OCCIDENTAL PETROLEUM CORPORATION OCCIDENTAL EXPLORATION .

INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENTDISPUTESWASHINGTON, D.C.In the annulment proceeding betweenOCCIDENTAL PETROLEUM CORPORATIONOCCIDENTAL EXPLORATION AND PRODUCTION COMPANY-andTHE REPUBLIC OF ECUADOR(ICSID Case No. ARB/06/11)DECISION ON ANNULMENT OF THE AWARDMembers of the CommitteeProf. Juan Fernández-Armesto, PresidentJudge Florentino P. Feliciano, Member of the CommitteeMr. Rodrigo Oreamuno B., Member of the CommitteeSecretary of the CommitteeMr. Gonzalo FloresRepresenting the Claimants:Representing the Republic of Ecuador:Mr. Donald P. de BrierMs. Marcia E. BackusOccidental Petroleum CorporationOccidental Exploration and ProductionCompanyLos Angeles, CAandMs. Laura C. AbrahamsonO’Melveny & MyersLos Angeles, CAandMr. David W. RivkinMs. Marjorie J. MenzaMs. Aimee-Jane LeeMr. Benjamin M. AronsonMs. Alexandra von WobeserDebevoise & Plimpton LLPNew York, NYandMr. Gaëtan VerhooselMs. Carmen Martínez LópezThree Crowns LLPLondon, UKDr. Diego García CarriónProcurador General del EstadoMr. George von MehrenMr. Stephen P. AnwaySquire Patton Boggs (US) LLP.Prof. Eduardo Silva RomeroMr. José Manuel García RepresaMs. Audrey CaminadesDechert (Paris) LLPProf. Pierre MayerDate of dispatch to the parties: November 2, 2015

ICSID Case No. ARB/06/11Decision on AnnulmentTABLE OF CONTENTSList of Defined Terms .5LIST OF CITED CASE LAW.9I.II.The Arbitration .131.Summary of the Dispute.132.Factual Background .133.Decision on Jurisdiction and Award .20The Annulment Procedure .23III. Grounds for Annulment in the Convention .251.Manifest Excess of Powers .252.Serious Departure from a fundamental Rule of Procedure.273.Failure to state Reasons.28IV.General Outline of the Grounds for Annulment .30V.The Decision on Jurisdiction .311.The Arbitrability Objection .31A.Respondent’s Position. 33B.Claimants’ Position . 33C.The Committee’s Decision . 332.The Standing Objection .36A.Respondent’s Position. 37B.Claimants’ Position . 37C.The Committee’s Decision . 373.The Inadmissibility Objection .39A.Respondent’s Position. 39B.Claimants’ Position . 39C.The Committee’s Decision . 404.The Negotiation Objection .41A.Respondent’s Position. 42B.Claimants’ Position . 42C.The Committee’s Decision . 43VI. Partial Annulment for Wrongful Assumption of Jurisdiction over 40% ofClaimants’ Investment .451.The Award .472.Respondent’s Position .52A.The Exercise of ratione personae Jurisdiction over Andes . 522

ICSID Case No. ARB/06/11Decision on AnnulmentB.Failure to apply the proper Rules of International Law on Damages . 53C.The Inexistence of the Assignment of the Farmout Agreement . 533.Claimants’ Position .54A.The Exercise of ratione personae Jurisdiction over Andes . 54B.Failure to apply the proper Rules of International Law on Damages . 54C.The Inexistence of the Assignment of the Farmout Agreement . 554.The Committee’s Decision .56A.Underlying Facts and Applicable Law . 57B. Excess of Powers in assuming Jurisdiction over the Investment held byAndes . 68VII. Other Grounds for Anullment .801.The Principle of Proportionality .81A.Respondent’s Position. 81B.Claimants’ Position . 82C.The Committee’s Decision . 832.The Finding of Negligence.89A.Respondent’s Position. 89B.Claimants’ Position . 90C.The Committee’s Decision . 903.Res Iudicata .95A.Respondent’s Position. 96B.Claimants’ Position . 96C.The Committee’s Decision . 974.DCF Model as exclusive Valuation Methodology .98A.Respondent’s Position. 99B.Claimants’ Position . 100C.The Committee’s Decision . 1015.The Decision to disregard Law 42 when assessing Claimants’Damages .103A.Respondent’s Position. 105B.Claimants’ Position . 108C.The Committee’s Decision . 1116.The decision to disregard the VAT Interpretative Law .123A.The Parties’ Positions . 126B.The Committee’s Decision . 1277.The Decision to disregard Alternatives to Caducidad .127A.The Parties’ Positions . 1283

ICSID Case No. ARB/06/11Decision on AnnulmentB.8.The Committee’s Decision . 129The Tribunal’s Email dated February 15, 2011 .129A.The Parties’ Positions . 130B.The Committee’s Decision . 131VIII. Costs and Expenses .132IX.Summary .133X.Decision .1354

ICSID Case No. ARB/06/11Decision on AnnulmentLIST OF DEFINED TERMSAECCity Investing Company Limited, a Bermuda company, orits mother company Alberta Energy Corporation Ltd., aCanadian company.AndesAndes Petroleum Co.ApplicationApplication for annulment of the Award dated October 9,2012.Arbitrability ObjectionEcuador’s jurisdictional objection as defined in para. 71infra.AwardOccidental Petroleum Corporation and OccidentalExploration and Production Company v. The Republic ofEcuador, ICSID Case No. ARB/06/11, Award, October 5,2012.BIT/ US-Ecuador BIT/TreatyTreaty between the United States of America and theRepublic of Ecuador Concerning the Encouragement andReciprocal Protection of Investments signed on August 27,1993.CIClaimants’ Counter-Memorial on Annulment, October 18,2013.C IIClaimants’ Rejoinder on Annulment, February 28, 2014.Caducidad DecreeDecree issued by the Ecuadorian Minister of Energy andMines on May 15, 2006, which terminated the ParticipationContract.CEEcuadorian Constitution of 1998.Civil CodeEcuadorian Civil Code, Official Registry Supplement 46dated June 24, 2005.ClaimantsOEPC and OPC.DCFDiscounted cash flow.Decision on Jurisdiction Occidental Petroleum Corporation and OccidentalExploration and Production Company v. The Republic ofEcuador, ICSID Case No. ARB/06/11, Decision onJurisdiction, September 9, 2008.DissentOccidental Petroleum Corporation and OccidentalExploration and Production Company v. The Republic of5

ICSID Case No. ARB/06/11Decision on AnnulmentEcuador, ICSID Case No. ARB/06/11, Dissenting Opinionby Prof. Brigitte Stern, October 5, 2012.DNHEcuador’s National Hydrocarbons Directorate.Ecuador / Republic/RespondentThe Republic of Ecuador.Farmout Agreement/FarmoutAgreement signed on October 19, 2000 between OEPC andAEC.Farmout AgreementsThe Farmout Agreement together with the Joint OperatingAgreement.Farmout PropertyWide concept as defined in Clause 1.01 of the FarmoutAgreement, see para. 194 infra.February EmailEmail from the President of the Tribunal to the Parties, datedFebruary 15, 2011.FETFair and equitable treatment.FMVFair market value.HCLEcuadorian Hydrocarbons Law.HTEnglish Transcript of the Hearing held in Paris on April 710, 2014.ICSIDInternational Centre for Settlement of Investment Disputes.ICSID ConventionConvention on the Settlement of Investment Disputesbetween States and Nationals of Other States.ICSID ArbitrationRulesICSID Rules of Procedure for Arbitration Proceedings ofApril 2006.InadmissibilityObjectionEcuador’s jurisdictional objection as defined in para. 106infra.Joint OperatingAgreementAgreement signed by OEPC and AEC in order to implementthe Farmout Agreement.Jurisdictional Objection Ecuador’s jurisdictional objection as defined in para. 70infra.Negotiation ObjectionEcuador’s jurisdictional objection as defined in para. 119infra.6

ICSID Case No. ARB/06/11Decision on AnnulmentLaw 42Law modifying the HCL, enacted by the EcuadorianCongress on April 19, 2006 and published in the OfficialGazette on April 25, 2006.Letter AgreementLetter Agreement executed between Andes and OEPC onFebruary 22, 2006.MinisterEcuadorian Minister of Energy and Mines.OEPCOccidental Exploration and Production Company.OPCOccidental Petroleum Corporation.ParticipatingAgreementsThe Participation Contract together with the Unit OperatingAgreements for the Eden-Yuturi Unitized Field and theLimoncocha Unitized Field.Participation ContractContract dated May 21, 1999 between OEPC andPetroEcuador for the exploration and exploitation ofhydrocarbons in Block 15 in the Ecuadorian Amazon.PCIJPermanent Court of International Justice.PetroEcuadorEcuador’s national oil company and successor to“Corporación Estatal Petrolera Ecuatoriana”, today,“Empresa Pública de Hidrocarburos del Ecuador”.RIEcuador’s Memorial on Annulment, August 12, 2013.R IIEcuador’s Reply on Annulment, January 6, 2014.R IIIEcuador’s Opening Statement at the Hearing on Annulment,April 7, 2014.Reply on JurisdictionRespondent’s submission dated April 23, 2008.Request for Arbitration Request for arbitration filed by Claimants on May 17, 2006.Standing ObjectionEcuador’s jurisdictional objection as defined in para. 86 etseq infra.State ParticipationIncome for the State related to the exploration andexploitation of crude deposits called the “participación delEstado en los excedentes de los precios de venta depetróleo” created by Law 42.VATValue Added Tax.VAT ArbitrationOccidental Exploration and Production Company v. TheRepublic of Ecuador, LCIA Case No. UN3467.7

ICSID Case No. ARB/06/11Decision on AnnulmentVAT AwardOccidental Exploration and Production Company v. TheRepublic of Ecuador, LCIA Case No. UN3467, Award, July1, 2004.VAT InterpretativeLawInterpretative Law relating to article 69-A (72) of theInternal Tax Regime Act (Law No. 2004-41) passed by theEcuadorian Congress on August 2, 2004.VCLTVienna Convention on Law of Treaties concluded on May23, 1969.8

ICSID Case No. ARB/06/11Decision on AnnulmentLIST OF CITED CASE LAWAESAES Summit Generation Limited and AES-Tisza Erömü Kftv. The Republic of Hungary, ICSID Case No. ARB/07/22,Decision of the ad hoc Committee on the Application forAnnulment, June 29, 2012.Amco IIAmco Asia Corporation and others v. Republic of IndonesiaICSID Case No. ARB/81/1, Decision on Annulment,December 3, 1992.AlemanniGiovanni Alemanni and others v. Argentine Republic, ICSIDCase No. ARB/07/8, Decision on Jurisdiction andAdmissibility, 17 November 2014AzurixAzurix Corp. v. The Argentine Republic, ICSID Case No.ARB/01/12, Award, July 14, 2006.Azurix (Annulment) Azurix Corp. v. The Argentine Republic, ICSID Case No.ARB/01/12, Decision on the Application for Annulment ofthe Argentine Republic, September 1, 2009.Binder-Haas ClaimBinder-Haas Claim, United States International ClaimsCommission (1951-1954), reprinted in I.L.R. 236-38(1957).CaratubeCaratube International Oil Company LLP v. Republic ofKazakhstan, ICISD Case No. ARB/08/12, Decision on theAnnulment Application of Caratube International OilCompany LLP, February 21, 2014.Chorzów FactoryCase concerning the Factory at Chorzów (Claim forIndemnity) (Merits), P.C.I.J. Series A, No. 17 (Judgement of13 September 1928).CMSCMS Gas Transmission Company v. The ArgentineRepublic, ICSID Case No. ARB/01/8, Decision onAnnulment, September 25, 2007.Duke EnergyDuke Energy International Peru Investments No. 1, Limitedv. Republic of Peru, ICSID Case No. ARB/03/28, Decisionof the Ad Hoc Committee, March 1, 2011.EnronEnron Corporation and Ponderosa Assets, L.P. v. ArgentineRepublic, ICSID Case No. ARB/01/3, Decision on theApplication for Annulment of the Argentine Republic, July30, 2010.9