Murphy Exploration and Production Company International v. Republic of Ecuador
ICSID · Investment (ICSID and treaty) · Ecuador · 15 Dec 2010
Why it matters
This case is significant for its analysis of the six-month waiting period and consultation requirements under BITs. The Tribunal held that the waiting period is procedural, not jurisdictional, and that futility of negotiations can excuse compliance. It also clarified that an Article 25(4) notice cannot unilaterally withdraw consent already given in a BIT.
Summary
Murphy Exploration and Production Company International, a US company, initiated ICSID arbitration against Ecuador under the US-Ecuador BIT, alleging that Ecuador's Law 42 (2006) and subsequent decrees, which imposed a 50% (later 99%) windfall tax on oil revenues, violated the BIT's fair and equitable treatment, full protection and security, umbrella clause, and expropriation provisions. Ecuador raised seven objections to jurisdiction, including that its December 2007 notice under ICSID Article 25(4) excluded disputes over natural resources, that Murphy had not suffered direct losses, and that Murphy failed to comply with the BIT's requirement to attempt amicable settlement through consultation and negotiation for six months before arbitration. The Tribunal rejected all objections. It held that Ecuador's Article 25(4) notice could not unilaterally modify the consent already given in the BIT. On the consultation requirement, the Tribunal found that the dispute arose in April 2006 with Law 42, and that Murphy's subsidiary and the consortium had engaged in negotiations. Even if not, the Tribunal considered negotiations futile given Ecuador's rigid position that contracts must be converted to service contracts. The six-month period was deemed procedural, not a jurisdictional condition precedent. The Tribunal also upheld Murphy's standing as a shareholder to claim for losses to its subsidiary. The award on jurisdiction was issued on December 15, 2010, allowing the case to proceed to the merits.
The detail
Parties: Murphy Exploration and Production Company International v. Republic of Ecuador
Case number: ICSID Case No. ARB/08/4
Outcome: The Tribunal dismissed Ecuador's objections to jurisdiction and upheld jurisdiction over the dispute.
Applicable law: Ecuador-United States BIT (1993); ICSID Convention
Issues in play: The dispute involved the interpretation of the BIT's consultation and negotiation requirements (Article VI(2) and (3)(a)), and whether Ecuador's Article 25(4) notice to ICSID could limit its prior consent to arbitration.
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