Latham Helps Ecuador Beat World Bank

Ecuador / International Arbitration

Latham Helps Ecuador Beat $1.7 Billion World Bank Arbitration Claim

David Bario

The American Lawyer

June 12, 2009

It took more than five years, but last week Ecuador and its lawyers from Latham & Watkins finally beat a $1.7 billion international arbitration claim that involved a dizzying array of jurisdictional questions and a bizarre backstory.

The claim was brought by one of Ecuador's indigenous leaders on behalf of an American-owned electrical utility that was seized by Ecuadorian authorities in 2000. The claimant, Miguel Lluco, asserted that he controlled the company, but on June 2, the World Bank's International Centre for Settlement of Investment Disputes concluded that he hadn't proved it, and that it therefore lacked jurisdiction to decide the claim under international law.

Ecuador took over the now defunct Electric Company of Ecuador (EMELEC) in March 2000, after its former owner, Ecuadorian businessman Fernando Aspiazu, was arrested in connection with the failure of one of the country's largest banks. EMELEC was created in 1925 as a subsidiary of a Maine power company and remained an American corporation, but for years was held in Ecuador by a Bahamian trust owned by Aspiazu.

Lluco, an Ecuadorian politician and supporter of indigenous rights, asserted that ownership of the EMELEC trust was transferred to him after the company was seized. Represented by Mark Sparks of Provost & Umphrey Law Firm in Beaumont, Texas, and Henry St. Dahl of the Offices of Henry St. Dahl in Washington, D.C., Lluco brought the arbitration claim in December 2004, alleging that EMELEC's seizure violated the U.S.-Ecuador bilateral investment treaty.

But the ICSID tribunal found that Lluco could not meet the treaty's nationality requirement because he could not prove ownership of EMELEC. (The ICSID decision has not yet been translated into English, but here's the Spanish version.)

For Latham, which defended Ecuador along with the Ecuadorian firm Cabezas & Wray, it was a gratifying win. "To the best of my knowledge," said Latham partner Robert Volterra, "this is the largest claim in the energy sector that has been successfully defended at the World Bank."

This article first appeared on The Am Law Litigation Daily blog on AmericanLawyer.com.