Worley settles US legal action over Ecuador’s $9.2m in legal bills over failed arbitration claims
The engineering group has settled a $9.2m costs claim with the Ecuadorian government, and taken a significant write-off regarding its exposure to a corruption scandal in the country.
Worley has settled a $US6m ($9.2m) costs claim with the Ecuadorian government, and taken a significant write-off regarding the engineering company’s exposure to a major corruption scandal in the country.
The group declared an interim dividend of 25c a share on Wednesday after booking a $106m half-year statutory profit.
Worley booked earnings before interest, tax, depreciation and amortisation of $287m, up from $23m for the first half of the previous financial year.
The results include a $58m write-off of money the company claims to have been owed for work conducted for Ecuador’s state-owned oil and gas company a decade ago, after Worley lost an international arbitration claim over the matter in December, with the tribunal finding Worley’s claim was inadmissable as its conduct in Ecuador was tainted by corruption.
In its half-year accounts, Worley again denied any corrupt conduct by its staff in Ecuador, and said it was still assessing its legal options to reverse the tribunal’s findings.
US court documents also show the company has settled a $US6m claim made by Ecuador for payment of the country’s legal costs in relation to the arbitration action. The documents do not show what, if any, payment was agreed by Worley, but Ecuador withdrew its legal action in the US overnight on Monday.
Worley is still facing $267m worth of civil claims in Ecuador over the disastrous petrochemical contracts, according to the company’s half-year report, plus two claims by Ecuador’s taxation authorities worth an additional $39.2m.
The contracting giant has long claimed Ecuador’s pursuit of civil and tax claims against it were unfair and without merit, and told shareholders on Monday it had already seen off 23 civil claims “on procedural grounds relating to the statute of limitations”. Worley has also recently won a $US6.5m tax claim in the courts, but the company noted an appeals process was still ongoing.
The corruption claims against the company were exposed by The Australian last month, after Worley lost a dispute with Ecuador in an international arbitration tribunal, brought under investor-state dispute resolution treaties.
The company had claimed $US83m for unpaid work, $US59m in interest and $US327.2m in civil liability and tax claims the Ecuadorians were pursuing the company for in the country’s courts – all relating to a series of contracts carried out between 2011 and 2017 that were an attempt by Ecuador’s government to reinvigorate its oil and gas industry.
Worley’s participation in the contracts was cancelled in 2017 after the leak of the Panama Papers in 2016 revealed widespread bribery and corruption in PetroEcuador – including payoffs made to government officials by a key Worley subcontractor.
Worley has always claimed to know nothing about the corruption by its subcontractors, and took its unpaid bills to the arbitration tribunal in 2019.
But that tribunal rubbed out Worley’s claims in December, on the basis that they were “tainted by illegality and bad faith”.
The tribunal sustained allegations made by the Ecuadorian government that Worley gained an inside advantage from confidential information when winning its first contract in Ecuador, then “corruptly offered undue advantages” to officials to help secure the contracts for extra work in the country worth hundreds of millions of dollars.
When disclosing the tribunal decision in December, Worley said only that its case had been rejected on “jurisdictional grounds”. The company did not give a detailed explanation of the affair until mid-January, after The Australian’s reporting on its previous failure to disclose the matter sparked direct questions to the company from the Australian Securities Exchange.
Worley managing director Chris Ashton told The Australian the company had not previously disclosed the matter because both Worley and the government of Ecuador had agreed to be bound by confidentiality provisions after taking the matter to arbitration.
He said the Ecuadorian government should have filed the tribunal decision as a confidential annexure to its claims for costs in the US courts, rather than as a public document. “We don’t think that we acted in a way that was corrupt, or relates to bribery, and we’re very clear that we haven’t breached any bribery or corruption laws,” he said.
Mr Ashton said the company was still considering its options to challenge the tribunal’s ruling through its own appeals processes, but – despite writing off the money it still believes it is owed in Ecuador in its accounts – could also choose to return to the country’s courts to seek payment of that money.
Worley confirmed its expected its full-year results to record higher revenue and underlying earnings margins to grow to 7.5-8 per cent for the full financial year.
“For five reporting periods in a row now we’ve delivered on what we’ve said we would, the markets that we’re facing into are strong, we’ve got a good strong differentiated strategy, and great customer relationships,” Mr Ashton said.
Worley shares closed up 37c at $16.10 on Wednesday.