Chevron Loses Another Round in Ecuador (Updated)

by Kevin Jon Heller

Great news — an appeals court in Ecuador has upheld the $18 billion damages award imposed on Chevron for the damage caused by its deliberate dumping of more than 18 billion gallons of toxic waste-water in the country, known as the “Rainforest Chernobyl”:

The lawsuit deals with pollution of the rainforest by energy company Texaco, which Chevron bought in 2001.

Chevron denounced the appeals court’s decision and said it would continue to seek recourse in other courts outside Ecuador.

“Today’s decision is another clear example of the politicisation and corruption of the justice system in Ecuador,” Chevron said in an emailed statement.

The San Ramon, California-based company has previously alleged fraud in the case. The plaintiffs have also accused Chevron of defrauding the Ecuadorean court to hide the scale of the oil contamination.

By the time of last year’s judgment the case had been winding its way through US and Ecuadorean courts for more than 17 years.

The suit was originally filed in a New York federal court in 1993 against Texaco and dismissed three years later after the oil company argued that Ecuador was the proper venue to hear the case. It was refiled in Ecuador in 2003.

Though it had only 47 named plaintiffs, the lawsuit sought damages on behalf of 30,000 people for environmental contamination and illnesses that allegedly resulted from Texaco’s operation of an oil consortium from 1972 to 1990 in the rainforest.

Notice the bolded text — it was Texaco/Chevron that wanted the case heard in Ecuador, not the plaintiffs.  Of course, the company wanted the case heard in Ecuador on one condition: that it win.  Now that it is losing in Ecuadorian courts, the system is corrupt and other courts should hear the case.  Because any court that rules against Chevron is by definition corrupt.  After all, everyone knows that Chevron always litigates in good faith, as The Guardian explained last year:

When it comes to aggressive legal tactics, vindictiveness, threats, pollution, intimidation, tax evasion and links with venal and repressive regimes, it is in a league of its own as its corporate lawyers bludgeon, bully and try to beat with the law any opposition it meets around the world.

Here’s a small taste of how the company works. Back in the late 1990s, it hired and transported the ruthless Nigerian military to remove a group of impoverished villagers from an company oil platform they had peacefully occupied in protest against pollution and the lack of jobs in the Niger Delta. Two villagers were killed and others were injured and then tortured by the soldiers. In 2009, the case ended up in San Francisco where a jury found Chevron not liable but then the company – whose turnover makes it bigger than 137 countries – tried to sue the villagers for its costs of $485,000. Even the judge remarked that the case was deeply mismatched. “The economic disparity between plaintiffs, who are Nigerian villagers, and defendants, international oil companies, cannot be more stark,” she said.

As a corporate citizen, the company is lousy. It is involved in polluting tar sands in Canada, massive coal mining operations in the US, and it is in constant battle with the authorities and communities over illegal gas flaring in Nigeria and Kazakhstan. It is also one of the world’s leading 10 lobbyists. It has been strongly criticised for – but has denied – human rights violations on three continents. But what it cannot dispute is that it has partnered and supported dictators and despots in Burma, Africa and Asia.

Its lawyers must be some of the busiest in the world. Court records show that in the past 20 years, the company has been made to pay around $2bn in fines and settlements to governments and communities for tax evasion, and environmental violations around the world.

But its handling of the Ecuadoran case breaks new ground in how a corporation tries to fight its corner and avoid its liabilities.

While not itself responsible for the massive oil spills that occurred in the Amazon forests – it only acquired legal responsibility when it bought Texaco – it has waged an extraordinary legal battle on the plaintiffs who took it to court.

Its tactics in the 18-year trial have shocked observers. These have included:

• Spending millions of dollars lobbying the US government to cancel Ecuador’s trade preferences. For this it employed political heavyweights such as the former Clinton trade officials Mickey Kantor and Mack McLarty and Republican super-lobbyist Wayne Berman.

• Denying to the very end of the case that its operations in Ecuador had harmed anyone or the environment. This was despite admitting that it had dumped many billions of gallons of chemical-laden “water of formation” into the streams and rivers of the Amazon that indigenous groups relied on, and in face of independent studies suggesting high rates of cancer and other health problems in the communities close to the spills and dumps.

• Threatening the Ecuadoran trial judge with criminal sanctions and prison if he did not dismiss the case.

• Counter-suing all 47 named Ecuadoran plaintiffs in New York.

• Trying to get a US judge to bar any American lawyer working on the case from enforcing a judgment from Ecuador’s court anywhere in the world.

• Claiming that the indigenous groups were trying to extort money from Chevron.

• Accusing Ecuadoran lawyers of forging the signatures of 20 of the 48 named plaintiffs.

• Accusing the indigenous groups of fraud.

• Accusing expert witnesses and organisations of racketeering.

Chevron’s slogan is “Human Energy.”  I didn’t realize it was referring to its team of litigators.

UPDATE: Letters Blogatory reminds us that the appellate court’s decision means that the plaintiffs will now seek to enforce the award in various courts around the world:

Readers may recall that the Ecuadoran plaintiffs stipulated that they would not begin proceedings to enforce the judgment “prior to entry of a ruling by the Provincial Court of Sucumbíos on the de novo appeal currently pending before that court in Ecuador”. Now that the Ecuadoran court has ruled—and in light of the Second Circuit’s decision vacating Judge Kaplan’s preliminary injunction enjoining enforcement—I predict we will see a flurry of enforcement activity in jurisdictions around the world where Chevron has assets. “Let slip the dogs of war,” or more colloquially, “release the hounds!”

http://opiniojuris.org/2012/01/04/chevron-loses-another-round-in-ecuador/

6 Responses

  1. Professor Heller,

    Because there have been a lot of posts about running a blog, I hope that you can indulge my comment for a second.  I think it would have been really helpful to a reader, especially one with less background on this very interesting case, for you to have pointed out some of the other events in the litigation, esp. the accusations of fraud against plaintiffs’ lawyers, the deal with the Crude movie out-takes showing possible corruption, the arbitration panel ruling, US court rulings.

    For me, someone who generally doesn’t share a lot of your views, I would really learn something if you included something along the lines of — Chevron has argued that the judge was bribed/coerced, and a US court has agreed, but here is why that is wrong and/or unenforceable …. but instead you just pretend like all that never happened, which makes it appear as if you either don’t have an answer or you are on a polemic.  And we all know that is, of course, not true.

  2. I am not a Chevron partisan–I think the correct outcome of the US litigation should be that Chevron, having gotten the case transferred to Ecuador, should be estopped to make the assertions it is now making about the Ecuadoran judiciary. But I think your post is a little unfair to Chevron’s position, because there is some real evidence to support its allegations of corruption. And if Chevron is right to argue that the Ecuadoran courts became politicized and corrupt in the interim between the forum non conveniens dismissal in New York and the judgment in Lago Agrio, then Chevron perhaps should win–if you don’t buy the estoppel argument.

  3. Ted,

    So does that mean that I should be able to file a lawsuit in, say, a German court to stay enforcement of a U.S. judgment I don’t like, as long as I don’t completely irrationally allege that the U.S. court was politicized (!) and corrupt in ruling against me?  Something tells me that most Americans would have a problem with that — although the doctrine would have come in handy during Bush v. Gore…

    The larger point, though, is the one I have made before: the Second Circuit has no authority to stay enforcement of the Ecuadorian decision, at least insofar as the plaintiffs attempt to enforce that judgment outside of the U.S. Under what theory do you believe a U.S. court has the right to determine that another state’s court system is so “politicized” and “corrupt” that it can overturn its judgment?

  4. Well, one of the grounds for non-recognition of a foreign judgment under the Uniform Foreign Money Judgment Recognition Act is that “the judgment was rendered under a system which does not provide impartial tribunals or procedures compatible with the requirements of due process of law.” The updated Uniform Foreign Country Money Judgment Recognition Act is similar. So if Chevron could prove what it says it could prove, then, in states that use these statutes (all of them?) the judgment is not conclusive–unless my point about estoppel is correct! So when I say that Chevron might win if it’s right about the supposed corruption in Ecuador, I mean that a US court might correctly hold that the judgment was not entitled to recognition in the US.
    The issue of the US court’s attempt to enjoin attempts at recognition and enforcement in other countries is not so straightforward. As I’ve noted at my blog and elsewhere, I think Judge Kaplan was wrong to issue such an injunction, in the absence of a showing that Chevron would for some reason be unable to persuade a foreign court that the Ecuadoran judgment was corrupt. In other words, if the judgment is as fatally flawed as Chevron says, why not let foreign courts reach that conclusion on their own? This is a way of saying that I don’t see how Chevron has shown a risk of irreparable harm, which is one of the prerequisites for a preliminary injunction in US civil procedure. Another way of looking at this is that Judge Kaplan did not accord sufficient weight to comity concerns. But in either case, I agree with you in that I think the injunction was wrongheaded.
     
     

Trackbacks and Pingbacks

  1. […] The Guardian report here and Opinio Juris here. An appeals court in Ecuador has upheld an $18bn ruling against Chevron Corporation for oil […]

  2. […] further details on the decision yet. Chevron has issued a press release rejecting the decision. Opinio Juris has coverage, as does The Hill.Readers may recall that the Ecuadoran plaintiffs stipulated that […]