¶ / ¶¶ Paragraph / paragraphs
1971 Hydrocarbons Law of Hydrocarbons, Supreme Decree 1459, passed on September Law 27, 1971, published in Official Registry No. 322, October 1, 1971
1973 Agreement Agreement between the Government of Ecuador, Ecuadorian Gulf Oil Company, and TexPet of August 6, 1973
1977 Agreement Supplemental Agreement between TexPet and the Government of Ecuador of December 16, 1977
1986 Refinancing Refinancing Agreement of Amounts Owed by CEPE through the Agreement Operations Account to TexPet for Sales of Crude for Internal Consumption as of September 30, 1986, November 25, 1986
1994 MOU Memorandum of Understanding Among the Government of Ecuador, PetroEcuador, and TexPet, December 14, 1994
1995 Global Settlement Agreement and Release among the Government of Settlement Ecuador, PetroEcuador, PetroProducción, PetroComercial, and TexPet, November 17, 1995
1995 Remediation Contract for Implementing of Environmental Remediation Work and Agreement Release from Obligations, Liability, and Claims among the Government of Ecuador, PetroEcuador, and TexPet, May 4, 1995
1995 Remediation Texaco Petroleum Company Remedial Action Plan for the Former Action Plan PetroEcuador-TexPet Consortium, September 8, 1995
Aguinda Maria Aguinda et al. v. Texaco, Inc., 945 F. Supp. 625 (S.D.N.Y. 1996), 142 F. Supp. 534 (S.D.N.Y. 2001), 93 Civ. 7527, 2000 WL 122143 (S.D.N.Y. Jan. 31, 2000), 303 F.3d 470 (U.S. Court of Appeals for the Second Circuit, Aug. 16, 2002).
BIT Bilateral Investment Treaty, specifically the Treaty Between the United States of America and the Republic of Ecuador Concerning the Encouragement and Reciprocal Protection of Investment of August 27, 1993 (entered into force May 11, 1997)
C I Claimants' Statement of Claim of October 19, 2007
C II Claimants' Counter-Memorial on Jurisdiction of March 31, 2008
C III Claimants' First-Round Post-Hearing Brief on Jurisdiction of July 22, 2008
C IV Claimants' Second-Round Post-Hearing Brief on Jurisdiction of August 12, 2008
C V Claimants' Memorial on the Merits of April 14, 2008
C VI Claimants' Reply Memorial on the Merits of November 24, 2008
C VII Claimants' First-Round Post-Hearing Brief of June 19, 2009
C VIII Claimants' Second-Round Post-Hearing Brief of July 15, 2009
C IX Claimants' letter of August 6, 2009 regarding the relevance of the judgment issued by the Provincial Court of Pichincha on July 14, 2009 in Case 153-93
C X Claimants' Cost Claim of August 7, 2009
C XI Claimants' Brief in Response to the Respondent's New Evidence of August 7, 2009
C XII Claimants' Reply to the Respondent's Cost Claim of August 21, 2009
C XIII Claimants' Rebuttal Brief in Response to the Respondent's New Evidence of August 21, 2009
C XIV Claimants' letter of October 19, 2009 regarding the relevance of the judgment issued by the Provincial Court of Pichincha on September 10, 2009 in Case 154-93
C XV Claimants' letter of November 17, 2010 submitting comments on the Joint Expert Report
C XVI Claimants' letter of December 10, 2010 submitting comments on the Respondent's letter of November 17, 2010
C XVII Claimants' letter of March 4, 2011 regarding Dr. Cordero Ordoñez's appointment to Ecuador's National Court of Justice
CEPE Corporación Estatal Petrolera Ecuatoriana, an Ecuadorian State-owned company
CEPE/PE CEPE, as later succeeded by PetroEcuador
Concession Agreements 1973 Agreement and 1977 Agreement
Consortium Consortium between TexPet, Ecuadorian Gulf Oil Company, and CEPE pursuant to the 1973 Agreement
DCCP Dutch Code of Civil Procedure
Decree 1258 Supreme Decree 1258, passed on November 8, 1973, published in Official Registry No. 433, November 15, 1973
Exh. C- Claimants' Exhibit
Exh. R- Respondent's Exhibit
Exh. RE- Respondent's Expert Witness Statement
Gulf Gulf Oil Company
HC1 Claimants' slides from their opening presentation at the Hearing on
Jurisdiction
HC2 Claimants' list of letters of TexPet to Ecuador courts handed out at the Hearing on Jurisdiction
HC3 Claimants' slides from their closing presentation at the Hearing on Jurisdiction
HC4 Claimants' slides from their opening presentation at the Hearing on the Merits
HC5 Claimants' slides from their closing presentation at the Hearing on the Merits
HR1 Respondent's slides from their opening presentation at the Hearing on Jurisdiction
HR2 Respondent's first set of slides with their closing presentation on retroactivity at the Hearing on Jurisdiction
HR3 Respondent's second set of slides with their closing presentation at the Hearing on Jurisdiction
HR4 Respondent's slides from their opening presentation at the Hearing on the Merits
HR5 Respondent's slides from their closing presentation at the Hearing on the Merits
ICSID International Centre for Settlement of Investment Disputes
ILC International Law Commission
ILC Draft Articles International Law Commission Draft Articles on State Responsibility for Internationally Wrongful Acts, adopted by the International Law Commission at its fifty-third session (2001)
Interim Award Tribunal's Interim Award of December 1, 2008
Joint Expert Report Joint Expert Report of Dr. Diego Almeida Guzmán and Dr. Javier Cordero Ordóñez dated October 20, 2010 regarding the effect on the quantum damages of any applicable Ecuadorian tax laws
Lago Agrio Maria Aguinda et al. v. Chevron Texaco Corporation, Proceeding No. 002-2003, Sup. Ct. of Justice, Nueva Loja, Ecuador
OPAH Operaciones para el Abastecimiento de Hidrocarburos (Hydrocarbons Supply Operations)
p. / pp. Page/pages
Partial Award Partial Award on the Merits of March 30, 2010
PCA Permanent Court of Arbitration
PetroEcuador Empresa Estatal de Petróleos de Ecuador
PO I Procedural Order No. 1 of May 22, 2007
PO II Procedural Order No. 2 of October 19, 2007
PO III Procedural Order No. 3 of April 21, 2008
PO IV Procedural Order No. 4 of May 23, 2008
PO V Procedural Order No. 5 of March 19, 2009
PO VI Procedural Order No. 6 of April 30, 2009
PO VII Procedural Order No. 7 of July 24, 2009
PO VIII Procedural Order No. 8 of March 31, 2010
R I Respondent's Statement of Defense of November 19, 2007
R II Respondent's Memorial on Jurisdiction of January 30, 2008
R III Respondent's First-Round Post-Hearing Brief on Jurisdiction of July 22, 2008
R IV Respondent's Second -Round Post-Hearing Brief on Jurisdiction of August 12, 2008
R V Respondent's Counter-Memorial on the Merits of September 22, 2008
R VI Respondent's Rejoinder Memorial on the Merits of January 26, 2009
R VII Respondent's First-Round Post-Hearing Brief of June 19, 2009
R VIII Respondent's Second-Round Post-Hearing Brief of July 15, 2009
R IX Respondent's letter of July 27, 2009 regarding the relevance of the judgment issued by the Provincial Court of Pichincha on July 14, 2009 in Case 153-93
R X Respondent's Cost Claim of August 7, 2009
R XI Respondent's Reply to the Claimants' Brief in Response to Respondent's New Evidence of August 14, 2009
R XII Respondent's Reply to the Claimants' Cost Claim of August 22, 2009
R XIII Respondent's letter of October 2, 2009 regarding the relevance of the judgment issued by the Provincial Court of Pichincha on September 10, 2009 in Case 154-93
R XIV Respondent's letter of November 17, 2010 submitting comments on the Joint Expert Report
R XV Respondent's letter of December 10, 2010 submitting comments on the Claimants' letter of November 17, 2010
R XVI Respondent's letter of March 7, 2011 regarding Dr. Cordero Ordoñez's appointment to Ecuador's National Court of Justice
Resolution 1179 Resolution 1179, issued by the Deputy Director of the Department of Finance of CEPE on November 19, 1980
Settlement 1994 MOU, 1995 Remediation Agreement, and 1995 Global Agreements Settlement
SG-PCA Secretary-General of the Permanent Court of Arbitration
Separate Opinion Separate Opinion of Dr. Javier Cordero Ordóñez regarding the effect on the quantum of damages of any applicable Ecuadorian tax laws
Tax Experts Dr. Diego Almeida Guzmán and Dr. Javier Cordero Ordóñez, appointed by the Claimants and Respondent, respectively, pursuant to paragraph 3.1 of Procedural Order No. 8
TexPet Texaco Petroleum Company, a corporation organized under the laws of Delaware, U.S.A., and wholly-owned subsidiary of Chevron Corporation
Tr. I Transcript of the Hearing on Jurisdiction in San Jose, Costa Rica, May 19-20, 2008
Tr. II Transcript of the Hearing on the Merits in Washington, D.C., April 2029, 2009
UNCITRAL United Nations Commission on International Trade Law
UNCITRAL Arbitration Rules of the United Nations Commission on International Arbitration Rules Trade Law, 1976
VCLT Vienna Convention on the Law of Treaties of May 23, 1969
6001 Bollinger Canyon Road San Ramon, CA, 94583
U.S.A.
Texaco Petroleum Company 6001 Bollinger Canyon Road San Ramon, CA, 94583
U.S.A.
Represented by: Mr. R. Doak Bishop Mr. Wade M. Coriell Ms. Isabel Fernández de la Cuesta Mr. David Weiss Ms. Elizabeth Silbert KING & SPALDING 1100 Louisiana, Suite 4000 Houston, TX 77002
U.S.A.
Mr. Edward G. Kehoe KING & SPALDING 1185 Avenue of the Americas New York, NY 10036-4003
U.S.A.
Dr. Alejandro Ponce-Martínez
QUEVEDO & PONCE
Ave. 12 de Octubre y Lincoln
Edificio Torre 1492 Piso 16
P.O. Box 17-01-600
Quito
ECUADOR
The Respondent The Republic of Ecuador
Represented by: Dr. Diego García Carrión Procurador General del Estado Dr. Álvaro Galindo C.
Director Nacional de Patrocinio Internacional PROCURADURÍA GENERAL DEL ESTADO Robles 731 y Av. Amazonas
Quito
ECUADOR
Mr. Eric W. Bloom Mr. Tomás Leonard WINSTON & STRAWN LLP 1700 K Street, NW Washington, D.C., 20006-3817
U.S.A
Mr. Ricardo Ugarte WINSTON & STRAWN LLP Grand-Rue 23
1204 Geneva
SWITZERLAND
Mr. C. MacNeil Mitchell
WINSTON & STRAWN LLP
200 Park Avenue
New York, NY, 10166-4193
U.S.A.
Mr. Bruno D. Leurent
WINSTON & STRAWN LLP
25, avenue Marceau
75116 Paris
FRANCE
Mr. Mark Clodfelter
FOLEY HOAG LLP
1875 K Street, NW
Suite 800
Washington, DC 20006-1238
U.S.A.
The Honorable Charles N. Brower
20 Essex Street Chambers 20 Essex Street London WC2 R3AL
UNITED KINGDOM
Appointed by the Respondent:
Prof. Albert Jan van den Berg Hanotiau & van den Berg
IT Tower, 9th Floor 480 Avenue Louise, B.9 1050 Brussels
BELGIUM
Appointed by agreement of the Co-Arbitrators with the consent of the Parties: Prof. Karl-Heinz Böckstiegel, Presiding Arbitrator Parkstrasse 38
D-51427 Bergisch-Gladbach
GERMANY
1. The Respondent's jurisdictional objections are denied.
2. The Tribunal has jurisdiction concerning the claims as formulated by the Claimants in their second Post Hearing Brief dated August 12, 2008, in paragraph 116.
3. The decision regarding the costs of arbitration is deferred to a later stage of these proceedings.
4. The further procedure in this case will be the subject of a separate Procedural Order of the Tribunal.
1. From the Interim Award of December 1, 2008, the Tribunal recalls the following decisions:
1. The Respondent's jurisdictional objections are denied.
2. The Tribunal has jurisdiction concerning the claims as formulated by the Claimants in their second Post Hearing Brief dated August 12, 2008, in paragraph 116.
2. The Respondent has breached Article II(7) of the BIT through the undue delay of the Ecuadorian courts in deciding TexPet's seven court cases and is liable for the damages to the Claimants resulting therefrom.
3. The Claimants have not committed an abuse of process and are not estopped from bringing the present claim against the Respondent.
4. In view of the Tribunal's decision in section 2 above regarding the breach of Article II(7) of the BIT, and given that the relief sought by Claimants with respect to its additional claims does not go beyond that sought pursuant to the claim regarding Article II(7), the Tribunal need not decide the Claimants' claims regarding other breaches of the BIT or customary international law.
5. As a result of the Tribunal's decision in section 2 above that the Respondent has breached Article II(7) of the BIT, the Respondent is liable for damages caused to Claimants by that breach. The amount of such damages will be decided by the Tribunal with the help of a procedure set out in a separate Procedural Order of the Tribunal to determine what taxes, if any, would have been due to the Respondent if no breach of Article II(7) of the BIT had occurred.
6. The Respondent is liable for pre-award compound interest at the New York Prime Rate (annual) on the final amount to be paid by Respondent according to section 5 above, from December 22, 2006 until the date that this sum becomes payable by Respondent.
7. The Respondent shall be liable for post-award compound interest at the New York Prime Rate (annual) on the amount awarded by the Tribunal, from the date that the Tribunal orders payment by the Respondent until the date payment is made.
8. The decision regarding the costs of arbitration is deferred to a later stage of these proceedings.
9. All other claims are dismissed.
This Procedural Order No. 2 puts on record the results of the discussion and agreement between the Parties and the Tribunal at the 1st Procedural Meeting held on Tuesday, October 2, 2007, in the Small Court Room of the Peace Palace, The Hague, The Netherlands:
1. Procedural Hearing
1.1 Names of all attending the meeting were notified in advance and are set forth in the following sections 1.2 and 1.3.
The representation of the Parties at the Procedural Meeting was as follows:
Claimants
Mr. R. Doak Bishop (King & Spalding)
Dr. Alejandro Ponce Martinez (Quevedo & Ponce)
Mr. Wade M. Coriell (King & Spalding)
Dr. Ana Belen Posso (Quevedo & Ponce)
Ms. Deborah Scott (Chevron Corporation and Texaco Petroleum Company)
Mr. Ricardo Reis Veiga (Chevron Corporation and Texaco Petroleum Company)
Respondent
Mr. Eric W. Bloom (Winston & Strawn LLP)
Mr. Ricardo E. Ugarte (Winston & Strawn LLP)
Mr. Mark A. Clodfelter (Winston & Strawn LLP)
Ms. Karen S. Manley (Winston & Strawn LLP)
Mr. Carlos Venegas Olmedo (Republic of Ecuador)
Ms. Christel Gaibor (Republic of Ecuador)
The Tribunal Members and other attendees at the Procedural Meeting were as follows:
Arbitral Tribunal
The Honorable Charles N. Brower Professor Albert Jan van den Berg Professor Karl-Heinz Böckstiegel (President)
Permanent Court of Arbitration
Mr. Brooks W. Daly
Ms. Rocío Digón Ms. Evelien Pasman
Assistant to The Honorable Charles N. Brower
Mr. Peter Prows
Court Reporters/Interpreters (ALTO International)
Reporters :
Ms. Carmen Preckler Galguera Ms. Maria Raquel Banos Ms. Laura Evens Ms. Michaela Philips Interpreters :
Mr. Jon Porter
Mr. Javier Ferreira Ramos
Ms. Ute Sachs
2. Earlier Rulings
2.1. Earlier Rulings of the Tribunal remain valid unless changed expressly. The Tribunal particularly recalls the following sections of Procedural Order No. 1 and includes any additions and changes made at the Procedural Meeting:
2.2. 7. Communications
Following the Meeting, paragraph 7.1 of Procedural Order No. 1 has been deleted and this section renumbered.
7.1. The Parties shall not engage in any oral or written communications with any member of the Tribunal ex parte in connection with the subject matter of the arbitration.
7.2. The Parties shall address communications directly to each member of the Tribunal by e-mail and confirmed by courier, with a copy to the counsel for the other Party. Confirmation may be made by fax instead of courier if it does not exceed 15 pages.
7.3. Copies of all communications shall be sent to the Registry.
7.4. To facilitate citations and word processing, Memorials and other larger submissions shall be in Windows Word and preceded by a Table of Contents.
7.5. Submissions of documents shall be submitted unbound in ring binders separated from Memorials and preceded by a list of such documents consecutively numbered with consecutive numbering in later submissions (C-1, C-2 etc. for Claimant; R-1, R-2 etc. for Respondent). As far as possible, in addition, documents shall also be submitted in electronic form (preferably in Windows Word, otherwise in Acrobat).
7.6. All written communications shall be deemed to have been validly made when they have been sent to:
Claimants: to the addresses of counsel as above.
Respondent: to the address as above.
As Respondent has now appointed its Counsel for this case, communications shall from now on be addressed to Winston & Strawn LLP (Winston) New York and Washington DC offices as given in its letters.
Tribunal: to the addresses as above.
Registry: to the addresses as above.
7.7. The Parties shall send copies of correspondence between them to the Tribunal only if it pertains to a matter in which the Tribunal is required to take some action, or be apprised of some relevant event.
7.8. Any change of name, description, address, telephone number, facsimile number, or e-mail address shall immediately be notified by the Party or member of the Tribunal to all other addressees referred to in paragraphs 1, 3 and 7.
After the discussion at the Procedural Meeting, the following clarification regarding confidentiality is added:
7.9. Either Party may publicly disclose submissions made in these proceedings unless there has been a decision by the Tribunal to the contrary. Requests for confidential treatment of any item communicated in these proceedings may be submitted by either Party to the Tribunal for a decision, in which case no item which is the subject of such request may be publicly disclosed unless and until the Tribunal has so decided.
2.3. 8. Language of the arbitration
After consultation with the Parties at the Procedural Hearing, the Tribunal shall determine the language or languages to be used in the proceedings in accordance with Art. 17(1) of the UNCITRAL Rules.
After the discussion at the Procedural Meeting and further comments from the Parties after the Meeting, the following is decided:
8.1. English and Spanish will be the official languages of the arbitration and, as between them, English will be the authoritative language.
8.2. Communications by the Tribunal (including orders, decisions and awards) and all submissions and communications by the parties shall be in English, including translations in full of any witness statements prepared in Spanish and translations in relevant part of documentary evidence and legal authorities in a language other than English.
8.3. Spanish translations of all writings referred to in paragraph 8.2 that are not already in Spanish shall be submitted or communicated with the writings or as soon as possible thereafter, but in no event later than three weeks after their submission or communication, except that the Spanish translations of any award or of Claimant's Memorial on the Merits and Respondent's Counter-Memorial on the Merits may be submitted up to six weeks after such award or submission is made.
8.4. All oral proceedings shall be simultaneously interpreted and transcribed into English and Spanish.
2.4. 9. Place of arbitration
After consultation with the Parties at the Procedural Hearing, the Tribunal shall determine the place of arbitration in accordance with Article 16(1) of the UNCITRAL Rules.
After the discussion at the Procedural Meeting and the submission of further written comments of the Parties, the following is decided: The Hague, The Netherlands is the place of arbitration.
In this context it is recalled that, according to UNCITRAL Rule 16.2, Hearings may be held at other venues.
3. Timetable
3.1. Taking into account the Parties' proposal submitted by Claimants' letter of September 26, 2007, and the discussion at the Procedural Meeting, the timetable shall be as follows:
3.2. By October 19, 2007,
Claimants' Statement of Claim
3.3. By November 19, 2007,
Respondent's Statement of Defense (including all jurisdictional objections)
3.4. By January 25, 2008,
Respondent's Memorial on Jurisdiction, to be submitted together with all evidence (documents, as well as witness statements and expert statements if any) Respondent wishes to rely on in accordance with the sections on evidence below.
3.5. By March 25, 2008,
Claimants' Counter -Memorial on Jurisdiction, to be submitted together with all evidence (documents, as well as witness statements and expert statements if any) Claimants wish to rely on in accordance with the sections on evidence below.
3.6. By April 8, 2008,
Claimants' Memorial on the Merits, to be submitted together with all evidence (documents, as well as witness statements and expert statements if any) Claimants wish to rely on in accordance with the sections on evidence below.
3.7. May 19, 2008,
One day Hearing on Jurisdiction; should examination of witnesses or experts be required, this hearing may be extended to up to two and a half days if found necessary by the Tribunal after consultation with the Parties, and be held May 1921, 2008.
3.8. As soon as possible after the Hearing on Jurisdiction, the Tribunal will decide on how it will address the question of jurisdiction and inform the Parties by order, award, or otherwise.
3.9. By 22 August 2008,
Respondent's Counter-Memorial on the Merits, to be submitted together with all evidence (documents, as well as witness statements and expert statements if any) Respondent wishes to rely on in accordance with the sections on evidence below.
3.10. The Parties do not foresee the need for document requests in these proceedings and the Tribunal accordingly makes no provision for dealing with such requests in this Order. Either Party may apply to the Tribunal should circumstances arise that would require revisiting this question.
3.11. By October 24, 2008, Claimants' Reply Memorial on the Merits with any further evidence (documents, witness statements, expert statements) but only in rebuttal to Respondent's 1st Counter-Memorial on the Merits.
3.12. By December 26, 2008, Respondent's Rejoinder on the Merits with any further evidence (documents, witness statements, expert statements) but only in rebuttal to Claimant's Reply Memorial.
3.13. Thereafter, no new evidence may be submitted, unless agreed between the Parties or expressly authorized by the Tribunal.
3.14. By January 23, 2009, the Parties submit
* notifications of the witnesses and experts presented by themselves or by the other Party they wish to examine at the Hearing,
* and a chronological list of all exhibits with indications where the respective documents can be found in the file.
3.15. On a date to be decided, Pre-Hearing Conference between the Parties and the Tribunal shall be held, if considered necessary by the Tribunal, either in person or by telephone.
3.16. As soon as possible thereafter, Tribunal issues a Procedural Order regarding details of the Hearing on the Merits.
3.17. Final Hearing on the Merits to be held April 20 to April 24, 2009, and, if found necessary by the Tribunal after consultation with the Parties, extended to continue from April 27 to April 29, 2009.
3.18. By dates set at the end of the Hearing after consultation with the Parties, the Parties shall submit:
* Post-Hearing Briefs of up to 50 pages (no new documents allowed)
* and Claims for Arbitration Costs.
4. Evidence
The Parties and the Tribunal may use, as an additional guideline, the "IBA Rules on the Taking of Evidence in International Commercial Arbitration", always subject to changes considered appropriate in this case by the Tribunal.
5. Documentary Evidence
5.1. All documents (which shall include texts of all law provisions, cases and authorities) considered relevant by the Parties shall be submitted with their Memorials, as established in the Timetable.
5.2. All documents shall be submitted with translations as provided in the above section on language and in the form established above in the section on communications.
5.3. New factual allegations or evidence shall not be any more permitted after the respective dates for the Rebuttal Memorials indicated in the above Timetable unless agreed between the Parties or expressly authorized by the Tribunal.
5.4. Unless a Party raises an objection within four weeks after receiving a document, or a late objection is found justified by the Tribunal:
* a document is accepted as having originated from the source indicated in the document;
* a copy of a dispatched communication is accepted without further proof as having been received by the addressee; and
* a copy of a document and its translation into English or Spanish, if any, is accepted as correct.
6. Witness Evidence
6.1. Written Witness Statements of all witnesses shall be submitted together with the Memorials mentioned above by the time limits established in the Timetable. Although not presently anticipated, should Witness Statements be submitted with the Parties’ submissions on jurisdiction, either Party may request that the Tribunal establish a timetable for the submission of rebuttal Witness Statements.
6.2. In order to make most efficient use of time at the Hearing, written Witness Statements shall generally be used in lieu of direct oral examination though exceptions may be admitted by the Tribunal. Therefore, insofar as, at the Hearing, such witnesses are invited by the presenting Party or asked to attend at the request of the other Party, the available hearing time should mostly be reserved for crossexamination and re-direct examination, as well as for questions by the Arbitrators.
7. Expert Evidence
Should the Parties wish to present expert testimony, the same procedure would apply as for witnesses.
8. Hearings
Subject to changes in view of the further procedure up to the Hearings, the following is established for the Hearings:
8.1. The dates are as established in the Timetable above.
8.2. No new documents may be presented at the Hearings except by leave of the Tribunal. But demonstrative exhibits may be shown using documents submitted earlier in accordance with the Timetable.
8.3. A live transcript shall be made of the Hearings and provided to the Parties and the Arbitrators. The PCA as Registry shall make the necessary arrangements in this regard.
8.4. Hearing on Jurisdiction:
8.4.1. After the discussion at the Meeting and the submission of further written comments by the Parties, it is decided that the hearing on jurisdiction shall be held at San Jose, Costa Rica.
8.4.2. Assuming that no witnesses or experts have to be examined at this Hearing on Jurisdiction, the Agenda shall be as set forth below. If witnesses are to be heard at the Hearing on Jurisdiction, the Agenda will be modified.
1. Short Introduction by Chairman of Tribunal.
2. Opening Statement by Respondent of up to 1 hour.
3. Opening Statement by Claimants of up to 1 hour.
4. Questions by the Tribunal, and suggestions regarding particular issues to be addressed in more detail in Parties' 2nd Round Presentations.
5. 2nd Round Presentation by Respondent of up to 1 hour.
6. 2nd Round Presentation by Claimants of up to 1 hour.
7. Final questions by the Tribunal.
8. Discussion on whether Post-Hearing Briefs are deemed necessary and of any other issues of the further procedure.
Members of the Tribunal may raise questions at any time considered appropriate.
8.5. Hearing on the Merits:
8.5.1. Should a Hearing on the Merits become necessary, further details shall be established after the Hearing on Jurisdiction and after consultation with the Parties.
8.5.2. Taking into account the time available during the period provided for the Hearing in the Timetable, the Tribunal intends to establish equal maximum time periods both for the Claimants and for the Respondent which the Parties shall have available. Changes to that principle may be applied for at the latest at the time of the Pre-Hearing Conference.
9. Extensions of Deadlines and Other Procedural Decisions
9.1. Short extensions may be agreed between the Parties as long as they do not affect later dates in the Timetable and the Tribunal is informed before the original date due.
9.2. Extensions of deadlines shall only be granted by the Tribunal on exceptional grounds and provided that a request is submitted immediately after an event has occurred which prevents a Party from complying with the deadline.
9.3. The Tribunal indicated to the Parties, and the Parties took note thereof, that in view of travels and other commitments of the Arbitrators, it might sometimes take a certain period for the Tribunal to respond to submissions of the Parties and decide on them.
9.4. Procedural decisions will be issued by the chairman of the Tribunal after consultation with his co-arbitrators or, in cases of urgency or if a co-arbitrator cannot be reached, by him alone.
10. Tribunal Fees
The Tribunal's hourly billing rate for all time spent on this matter shall be €500 and shall be charged along with any applicable VAT in accordance with paragraph 11 of Procedural Order No. 1.
1. Introduction
1.1. This Order recalls the earlier agreements and rulings of the Tribunal, particularly in Procedural Order No. 2 sections 3.7. and 8.4.
1.2. In order to facilitate references to exhibits the Parties rely on in their oral presentations, and in view of the great number of exhibits submitted by the Parties to avoid that each member of the Tribunal has to bring all of them to the Hearing, the Parties are invited to bring to the Hearing:
for the other Party and for each member of the Tribunal Hearing Binders of those exhibits or parts thereof on which they intend to rely in their oral presentations at the hearing, together with a separate consolidated Table of Contents of the Hearing Binders of each Party, for the use of the Tribunal, one full set of all exhibits the Parties have submitted in this procedure, together with a separate consolidated Table of Contents of these exhibits.
2. Time and Place of Hearing
2.1. The Hearing shall be held at the Inter-American Court of Human Rights Avenue 10, Street 45-47 Los Yoses, San Pedro P.O. Box 6906-1000, San José, Costa Rica Telephone: (506) 2234 0581 Fax: (506) 2234 0584
Since witnesses and experts will have to be heard, two and a half days will be blocked and the Hearing will start on May 19, 2008, at 10:00 a.m., ending, at the latest, at 1 p.m. on May 21, 2008.
2.2. To give sufficient time to the Parties and the Arbitrators to prepare for and evaluate each part of the Hearings, the daily sessions shall not go beyond the period between 10:00 a.m. and 6:00 p.m. However, the Tribunal, in consultation with the Parties, may change the timing during the course of the Hearings.
3. Conduct of the Hearing
3.1. No new documents may be presented at the Hearing, unless agreed by the Parties or authorized by the Tribunal. But demonstrative exhibits may be shown using documents submitted earlier in accordance with the Timetable.
3.2. To make most efficient use of time at the Hearing, written Witness Statements shall generally be used in lieu of direct oral examination though exceptions may be admitted by the Tribunal. Therefore, insofar as, at the Hearing, such witnesses are invited by the presenting Party or asked to attend at the request of the other Party, the presenting Party may introduce the witness for not more than 10 minutes, but the further available hearing time shall be reserved for crossexamination and re-direct examination, as well as for questions by the Arbitrators.
3.3. If a witness whose statement has been submitted by a Party and whose examination at the Hearing has been requested by the other Party, does not appear at the Hearing, his statement will not be taken into account by the Tribunal. A Party may apply with reasons for an exception from that rule.
3.4. In so far as the Parties request oral examination of an expert , the same rules and procedure shall apply as for witnesses.
4. Agenda of Hearing
4.1. In view of the examination of witnesses and experts, the following Agenda is established for the Hearing:
1. Introduction by the Chairman of the Tribunal.
2. Opening Statements of not more than 30 minutes each for the
a) Respondent,
b) Claimants.
3. Unless otherwise agreed by the Parties: Examination of witnesses and experts presented by Respondent. For each:
a) Affirmation of witness or expert to tell the truth.
b) Short introduction by Respondent (This may include a short direct examination on new developments after the last written statement of the witness or expert).
c) Cross examination by Claimants.
d) Re-direct examination by Respondent, but only on issues raised in cross-examination
e) Re-Cross examination by Claimants.
f) Remaining questions by members of the Tribunal, but they may raise questions at any time.
4. Examination of witnesses and experts presented by Claimants. For each: vice versa as under a) to f) above.
5. Any witness or expert may only be recalled for rebuttal examination by a
Party or the members of the Tribunal, if such intention is announced in time to assure the availability of the witness and expert during the time of the Hearing.
6. Rebuttal Arguments of not more than 1 hour each for the
a) Respondent,
b) Claimants.
c) Additional questions of members of the Tribunal, if any.
7. Closing arguments of not more than 45 minutes each for the
a) Respondent,
b) Claimants.
c) Remaining questions by the members of the Tribunal, if any.
8. Discussion regarding any post-hearing submissions and other procedural issues.
4.2. Examination of witnesses and experts shall take place in the order agreed by the Parties. If no such agreement has been reached, unless the Tribunal decides otherwise, Respondent's witnesses and experts shall be heard first in the order decided by the Respondent, and then Claimants' witnesses and experts shall be heard in the order decided by the Claimants.
4.3. Unless otherwise agreed between the Parties or ruled by the Tribunal, witnesses and experts may be present in the Hearing room during the testimony of other witnesses and experts.
4.4. As already foreseen in Procedural Order No. 2 for the hearing on the merits, in view of the examination of witnesses and experts also for this Hearing on Jurisdiction, taking into account the time available during the period provided for the Hearing in the timetable, the Tribunal establishes equal maximum time periods which the Parties shall have available for their presentations and examination and cross-examination of all witnesses and experts. Taking into account the Calculation of Hearing Time attached to this Order, the total maximum time available for the Parties (including their introductory and final statements) shall be as follows:
5 hours for Claimants
5 hours for Respondent
The time limits "not more than" for the Parties' Agenda items above shall be considered as a guideline. However, it is left to the Parties, subject to section 3.2. above, how much of their allotted total time they want to spend on Agenda items in section 4.1. above, subsections 2., 3. b, c, d, and e, 4., 6. and 7. as long as the total time period allotted to them is maintained.
4.5. The parties shall prepare their presentations and examinations at the Hearing on the basis of the time limits established in this Procedural Order.
5. Other Matters
5.1. The PCA has organized availability of the court reporter and translation, that microphones are set up for all those speaking in the Hearing room to assure easy understanding over a loud speaker and for translation, and, taking into account the numbers of persons attending from the Parties' side, sufficient supplies of water on the tables and coffee and tea for the two coffee breaks every day.
5.2. The Tribunal may change any of the rulings in this order, after consultation with the Parties, if considered appropriate under the circumstances.
Taking into account the discussion and the agreements reached with the Parties at the end of the Hearing on Jurisdiction in San José on May 20, 2008, the Tribunal issues this Procedural Order No. 4 as follows:
1. Post-Hearing Briefs
1.1. By July 22, 2008, the Parties shall simultaneously submit Post-Hearing Briefs containing the following:
1.1.1. The relief sought by the Parties regarding both jurisdiction and the merits;
1.1.2. Any comments they have regarding,
a) issues raised in submissions of the other side to which they have not yet replied; and
b) issues raised at the Hearing on Jurisdiction;
1.1.3. Separate sections responding in particular to the following questions:
a) Explain why the alleged investment in this case is or is not an investment "existing at the time of entry into force" of the Treaty.
b) What exactly is Claimants’ case regarding an "investment agreement" under Article VI(1)(a) of the Treaty?
1.2. The sections of the Post-Hearing Briefs requested under 1.1.2 and 1.1.3 above shall include short references to all sections in the Party’s earlier submissions, as well as to exhibits (including legal authorities, witness statements, and expert statements) and to hearing transcripts on which it relies regarding the respective issue. For the avoidance of doubt, the Tribunal wishes to receive from each Party,
1.2.1. A statement of each point of law it wishes the Tribunal to adopt; and
1.2.2. A statement of each fact relevant to jurisdiction that it wishes the Tribunal to accept.
1.3. New exhibits shall only be attached to the Post-Hearing Brief if they are required to rebut factual or legal issues raised by the other side in its unanswered written submissions or at the Hearing on Jurisdiction.
1.4. By August 12, 2008, the Parties shall simultaneously submit a second round of Post- Hearing Briefs, but only in rebuttal to the first round Post-Hearing Briefs of the other side.
2. Procedure on the Merits
2.1. As discussed and agreed at the Hearing on Jurisdiction, to avoid any misunderstanding, the above schedule does not affect the Timetable regarding the procedure on the merits as agreed between the Parties and the Tribunal and recorded in sections 3.6 to 3.18 of Procedural Order No. 2. This is without prejudice to the decision of the Tribunal regarding jurisdiction provided for in section 3.8 of Procedural Order No. 2.
1. The Respondent's jurisdictional objections are denied.
2. The Tribunal has jurisdiction concerning the claims as formulated by the Claimants in their second Post Hearing Brief dated August 12, 2008, in paragraph 116.
3. The decision regarding the costs of arbitration is deferred to a later stage of these proceedings.
4. The further procedure in this case will be the subject of a separate Procedural Order of the Tribunal.
1. Introduction
1.1. This Order recalls the earlier agreements and rulings of the Tribunal and particularly takes into account the recent submissions and letters of the Parties.
1.2. In order to facilitate references to exhibits the Parties rely on in their oral presentations, and in view of the great number of exhibits submitted by the Parties to avoid that each member of the Tribunal has to bring all of them to the Hearing, the Parties are invited to bring to the Hearing:
for the other Party and for each member of the Tribunal Hearing Binders of those exhibits or parts thereof on which they intend to rely in their oral presentations at the hearing, together with a separate consolidated Table of Contents of the Hearing Binders of each Party,
for the use of the Tribunal, one full set of all exhibits the Parties have submitted in this procedure, together with a separate consolidated Table of Contents of these exhibits.
2. Time and Place of Hearing
2.1. The Hearing shall be held at Winston & Strawn LLP 1700 K Street, NW Washington, D.C. 20006-3817 USA
Tel: +1 202 282 5000 Fax: +1 202 282 5100
As agreed, eight days will be blocked and the Hearing will start at 10:00 a.m. on April 20, 2009, and end, at the latest, at 6 p.m. on April 29, 2009
2.2. Two extra days, April 30 and May 1, will also be blocked as a contingency in the event that the Tribunal deems absolutely necessary to extend the Hearing.
2.3. To give sufficient time to the Parties and the Arbitrators to prepare for and evaluate each part of the Hearings, the daily sessions shall not go beyond the period between 10:00 a.m. and 6:00 p.m. However, the Tribunal, in consultation with the Parties, may change the timing during the course of the Hearings.
2.4. By March 20, 2009, the Parties shall submit notifications of the persons that will be attending the Hearing on their respective sides.
3. Conduct of the Hearing
3.1. No new documents may be presented at the Hearing, unless agreed by the Parties or authorized by the Tribunal. But demonstrative exhibits may be shown using documents submitted earlier in accordance with the Timetable.
3.2. Documents in rebuttal of recent witness statements to which the respective Party has not had an opportunity to reply may be introduced, together with a short explanatory note, by April 1, 2009.
3.3. To make most efficient use of time at the Hearing, written Witness Statements shall generally be used in lieu of direct oral examination though exceptions may be admitted by the Tribunal. Therefore, insofar as, at the Hearing, such witnesses are invited by the presenting Party or asked to attend at the request of the other Party, the presenting Party may introduce the witness for not more than 10 minutes, or, regarding new developments after the last statement of the witness, for not more than 20 minutes, but the further available hearing time shall be reserved for cross-examination and re-direct examination, as well as for questions by the Arbitrators. Argument by a Party may only be presented during the opening and closing statements as provided in the Agenda.
3.4. If a witness whose statement has been submitted by a Party and whose examination at the Hearing has been requested by the other Party, does not appear at the Hearing, his statement will not be taken into account by the Tribunal. A Party may apply with reasons for an exception from that rule.
3.5. In so far as the Parties request oral examination of an expert, the same rules and procedure shall apply as for witnesses.
4. Agenda of Hearing
4.1. In view of the examination of witnesses and experts, the following Agenda is established for the Hearing:
1. Introduction by the Chairman of the Tribunal.
2. Opening Statements of not more than 2 hours each for the
a) Claimants,
b) Respondent.
3. Unless otherwise agreed by the Parties: Examination of Claimants' witnesses and experts. For each:
a) Affirmation of witness or expert to tell the truth.
b) Short introduction by Claimants (This may include a short direct examination on new developments after the last written statement of the witness or expert.).
c) Cross-examination by Respondent.
d) Re-direct examination by Claimants, but only on issues raised in cross-examination.
e) Re-cross examination by Respondent.
f) Remaining questions by members of the Tribunal, but they may raise questions at any time.
4. Examination of Respondent's witnesses and experts. For each: vice versa as under a) to f) above.
5. Any witness or expert may only be recalled for rebuttal examination by a Party or the members of the Tribunal, if such intention is announced in time to assure the availability of the witness and expert during the time of the Hearing.
6. Closing arguments of not more than 2 hours each for the
a) Claimants,
b) Respondent.
c) Remaining questions by the members of the Tribunal, if any.
7. Discussion regarding any post-hearing submissions and other procedural issues.
4.2. Examination of witnesses and experts shall take place in the order agreed by the Parties. If no such agreement has been reached, unless the Tribunal decides otherwise, Claimants' witnesses and experts shall be heard first in the order decided by Claimants, and then Respondent's witnesses and experts shall be heard in the order decided by Respondent.
4.3. Unless otherwise agreed between the Parties or ruled by the Tribunal, witnesses and experts may be present in the Hearing room during the testimony of other witnesses and experts.
4.4. As already foreseen in Procedural Order No. 2 for the hearing on the merits, in view of the examination of witnesses and experts, taking into account the time available during the period provided for the Hearing in the timetable, the Tribunal establishes equal maximum time periods which the Parties shall have available for their presentations and examination and cross-examination of all witnesses and experts. Taking into account the Calculation of Hearing Time attached to this Order, the total maximum time available for the Parties (excluding their introductory and final statements) shall be as follows:
16.25 hours for Claimants 16.25 hours for Respondent
It is left to the Parties how much of their allotted total time they want to spend on Agenda items in sections 3, 4, and 5, as long as the total time period allotted to them is maintained.
By April 1, 2009, the Parties may submit a further notification as to whether they do not intend to examine any of the witnesses so far notified. Thereafter, the Tribunal will re-examine whether, in view of the numbers of witnesses to be examined from each side, the above allotment of periods to each Party has to be changed. If a Party does not call a witness for cross-examination at the hearing, this will not be considered as an acceptance of that witness's testimony.
4.5. The Parties shall prepare their presentations and examinations at the Hearing on the basis of the time limits established.
5. Other Matters
5.1. The PCA has organized availability of the court reporter and translation.
5.2. Counsel for Respondent will assure that microphones are set up for all those speaking in the Hearing room to assure easy understanding over a loud speaker and for translation.
5.3. Counsel for Respondent, in consultation with counsel for Claimants and the PCA, will arrange for catering of lunches and, taking into account the numbers of persons attending from each side, sufficient supplies of water on the tables and coffee and tea for the two coffee breaks every day.
5.4. The Tribunal may change any of the rulings in this Order, after consultation with the Parties, if considered appropriate under the circumstances.
Taking into account the discussion and the agreements reached with the Parties at the Hearing on the Merits held in Washington, D.C. from April 20 to 24 and April 27 to 28, 2009, the Tribunal issues this Procedural Order No. 6 as follows:
1. Post-Hearing Briefs
1.1. By June 19, 2009, the Parties shall simultaneously submit Post-Hearing Briefs, limited to a maximum of 80 pages (double-spaced) in length, containing the following:
1.1.1. Any comments they have regarding issues raised at the Hearing on the Merits;
1.1.2. To the extent not fully and completely answered during the Hearing on the Merits, separate sections responding in particular to any questions posed by the Tribunal during the Hearing on the Merits as well as those in section 3 below.
1.2. The sections of the Post-Hearing Briefs requested under 1.1.1 and 1.1.2 above shall include short references to all sections in the Party's earlier submissions, as well as to exhibits (including legal authorities, witness statements, and expert statements) and to hearing transcripts on which it relies regarding the respective issue.
1.3. No new documents shall be attached to the Post-Hearing Briefs unless expressly authorized in advance by the Tribunal.
1.4. By July 15, 2009, the Parties shall simultaneously submit a second round of Post- Hearing Briefs, limited to a maximum of 40 pages (double-spaced) in length, but only in rebuttal to the first round Post-Hearing Briefs of the other side.
2. Cost Claims
2.1. By August 7, 2009, the Parties shall simultaneously submit Cost Claims, briefly setting out the costs incurred by each side. Such Cost Claims need not include supporting documentation for the costs claimed.
2.2. By August 21, 2009, the Parties shall simultaneously submit any comments on the Cost Claims submitted by the other side.
3. Questions
In addition to providing any further comments on the questions already posed during the Hearing on the Merits, the Parties are requested to address the following questions in the Post-Hearing Briefs:
3.1. What is the standard applicable under Article II(7) of the BIT ("effective means of asserting claims and enforcing rights")? Is that standard lower than the standard for denial of justice?
3.2. Even if the Claimants have the burden of proof to show a denial of justice, is it of any relevance which of the processing of the 7 cases by the courts of Ecuador occurred before the Claimants filed their Notice of Arbitration in December 2006, and which occurred after that point in time?
3.3. What is it about the order of payment to TexPet's legal representative that prevents TexPet from collecting on the judgment in the Refinancing Agreement case? Why cannot TexPet designate its local counsel as its legal representative to collect on the judgment in the Refinancing Agreement case?
3.4. To what extent can the Tribunal apply its own interpretation of the three relevant Contracts?
3.5. To what extent are the conclusions of the court-appointed experts in the seven cases relevant in our context? Does this impact the question of the probability of success or the likely outcome in the Ecuadorian courts?
3.6. Can a State rely on the invalidity of a contract despite it having been signed by its own Ministers?
3.7. What is the Claimants' reason for specifically asking for a declaration that the 1973 and 1977 Agreements were breached as a part of its Relief Sought?
3.8. What is the relevance of the treatment accorded to TexPet's cases (1) by the Ecuadorian courts before the Notice of Arbitration in December 2006 as compared to (2) after the Notice of Arbitration was filed? Is there a difference?
3.9. Apart from,
(1) the references to "the period between the date of the signature of the herein agreement until 12 months subsequent to that date" in Section 1 ("Works of Geology and Geophysics") and Sections 3 and 3(c) ("Production"),
(2) the reference to "the period between the 12 months of the work program" in Section 3(g) ("Production"), and
(3) the reference to "this annual period" in Section 1.2 ("General Rules that shall rule the Production"), does the 1977 Agreement contain any indication suggesting that it is limited to a one-year term, having particular regard to the purpose of the 1977 Agreement as set forth in the preambular section entitled "Object of the Agreement"?
3.10. In the event that the Tribunal were to consider a monetary award, in order to ensure payment by the Claimants of taxes legitimately due in respect of any such award, what mechanism would the Parties consider to be an acceptable alternative to the Tribunal deducting taxes from any amount awarded?
Taking into account the Claimants' letter dated July 16, 2009, the Respondent's letter dated July 22, 2009, and paragraph 1.3 of the Tribunal's Procedural Order No. 6, which states:
No new documents shall be attached to the Post-Hearing Briefs unless expressly authorized in advance by the Tribunal[,] the Tribunal issues this Procedural Order No. 7 as follows:
1. The above ruling in paragraph 1.3. refers to all "documents" and therefore is also applicable to authorities. Respondent, therefore, should not have submitted exhibits R-1020 to R-1033 without an authorization by the Tribunal "in advance".
2. The Tribunal notes that Claimant's letter of July 16, 2009, while containing a general objection to all new documents submitted by Respondent, presents detailed reasons for objections only regarding exhibits R-1022, 1023, 1025, 1027, 1028, 1029, 1030, 1031, and 1033.
3. Since the Tribunal wants to assure that it has all exhibits and authorities considered relevant by the Parties available by the time of its deliberations for the Award on the Merits, and since the timetable of Procedural Order No. 6 still provides time for two rounds of submissions regarding costs so that no delay is caused by short further rounds of submissions, the Tribunal rules as follows:
3.1. By August 7, 2009, Claimant may submit a further short Brief commenting on the new documents submitted by Respondent and may attach to this Brief any further documents in rebuttal of Respondent's new documents.
3.2. Should Respondent wish to submit any new documents in rebuttal to such further documents submitted by Claimant, it may submit a reasoned application by August 14, 2009, but without any new documents attached, and Claimant may comment on such an application by August 21, 2009.
1. From the Interim Award of December 1, 2008, the Tribunal recalls the following decisions:
1. The Respondent's jurisdictional objections are denied.
2. The Tribunal has jurisdiction concerning the claims as formulated by the Claimants in their second Post Hearing Brief dated August 12, 2008, in paragraph 116.
2. The Respondent has breached Article II(7) of the BIT through the undue delay of the Ecuadorian courts in deciding TexPet's seven court cases and is liable for the damages to the Claimants resulting therefrom.
3. The Claimants have not committed an abuse of process and are not estopped from bringing the present claim against the Respondent.
4. In view of the Tribunal's decision in section 2 above regarding the breach of Article II(7) of the BIT, and given that the relief sought by Claimants with respect to its additional claims does not go beyond that sought pursuant to the claim regarding Article II(7), the Tribunal need not decide the Claimants' claims regarding other breaches of the BIT or customary international law.
5. As a result of the Tribunal's decision in section 2 above that the Respondent has breached Article II(7) of the BIT, the Respondent is liable for damages caused to Claimants by that breach. The amount of such damages will be decided by the Tribunal with the help of a procedure set out in a separate Procedural Order of the Tribunal to determine what taxes, if any, would have been due to the Respondent if no breach of Article II(7) of the BIT had occurred.
6. The Respondent is liable for pre-award compound interest at the New York Prime Rate (annual) on the final amount to be paid by Respondent according to section 5 above, from December 22, 2006 until the date that this sum becomes payable by Respondent.
7. The Respondent shall be liable for post-award compound interest at the New York Prime Rate (annual) on the amount awarded by the Tribunal, from the date that the Tribunal orders payment by the Respondent until the date payment is made.
8. The decision regarding the costs of arbitration is deferred to a later stage of these proceedings.
9. All other claims are dismissed.
1. Partial Award on the Merits
The Tribunal recalls, from its Partial Award on the Merits of March 29, 2010 :
1.1. From its Decisions in Section I:
As a result of the Tribunal's decision in section 2 above that the Respondent has breached Article II(7) of the BIT, the Respondent is liable for damages caused to Claimants by that breach. The amount of such damages will be decided by the Tribunal with the help of a procedure set out in a separate Procedural Order of the Tribunal to determine what taxes, if any, would have been due to the Respondent if no breach of Article II(7) of the BIT had occurred.
1.2. From the considerations of the Tribunal in Section H.VII, in particular:
[T]he final determination of the quantum of damages to be awarded is to be dealt with through a procedure that the Tribunal will set out in a separate order. It is to be noted that the purpose of that procedure is to establish the quantum of the Claimants' loss taking into account applicable Ecuadorian tax laws. The purpose is not to establish the amount of tax that would be assessed by Ecuadorian authorities today on an arbitral award.
2 Negotiation Period
2.1. The Parties are invited to attempt to agree on the amount, if any, that should be deducted from the total set forth in the Table at paragraph 549 of the Tribunal's Partial Award on account of any applicable Ecuadorian tax laws, in light of the principles set out in said Partial Award.
2.2. Should the Parties be unable to come to an agreement by May 31, 2010, the Tribunal will proceed with the expert procedure detailed below.
3. Expert Procedure
3.1. Should no agreement be reached according to section 2 above, between Claimants and Respondent, each side will appoint an expert on Ecuadorian tax laws by June 30, 2010.
3.2. The Tribunal may also consider appointing an expert on its behalf, whose terms of reference will be determined at the time of such appointment in accordance with the purpose of this procedure and Article 27 of the UNCITRAL Rules.
3.3. The party-appointed experts and the Tribunal-appointed expert, if any has been appointed, will cooperate and attempt to present a joint proposal to the Tribunal as to the amount, if any, to be deducted from the total set forth in the Table at paragraph 549 of its Partial Award on account of any applicable Ecuadorian tax laws.
3.4. Should the experts above be unable to form a joint proposal to the Tribunal by August 30, 2010, the Tribunal may ask for individual submissions from each expert or from any of them in accordance with instructions to be set out by the Tribunal at that time.
4 Tribunal Decision on Damages
After the above procedures are completed, taking their results into account, the Tribunal intends to decide on the damages to be awarded on the basis of its Partial Award.
| Spanish Original | English Translation |
| CLAUSULA DECIMA-NOVENA: ABASTECIMIENTO INTERNO 19.1 Para el abastecimiento de las plantas refinadoras e industriales establecidas o que se establecieren en el País, el Ministerio del Ramo podrá exigir a los contratistas, cuando lo juzgue necesario, el suministro de un porcentaje uniforme del petróleo que les pertenece y efectuar entre ellos las compensaciones económicas que estime convenientes para que esas plantas se abastezcan con el petróleo crudo que sea el más adecuado, en razón de su calidad y ubicación. El porcentaje a que se refiere el inciso anterior se aplicará a todos los productores del País, incluyendo a CEPE y se determinará trimestralmente dividiendo el consumo interno nacional en barriles por día entre la producción total que corresponde a dichos productores, también expresada en barriles por día y multiplicando el resultado por cien. Se entiende que no existe obligación alguna para utilizar el petróleo que corresponde al Estado según el Artículo cuarenta y seis de la Ley de Hidrocarburos, en el consumo interno del País. 19.2 Los contratistas se comprometen a suministrar, si el ministerio del Ramo lo pidiere, su parte proporcional, de cualquier volúmen [sic] de petróleo crudo que fuese necesario para la producción de derivados destinados al consumo interno del País, calculada de acuerdo a lo previsto en el numeral anterior de esta cláusula. Esta obligación de los contratistas no será limitada por las disposiciones del numeral 19.3 de esta cláusula. 19.3 En el caso de que la plantas refinadoras, industriales o petroquímicas ubicadas en el País elaboren derivados para la exportación y si para el efecto fuere necesario el suministro de un volúmen [sic] adicional de crudo, después de haberse utilizado en dichas plantas todo el petróleo que corresponde al Estado de acuerdo con el Artículo cuarenta y seis de la Ley de Hidrocarburos y el que produzca o corresponda a CEPE por cualquier | CLAUSE 19: LOCAL SUPPLY 19.1 For the supply of refining and industrial plants established or which may be established in the country, the respective Ministry may require from the contractors, when it deems it necessary, the supply of a uniform percentage of the oil belonging to them, and make the economic compensations it considers appropriate between them in order that such plants may be supplied with the crude oil which is the most appropriate by reason of its quality and location. The percentage referred to in the preceding paragraph shall be applied to all producers in the country, including CEPE, and will be determined quarterly by dividing the national domestic consumption in barrels per day by the total production corresponding to such producers, also expressed in barrels per day, and multiplying the result by 100. It is understood that there is no obligation whatsoever to use oil corresponding to the State pursuant to Article 46 of the Hydrocarbons Law in the internal consumption of the country. 19.2 The contractors agree to supply, if the respective Ministry so requests, their proportionate part of whatever quantity of crude oil may be necessary for the production of derivatives for the internal consumption of the country, calculated in accordance with the provisions of the preceding numbered paragraph of this clause. This obligation of the contractors shall not be limited by the provisions of paragraph 19.3 of this clause. 19.3 In the event that the refining, industrial or petrochemical plants located in the country manufacture derivatives for export and if the supply of an additional quantity or crude should be necessary for that purpose, after all oil corresponding to the State in accordance with Article 46 of the Hydrocarbons Law and that which is produced by or corresponds to CEPE for any reason has been utilized in said plants, the |
| concepto, el Ministerio del Ramo podrá exigir a los contratistas, del crudo que les pertenece, un porcentaje uniforme en relación al exigido a los demás productores del País. Tal porcentaje será calculado dividiendo el mencionado volúmen [sic] adicional, expresado en barriles por día, para la producción total del País, después de deducir el volúmen [sic] total que produzca o corresponda a CEPE por cualquier concepto, también expresado en barriles por día y multiplicando el resultado por cien. Tal porcentaje se aplicará a la producción total del área de los contratistas excluyendo la participación parcial o total que haya ejercido CEPE, según la cláusula quincuagésima segunda de este Contrato y el volúmen [sic] resultante, será tal que permita disponer, para la exportación por parte de los contratistas, de un volumen de crudo de no menos del cuarenta y nueve por ciento del petróleo total producido en el área del contrato. | respective Ministry may require of the contractors, from the crude that belongs to them, a percentage equal to that required of the other producers in the country. Such percentage shall be calculated by dividing the said additional quantity, expressed in barrels per day, by the total production of the country, after deducting the total quantity produced by or corresponding to CEPE for any reason, also expressed in barrels per day, and multiplying the result by 100. Such percentage shall be applied to the total production from the contractors' area, excluding the partial or total participation elected by CEPE, pursuant to Clause 52 of this contract, and the resulting volume shall be such that will permit availability, for export by the contractors, of a volume of crude not less than 49% of the total oil produced in the contract area. |
| 19.4 El Estado autorizará a los contratistas la exportación del petróleo que les corresponda, una vez satisfechas las necesidades del País de acuerdo con lo establecido en los numerales anteriores de esta cláusula y en la 26.1. | 19.4 The State will authorize the contractors to export the oil that corresponds to them once the requirements of the country are satisfied in accordance with the provisions of the preceding numbered paragraphs of this clause and paragraph 26.1. |
| CLAUSULA VIGESIMA: PRECIOS DEL PETROLEO PARA REFINERIAS O INDUSTRIAS | CLAUSE 20: OIL PRICES FOR REFINERIES OR INDUSTRIES |
| 20.1 Los precios de los diversos tipos de petróleo crudo que se requieran para las refinerías o industrias de hidrocarburos establecidas en el País, destinadas al consumo interno de derivados, serán los señalados por el Ministerio del Ramo y para su determinación se tomarán en cuenta los costos de producción incluyendo las amortizaciones, tarifas de transporte y una utilidad razonable. | 20.1 Prices of the various types of crude oil required for hydrocarbon refineries or industries established in the country, for internal consumption of derivatives, shall be those determined by the respective Ministry, and for their determination production costs including amortization, transportation tariffs and a reasonable profit shall be taken into account. |
| 20.2 Los precios de los diversos tipos de petróleo crudo que se requieran para las refinerías o industrias de hidrocarburos establecidas en el País, destinados a la elaboración de derivados o productos de exportación, serán convenidos de acuerdo a los precios del petróleo crudo en el mercado internacional. | 20.2 Prices of the various types of crude oil required for the hydrocarbon refineries or industries established in the country for the production of derivatives or products for export shall be agreed upon in accordance with the prices of crude oil on the international market. |
| (Exh. C-4) | (Exh. R-570; Tr. II at 947:19-949:5) |
| Spanish Original | English Translation |
| OBJETO DEL CONVENIO.- El presente convenio tiene por objeto: - Promover la exploración tendiente al descubrimiento de nuevas reservas de petróleo; - Desarrollar en forma integral el área del contrato de 6 de agosto de 1973, a fin de incorporar a la producción petrolera nacional nuevos campos hidrocarburíferos; - Continuar realizando un adecuado mantenimiento de los pozos productivos, de conformidad con las especificaciones que aconseja la técnica; - Incentivar la inversión del consorcio en programas de recuperación secundaria y métodos mejorados de producción; y, - Lograr un incremento de la producción de petróleo, siempre dentro de las normas de conservación de reservas establecidas por el Ministerio de Recursos Naturales y Energéticos. [...] Petróleo destinado a Consumo Interno De conformidad con lo que dispone el artículo 31 de la Ley de Hidrocarburos y la cláusula 19 del contrato de exploración y explotación de hidrocarburos suscrito entre el Gobierno Nacional y las compañías Texaco Petroleum Company y Ecuadorian Gulf Oil Company, el 6 de agosto de 1973, el consorcio CEPE-Texaco Petroleum Company suministrará las cantidades de petróleo crudo que sean necesarias para el consumo interno del país. La Dirección General de Hidrocarburos, en forma trimestral y con quince días hábiles de anticipación al inicio de cada trimestre fijará un estimado del Consumo Nacional Interno. Esto es, el volumen de crudo a ser procesado en las | OBJECT OF THE AGREEMENT.- The herein agreement has the object of, namely: - Promoting the exploration tending to the discovery of new oil reserves; - Developing in an integral way, the area of the contract of August 6 of 1973, in order to incorporate new hydrocarbon fields to the national oil production; - Continuing with the performance of an appropriate maintenance of the productive wells, in accordance with the specifications that the technique advised; - Fostering the investment of the Consortium in programs of secondary recovery and improved methods of production; and, - Achieving an increase of the production of oil, always within the rules of conservation of reserves established by the Ministry of Energy and Natural Resources. [...] Oil destined to Internal Consumption In accordance with what is set forth in article 31 of the Hydrocarbons Law and clause 19 of the Contract of Exploration and Exploitation of Hydrocarbons, subscribed between the National Government and the Companies Texaco Petroleum Company and Ecuadorian Gulf Oil Company, on August 6 of 1973, the Consortium CEPE-Texaco Petroleum Company shall supply the crude oil amounts that are necessary for the internal consumption of the country. The General Hydrocarbons Directorate, quarterly and with fifteen business days in advance to the initiation of each quarter shall fix an estimate of the National Internal Consumption. This is, the volume of crude to be processed in the refineries, |
| refinerías, menos el volumen de productos exportables y más el crudo de compensación. El volumen de productos exportables será multiplicado por el cuociente que resulte de dividir el precio promedio ponderado de las exportaciones de productos de la Corporación Estatal Petrolera Ecuatoriana en el trimestre anterior, por el precio promedio ponderado de las ventas de petróleo crudo realizadas en dicho trimestre anterior, por la misma Corporación Estatal. En ambos casos, los precios serán ajustados a pago al contado. (No más de 20 días laborales de crédito.) En los veinte días posteriores a la finalización de cada trimestre, la misma Dirección realizará la reliquidación respectiva del Consumo Nacional Interno según la definición que antecede, tomando para ello los datos reales durante el trimestre sujeto a reliquidación. Los saldos que resulten de tal reliquidación se imputarán a los 90 días siguientes a la fecha de tal reliquidación, haciéndose los ajustes que correspondan. Los productos exportables serán de propiedad exclusiva de la Corporación Estatal Petrolera Ecuatoriana. (Exh. R-3) | less the volume of exportable products and plus the crude oil of compensation. The volume of exportable goods shall be multiplied by the coefficient that results from dividing the weighted average price of the exports of products of the Ecuadorian State Oil Company in the previous quarter, for [sic] the average weighted price of the sales of crude oil performed in such quarter above mentioned, by the same State Company. In both cases, the prices shall be adjusted to cash payment. (No more than 20 business days of credit). In the following twenty days to the end of each quarter, the same Directorate shall perform the corresponding reliquidation of the National Internal Consumption according to the definition above mentioned, taking for that the real data during the quarter subject to reliquidation. The balances that result of such reliquidation shall be allocated the [sic] to 90 following days to the date of such reliquidation, performing the corresponding adjustments. The exportable products shall be exclusive property of the Ecuadorian Oil State Company. (Exh. R-3; Tr. II at 949:1-10) |
Pursuant to the recommendations made by the Special Rapporteur in his preliminary report, the Ecuadorian institutions set up a Qualifications Committee which selected the new judges of the Supreme Court in a transparent manner, with public oversight, under the supervision of international and national bodies and with the participation of judges from other countries in the region.2
Nonetheless, the Special Rapporteur continued to criticize certain aspects of the Ecuadorian judiciary and highlighted "the urgent need to [further] reform the whole of the judiciary."3
| Table 1. TexPet's Seven Cases in Ecuadorian Courts 4 | ||||||
| Case No. | Subject Matter | Date Commenced | Procedural History | Current Status | ||
| 23-91 | 1973 Agreements (Esmeraldas Refinery) | 17 Dec 1991 | Evidentiary phase (to Aug 1995) Auto para sentencia (13 Dec 2002) Auto para sentencia (29 Jan 2004) Declaration of nullity of 13 Dec 2002 and 29 Jan 2004 rulings (17 June 2004) Dismissed - prescription (29 Jan 2007) Appeal filed (9 Feb 2007) Appeal dismissed (7 Mar 2008) Cassation filed (4 Apr 2008) Cassation dismissed (14 May 2008) Fact appeal filed (16 May 2008) Fact appeal dismissed (9 June 2008) | Closed as of 9 June 2008 | ||
| 152-93 | 1973/1977 Agreements (Esmeraldas Refinery) | 10 Dec 1993 | Evidentiary phase (to mid-1996) Auto para sentencia (22 May 2002) | Pending at first instance | ||
| 7-92 | 1973 Agreements (Amazonas Refinery) | 15 Apr 1992 | Date set for appointment of experts (5 May 1993) Motion for recusal of the President of the Supreme Court (4 Mar 1994) Order recusing the President of the Supreme Court (6 May 1994) Declared abandoned (9 Apr 2007) Appeal filed (25 Apr 2007) Appeal dismissed (20 May 2008) Cassation filed (27 May 2008) Cassation dismissed (24 June 2008) Fact appeal filed (30 June 2008) Fact appeal dismissed (16 July 2008) | Closed as of 16 July 2008 | ||
| 153-93 | 1973/1977 Agreements (Amazonas Refinery) | 14 Dec 1993 | Expert reports filed (31 Oct 1996) Auto para sentencia (12 Oct 1998) Auto para sentencia (22 May 2002) Judgment for Government of Ecuador (14 July 2009) | Judgment at first instance | ||
| 154-93 | 1973 Agreement (Imported products) | 14 Dec 1993 | Evidentiary phase (to 8 July 1997) Auto para sentencia (8 Oct 1997) Auto para sentencia (21 May 2002) Judgment for Government of Ecuador (10 Sept 2009) | Judgment at first instance |
| 8-92 | 1973 Agreement (Force majeure - earthquake) | 15 Apr 1992 | Motion for recusal of the President of the Supreme Court (4 Mar 1994) Order recusing the President of the Supreme Court (8 Jun 1994) Evidentiary phase (to Mar 1995) Auto para sentencia (18 July 1995) Declared abandoned (2 Oct 2006) Overturned on appeal (22 Jan 2008) Dismissed - prescription (1 July 2008) Appeal filed (2 July 2008) | On appeal | ||
| 983-03 (prev. 6-92) | 1986 Refinancing Agreement (Unpaid Interest) | 15 Apr 1992 | Evidentiary phase (to Mar 1995) Transferred btw courts (Oct 2003) Auto para sentencia (6 Feb 2007) Judgment for TexPet (26 Feb 2007) Appeal filed - CEPE (1 Mar 2007) Appeal filed - TexPet (12 Mar 2007) | On appeal |
I, Dr. Javier Cordero Ordóñez, remark to the Tribunal that should no breach of contract by the Republic of Ecuador had occurred, TexPet would have received the monetary amount of its oil exports (US$ 345,558,145), net of the 87.31% Unified Income Tax (US$ 309,564,716.40), being so only the amount of US$ 44,993,428.60. Therefore, it is my opinion that, given that this sum is the effective amount of the Direct Damages, Interest must be calculated on this amount (US$ 44,993,428.60) and not on the gross amount of US$ 345,558,145. Additionally, I also call your attention to the fact that, according to Ecuadorian law, it is not allowed to calculate interest in favor of TexPet on amounts that it is not entitled to receive.
(English Translation of Joint Expert Report, p. 12)
At the end of the joint report, I express my individual opinion on how the 87.31% Unified Tax reduces the direct damage and, consequently, decreases the base upon which simple interest would be calculated, thereby reducing interest proportionally (eg a 87.31%)
Finally, the 25% tax on interest would then be applied to the recalculated interest. In sum, as experts we do not agree only as to whether the Tribunal allowed us to recalculate interest upon the new direct damage base.
(English Translation of Dr. Cordero Ordóñez's letter dated October 26, 2010, pp. 1-2)
Ecuadorian court judgment that already included a final interest calculation." Dr. Cordero's attempt to revisit the Tribunal's calculation of interest violates general international law principles such as those embodied in Article 32 of the UNCITRAL Rules, providing that "the award shall be made in writing and shall be final and binding on the Parties." The Claimants further allude to the general doctrine "that arbitral awards are final and subject to challenge only in limited fora, such as annulment proceedings" and cite the Amco v. Indonesia5 and Waste Management v. Mexico6 cases (C XV, p. 4).
To calculate the damage suffered by the Claimants, the Tribunal starts from the principal sums that an honest, impartial, and independent Ecuadorian judge would have found owing in each of TexPet's cases, plus what they would have found as simple interest.
[...]
This is not the end of the Tribunal's enquiry, however. In the absence of a BIT breach by Ecuador, the Claimants may not have kept the entire amount as being equivalent to their loss. To calculate the Claimants' real loss, that amount must be reduced if such would have been required by any applicable Ecuadorian tax laws. Were the Tribunal not to take such tax laws into account, it would run the risk of overstating the loss suffered by the Claimants, such that the Claimants would be overcompensated. Put differently, the loss suffered by the Claimants is the amount plus interest it should have been awarded by the Ecuadorian judges net of amounts due under any applicable Ecuadorian tax laws. When quantifying and assessing damages, the Tribunal cannot award more than the amount that Claimants ultimately would have obtained.
(R XIV ¶7; R XV, ¶¶14-24; Partial Award, ¶¶551-552)
An arbitral award has conclusive and preclusive effects in the further arbitral proceedings as to:
4.1 determinations and relief contained in its dispositive part as well as in all reasoning necessary thereto;
4.2 issues of fact or law which have actually been arbitrated and determined by it, provided such determination was essential or fundamental to the dispositive part of the arbitral award.
(R XV, ¶27)
In the absence of a BIT breach by Ecuador, the Claimants may not have kept the entire amount as being equivalent to their loss. To calculate the Claimants' real loss, that amount must be reduced if such would have been required by any applicable Ecuadorian tax laws. Were the Tribunal not to take such tax laws into account, it would run the risk of overstating the loss suffered by the Claimants, such that the Claimants would be overcompensated. Put differently, the loss suffered by the Claimants is the amount plus interest it should have been awarded by the Ecuadorian judges net of any amounts due under any applicable Ecuadorian tax laws. When quantifying and assessing damages, the Tribunal cannot award more than the amount that Claimants ultimately would have obtained.
[emphasis added]
(i) the principal amount should be reduced by the 87.31% Unified Tax rate agreed by the Tax Experts, resulting in a figure that is 12.69% (i.e., 100% - 87.31%) of the principal amount decided in the Partial Award;
(ii) interest should therefore be calculated on this reduced principal amount, resulting in 12.69% of the interest decided in the Partial Award; and
(iii) tax at the Tax Experts' agreed rate of 25% should be assessed on the reduced amount of interest calculated in (ii).
5. As a result of the Tribunal's decision in section 2 above that the Respondent has breached Article II(7) of the BIT, the Respondent is liable for damages caused to Claimants by that breach. The amount of such damages will be decided by the Tribunal with the help of a procedure set out in a separate Procedural Order of the Tribunal to determine what taxes, if any, would have been due to the Respondent if no breach of Article II(7) of the BIT had occurred.
6. The Respondent is liable for pre-award compound interest at the New York Prime Rate (annual) on the final amount to be paid by Respondent according to section 5 above, from December 22, 2006 until the date that this sum becomes payable by Respondent.
7. The Respondent shall be liable for post-award compound interest at the New York Prime Rate (annual) on the amount awarded by the Tribunal, from the date that the Tribunal orders payment by the Respondent until the date payment is made.
[emphasis added]
"TexPet's breach of contract losses include only those realizable had there been no breach", something which is "no different than deducting other expenses avoided to determine lost profits" (R XV, ¶¶56-59).
[T]he seven lawsuits brought by TexPet against the Government in Ecuadorian courts cannot legitimately be taken out of context and disassociated from the oil production and sales, the contracts, the rights granted to TexPet, and the Government's breaches, all of which are at the heart of the court cases. The investment is a continuum of events that began with the first contract and oil operations in the 1960s and continues today in the form of the lawsuits to enforce legal and contractual rights.
(R XV ¶72; C II, ¶131)
Based on the principle that the Claimants must be made whole, the quantum of damages awarded is intended to indemnify Claimants for what they lost as a result of Respondent's breach of Article II(7) of the BIT. The calculation of the quantum of the Claimants' loss is as follows:
$"X, as an award for direct damages suffered by the Claimants for the breach of Article II(7); and
$"X, as an award for the undue delay in payment on the decisions that an honest, impartial, and independent Ecuadorian judge would have found owing in each of TexPet's cases.
(C XV, p. 13)
(1) TexPet's direct damages must be reduced by 87.31%, according to the Unified Tax Rate which the Tribunal finds applicable to this amount; and
(2) TexPet's pre-judgment interest must also be reduced by 87.31% in order to deduct interest on monies that, as a result of the reduction under (1), do not form part of TexPet's damages, and then this amount must be further reduced by 25%, according to the general Income Tax Rate.
| Partial Award (Paragraph 549) | Adjustment for Unified Tax of 87.31% (to Direct Damages) | Adjustment in proportion to Unified Tax of 87.31% (to Pre-judgment Interest) | Adjustment for Income Tax of 25% (to Pre-judgment Interest) | Total of Direct Damages and Pre-judgment Interest | Application of pre-award interest (from Notice of Arbitration of December 21, 2006 to August 31, 2011) | |||||||||||||||||||
| Direct Damages | $354,558,145.00 | $44,993,428.60 | $44,993,428.60 | $55,767,627.01 | ||||||||||||||||||||
| Pre- judgment Interest19 | $344,063,759.84 | $43,661,691.12 | $32,746,268.34 | $32,746,268.34 | $40,587,742.16 | |||||||||||||||||||
| TOTAL | $698,621,904.84 | $77,739,696.94 | $96,355,369.17 |
[T]he Republic's undersigned counsel has been duly authorized to represent to the Tribunal that there will be no further taxes imposed by the Republic on the net Award amount, and that this representation and its content may be recited and incorporated into the Award itself with the Republic's consent.
(R VII, ¶168)
The Tribunal considers this representation, among others made over the course of the proceedings, to adequately protect the Claimants against duplicative taxation or penalties for late tax payment. Consequently, the Tribunal declines to make the orders regarding further taxes and penalties requested by the Claimants (see ¶340 above).
528. For the foregoing reasons, Claimants request that the Tribunal render an award in favor of the Claimants:
[...]
(vii) Ordering Respondent to pay all costs, fees and expenses of this arbitration proceeding, including the fees and expenses of the Tribunal and the cost and fees of legal representation, plus interest thereon in accordance with the Treaty;
(1) Three rounds of pleadings on jurisdiction (one round of memorials prior to the hearing and two rounds of post-hearing briefs), including 1 witness statement, 2 expert reports, and 410 exhibits and 127 legal authorities as supporting documents;
(2) Four rounds of pleadings on the merits (two rounds of memorials prior to the hearing and two rounds of post-hearing briefs), including 2 witness statements, 11 expert reports, and 387 exhibits and 110 legal authorities as supporting documents;
(3) Two full hearings (one on jurisdiction and one on the merits), which combined lasted more than 10 days;
(4) Several exchanges between the Tribunal and the Parties discussing the pleadings schedule, admissibility of extemporaneous evidence filed by Ecuador, and organizational issues relating to the jurisdictional and merits hearings; and
(5) Two rounds of submissions on costs.
(C X, ¶8)
The arbitral tribunal shall fix the costs of arbitration in its award. The term "costs" includes only:
(a) The fees of the arbitral tribunal to be stated separately as to each arbitrator and to be fixed by the tribunal itself in accordance with article 39;
(b) The travel and other expenses incurred by the arbitrators;
(c) The costs of expert advice and of other assistance required by the arbitral tribunal;
(d) The travel and other expenses of witnesses to the extent such expenses are approved by the arbitral tribunal;
(e) The costs for legal representation and assistance of the successful party if such costs were claimed during the arbitral proceedings, and only to the extent that the arbitral tribunal determines that the amount of such costs is reasonable;
(f) Any fees and expenses of the appointing authority as well as the expenses of the Secretary-General of the Permanent Court of Arbitration at The Hague.
1. Except as provided in paragraph 2, the costs of arbitration shall in principle be borne by the unsuccessful party. However, the arbitral tribunal may apportion each of such costs between the parties if it determines that apportionment is reasonable, taking into account the circumstances of the case.
2. With respect to the costs of legal representation and assistance referred to in article 38, paragraph (e), the arbitral tribunal, taking into account the circumstances of the case, shall be free to determine which party shall bear such costs or may apportion such costs between the parties if it determines that apportionment is reasonable.