Burlington Resources Inc v Republic of Ecuador

In  Burlington Resources Inc v Republic of Ecuador (ICSID Case No ARB/08/5) the tribunal considered whether it had jurisdiction over claims relating to tax legislation and lack of protection against indigenous protests.

Ecuador objected the tribunal's jurisdiction over non-expropriation claims raised by a US oil company based on Ecuador's tax legislation and indigenous opposition to the claimant's oil exploration in Ecuador. Most of Ecuador's objections were successful. The tribunal found that it did not have jurisdiction in relation to:

• Non-expropriation claims which challenged Ecuador's tax legislation, as these matters were outside the scope of the US-Ecuador bilateral investment treaty (BIT).
• Claims relating to breach of contract.
• Claims relating to the breach of the obligation to provide full protection and security, as the claimant did not fulfil the necessary requirements before filing a request for ICSID arbitration, which made these claims inadmissible.

The tribunal adjourned one jurisdictional issue to the merits phase, as a related objection by Ecuador had not been sufficiently discussed. The dispute will now proceed to the merits phase, as Ecuador did not object to the tribunal's jurisdiction in relation to claims of expropriation.

The tribunal's decision was based on a strict interpretation of the BIT and is a good illustration of how a BIT exceptions clause relating to tax issues works in practice. It also provides a useful analysis of "investment" and "investment agreement", and illustrates the importance of compliance with treaty obligations to negotiate and give notice of a dispute before proceeding to submit a dispute to arbitration.

Source: http://dispute.practicallaw.com/1-502-7188#null