By Interim Award signed on April 15 and 16, 2013 ("the Interim Award") the Tribunal determined as follows:

WHEREFORE, for the reasons set forth above, Offshore is ORDERED to reimburse Ecopetrol for the payments that Savia has made to the Peruvian tax authorities for VAT taxes asserted to be due for the tax years 2002 through 2007. This reimbursement shall be made on or before the 30th calendar day after the issuance of this Interim Award.

This Interim Award does not in any way resolve the underlying merits of the dispute among the parties, including, without limitation, whether Offshore would ultimately be entitled to, among other relief, the return of the amounts paid pursuant to this Order by reason of the Respondents’ breach of the SPA, or otherwise.

The Interim Award required the payment of US $75,308,179.03 by May 28, 2013. Claimant subsequently attempted to satisfy this payment obligation with funds to be withdrawn from a certain Escrow Amount pursuant to the terms of the Indemnification Escrow Agreement ("the Escrow Agreement") established under Section 2(b) of the SPA.¹ Purchaser refused to consent to payment in this manner. Seller (the Claimant in the arbitration) then commenced an action in the U.S. District Court for the Southern District of New York on May 24, 2013 ("the Federal Court Action") seeking an order from the district court permitting its payment obligation under the Interim Award to be satisfied with funds withdrawn from the Escrow Amount.

Purchaser claims that the Seller has violated the terms of the Interim Award and now moves in this arbitration pursuant to ICDR Article 21 for a supplemental interim award (i) declaring that Seller’s instruction to the Escrow Agent to pay its obligation from the Escrow Amount was ineffective; (ii) declaring that Seller’s tender of performance in supposed compliance with the Interim Award was ineffective; and (iii) ordering Seller to comply with the Interim Award by paying US $75,308,179.03 by wire transfer in immediately available funds. See, Purchaser’s Request for Supplemental Relief dated June 3, 2013 ("Request for Supp. Relief’) at pages 2-3. Seller also requests that the Tribunal issue an order ordering Seller to dismiss the Federal Court Action and further ordering the parties to stay all court proceedings in the meantime. Seller also seeks all costs caused by reason of Seller’s lawsuit, including, among others, all fees and costs incurred by the Escrow Agent and its counsel. Id.

Seller defends against the instant application on both jurisdictional and substantive grounds. According to Seller, the Tribunal must defer to the district court because it lacks jurisdiction over the Purchaser’s application which involves an interpretation of the Escrow Agreement, a contract that contains no arbitration clause and a submission to the New York courts "with respect to any lawsuit or judicial proceeding arising or relating to this Indemnification Escrow Agreement." Indemnification Escrow Agr. paragraph 12. Seller also defends on substantive grounds arguing that the SPA and the Escrow Agreement, read together, permit Seller to satisfy the Interim Award with funds withdrawn from the Escrow Account.

The Escrow Amount was originally established at the closing of the stock sale pursuant to SPA Section 2(b). The Escrow Amount is meant to secure the Purchaser’s entitlement to indemnification under, among other sections, SPA Section 7.4 and SPA Article 8. See, SPA Section 2(b) and Escrow Agreement, Section 3(a). Section 7.4 of the SPA, entitled "Tax Indemnification", generally sets forth the Seller’s obligation to indemnify and defend the Purchaser² from all liability for taxes attributable to any period prior to the Closing. Section 8.2 sets forth the Seller’s obligation to indemnify and defend Purchaser against claims resulting from a breach of any of the Seller’s representations and warranties under the SPA. The remainder of Article 8, entitled "INDEMNITY", sets forth the procedures to be followed to enable the Purchaser to withdraw funds from the Escrow Amount in the event of a claim for indemnification.

The Escrow Amount is controlled by the Escrow Agent under the terms of the Indemnification Escrow Agreement effective February 5, 2009 ("the Escrow Agreement"). The Escrow Amount is defined as $150 million and is deposited with the Escrow Agent "[p]ursuant to Section 2.3 (b)(i) of the Stock Purchase Agreement." Escrow Agreement, paragraph 2. Under paragraph 3 of the Escrow Agreement, the Escrow Agent is authorized to honor a request for payment by the Purchaser upon the Purchaser’s delivery of a "Purchaser’s Indemnity Certificate" describing the Purchaser’s entitlement to the funds claimed, followed by the Seller’s consent to the withdrawal. In the alternative, if the Seller objects to the disbursement, the Purchaser may deliver a "Final Award Certificate" which attaches "a final decision of an arbitral tribunal pursuant to Section 10.7 of the Stock Purchase Agreement." Id. paragraph 3.

There is no provision in the Escrow Agreement enabling the Seller—absent the Purchaser’s consent— to effect the payment of a claim or other obligation, on its own initiative, from the Escrow Amount.

As a threshold proposition, the Tribunal has the right to determine its own jurisdiction. This arbitration is being conducted under the International Arbitration Rules of the American Arbitration Association ("the AAA"). (See, SPA Section 10.7 quoted below). The AAA’s International Rules are set forth in the arbitration rules of the International Centre for Dispute Resolution ("the ICDR Rules"). The parties agreed that these Rules would govern the proceeding. See, Procedural Order No. 2 dated June 26, 2012, paragraph 5. ICDR Article 15.1 provides that "the tribunal shall have the power to rule on its own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement." By agreeing to the ICDR Rules, the parties manifested the required unmistakable intention³ to have the arbitral tribunal determine its own jurisdiction. Contec Corporation v. Remote Solutions, 398 F.3d 205, 208 (2d Cir. 2005), citing Shaw Group, Inc. v. Triplefine Int’l Corp., 322 F.3d 115, 122 (2d Cir. 2003).

The parties’ mutual consent to have the Tribunal determine its own jurisdiction also must be read in conjunction with a broad arbitration clause which, in SPA Article 10.7, provides in pertinent part:

(a) Any dispute, controversy or Action arising out of or relating to this Agreement [the SPA], or the breach thereof... shall be determined by arbitration administered by the American Arbitration Association in accordance with its International Arbitration Rules.

Claimant-Seller argues that the Tribunal lacks jurisdiction to order the Seller to satisfy the Interim Award with new funds, rather than with funds from the Escrow Amount, because the Indemnification Escrow Agreement contains a submission to the jurisdiction of the New York courts, and this particular dispute (argues Seller) relates to the operation of the escrow. As such, the dispute over whether the Seller can pay its obligation under the Interim Award with funds drawn from the Escrow Amount is a matter that must be determined in the district court.

The Respondents on the other hand argue that this is not a dispute under the Escrow Agreement, which is clear in its terms. Instead, this is the continuance of the dispute over the Seller’s obligation to front the money that Purchaser had to pay to the Peruvian tax authorities for VAT taxes. That dispute was jointly submitted to the Tribunal for decision and was decided in the Interim Award. The means of payment under that Interim Award is merely a continuation of the original dispute and is, therefore, in the province of the arbitrators. In addition, Respondents argue that the SPA itself references the Indemnification Escrow Agreement and provides for the means of obtaining funds from that account. Any dispute over withdrawal rights, therefore, must be determined under the SPA.

In that regard, SPA Section 8.6 provides:

Section 8.6 Escrow: Right of Set-off. By written notice to Seller specifying in reasonable detail the basis for set-off, Purchaser may assert a claim to set off any amount to which it is or if Seller has objected has been determined to be entitled under Article 7 and this Article 8 against the Escrow Amount, and such set-off amount may be disbursed to Purchaser in accordance with the terms of this Agreement and the Indemnification Escrow Agreement...

The Seller in this case sought to tender payment of the Interim Award from the Escrow Amount, thereby putting its rights and obligations under Section 8.6 directly in play (as well as any rights and obligations to pay from the Escrow Amount as may be found or implied in other sections of the SPA). This is the essence of the parties’ dispute. It arises out of the SPA and not the Escrow Agreement which is clear as to the right of the Escrow Agent to refuse to disburse funds absent compliance with the escrow terms.

Thus, the Tribunal has jurisdiction pursuant to SPA Section 10.7 to resolve the interpretive dispute that arises under SPA Section 8.6 (or elsewhere in the SPA) and rejects the Seller’s contention that it lacks jurisdiction to determine whether the Seller must comply with the Interim Award with new funds rather than with funds from the Escrow Amount.

While SPA Section 8.6, quoted above, gives the Purchaser the right to assert a claim and be paid out of the Escrow Amount in the situations there described, the SPA contains no language giving the Seller either a unilateral right to pay an indemnification claim from the Escrow Amount, or a right to force the Purchaser to accept payment of such a claim from the Escrow Amount. Indeed the language of Section 8.6 relates only to the rights of the Purchaser and, as to those rights, is permissive and not mandatory ("Purchaser may...").

Purchaser has declined to authorize the Escrow Agent to pay the Interim Award from the Escrow Amount because of the existence of its other claims for indemnification under the SPA which would—if ultimately found valid—deplete the Escrow Amount. Its decision is rational and fully consistent with the purpose of SPA Section 2(b) and the Escrow Agreement which is to secure the payment of claims awarded to the Purchaser for the Seller’s breaches of its representations and warranties.

Indeed, in its papers opposing the Purchaser’s original application,⁴ the Seller argued that the SPA does not permit a party from satisfying an interim award from the escrowed funds. As Offshore there stated:

What this means is that in the SPA the parties specifically provided for a remedy of a breach of Section 7.4 and specifically agreed that if there was a dispute, the money that would remedy the dispute would not be released from the escrow until "final determination of such dispute." [footnote omitted]. This bars the escrow funds from being used to satisfy any claim for preliminary monetary relief, which by definition is not a final determination..."

Claimant’s Opp., para. 73.

The Tribunal agrees with that statement. The SPA does not authorize the use of escrowed funds to satisfy an interim award, and certainly not over the objection of the Respondent. Indeed, whether the escrowed funds can be used to satisfy a final award over the objection of the Respondent is still an open question.

Purchaser has demonstrated a right to an order declaring ineffective the Seller’s tender of performance in supposed compliance with the Interim Award. The Seller’s payment of the Interim Award will constitute compliance, not its unaccepted offer to pay from the escrowed funds. As to Purchaser’s request for an order requiring Seller to pay the sum of US $75,308,179.03, the Purchaser has already obtained such relief in the Interim Award quoted above. The Tribunal declines to issue a redundant order and trusts that this Supplemental Award will act to clarify the rights and obligations of the parties.

The Tribunal denies the Purchaser’s request for an order compelling the Seller to dismiss the Federal Court Action. The Tribunal has no power to deny court access to a party (or, if it does, declines to exercise such a power). There may be costs implications to Purchaser’s continuing prosecution of the litigation, but these will be dealt with in the context of the final award in this matter.

Accordingly, for the reasons set forth above, the Tribunal:

1. DECLARES that the Tribunal has jurisdiction to the extent necessary to ensure compliance with its Interim Award, including the jurisdiction to interpret SPA Article 8 as it relates to the use of escrowed funds to satisfy the Interim Award.

2. DECLARES that the Seller’s tender of performance in purported compliance with the Interim Award is ineffective.

3. DEFERS until the final hearings in this arbitration any decision on whether damages, interest and costs, if any, allegedly caused by the Seller’s actions, should be awarded to Respondent.