Chevron: Tribunal says it can hear claims against Ecuador

Jessica M. Karmasek Feb. 28, 2012, 1:50pm

SAN RAMON, Calif. (Legal Newsline) - Chevron Corp. announced Tuesday that an international arbitration tribunal has ruled it has jurisdiction to hear the company's claims against the Republic of Ecuador.

The tribunal is convened under the authority of the U.S.-Ecuador Bilateral Investment Treaty, also known as the BIT, and administered by the Permanent Court of Arbitration.

The PCA, located in The Hague, Netherlands, administers cases arising out of international treaties and other agreements to arbitrate.

Earlier this month, the tribunal issued a second interim award, ordering Ecuador to prevent enforcement and recognition of the $18 billion judgment against Chevron.

The oil giant claims that Ecuador has breached its obligations under the BIT and international law through the Lago Agrio litigation, the resulting judgment and the appellate decision upholding the judgment.

The appellate court's ruling, issued last month by a panel of three temporary judges in the Provincial Court of Justice of Sucumbios in Lago Agrio, upheld the $18 billion judgment against the company for its alleged contamination of the country's rain forest.

The ruling, which stems from an environmental lawsuit involving Texaco Petroleum, confirmed a lower court's ruling last February.

The lower court had found the company liable for dumping billions of gallons of toxic waste into the Amazon, causing an outbreak of disease and decimating indigenous groups.

"With today's decision, Chevron will proceed to the merits of its arbitration to hold Ecuador responsible for the fraud being committed through its judicial system," Hewitt Pate, Chevron vice president and general counsel, said in a statement Tuesday.

"Rather than allow American plaintiffs' lawyers to cause even more damage for which Ecuador may ultimately be held responsible, the Republic should take this opportunity to pursue a more constructive course."

Chevron's claim will now proceed to the "merits phase" of the arbitration, it said.

A three-judge appellate panel in Ecuador has already rejected the international tribunal's order issuing a second interim award.

In a decision filed Feb. 17, the appellate court said the Inter-American Convention of Human Rights and Ecuador's Constitution trumped the PCA tribunal's authority.

"No part of this Convention can be interpreted to permit any person (such as Chevron or the Arbitral Panel) to interfere with the enjoyment and exercise of rights and liberties recognized in the Convention, nor can it override other rights and guarantees that are inherent in the rights of all men," the court wrote.

The award directed Ecuador, including "its judicial, legislative or executive branches," to "take all measures necessary to suspend or cause to be suspended the enforcement and recognition within and without Ecuador" of the judgment.

In particular, the tribunal stated that these measures must "preclude any certification" by Ecuador or its courts that would cause the judgment to become enforceable.

"The Ecuador appellate panel spoke in a way that is consistent with both Ecuador's laws and the country's international treaty obligations," Karen Hinton, a spokeswoman for the Ecuadorians, said last week. "It shows that Ecuador's independent courts will not succumb to Chevron's political pressure nor its request for special treatment."

She added, "After 18 years of dealing with Chevron's bad faith and abusive litigation tactics, the rain forest communities have a final and enforceable judgment."

Chevron, which has vowed never to pay the $18 billion judgment, filed a racketeering lawsuit in the Southern District of New York last February, alleging that the Ecuador suit has been used to threaten the oil company, mislead U.S. government officials, and harass and intimidate its employees -- all to extort a financial settlement from the company.

This month, Judge Lewis Kaplan lifted a stay of proceedings in the civil lawsuit.

From Legal Newsline: Reach Jessica Karmasek by email at

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