A Luxembourg judicial authority ordered banks to freeze Ecuador’s assets in the country’s accounts due to a dispute over a US$391 million settlement that Anglo-French oil company Perenco says remains unpaid, according to a document accessed by Reuters.
Ecuador’s government pledged in June 2021 to pay the debt awarded to Perenco by the World Bank’s International Centre for Settlement of Investment Disputes (ICSID), which ruled that Ecuador had illegally terminated a production-sharing agreement with the company.
The country’s attorney general said last year that, due to financial difficulties, the government had contacted Perenco to negotiate a payment plan.
“To date, more than a year later, Perenco has still not received a single dollar from Ecuador,” Perenco said in a statement Monday, adding that it “will take steps to enforce its payment rights against Ecuador in Luxembourg and other jurisdictions.”
Ecuador’s economy and energy ministries were not immediately available for comment outside business hours. Global law firm Hogan Lovells, Ecuador’s legal advisers on U.S. law, was not immediately available for comment when called in London and Luxembourg.
A spokesman for the London office of Cleary Gottlieb Steen & Hamilton LLP, legal advisers to Ecuador’s Eurobond manager, did not immediately respond to a request for comment.
A document accessed by Reuters shows that a Luxembourg bailiff, Pierre Biel & Geoffrey Galle, ordered 122 banks operating in Luxembourg on July 28 to freeze assets in accounts used by Ecuador on behalf of Perenco. An employee of the judicial authority declined to comment when contacted by Reuters because they are not authorized to speak to parties not involved in the case.
Reuters could not immediately establish what assets Ecuador held in the Luxembourg accounts. The banks cited include Deutsche Bank, Credit Suisse, and HSBC.
Credit Suisse declined to comment, while HSBC and Deutsche Bank did not immediately respond to requests for comment.
Two years ago, the South American country defaulted on US$17.4 billion in foreign debt as the nation collapsed under one of the region’s worst coronavirus outbreaks after years of economic stagnation.
As part of the debt restructuring, Ecuador sold new bonds maturing in 2030, 2035, and 2040 listed on the Luxembourg stock exchange.
Many of these bonds had interest payments maturing on July 31.
It was not immediately clear what impact a freeze might have on Ecuador’s ability to make those payments.
Ecuador’s international bondholders include major asset managers such as BlackRock, PIMCO, and JPMorgan, according to data available from EMAXX, which provides details of fund holdings based on their public filings. The asset managers were not immediately available for comment.
The case that led to the ICSID award stemmed from a 2007 decree issued by then-President Rafael Correa that increased Ecuadorian state profits from oil sales generated by private companies above a certain level.
Perenco sued Ecuador in 2008 and finally received US$412 million in May last year. Perenco is entitled to US$391 million; after considering the compensation, it was ordered to pay Ecuador for environmental damage caused in the areas where it operated in blocks 7 and 21.
President Guillermo Lasso, a conservative former banker who took office in May 2021, has promised to revive Ecuador’s economy and attract investment, especially in oil and mining.
“Perenco remains hopeful that the Government of Ecuador will finally comply with its international obligations, demonstrate its commitment to the rule of law and keep its promises to foreign investors by promptly satisfying the award without further delay,” the company said in its statement.
With information from Reuters