memorial Ecuador’s Supplemental Memorial on the Counterclaims dated 27 April 2012 the Ministry Ministry of Energy and Mines, later the Ministry of Non-Renewable Natural Resources iii the Treaty or the BIT Agreement between the Government of the French Republic and the Government of the Republic of Ecuador on the Reciprocal Promotion and Protection of Investments TULAS Texto Unificado de Legislación Ambiental Secundaria (Unified Text of Secondary Environmental Legislation) published in the Official Register No. E 2 on 31 March 2003 iv TABLE OF CONTENTS I. INTRODUCTION................................................................................................................ 1 A. Parties ........................................................................................................................... 1 B. Dispute .......................................................................................................................... 1 II. PROCEDURAL HISTORY ................................................................................................ 2 III. ENVIRONMENTAL COUNTERCLAIM ........................................................................ 7 A. Introduction ................................................................................................................... 7 (1) Summary of the Parties’ Submissions .................................................................7 (2) Blocks 7 and 21 .................................................................................................14 B. The Framework of the Applicable Law ...................................................................... 17 (1) The 2008 Constitution .......................................................................................20 (2) The Environmental Management Law ..............................................................22 (3) RAOHE .............................................................................................................24 (4) TULAS ..............................................................................................................28 (5) The Participation Contracts ...............................................................................33 C. The Parties’ Submissions on the Legal Issues ............................................................ 36 (1) Strict Versus Fault-based Liability ....................................................................36 (2) Burden of Proof in Relation to Causation .........................................................47 (3) Liability of operators inter se ............................................................................52 (4) Imprescriptibility ...............................................................................................54 (5) Remediation criteria ..........................................................................................59 D. Introduction to the expert evidence on the state of the Blocks ................................... 69 E. First round of expert reports of IEMS and GSI .......................................................... 70 F. Third expert report of IEMS and second expert report of RPS .................................. 86 G. Second expert report of GSI and Dr. Rouhani’s analysis of IEMS’ modelling .......... 97 H. IEMS’ response to Dr. Rouhani’s analysis ................................................................. 99 I. Contemporaneous Evidence Noted by the Experts and the Parties .......................... 100 IV. FINDINGS ........................................................................................................................ 103 A. The Tribunal’s Approach to the Counterclaim as it Currently Stands ...................... 103 B. The Tribunal’s Findings on the Legal Framework Governing the Dispute .............. 103 (1) The Constitution and the Applicable Regulatory Regime ...............................103 (2) The Relationship Between the Constitution and the Hydrocarbons Environmental Regulations .............................................................................103 v (3) Conclusion on the Relationship Between the Constitution and the Hydrocarbons Environmental Regulations ......................................................112 (4) Does the Constitution’s Strict Liability Regime Apply to Perenco’s Activities Conducted Prior to 20 October 2008? .............................................................112 (5) Conclusion on the Strict Liability Regime’s Application ...............................114 (6) The Time Bar Defence ....................................................................................114 (7) Conclusion on the Time Bar Defence..............................................................116 (8) The Legal Effect of Petroamazonas’ Succeeding Perenco in Blocks 7 and 21116 (9) Conclusion on the Succession of the Operatorship .........................................117 (10) The Tribunal’s Approach to the Fault-based Regime .....................................118 (11) Conclusion on the Fault-based Regime ...........................................................120 (12) Determining the State of Blocks 7 and 21 at the Time of Perenco’s Acquisition of its Interests ..................................................................................................120 (13) Conclusion on the State of the Blocks at the Time of Their Acquisition ........127 (14) Observations on Perenco’s Environmental Management Practices in Blocks 7 and 21 ..............................................................................................................128 a) Failure to Conduct Biennial Environmental Audits ........................... 129 b) Lack of Environmental Management Plan (Plan de Manejo Ambiental) ............................................................................................................ 130 c) Lack