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CHEVRON – TWO DECADES OF LITIGATION: IS IT FINALLY OVER?

In this Guest Post, VERONICA ARROYO from Ecuador reports on the never-ending Chevron-Ecuador battle.

2012 began here in Ecuador with a major jolt for Chevron Texaco. On 3rd January, a court in Sucumbios upheld the ruling against Chevron Texaco, through which it ratified the payment of 18 billion dollars against Chevron for environmental damages caused in Ecuador’s rainforest between 1972 and 1990 when Texaco operated in the forest. Texaco became a subsidiary of Chevron in 2001. Chevron has long claimed that a 1998 agreement between Texaco and Ecuador, after a cleanup of 40 million dollars, absolves it of liability. Chevron has also been ordered to publicly apologize for the incident by 1st March 2012, or else face a judgment for double the sum.

 The oil company appealed the initial judgment on the ground that the process had been marked by corruption. While for the plaintiffs, the amount of compensation was not enough to remedy the damage. A bench of three judges heard both the appeals for almost a year and rejected them.

According to an unofficial English translation of the sixteen page opinion, the Court dismissed all of Chevron’s arguments, including the allegations of fraud:

As for the invalidity of the trial “for procedural fraud and violation of the guarantees of due process” it must be said that the record of the trial court reflects that the Defendants have exercised a vigorous and ample defense in the trial—the thousands of pages that bloat the trial have already been mentioned, in addition to this appeal and litigation; insinuating expert witnesses; requestioning and reexamining these same judicial auxiliaries, and to witnesses, visiting each and each one of the formalities given in the first trial. As such, the trial has been public and, from what can be seen, also transparent, with a horrifyingly uncommon temporal duration, and without a doubt, affecting the interests of those that drive the case, as since the action, more than eight years have passed in Ecuador alone; definitely putting into process the proof and the performances—all of them—requested by the parties in the investigative procedures….

Fraud and corruption were also mentioned, of officials, attorneys, and representatives, the issue of which this Court should not make any reference, only to leave emphasized that the same accusations can be found pending before authorities of the United States in the denouncement that has been presented the same here by the Defendant Chevron, under the RICO act, and the Court does not have competence to resolve the conduct of attorneys, expert witnesses, or other government employees or administrators and judicial auxiliaries, if that is the case….

The logical anticipated consequence, in the case of carrying out the request, was that it was impossible to rely on any expert, and resulted in not being able to have expert proof which paralyzed the trial; thus Chevron has acted up until the outer limits of its defense and the Court considers the particularly precarious situation which could doom the administration of justice should it be allowed during the controlling procedural moments and stages of the suit, making it depend on its decision in the advancing of the cases. The deeds made public considered in the judge’s decision at the first instance, and Chevron was condemned to pay trial costs for manifest bad faith, notorious and obvious; so much so that now suffice it to say that the procedural conduct of the defendant, few times seen in the annals of the administrator of Justice in Ecuador, were abusive to the point that, in terms of attitude, that the Court will not even dedicate any more writings to this portion of the decision, it would be an example of disastrous precedent for other litigants.(Source: Kluwer Arbitration Blog)

Following this ratification, the parties have the legal recourse of cassation before the National Court of Justice. If Chevron wishes to access to this way out, it will have to file a bond or a financial guarantee in order to stay enforcement of the decision, which apparently has been Chevron’s most important goal. As part of its strategy to block the execution of the sentence, Chevron launched in February 2011 a separate lawsuit in New York, where Judge Lewis Kaplan was asked to declare that the Ecuadorian Judicial System is entirely inoperative, broken and  plagued of corruption. Following Chevron’s motion, Kaplan issued a preliminary injunction blocking worldwide enforcement of the 18 billion environmental judgment in Ecuador.

On September 2011 The Federal Court of Appeals in New York reversed Judge Lewis Kaplan´s preliminary injunction. All actions taken by Judge Kaplan were shot down on the basis of the lack of a legal theory and authority that could stay enforcement of a judgment outside the United States. As reported by law.com:

Judge Lynch in particular questioned again and again the power of a defendant to use New York’s Uniform Foreign Country Money-Judgments Recognition Act offensively as the basis for enjoining other enforcement actions around the world—rather than waiting to seek the anti-suit injunction as a defense to an actual recognition action brought by the plaintiffs in New York. How would New York courts react, queried Lynch, if a Venezuelan court used Venezuelan law to enjoin a Russian judgment holder from going to New York to enforce it? Should or would New York courts respect it?

 After the 2012 ratification, Chevron continues its plan to block execution of the decision. Recently Chevron has filed a motion with the Second Circuit asking the Court to grant emergency relief form its September 19, 2011 summary order. Specifically Chevron requested “to vacate its prior order, pending reargument, insofar as it vacated the District Court’s injunction and stayed proceedings”. Chevron argues that without this relief, plaintiffs will “immediately commence their extortionate plan to harass Chevron through multiplicative, vexatious enforcement proceedings expressly intended to disrupt the operations of Chevron affiliates in foreign countries”

With this motion, Chevron aims to “preserve the status quo¨ and prevent plaintiffs from executing the sentence. What needs to be deeply reasoned is when the execution of a sentence turned out to be harassment and extortion?

Chevron also initiated an arbitration proceeding against Ecuador in the Hague under the U.S Ecuador Bilateral Investment Treaty, where the Tribunal has required Ecuador to take all measures at is disposal to prevent enforcement of the Lago Agrio judgment. The Tribunal has gone even further considering that if it were established that any judgment made by an Ecuadorian Court ends up being considered as a breach of an obligation as a matter of international law, any loss arising from the enforcement of such judgment may be losses for which Ecuador would be responsible under international law.

Ecuadorian native communities originally filed the case against Texaco in a New York Federal Court in 1993 and was dismissed 10 years later after the oil company argued that Ecuadorian Jurisdiction  was the proper venue to hear the case. It was refilled in Ecuador in 2003 and after two decades of litigation, the judgment has reached a critical enforcement stage. Will the Second Circuit stay enforcement of the 18 billion judgment? Will foreign courts recognize and enforce it? Could this recognition be considered a breach of international law under the Ecuador- Us Bilateral Investment Treaty? Readers comments are welcome.

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