Ecuador plans oil talks with China, slams tribunals

BEIJING, Nov 22 (Reuters) - Ecuador's president on Thursday condemned international arbitration as a biased tool of the rich world, as some of the country's foreign investors say they may turn to tribunals over a disputed tax on oil earnings.

The comments by Rafael Correa would likely dim hopes by foreign companies such as Spain's Repsol to overturn a windfall tax and help alleviate millions of dollars in losses.

The leftist president shocked investors in October by raising the tax to 99 percent from 50 percent of the extra oil revenues generated by companies above a contractual price.

Visiting China for the first time since his election, Correa said the two countries would set up a special working group to discuss the tax but in the long term he would like to see Latin American tribunals deciding similar spats.

"(We aim to) construct regional tribunals to discuss any problem within Latin America, knowing that justice will be applied," he said.

"With an institution which is a cheerleader for transnational capital, which is financed by this capital and is in debt to these countries where the capital is -- what guarantee of impartiality are we going to have?"

Last month, Ecuador also said it wants companies to switch to new deals that give the state all of the oil they extract and the companies a service fee payment instead.

Since then one firm, U.S.-owned City Oriente, has already filed an arbitration claim. Repsol is considering similar action and Chinese industry executives said the country's state oil firms may also turn to the courts.

An international tribunal has sided with City in the spat, ordering Ecuador to temporarily halt demands to charge the controversial windfall tax, according to court documents released by the company on Wednesday.

But the Ecuador attorney general's office has refused to recognise the tribunal's jurisdiction in this case and has not assigned defence lawyers. And Correa also said that he did not trust international tribunals.

Energy and Mines Minister Galo Chiriboga said Beijing and Quito hoped the working group had set a year-end target for reaching an agreement, and had signed two more deal covering the upgrading of two refineries in Ecuador and increasing recovery rates at the country's mature fields.

But Correa also said he thought there was room for improvement in ties between the two countries, particularly in managing a flow of Chinese products across the Pacific.

"Cooperation between China and Ecuador are at this moment very good but they can improve a lot," he said.

"We have a huge trade deficit with China. For China that is not interesting, it's just $500 million but for us it is a lot and increasing," he added.