Ecuadorian panel again denies Chevron motion to block judgment

Jessica M. Karmasek Mar. 6, 2012, 12:50pm

QUITO, Ecuador (Legal Newsline) - A three-judge appellate panel last week denied -- for the second time -- a motion by Chevron Corp. to block the Republic of Ecuador from enforcing a $18 billion judgment against the company in countries around the world.

On Thursday, the court ruled that a second interim award from an international arbitration tribunal, which asked Ecuador's government to suspend the litigation, could not stop enforcement of the judgment given that the rain forest communities were not a party to the proceeding.

The court also found that human rights law obligated the country's government to protect the rights of its citizens to pursue their legal claims without "outside interference."

"In no part of its request did Chevron dispute the supreme authority of international human rights law," it wrote.

The court also ruled that Chevron's request would require it to violate the country's constitution by letting the tribunal override the nation's public court system, itself a violation of international law.

"Our people are dying because of the failure of Chevron's current management team to live up to its legal obligations," Pablo Fajardo, the lead lawyer for the Ecuadorians, said in a statement.

"We will not stop until every last penny of this judgment is collected and those in Chevron who are responsible for the company's environmental contamination and fraudulent cover-up are held accountable for their misconduct."

He added, "The court has determined Chevron broke the rain forest of Ecuador. Now it must fix it."

Last week, the international arbitration tribunal ruled it has jurisdiction to hear the oil giant's claims against 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.

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

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 in January 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 in February 2011.

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.

"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 last week.

"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."

The appellate panel in Ecuador had 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 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.

Karen Hinton, a spokeswoman for the Ecuadorians, said the appellate court's decision protects the independence of Ecuador's courts and ensures that a private investor treaty cannot trump the fundamental human rights of ordinary citizens.

"The Ecuador appellate panel spoke in a way that is consistent with both Ecuador's laws and the country's international treaty obligations," she said in a recent statement. "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.

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

In a guest column for Forbes Tuesday, attorney Theodore J. Boutrous Jr. points to Ecuadorian President Rafael Correa's $42 million criminal libel judgment against newspaper El Universo as "powerful new evidence" why courts around the world should reject efforts to enforce the $18 billion judgment against Chevron.

Boutrous, a partner at the law firm of Gibson, Dunn and Crutcher LLP, is representing the oil giant in the fight against Ecuador.

He says the two cases, though they involve different types of legal claims, are products of the "same corrupt judiciary and trials marred by remarkably similar violations of the rule of law."

"Court rulings and documents establish that the Chevron case, like El Universo's, features direct interference by President Correa, a judicial bribery scheme, superhuman judicial speed reading, a judgment ghostwritten by the plaintiffs' lawyers, bogus criminal charges, irregular selection of temporary judges, and an offer to eliminate part of the judgment in exchange for a coerced 'apology,'" Boutrous wrote.

Boutrous says the Chevron case exemplifies a "disturbing phenomenon."

That is, U.S.-based plaintiffs' lawyers "colluding" with corrupt foreign courts to fabricate "whopping" civil judgments against American companies, and then using the "bogus" judgments to try to coerce a big settlement, he says.

"The lessons of the El Universo debacle should help thwart the fraud underway against Chevron and bolster its ongoing international arbitration with the Republic of Ecuador over the case," he wrote.

"Hopefully, it will also curb the appetite of U.S. plaintiffs' lawyers seeking to exploit corrupt and politicized foreign courts for their own personal gain."

From Legal Newsline: Reach Jessica Karmasek by email at

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