Caso Chevron

Tribunal Condemns Ecuador’s $9.5 Billion Ruling Against Chevron

Arbitration court in The Hague echoes earlier decisions, bolstering company’s campaign to invalidate the 2011 environmental judgment

Wall Street Journal - Sara Randazzo 07/09/2018

Oil floats on the water near a home in Lago Agrio, Ecuador, in 2008. An international tribunal found Ecuador violated a treaty with the U.S. by allowing its court system to issue a $9.5 billion judgment against Chevron in the environmental case. Photo: WSJ

Oil floats on the water near a home in Lago Agrio, Ecuador, in 2008. An international tribunal found Ecuador violated a treaty with the U.S. by allowing its court system to issue a $9.5 billion judgment against Chevron in the environmental case. Photo: WSJ

An international tribunal found the Republic of Ecuador violated a treaty with the U.S. by allowing its court system to issue a $9.5 billion judgment against Chevron Corp. CVX -0.84% in an environmental case.

The Friday ruling by the international arbitration court in The Hague further bolsters Chevron’s campaign to invalidate the massive 2011 Ecuadorean judgment, which sought to hold the energy giant responsible for environmental damage in an Amazonian village.

The tribunal, echoing earlier U.S. court rulings, concluded in a 500-page decision that the Ecuadorean case was tainted by fraud and corruption and that the $9.5 billion judgment can’t be enforced. The tribunal detailed conduct by a judge that it called “grossly improper by any moral, professional and legal standards.”

Chevron’s general counsel, R. Hewitt Pate, said “the tribunal explicitly found that it would be contrary to international law for the courts of any other state to recognize or enforce” the Ecuadorean judgment, adding that the company “takes no pleasure in any dispute with a sovereign nation.”

Ecuador Attorney General Inigo Salvador Crespo said an international arbitration against the country should not have been used to interfere with the dispute between Chevron and the indigenous plaintiffs.

The underlying dispute has spanned decades and crisscrossed the globe. It began with a partnership in the 1960s to drill oil in the Amazon rain forest between Texaco Inc., now a Chevron subsidiary, and Ecuador’s state-owned energy company. A few years after Texaco pulled out of the area in the 1990s, it reached an agreement with Ecuador to clean up some of the waste its operations left behind.

Residents of a village in northeastern Ecuador called Lago Agrio said the cleanup efforts didn’t reach their region. Represented by lawyer Steven Donziger, the villagers sued Texaco in 1993, seeking compensation for what they said were illnesses spawned by polluted water.

Chevron, which has never operated in Ecuador, inherited the case when it bought Texaco in 2001.

Mr. Donziger spent years crusading for the villagers and seeking a payday. An Ecuadorean court handed his clients a $19 billion win in 2011, later reduced to the $9.5 billion still at issue. Because Chevron denied causing the environmental damage and refused to pay, Mr. Donziger went after the company’s assets around the world.

Mr. Donziger said Friday that the tribunal’s ruling, which he and his clients weren’t a party to, won’t stop his efforts to collect the judgment. He said he is currently focused on Canada, where an appellate court ruled earlier this year that Chevron’s Canada subsidiary can’t be held liable for the judgment.

The tribunal noted in its analysis that it couldn’t prevent individual plaintiffs from continuing to pursue their claims.

Chevron won a major victory in 2014, when a New York judge found the Ecuadorean verdict was the product of fraud and racketeering. The court concluded Mr. Donziger and his litigation team fabricated evidence, promised $500,000 to an Ecuadorean judge to rule in their favor, ghost-wrote much of the final verdict and took other actions that “perverted” the course of justice. Mr. Donziger disputes the findings

An appellate court upheld that decision in 2016, affirming the inability to collect on the judgment in the U.S.

Chevron initiated The Hague proceeding in 2009, arguing the company did its part to clean up the drilling site under a 1995 agreement with Ecuador and that any further pollution should be the country’s responsibility. It later amended its complaint to contest the 2011 judgment. The proceedings ground on for years, including having the tribunal members visit the contested site in Ecuador.

In its Friday decision, the tribunal found that by allowing the judgment to stand, Ecuador “wrongfully committed a denial of justice” under international law. The panel said the ruling wasn’t an indictment on the entirety of the Ecuadorean legal system, but focused on the corruption of a single judge.

The tribunal found Ecuador released Texaco in 1998 of its cleanup duties after the company spent $40 million on environmental remediation.

The ruling orders Ecuador to make the $9.5 billion judgment unenforceable and “wipe out all the consequences” from it. A later phase of the proceeding will determine what damages Chevron is entitled to from Ecuador.

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