Tuesday, September 23, 2008

Brazilian Investment in Ecuador in trouble

In my posting dated May 04, 2007, I’ve mentioned that there was a strong reason for a review in Brazil’s long-standing aversion to investment-arbitration: the protection Brazilian nationals' investment abroad.

Well, there are clear examples of that taken from today’s international news.

Earlier today, President Rafael Correa of Ecuador ordered the Ecuador’s armed forces to seize assets of Brazilian multinational Odebrecht. The assets are estimated to be worth about $800 million US Dollars (link here).

Today’s news also mentions the troubles of Petrobras (Brazil’s state-controlled oil company) in Ecuador, relating to the surrendering of Petrobras’ oil field concessions in that country (link here).

I don’t know if either Odebrecht or Petrobras made their FDI in Ecuador through subsidiary companies (in a country allowing them to use an investment-arbitration scheme) or using Brazilian vehicles. Also, I don't know any further details of either case, and I'm not making any judgments here. My personal opinion is simply that both companies would be much better off arbitrating their disputes at ICSID or any other neutral arbitral tribunal than litigating against Ecuador in Ecuadorian courts.

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