Legal aspects

During the year 2007, legal and juridical corporate aspects were focused on the capitalization project and the development of numerous changes derived from this process. Similarly, five constitutionality claims, one class action, and one action for the protection of fundamental rights against Law 118 of 2006 were resolved successfully.

Furthermore, the company was adjusted to the regulatory changes derived from the transformation of its legal status. Major consequences from the change in the legal status of the company from a joint stock company to a mixed economy corporation are the following:

• The enforcement of the Budgetary Organic Statute changed, as said norm will no longer be fully applicable on the company. Nevertheless, based on planning principles and efficiency in budget management, there are new internal rules that substitute the benefits of the former regime.

• Law 1118 of 2006 determined that for Ecopetrol the applicable legal regime will be that of private law. In turn, the recent amendment to the State Procurement Law (Law 80 of 1993) ratified said exclusion, provided however the norms related to inabilities or incompatibilities should still be applicable, as well as principles of equality, morality, efficiency, economy, responsiveness, impartiality
and reputation. Thus, the company no longer applies a dual regime, but a single contracting regime. The foregoing made it necessary to prepare a new contracting manual.

• With regard to the company’s labor relations, the benefits and conditions of its employees are maintained and, therefore, the individual work contracts are subject to the norms provided for in the Labor Substantive Code, the Collective Bargaining Agreement, and Agreement 01 of 1977, as established in Law 1118 of 2006.

Some of the changes derived from the new regime are related to the enforcement of article 92 of Law 617, a provision intended to limit personnel costs and the competence of the Disciplinary Control Office.

The first one is an opportunity for Ecopetrol to get closer to the market compensation regime relative to employees who have a substantially low remuneration as compared with the industry and who, based on their performance, are considered under the retention
policy. The second one will allow, in the medium term, to direct the Disciplinary Control Office labor towards a preventative management. This means that Ecopetrol will not be subject to
the norms that required it to exercise internal control and have an office exclusively dedicated to such matters. Without prejudice of the foregoing, the Internal Audit Office will be strengthened and its management will be governed by international standards.

• The General Comptrollership of the Republic will continue exercising fiscal control on the assets, acts or contracts that are directly, expressly or exclusively of a public nature.

Defense in litigation

The year 2007 began with a total of 2,495 active lawsuits, out of which definitive settlements were reached for $431,113.2 million.

With regard to legal proceedings against Ecopetrol, claims amounting to $361,501.5 million were settled, $1,230.5 million against the company.

Relative to claims in proceedings in which Ecopetrol was the complaining party, claims for $69,611.7 million were settled, with judgments favorable to the company amounting to $38,668.1 million.

Furthermore, 151 actions for the protection of fundamental rights were filed, with favorable results in 91% of the cases.

Based on the amounts, the three main active proceedings against Ecopetrol are the following:

• The Ecopetrol Accountability Employees Participation Multiactive Fund, at the Upper Court of the Bogotá Judicial District – Civil Room, with an appeal filed against the first instance judgment that order to the claiming party the payment of $541,833.7 million.

• Contractual Administrative Proceeding of Latin American Hydrocarbon Corporation S.A., at the Cundinamarca Administrative Court – Third Section, first instance underway. The claim in this lawsuit amounts to $162,052.2 million.

• Class Action of El Llanito Community Action Board and El Llanito Fishermen Association, with a judgment issued in first instance, denying the petitions of the claim, which amount to $115.000 million. The judgment was appealed by the complaining party.

Similarly, based on their amount, the three active proceedings in which Ecopetrol is the complaining party are:

• Ecopetrol against Comuneros de Santiago de Las Atalayas and Pueblo Viejo de Cusiana: nullity and right reinstatement action, with a final judgment that accepts the petitions of the claim. The party complained against filed an extraordinary court appeal, pending to be resolved by the Counsel of State – Second Section. Claims amount to $150,000 million.

• Ecopetrol against Bufete Industrial de Construcciones S.A. de C.V. - Distral S.A. - CMD S.A.: contractual administrative proceeding at the Santander Administrative Court, pending first instance judgment. The petitions of the claim amount to $63,240.4 million.

• Ecopetrol vs. Distral - CMD S.A. - Tito Marcelo - Pavicon Ltda. -Primont Ltda: contractual administrative proceeding at the Cundinamarca Administrative Court - Third Section, in addition to another claim that the party complained against has as complaining party, against Ecopetrol. The claims amount to $60,000 million.

Legal Advisory

Advisory to the various areas of Ecopetrol in the year 2007 implied over 111 thousand lawyer hours, with general quality results of 88%, according to the conclusions of the survey conducted by the Centro Nacional de Consultoría (National Consulting Center).

During the process of internationalization of the company, particularly in the exploration area, the Legal Directorate supported the incorporation of companies, the participation in area
awards, and the negotiation of joint operation agreements in Brazil, Perú and United States.
The company is not aware of situations that involve failures to fulfill its operations in accordance with the statutes and decisions of the General Shareholders Assembly and the Board of Directors.