Murphy Exploration & Production Company International v. Republic of Ecuador
PCA · Investment (ICSID and treaty) · Ecuador · 13 Nov 2013
Why it matters
This case is significant because it clarifies that a failure to observe a cooling-off period in an investment treaty is a curable procedural defect, not a jurisdictional bar. It also addresses the effect of a State's denunciation of the ICSID Convention on an investor's ability to resubmit claims, holding that the investor may resort to UNCITRAL arbitration if ICSID is no longer available. The decision reinforces the object and purpose of investment treaties to provide effective dispute resolution.
Summary
Murphy Exploration & Production Company International, a US company, invested in Ecuador's oil sector through a participation contract. In 2006, Ecuador enacted laws that increased the government's share of oil revenues, which Murphy claimed breached the US-Ecuador BIT. Murphy initiated ICSID arbitration in 2008 without waiting six months after the dispute arose, as required by Article VI(3)(a) of the BIT. The ICSID tribunal dismissed the claim for lack of jurisdiction due to this procedural defect. After Ecuador denounced the ICSID Convention in 2009, Murphy could not refile with ICSID. Instead, Murphy commenced a new arbitration under UNCITRAL rules in 2011, after having engaged in six months of negotiations. Ecuador objected to jurisdiction, arguing that the six-month requirement was a condition precedent that could not be cured, and that Murphy's choice of ICSID in the first arbitration triggered a fork-in-the-road provision, barring any subsequent arbitration. The tribunal rejected Ecuador's objections. It held that the six-month cooling-off period is a curable procedural defect, not an absolute jurisdictional requirement. The tribunal noted that Murphy had since cured the defect by waiting six months before filing the UNCITRAL arbitration. It also found that Murphy's consent in the first ICSID arbitration was invalid because the condition precedent had not been met, so the fork-in-the-road provision was not triggered. Furthermore, because Ecuador's denunciation of ICSID made that forum unavailable, the object and purpose of the BIT required that Murphy be allowed to proceed under UNCITRAL. The tribunal therefore upheld jurisdiction, allowing the case to proceed to the merits.
The detail
Parties: Murphy Exploration & Production Company International v. Republic of Ecuador
Case number: PCA Case No. 2012-16
Outcome: Tribunal upheld jurisdiction, rejecting Ecuador's objection that the claim was barred because Murphy had not waited six months before filing the first ICSID arbitration; the defect was curable and Murphy could now proceed under UNCITRAL.
Applicable law: US-Ecuador BIT (1993), UNCITRAL Arbitration Rules 1976
Issues in play: The collision was between the procedural requirement of a six-month cooling-off period under Article VI(3)(a) of the BIT and the investor's right to access international arbitration. The tribunal held that the cooling-off period is a curable procedural defect, not an absolute jurisdictional bar, especially where the State's denunciation of ICSID left UNCITRAL as the only available forum.
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