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Final Award

[…]

The Escrow Interest Due Seller

27.
Paragraph IV.E.2 of the PFA resolved the Escrow Interest Claim, and required the parties to meet and confer regarding the appropriate amount of interest income that should be remitted to Seller. The parties could not come to an agreement in that regard, and, on August 31, 2015, each submitted its position on the issue The Tribunal also received reply emails, one from Respondents on September 16, 2015 and another from Claimant on September 17, 2015 (which dealt with, among other things, the substance of Respondents' September 16, 2015 submission). Claimant correctly pointed out in its September 17th submission that the Respondents' Reply was unauthorized and asked the Tribunal to strike the submission or for leave to respond in a more fulsome manner. The Tribunal, however, is confident that it has all material facts before it with respect to the Escrow Interest dispute and will thus proceed to determine the amount of interest to which the Claimant is presently entitled.
28.
It is worth emphasizing that the dispute over the interest in the Escrow Account is. in the last analysis, a question of timing, rather than a net gain or loss for one of the parties. The Escrow Account stands as security for the payment of claims. At some point in this process, the disputes will end and all claims will either be denied or liquidated at sums certain. At that point, the Seller can either pay the excess (if the liquidated claims exceed the amount in the Escrow Account) or the Purchasers may collect out of the Escrow Account if there are sufficient funds remaining. In either event, the remaining funds in the Escrow Account (including any accrued interest) will be applied to the payment of claims that have been finally determined, with any excess—whether characterized as interest or principal, remitted to the Seller. Thus, the Seller will eventually receive the benefit of any interest remaining in the Escrow Account through the payment of legitimate claims or a final remittance after all claims have been satisfied.
29.
As set forth above, and in the PFA. the Escrow Account was established at $150 million with interest to be remitted periodically to the Seller. In the PFA, the panel essentially agreed with Purchasers that a decrease in principal below $150 million (less authorized withdrawals) would frustrate the parties' mutual intention to create a security fund in a fixed amount with its principal declining as claims were paid. The problem arose when the value of the securities that were purchased by the Escrow Agent fluctuated with the market. That rise or fall, however, should not obscure the purpose of the Fund which was to stand in a fixed amount for the payment of claims.
30.
Accordingly, the Tribunal determines that the Purchaser’s position on the accrued interest best comports with the logic underpinning the establishment of the Escrow Account. As explained in Purchaser's letter of September 16, 2015, the Escrow Account's Unresolved Amount, i.e. the amount that still stands for the payment of unresolved claims was $125,214,352.04 as of June 30, 2015. Awarding Seller the interest that it claims would reduce the Escrow Amount below $125,214,352.04, a result inconsistent with the purpose for which the Escrow Account was established. The Purchaser computed its suggested figure of $426,695.45 (as of June 30, 2015) in a manner consistent with the ¶ 294 of the PFA. It took the book value of the Escrow Account’s positions plus accrued interest minus the Unresolved Amount. We endorse the Purchaser s calculation. Accordingly, the Seller will be awarded $426,695.45 at this time, recognizing that the Seller will eventually receive all funds remaining in escrow once all claims are resolved.
31.
For the reasons set forth in the PFA, as corrected and interpreted, and for the reasons set forth in this Final Award, which resolves the remaining issues to be determined, the Tribunal AWARDS the following relief:

A. With respect to the VAT claims discussed in PFA Section V.A.:

(1) AWARDS Purchaser compensation for all losses occasioned by Seller's failure to reimburse Purchaser for the VAT taxes that Purchaser paid for tax years 2001 through 2007, including: (a) the amounts of such taxes paid; (b) interest on such amounts at the simple rate of nine percent (9%) per annum from the date of such payments until satisfaction of this AWARD; (c) the amount of $8,240,221.40, apportioned $4,570,026.79 to Ecopetrol, and $3,670,194.61 to KNOC, representing the sum of (i) the reasonable costs and counsel fees incurred in responding to the VAT tax litigation in Peru; (ii) the reasonable costs and counsel fees incurred in the prosecution of the claims on which Purchaser prevailed before this Tribunal; and (iii) the reasonable costs and counsel fees incurred in the litigation involving the Interim Awards before the U.S. District Court. These payment amounts shall be reduced by $22,833.06 and $6,909.10 respectively, reflecting the refunded amount of the arbitration costs and fees to be issued to Ecopetrol and KNOC, individually, by the ICDR. With respect to the computation of interest in accordance with ¶ A(1)(b) of the PFA. Purchaser shall be entitled to such interest for tax years 2001 and 2003 from the payment dates reflected in ¶ 65 of the PFA, as corrected by the Correction, to the date of Sellers payment of these amounts on February 15, 2011 (see ¶ 58 of the PFA), and Purchaser shall he entitled to such interest for tax years 2002 and 2004 through 2007 from the payment dates reflected in ¶ 65 of the PFA (again, as corrected by the Correction) to the date of Seller's payment of these amounts pursuant to this AWARD.

(2) Purchaser sought no affirmative relief with respect to VAT taxes for Tax Year 2008, but the Tribunal trusts that, to the extent such 2008 VAT taxes are imposed, Seller shall pay such taxes directly when they become due, or shall reimburse Purchaser for its payment of such 2008 VAT taxes immediately upon Purchaser’s payment of such 2008 VAT taxes and its written demand for reimbursement.

(3) Assuming Seller's full satisfaction of its VAT obligations as set forth in this ¶ A, Purchaser shall return to Seller, upon 30 days from its receipt, any refunds of VAT taxes that Purchaser has already received for those years (the "VAT Refunds"), whether the VAT Refunds are received in the form of cash or credits against other liabilities that Purchaser may owe. To the extent that Seller does not fully satisfy its VAT obligations as set forth in this ¶ A, Purchaser shall duly credit Seller for VAT Refunds against the amount owing in accordance with this AWARD.

(4) Notwithstanding anything to the contrary in ¶ A(1) above, the accrual of Seller’s nine percent interest obligation will cease to accrue upon Purchaser s receipt of any VAT Refunds, but Purchaser need not make any reimbursement until Seller fully satisfies its VAT obligations less any credit to which it is entitled in accordance with ¶ A(3) above.

B. With respect to the IMI Tax Claims discussed in PFA Section V.B.:

(1) With respect to the IMI Tax Claim relating to lax year 2001, AWARDS Purchaser the sum of $1,491,384.64 with interest on such amount at the simple rate of nine percent (9%) per annum commencing from the date that OFG paid the bankruptcy claims until satisfaction of this AWARD;

(2) With respect to the IMI Tax Claim relating to tax year 2000, DECLARES that Seller shall reimburse Purchaser for any amounts that Purchaser may pay for such tax liability within 30 days of Purchaser's demand for indemnification in accordance with the provisions of SPA § 7.4(d). Any unpaid amount shall bear interest at the simple rate of nine percent (9%) per annum commencing on the date that Purchaser pays any such tax liability and continuing until satisfaction of this AWARD.

C. DENIES Purchaser’s Pipeline Maintenance Claim.

D. With respect to the Pipeline Abandonment and EIS Environmental Claims, the Health and Safety Claims, the Vacation Claims and the Profit Distribution Claim discussed in PFA Section V.D.:

(1) DECLARES, provided that, as of the date of this AWARD, the aggregate amount of liability for all Losses which are subject to the "Basket" defined in SPA ¶ 8.5 has not exceeded the sum of $15 million, there is no present duty of Seller to compensate Purchaser for any of the claims identified in this ¶ D.

(2) DECLARES that, for purposes of any future enforcement of Purchaser’s indemnity rights, and only upon any eventual fulfillment of the Basket requirement, Purchaser would be entitled to indemnification in the following amounts:

(a) the sum of $374,507,62 with respect to the Pipeline Abandonment. EIS Environmental and Health and Safety Claims (the "Indemnified Amount"), together with interest at the simple rate of nine percent (9%) per annum commencing on the dates the payments constituting the Indemnified Amount were made until satisfaction of this AWARD; and

(b) the sum of $1,147,455.03 with respect to the Vacation Claims together with interest at the simple rate of nine percent (9%) per annum commencing on the dates payments of the indemnified Vacations Claims were made until satisfaction of this AWARD;

(3) DENIES Purchaser’s Profit Distribution Claim and Awards Seller interest at the simple rate of nine percent (9%) per annum commencing on the date such amount was deducted from the Earn-Out and ending on the date of this Final Award. Purchaser shall credit the amount of the Profit Distribution Claim plus the interest against amounts owed to Purchaser in this AWARD.

E. With respect to the Escrow Income Claim discussed m PFA Section V.E.:

ORDERS that, within sixty (60) days from the date of the service of this AWARD, the Purchaser consent to the Escrow Agent’s payment to Seller of $426,695.45 representing interest due Seller as of June 30, 2015.

F. As reflected in ¶¶ 5.C., 15 and 21 above, that fraction of the administrative costs of the arbitration and the fees of the arbitrators awarded to the parties already reflect the amounts to which they are entitled. Thus, no further allocation will be ordered and the ICDR is requested to return any excess deposits on account to the parties as each may have previously advanced them. For recording purposes the Administrative fees and expenses of the ICDR totaled $46,122.23 and the Compensation and expenses of Arbitrators totaled $1,270,886.86.

G. This FINAL AWARD is in full settlement of all claims and counterclaims submitted to the Tribunal for decision.

H. WE HEREBY CERTIFY that, for the purposes of Article 1 of the New York Convention of 1958, on the Recognition and Enforcement of Foreign Arbitral Awards, this Final Award was made in New York County, New York. United States of America.

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