Andean Group - March 2011 (ISSN 1741-4466)

On 12 February, the government of President Rafael Correa announced that it would accept a ruling by the International Court of Justice (ICJ) at The Hague in the 18 year old dispute with Chevron. Ecuador's attorney general's office (Procuradurí­a) said that it would abide by the ICJ decision ordering the Ecuadorean government not to take any action to enforce any judgment by an Ecuadorean court against Chevron.

The ICJ's ruling (on 9 February) came just days before a court in Sucumbí­os awarded US$8.6bn in damages against Chevron (on 15 February). The Sucumbí­os court award was for the damage Chevron (or more exactly, Texaco, a company Chevron had taken over) had caused during oil production in the region from 1964 to 1990. The US$8.6bn in damages was the highest ever awarded in an environmental case. Texaco had operated 350 wells during the lifetime of its concession, which was exclusive until 1990 but continued until 1992.

As Chevron has no assets in Ecuador, the plaintiffs - local environmentalists led by a human rights lawyer, Pablo Fajardo, backed by the Ecuadorean government - wanted to use the US courts to extract meaningful damages from Chevron. Chevron, naturally, realised this and argued from the outset in 1993 that the proper forum for deciding the case was Ecuador. In 2002, after seven years of courtroom argument, the Southern District Federal Court of New York dismissed the environmentalists' case, arguing that the case should be tried in Ecuador.

The case was heard in Sucumbí­os and it became increasingly obvious that Chevron was losing. In September 2009, Chevron infuriated the plaintiffs by apparently attempting to switch jurisdictions again and arguing that the   prosecution violated a Bilateral Investment Treaty (BIT) between the US and Ecuador. As part of the BIT dispute settlement process, an arbitration panel was called. This strand of the litigation led to the ICJ, which has yet to rule on the substantive issue of whether the litigation against Chevron violates the BIT.

Essentially, the Ecuador state is gambling that by accepting the ICJ's pre-eminence over national courts, other jurisdictions will enforce ICJ judgments when they are made. The ICJ itself noted that Ecuador had not yet accepted the ICJ's jurisdiction to rule on the terms of the BIT, signed by Ecuador and the US in 1993. By voluntarily agreeing to accept the ICJ's authority, Ecuador probably retains its rights to withdraw its acquiescence to the ICJ's temporary decision, should the substantive decision be in favour of Chevron (i.e. that its prosecution in Ecuador violated the BIT).

Ecuador's legal position is that by surrendering its domestic rights, which it has as a sovereign power, to punish Chevron for its alleged environmental crimes, international courts will have to uphold any judgment by the ICJ. Environmental lawyers claim that the ICJ ruling, also welcomed by Chevron, knocks away one of Chevron's arguments that the Ecuadorean courts are interfering in the core case over the scope of the BIT.

The substance of the core case, brought by environmentalists and human rights groups in Sucumbí­os, is over environmental damage. Chevron argues that it (and Texaco) has already paid for the clean-up and any subsequent damage is the fault of the Ecuadorean state oil company, Petroecuador.  

Environmentalists and human right activists in Ecuador say that Chevron/Texaco corrupted officials and politicians to sign off on the clean up, which had not in fact taken place. So far, seven former ministers have been warned that they may face criminal charges.

• International lawyers argue that the only chance Ecuador and the environmentalists had of extracting money from Chevron was by successfully suing Chevron/Texaco in the US courts. Although Chevron filed documents saying that it would accept and respect the Ecuadorean court's judgement, senior executives have clearly changed their minds.