Dear Mr. Daly:

Pursuant to the schedule set by the Permanent Court of Arbitration (“PCA”) on December 22, 2011, Claimant Murphy Exploration & Production Company – International (“Murphy”) hereby submits further comments in support of its challenge to the arbitrator appointed by Respondent the Republic of Ecuador (“Ecuador”), Professor Brigitte Stern.

I. Summary

Ecuador’s appointment of Professor Stern raises an unprecedented and intolerable situation in the world of investment arbitration. Ecuador proposes to appoint as an “independent and impartial” arbitrator a person who has already decided in Ecuador’s favor (and against Murphy’s position) on critical and potentially-dispositive issues in a closely-related arbitration involving the same contract terms, the same treaty, the same investment structure, the same law, the same measures, and virtually the same legal claims and defenses. Incredibly, Ecuador makes this appointment (and rejects Murphy’s challenge) even after having successfully petitioned the PCA to remove another arbitrator in a related case involving the same contract terms, law, measures, claims, and defenses, on far more tenuous grounds of “prejudgment” than are present here. This claim involves a law (“Law 42”) that Ecuador alleges to be a tax, and a treaty that contains an exception providing for only narrow protection against tax measures. In the prior case (Burlington v. Ecuador),1 Professor Stern ruled that (1) Law 42 is a tax, (2) the taxmeasures exception of the treaty applies, (3) Burlington (and therefore, Murphy) cannot invoke the “investment agreement” exception to the tax-measures provision because Burlington’s contract (and therefore, Murphy’s) is not an “investment agreement” under the treaty, (4) Burlington (and therefore Murphy) cannot rely on the “umbrella clause” in the treaty to invoke a clause in the contract obliging Ecuador to compensate for the effects of Law 42 because Burlington (and therefore, Murphy) is not a signatory to the contract, and (5) Burlington’s (and therefore, Murphy’s) claim fails unless it can establish that Law 42 is an expropriation. No arbitral system in the world allows an arbitrator to sit again after she has already acted as an arbitrator of the same dispute, which is in substance the situation here. Professor Stern argues that the import of Murphy’s challenge is that only an arbitrator who will change her mind is an unbiased one. To the contrary, Murphy does not and would not expect Professor Stern to change her mind. It is precisely because she has already decided the dispute, and Murphy has no reasonable expectation (nor should it) that she will decide it differently the second time around—thus easily satisfying the standard of “justifiable doubts” as to her ability to decide Murphy’s claim independently and impartially—that the PCA must disqualify her.