The Court of Appeal has upheld an arbitral award against Ecuador, confirming that the tribunal had jurisdiction to deal with certain taxation matters under the relevant bilateral investment treaty (BIT) between the USA and Ecuador. This is understood to be the first case in which a challenge to an award made pursuant to a BIT has been considered by the English Courts.

In The Republic of Ecuador v Occidental Exploration & Production Co [2007] EWCA Civ 656, Ecuador applied to set aside an award under section 67 of the Arbitration Act 1996 on the basis that the tribunal lacked substantive jurisdiction. The Court of Appeal undertook a detailed review of the first instance decision, and has upheld that decision and the findings of the tribunal that the particular taxation issues fell within the ambit of the relevant BIT. The effect of this decision is that certain taxation matters may well fall within the ambit of the protections afforded by a BIT (rather than falling within the scope of any separate bilateral taxation treaty), assuming they relate to the performance of an obligation in the relevant contract. Other BITs may vary in their precise wording on taxation issues and each case will, inevitably, turn on its own facts as to the question of whether a taxation matter does, in fact, relate to the performance of a contractual obligation.