Above: A gas flare burns at the Sacha 53 well. Photo by Lawrence Hurley.
In February 2011, a judge in Ecuador ruled that Chevron Corp. should pay up to $18 billion in damages for oil pollution in the eastern part of the country. The 18-year battle has been ugly, both in Ecuador and in U.S. courts, where Chevron has sought to undermine the plaintiffs' arguments and the legitimacy of the Ecuadorean court system. Legal reporter Lawrence Hurley traveled to Ecuador to investigate Chevron's claims and examines whether the case is any closer to a resolution.
Click here for a timeline of events.
Long before the $18 billion verdict for oil pollution issued by an Ecuadorean judge this year, there was Lago Agrio 01, the first site where Texaco Petroleum Corp. discovered oil when it started operations in the 1960s. E&E visited the oil fields around Lago Agrio to view the contested sites firsthand.
A panel of international arbitrators is scheduled to meet in Washington, D.C., this weekend to consider Chevron Corp.'s claim that the state of Ecuador needs to act to prevent indigenous plaintiffs from enforcing a judgment against the oil company worth up to $18 billion.
Chevron Corp. missed an Ecuadorean court deadline Friday requiring it to apologize for oil contamination that indigenous groups say it is responsible for.
A federal appeals court today said that oil giant Chevron Corp. jumped the gun in asking a U.S. court for an injunction preventing enforcement of an Ecuadorean judgment worth up to $18 billion.
Chevron Corp. said Friday it will ask Ecuador's highest court to quash a judgment worth up to $18 billion dollars that was entered against the company last year.
Oil giant Chevron Corp. today failed -- at least for now -- in it latest effort to combat a multibillion-dollar judgment entered against it by an Ecuadorean court.
An appeals court in Ecuador yesterday upheld a multibillion-dollar judgment against Chevron Corp. for alleged oil pollution in the eastern part of the country.
Oil giant Chevron Corp. yesterday launched a new legal strategy in its effort to combat a multibillion-dollar judgment entered against it by an Ecuadorean court.
Acting with surprising speed, a federal appeals court yesterday lifted an injunction that stopped Ecuadorean plaintiffs from enforcing an $18 billion judgment against Chevron Corp. just three days after hearing arguments in the case.
As waves of litigation continue around an Ecuador court's $18 billion judgment against Chevron Corp., an appeals court today heard arguments over whether a federal judge can stop the plaintiffs from collecting the damages.
An environmental consulting firm named as a defendant in a racketeering suit filed by Chevron Corp. over a landmark pollution lawsuit in Ecuador is continuing to work on another blockbuster case: the Deepwater Horizon oil spill investigation.
The Ecuadorean ambassador to Washington has launched a defense of his country's judicial system following a U.S. federal judge's decision Tuesday that would prevent indigenous plaintiffs from enforcing an $8.6 billion judgment against oil giant Chevron Corp.
Chevron Corp. scored a major legal victory last night when a federal judge ruled that plaintiffs who won an $8.6 billion judgment for pollution in Ecuador cannot seek to collect damages in the United States or in other countries.
When a court in Ecuador ruled yesterday that Chevron Corp. should pay at least $8.6 billion in damages for pollution in the Amazon jungle, it opened up a new chapter in a case that has already been contested for 18 years.
Third of a three-part series.
The final battle in Chevron's high-profile war against an $18 billion judgment over oil pollution in Ecuador is likely to be fought behind closed doors in an ornate building in the Netherlands.
The Peace Palace -- a neo-Renaissance structure built in The Hague with the financial backing of industrialist Andrew Carnegie almost a century ago -- is home to the Permanent Court of Arbitration, whose specialty is resolving international legal disputes.
Although litigation continues both in Ecuador and New York over the February ruling against Chevron, experts say the arbitration court, which shares its grand home with the International Court of Justice, could have a crucial role to play.
| TIMELINE OF EVENTS |
A look at Chevron's history in Ecuador and the developments that led to the legal battle between the oil company and the country. Click here to view the timeline. |
That is because the court is currently considering a 2009 claim brought by Chevron against Ecuador in which the oil company claims the Andean nation violated a bilateral trade agreement between it and the United States.
The arbitration proceeding is one part of a tangled web of litigation that illustrates the oil company's no-holds-barred approach to the Ecuador case, which has been ongoing in various forms for 18 years.
Despite concerns raised by shareholders at last week's annual meeting at Chevron's San Ramon, Calif., headquarters about the judgment and the scant prospect of a settlement any time soon, the company has stressed its continued commitment to fighting to the bitter end.
In Ecuador, Chevron has appealed the $18 billion ruling entered by Judge Nicholas Zambrano, while in New York it is pursuing a federal racketeering case against the American lawyers who represent the indigenous plaintiffs, alleging the entire case is a scam.
But what the three-man arbitration panel concludes could be decisive, according to experts such as Peter McGrath, a partner at the Moore & Van Allen law firm in Charlotte, N.C., and a specialist in environmental law.
"The mechanism through which everything will be sorted out will be the arbitration," McGrath said.
The genesis of the dispute between Chevron and Ecuador dates to when Texaco Petroleum Co. became part of an oil consortium that, during the 1970s and 1980s, worked alongside the Ecuadorean government-controlled company, Petroecuador.
Texaco withdrew from Ecuador in 1992, leaving Petroecuador in sole control of the oil fields, which are near the town of Lago Agrio in the eastern part of the country.
A year later, the plaintiffs -- backed by American lawyers -- filed their first lawsuit against Texaco in New York. It was eventually dismissed on jurisdictional grounds, but the plaintiffs sued again in 2003, this time in Ecuador.
Now, Chevron, which acquired Texaco in 2001, was the defendant.
It's that case that led eventually to February's mammoth ruling (Greenwire, May 17).
By that time, Chevron had already filed its arbitration claim, part of its wider legal strategy to undermine the plaintiffs' case, in part by pointing the finger at the Ecuadorean government (Greenwire, May 23).
"It's one of the options to seek justice," Chevron spokesman James Craig said of the arbitration proceeding.
The oil giant maintains that Ecuador is bound by the contracts Texaco entered into with the government before Chevron was ever on the scene.
That includes an agreement in which Texaco agreed to remediate some sites before leaving the country in return for the government absolving it from liability.
The plaintiffs, who are not parties to the arbitration, say the agreement only released Texaco from claims made by the Ecuadorean government and not private parties.
So far, the arbitration proceeding is at an early stage. The panel has not yet even decided whether it has jurisdiction to consider Chevron's claims, although legal experts think it will probably conclude that it does.
The only action the arbitrators have taken to date was to ask Ecuador not to allow the enforcement of the judgment while the panel continues its considerations (E&ENews PM, Feb. 11).
Chevron was particularly worried about that issue because the plaintiffs had a plan to petition courts around the world -- in countries where Chevron has assets -- to enforce the judgment.
Ecuador has responded that the ruling could not be enforced immediately anyway because it remains on appeal in Ecuadorean courts.
An appeals court ruling is not expected for months.
"Right now, according to the Ecuadorean law, this judgment cannot be executed," Ecuador's attorney general, Diego Garcia, said in a recent interview in Quito, the Ecuadorean capital.
The panel's findings "didn't add anything to what the law already establishes in Ecuador regarding judgments that have not been executed and cannot be executed," he added.
The arbitration panel -- consisting of two Brits and an Argentine, all experienced international lawyers -- has two points to consider if it decides it has jurisdiction.
The first is whether Chevron has any liability based on its agreement with the Ecuadorean government.
The second is whether Ecuador violated the bilateral treaty by failing to provide what could be described in American legal terms as due process.
Chevron's 281-page filing lays out in detail its argument that Texaco was released from all environmental claims and fulfilled whatever remediation obligations it had.
The oil company also argues that Petroecuador "has caused extensive environmental damage" since taking over full control of the sites in 1992 and repeats some of its claims about alleged fraud on the part of the plaintiffs, which are the basis of the racketeering suit in New York.
Furthermore, Chevron says the Ecuadorean government "is colluding with the plaintiffs to improperly influence the court and undermine Chevron's defense."
Ecuador will not file its response to Chevron's claims until after the panel agrees whether it has jurisdiction.
Chevron's complaint is not typical of the type of cases decided via international arbitration, according to Marcos Orellana, a senior attorney at the Center for International Environmental Law.
Arbitration is usually "most effective when there is clear government misconduct," he added. It is not clear that Chevron's allegations against the Ecuador government reach that level, Orellana said.
The tribunal has wide latitude in terms of what it might decide once it gets to the merits, but all of its rulings would be based on to what extent, if any, Ecuador is liable for anything Chevron is required to pay to the plaintiffs, according to legal experts familiar with the case.
In essence, the arbitration boils down to whether Ecuador has to indemnify Chevron from any losses it may incur as a result of the judgment in Lago Agrio.
But as Allen Weiner, who directs the international and comparative law program at Stanford Law School, pointed out, while the tribunal can require Ecuador to indemnify Chevron, it cannot stop the plaintiffs from seeking the damages in courts worldwide.
"There have been cases where people say there was a miscarriage of justice that violations treaty obligations," he added. "That's not to say Ecuador can stop plaintiffs enforcing the judgment."
LAGO AGRIO, Ecuador -- Sitting in a dimly lit office with blue paint peeling off the walls, Judge Nicolas Zambrano is remarkably relaxed for a man responsible for the biggest environmental damage ruling in history.
In February, Zambrano ordered Chevron Corp. to pay up to $18 billion for oil pollution in the region around this hard-edged frontier town on the fringe of the Amazon jungle.
Only the tab likely to be faced by BP PLC over the Deepwater Horizon spill in the Gulf of Mexico has the potential to be bigger.
Sporting a gold watch on his left wrist and an arresting shaven head, Zambrano –- the sixth judge to preside over the case -- has received his fair share of attention since his 188-page blockbuster.
He said, with a straight face, that the Chevron case is like any other.
"The case is as important as all the cases that are handled by this court," he said in a rare interview. "We treat all cases with the same attention and depth."
Zambrano, who has the tough stare of a former prosecutor, is clearly aware of the attention his ruling has received around the world.
After all, the case has, in one form or another, been ongoing for 18 years and has spawned a documentary film, "Crude," and a Vanity Fair cover story, not to mention frenzied allegations of fraud and corruption.
Asked how he managed the burden, Zambrano replied, "With a lot of work."
Now, with his ruling on appeal and Chevron desperately seeking to prevent its enforcement in courts around the world, some might be forgiven for thinking the case is reaching its final stages.
Based on how contentious the case has become, that's probably not a wise assumption.
QUITO, Ecuador -- Gathered in front of the presidential palace in the Spanish colonial quarter of the Ecuadorean capital, the crowd held aloft green and yellow signs that screamed one word: "Sí."
Possibly with a nudge from the leftist government of President Rafael Correa, the demonstrators were showing their support for a referendum held here earlier this month.
Among the 10 issues up for a vote were reforms of Ecuador's much-criticized judicial system, which has faced the international spotlight due to Chevron Corp.'s efforts to fight a judgment that could cost the oil giant up to $18 billion.
Chevron has launched a broadside assault on the Ecuadorean judiciary in an effort to persuade courts outside the country not to enforce the ruling, in which a judge found the company responsible for environmental pollution in the oil fields around the town of Lago Agrio.
Texaco Petroleum Corp., which Chevron acquired in 2001, was the major player in the area from the 1960s until it pulled out in 1992.
In attacking the integrity of the judicial system, Chevron has found what appears to be a soft target.
Even Ecuadoreans, most of whom are at least vaguely familiar with the Lago Agrio case, tend to agree the system can be corrupt and easily swayed by political agendas.
"We hope that we have enough strength in this referendum in order to change the justice system," said Patricio Reyes, a member of a road workers union who attended the rally with several of his colleagues. "There is a lot of corruption."
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