Ecuador president says will leave arbitration body

By GABRIELA MOLINA

Ecuador's president said Saturday that his country plans to pull out of an international arbitration body that is considering complaints by several oil companies, arguing the process infringes on his country's sovereignty.

The Washington-based International Center for Investment Disputes, with 143 participating countries, helps assure investors that governments will not arbitrarily toss out contracts or confiscate property.

During his weekly radio address, Rafael Correa acknowledged the pullout could risk international legal battles.

He said all active cases "will have to continue" - apparently indicating his government will honor rulings involving several foreign oil companies that are battling Ecuador's efforts to cancel concessions or raise taxes.

The arbitration institute, an affiliate of the World Bank, dealt a setback to Ecuador this month when it told the government to hold off collecting disputed tax money from Paris-based Perenco SA and to avoid canceling the company's contracts until a final ruling is reached.

The government earlier had threatened to seize 70 percent of Perenco's oil production, nearly quadrupling its cut, until it collects enough money to cover a windfall profits tax imposed in 2007.

Los Angeles-based Occidental Petroleum Corp. is challenging Ecuador's cancellation of its contract.

Correa complained that the arbitration judges "can decided that the law of a sovereign country like Ecuador is too strong" and slash penalties "even if it recognizes that the foreign company violated the law."

He said that while international human rights courts require people to exhaust legal options at home before taking their case abroad, the International Center for Investment Disputes gives companies the right to bypass Ecuadorean courts and "bring us to Washington, to a center of arbitration."

"That is inadmissible. That cannot be tolerated even one minute more in a sovereign country."

Ecuador relies on oil exports for 40 percent of its national budget. It has renegotiated energy deals with Spanish oil company Repsol-YPF, China's Andes Petroleum and Brazil's state-run Petrobras SA to boost its share in oil profits by trying to switch to fee-for-service rather than per-barrel contracts.