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Andean Group - August 2015 (ISSN 1741-4466)

JUSTICE: Chevron case takes fresh twist

The US circuit court of appeals for the District of Columbia in Washington ruled on 4 August that Ecuador should compensate the US oil company Chevron to the tune of US$106m (including interest), based on the US-Ecuador bilateral investment treaty (BIT) that came into effect in 1997. This would be an impossibly bitter pill to swallow for Ecuador, which has pursued Chevron for 22 years in an effort to win multi-billion dollar legal compensation from the US oil giant for despoliation of large swathes of Ecuador’s Amazon, which damaged the health and livelihoods of the country’s indigenous communities and peasants.

The US appeals court rejected Ecuador’s challenge of a US$96m international arbitration award in 2011 by the permanent court of arbitration at the International Court of Justice at The Hague. Chevron began arbitration proceedings at The Hague in 2006. The oil major contended that Ecuadorean courts had failed to resolve lawsuits in a sufficiently timely manner, contravening the BIT between Ecuador and the US. Specifically, it maintained that between 1991 and 1993 Texaco, which was acquired by Chevron in 2001, had presented six lawsuits in Ecuadorean courts against the State for alleged violations of a joint accord to explore oil together in the Amazon, upon which the Ecuadorean justice system had failed to rule.

Chevron subsequently filed a suit in Washington in pursuit of a ruling confirming The Hague’s decision in order to collect the award of US$96m. This was duly affirmed by a US federal judge in 2013, which prompted Ecuador to lodge its appeal.

Ecuador argued that the court of arbitration did not have jurisdiction in the case because the BIT had taken effect in 1997, five years after Texaco had ended its operations in Ecuador in 1992. This did not cut any ice with the US appeals court. “In signing [the BIT], Ecuador agreed to arbitration of precisely this type of action,” US Judge Robert Wilkins wrote for a three-judge panel.

Chevron issued a statement expressing its content at the ruling, pegging the award of damages at US$106m, including interest. Ecuador’s attorney general’s office rejected the ruling. In a statement the attorney general’s office said that it was evaluating its position and was not ruling out the possibility of appealing the ruling before the Plenary District Court, or even the US Supreme Court of Justice.

Ecuador’s attorney general’s office accused the US court of appeals of having “failed to apply the US Sovereign Immunity Act which would have obliged it to examine the existence of a treaty of investment protection benefiting Chevron. If it had done so, it would surely have discovered the incongruity of protecting an investment that finished before the treaty entered into force”.

Pablo Fajardo, the lawyer representing the indigenous communities and peasants who have never been compensated for the massive oil spill and contamination of the Amazon by Texaco, wrote on Twitter that it would be “unjust for the government to pay Chevron after it committed the worst environmental crime against humanity”.

Fajardo said that Ecuador’s provincial court of Sucumbíos had prohibited any payment until Chevron pays US$8.6bn in compensation for environmental damage in accordance with a 2013 ruling. “The State doesn’t have to pay Chevron but the Amazon as part of the debt that Chevron has with us,” Fajardo said.

  • Chevron

In March 2014 a US district court in New York found against Steven Donziger, the US lawyer who fought the case against Chevron for the poor plaintiffs in Ecuador. During this trial, Chevron’s lawyers described the corrupt practices employed by Donziger’s legal team, assembling recorded clips, emails and other documents to make their case. Donziger was eventually found liable of violating the provisions of the US Racketeering Influence and Corrupt Organizations (RICO) Act for falsifying evidence and committing fraud in the original case.

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