Chevron Wins Arbitration Ruling in Endless Ecuador Fight
The TV series Mad Men announced Tuesday that it would spread its final season over two years. On the same day, the international arbitrators in the world's hottest legal drama, Chevron v. Ecuador, made a similar maneuver.
The arbitral tribunal concluded that the 1995 and 1998 exit agreements between Ecuador and Texaco Petroleum Company released Chevron, as TexPet's future parent, from lawsuits by individuals to vindicate the collective right to a pollution-free environment guaranteed in Ecuador's Constitution. In the arbitrators' view, Ecuador's 1999 Environmental Management Act only gave individuals standing to assert that collective right, which had already been extinguished vis-a-vis Chevron.
However, the arbitrators also held that Ecuador is not bound to indemnify Chevron for purely individual claims. They reserved the question of whether the huge Lago Agrio lawsuit over Amazonian oil pollution, resulting in a February 2011 verdict of $19 billion against Chevron, sought exclusively to vindicate collective rights. The panel wrote that it lacked enough information to assess whether other claims asserted by the Lago Agrio plaintiffs are collective in nature. In addition, the arbitrators deferred Ecuador's argument that the Ecuadorian lawsuit should be regarded as an extension of an earlier U.S. action, Aguinda v. Texaco, which apparently was not barred by the release agreement. Most importantly, the arbitrators have not yet concluded whether Ecuador has committed a breach of contract under international law, and, if so, what relief Chevron should be awarded.
You can read the tribunal's full decision here. Chevron's legal team in the arbitration includes R. Doak Bishop of King & Spalding and James Crawford of Matrix Chambers. Ecuador's lineup includes Winston & Strawn's Eric Bloom and Zachary Douglas of Matrix Chambers.
Chevron, for its part, is claiming a major victory. General counsel Hew Pate crowed that the "game is up." The accompanying press release argues that the "Lago Agrio plaintiffs' lawyers have repeatedly admitted, and the relief in the Lago Agrio judgment makes clear, that their claims are exclusively collective and not individual."
One spokesperson for the Lago Agrio plaintiffs questioned the arbitrators' efficacy: "The president of Ecuador visited Lago Agrio yesterday and called for a global boycott of Chevron. Doesn't sound like a man who is going to be moved by three well-paid guys in [London, Washington, or The Hague]."
Another, Christopher Gowen, questioned the tribunal's legitimacy: "Chevron has lost on this issue every time including in front of the Ecuadorian courts actually competent to decide the question, and additionally lost in front of a U.S. federal court Chevron got to consider the question as part of the company's massive collateral litigation campaign. Chevron has now found a quasi 'court' willing to buy its goods: a secretive 'tribunal' of private lawyers, convened and paid by Chevron, with no experience in Ecuadorian law, no proper jurisdiction to consider such claims, and no legitimacy whatsoever."
Gowen is correct that the Ecuadorian court considered and rejected Chevron's argument under the 1995 release agreement, and that U.S. District Judge Leonard Sand in Manhattan rejected some of Chevron's contract arguments. However, Sand's 2007 decision only interpreted a 1965 agreement that established Texaco's ill-fated Ecuador oil concession. That U.S. case was dismissed by consent of the parties before any examination of the exit agreements.
Contract questions aside, the arbitrators are now considering whether Chevron is entitled to damages because Ecuador has violated their interim orders to halt the Lago Agrio judgment from becoming final. On Jan. 20, they are scheduled to hear arguments under investment treaty law. Next week, meanwhile, the U.S. Court of Appeals for the Second Circuit will consider claims that U.S. District Judge Lewis Kaplan in Manhattan has been biased toward Chevron in the oil giant's fraud and racketeering lawsuit against the Lago Agrio plaintiffs' U.S. lawyer, Steven Donziger. If the Second Circuit disagrees, Donziger is slated to face trial beginning Oct. 15.
Perhaps historians will look back on Tuesday's award and agree that game was up. But like Mad Men fans, Chevron v. Ecuador junkies can look forward to a prolonged final season of drama.