Environmental litigation Republic of Ecuador -v- Chevron at Lago Agrio

Ecuador has a gross domestic product of around $61 billion in 2010. Ecuador is simply dwarfed by the size of multinational companies like Chevron whose total revenues in 2010 were $200 billion. Between 1972 and 1992 Texaco (now part of Chevron) was active in the small South American republic of Ecuador.

The Ecuadorians believe that Chevron, between 1960 and 1992 dumped 18 billion gallons of toxic substances into earth pits which have leached into the Amazon River basin and damaged crops, wildlife, the rain forest and caused risks of cancer among the indigenous population. Chevron denied the claim.

The Ecuadorians started proceedings in Lago Agrio in Ecuador and Chevron sought to have the proceedings brought only in the United States, but after a ten year series of lawsuits in the USA, the American courts decided that the claim should be brought in Ecuador.

The court in Ecuador appointed an expert and no doubt assisted by the expert’s finding ruled against Chevron very recently – many decades after the events complained of. Chevron was ordered to pay $9.5 billion in February this year. The Ecuadorians think the sum is too small and Chevron think there has been foul play, and have instigated civil racketeering charges against the Ecuadorian lawyers and consultants who have been pursuing this lawsuit for so many years. I have, I admit, never heard of a lawyer being faced with racketeering charges for bring a lawsuit (RICO).

A court in New York has issued a temporary order restraining the lawyers from benefiting from proceedings for the enforcement of the judgment. Chevron claims that the lawsuit was a product of fraud, which hardly shows any respect for the Ecuadorian legal system.

Of course, New York judges, despite what they rule, do not have jurisdiction in Ecuador. It is nevertheless a feature of the New York legal system that the state can apparently assert jurisdiction over anything anyone and anywhere. This sits uneasy with the USA not recognising the International Criminal Court.

Chevron has also been busy preventing the enforcement of the Ecuadorian judgment against it. Its very substantial team of lawyers discovered that Ecuador and the USA signed a bi lateral treaty for the protection of foreign investment and that treaty was enforceable at the Hague Arbitration Tribunal. It accordingly applied to the Tribunal seeking a temporary restraint against enforcing the Ecuadorian Court’s order for damages. The Arbitration Tribunal, in a short ruling gave a temporary restraint until the matter is brought before it again.

All this sounds a bit like Dickens’Jarndyce v Jarndyce; litigation that drags on for decades are the events complained of is extremely unlikely to provide a just result.

I do not know the rights and wrongs of the complaints against Chevron. It is very easy to have a natural prejudice against multinational oil companies for their environmental activities – their record today when we think of the leak in the Gulf of México and the way that the oil companies are exploiting Canada’s tar sands is bad enough – never mind what they did in 1972.

The important feature about this case is that Chevron has spent nearly twenty years defending it, and that speaks for itself. If the claim is valid (regardless of whether the amount awarded by the Ecuadorian Court is too little or too much) then there is an interesting contrast between the way in which the USA reacted to the oil spillage in the Gulf of México and the way in which a US company has reacted to an environmental claim in Ecuador.

None of the decisions of the courts or tribunals (and they are legion) are final. The case continues.

You can see the Arbitration court’s decision at

http://www.chevron.com/documents/pdf/ecuador/SDNYRestrainingOrder.pdf

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