2016 Was A Really Bad Year For Lawfare Against Chevron

Forbes - Michael I. Krauss 03/01/2017

US actress Mia Farrow visits Lago Agrio, Aguarico, Ecuador, on January 28, 2014. AFP PHOTO/JUAN CEVALLOS (Photo credit should read JUAN CEVALLOS/AFP/Getty Images)

Steven Donziger and his allies were riding high when they obtained a multi-billion dollar award against Chevron from the Ecuadorean judicial system.  But things have not gone well for Donziger and his allies since then, as several of my previous blog entries have detailed.

As a refresher, on August 8 a three-judge panel of the United States Court of Appeals for the Second Circuit unanimously affirmed District Judge Lewis Kaplan’s 2014 ruling that Donziger and his associates had obtained their Ecuadorean award through fraud and racketeering. “The record in the present case reveals a parade of corrupt actions by the [plaintiffs’] legal team, including coercion, fraud, and bribery,” the panel wrote. Donziger protested that the panel's decision was an “unprecedented authorization of a pre-emptive collateral attack on a foreign money judgment,”and he sought a rehearing of his appeal before the entire Second Circuit. This en banc petition was also rejected in a terse, one-line order on November 1.

But so much has gone on in this case in 2016 that a year-end summary seems in order.   The summary will give readers an idea of the massive amounts of legal fees that Chevron has had to expend to defend itself across the world.

• An international arbitration tribunal, convened under the U.S.-Ecuador Bilateral Investment Treaty (BIT) to hear the company’s denial of justice claims, has issued a number of monetary awards and injunctions in favor of Chevron since 2009. Ecuador attempted to nullify several of these awards before the International Court in The Hague in January 2016.  Ecuador claimed that the international arbitration tribunal lacked jurisdiction to hear Chevron’s claims, and that its awards ought to be set aside because they violated "public policy."  But in a decision rendered on January 20, 2016 the Hague court affirmed the international arbitration tribunal’s determination that it had  jurisdiction over Chevron's claim, and observed that “serious indications” of fraud in the Ecuadorean process provided a valid basis for the arbitration tribunal's interim relief. Chevron now awaits the arbitration tribunal’s final award.

• In February, the American Media Institute reported on the multi-million-dollar public relations campaign by Ecuadorean President Rafael Correa to advance the lawsuit against Chevron. The campaign worked with Rolling Stone magazine, enlisted  Danny Glover and Mia Farrow, and sought to recruit Cher and Bianca Jagger to accuse Chevron of environmental crimes. The AMI report indicates that to pay for all this (including free junkets for the Hollywood stars) Correa hired MCSquared, a Brooklyn, New York public relations firm set up by Correa's longtime friend Maria del Carmen Garay, depositing $534,000 each month in a Citibank account on Park Avenue in New York.  Foreign interference in American government, anyone?

• In March, Argentina's public prosecutor’s office (“MPF”)  recommended that its National Court reject the effort to recognize the Ecuadorian judgment in Argentina.  The MPF concluded that the Ecuadorian proceedings were “a scheme intended to give a big windfall to individuals foreign to the landscape supposedly impacted,” and that evidence “casts a shadow over” the  trial. The MPF found that forensic evidence “is conclusive in that other persons participated in the drafting of the judgment signed by Judge Nicolas Zambrano,” and concluded that, “the anomalies identified cannot be accepted in our territory, because they clearly violate the public order of the national legal system.” The National Court publicized this report on April 15.  Three days later, Argentine attorney Enrique Bruchou resigned as the plaintiff’s Argentine counsel of record, presumably for reasons of ethics. 

• In July, after losing appeals all the way to U.S. Supreme Court, Ecuador paid Chevron $112 million to satisfy (with interest) other commercial claims that had originally been filed by Chevron's predecessor, Texaco in the early 1990s. Donziger’s team had tried to attach and seize this money in partial payment of its Ecuadorean judgment against Chevron, and had even obtained an Ecuadorean court order diverting the payment.  Ecuador's government had been eager to comply with Donziger's request.  But as I wrote in an earlier blog entry, this would certainly have obliged Ecuador to pay a second time, directly to Chevron.  Ecuadorian officials eventually saw the light and acknowledged  that they had to pay Chevron to avoid breaching treaty obligations.  The abandonment of the Ecuadorean order to divert payment seems to have caused a schism in the legal team arrayed against Chevron.

• In September, an Ontario, Canada court held hearings on Donziger’s attempt to enforce the Ecuadorian judgment in that country. The court heard arguments on dismissal motions by Chevron Corp. and Chevron Canada, and on the plaintiffs’ request that the court not consider any evidence of Donziger’s fraud and racketeering. The Ontario decision is still under advisement, but Canadian observers have issued their own opinions. “[T]he notion that every corporate shakedown on earth might wash up in Canada, inspired by the success of Donziger and his Ecuadorian cronies (including the country’s president Rafael Correa) in getting their case heard, could bring Canada’s legal system to a halt, not to mention into disrepute,” wrote Peter Foster in the Financial Post on Sept. 8. “Let’s not let our courts be dragged into this quagmire,” opined Joanna Baron, director of the Runnymeade Society, in the Globe and Mail on Sept. 13.

Here's hoping that 2017 will see a closing chapter to this sordid effort to crush the Rule of Law.  Do not ever forget:  Ecuadorean citizens have quite possibly been harmed by oil pollution, which is almost certainly the responsibility of the Ecuadorean government (as I have previously shown).  Those harmed have unfortunately been cruelly manipulated by efforts to extract money from "deep pockets."  Shame on all who have participated in this effort to defraud the millions who own (directly or indirectly) shares in Chevron Corp.