Burlington v. Ecuador

Burlington Resources, Inc. v. Republic of Ecuador ICSID Case No. ARB/08/5
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Type of case:
Investor-State
Date of introduction:
21 Apr 2008
Status of the case:
Decided in favor of investor
Claimant's Country of Origin:
United States
Respondent:
Ecuador
Institution:
ICSID (International Centre for Settlement of Investment Disputes)
Applicable Treaties:
Ecuador - United States o...
Source(s) of the information:
Reproduced with the permission of the International Centre for Settlement of Investment Disputes :
Link1 (EN) Official source

Documents of the case

Brigitte Stern Appointed by the State
Stephen L. Drymer Appointed by the investor
Gabrielle Kaufmann-Kohler President
Source(s) of the information:
Reproduced with the permission of the International Centre for Settlement of Investment Disputes

Lawyers and other representatives

Decision on Counterclaims

TABLE OF ABBREVIATIONS AND DEFINITIONS
2nd SMCC Respondent [Ecuador]'s Second Supplemental Memorial on Counterclaims of 24 April 2012 (corrected as of 7 May 2012)
Andrade ER Expert Report of Fabián Andrade Narváez of 20 February 2013
API American Petroleum Institute
Arbitration Rules ICSID Rules of Procedure for Arbitration Proceedings
Award Decision on Reconsideration and Award
Bedón ER1 1st Expert Report of Dr. René Bedón of 27 September 2012
Bedón ER2 2nd Expert Report of Dr. René Bedón of 2 July 2013
BIT Bilateral Investment Treaty; specifically "Treaty between the United States and Ecuador concerning the Encouragement and Reciprocal Protection of Investments" of 11 May 1997
BP British Petroleum Development Limited
Burlington Burlington Resources Inc.
CEPE Corporación Estatal Petrolera Ecuatoriana
Civil Code or CC Ecuadorian Civil Code
CMCC Claimant [Burlington]'s Counter-Memorial on Counterclaims of 29 September 2012
Consortium Consortium formed by Perenco Ecuador Limited and Burlington Resources Oriente Limited
CPF Central Production Facility
C-PHB Claimant [Burlington]'s Post-Hearing Brief of 3 October 2014
C-PSVB Claimant [Burlington]'s Post-Site Visit Brief of 15 July 2015
CPUF Coca-Payamino Unified Field
Crespo ER Expert Report of Ricardo Crespo Plaza of 29 September 2011
Decision on Liability Decision on Jurisdiction Decision on Liability of 14 December 2012 Decision on Jurisdiction of 2 June 2010
EIS Environmantal Impact Study
EML Environmental Management Law (Ley de Gestión Ambiental)
ER Expert Report
Exh. Exhibit
Exh. C- Claimant [Burlington]'s Exhibits
Exh. CL- Claimant [Burlington]'s Legal Exhibits
Exh. E- Respondent [Ecuador]'s Exhibits
Exh. EL- Respondent [Ecuador]'s Legal Exhibits
GSI GSI Environmental Inc.
GSI ER1 1st Expert Report of GSI of 20 September 2012
GSI ER2 2nd Expert Report of GSI of 2 July 2013
HL Hydrocarbons Law (Ley de Hidrocarburos)
ICSID International Centre for Settlement of Investment Disputes
ICSID Convention Convention on the Settlement of Investment Disputes between States and Nationals of other States
IDW Inverse Distance Weighting
IEMS Integrated Environmental Management Services, S.A. de C.V.
IEMS ER1 1st Expert Report of IEMS of 11 January 2011
IEMS ER2 2nd Expert Report of IEMS of 29 September 2011
IEMS ER3 3rd Expert Report of IEMS of 23 April 2012
IEMS ER4 4th Expert Report of IEMS of 18 February 2013
MAB UNESCO Man and the Biosphere Program
NTU Nephelometric Turbidity Units
P&T Pump-and-Treat
Perenco Perenco Ecuador Limited
PHB Post-Hearing Brief
PO [No.] Procedural Order [number]
PRB Permeable Reactive Barriers
Protocol Joint Site Visit Protocol signed by both Parties of 20 January 2015
PSC Production Sharing Contract
PSE Prediction Standard Error
RAOHE Environmental Regulation for Hydrocarbon Operations in Ecuador (Reglamento Ambiental para las Operaciones Hidrocarburíferas en el Ecuador)
REC Recognized Environmental Condition
Rejoinder Claimant [Burlington]'s Rejoinder on Counterclaims of 8 July 2013
Reply Respondent [Ecuador]'s Reply on Counterclaims of 18 March 2013
ROH Regulation of Hydrocarbon Operations (Reglamento de Operaciones Hidrocarburíferas)
R-PHB Respondent [Ecuador]'s Post-Hearing Brief of 3 October 2014
RPS RPS Group Plc
RPS ER2 2nd Expert Report of RPS of February 2013
R-PSVB Respondent [Ecuador]'s Post-Site Visit Brief of 15 July 2015
Saltos WS1 1st Witness Statement of Wilfrido Saltos of 28 September 2012
Saltos WS2 2nd Witness Statement of Wilfrido Saltos undated
Site Visit The inspection of a number of sites within Blocks 7 and 21
SMCC Respondent [Ecuador]'s Supplemental Memorial on Counterclaims of 30 September 2011
SNAP National System of Protected Areas (Sistema nacional de áreas protegidas)
SPLP Synthetic Precipitation Leaching Procedure
TCLP Toxicity Characteristic Leaching Procedure
TPH Total Petroleum Hydrocarbons
Tr. [(Day)] [(Language)] [page:line] Transcript of the Hearing on Counterclaims of 1-7 June 2014, English or Spanish version, as indicated
Tr. Site Visit [(Day)] (ENG) [page:line] Transcript of the Site Visit of 29 March to 1 April 2015, English version
TULAS Unified Text of Secondary Environmental Legislation (Texto Unificado de Legislación Ambiental Secundaria)
UNESCO United Nations Educational, Scientific and Cultural Organization
UPL Upper Prediction Limit
USD United States Dollar
USEPA United States Environmental Protection Agency
VOC Volatile Organic Compounds
WS Witness Statement

 

 

 

I. THE PARTIES

A. The Counter-Claimant

1.
The Counter-Claimant is the Republic of Ecuador ("Ecuador" or the "Counter-Claimant" or the "Respondent").
2.
The Counter-Claimant is represented in these proceedings by Dr. Diego García Carrión, Procurador General del Estado, Dr. Blanca Gómez de la Torre, Directora de Asuntos Internacionales y Arbitraje, Dr. Christel Gaibor, and Dr. Diana Moya at the PROCURADURÍA GENERAL DE ECUADOR; by Professor Eduardo Silva Romero, Mr. José Manuel García Represa, Mr. Philip Dunham, Mr. Alvaro Galindo, Ms. Maria Claudia Procopiak, Ms. Audrey Caminades and Ms. Gabriela González Giráldez of the law firm DECHERT (Paris) LLP; and by Professor Pierre Mayer who left DECHERT (Paris) LLP on 1 June 2015.

B. The Counter-Respondent

3.
The Counter-Respondent is Burlington Resources Inc. ("Burlington" or the "CounterRespondent" or the "Claimant"), a corporation created under the laws of the State of Delaware, United States of America, in 1988 and active in the exploitation of natural resources. On 31 March 2006, Burlington was acquired by ConocoPhillips, a multinational energy company with headquarters in the State of Texas, United States of America.
4.
The Counter-Respondent is represented in these proceedings by Mr. Nigel Blackaby, Ms. Noiana Marigo, Ms. Lauren Friedman, Mr. Leon Skornicki and Ms. Giulia Previti of the law firm FRESHFIELDS BRUCKHAUS DERINGER US LLP; by Ms. Tracie Renfroe, Mr. Wade Corriell, Mr. Esteban Leccese, Ms. Jamie M. Miller, Ms. Anisha Sud and Ms. Sara McBrearty of the law firm KING & SPALDING; and by Mr. Javier Robalino-Orellana of the law firm FERRERE.

II. PROCEDURAL HISTORY

5.
The counterclaims addressed in this decision (the "Decision") were filed as part of ICSID Case No. ARB/08/5, which has already given rise to decisions on jurisdiction and liability and which will end by the notification of an Award shortly following this Decision.

A. Initial Phase

6.
Pursuant to Rule 40(2) of the ICSID Arbitration Rules, Ecuador asserted two counterclaims in its Counter-Memorial on Liability of 17 January 2011. Although Burlington initially stated that it would challenge the Tribunal's jurisdiction, the Parties later executed an agreement dated 26 May 2011 by which Burlington accepted the jurisdiction of the Tribunal over the counterclaims.1

B. Written Phase

7.
After having consulted with the Parties, the Tribunal issued Procedural Order No. 8 on 21 July 2011 (Procedural Orders are referred to herein as "PO" followed by their respective numbers; for example, Procedural Order No. 8 is "PO8"), which referred to and annexed the Parties' jurisdictional agreement and contained the calendar for the written phase of the counterclaims proceedings.
8.
In accordance with this calendar as later amended on the Parties' request, Ecuador filed a Supplemental Memorial on Counter-Claims on 30 September 2011 and a Second Supplemental Memorial on Counter-Claims on 24 April 2012. Burlington then filed its Counter-Memorial on Counter-Claims on 29 September 2012. Ecuador filed its Reply on 18 March 2013 and Burlington its Rejoinder on 8 July 2013.
9.
On 6 July 2012, the Tribunal issued PO9 with regards to Burlington's request for production of documents. On 14 December 2012, the Tribunal issued PO10 with regard to Ecuador's request for production of documents. On 22 May 2013, the Tribunal issued PO13 with regard to Burlington's additional requests for production of documents.
10.
On 8 April 2014, the Tribunal issued PO16 with regard to Ecuador's request to add new evidence to the record. On 16 April 2014, the Tribunal issued PO17 with regard to Burlington's request to add new evidence to the record. On 16 May 2014, the Tribunal issued PO20 with regard to Burlington's request to add new evidence in response to exhibits admitted by the Tribunal in PO16.

C. Hearing on Counterclaims

11.
Pursuant to PO14 dated 16 July 2013, the hearing on counterclaims (the "Hearing") was initially set to take place from 26 August to 31 August 2013. Due to the Proposal for Disqualification of Professor Francisco Orrego Vicuña submitted on 25 July 2013, the proceedings were suspended in accordance with Rule 9(6) of the ICSID Arbitration Rules. The proceeding was resumed on 10 January 2014 following the disqualification of Professor Orrego Vicuña and the appointment of Mr. Stephen Drymer as arbitrator. The Hearing was thus rescheduled and, in accordance with PO19 dated 16 May 2014, took take place from 1 to 7 June 2014.
12.
The Hearing was held at the World Bank offices in Paris. The following persons attended the Hearing:

• The Tribunal

Members of the Tribunal

Professor Gabrielle Kaufmann-Kohler, President

Professor Brigitte Stern, Arbitrator Mr. Stephen L. Drymer, Arbitrator Secretary of the Tribunal Mr. Marco Tulio Montañés-Rumayor Assistant to the Tribunal Mr. Magnus Jesko Langer

• Ecuador's representatives Counsel

Mr. Pierre Mayer Dechert (Paris) LLP

Mr. Eduardo Silva Romero Dechert (Paris) LLP

Mr. Philip Dunham Dechert (Paris) LLP

Mr. José Manuel García Represa Dechert (Paris) LLP

Mr. Timothy Lindsay Dechert LLP

Ms. Meredith Bloch Dechert (Paris) LLP

Ms. Audrey Caminades Dechert (Paris) LLP

Ms. Gabriela González Giráldez Dechert (Paris) LLP

Support

Ms. Djamila Rabhi Dechert (Paris) LLP

Mr. Jeremy Eichler Dechert (Paris) LLP

Mr. Pedro Arcoverde Dechert (Paris) LLP

Mr. Oswaldo Santos Davalos Dechert (Paris) LLP

Ms. Katerine Marami Dechert (Paris) LLP

Parties

Dr. Diego García Carrión Procuraduría General del Estado

Dr. Blanca Gómez de la Torre Procuraduría General del Estado

Dr. Diana Moya Procuraduría General del Estado

• Burlington's representatives

Counsel

Mr. Nigel Blackaby Freshfields Bruckhaus Deringer

Ms. Noiana Marigo Freshfields Bruckhaus Deringer

Ms. Lauren Friedman Freshfields Bruckhaus Deringer

Ms. Giulia Previti Freshfields Bruckhaus Deringer

Mr. Leon Skornicki Freshfields Bruckhaus Deringer

Ms. Sarah Gans Freshfields Bruckhaus Deringer

Mr. Anthony Ogunseye Freshfields Bruckhaus Deringer

Ms. Cassia Cheung Freshfields Bruckhaus Deringer

Ms. Tracie Renfroe King & Spalding

Mr. Wade Coriell King & Spalding

Mr. Esteban Leccesse King & Spalding

Ms. Jamie Miller King & Spalding

Ms. Anisha Sud King & Spalding

Ms. Sara McBrearty King & Spalding

Ms. Veronica Garcia King & Spalding

Ms. Pui Yee (Lisa) Wong King & Spalding

Mr. Thomas Norgaard Debevoise & Plimpton

Ms. Floriane Lavaud Debevoise & Plimpton

Paz Horowitz Robalino Garces

Mr. Javier Robalino

Abogados

Mr. James Haase FTI Consulting

Parties

Ms. Janet Kelly ConocoPhillips Company

Mr. Clyde Lea ConocoPhillips Company

Ms. Laura Robertson ConocoPhillips Company

Ms. Suzana Blades ConocoPhillips Company

Mr. Fernando Avila ConocoPhillips Company

Ms. Ann Morgan ConocoPhillips Company

Mr. Jared L. Richards ConocoPhillips Company

Mr. Rick Greiner ConocoPhillips Company

• Ecuador's witnesses and experts

Witnesses

Mr. Saulo Bernabe Carrasco Paredes Agencia de Regulación y Control Hidrocarburífero del Ecuador (ARCH)

Mr. Pablo Alberto Luna Hermosa Petroamazonas

Mr. Diego Fernando Montenegro Munoz Petroamazonas

Mr. Manuel Solís Petroamazonas

Mr. Marco Puente Petroamazonas

Experts

Mr. Ricardo Crespo Universidad San Francisco de Quito

Mr. Fabian Alexander Andrade Narvaez Universidad San Francisco de Quito

Mr. José Rubén Villanueva Peon IEMS (Integrated Environmental Management Services, S.A. de C.V.)

Mr. José Francisco Alfaro Rodriquez IEMS (Integrated Environmental Management Services, S.A. de C.V.)

Mr. Jonathan Green IEMS (Integrated Environmental Management Services, S.A. de C.V.)

Mr. Henry Chaves Kiel IEMS (Integrated Environmental Management Services, S.A. de C.V.)

Ms. Kathleen Kerr RPS

Ms. Martha Pertusa RPS

Mr. Scott Crouch RPS

• Burlington's witnesses and experts

Witnesses

Mr. Alex Martinez Burlington Resources Peru Ltd

Mr. Wilfrido Saltos Perenco Ecuador Limited

Mr. Eric d'Argentré Perenco Ecuador Limited

Experts

Mr. John Connor GSI Environmental Inc.

Mr. Gino Bianchi GSI Environmental Inc.

Mr. Danny Bailey GSI Environmental Inc.

Ms. Claudia Sanchez de Lozada GSI Environmental Inc.

Mr. Geoffrey R. Egan Intertek

Mr. Dr. René Bedón Albán Bedón Macías & Associates

Mr. Shahrokh Rouhani NewFields

13.
The Tribunal heard opening and closing statements by counsel as follows:

• For Ecuador: Mr. Eduardo Silva Romero, Mr. Pierre Mayer, Mr. José Manuel García Represa, Mr. Philip Dunham, and Mr. Timothy Lindsay.

• For Burlington: Mr. Nigel Blackaby, Mr. Wade Coriell, and Ms. Tracie Renfroe.

14.
The Tribunal also heard evidence from the fact witnesses and experts listed in paragraph 12.
15.
The Hearing was interpreted to and from English and Spanish. It was also sound-recorded and transcribed verbatim, in real time, in both English and Spanish. Copies of the sound recordings and the transcripts were delivered to the Parties. At the end of the Hearing, the Tribunal and the Parties held a procedural discussion in relation to posthearing matters, including the advisability and feasibility of a site inspection.

D. Post-Hearing Phase

16.
Pursuant to PO21, and after several postponements, the Parties simultaneously filed Post-Hearing Briefs on 3 October 2014.
17.
On 22 December 2014, the Tribunal issued PO24 with regard to Burlington's requests for production of documents, of which one request partially related to the counterclaims proceedings.

E. Site Visit

18.
Having secured the Parties' consent at the Hearing, the Tribunal proceeded with the inspection of a number of sites within Blocks 7 and 21 (the "Site Visit"). The Tribunal informed the Parties by letter of 23 July 2014 that the main objective of the Site Visit was to focus on (i) soil contamination, including issues of topography and groundwater and (ii) land use, including the Sumaco Biosphere Reserve.2 Upon the invitation and with the guidance of the Tribunal, the Parties drew up a Joint Site Visit Protocol (the "Protocol"). For this purpose, the Parties and the Tribunal held two telephone conferences, respectively on 8 October 2014 and 4 November 2014. The Protocol was executed by the Parties on 20 January 2015.
19.
The Protocol was incorporated into PO30 dated 25 March 2015. It set out the scope of the Site Visit, provided for the preparation of joint site information packets ("Joint Site Packets"), addressed pre-Site Visit inspections, detailed the Site Visit itinerary and schedule, provided for a confidentiality regime as well as immunities, and touched on miscellaneous other issues, such as transportation and security, accommodation, food, safety and health.
20.
Up to 12 representatives per Party were permitted to attend at each visited site.3 Counsel for the Parties were invited to make oral presentations at each site and to respond to the Tribunal's questions. The Tribunal also addressed questions to the group of experts and to the fact witness designated by each Party for a given site.4 Follow-up questions by the Parties were not allowed, subject to the Tribunal's permission under certain circumstances (such as the particular relevance of the topic and available time), which was in fact granted on many occasions.5
21.
Under the Protocol, Party presentations were considered to be in the nature of submissions and expert and witness responses to Tribunal questions were deemed to be evidence. Accordingly, the experts and witnesses who participated in the Site Visit made the declaration provided in Rule 35(2) or (3) of the ICSID Arbitration Rules at the outset of the Site Visit.6
22.
The Protocol further specified that any objection regarding the conduct of the Site Visit had to be raised immediately whenever possible and at the latest at dinner time on the day when the incident complained of occurred.7 In fact, informal debriefing meetings were held each day before dinner to discuss the conduct of the Site Visit that day and to seek to agree on possible improvements.
23.
The Joint Site Packets included information relating to the specific sites to be visited (for instance, excerpts from expert reports, pleadings, photographs, maps and/or historical records), their content being limited to evidence already in the record.8 The Parties agreed that no sampling was to be undertaken and that no media would be disturbed (soil, groundwater, sediment, or surface water) before or during the Site Visit.9 Off platform locations could be inspected upon request and disagreements concerning the planned Site Visit were to be resolved by the Tribunal prior to the Site Visit.10
24.
The Site Visit was conducted in English and Spanish with simultaneous translations.11 It was audio- and video-recorded, the audio/video record capturing (i) the presentations by the Parties, (ii) questions from the Tribunal, (iii) answers to such questions, and (iv) any features of the sites requested by the Tribunal.12
25.
The Site Visit took place from 29 March 2015 to 1 April 2015, with 2 April 2015 in reserve. The following persons attended the Site Visit:13

• For the Tribunal

Professor Gabrielle Kaufmann-Kohler, President of the Tribunal

Professor Brigitte Stern, Arbitrator

Mr. Stephen Drymer, Arbitrator

Secretary of the Tribunal

Mr. Marco Tullio Montañés-Rumayor

Assistant to the Tribunal

Mr. Magnus Jesko Langer

• Ecuador's representatives

Dr. Diego García Carrión, Procuraduría General del Estado Dr. Blanca Gómez de la Torre, Procuraduría General del Estado Dr. Diana Moya, Procuraduría General del Estado

Mr. Eduardo Silva Romero, Dechert (Paris) LLP Mr. José Manuel García Represa, Dechert (Paris) LLP Ms. Audrey Caminades, Dechert (Paris) LLP

Ms. Gabriela González Giráldez, Dechert (Paris) LLP

• Burlington's representatives

Ms. Suzana Blades, Burlington/ConocoPhillips Mr. Rick Greiner, Burlington/ConocoPhillips Ms. Laura Robertson, Burlington/ConocoPhillips Mr. John Urby, Burlington/ConocoPhillips14 Mr. Nigel Blackaby, Freshfields Bruckhaus Deringer Ms. Tracie Renfroe, King & Spalding LLP Ms. Jamie Miller, King & Spalding LLP Mr. Thomas Norgaard, Debevoise & Plimpton LLP Mr. Javier Robalino, Paz Horowitz

• Ecuador's witnesses and experts Ms. Martha Pertusa, RPS

Mr. Scott Crouch, Di Sorbo Consulting

Mr. Francisco Alfaro, IEMS

Mr. Henry Chaves, IEMS

Mr. Rodrigo Anota, IEMS

Mr. Marcel López, IEMS

Mr. Marco Puente, Petroamazonas

Mr. Pablo Luna, Petroamazonas

• Burlington's witnesses and experts Mr. John Connor, GSI Environmental Mr. Gino Bianchi, GSI Environmental

Mr. Danielle Kingham, GSI Environmental Mr. Wilfrido Saltos, Perenco

• Technical team

Mr. Daniel Giglio, Interpreter Mr. Charles Roberts, Interpreter Mr. Favio Claure, AV Contractor

Mr. Christian Richard Winter, AV Contractor

26.
The Tribunal and the Parties visited the following sites:

On day 1 (29 March 2015): Yuralpa Pad A;

On day 2 (30 March 2015): Payamino 2/8, Payamino 1/CPF, Coca 8 and Coca CPF;

On day 3 (31 March 2015): Jaguar 1, Jaguar 7/8 and Mono CPF;

On day 4 (1 April 2015): Gacela 2, Gacela CPF, Gacela 1/8 and Coca 15.15

27.
While the Protocol provided that there would be no record of the Site Visit other than the transcript, audio and video recordings mentioned above, it was arranged with the consent of the Parties that an official photograph be taken on day 2 at the Coca 8 site. Such photograph, reproduced below, shows the Tribunal, its Secretary and Assistant, the Party representatives and their Counsel, the experts, the fact witnesses, and the interpreters.

F. Post Site Visit Phase

28.
Pursuant to paragraph 31 of the Protocol and paragraph 2 of PO31 dated 21 April 2015, the ICSID Secretariat made copies of the unedited audio/video recording available to the Parties on 21 April 2015. It also provided the Parties with the "floor" transcripts on 19 May 2015 and circulated the translated transcripts on a rolling basis from 31 May 2015 to 6 June 2015.
29.
Burlington objected to Ecuador's wish to make public use of the audio/video recording. The Tribunal decided that absent the consent of both Parties, under the Protocol and Regulation 22(2) of the ICSID Administrative and Financial Regulations, the audio/video recording and its transcript could not be made available to the public or used outside the present proceedings. However, in light of Ecuador's insistence on its duty of transparency within its domestic legal framework, the Tribunal indicated that if Ecuador wished to use the audio/video recording and/or transcript, it could apply for leave from the Tribunal by (i) identifying with precision the excerpts which it wished to use, (ii) describing the specific purpose for which the identified excerpts would be put to use, and (iii) explaining the reasons why such publication is deemed necessary.16 Ecuador did not seek leave from the Tribunal thereafter.
30.
In accordance with PO31, the Parties filed Post-Site Visit Briefs on 15 July 2015. In PO31, the Tribunal had asked the Parties to jointly file certain depth-integrated maps for the sites inspected during the Site Visit so as to enable the Tribunal to more easily compare the Parties' respective delineations of the alleged contamination and of the areas to be remediated as a result. This request raised difficulties for the parties in terms of the data required to generate these maps and the potential use of data and maps not previously filed in the record. As a result, after a lengthy series of correspondence, the Tribunal advised the Parties on 12 August 2015 that, in light of such unexpected difficulties, it preferred not to receive these maps.
31.
Following the issuance on 14 August 2015 of the Interim Decision on Ecuador's Environmental Counterclaim in ICSID Case No. ARB/08/6, Perenco Ecuador Limited v. the Republic of Ecuador ("Perenco v. Ecuador"), the Tribunal invited the Parties to provide their comments on that decision, which they did on 18 September 2015.
32.
In the course of its deliberations, the Tribunal provided the Parties with status reports on its progress on 13 November 2015, on 25 February 2016, on 27 July 2016 and on 29 November 2016. Upon the invitation of the Tribunal, the Parties filed their cost submissions on 2 May 2016, and their reply submissions on 23 May 2016.
33.
By letter of 18 January 2017, Ecuador requested leave from the Tribunal to submit the audio and video recording of the site visit to Blocks 7 and 21 conducted in Perenco v. Ecuador. By letter of 20 January 2017, Burlington objected to Ecuador's request. After due deliberation, the Tribunal reached the conclusion that the submission of the audio and video recording of the site visit in Perenco v. Ecuador would not assist the resolution of the counterclaims in these proceedings. Accordingly, by letter of 25 January 2017, the Tribunal denied Ecuador's request to file the audio and video recording of the Perenco site visit into the record of this arbitration. Further, by means of the same letter, the Tribunal, declared the proceedings closed as of 25 January 2017 in accordance with ICSID Arbitration Rule 38(1).

III. GENERAL INFORMATION REGARDING BLOCKS 7 AND 21

34.
To the extent relevant for purposes of the counterclaims, the descriptions of fact contained in decisions previously rendered in this arbitration, i.e. the Decision on Jurisdiction and the Decision on Liability, are incorporated into the present Decision. Similarly, terms and abbreviations used there are used here with the same meaning.
35.
This section addresses various characteristics of Blocks 7 and 21 not previously discussed, in particular as regards their geography and the oilfield operations that have been conducted in the Blocks, including by Petroamazonas after July 2009. It is based on allegations of facts that were not disputed or on facts that the Tribunal considers established. Where a fact referred to has been disputed it is noted as such.
36.
Blocks 7 and 21 are located in the provinces of Francisco de Orellana, Napo and Pastaza, in the Amazon region of the Ecuadorian Oriente.17 Situated east of the Andean mountains in North-Eastern Ecuador, the Oriente is located in a slightly undulated plain between 200 and 350 meters above sea-level, characterized by the presence of swamps and numerous water bodies flowing into the Napo River.18

Topographic Map of Blocks 7 and 2119

A. Block 7 (including the Coca-Payamino Unified Field)

37.
Block 7 and the Coca-Payamino Unified Field (the "CPUF"), which extends to the northeast of Block 7, cover an area of nearly 2,000 square kilometers located approximately 160 kilometers east of the capital Quito.
38.
It is also a relatively populated area: the city of Francisco de Orellana (also known as "Coca"), capital of Orellana province, is located on this Block at the confluence of the Napo, Coca and Payamino Rivers.20 Orellana province has a population of 136,000, of which about 73,000 live in the city of Coca.21 Coca is the main hub for oilfield contractors and functions as the platform for numerous oilfield operations throughout the region. The following map shows Block 7:22
39.
A large part of Block 7, including the city of Coca, overlaps with the Sumaco Biosphere Reserve,23 and with the Yasuní Biosphere Reserve, both of which are UNESCO MAB reserves established pursuant to the UNESCO Man and Biosphere Program.24 The following map shows the Sumaco and Yasuní Biosphere Reserves:25
40.
Other than some exploratory wells, such as Zorro and Cóndor, which were drilled by Texaco in the 1970s, Block 7 was first developed by British Petroleum Development Limited ("British Petroleum" or "BP") under a Service Contract concluded in December 1985 ("Service Contract") with the then Ecuadorian State Petroleum Corporation (Corporación Estatal Petrolera Ecuatoriana ; "CEPE").26 At that time, Block 7 did not include the Coca field or the portion of the Payamino field that extended to the north of Block 7 and that were operated by CEPE.27 Following BP's 1986 discovery of oil in the Payamino field, in the northeastern corner of Block 7,28 CEPE's drilling of the Payamino 2 well in 1987 and the drilling by CEPE's upstream subsidiary Petroproducción of the Coca 4 and Coca 7 wells, the conclusion was reached in 1989 that the oil reservoir from the Payamino field extended beyond the borders of Block 7 into the Coca field, thus forming a "common oil deposit".29
41.
As a result, negotiations began for a Unified Exploitation Operating Agreement for the Common Oil Deposits of Basal Tena, Napo "U", and Hollín Superior and Hollín Principal of the CPUF ("Unitization Agreement").30 On 11 October 1990, Oryx (which had acquired 100% of BP's rights under the Service Contract in September 1990) and Petroecuador (which had replaced CEPE in September 1989) executed the Unitization Agreement, providing for alternate operatorship of the CPUF between Oryx and the State-owned enterprise Petroproducción (which exercised Petroecuador's rights under the Unitization Agreement).31 Accordingly, Petroproducción operated the CPUF between February 1991 and February 1994. Oryx operated the CPUF between February 1994 and June 1997, and Petroproducción reassumed operations from June 1997 through February 2000.32
42.
The CPUF is depicted on the map below:33
43.
As shown in the maps at paragraphs 38 and 412 above, Block 7 (including the CPUF) features seven active oil fields: Payamino, Coca, Lobo, Mono, Jaguar, Oso, Gacela, and Cóndor.34 As noted above, Oryx acquired British Petroleum's interest in the Block 7 Service Contract in 1990. In 1993, Santa Fe Minerales del Ecuador, S.A. ("Santa Fe"), Sociedad Internacional Petrolera ("Sipetrol") and Sigdoil, S.A. (later renamed Compañía Latinoamericana Petrolera Numero Dos, S.A. or "Clapsa II") acquired interests in the Service Contract.35 In 1995, Santa Fe transferred its rights to Preussag Energie GmbH ("Preussag").36
44.
In 1999, Oryx became Kerr McGee Ecuador Energy Corporation ("Kerr McGee" or "KmG").37 In March 2000, an amendment to the Service Contract was executed and the contractual framework was migrated into a Production Sharing Contract ("PSC"), which was entered into between Petroecuador on the one hand, and Kerr McGee, Preussag, Sipetrol and Clapsa II on the other hand, for the joint operation of Block 7 and the Coca-Payamino Unified Field.38 As a result of that transaction, Kerr McGee became the joint operator of Block 7 and the Coca-Payamino Unified Field, and the two areas have been jointly administered ever since.39 Under the Participation Contract, the Contractor companies were to invest in the Block at their own risk in exchange for a share of the crude oil produced.40
45.
In the course of 2001, Perenco Ecuador Limited ("Perenco") and Burlington both acquired interests in the Block 7 PSC, Perenco holding 45%41 and Burlington 42.5%.42 Perenco became the operator of the block on 12 December 2002. The Perenco-Burlington Consortium (the "Consortium") then became the 100% operator of Block 7 in September 2005.
46.
By the time the Consortium ceased operating the Blocks in July 2009, Block 7 included six CPFs; multiple platforms – 7 in Gacela, 11 in Mono, 7 in Jaguar, 16 in Coca, 10 in Oso, 17 in Payamino, 4 in Lobo, and a platform in the Cóndor field (a field where no oil was found); fluid lines and pipelines connecting these facilities with each other and beyond; three camps for employees; and a waste management area.43 With Perenco as operator, the production in Block 7 increased from approximately 13,000 barrels a day in February 2003 to approximately 19,000 barrels a day in February 2009.44

B. Block 21

47.
To the south of Block 7, Block 21 covers an area of nearly 1,550 square kilometers in the Eastern-Central Oriente basin about 240 kilometers southeast of Quito.45 Block 21 is shown on the following map:46
48.
Several indigenous communities reside in Block 21, including fourteen Kichwa and three Huaorani communities.47 Block 21 partly overlaps with the Sumaco Biosphere Reserve, the Yasuni Biosphere Reserve, as well as with the Huaorani Indigenous Reserve located in the eastern part of the Block.48
49.
Prior to 1995, Block 21 had been explored by Texaco and Exxon, each drilling a single well in 1972 and 1987 respectively.49 On 20 March 1995 Oryx and Ecuador entered into a Participation Contract for Block 21.50 Burlington acquired a 37.5% interest in the Block in late 2001 and a further 8.75% in 2005 (for a total of 46.25%). Perenco owned the remaining share and was the operator of the Block.
50.
Although exploitation of the Block began on 8 June 2001,51 as late as 2002 Block 21 remained sparsely developed52 with only a small number of wells and no CPF.53 Actual production in the Block began only in 2003 and it was largely developed by the Consortium.54 By July 2009, the Consortium had increased the number of wells from 3 to 3155 and Block 21 contained a total of 6 platforms in the Yuralpa field, 2 platforms in Chonta and Waponi-Ocatoe, two injection wells in Sumino and Nemoca, one camp, one CPF, one waste management area and a pipeline linking Yuralpa and Puerto Napo.56
51.
Burlington highlights the fact that, in contrast to Block 7 which had already been developed by prior operators, Block 21 only accounts for 8.3% of Ecuador's soil remediation claims and 16.7% of the total cost for groundwater remediation.57

IV. SUMMARY OF THE PARTIES' POSITIONS AND REQUESTS FOR RELIEF

A. Ecuador's Position and Request for Relief

52.
Ecuador's case on the counterclaims can essentially be summarized as follows:

i. Under Ecuadorian law, Burlington is strictly liable for any environmental damage found in Blocks 7 and 21. There is environmental damage in Blocks 7 and 21 in the form of significant soil and groundwater pollution. IEMS, Ecuador's environmental experts, discovered that close to 2.5 million cubic meters of soil and all groundwater locations tested (18) are polluted with hydrocarbons, heavy metals or both. Burlington is liable for this damage.

ii. Under the PSCs and Ecuadorian law, Burlington was bound to maintain the infrastructure, and return it to Ecuador, in good working condition in accordance with industry standards. Burlington breached this obligation and is thus liable.

iii. As a result of these breaches, Burlington must pay damages to Ecuador in the total amount of USD 2,797,007,091.42 composed of USD 2,507,107,626 for soil remediation and USD 265,601,700 for groundwater remediation, USD 3,380,000 to complete groundwater studies, USD 3,500,000 for the abandonment of wells in Block 7, and USD 17,417,765.42 for infrastructure damage,58 plus interest and costs.

53.
On this basis, in its Post-Hearing Brief, Ecuador requests that the Tribunal to render an award:

1. Declaring

(i) That Burlington is liable towards Ecuador for the costs of restoring the environment in areas within Blocks 7 and 21 of the Ecuadorian Amazon Region;

(ii) That Burlington is liable towards Ecuador for the costs required to remedy the poor state of the infrastructure of Blocks 7 and 21 left behind by Burlington;

2. Ordering

(i) Burlington to pay damages to allow the State to proceed with full restoration of the environment in areas within Blocks 7 and 21 of the Ecuadorian Amazon Region quantified at USD 2,507,107,626 (or, alternatively, USD 790,465,298) for soil clean up costs and USD 265,601,700 for groundwater remediation costs;

(ii) Burlington to pay the costs for Ecuador to complete groundwater studies in 52 additional locations quantified at USD 3,380,000;

(iii) Burlington to pay the costs of abandonment of wells in Block 7, quantified at USD 3,500,000;

(iv) Burlington to pay damages for its failure to return the Blocks' infrastructure in good condition to Ecuador in an amount quantified at USD 17,417,765.42 with interest at an adequate commercial interest rate from the date of disbursement thereof until the date of the Award;

(v) Burlington to pay all the costs and expenses incurred in this arbitration in connection with Ecuador's counterclaims, including but not limited to Ecuador's legal and expert fees and costs and ICSID's other costs; and

(vi) Claimant to pay interest at an adequate commercial interest rate on all amounts stated in the preceding paragraphs from the date of the Award until the date of full payment; and

3. Awarding

(i) Such other relief as the Tribunal considers appropriate.59

54.
In its Post-Site Visit Brief, Ecuador has expressly maintained these prayers for relief.60

B. Burlington's Position and Request for Relief

55.
In essence, Burlington makes the following submissions:

i. Ecuador's multi-billion environmental claim is no more than tactical retaliation fabricated after Burlington lodged its ICSID claim, with the objective of offsetting the significant damages that are owed to Burlington by Ecuador for its unlawful seizure of the Blocks.61 Similarly, the infrastructure claim is opportunistic and lacks merit.62 It was fabricated to provide additional support for Ecuador's environmental claim. Not satisfied in having cashed in over USD 4 billion in "unanticipated" oil revenues from the seizure of the Blocks, Ecuador now seeks USD 2.6 billion for an alleged "tremendous environmental harm" caused by a "series of small incidents", and an additional USD 17 million to upgrade infrastructure it took from the Consortium.63

ii. Ecuador in fact seeks to impose on Burlington responsibility for environmental conditions preexisting the Consortium's operation of Blocks 7 and 21, and even preexisting any human activity on the Blocks. Moreover, whatever environmental damage may be present in the Blocks today is the result of, or has been severely exacerbated by, Ecuador's own operation and indeed expansion of oilfield operations.

iii. Ecuador's claims must be rejected in toto, since Ecuador relies on invented legal tests that have never been applied in practice and are scientifically unsupported. Alternatively, the Tribunal should evaluate the reasonable costs of remediating "the pockets of exceedances at the two sites that are possibly attributable to the Consortium, as would have occurred in a normal orderly handover, absent Ecuador's unlawful actions".64 These costs amount to USD 1.09 million and include the remediation of Yuralpa Pad A and Jaguar 1 Area 3T.

56.
Accordingly, in its Post-Hearing Brief, Burlington requests the Tribunal to grant the following relief:

(a) DISMISS with prejudice Ecuador's environmental counterclaims in their entirety;

(b) In the alternative, determine that the reasonable cost of remediating the exceedances possibly attributable to the Consortium, including the costs of closing four pits and abandoning seven wells is no more than USD 1.09 million;

(c) DECLARE that, beyond the exceedances assessed by the Tribunal, Burlington has no further liability for environmental harm in Blocks 7 and 21;

(d) DISMISS with prejudice Ecuador's infrastructure counterclaims in their entirety;

(e) ORDER Ecuador to pay all of the costs and expenses of this arbitration, including Burlington's legal and expert fees, the fees and expenses of any experts appointed by the Tribunal, and ICSID's other costs;

(f) ORDER Ecuador to pay compound interest on the sum awarded in (e) above, until the date of effective and complete payment, at a rate of 4 percent compounded annually, or at such a rate and for such a period of compounding as the Tribunal considers just and appropriate in the circumstances; and

(g) AWARD such further and other relief as the Tribunal considers appropriate.65

57.
The Post-Site Visit Brief did not change these requests for relief.

V. ANALYSIS

58.
Having considered the Parties' extensive submissions as well as the very extensive evidentiary record, including the evidence gathered during the Site Visit, the Tribunal now proceeds with its analysis of the counterclaims. It will first address various preliminary matters (Section A). Thereafter, it will review Ecuador's environmental counterclaims (Section B) and then turn to the infrastructure counterclaims (Section C) before concluding on the counterclaims, including on the avoidance of double recovery in connection with the counterclaims pending against Burlington's consortium partner Perenco (D). Finally, the Tribunal will discuss interest (VI) and costs (VII) before setting out its decision (VIII).

A. Preliminary Matters

59.
The present section deals with (1) the Tribunal's jurisdiction over the counterclaims, (2) the scope of this Decision, (3) the relation between this arbitration and the Perenco arbitration, (4) the law applicable to the merits of Ecuador's counterclaims, and (5) certain evidentiary matters.

1. Jurisdiction

60.
The Tribunal's jurisdiction in respect of Ecuador's counterclaims is not challenged, and rightly so. As noted in PO8, it derives from an agreement entered into by the Parties on 26 May 2011.66 In this agreement, Burlington and Ecuador expressed their agreement and consent that this arbitration is the "appropriate forum for the final resolution of the Counterclaims arising out of the investments made by Burlington Resources and its affiliates in Blocks 7 and 21, so as to ensure maximum judicial economy and consistency".67
61.
Burlington committed not to raise any jurisdictional objections.68 The Parties further agreed that (i) the Tribunal's decision would be final and binding,69 (ii) Ecuador (including its emanations, agencies, instrumentalities, subdivisions and controlled corporations) waived its right to file the counterclaims against Burlington, its subsidiaries or any other corporation in the ConocoPhillips Group before "any jurisdiction whatsoever whether arbitral or judicial, national or international except for this Arbitration".70
62.
Since the agreement just described deals with jurisdiction over counterclaims, one must in addition refer to Article 46 of the ICSID Convention. Article 46 allows for counterclaims "arising directly out of the subject-matter of the dispute provided that they are within the scope of the consent of the parties and are otherwise within the jurisdiction of the Centre".71 These conditions are met here: (i) the counterclaims arise directly out of the subject-matter of the dispute, namely Burlington's investment in Blocks 7 and 21; (ii) they are within the scope of the Parties' consent to ICSID arbitration which is manifested in the agreement just referred to; and (iii) they also fall within the jurisdiction of the Centre as circumscribed by Article 25 of the ICSID Convention (legal dispute arising out of an investment, and nationality requirement).

2. Scope of this Decision

63.
This Decision resolves one part of the dispute which forms the subject matter of this arbitration, namely Ecuador's environmental and infrastructure counterclaims raised in the course of the proceedings over Burlington's claims against Ecuador. Burlington's claims, which form the other part of this dispute, have been dealt with in part in the Decision on Jurisdiction of 31 May 2010 and the Decision on Liability of 14 December 2012. Ecuador's request for reconsideration of the latter decision as well as the quantification of Burlington's claims will be settled in the forthcoming Award.

3. Relation with the Perenco arbitration

64.
In the separate ICSID arbitration initiated by Burlington's Consortium partner, Perenco, Ecuador has raised counterclaims essentially resting upon the same facts and legal arguments as those before this Tribunal. On 11 August 2015, the Perenco tribunal issued an Interim Decision on the Environmental Counterclaim (the "Perenco Decision"), in which it ruled on certain issues of fact and law with a view to narrowing its analysis of the counterclaims.72
65.
While the evidence gathered in the two proceedings was not identical, among other things, in terms of the witnesses heard,73 it remains that the two arbitrations essentially deal with the same alleged damages. Not surprisingly, questions thus arose during the arbitration on the relation between these two parallel proceedings, in particular in respect of (i) their potential consolidation or other "coordination" between the two tribunals, (ii) the admissibility in these proceedings of submissions and testimony presented in the Perenco arbitration (including transcripts from that arbitration), (iii) the impact of the Perenco Decision on this Tribunal's decision-making, and (iv) the risk of double recovery.
66.
With respect to item (i), Ecuador opposed the possibility of a consolidation of the counterclaim proceedings.74 While acknowledging that the two arbitrations were "parallel", Ecuador disagreed with Burlington that they were "nearly identical".75 At the end of the Hearing, the Tribunal enquired whether the Parties would accept some level of coordination between the two tribunals.76 Subject to consulting with Perenco, Burlington was in favor of such coordination if it could reduce the risk of contradictory decisions.77 By contrast, Ecuador maintained its opposition to consolidation and stated that it was "too late" for a coordination between the two tribunals.78 Lacking the consent of the Parties, the Tribunal had no choice but to refrain from any coordination with the Perenco tribunal.
67.
In connection with item (ii) above, the issue arose whether the Parties could rely on the transcripts of the Perenco hearing. Ecuador opposed the introduction into the record of the Perenco transcripts on the grounds that it "would threaten the structural integrity of the [present arbitration, as well as] violate the separate identity of the proceedings and create an unacceptable risk of pre-judgment".79 Following various exchanges, the Parties agreed to admit the Perenco transcripts, but only for impeachment purposes during cross-examination of each other's witnesses.80 Accordingly, except for a few instances where specific passages of the Perenco transcript were used for this purpose at the Hearing, the Perenco transcripts are not part of this record.81
68.
The Parties were asked to comment on the third issue, concerning the impact of the Perenco Decision on this case, after that decision was rendered. In its comments dated 18 September 2015, Ecuador reiterated that the two sets of proceedings are separate and invited the Tribunal to consider only the arguments and evidence before it in this present arbitration.82 For its part, Burlington commented that the Perenco Decision "substantially narrowed the disputed issues" and therefore invited the Tribunal to carefully assess that decision's conclusions.83 Burlington further stated that the Site Visit effectively eliminated the need to appoint an independent expert or to engage in further fact-finding.84
69.
The Tribunal is mindful of the separate nature of the two arbitrations and of its duty to resolve the dispute before it solely on its own record and merits. This said, the Tribunal is also mindful of the risk of double recovery, to which it will revert, and of the potential risk of contradictory decisions. For reasons linked to the value of coherence of the legal system, it considers that contradictory decisions on identical issues should be avoided to the degree possible without sacrificing any party's rights of due process or fairness. While ruling on the basis of the record in this case exclusively, the Tribunal will refer to the Perenco Decision in those instances where, in spite of the desire to avoid contradictions, it reaches a conclusion different from that of the Perenco tribunal.
70.
As regards the risk of double recovery (item (iv) above), Ecuador does not dispute that it seeks what Burlington calls "identical overlapping compensation with regard to the same alleged damage" in both proceedings.85 It also agrees that there is a risk of double recovery.86 This being so, at the end of the Hearing, Ecuador explained that it does not intend to recover its claimed damages twice, but that it will rely on whichever decision proves to be more favorable to its position.87 Burlington, on its part, requested that the Tribunal expressly address the risk of double recovery, such that "if the dispositive part of either of the awards on counterclaims provides for any compensation, Ecuador would be prevented from enforcing the second award to the extent that it has already been compensated by the first".88 The Tribunal addresses double recovery below (Section D).

4. Applicable Law

71.
The law governing the conduct of the procedure on the counterclaims is addressed in the rules of the ICSID Convention, the ICSID Arbitration Rules and the Tribunal's procedural orders, in particular PO8 (Proceedings on Counterclaims), PO14 (Hearing on Counterclaims), PO21 (Post-Hearing Matters), PO30 (Site Visit), and PO31 (Post Site Visit Matters).
72.
As regards the substance of the dispute, it is undisputed that Ecuadorian law applies to both the environmental and the infrastructure counterclaims. This being so, there is no common ground between the Parties with respect to the applicability to the environmental counterclaims of the Block 7 and Block 21 PSCs and the relevance of international law.
73.
With respect to the environmental counterclaims, Ecuador affirmed throughout the proceedings that its action is solely based on Ecuadorian tort law, as opposed to contract law, although it relies on several provisions of the PSCs to support its interpretation of the strict liability regime under Ecuadorian law.89
74.
According to Article 42(1) of the ICSID Convention, the Tribunal shall decide the dispute "in accordance with such rules of law as may be agreed by the parties", absent which "the Tribunal shall apply the law of the [host State] … and such rules of international law as may be applicable".90 Here, Ecuador brings a tort action, and neither Party has argued that the choice of (Ecuadorian) law in the PSCs encompasses torts. Therefore, the Tribunal will apply Ecuadorian tort law, not as the law chosen by the Parties under the first leg of Article 42(1) of the ICSID Convention, but as the law of the host State under the second leg of that provision. The relevance of this distinction is that, under the second leg, international law also "may be applicable". According to prevailing case law,91 it is left to the Tribunal's discretion to apply either municipal or international law depending on the type of issue to be resolved. Subject to any particular matter that may call for the application of international law, which will be discussed if and when it arises in the analysis, the Tribunal will thus apply Ecuadorian law to the environmental counterclaims. The fact that the dispute is governed by tort law does not mean, however, that the Tribunal may not look to the PSCs to inform its understanding of the obligations assumed by the Consortium in terms of environmental stewardship.
75.
With respect to the infrastructure counterclaims, Ecuador argues that Burlington's liability for the poor condition of the infrastructure arises both under the Block 7 and 21 PSCs and under Ecuadorian law.92 In this regard, the PSCs contain a choice of Ecuadorian law and, accordingly, the Tribunal will apply such law (under the first leg of Article 42(1) of the ICSID Convention) as well as any relevant contractual provisions of the PSCs.

5. Assessment of evidence

76.
At the Hearing, in accordance with its powers in evidentiary matters, the Tribunal suggested to the Parties that an inspection of various sites would assist its understanding of several key issues connected to the environmental counterclaims, such as soil and groundwater contamination, the experts' sampling programs, land use, the topography of the Blocks and specific sites, and the extensive modelling and delineation employed by the Parties' respective experts. As discussed above, both Parties having given their consent prior to the close of the Hearing, the Tribunal decided to conduct a Site Visit in accordance with ICSID Arbitration Rule 34(2)(b).93
77.
Further, in light of the technical nature of many of the factual issues at stake in the environmental counterclaims, including issues explored during the Site Visit, the Tribunal put to the Parties whether, in their view, it should seek the assistance of a Tribunal-appointed expert in addition to the experts offered by the Parties. The Tribunal ultimately concluded in the negative, because (i) neither Party requested the appointment of a Tribunal expert (for example, Burlington stated that with the benefit of the Site Visit it considered that the Tribunal was fully equipped to decide the environmental counterclaims "without the need for an independent expert or additional fact finding"),94 (ii) it had before it extensive evidence from qualified experts, (iii) it also had detailed evidence from fact witnesses, including persons with long-time familiarity with the fields, (iv) it had visited relevant sites and had thus acquired a further, firsthand, visual understanding of the physical environment in which the oil exploration and production operations were conducted, of the situation of the platforms and the other installations, and of the terrain and areas modelled and delineated by the experts. In addition, (v) developing and engaging in a process involving a Tribunal-appointed expert would have caused delays and costs which the Tribunal considered would be disproportionate to the possible usefulness of such an exercise in the circumstances, and contrary to the Tribunal's duty of efficiency.
78.
Several issues also arose in the context of the document production exercise, which will be addressed if and to the extent relevant to the Tribunal's analysis of particular claims or submissions discussed later in this Decision.

B. Environmental Counterclaims

79.
In a nutshell, Ecuador claims that the Consortium abandoned Blocks 7 and 21 leaving behind a massive environmental catastrophe, a claim which Burlington strongly denies (save for an admission of liability in an amount of approximately USD 1.09 million). The Parties are in sharp disagreement on nearly all issues of fact and law raised by these counterclaims. To untangle this disagreement, the Tribunal will first set out the Parties' positions on matters of law (Section 1). It will then review the regulatory framework applicable to oilfield operations in Ecuador, in particular as it relates to environmental protection and stewardship (Section 2). This will then allow the Tribunal to assess the legal positions advocated by the Parties (Section 3). In the light of this assessment of the law, the Tribunal will thereafter summarize the Parties' positions on the facts and proceed to analyze such facts on soil contamination (Section 4), mud pits (Section 5), groundwater (Section 6), and well site abandonment (Section 7).

1. Parties' positions

1.1 Ecuador's position

1.1.1 Burlington is liable for all environmental harm in Blocks 7 and 21

80.
According to Ecuador, Burlington is incorrect when alleging, and in any event it fails to establish, that Ecuador's counterclaims are a mere set-off strategy. As Professor Crespo explained at the Hearing, Ecuador's position in and approach to these proceedings are proof that Ecuador is pursuing its constitutional obligation to vindicate any environmental harm caused by the Consortium in Blocks 7 and 21.95 Furthermore, Burlington's novel theory on sustainable development does not withstand scrutiny. Sustainable development cannot amount to a "license to pollute".96 Quite to the contrary, this principle encompasses the polluter-pays principle, and Ecuador only allowed oil operations to be carried out because such operations are highly regulated and any environmental harm must be fully restored under the maxim ubi emolumentum, ibi onus.97 If one were to accept Burlington's permissible limits theory, it would signify that "the Ecuadorian environment and the society at large will be forced to assume part of the costs of Burlington's oil activities […]"; an unacceptable position.98 As stated by Professor Crespo, sustainable development implies that operators internalize environmental costs.99

1.1.2 Burlington is strictly liable for any environmental harm found in Blocks 7 and 21

81.
According to Ecuador, under the 2008 Constitution, oil operators bear strict liability for environmental harm. Strict liability means that oil operators are liable upon a mere showing of environmental harm in the areas where they performed oil operations. The State need not prove that the oil operator is at fault, nor that there is a causal nexus between a breach of the duty of care and the environmental damage.100
82.
Under the strict liability regime, the State must only prove the existence of an economic activity in the relevant area entailing serious risks to the environment and a negative impact on the environment of the type that comes with such perilous economic activity. For Ecuador, Burlington is wrong in seeking to downplay the significance of the impact of its operations on the environment. Indeed, Burlington's "significant admission" of liability to restore soils in the amount to USD 10 million is itself a manifestation of a "significant impact".101

1.1.3 The 2008 Constitution applies to damage discovered after its entry into force

83.
In terms of temporal application, Ecuador submits that the 2008 Constitution applies to any environmental harm discovered after its entry into force, no matter when the harm actually occurred. Burlington did not contradict Ecuador's legal experts, Professors Crespo and Andrade, who stated that the 2008 Constitution applies, at the very least, to all environmental harm that occurred after its entry into force. This follows from Articles 11.3 (direct application)102 and 396 of the 2008 Constitution (strict liability for environmental torts), the latter providing for full reparation of any environmental harm ("todo daño al ambiente").
84.
Professor Bedón, Burlington's expert, also did not deny that the 2008 Constitution could apply to environmental harm preceding the entry into force of the Constitution if a particular norm dictated its application.103 Such norm does exist, so argues Ecuador, as the court confirmed in Nelson Alcívar in reliance on the principle in dubio pro natura (enshrined in Article 395(4) of the 2008 Constitution),104 in the following terms:

"It is important that we highlight that the constitutional principal [sic] that states that in doubt, the rule that most favors environmental protection shall apply, as it is a standard that generates ample protection, the matters contemplated by the current Constitution will apply, as it is a standard that creates a broad protection to the environment, above the matters outlined by the Environmental Management Law or the 1998 Constitution. The provisions of the current Constitution as it relates to environmental issues and its protection is also preferably applied, since, in procedural matters, the rules in force at the time of filing the action apply, and not those that were in force when the legal situation was created".105

1.1.4 Environmental claims are imprescriptible

85.
The Respondent further emphasizes that in Nelson Alcívar the court also held that, under Article 396(4) of the 2008 Constitution, environmental claims are "imprescriptibles", that is subject to no statute of limitation, and that the Constitution applies to all environmental claims filed after its entry into force.106 Accordingly, since Ecuador filed its environmental counterclaims in January 2011, i.e. after the entry into force of the 2008 Constitution, Burlington cannot rely on Article 2235 of the Ecuadorian Civil Code (the "Civil Code" or "CC") to argue that claims relating to environmental harm caused prior to January 2007 are prescribed, i.e. time-barred.
86.
Burlington's argument that Ecuador's claims are time-barred with regard to harm resulting from acts prior to January 2007, i.e. four years before Ecuador first filed its counterclaims, is also misplaced. Burlington ignores that Article 2235 of Ecuador's Civil Code exclusively governs fault-based liability. The present environmental claims are for strict liability and are not subject to a statute of limitation according to Article 396(4) of the 2008 Constitution, as acknowledged by the Claimant's expert Professor Bedón at the Hearing.107 Even if Article 2235 of the Civil Code were to apply, the time period for prescription (the "clock") would only start running upon discovery of the harm, which in this case was after the Consortium abandoned the Blocks in July 2009.108
87.
This understanding of Ecuadorian law is reinforced by Burlington's policy of concealing and failing to report environmental harm,109 which incidentally also does away with Burlington's "utterly misplaced" argument that environmental impact studies approved by Ecuador would somehow allow Burlington to evade liability.110
88.
In any event, by acquiring its interest in the Blocks and contractually assuming the environmental liabilities of prior operators, Burlington waived its right to invoke any statute of limitations.111
89.
In the alternative, so argues Ecuador, Burlington has not denied that norms of public order may be applied with retroactive effect, as was held in Baquerizo.112 The Claimant's expert Professor Bedón acknowledged at the Hearing that Article 14(2) of the 2008 Constitution characterizes the constitutional environmental protection regime as a matter of public order.113 Incidentally, the same approach has been adopted in various other jurisdictions.114
90.
Be that as it may, for the Respondent, even if the 2008 Constitution had no retroactive effect, the result would be the same. Read in conjunction with the Delfina Torres decision, the environmental regime set out in the 1998 Constitution also imposes strict liability (responsibilidad objectiva) for environmental torts.115 As explained by the Respondent's expert Professor Andrade at the Hearing, the only differences between the 1998 and the 2008 regimes concern the burden of proof and the statute of limitations.116 Similarly, the court in Aguinda v. Chevron confirmed the objective nature of the liability, holding that "[l]iability for environmental harm is always strict, regardless of whether a legal provision exists that establishes so".117

1.1.5 Burlington bears the burden to prove the inexistence of harm

91.
As regards the burden of proof, Ecuador notes that Burlington "conveniently remained silent" on Article 397(1) of the 2008 Constitution, which places the burden of proving the inexistence of potential or real environmental damage on the operator. Its expert Professor Andrade explained that Ecuador must only establish the existence of a "negative impact", that is an "alteration of the natural environment" (something far less than "harm") for the burden of proof to shift to Burlington:118

"[W]hat the Constitution did in relation to these two components – harm on the one hand and quantum on the other, the quantum of environmental harm – what it did it was transfer the burden of proof to the person carrying out the activity or the defendant. So, the only modification of the 2008 Constitution in connection with this matter is that what must be shown, the evidence that must be given by the Claimant, is the negative impact, obviously the impact, negative impact upon nature. This is as far as he has to go".119

92.
More specifically, Ecuador argues that it only needs to establish that the Blocks have been "adversely impacted", upon which the burden shifts to Burlington to show that this negative impact is "not significant within the meaning of the Ley de Gestión Ambiental".120 It is sufficient for it to establish that Burlington performed environmentally risky activities in a certain area and that an adverse environmental impact of the kind that may be caused by such activities is present in that area.121 Finally, Professor Andrade confirmed without being contradicted, that pursuant to Article 2217 of the Civil Code, even if the harm to the Blocks were caused by several persons, including prior operators, Burlington remains jointly liable with all third parties for all such harm.122

1.1.6 Under strict liability, causation is presumed

93.
Ecuador argues primarily that under the strict liability regime, causation is presumed and Burlington can only escape liability if it shows that force majeure, Ecuador, or a third party caused the environmental harm.123 Burlington cannot, however, escape liability for the actions or omissions of prior operators since the PSCs require the operator to restore the Blocks so as to "allow the potential return to environmental conditions similar to those encountered at the beginning of the operations".124 In other words, Burlington contractually agreed to repair any environmental harm found in the Blocks that may have been caused by prior operators.125 Nor can Burlington escape liability by showing that it took appropriate measures to prevent damage during its tenure as operator.126
94.
More specifically, the Respondent cites to Article 396 of the 2008 Constitution under which "[l]iability for environmental harm is strict".127 It also refers to Article 397(1) pursuant to which the burden to prove the inexistence of potential or real environmental harm falls on the operator.128 In addition, in its Final Report on Natural Resources and Biodiversity, the Constituent Assembly of Ecuador indicated that it is not for the claimant to prove causation, but for the respondent to disprove its existence.129 This approach was first applied in Delfina Torres130 and again in Aguinda where the National Court of Justice confirmed that strict liability presumes causation.131
95.
Once the existence of harm in the area of oil operations is proven, the oil operator is liable, unless it can show that the harm results from force majeure, the actions or omissions of the victim, or a third party. As Professor Crespo explained, the rationale for such a regime is that in most instances it is very difficult or impossible to establish that the operator's fault caused the environmental damage.132
96.
Ecuador concludes that, in the present case, there is environmental harm in Blocks 7 and 21. Since the Consortium has not demonstrated that the damage is due to force majeure, a third party, or the victim, the Consortium is strictly liable for the harm and must fully restore the ecosystems or pay damages to allow the State to proceed with such restoration.133
97.
Furthermore, Ecuador argues that, contrary to Burlington's assertion, the presumption of causation applies not only to entities operating simultaneously in the Blocks but also to successive operators. Article 2217 of the Civil Code reinforces this view by providing for joint liability "where a single harm has been caused by several tortfeasors".134 Joint liability in environmental law precisely addresses the issue of contamination resulting from years of environmentally risky operations. In any event, according to the Respondent, Burlington failed to establish that Petroamazonas caused any harm in Blocks 7 and 21.135
98.
Finally, Ecuador argues that it has proven that Blocks 7 and 21 have suffered widespread environmental harm and must be fully restored to background values, or, in the alternative, to the sensitive ecosystem standard set out in Reglamento Ambiental para las Operaciones Hidrocarburíferas en el Ecuador ("RAOHE"). It also emphasizes that that Burlington must bear the full costs of restoration.

1.1.7 Burlington must fully restore the damaged environment to background values or, in the alternative, to the sensitive ecosystems standard

a. Environmental harm is distinct from violations of regulatory permissible limits

99.
In reliance on the 2008 Constitution, Ecuador argues that Burlington is under an obligation to repair the harm "found in the Blocks" and to restore the environment to its original condition (restitutio in pristinum).136 Ecuador also points to Burlington's identical obligation in Clause 5.1.20.10 of the Block 7 PSC and Clause 5.1.20 of the Block 21 PSC.137
100.
As Ecuador's expert Professor Crespo explains, the notion of "environmental harm" under the Constitution was intentionally left undefined in order to cover as many types of environmental harm as possible. The notion includes the loss of biodiversity as well as impacts on air quality, health of local populations, cultural heritage, and the local economy.138
101.
According to the Respondent, Burlington's reliance on the regulatory permissible limits is misplaced. As Ecuador puts it, "[b]elow the numerical permissible limits, pollution is not simply dirt that can be swept under the carpet".139 While a harmful activity may be conducted lawfully, it still gives rise to an obligation to repair where harm occurs. The Claimant confuses fault and harm, which are independent from each other.
102.
In reliance on decisions of the Colombian Constitutional Court and on scholarly writings, specifically Betancor Rodríguez and Peña Chacón, Ecuador submits that RAOHE and the Texto Unificado de Legislación Ambiental Secundaria ("TULAS") do not define compensable environmental harm. That definition is found in the Environmental Management Law of Ecuador (Ley de Gestión Ambiental) ("EML"). The EML defines environmental harm as "all loss, reduction, detriment or significant damage to the preexisting conditions in the environment or one of its components. It affects the functioning of the ecosystem or the renewal of its resources".140
103.
Therefore, under the EML, "the significance of the harm depends exclusively on the magnitude of the impact on the environment", whereas RAOHE and TULAS make environmental harm dependent on the economic use of the land affected.141 In other words, the significant harm standard under the EML "is perfectly operational, without the need for numerical standards",142 which is reinforced by the fact that the EML makes no reference to limits.143 In addition, asserts the Respondent, Article 396 of the 2008 Constitution mandates that all environmental damage is to be fully repaired, and Article 397 similarly mentions full restoration. In any event, TULAS also requires that contaminated soils be restored to their "prior condition".144 This "prior condition" is represented by the background values established by IEMS.

b. Burlington must remediate contaminated soils back to background values

104.
What Ecuador refers to as its "main case" is its claim that full restoration under Article 396(2) in conjunction with Article 71 of the 2008 Constitution requires remediation of all environmental harm to the level of the so-called background values, i.e. restoration of the environment to a condition equivalment to its condition prior to the initiation of oil operations. In Ecuador's submission, any "alteration to the natural state"145 qualifies as contamination or harm and must be fully remedied back to so-called background values. There is no "right to freely pollute up to the permissible limits".146
105.
This approach is consistent with case law of the highest court in Ecuador147 and was endorsed by Professor Andrade's oral evidence.148 From a scientific point of view, IEMS also testified that the regulatory criteria are insufficient to fully protect the environment or the health of the population. In IEMS's opinion, there is contamination whenever a contaminant exceeds the background values triggering the duty of the operator to "remediate the affected area so as to return it to its natural state".149
106.
Ecuador argues six grounds for its background values case. First, the Parties' experts agree that the 2008 Constitution requires full restoration. Since the permissible limits set forth in RAOHE and in TULAS do not represent full restoration, the Tribunal should disregard them and apply the background values established by IEMS.
107.
Second, as stated above, RAOHE and TULAS do not define compensable environmental harm. They merely set limits within which hazardous activities may be lawfully conducted in a manner so as to prevent to the extent possible the occurrence of harm.150
108.
Third, the Hearing confirmed that RAOHE and TULAS do not purport to define environmental harm, but that their purpose is to regulate the activities of operators.151 The "hollow theory of tolerable and intolerable impact" put forward by the Claimant's expert Professor Bedón was put to rest when, confronted with Professor Peña Chacón's comprehensive quote, he had to admit that the strict liability regime excluded a requirement of fault. For Ecuador, "[i]f the fault element disappears with strict liability, then infringing regulations such as those contained in RAOHE and TULAS regulations becomes irrelevant to assessing the existence and extent of environmental harm".152
109.
Fourth, RAOHE and TULAS are merely risk management tools. They seek to prevent environmental harm and therefore apply ex ante.153 Compliance with administrative regulations is no shield against environmental harm. For instance, harm can occur as a result of the "cumulative effect of certain emissions […] where no permissible limits have been infringed".154
110.
Fifth, as Professor Crespo confirmed, RAOHE and TULAS govern administrative liability, not civil liability for environmental harm. While the administrative liability regime aims at preventing the occurrence of environmental harm, the civil liability regime provides for full restoration.155
111.
Sixth and last, environmental harm cannot be determined in the abstract by ‘blindly' applying the permissible limits provided in RAOHE and TULAS. It must be assessed on the facts specific to each case.156 Referring to Professor Andrade's evidence, Ecuador submits that the permissible limits in RAOHE and TULAS are irrelevant "because any harm must be assessed on site "157 and because "ex ante empirical data cannot determine, in advance, whether the renewability of a specific ecosystem has been impaired, let alone significantly impaired".158 More importantly, RAOHE and TULAS do not distinguish between "types and characteristics of lands (deserts, forest, rainforest, mountains, islands…)", making them unsuitable for the sensitive ecosystem of the Amazon rainforest.159 Finally, while the limits set in RAOHE and TULAS are bound to vary over time, thus making them unreliable, the notion of environmental harm in the EML will not change over time.160
112.
In sum, it is Ecuador's submission that remediation to background values is no extraordinary requirement. Comparative law corroborates this approach.161 Burlington's argument that it has the right to pollute up to the permissible limits is incompatible with "two of the most fundamental principles of environmental law".162 The first is the polluter-pays principle according to which operators must internalize the environmental costs of their economic activities, as enshrined in the 2008 Constitution, general tort law, and the Rio Declaration. The second fundamental principle is that nature itself is a bearer of rights entitled to protection and reparation in the event of environmental harm under Article 71 of the Constitution.163 According to Ecuador, the 2008 Constitution also establishes that, in case of doubt, "environmental regulations should be interpreted in the sense most favourable to the protection of Nature" (in dubio pro natura).164 Hence, absent proof to the contrary, any damage found must be considered significant and thus compensable.

c. In the alternative, Burlington must remediate contaminated soils back to the sensitive ecosystems standard

113.
Alternatively, if the Tribunal were to discard the background values approach and refer to RAOHE and TULAS as the basis for defining environmental harm, it should apply the permissible limits for sensitive ecosystems in those laws,165 for the two following reasons. First, the future land use, taken into account under RAOHE to determine the applicable limits, must be taken to refer to the time "when oil operations will end", as opposed to the end of a given operator's activities, as was clarified at the Hearing.166 Oil operations are temporary and the oilfields in Blocks 7 and 21 are "destined to be absorbed again by rainforest".167 As a result, the sensitive ecosystem standard must apply, which implies restoration to the state of pristine rainforest.
114.
Second, the oilfields were "carved out" of the sensitive ecosystems of the Amazonian rainforest, an area of "significant ecological importance" vulnerable to change and in need of protection.168 According to Ecuador, Block 7 is situated in a "fragile and diverse ecosystem" with numerous rivers and streams, such as the Napo River crossing the entire Block, the Suno River crossing the Oso field, and the Payamino River in the northern part of Block 7.169 Similarly, Block 21 is an ecologically rich but vulnerable area, characterized by rainforest and drained by several rivers, of which the most important is the Napo River.170 Burlington's argument that Blocks 7 and 21 do not qualify as sensitive ecosystems under RAOHE and TULAS, because they are not so-called "designated protected areas" under Ecuadorian law, is ill-founded. According to Ecuador, by devising a distinction in RAOHE between industrial use, agricultural use and sensitive ecosystem, "the Ecuadorian legislator obviously intended for the Amazonian rainforest, which does not fulfill any industrial or agricultural use, to be included in the latter category".171
115.
In this respect, Ecuador stresses that the map showing the ‘ Sistema nacional de áreas protegidas ' ("SNAP"), filed by Burlington – disproves the latter's position that would imply that all non-colored areas of the map would be industrial or agricultural land.172 Even GSI, the Claimant's environmental expert, acknowledged at the Hearing, says Ecuador, that some sites within Blocks 7 and 21 were "sensitive ecosystems".173 More significantly, Burlington's position is contradicted by the wording of RAOHE, which defines sensitive ecosystems in a non-exhaustive way by referring to areas "such as the National Heritage of Natural Areas and others identified in the corresponding Environmental Study (tales como Patrimonio Nacional de Areas Naturales y otros identificados en el correspondiente Estudio Ambiental)".174
116.
Ecuador further emphasizes that Blocks 7 and 21 are located in the Napo River basin, which is "one of the most bio-diverse regions in the world".175 Similarly, it notes that the "greater part of the Blocks is entirely within the Sumaco and Yasuni Biosphere Reserves", while a significant portion of Block 21 lies additionally in the Huaorani indigenous reserve.176
117.
For Ecuador, the "mega-diversity" of the area is further supported by environmental impact studies carried out in 2010 as well as by IEMS, which note the high diversity of the area and the fact that some species are endangered.177 More importantly, in various environmental impact studies, the Consortium itself concluded "that the characteristics of the Blocks 7 and 21 area were those of a sensitive ecosystem".178 In addition, Burlington's witness Mr. Wilfrido Saltos also recognized the dynamic nature of the ecosystem around the platforms.179

1.2 Burlington's position

118.
In brief, Burlington's submission is that Ecuador's USD 2.6 billion environmental claim is a "work of fiction", unsupported by the facts and ill-founded as a matter of law.180 Essentially, to succeed with its claim, the Respondent must show that (i) the Consortium acted in breach of its duty of care; (ii) Ecuador suffered harm; and (iii) there is a causal nexus between the act and the harm. Ecuador has not established any of these elements.
119.
In support of its defense, Burlington contends that (i) the Consortium was a responsible operator; (ii) Ecuador misstates the applicable legal standards; (iii) it uses the wrong definition of harm; (iv) it erroneously relies on background values; (v) it applies the wrong standards when it alternatively refers to regulatory criteria; (vi) it does not prove causation; and (vii) it raises a claim that is time-barred.

1.2.1 The Consortium was a responsible and environmentally conscientious operator

120.
Ecuador's attempt to depict the Consortium as a careless operator is contradicted by Ecuador's own data. Indeed, there were no material oil spills during the Consortium's operations and there are only limited pockets of regulatory exceedances in the Blocks.181 In reality, the Consortium "was a responsible operator and good corporate citizen that prioritized environmental conditions, complied with government regulations, promptly reported and remediated spills and invested in the neighboring communities".182 In particular, the environmental audits attested to the Consortium's "overall regulatory compliance and sound stewardship of the Blocks".183 In any event, Burlington asserts that there can be no liability so long as the Consortium acted as a bonus pater familias or a reasonably prudent operator.184
121.
As a responsible member of the Consortium, Burlington is willing to accept responsibility for exceedances above regulatory criteria for two sites "at which it cannot definitively link harm to non-Consortium activities (Yuralpa Pad A and Jaguar 1 Area 3T)" and to bear the costs to close four open pits and abandon seven wells.185

1.2.2 Ecuador misstates the applicable legal standards

122.
First, fault-based and not strict liability governs Ecuador's environmental claim. Ecuadorian law imposed strict liability in October 2008. Under Article 7 of the Civil Code, "the law provides only for the future; it has no retroactive effect [...]" (Translation by the Tribunal). Hence, the strict liability regime of the 2008 Constitution does not govern Ecuador's claim in respect of harm that predates the entry into force of the Constitution in October 2008.186 Accordingly, Burlington cannot be held liable unless it is proven that the Consortium breached its duty of care.187 No such proof has been addressed.
123.
Burlington further notes that, as Professor Bedón explains, the relevant date to determine the applicable legal regime is the date of the occurrence of the act. This date is consistent with the statute of limitation for torts in the Civil Code, which runs from the date on which the harmful act occurred.188 As a result, it rejects Ecuador's argument that strict liability governs because that regime was only in place at the time of IEMS's inspection in 2011. Similarly, it discards Ecuador's view that the Ecuadorian Supreme Court imposed strict liability as early as 2002. Indeed, in Delfina Torres, the Supreme Court merely discussed strict liability in dicta, and in fact applied fault-based liability with a reversal of the burden of proof.189 In any event, Burlington reiterates that whatever changes were made in 2008, the new Constitution "cannot have any retroactive effect",190 since the applicable legal regime is the one in force at the time of the allegedly harmful act.191 Accordingly, the 2008 regime only applies to acts that postdate the Constitution's entry into force.192
124.
The Claimant identifies a second misstatement of the law argued by Ecuador, relating to the burden of proof. For Burlington, Ecuador has the burden of proving environmental harm.193 Proof of harm is an essential element of tortious liability. Ecuador's position that any effect on the environment is an environmental harm and that it only needs to make a showing of a "negative impact" defies common sense. An effect on the environment in compliance with environmental regulations cannot constitute recoverable "harm". Otherwise, there would be no purpose in regulations and government authorizations.194 Astonishingly, Professor Crespo erroneously believes that Ecuador need only "allege" or "point out the probability of harm".195 If that were true, Ecuador's theory would imply that "any participant in human activity in Ecuador is presumptively liable for an environmental damage figure chosen by any plaintiff", since any human activity causes some impact to the environment.196
125.
Third, contrary to Ecuador's contention, Ecuadorian law requires causation even for strict liability. The Supreme Court of Ecuador held so and Article 396 of the 2008 Ecuadorian Constitution expressly provides that persons are strictly liabile for damages which they have "caused". Thus, Ecuador is wrong to argue that it "need only establish that environmental harm exists".197 In addition, it must prove that Burlington and Perenco caused such harm.198

1.2.3 Ecuador's definition of environmental harm is baseless, since a significant impact requires an exceedance of permissible limits

126.
According to Burlington, Ecuador's allegation of widespread environmental harm in the Blocks is a "fantasy"199 based on novel and unsupported theories about the definition of environmental harm and on flawed reports from its expert IEMS. Among other things, IEMS applied incorrect legal standards, analyzed the soil in mud pits as though it were regular soil, overestimated the volume of contaminated soil through unreliable modelling, and failed to properly filter groundwater samples.
127.
Burlington notes that it is common ground that the EML defines harm under Ecuadorian law and that the 2008 Constitution left this definition untouched. Ecuador is wrong to deny that the notion of harm is further specified in RAOHE and TULAS, and to make artificial distinctions between the notion of harm and the idea of setting limits to prevent harm. Ecuador's first argument in its Second Supplemental Memorial that its own regulations were "arbitrary" is just as erroneous as its second argument that RAOHE and TULAS do not define harm but merely seek to set limits on dangerous activities.200
128.
In conformity with the EML, "harm" requires a "significant negative impact". As the Respondent's experts Professors Andrade and Crespo acknowledged, this wording implies that some negative impacts are significant, while others are not.201 If all types of negative impacts were prohibited, there could be no development at all.202 While the EML defines "harm", it does not set specific permissible limits for each contaminant. Burlington therefore considers it necessary to resort to Ecuador's implementing regulations, specifically RAOHE and TULAS, where the notion of "harm" is further specified.203
129.
Burlington also asserts that reliance on the limits set in RAOHE and TULAS conforms with the "constitutional right of legal certainty".204 In other words, "there must be a clear dividing line determining the point at which environmental impacts become significant – a dividing line between ‘insignificant impacts' and ‘harm'".205
130.
The Claimant further points to Ecuador's practice after 2008, which shows that it refers to permissible limits, not to background values, when it defines "harm". For instance, the Ministerial Accord 169 provides that environmental harm must be restored to the conditions "determined by the environmental authority", and the Ministerial Resolution No. 1 refers to "harm" by reference to permissible limits.206 Ecuadorian case law and the practice of Ecuador's regulatory agencies equally demonstrate that harm is always defined by reference to permissible limits. With respect to case law, Professor Andrade, the Respondent's expert, conceded at the Hearing that no Ecuadorian court had ever applied background values.207 The Los Vencedores and the Municipality of Orellana decisions support the proposition that there is no harm if there is no exceedance of permissible limits.208 In respect of Aguinda, Professor Andrade admitted that the court speaks of "full reparation", but does not once make reference to – let alone apply – background values.209
131.
In connection with regulatory practice, Ecuador's agencies have never applied background values either.210 In support, Burlington cites the following elements: (i) Ecuador's Ministry of the Environment applies Ministerial Resolution No. 1, i.e. permissible limits, when a spill occurs; (ii) Petroamazonas remediates spills by reference to permissible limits; (iii) Professor Andrade acknowledged that if a spill occurs, agencies apply permissible limits; (iv) an agency of the Ministry of the Environment called PRAS issued operational policies and norms explicitly based on RAOHE; (v) IEMS applied regulatory criteria in their first expert report before being instructed by Ecuador to discard them; and (vi) Professor Bedón testified that he had never seen background values applied.211 In conclusion, Ecuador has provided no evidence of even a single instance where background values have been applied, whereas Burlington has shown that in fact Ecuador applies permissible limits in determining the existence of environmental harm.212

1.2.4 Ecuador uses background values to falsely portray and inflate alleged environmental harm

132.
Burlington opposes Ecuador's use of background values, including IEMS's position that only background values are sufficiently protective of the public health. Burlington highlights that IEMS was instructed by Ecuador to employ background values and never actually analyzed whether the ecosystem was in fact affected.213 IEMS's first expert report actually referred to permissible limits as applicable standard.214 "Astonishingly – argues Burlington – IEMS admitted that if the Consortium were operating today […], it would be subject to RAOHE and TULAS regulations, not ‘background values'".215 Thus, had Burlington not been expropriated, it would be subject to the regulatory standards. Having been expropriated, it is somehow subject to background values "resulting in billions of dollars of bogus damages".216
133.
In support of its argumentation, the Claimant also relies on the purpose of RAOHE, which in the regulation's words, is to set "[p]ermissible limits for the identification and remediation of contaminated soils in all phases of the hydrocarbon industry".217 Should background values govern, as Ecuador claims, RAOHE would serve no apparent purpose. Further, IEMS itself acknowledged, in its first report and in the City Oriente v. Ecuador arbitration, that RAOHE establishes the criteria to define the scope of environmental harm.218 If background values were relevant, then active oil fields would have to be restored to a pristine state of nature even as the oil fields continue to be in operation. This is absurd, especially considering Ecuador's aggressive expansion of oil production.
134.
In refutation of Ecuador's reliance on RAOHE Table 6, Burlington remarks that Table 6 states that background values may be used to increase permissible limits, not to decrease them. Thus, if the natural concentration of a given element in the soil is higher than its regulatory limit, the permissible limit may be increased to that naturally occurring level – the reverse is not true.219
135.
Burlington also rebuts Ecuador's further argument according to which background values alone comport with the 2008 Ecuadorian Constitution. First, the 2008 Constitution cannot apply retroactively and thus would cover at most a 10-month period (between its coming into force in October 2008 and Ecuador's takeover of the Blocks in July 2009). Second, Article 396 of the 2008 Constitution only comes into play in the event of "harm", which is defined in environmental regulations and in particular RAOHE.220
136.
Burlington further disputes IEMS's assertion that the Ecuadorian regulatory criteria "might not be enough to protect the health of the local population [...]".221 On the contrary, says Burlington, "Ecuador's regulatory limits are remarkably stringent".222 Ecuador is more protective than other oil producing regions such as Venezuela, Texas and Louisiana. Its regulations are also more stringent than the Risk-Based Corrective Action ("RBCA") methodology widely adopted in European countries, the United States, and other parts of the world. In a nutshell, RAOHE criteria are highly protective of human health and no public health rationale warrants the application of a more stringent standard.223
137.
Burlington moreover criticizes IEMS's methodology in calculating the background values that it employs, which resulted in labeling clean samples as contaminated ones. When aggregated across contaminants, Ecuador's background values result in 84% of clean samples being labeled as contaminated.
138.
Finally, according to Burlington, Ecuador's reliance on background values, as opposed to RAOHE criteria, has enormous consequences for its counterclaims. An amount of damages of approximately USD 1.3 billion of Ecuador's claim depends on the application of background values. If the background values are discarded, Ecuador's claims shrink from USD 2.2 billion to USD 895 million.224

1.2.5 IEMS's "regulatory case" based on sensitive ecosystems is likewise incorrect

139.
Burlington also challenges Ecuador's alternative submission based on regulatory criteria because it exclusively relies on the sensitive ecosystem standard, which is inapposite in most cases. Burlington disagrees with Ecuador's assertion that the entirety of the Blocks is situated in a "sensitive" region or that they are located in a biosphere reserve, noting that only a very limited number of areas are designated by Ecuador's Ministry of the Environment as "sensitive ecosystem".225
140.
Burlington further argues that, according to RAOHE Table 6, the permissible levels of contamination depend on the "use" of the land, which is classified by RAOHE as industrial, agricultural or sensitive ecosystem, the first being the most permissive and the last the least permissive. IEMS's calculation of contamination levels based on the sensitive ecosystem threshold is unwarranted as only a small number of sites in the Blocks intersect with designated "sensitive ecosystems" areas.226 Most of the areas where the Consortium's active operations take place are a "quintessential example" of land use for industrial purposes, with the surrounding areas being used mostly for agriculture.227
141.
For Burlington, Ecuador's argument that the Blocks are to be considered as sensitive ecosystem in their entirety is inconsistent with RAOHE and with Ecuador's own application of RAOHE other than in this arbitration.228 Under RAOHE, the "posterior use that will be given to the remediated soil" determines the land use. Posterior use is "immediate subsequent use to the seizure", and not use when the oil operations are completed as advocated by Ecuador.229 The areas within the oilfields, such as platforms and drilling equipment, are used to conduct hydrocarbon operations – an industrial use. This is the sole purpose, present and foreseeable, of these areas. The lands surrounding the oilfields, in turn, are used mostly for pastures, crops, or wood gathering, that is, for agricultural purposes. According to GSI, "95% of the areas surrounding the inspected platforms constitute agricultural areas or secondary forests".230
142.
Burlington also considers that Ecuador's exclusive reliance on the sensitive ecosystem standard is contrary to its own practice. According to Burlington, that practice confirms that most of the land in the Blocks is destined for either "industrial" or "agricultural" use. On multiple occasions, Ecuador approved, or did not object to, plans where the land in the Blocks was classified as either "industrial" or "agricultural".231 For instance, IEMS conceded at the Hearing that the ex-post studies on the environmental condition of the Blocks after Ecuador's takeover applied the agricultural use standard.232 In application of RAOHE, the "posterior use" of any soil remediated will continue to be either "industrial" or "agricultural". In short, the "sensitive ecosystems" classification bears no relationship to the actual use of the land and must be rejected.233
143.
IEMS also incorrectly relies on Table 2 of Annex 2, Book VI of TULAS. For the Claimant, this table only establishes pre-estimated background values for substances not included in RAOHE Table 6 (such as barium and vanadium). It does not express remediation criteria, which are found in Table 3 of Annex 2, Book VI of TULAS, entitled "Criteria for Remediation and Restoration of Soils". TULAS expressly states that the standards for remediation or restoration "are included in Table 3",234 a fact that IEMS itself has acknowledged in the City Oriente arbitration. Hence, Burlington views TULAS Table 3 as the appropriate table to determine soil remediation standards.235
144.
As a final point, Burlington stresses that the land use designations in RAOHE are sufficiently protective of the human health and the environment, since Ecuador's standards are amongst the most stringent worldwide.236
145.
As noted above, for Burlington, applying the proper regulatory criteria has an enormous impact on Ecuador's damages claim. In particular, GSI found that 74% of the soil samples analyzed by IEMS that show exceedances of the "sensitive ecosystems" limits are in reality compliant with Ecuadorian regulations for industrial and agricultural land.237 Applying correct regulatory criteria, Ecuador's alleged damages are further reduced by USD 885 million to a total of approximately USD 10 million, for which Burlington accepts liability in the amount of USD 1.09 million.238

1.2.6 Ecuador entirely ignores its duty to prove causation

146.
Burlington opposes Ecuador's view that Ecuadorian law imposes a rebuttable presumption of causation. For Burlington, the 2008 Constitution imposes the burden to prove causation on Ecuador and Burlington is only liable for harm caused during its tenure of the Blocks, not for the one caused by Ecuador itself or prior operators.

a. Ecuador bears the burden to prove causation

147.
Burlington's submission is that causation is not presumed, and that Ecuador must prove causation. Professor Bedón gave clear evidence to this effect at the Hearing and even Professor Crespo acknowledged that environmental harm must "be caused by the operator's activity".239 Ecuadorian courts consistently require plaintiffs to prove causation, including in strict liability cases.240 For instance, in Medardo Luna, the Ecuadorian Supreme Court held that the injured party must prove (i) the fact, (ii) the damage, and (iii) the causal nexus. The same conclusion was reached by the re-named National Court of Justice in Aguinda, where it held that in the post-2008 strict liability regime the plaintiff must only "corroborate the risky activity and the relation of causality".241

b. Burlington is only liable for harm caused during its tenure of the Blocks

148.
The Claimant further submits that it is only liable for damage caused while the Consortium operated the Blocks. Causation must be proven because each operator is responsible for the damage which it has caused, not for harm caused by someone else.242 Since Professor Crespo testified that Ecuador must prove that the damage was caused "during the time of the Consortium's operations", it follows that Petroamazonas, who is presently operating the Blocks, is presumptively liable for any harm that occurred after July 2009. In this context, Professor Andrade's explanations that Petroamazonas somehow plays by different rules must be rejected.243
149.
Consequently, Burlington also disputes that it is jointly liable for harm caused by prior operators.244 Joint and several liability can only result from "the same tort or wrongful act, not successive ones".245 Hence, Burlington is only liable for the conduct of Perenco, as operator for the Consortium, and not for the conduct of previous or subsequent operators.246

c. Contamination in Coca-Payamino was caused by Ecuador itself

150.
Burlington submits that the environmental harm in Coca-Payamino, which constitutes more than half of Ecuador's claim, was "almost certainly" caused by CEPE and Petroproducción when they operated the fields in the 1980s and during the latter's alternate operatorship with Oryx of the CPUF in the 1990s.247
151.
Indeed, there is abundant evidence of oil spills, problems with mud pits, lack of remediation, and continuous discharges into the environment during CEPE and Petroproducción's tenures of the Blocks. For instance, an environmental audit in 1999 found Petroproducción's operating practices to be "reactive and not proactive".248 Furthermore, Burlington notes that, notwithstanding the express order of the Tribunal, Ecuador failed to produce any spill report or remediation program from that period.249 In support of its allegations, Burlington cites the following facts: (i) in Coca CPF, Petroproducción "permanently discharged production water" into the environment prior to 1994;250 (ii) in Payamino 2 and 8, the crude oil and heavy metals found in the Jungal swamp originate from a pre-1992 rupture of the mud and production test pits built by CEPE in 1987;251 (iii) in Coca 6, a serious spill was recorded by Oryx in 1999 and the pit in the northern part of the platform was built by Petroproducción in 1989, while the 2007 spill was fully remediated;252 (iv) in Payamino 4, CEPE built pits in 1988 without using liners and filled them with oil-based drilling muds;253 and (v) in Coca 4, drilling was undertaken by CEPE in 1989 which explains the presence of barium in that area.254

d. Ecuador fails to account for environmental harm caused by Petroamazonas after July 2009

152.
Burlington calls attention to the fact that Ecuador's claim ignores that the latter took over the Blocks in July 2009 and aggressively expanded operations. In this context, Ecuador's insistence on the sensitive ecosystem standard is "absurd" when one considers that Ecuador itself has actively increased the industrial use of the Blocks.255 According to Burlington, Ecuador's expansion of the fields has obviated the need for any remediation, as is shown by three illustrations.
153.
First, the Coca 13 site has been expanded by over 40,000 square meters, 11 new wells, four new mud pits and a new CPF. Doing so, Ecuador has subsumed and "wiped out" the alleged zone of contamination for which it claims that Burlington is liable. Yet, it claims USD 26.5 million in damages under its background values case and USD 7.4 million under its sensitive ecosystem case for this site.256
154.
Second, Oso A has also been dramatically expanded, with Ecuador drilling 14 new wells. As with Coca 13, "Petroamazonas's extensive development of Oso A since July 2009 has obviated the need for any remediation and rendered IEMS's conclusions obsolete – if contamination even existed in the first place".257
155.
Third, Burlington argues that Ecuador failed to mention or account for the occurrence of a spill in Mono CPF that occurred in 2010 or 2011. In this context, Burlington highlights that IEMS's first report identified this spill as a recognized environmental condition ("REC"), but "curiously" did not include it in its third report "despite the fact that Mono CPF represents one of the single largest claims by dollar amount in all of Ecuador's counterclaims".258 Therefore, Ecuador's claims for over USD 100 million must fail because it cannot show that the alleged contamination is attributable to the Consortium.259

e. The PSCs exonerate the Consortium for harm caused by others

156.
Burlington notes that Ecuador relies on the PSCs to absolve it from having to prove causation, the Consortium being allegedly liable for environmental harm caused by prior operators. Not only is Ecuador's reference to the PSCs barred by the tortious nature of its counterclaim, it is also wrong in and of itself. Indeed, the PSCs "expressly exonerate the Consortium from responsibility for harm caused by others".260
157.
In this context, Burlington further observes that the limited exceedances above regulatory criteria found at 17 sites were not caused by the Consortium, but by prior operators, including State-owned operators. For instance, there is ample proof that the contamination of the Jungal swamp in Payamino 2 and 8 was caused by CEPE between 1988 and 1992. In fact, Burlington produced evidence linking the contamination found at all but two of the 17 sites to the activities of parties other than the Consortium. As a responsible member of the Consortium, Burlington is "willing to accept liability for the two sites at which it cannot definitely link harm to non-Consortium activities" for a total cost of USD 1.09 million.261

1.2.7 Ecuador's claims are time-barred under Ecuadorian law

158.
Burlington's last defense is that the counterclaim is time-barred. Article 2235 of the Civil Code enshrines a four-year limitation period. Ecuador's reliance on the so-called ‘discovery rule', which it borrows from other jurisdictions, is ill-founded. Indeed, Ecuador fails to cite a single case in support of this rule. Even if such a discovery rule were to exist, the period would start to run only when Ecuador knew or should have known ("constructive knowledge") about the alleged environmental harm.262 In light of the fact that the Consortium was strictly supervised by Ecuadorian regulatory authorities, that Ecuador consistently approved the Consortium's environmental impact studies, that the Consortium regularly filed reports and audits, and that regular inspections were carried out, Ecuador must be deemed to have had constructive knowledge of any alleged harm throughout the Consortium's operations.263 Thus, even if Ecuador had legitimate claims, they are now time-barred under Article 2235 of the Civil Code.

2. Applicable legal framework

159.
Since the 1970s, Ecuador has incorporated environmental norms into its legal order, including with respect to hydrocarbons activities, at the constitutional, legislative and regulatory levels, as discussed below.264 After setting out the relevant provisions of the Hydrocarbons Law (2.1), the Tribunal will review the evolution of Ecuador's environmental framework for oilfield operations, including the Law on the Prevention and Control of Environmental Contamination (2.2), the 1978 and 1998 Constitutions (2.3), the Law on Environmental Management (2.4), the Substitute Environmental Regulation for Hydrocarbon Operations in Ecuador (2.5), the Unified Text of Secondary Environmental Legislation (2.6), and the 2008 Constitution (2.7). Finally, it will set out relevant provisions of the PSCs (2.8).

2.1 The Hydrocarbons Law and regulation of hydrocarbons industry

160.
The Hydrocarbons Law (Ley de Hidrocarburos ("HL")) was enacted in 1971.265 It contained the first expression of the State's general duty to ensure that the oil industry "does not cause harm to people, property or the environment", obligating the State to conduct periodical socio-environmental audits.266 The Ecuadorian legislature progressively imposed environmental obligations on oilfield operators, such as the 1982 amendment of the HL providing for the obligation of operators to comply with applicable environmental laws and regulations267 and to conduct environmental impact studies and prepare environmental management plans.268 In 2002, the Regulation of Hydrocarbon Operations (Reglamento de Operaciones Hidrocarburíferas ("ROH")) was enacted.269 It contains rules applicable to all phases of the hydrocarbon operations, exploration, drilling and exploitation, as well as an annex with definitions of terms.270 Article 7 prescribes that oilfield operators must comply with applicable laws and regulations relating to the protection of the environment.271

2.2 The Law on the Prevention and Control of Environmental Contamination

161.
In 1976, Ecuador adopted the Law on the Prevention and Control of Environmental Contamination, establishing for the first time rules to prevent soil, water and air contamination, without however specifying any parameters.272
162.
As regards water, for instance, Article 16 prohibited the dumping of waste water containing contaminants harmful to human health, fauna or property "into the sewage network, or into streams, irrigation channels, rivers, natural or artificial lakes, or in the ocean, or to let it infiltrate onto land".273 In connection with soils, Article 20 prohibited the discharge of "any type of contaminants that could alter the quality of the soil and affect human health, flora, fauna, natural resources and other goods" without complying with applicable technical and regulatory standards.274

2.3 The 1978 and 1998 Constitutions

163.
Protection of the environment was enshrined in the constitution for the first time in the 1978 Constitution.275 Article 19 of such Constitution enshrined the fundamental right to live in an environment free of contamination, specifying that environmental protection would require laws restricting the "exercise of certain rights or liberties".276 In 1996, a constitutional reform instituted the collective right to a healthy environment and declared the following to be of public interest: (i) the protection of the environment and the conservation of ecosystems and biodiversity, (ii) the principles of prevention and sustainable exploitation of natural resources, and (iii) the establishment of a system of protected areas.277
164.
The 1998 Constitution further elaborated the environmental regime by enshrining the principles of sustainable development, prevention, precaution, rehabilitation, and participation.278 Furthermore, Article 91 provided for the State's liability, including that of its "delegates and concessionaires", for environmental harm.279

2.4 The 1999 Environmental Management Law (EML)

165.
In order to implement the environmental provisions of the 1998 Constitution, Ecuador adopted in 1999 the EML.280 The EML established the principles and guidelines of Ecuador's environmental policy, determining the obligations, responsibilities and levels of participation of the public and private sectors in environmental management and indicating "the permissible limits, controls and sanctions" in such matters.281 It set out the scope and principles of environmental management; the institutional regime underlying environmental management; the various instruments of environmental management; financial mechanisms; as well as provisions on information and participation, and the protection of environmental rights.
166.
With respect to the instruments of environmental management, the EML provided for the assessment of environmental impacts and environmental controls. For instance, Article 21 EML provides that licenses for economic activities may only be granted if environmental management systems are drawn up, which must include "base line studies; an environmental impact assessment; risk assessment; management plans; risk management plans; monitoring systems; contingency and mitigation plans; environmental hearings and plans for withdrawal".282 The EML also defines many relevant terms, such as contamination, environmental harm, and environmental impact.283

2.5 The Environmental Regulation for Hydrocarbon Operations in Ecuador (RAOHE)

167.
In 1992, Ecuador enacted RAOHE,284 which was amended in 1995285 and replaced in 2001 by an expanded and updated version.286 RAOHE contains various chapters and annexes that apply to all phases of oilfield operations in Ecuador,287 including prospection, exploration, exploitation, industrialization, storage and transportation, and commercialization of crude oil, its derivatives, and natural gas susceptible of causing environmental impacts.
168.
RAOHE requires operators to submit environmental programs and audits to the relevant Ministry on a regular basis,288 to undertake regular internal monitoring of environmental conditions in relation to atmospheric emissions, solid and liquid discharges, as well as remediation of contaminated soils or pits.289 It also requires operators to present environmental impact studies prior to any new phase in oilfield operations,290 including by providing environmental management and monitoring plans to mitigate and control adverse impacts.291
169.
Article 42 of RAOHE further provides that operators must conduct biennial environmental audits,292 in order to determine whether their oilfield operations comply with applicable environmental standards, including the management and monitoring plans.293 Article 42 reads as follows:

ART. 42.– Environmental audit.– The Undersecretariat of Environmental Protection, through the National Environmental Protection Directorate, shall audit, at least every two years, or whenever the Undersecretariat of Environmental Protection so orders upon detecting non-compliance with the Environmental Management Plan, the environmental aspects of the various hydrocarbons activities conducted by the ones subjected to control.

The Undersecretariat of Environmental Protection, through the National Environmental Protection Directorate (DINAPA), shall determine the type and scope of the Environmental Audit for the operations of those subjected to control based on compliance with the Environmental Management Plan.

At least every two years, those subjected to control shall conduct an Environmental Audit of their activities, following approval of the corresponding Terms of Reference by the Undersecretariat of Environmental Protection, and they shall submit the respective audit report to the Undersecretariat of Environmental Protection.

Additionally, the parties, upon the termination of hydrocarbons exploration and exploitation, or in the event of a change of operator, shall conduct the audit referenced in Art. 11 of the Regulation to Law 44, amending the Hydrocarbons Law.

To the effect of the aforementioned audits, the ones subjected to control shall select an environmental auditor qualified by the Undersecretariat of Environmental Protection to carry out the monitoring and verification of compliance with the Environmental Management Plan, in accordance with the Terms of Reference previously approved by the Undersecretariat of Environmental Protection, in which the documentary framework is determined against which the audit shall be conducted (Translation by the Tribunal).

170.
Article 16 of RAOHE stipulates that the operator must present for approval to the Undersecretariat of Environmental Protection (Subsecretaría de Protección Ambiental) a remediation plan in cases of remediation of pits, contaminated soils, and "major accidents with spills of more than five barrels of oil, combustibles or other product".294 Within 15 days after completion of the remediation works, the operator must submit a technical evaluation report to the Undersecretariat for Environmental Protection through the National Direction of Environmental Protection (Dirección Nacional de Protección Ambiental).295
171.
RAOHE also requires that operators comply with permissible limits, i.e. with maximum benchmark values set out in the annexes. Thus, with respect to atmospheric emissions, liquid discharges and solid wastes, Article 86 of RAOHE requires that operators comply with the permissible limits set out in Annexes Nos. 1, 2 and 3, which constitute the "minimum program for the internal environmental monitoring" of the operator.296 If a permissible limit set in the annexes is exceeded, the operator must immediately notify the Undersecretariat of Environmental Protection and explain what corrective measures have been applied.297
172.
Annex 2 contains six tables detailing "parameters, maximum benchmark values and permissible limits" for routine environmental monitoring and control relating to atmospheric emissions (Table 3), liquid water and effluent discharges (Table 4), black and grey water discharges (Table 5), soil remediation (Table 6), mud pit leachates (Table 7), and waste disposal (Table 8). Finally, Annex 3 contains additional parameters, benchmarks and limits for more in-depth environmental monitoring and control.298
173.
RAOHE Table 4 establishes permissible limits for the permanent environmental monitoring of water and effluent discharges during all phases of hydrocarbons operations. It requires oilfield operators to routinely monitor discharges in accordance with the limits for discharge points (Table 4a) and for points at the receptor bodies (Table 4b).299
174.
RAOHE Table 6 sets out permissible limits for the identification and remediation of contaminated soils "in all phases of the hydrocarbons industry".300 It specifies that "the permissible limits to be applied to a determined project depend on the subsequent use (uso posterior) to be given to the remediated soil".301 As already mentioned, Table 6 distinguishes between three types of land use: industrial, agricultural and sensitive ecosystems.302 Industrial land use criteria apply to "sites of industrial use (constructions, etc.)"; agricultural land use criteria focus on the "protection of soils and crops"; and sensitive ecosystem land use criteria are employed for the "protection of sensitive ecosystems such as the National Heritage of Natural Areas and others identified in the corresponding environmental study".303
175.
The permissible limits set in RAOHE Table 6, Annex 2 are the following:304

RAOHE Table 6, Annex 2
ParameterExpressed inUnitAgricultural UseIndustrial UseSensitive Ecosystems
Total hydrocarbons TPH mg/kg<2500<4000<1000
Polycyclic Aromatic Hydrocarbons (PAHs) C mg/kg<2<5<1
Cadmium Cd mg/kg<2<10<1
Nickel Ni mg/kg<50<100<40
Lead Pb mg/kg<100<500<80

176.
Table 6 also contemplates the possibility of increasing the maximum allowable limits where uncontaminated soils show natural concentrations, in other words background values, above the limits of Table 6. In such a case, RAOHE stipulates that these background values must prevail.
177.
According to Table 6, contaminated soils must be monitored at least every six months with at least one sample and a final characterization once remediation works are finalized.
178.
RAOHE Table 7 spells out the permissible limits for leachates during the "final disposal at surface-level of mud drillings and cuttings".305 The limits vary depending on whether a pit is lined or not (has an "impermeabilization at its base or not").306 Table 7a applies to unlined pits and Table 7b to lined pits. Table 7a contains the following permissible limits:

RAOHE Table 7a, Annex 2
a) WITHOUT impermeabilizaron at the base
ParameterExpressed inUnitPermissible limit value
Hydrogen potential pH — 6
Electrical conductivity CE pS/cm 4,000
Total hydrocarbons TPH mg/l<1
Polycyclic Aromatic Hydrocarbons (PAHs) C mg/l<0,003
Cadmium Cd mg/l<0.05
Total chromium Cr mg/l<1.0
Vanadium V mg/l<0.2
Barium Ba mg/l<5

179.
And Table 7b contains the following limits:

RAOHE Table 7b, Annex 2
b) WITH impermeabilizaron at the base
ParameterExpressed inUnitPermissible limit value
Hydrogen potential pH — 4
Electrical conductivity CE pS/cm 8,000
Total hydrocarbons TPH mg/l<50
Polycyclic Aromatic Hydrocarbons (PAHs) C mg/l<0,005
Cadmium Cd mg/l<0.5
Total chromium Cr mg/l<10.0
Vanadium V mg/l<2
Barium Ba mg/l<10

180.
RAOHE Table 7 further indicates that, in addition to the initial analysis of the mud drillings and cuttings for final disposal, the operator must undertake periodic sampling and analysis of the pit (i) seven days after the disposal, (ii) three months after the disposal, and (iii) six months after the disposal.307

2.6 Unified Text of Secondary Environmental Legislation (TULAS)

181.
TULAS was promulgated on 31 March 2003 in furtherance of the principles established in the EML.308 It deals inter alia with the environmental authorities, environmental management, forest regime, biodiversity, coastal resources, environmental quality, the special regime of the Galápagos, the Institute for the eco-development of the Amazon region or ECORAE, and a special tax regime for the use of resources under the authority of the Ministry of the Environment.
182.
The provisions relevant to the present case are found in Book VI of TULAS, which is composed of a number of sections and annexes. TULAS establishes a Single Environmental Management System (the "SUMA") in order to ensure inter alia the State's oversight of compliance with environmental management plans of regulated entities.309 One of the main objectives of TULAS, in particular in Title IV, is to provide the necessary regulations in pursuance of the Environmental Management Law for the Prevention and Control of Environmental Contamination.310 Article 42 of Title IV provides that TULAS seeks to "determine, at the national level, the permissible limits for discharges into water bodies or sewer systems; emissions in the air, including noise, vibrations and other forms of energy; wastes, application and disposal of liquids, solids or a combination, into the soil", and to "establish the quality criteria of a resource and criteria or objectives of remediation of an impacted resource".311
183.
Article 45 of Title IV sets forth general principles of environmental stewardship of regulated entities, such as sustainability, equity, prior informed consent, valid representation, coordination, precaution, prevention, mitigation and remediation of negative impacts, solidarity, co-responsibility, co-operation, recycling and reuse of wastes, conservation of resources in general, minimization of wastes, use of clean technologies, alternative and environmentally sound technologies, and respect for traditional cultures and practices as well as ancestral possessions.312
184.
Chapter IV of Title IV addresses environmental control techniques, such as environmental impact studies, environmental management plans, environmental audits, and inspections.313 In this context, Article 70 specifies that the approval of environmental management plans or other environmental studies cannot exonerate operators from liability for environmental contamination.314 Chapter V sets out the rights and obligations of regulated entities, such as the duties to submit annual reports on environmental monitoring,315 to obtain approval of environmental management plans and environmental audits,316 to immediately notify emergency situations,317 and to obtain permits for discharges or emissions.318 Finally, Chapter VIII addresses environmental norms, including the various stages for the elaboration of standards in pursuance of Article 4 of the EML.
185.
According to Ecuador, TULAS sets out general rules for the evaluation of environmental impacts of water and soil resources "from a technical perspective".319 TULAS is therefore complementary to RAOHE, since it supplies chemical parameters not present in RAOHE and also provides for the application of background values.320
186.
By contrast, according to Burlington, RAOHE is the primary source of environmental obligations of oilfield operators in Ecuador, because, unlike the more general TULAS, it expressly and specifically applies to oilfield operations, and TULAS merely supplements RAOHE. Burlington submits that the rules in RAOHE trump the more general regulations contained in TULAS, except where RAOHE is silent. This is so, for instance, with respect to some soil contaminants that are not listed in RAOHE Table 6, Annex 2.321
187.
The Annexes to Book VI of TULAS establish the limits for different environmental media.322 For present purposes, Annex 1 relating to the quality of water resources and effluent discharge standards and Annex 2 relating to soil quality standards and remediation criteria are of particular relevance.
188.
Turning first to soil quality, Annex 2, entitled "Environmental Quality Standard for Soil Resources and Remediation Criteria for Contaminated Soils", sets out regulatory standards in furtherance of the EML and the Regulation of the EML for the Prevention and Control of Environmental Contamination. Its application is mandatory across the entire Ecuadorian territory.323 Its main objective is to prevent and control soil contamination, so as to preserve the integrity of humans, ecosystems and their interrelationships, as well as the environment at large.324 To this end, it establishes (i) norms of general application for soils with distinct uses, (ii) soil quality standards, (iii) remediation criteria for contaminated soils, and (iv) technical norms for the evaluation of the agrological capacity of soils.325
189.
Article 4.1.2 deals with activities that are degrading the soil quality.326 It provides that public or private entities engaged inter alia in hydrocarbons exploration and exploitation must take the necessary measures to avoid harm to soils.327 Article 4.1.3, relating to contaminated soils, states that contamination due to spills or leaks must be remediated taking into account "the remediation criteria for contaminated soils found in [TULAS]".328 It prescribes that the competent regulatory authority must request that remediation and monitoring be undertaken until the "remediation objectives or remediation values" established in TULAS are achieved.329 It further states that "in case of the inapplicability for the specific case of any parameter established in [TULAS] or in case of the absence in the regulation of a relevant parameter for the soil under study", the regulated entity must establish the "background or reference value of the parameter of interest present in the soil" in the affected area, in order to compare the actual values with these background values.330 This provision further indicates that a concentration exceeding three times the background value for the soil constitutes contamination that requires "immediate attention" on the part of the environmental control authority.331 In such cases, the regulated entity must remediate the contaminated soil until the concentration is lower or equal to 1.5 times the background value.332
190.
Article 4.2 establishes soil quality standards and remediation standards. It defines soil quality standards as "approximate background values or analytical detection limits for a contaminant in the soil".333 Background values refer to "representative environmental levels for a contaminant in the soil", which can reflect natural geological variations of undeveloped areas or areas free of the influence of generalized industrial or urban activities.334 Table 2 sets out soil quality standards, comprising 3 general parameters (electric conductivity, pH and sodium adsorption ratio), 19 inorganic parameters (including arsenic, barium, cadmium, total chromium, mercury, nickel, lead, vanadium and zinc), and 14 organic parameters (including polycyclic aromatic hydrocarbons).335 The table below sets out the relevant parameters:

Excerpts of TULAS, Book VI, Annex 2, Table 2
SubstanceUnits (Concentration in Dry Weight)Soil
General Parameters
Conductivity mmhos/cm 2
pH 6 to 8
Inorganic Parameters
Arsenic mg/kg 5
Barium mg/kg 200
Cadmium mg/kg 0.5
Total Chromium mg/kg 20
Nickel mg/kg 20
Lead mg/kg 25
Vanadium mg/kg 25
Organic Parameters
Polycyclic Aromatic Hydrocarbons mg/kg 0.1

191.
In this context, Article 2.38 of Annex 2 defines background values as the "prevailing environmental conditions, prior to any disturbance", that is, the "conditions that would have predominated in the absence of anthropogenic activities, with only natural processes being active".336
192.
Article 4.2.2 defines soil remediation or restoration standards in accordance with the use of the soil, distinguishing agricultural, commercial, residential and industrial uses. The standards set out in Table 3 are meant to determine the "maximum contaminant concentration levels for soil in the process of remediation or restoration".337 It contains the following relevant parameters:

Excerpts of TULAS, Book VI, Annex 2, Table 3
SubstanceUnitsLand Use
Agricultural Residential Commercial Industrial
General Parameters
Electrical Conductivity mmhos/cm 2 2 4 4
pH 6 to 8 6 to 8 6 to 8 6 to 8
Inorganic Parameters
Arsenic mg/kg 12 15 15 15
Barium mg/kg 750 500 2000 2000
Cadmium mg/kg 2 5 10 10
Total Chromium mg/kg 65 65 90 90
Nickel mg/kg 50 100 100 100
Lead mg/kg 100 100 150 150
Vanadium mg/kg 130 130 130 130
Organic Parameters
Polycyclic Aromatic Hydrocarbons mg/kg< 2< 5< 1

193.
Coming now to groundwater, Annex 1 of Book VI of TULAS determines (a) permissible limits for discharges into water bodies or sewer systems, (b) water quality standards according to their various uses, and (c) methods and procedures to determine the presence of contaminants in water.338 Its objective is to prevent and control contamination of water resources, to preserve the integrity of humans, ecosystems and their interrelationships, as well as the environment more generally.339
194.
Article 4.1.3 addresses quality standards for groundwater.340 It stipulates that any proven alteration of the quality of groundwater triggers the duty to remediate the contaminated groundwater and the affected soil.341 Table 5 sets out the quality standards for groundwater "considering a soil with clay content between (0-25.0)% and organic material content between (0-10.0)%".342 It contains the following relevant parameters:

Excerpts of TULAS, Book VI, Annex 1, Table 5

ParametersExpressed AsUnitMaximum Permissible Limit
Arsenic (total) As Mg/l 35
Barium Ba Mg/l 338
Cadmium Cd Mg/l 3,2
Cobalt Co Mg/l 60
Copper Cu Mg/l 45
Total Chromium Cr Mg/l 16
Molybdenum Mo Mg/l 153
Mercury (total) Hg Mg/l 0,18
Nickel Ni Mg/l 45
Lead Pb Mg/l 45
Zinc Zn Mg/l 433
Total Petroleum Hydrocarbons Mg/l 325

2.7 The 2008 Constitution

195.
Ecuador entered a new stage of environmental protection with the adoption of the 2008 Constitution. Most notably, the new Constitution bestows rights to nature (called Pacha Mama using the term employed in traditional Andean cultures) and codifies the fundamental principles of environmental stewardship. It declares that the elimination of poverty and the promotion of sustainable development, as well as the equitable redistribution of resources and wealth are fundamental duties of the State.343 It also specifies that constitutional principles and rights, including those relating to environmental matters, are "unalienable, obligatory, indivisible, interdependent and of equal importance".344
196.
Addressing first the rights of nature, the Tribunal notes Article 10 providing that "[n]ature shall be the subject of those rights that the Constitution recognizes for it". These rights are then specified in Articles 71 to 74.
197.
Article 71 declares that "Nature or Pacha Mama, where life is reproduced and occurs, has the right to integral respect for its existence and for the maintenance and regeneration of its life cycles, structure, functions and evolutionary processes".
198.
Article 72 further provides that "Nature has the right to be restored" and that the duty to restore nature runs in parallel to the duty to compensate individuals and communities that depend on affected natural systems.345 The exploitation of non-renewable natural resources leading to "severe or permanent environmental impact" must be subject to "the most effective mechanisms to achieve the restoration", including through "adequate measures to eliminate or mitigate harmful environmental consequences".346
199.
Article 73 requires the State to apply "preventive and restrictive measures on activities that might lead to the extinction of species, the destruction of ecosystems and the permanent alteration of natural cycles".347
200.
Article 74 then qualifies the rights of nature by stating that persons, communities, peoples and nations have the "right to benefit from the environment and the natural wealth" so as to enable them "to enjoy the good way of living", while specifying that environmental services are not subject to appropriation.348
201.
Turning then to environmental protection in general, the Constitution declares as matters of "public interest", inter alia, environmental conservation, the protection of ecosystems, biodiversity, the prevention of environmental damage and the recovery of degraded natural spaces.349 The Constitution further recognizes the "right of the population to live in a healthy and ecologically balanced environment that guarantees sustainability and the good way of living (sumak kawsay)".350 In this context, the State is called upon to promote the use of environmentally clean technologies, nonpolluting and low-impact alternative sources of energy, while certain noxious substances, such as highly toxic persistent organic pollutants or toxic wastes, are forbidden.351
202.
The Constitution also highlights the special value of the Amazon ecosystem, providing that, in addition to the regular territorial subdivisions, special systems may be established for reasons of environmental conservation.352 With respect to the Amazonian region, Article 250 insists on the conservation of its ecosystem as part of the planet's environmental equilibrium:

"The territory of the Amazon provinces is part of an ecosystem that is necessary for the planet's environmental balance of the planet [sic]. This territory shall constitute a special territorial district, for which there will be integrated planning embodied in a law including social, economic, environmental and cultural aspects, with land use development and planning that ensures the conservation and protection of its ecosystems and the principle of sumak kawsay (the good way of living)".353

203.
To implement these objectives, Article 259 requires the State to adopt sustainable development policies:

"With the aim of safeguarding the biodiversity of the Amazon ecosystem, the central State and decentralized autonomous governments shall adopt sustainable development policies which shall also offset disparities in their development and consolidate sovereignty".354

204.
In connection with the economic aspects of environmental protection, the Constitution reserves the State's powers to administer, regulate, monitor and manage strategic sectors,355 such as the hydrocarbons industry,356 in accordance with "the principles of environmental sustainability, precaution, prevention and efficiency".357 Only on an exceptional basis may the State delegate to private enterprise the management of strategic resources, including the sustainable use of natural resources.358
205.
Non-renewable natural resources are declared part of the "unalienable heritage of the State and are not subject to a statute of limitations".359 Their management must take into account the "responsibility between generations" and "the conservation of nature" as well as the objective to "minimize the negative impacts of an environmental, cultural, social and economic nature".360 Water, as a "vital element for nature and human existence", forms part of the "country's strategic heritage for public use" which is "unalienable" and imprescriptible property of the State.361
206.
Of particular relevance for present purposes is Chapter II of Title VII which deals with biodiversity and natural resources management as part of the so-called Good Way of Living System. It addresses fundamental environmental principles,362 biodiversity conservation,363 natural assets and ecosystems,364 natural resources,365 soils,366 water,367 and the biosphere, urban ecology and alternative sources of energy.368
207.
Within Chapter II, Article 395 sets forth fundamental environmental principles, such as sustainable development, based on a model that is "environmentally balanced and respectful of cultural diversity, conserves biodiversity and the natural regeneration capacity of ecosystems, and ensures meeting the needs of present and future generations",369 integration,370 and public participation.371 Article 395(4) embodies the principle in dubio pro natura in the following terms:

"In the event of doubt about the scope of legal provisions for environmental issues, it is the most favorable interpretation of their effective force for the protection of nature that shall prevail".

208.
Article 396 then addresses the risks and consequences of human-induced environmental impacts. Having articulated the principles of prevention and precaution,372 it provides in paragraph 2 that strict liability governs environmental harm and that full restoration of ecosystems must be achieved in addition to compensating affected persons and communities:

"Responsibility for environmental damage is objective. All damage to the environment, in addition to the respective penalties, shall also entail the obligation to integrally restoring the ecosystems and compensating the affected persons and communities".373

209.
The third paragraph of Article 396 then imposes on all economic actors the duty to prevent environmental impacts, and to mitigate and repair the "damages caused" by them to the environment:

"Each one of the players in the processes of production, distribution, marketing and use of goods or services shall accept direct responsibility for preventing any environmental impact, for mitigating and repairing the damages caused, and for maintaining an ongoing environmental monitoring system".374

210.
Finally, the fourth paragraph of Article 396 provides for the imprescriptibility of environmental claims in the following terms:

"The legal proceedings to prosecute and punish those responsible for environmental damages shall not be subject to any statute of limitations".375

211.
In case of environmental harm, Article 397 provides that the "State shall act immediately and with a subsidiary approach to guarantee the health and restoration of ecosystems". That provision further specifies that, in addition to sanctions, "the operator of the activity that produced the damage" must procure "integral reparation, under the conditions and on the basis of the procedures provided for by law".
212.
In this context, the (individual and collective) right to live in a healthy and ecologically balanced environment is secured by a guarantee of access to justice, ascertaining "effective custody in environmental matters".376 This entails among other things that the operator of the impugned activity bears the burden of proving the "absence of potential or real danger".377
213.
In this section of Chapter II dealing with fundamental principles, the State further pledges to "ensure the intangibility of protected natural areas, so as to guarantee the conservation of biodiversity and the maintenance of the ecological functions of the ecosystems".378 Finally, Article 399 vests a decentralized national environmental management system with overall stewardship over the environment and nature.379
214.
Among the other provisions of Chapter II which may be relevant for the resolution of this dispute, the Tribunal notes in Section III: Article 404 under which ecosystems380 must be managed "in accordance with land use planning and ecological zoning, in compliance with the law"; Article 405 referring to the "national system of protected areas" which serves to guarantee the conservation of biodiversity and the "maintenance of ecological functions"; Article 406 mandating that the State regulate "fragile and threatened ecosystems", such as "high Andean moorlands, wetlands, cloud forests, dry and wet tropical forests and mangroves, marine ecosystems and seashore ecosystems"; and Article 407 prohibiting extractive industries of non-renewable natural resources in protected areas and in "areas declared intangible assets", subject to limited exceptions.
215.
In the remainder of Chapter II, attention is called to norms of the following content: Section IV which deals with non-renewable natural resources as part of the "unalienable property of the State, immune from seizure and not subject to a statute of limitations",381 the production of which must be "in strict compliance with the environmental principles set forth in the Constitution";382 soil conservation as a matter of "public interest and national priority";383 the State must regulate water resources and the equilibrium of ecosystems,384 mitigate climate change, limit greenhouse gas emissions, deforestation and air pollution, as well as conserve "forests and vegetation".385
216.
This overview demonstrates that environmental protection is one of the 2008 Constitution's fundamental pillars and that environmental stewardship has taken on a new dimension in Ecuadorian society, where nature (or Pacha Mama) is itself bearer of constitutional rights.

2.8 The PSCs

217.
Although its claim is not contractual in nature, Ecuador has relied on the PSCs to strengthen its contention that Burlington is liable for the environmental conditions found in Blocks 7 and 21.
218.
Under the Block 7 and Block 21 PSCs, the Contractor agreed to comply with "all laws, regulations and other provisions" of Ecuador that are applicable to the contracts.386 The Consortium also gave its consent to a series of reporting requirements, such as keeping Petroecuador informed of the activities carried out under the contracts, including by submitting environmental management plans;387 carrying out environmental impact studies in accordance with RAOHE;388 providing the Ministry of Energy and Mines and Petroecuador with copies of environmental information related to the Consortium's activities;389 and conducting periodical socio-environmental audits "in order to prevent, as much as possible, any negative impact of the Contractor's activities on human settlements and on the environment".390
219.
Under Clause 5.1.20 of the Block 7 PSC, the Contractor agreed to "preserve the existing ecological equilibrium in the Contract Area" in accordance with all pertinent standards and the environmental impact studies.391 The Contractor also accepted to "[t]hroughout the term of this Contract, take all necessary measures to conserve and safeguard life and property and to protect the environment".392 In order to achieve these goals, the Contractor further undertook to employ "qualified personnel, equipment, machinery, materials, operational procedures and, in general, technology which complies with environmental protection standards and practices used in the international petroleum industry, subject to compliance with existing standards in Ecuador".393
220.
The Block 7 and Block 21 PSCs also addressed the issue of remediation and postoperations cleanup, in particular by providing that the Contractor would not be liable for preexisting environmental conditions (prior to the Services Contract for Block 7, and prior to the Participation Contract for Block 21), or for environmental conditions resulting from operations that are subsequent to the expiry of the PSCs. Clause 5.1.20.10 of Block 7 PSC reads as follows:

"The Contractor will take responsibility for cleanup and reforestation of the area with species similar to those originally found at the site, in order to, with time, allow the site to return to its original potential, with environmental conditions similar to those found at the beginning of the operations. The Contractor will also be responsible for abandonment of the wells and installations for which the Contractor has been responsible under the terms of this Contract. The cleanup, reforestation and return to similar conditions and abandonment activities will comply with the Environmental Regulations for Hydrocarbon Operations and with the provisions of the Environmental Impact Study. The Contractor will not be liable for preexisting environmental conditions at the beginning of the Service Contract activities. In situations where government authorities order remediation of the environment in the Contract Area due to preexisting conditions, the Contractor will not be liable for the costs and services. Moreover, the Contractor will not be liable for environmental conditions resulting from operations conducted by PETROECUADOR or third parties after the Contractor has returned the Contract Area".

221.
Similarly, Clause 5.1.20 of the Block 21 PSC reads as follows:

"The Contractor shall be responsible for the clean-up, reforestation, and abandonment of non-productive wells and facilities as a result of this Contract. These activities shall be carried out in accordance with the legislation in effect in Ecuador at the time that such clean-up, reforestation, or abandonment is carried out and as contemplated in the Environmental Impact Study.
The Contractor shall not be responsible for pre-existing environmental conditions at the start of the operations under the Contract.
In such cases where the competent authorities order mitigation of the environment in the Contract Area due to pre-existing conditions, any costs incurred in connection with such activities shall be assumed by the Ecuadorian State.
Nor shall the Contractor be responsible for environmental conditions resulting from operations by PETROECUADOR or third parties after the Contract Area is returned by the Contractor".394

222.
Finally, in the context of the Contracts' termination, the PSCs specify that the Consortium was to undertake a "comprehensive environmental audit" two years prior to the termination of the PSC. Clause 5.1.20.7 of the Block 7 PSC, for instance, reads as follows:

"Two (2) years prior to the termination date of this Contract, the Contractor will contract a comprehensive environmental audit of the Contract Area, based on the Environmental Impact Studies, and this audit must be completed no later than six (6) months prior to the termination date of this Contract. The final results of the audit will be binding for the Parties. The cost of performing the audit will be paid by the Parties in equal proportions (50/50). This audit will be performed by a company selected by mutual agreement of the Parties in a written agreement and the audit will comply with applicable Ecuadorian Law. The parties who perform these studies and audits must be previously qualified by the Ministry of Environment through the Undersecretary of the Environment".395

3. Conditions of liability

223.
The Tribunal will start by reviewing the liability regime applicable to hazardous activities, such as oilfield operations, in Ecuador (3.1). It will then address the statute of limitation (3.2) and the liability for successive operators (3.3).

3.1 The liability regime for hydrocarbons operations in Ecuador

224.
The Tribunal is called to rule on Burlington's possible liability in tort, as opposed to contractual liability under the PSCs. It will thus review the tort liability regime for environmental harm as it arises from the 2008 Constitution (3.1.1) and as it existed before (3.1.2), to then draw the necessary conclusions for the case at hand.

3.1.1 The strict liability regime under the 2008 Constitution

225.
The Parties agree, and rightly so, that the 2008 Constitution establishes strict liability for environmental harm.396 The Constitution also sets the following rules of the strict liability regime: (i) the burden of proof of the inexistence of harm falls on the operator;397 (ii) the operator is only responsible for the harm caused by him;398 and environmental claims are imprescriptible.399
226.
The constitutional regime has been clarified in case law. Specifically, the burden of proof of environmental harm was addressed in Los Vencedores, a decision dealing with a claim against Perenco for soil contamination in Block 7 that occurred after the entry into force of the 2008 Constitution.400 The Court held that the burden of proving harm had been reversed by Article 397(1) of the 2008 Constitution, which provides that "[t]he burden of proof regarding the inexistence of potential or real harm shall lie with the manager of the activity or the defendant". The Tribunal's understanding is that the plaintiff still has the burden to make a showing of harm plausibly connected to the defendant's activities and the defendant then has the burden of proving its absence.
227.
Applied to the present case, the rule contained in Article 397(1) means that once Ecuador has made a showing of the existence of environmental harm reasonably related to the Consortium's risky activities, for example by way of the IEMS sampling exercise, Burlington then carries the burden of demonstrating that there is no harm or, if there is harm, what its limits are.
228.
Ecuadorian courts have also held that fault is not a requirement of strict liability. The National Court of Justice explained that strict civil liability is the equivalent of "risk liability" or "fault-less liability" that is triggered "regardless of whether there was willful misconduct or negligence from the person".401 The Court added that the duty to repair environmental harm is based on the fact that the harm caused "may be materially attributed to a certain activity, not on the existence of fault".402
229.
Applied to this case, the absence of a requirement of fault implies that Burlington may not avoid liability by raising that it acted diligently.
230.
Another element of strict liability addressed by the courts is the requirement of causation. Under the strict liability regime, causation is presumed. In Aguinda, the National Court of Justice referred to the Delfina Torres decision, where it was held that under strict liability the operator could only escape liability by showing that the harm was caused by force majeure (hecho fortuito), a third party or the victim.403
231.
The reliance on a presumption of causation under the constitutional regime is further substantiated by the Final Report of Committee 5 on Natural Resources and Biodiversity of the Constituent Assembly that prepared the 2008 Constitution. This report explains that the reversal of the burden of proving harm is due to the need to establish a "presumption of innocence" in favor of the environment,404 which, in turn, entails a reversal of the burden of proving the causal nexus between the act and the damage:

"The presumption of innocence should be established in favour of the environment. From this perspective, the burden of proof should be reversed to be against the defendant […], in other words, counter to the former principle which assumes innocence until guilt is proven, strict liability would be the defense in environmental matters. The plaintiff will not be required to prove causal nexus, and the burden of proof would correspond to the defendant. This principle eliminates one of the barriers impeding access to environmental justice, which is the cost of producing evidence and the technical requirement to prove environmental damages".405

232.
For present purposes, this holding means that Burlington can be exempted from liability if it proves that the harm was caused by force majeure, by a third party, or by Ecuador and in particular by Petroamazonas after the takeover of the Blocks.406 Burlington accepts that the strict liability regime established under the 2008 Constitution involves "some burden shifting within the concept of causation". It insists, however, that Ecuador needed first to prove that the harm "occurred on the Consortium's watch", after which Burlington could show that the harm was caused by force majeure, the victim or a third party.407 While the Tribunal will revert to the issue of successive tort liability, it disagrees with Burlington's position that Ecuador must prove that the harm was caused during the time of the Consortium's operations. Indeed, proof of causation is not required. Causation is presumed, with the result that liability ensues from the mere exercise of a risky activity and the occurrence of harm that is plausibly connected to such activity as far as the type and location of the harm is concerned.
233.
The constitutional regime just described has no retroactive effect. Indeed, Article 7 of the Civil Code restates the general principle that laws have no retroactive effect.408 It is true that the decision in Baquerizo held that rules of public order do apply retroactively.409 However, environmental protection is not a matter of public order under the 2008 Constitution. It is merely a matter of public interest. Public interest, which is dealt with in Article 14 of the Constitution cannot be equated with public order, the latter notion being more restrictive than the former. As a result, there is no room to apply a rule on environmental protection such as the imprescriptibility of claims under Article 396(4) retroactively.

3.1.2 The liability regime for hydrocarbons operations prior to the 2008 Constitution

234.
The strict liability regime of the 2008 Constitution not applying retroactively, the Tribunal must assess the rules governing liability for hydrocarbons operations prior to the 2008 Constitution.
235.
The Parties diverge on whether these rules provided for fault-based or strict liability. Burlington argues in favor of the former, with the result that Ecuador must prove the existence of environmental harm and that the harm was caused by the Consortium's lack of diligence, that is, its fault. In other words, for Burlington, Ecuador must prove harm, fault and causation. For its part, Ecuador argues that the Consortium's activities were always subject to strict liability, or at the latest since the 2002 Delfina Torres decision of the Ecuadorian Supreme Court. Accordingly, says Ecuador, Burlington can only be exonerated if it establishes that the harm was caused by force majeure, a third party or the victim.410 A showing of diligence, or lack of fault, would not suffice.
236.
Prior to the entry into force of the 2008 Constitution, tort liability was governed by the Civil Code. While liability was fault-based, the Civil Code also provided for an objective liability standard applicable to particular situations.411 Moreover, the Ecuadorian courts, especially the Supreme Court in the Delfina Torres case, had extended objective liability to hazardous activities such as oilfield operations based on the theory of risk.412 In Delfina Torres, the Supreme Court of Justice provided the legal foundations for risk based liability in the following language:

"Today's world and the coming world, with its extraordinary and progressive accumulation of risks, requires greater defense of the values of man, created by a technology that, while it enables everything, it also threatens everything. The variety of real contingencies of dangers and risks that are actually drawn as a result of dissatisfaction and aside from any idea of damages, led to a slow evolution of elements and knowledge that enabled the most advanced legal systems to enter into socialization regimes of risk leading to the proposition that the victim is not left defenseless. This gave rise to the theory of risk, according to which, he who uses and takes advantage of any type of means that endow it with benefits, generates social risks through such means, and, as a result of that circumstance, must assume liability for harm caused by them […]. No fault or wrongfulness is required to recognize tort liability. It is enough that the harm is a direct consequence of the event that has caused it. It is purely strict liability".413

237.
The Supreme Court of Justice then identified the elements of strict liability showing that it is for the alleged tort feasor to prove that he or she did not cause the harm:

"Hence, the need arises to promulgate a new type of liability for this type of harm, eliminating the criteria of fault through strict liability or the establishment of an absolute presumption of such. The owner of an exploitation or industry should respond directly for harm caused by the referenced industry or exploitation, and he may only exempt himself from liability if he shows that the harm did not arise from the exploitation, and arose instead from a foreign act (force majeure, fault of a third party or the fault of the victim itself)".414

238.
Accordingly, the following elements are characteristic of the strict liability regime for environmental harm under Ecuadorian law as established in Delfina Torres :

(i) the plaintiff must prove harm connected to the defendant's activities;

(ii) fault is not required; and

(iii) causation is presumed, the defendant being exonerated if he or she proves that the harm was caused by force majeure, the victim or a third party.

239.
The Supreme Court of Justice also held in Medardo Luna that fault is not required for strict liability.415 In the context of the Code of Aeronautics, the Medardo Luna court held that it was irrelevant whether the company followed applicable regulations and whether the pilot acted with care.416
240.
The Tribunal notes that the Parties' experts disagree on whether fault is not a requirement of strict liability at all or whether it remains a requirement but is presumed. Differently worded, they disagree on whether there is a rebuttable presumption of fault (Burlington) or an irrebuttable one (Ecuador). The Respondent's expert Professor Andrade speaks of an irrebuttable presumption ("presunción de culpabilidad absoluta"),417 while the Claimant's expert Professor Bedón considers the presumption to be iuris tantum, that is rebuttable.418 The analysis of the Delfina Torres and Medardo Luna decisions just referred to show that the presumption of fault cannot be rebutted by a showing that all precautions have been followed. Only a showing of force majeure, an act of a third party or of the victim can exonerate the defendant.419
241.
Even if the Tribunal were to adopt the position that the pre-2008 strict liability regime implies a rebuttable presumption of fault, any exceedance of RAOHE or TULAS values would defeat a due diligence argument. In addition, the non-compliances identified by Ecuador's expert RPS in connection with the biennial audits for instance,420 as well as evidence of Mr. Saltos, one of Burlington's witnesses, on various practices of the Consortium (discharges, mud pits, spills), would produce the same result.
242.
More specifically, RPS reviewed the compliance record of the Consortium in environmental matters and identified the following non-compliances during the Consortium's operatorship: (i) failure to conduct biennial environmental audits in 2004 in breach of Article 42 of RAOHE and Article 61 of Book VI of TULAS; (ii) lack of key environmental documents, such as environmental management plans and environmental licenses; (iii) irregularities in the management of drill cuttings and mud pits, such as exceedances in maximum permissible limits of leachates in unlined pits; (iv) exceedances in maximum permissible limits for wastewater, as well as soil quality; (v) additional non-compliances, such as irregular waste and chemical management, or failure to respect a "highly sensitive ecological area" in Block 21; and (vi) environmental liabilities associated with the Payamino field operations resulting in offsite contamination and affecting third parties.421
243.
These instances refute Burlington's contention that the Consortium complied with all regulatory requirements.422 It is further preoccupying that the Consortium was operating the Coca-Payamino, Jaguar, Mono and Gacela fields without any proper environmental license423 and was relying on an outdated environmental impact study for the Coca-Payamino Field.424 And while the Consortium sought to downplay the fact that it produced no biennial environmental audit in 2004, the Subsecretary of Environmental Protection held this omission to be a serious breach of RAOHE.425 In this overall context, the Tribunal further observes that Burlington has not put into the record any baseline studies or internal due diligence studies generated at the outset of operations, allowing to assess the environmental condition of the Blocks at the start of operations as well as preexisting environmental liabilities.426
244.
The testimony of Mr. Saltos, also revealed various instances of Consortium malpractices. For instance, Mr. Saltos mentioned that production water was discharged on the sand bank of the Napo River at the Oso 4 site, so as to filter these discharges before they reached the water body.427 Mr. Saltos further testified that the Consortium was using auxiliary mud pits, such as the well workover pit in Area 2MT in Payamino 1/CPF, which is located beneath the CPF close to the Añango River.428 Mr. Saltos also conceded that, during well workovers, the Consortium was moving drilling muds from one site to another site with open pits, eventually even reopening sealed pits to introduce newly contaminated soils.429 In addition, as the example of auxiliary pits shows, the Consortium also made use of pits that were not reported to the authorities, thus forcing Ecuador's experts to discover unreported mud pits as a result of their sampling campaigns (see, for instance, Payamino 1/CPF; Payamino 16).430 Mr. Saltos also confirmed that the collapse of the pit at Cóndor Norte due to a landslide in 2006 was not remediated until the Consortium left the Blocks in 2009.431
245.
With respect to spills, the evidence provided by Mr. Manuel Solís of Petroamazonas shows that Mr. Saltos' list of spills during the Consortium operatorship is incomplete, further showing that the Consortium did not report all spills to the authorities. Mr. Saltos confirmed that at Jaguar 1, for instance, the 2005 spill in Area 3T was left unreported and, worse, was left unremediated with a 30cm layer of clean soil having been put on top of the affected area, which is not more than 8 meters away from a water body in close proximity to human dwellings and a school.432 Mr. Saltos also testified at Coca CPF during the Site Visit that, while the malpractice of prior operators in discharging produced water into the drainage leading to the Chalá swamp was discontinued and remediated, oil seeping continued during the Consortium's operatorship without any proper remediation being undertaken by the Consortium.433
246.
While the Tribunal accepts Mr. Saltos' representation that the risk of spills is always present in oilfield operations "no matter how cautious the operator is", the Tribunal has much more difficulty in accepting his statement that the Consortium had a "robust spill prevention system" in place.434 The Tribunal is even less inclined to accept Mr. Saltos' attempts to minimize the importance of certain spills, which he qualified as "casi derrames" or "liqueos",435 since the accumulation over time even of minute amounts of certain contaminants can in certain circumstances lead to significant environmental harm if left unremediated. Finally, while Mr. Saltos is right to argue that discharging effluents into a river was not prohibited prior to the entry into force of TULAS on 31 March 2003,436 this practice does not support Burlington's contention that the Consortium was a responsible operator.
247.
To conclude, the Tribunal reaches the conclusion that in Ecuadorian law strict liability governed instances of environmental harm at the latest since the Delfina Torres decision was handed down in 2002.437
248.
The Tribunal is mindful that the Perenco tribunal held that fault-based liability governed Ecuador's claims for environmental harm that predates the 2008 Constitution. While the Tribunal agrees with the finding in the Perenco Decision that "an operator can in general be held only to the legal standards that applied to its conduct at the time",438 it has difficulty following the Perenco tribunal's view that decisions of the Ecuadorian courts have merely "strengthened the presumptions in favour of a finding of liability in the case of damage caused through hazardous activities".439 It finds indeed that these courts have established a strict liability regime for hazardous activities, in particular oilfield operations.
249.
In addition, it is not disputed that Burlington may be held liable for the harm caused by its Consortium partner, Perenco, which operated the Blocks during the Consortium's tenure.440 It is a different issue whether Burlington may be held liable for harm caused by prior operators as Ecuador claims and Burlington opposes, to which the Tribunal will revert after having addressed the limitation period.441

3.2 Statute of limitations

250.
Burlington submits that most of Ecuador's claims are time-barred under the four-year statute of limitations of Article 2235 of the Civil Code,442 which runs from the date when the allegedly harmful act occurred.443 For Burlington, Ecuador is wrong in seeking to import the so-called "discovery rule" into the Ecuadorian legal system or to argue that the imprescriptibility rule of the 2008 Constitution could apply retroactively.444 Accordingly, Burlington submits that claims arising out of incidents that occurred before 18 January 2007 are time-barred and inadmissible.445
251.
Ecuador opposes Burlington's argument mainly on the ground that Article 2235 of the Civil Code only governs liability based on fault.446 Claims for strict liability are subject to the limitation set forth in Article 396(4) of the 2008 Constitution, as the Claimant's expert Professor Bedón acknowledged at the Hearing.447 Even if Article 2235 of the Civil Code were to apply, says Ecuador, the period would start to run when the harm is discovered, which is after the Consortium abandoned the Blocks in July 2009.448 Ecuador adds that its argumentation is reinforced by Burlington's concealment policy and lack of reporting,449 and that by acquiring its interest in the Blocks, Burlington contractually took over the environmental liabilities of prior operators.450
252.
It is common ground that environmental claims for harm caused after the entry into force of the 2008 Constitution are imprescriptible. The Parties disagree, however, on the prescriptibility of claims for harm caused prior to the Constitution's entry into force. They diverge on whether such claims are subject to the four-year limitation of Article 2235 of the Civil Code or whether they are imprescriptible.
253.
The Tribunal is not convinced by Ecuador's argument that questions related to the statute of limitations are procedural rather than substantive. The approach in Nelson Alcívar in this regard is not convincing, nor is its criterion of the date of the filing of the claim.451 Article 7(20) of the Civil Code is of no help either here, since it leaves unaffected terms that have begun to run prior to a change in law.452 More generally, the Tribunal is of the view that in comparative law and private international law the trend is to consider the statute of limitation as a substantive rather than a procedural issue.453
254.
In the Tribunal's view, it is correct that in principle the four-year statute of limitation period provided in Article 2235 CC applies to harm caused prior to the entry into force of the 2008 Constitution, subject to the following specifications.454 The date of the discovery must apply for environmental harm, not the date of the act, since strict liability is focused on the result, not on the act causing the harm. This is so because it is difficult to identify the precise time when environmental harm is generated455 and because, in oilfield operations in Ecuador, the identification of environmental harm is essentially dependent on the operator's self-reporting.456 In the same vein, reliance by Burlington on environmental audits produced by the Consortium as a means to establish constructive knowledge is misplaced here, since (i) environmental audits have no preclusive effect as a general matter under Ecuadorian law,457 and (ii) the Consortium did not generate the required 2004 biennial audits.458 Accordingly, the limitation period only starts to run from the discovery of the harm. The same applies to harm that has been insufficiently remediated, since Ecuador could only assume on the basis of remediation plans and reports submitted by the Consortium that identified harm had been properly remediated. In this context, the notion of "pasivo ambiental" in Article 1 of the Ministerial Agreement No. 169 (2012), which refers to insufficiently remediated harm, further reinforces the Tribunal's findings above.459
255.
In sum, (i) environmental harm caused and/or discovered after the entry into force of the October 2008 Constitution is actionable (Articles 396(4) and 11(3) Cst.), (ii) environmental harm caused between 17 January 2007 and the entry into force of the 2008 Constitution is actionable, and (iii) environmental harm caused prior to 17 January 2007 is actionable to the extent that it was discovered thereafter (Article 2235 CC read in light of strict liability). This extends to harm that has been insufficiently remediated, since any remaining exceedances were only discovered by IEMS in 2011 or thereafter.

3.3 Successive liability of operators

256.
Burlington rejects Ecuador's attempts to hold it liable for harm caused by prior operators as a matter of tort law (successive tort liability) or pursuant to Clause 5.1.20.10 of the Block 7 PSC and Clause 5.1.20 of the Block 21 PSC (successive contractual liability).460 After addressing the issue of Burlington's liability for the acts of prior operators, the Tribunal will also address the matter of liability for acts of Petroamazonas, the operator that succeeded the Consortium and is presently operating the Blocks.
257.
With respect to successive tort liability for prior operators, the Tribunal has already held above that causality is a component of strict liability (both under the liability regime of the 2008 Constitution and under the anterior regime elaborated by Ecuadorian courts), although it is presumed. Accordingly, to be exonerated, Burlington must prove that any alleged harm was caused by force majeure, the victim, or a third party. In other words, under the strict liability regime, Burlington cannot be held liable for harm which it can prove to have been caused by prior operators.