|AGD||Deposit Guarantee Agency [Agenda de Garantía de Depósitos AGD]|
|CATEG||Corporación para la Administración Temporal Eléctrica de Guayaquil|
|CENACE||National Energy Control Center [Centro Nacional de Control de Energía CENACE]|
|ICSID||International Centre for Settlement of Investment Disputes|
|CONELEC||National Electricity Council [Consejo Nacional de Electricidad]|
|EMELEC||Empresa Eléctrica del Ecuador, Inc.|
|NEPEC||North Eastern Power Energy Co.|
|PDT||Progreso Depositors Trust|
|PRTI||Progreso Recapitalization Trust|
|PRTII||Progreso Repatriation Trust|
|BIT||Treaty between the United States of America and the Republic of Ecuador concerning the Encouragement and Reciprocal Protection of Investment of August 1993|
After the procedural timetable for written submissions on jurisdiction had been completed, the hearing took place at the seat of the Centre in the offices of the World Bank in Washington D.C., on February 29, 2008. The hearing was conducted by the President Bernardo Sepúlveda; Mr. John Rooney, Arbitrator; and Professor Michael Reisman, Arbitrator. During the hearing, the Parties presented their oral arguments in support of their submissions of fact and law. Present at the hearing were: Mr. Mark Sparks and Mr. Kyle Maciel of Provost Umphrey LLP; Mr. Henry Dahl; and Ms. Tamera Boudreau representing the Claimant, while for the Respondent were H.E. Xavier Garaicoa, then Attorney General of the Republic of Ecuador; Mr. Carlos Venegas, Mr. Diego Romero, Mr. Francisco Paredes, Ms. Claudia Salgado, and Ms. Bárbara Doth of the Attorney General’s Office; Mr. Alberto Wray, Mr. Ernesto Albán Ricaurte, Mr. Eduardo Carmigniani, Ms. Veronica Arroyo, and Ms. Paola Delgado of Cabezas & Wray; and Mr. Robert Volterra of Latham & Watkins. Mr. Michael Quinlan and Mr. Augusto Ramirez Arboleda appeared at the hearing as witnesses for the Claimant.
An exact accounting up to May 22, 2000, in United States dollars, is as follows:
Claimant’s Debt to Respondent 143,245,496.71
Respondent’s Debt to Claimant 469,823,678.89
Balance in Claimant’s favor 326,578,182.18.12
In the documentation exhibited by EMELEC, the Tribunal could find no explanation of why the Memorial contained divergent debt figures.
The corporate records of EMELEC reflect that EMELEC has only one shareholder, the North Eastern Power Energy Co. (NEPEC).
The corporate records of EMELEC also reflect that EMELEC has only one Director, Mr. Ramiro Ponce Cerda.
The corporate records of EMELEC contain documents further reflecting that Mr. Miguel Lluco Tixe is the trustee of the Progreso Repatriation Trust; that the Progreso Recapitalization Trust was terminated on February 15, 2000; and that the Progreso Depositors Trust is of no effect and substance since it was not created under the instructions of the Grantors of the Progreso Repatriation Trust.
Documents contained in the corporate records of EMELEC additionally indicate that the shares of NEPEC have been contributed as property of the Progreso Repatriation Trust.14
The respondent is Empresa Eléctrica del Ecuador, Inc., legally represented by the attorney of its Ecuadorian branch, Enry Basurto Quinde, Esq., pursuant to the special power of attorney granted by Mr. Glenn Martin Goldhagen, in his capacity as representative of Empresa Eléctrica del Ecuador Inc., on February 28, 2004, recorded in the Mercantile Register of the city of Guayaquil on April 26, 2004, which document is annexed hereto.16
The Dictamen and the Pronunciamiento indict Messrs. Heberling and van Diepen for the embezzlement of Claimant’s funds. The Dictamen drops embezzlement charges against Mr. Goldhagen and the Pronunciamiento absolves Mr. Goldhagen of that same crime. (Claimant’s Comments, p. 12).
In its Comments, however, EMELEC also expressed reservations on the legal value of the Dictamen and the Pronunciamiento, noting the following:
The fact that the Dictamen and the Pronunciamiento do not charge or indict anyone for destruction of documents or for obstructing the criminal investigation should not be taken as evidence in this Tribunal that such crimes did not occur (Claimant’s Comments, p. 18).
The Tribunal observes that it cannot ignore the content of documents such as the Dictamen and the Pronunciamiento, which are of probative value and have not been refuted. Sufficient evidence would have to be submitted to establish the contrary.
In order to establish the jurisdiction of ICSID in this arbitral proceeding, EMELEC invokes the terms of the BIT, specifically Article VI, which provides as follows:
1. For purposes of this Article, an investment dispute is a dispute between a Party and a national or company of the other Party arising out of or relating to (a) an investment agreement between that Party and such national or company; (b) an investment authorization granted by that Party's foreign investment authority to such national or company; or (c) an alleged breach of any right conferred or created by this Treaty with respect to an investment.
2. In the event of an investment dispute, the parties to the dispute should initially seek a resolution through consultation and negotiation. If the dispute cannot be settled amicably, the national or company concerned may choose to submit the dispute, under one of the following alternatives, for resolution: (a) to the courts or administrative tribunals of the Party that is a party to the dispute; or (b) in accordance with any applicable, previously agreed dispute-settlement procedures; or (c) in accordance with the terms of paragraph 3.
(a) Provided that the national or company concerned has not submitted the dispute for resolution under paragraph 2 (a) or (b) and that six months have elapsed from the date on which the dispute arose, the national or company concerned may choose to consent in writing to the submission of the dispute for settlement by binding arbitration:
i. to the International Centre for Settlement of Investment Disputes ("Centre") established by the Convention on the Settlement of Investment Disputes between States and Nationals of other States, done at Washington, March 18, 1965 ("ICSID Convention"), provided that the Party is a party to such Convention; or
(b) once the national or company concerned has so consented, either party to the dispute may initiate arbitration in accordance with the choice so specified in the consent.
4. Each Party hereby consents to the submission of any investment dispute for settlement by binding arbitration in accordance with the choice specified in the written consent of the national or company under paragraph 3. Such consent, together with the written consent of the national or company when given under paragraph 3, shall satisfy the requirement for:
(a) written consent of the parties to the dispute for purposes of Chapter II of the ICSID Convention (Jurisdiction of the Centre) and for purposes of the Additional Facility Rules; and (b) an "agreement in writing" for purposes of Article II of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958 ("New York Convention").
6. Any arbitral award rendered pursuant to this Article shall be final and binding on the parties to the dispute. Each Party undertakes to carry out without delay the provisions of any such award and to provide in its territory for its enforcement.31
a) EMELEC, being a juridical person, is not accredited with the Centre, since the persons who have acted on its behalf do not have the proper certification.
b) Even on the assumption that EMELEC were to be duly represented in this proceeding, given that it is composed, analysis, of Ecuadorian capital only, the dispute which it seeks to submit to the Tribunal for settlement falls outside the scope of the ICSID Convention;
c) Even on the assumption that the requirement of nationality rationae personae were to be deemed fulfilled, EMELEC cannot invoke the BIT in its favor because under Article I (2) of the Treaty the advantages thereof were denied to it; and
d) In any case, Ecuador has not given its consent to the submission of its disputes with Mr. Lluco or with EMELEC to the jurisdiction of ICSID.35
a) EMELEC has only one shareholder, the North Eastern Power and Energy Corporation (NEPEC);
b) The shares of NEPEC have been contributed as property of the PRT II by Mr. and Mrs. Aspiazu;
c) Mr. Lluco is the trustee of PRT II;
d) Mr. Lluco, as the sole shareholder of PRT II, had authorized the filing of this arbitration claim before ICSID;
e) Under the law of the state of Maine, EMELEC has only one shareholder, NEPEC, and the shares of NEPEC are the property of PRT II;
f) The Progreso Recapitalization Trust (PRT I) was terminated on February 15, 2000; the terms and conditions of the Progreso Depositors Trust (PDT) are of no effect and substance because the Trust was not created under the instructions of Grantors of the Progreso Repatriation Trust (PRT II).
The Grantors’ equity and other interests in North Eastern Power and Energy Corporation, a Bahamian corporation ("North Eastern"), represented by two (2) shares of common stock, $1.00 par value, which directly controls all of the stock of Electroecuador, Inc., a Bahamian corporation ("Electroecuador"), and indirectly controls all of the stock of Empresa Eléctrica del Ecuador, Inc., a Maine corporation ("EMELEC"), which operates electric utilities in Ecuador.44
a) Mr. Pérez Loose (the original trustee) states that it is impossible for him to perform or complete the transactions referred to in PRT I;
b) Taking into account the events that have occurred (it is not established what events are referred to), the trustee, Mr. Pérez Loose, declares that PRT I has been liquidated;
c) The Grantors, Mr. and Mrs. Aspiazu, state that they have been informed by the trustee of his intention to terminate PRT I, and they confirm that they have directed the trustee to transfer the assets and liabilities of PRT I to the new trustee (the successor trustee), as described in the notarized document itself, so that the new trustee, Mr. Heberling, can establish a new trust with the same trust property;
d) The new trustee acknowledges receipt of the assets described in the notarized instrument;
e) The new trustee releases his predecessor of all responsibility in relation to PRT I; the Grantors do the same.
f) The assets of the trust, with its liabilities, are described in the Deed of Termination and include ten shares of NEPEC, representing 100% of the existing shares.
We hereby note that you intend to terminate the Progreso Recapitalization Trust. As the Grantors under such Trust, we hereby direct you to transfer all the Trust property held under the Trust to a new trust to be established by you with yourself as the new trustee for the purpose of administering such trust and otherwise effecting certain sales transactions for the benefit of the depositors of Banco del Progreso Ltd., a Cayman corporation, and secondly the depositors of Banco del Progreso S.A., an Ecuadorian corporation, and lastly ourselves in default of all such depositors.
To avoid any doubt, we intend that you shall vest the Trust property directly in yourself as trustee of the new trust, and in the event of any uncertainty, you are to follow the provisions of such new trust. You may arrange the preparation of any formal document that you would wish us to sign to formalize our directions stated herein.47
It is on the basis of the directions stipulated in the Letter that Mr. Heberling proceeded to terminate PRT I and create a new trust, to which he transferred all the property previously held under PRT I.
"Primary Beneficiaries" means the depositors of Banco del Progreso S.A., a financial institution organized under the laws of Ecuador, and the depositors of Banco del Progreso Ltd., a financial institution organized under the laws of the Cayman Islands, who, on such date or dates, had deposits which constituted obligations of Banco del Progreso S.A. or Banco del Progreso Ltd., as the case may be, which did not exceed US$4,000 in the aggregate.
"Secondary Beneficiaries" means the depositors of Banco del Progreso S.A., and the depositors of Banco del Progreso Ltd., who, on such date or dates, had deposits which constituted obligations of Banco del Progreso S.A. or Banco del Progreso Ltd., as the case may be, which exceeded US$4,000 in the aggregate.
[...] established an international trust to which he transferred his entire estate, which is represented in securities and stocks of [foreign companies] with the sole purpose that such properties may be used to guarantee and pay any potential deficiencies that could arise in the performance of the obligations undertaken by Banco del Progreso S.A. and Banco del Progreso Ltd. to their clients, depositors and investors and to the Ecuadorian State for certain obligations, the payment of which it had assumed or which were owed to it [...]49
Given Mr. Aspiazu’s circumstances at the time, Ecuadorian law deprived him of the capacity of disposing of the property of the trust of his own free will, but the law did not prevent him from stating a point of view or expressing an opinion reaffirming events that had occurred and that were still valid.
IX. The third trust: Progreso Repatriation Trust (PRT II).
The purported trust, termed the Progreso Depositors Trust, was not created under the instructions of the Grantors and its terms and conditions are of no effect and substance.
As will be recalled (see paras. 87 to 93), the Deed of Termination and the Letter not only terminated PRT I but also authorized the establishment of the PDT. This means, obviously and evidently, that the PDT was established "under the instructions of the Grantors." Another important matter should be highlighted. If Mr. and Mrs. Aspiazu recognize in the Deed of Termination the validity of the termination of PRT I (even if only through the acts of Mrs. Aspiazu, according to the legal assumption proposed in paragraph 107), it is insuperably difficult to accept that Mr. and Mrs. Aspiazu could declare that the terms and conditions of the PDT "are of no effect and substance," given that, in the Deed of Termination itself, they approved the establishment of the PDT.
a) Mr. and Mrs. Aspiazu are no longer desirous of having you serve in the capacity as Trustee;
b) Based upon information received, it appears that, acting in concert with Mr. Heberling, you and others have wrongfully depleted funds, which were held on trust by yourselves for Mr. and Mrs. Aspiazu, by way of several unauthorized bank transfers, by overcompensating yourselves, and further, by not working towards any Trust objectives;
c) Attached hereto please find a duly executed Trust Deed between Mr. and Mrs. Aspiazu and a newly designated Trustee, Mr. Lluco;
d) My clients urge you to transfer the Trust property to the new Trustee; failure to do so will result in legal action against you.
a) The PDT is an irrevocable trust, which was set up through a Declaration of Trust dated February 15, 2000, by Mr. Heberling, then the Trustee of the PRT I;
b) On that same day, Mr. Aspiazu and his wife both signed a Deed terminating PRT I and "pouring over" the assets of PRT I into the new PDT. Nothing in the terms of the PDT allows Mr. and Mrs. Aspiazu to terminate that Trust, or to change their minds as to the trust assets;
c) All of this was done with the intervention of at least two major United States law firms and a prominent Bahamian firm;
d) On August 1, 2002 and October 25, 2002, Mr. Aspiazu signed notarized documents cancelling the PDT and approving the possible transfer of its assets to the "Agenda de Garantía de Depósitos" in Ecuador, or to an Ecuadorian trust to perform the trusts entrusted to the Trustee under the PDT, respectively;
e) Now, three years after the PDT was first established, and disregarding all of the foregoing, Mr. and Mrs. Aspiazu attack the PDT’s validity, and attempt to establish a new trust to hold the same assets already held by the PDT;
f) In sharp contrast with the PDT, the new trust is revocable. As a result, Mr. and Mrs. Aspiazu, if this effort succeeded, could conveniently terminate the new trust and revest the trust assets in themselves at any time in their sole discretion;
g) As your letters acknowledge, the assets of the trust are already held by the Trustee of the PDT, who intends to perform the trusts entrusted to him under the PDT.
a) After the termination of the PRT I, Mr. Heberling was never given instructions to hold the Trust property in the PDT;
b) We are instructed that Mr. Heberling has committed flagrant breaches in relation to the Trust property, including the transfer of large sums of money into the account of his wife;
c) Throughout the three-year period since the termination of the PRT I, the Trust property which had been vested in Mr. Heberling has not been distributed in accordance with the instructions of the Aspiazus to pay the creditors of Banco del Progreso Ltd. and Banco del Progreso S.A.;
d) We are awaiting instructions as to the commencement of legal action against all persons who have been involved in the unauthorized distribution of Trust property with the aim of recovering this property and facilitating the transfer of the same to PRT II and its Trustee, Mr. Lluco.
a) Attorney Wells attempts no response to the two notarized documents signed by Mr. Aspiazu in 2002, recognizing the validity of the PDT and approving the transfer by that trust of its assets to the Ecuadorian Agenda de Garantía de Depósitos (AGD) and to an Ecuadorian trust established to carry out the functions of the PDT;
b) Attorney Wells has also omitted any reference to Mr. Aspiazu’s situation at the time, having been sentenced to prison for committing massive fraud. Being in that legal situation, Mr. Aspiazu has no legal capacity to dispose of any property, through the creation of a trust or otherwise. Any pretended disposition of those assets is void ab initio, under current law;
c) A trust cannot be invalidated simply because a contributor of assets announces it to be so. Bahamian law has legal procedures for the invalidation of trusts, which must be followed in order to invalidate the PDT;
d) Over the past three years, the PDT has been actively seeking to sell its assets to use the proceeds to pay back the depositors of Banco del Progreso. Adverse circumstances had made it impossible to close those sales. But AGD has paid approximately 90% of the debts of Banco del Progreso to the depositors. The PDT is engaged in negotiations to sell its assets to AGD or to an Ecuadorian trust, with the aim of paying the remaining unpaid depositors and reimbursing AGD for the depositors it has paid;
e) The trust that has been invalidly established is a revocable trust. Were this trust not void, and were the assets at issue not already owned by the PDT, it would be very convenient for Mr. Aspiazu to be able to terminate the new trust and regain its assets for himself;
f) The PDT is an irrevocable trust, which cannot be arbitrarily dissolved by Mr. Aspiazu;
g) With regard to possible legal action, by virtue of his being an incarcerated criminal offender, Mr. Aspiazu does not, under Ecuadorian law, have the right to commence any such action, nor will he have that right until the nine years of his full sentence have elapsed, independently of whether he might actually be released before the nine years have elapsed;
h) The withdrawal by Mr. Lluco, with Attorney Wells’s assistance, of the corporate records for NEPEC from Higgs and Johnson, by means of an intentionally misleading letter is a known fact. That withdrawal does not affect legal title to that corporation (NEPEC), since corporate books may be duplicated, and possession of them is not synonymous with ownership. Unless those corporate records are promptly returned to Higgs and Johnson, those involved will be sued for wrongfully taking the PDT’s property.
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