A Luxembourg bailiff told banks to shut off the taps on Ecuadorian state accounts, after the Anglo-French oil company Perenco pursued its $391m legal claim in the grand duchy. Library picture: Oil well in the Ecuadorian Amazon. Photo credit: Dr Morley Read/Shutterstock

A Luxembourg bailiff told banks to shut off the taps on Ecuadorian state accounts, after the Anglo-French oil company Perenco pursued its $391m legal claim in the grand duchy. Library picture: Oil well in the Ecuadorian Amazon. Photo credit: Dr Morley Read/Shutterstock

More than 120 Luxembourg banks have been told to suspend Ecuadorian state accounts, following Quito’s dispute with an oil company.

Ecuador’s government said it will pay $374m to an Anglo-French oil company after Quito’s assets in Luxembourg were frozen.

Perenco was awarded $412m by the International Centre for Settlement of Investment Disputes in a May 2021 arbitration ruling, the oil company on 1 August.

It is owed $391m, after environmental penalties are accounted for.

Ecuador’s finance minister promised, Perenco said, to pay up by the end of September 2021, but has not done so.

The case stemmed from 2007 decree that unilaterally increased the proportion of profits that private oil companies had to pay to the Ecuadorean state. In 2009, Quito cancelled Perenco’s contract to exploit two blocks, saying the firm had abandoned its operations.

Luxembourg banks

According to , a Luxembourg bailiff, Pierre Biel & Geoffrey Galle, ordered 122 banking entities to freeze assets in Ecuadorian-controlled accounts.

Clearstream confirmed that it had received the notice. The news agency said that Deutsche Bank, Credit Suisse and HSBC also received the notice, but those banks did not comment or did not respond to a request for comment when contacted by Reuters.

Luxembourg bonds

Ecuador uses Luxembourg banks to make coupon payments on bonds listed on the Luxembourg Stock Exchange. Holders of the bonds--which mature in 2030, 2035 and 2040--include Blackrock, JP Morgan and Pimco, Reuters reported, citing the Emaxx database. The asset managers did not comment or were not immediately available for comment when contacted by Reuters.

If Ecuador cannot make the coupon payments, it risks having to pay penalties to investors and faces higher borrowing costs on global capital markets.

Ecuador’s economy ministry said on Monday that it would pay $374m and that “work has under way to figure out payment terms,” the news service reported.

Perenco said that it has 6,800 employees, and operates oil and gas wells in 15 countries, including Congo, France and Peru. Its website that it produces 490,000 barrels of oil equivalent per day.

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