OIL AND GAS:

Ecuador's U.S. ambassador speaks out on Chevron case

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.

In the ruling, U.S. District Judge Lewis Kaplan of the Southern District of New York was highly critical of the Ecuadorean court system and raised questions about interference from leftist President Rafael Correa's government (Greenwire, March 8).

The long-running case focuses on alleged oil pollution in the Lago Agrio area of Ecuador caused by Texaco Petroleum Corp., which was acquired by Chevron in 2001.

In a statement released last night, Ambassador Luis Gallegos took issue with Kaplan's conclusions and expressed "consternation that a U.S. court has elected to pass judgment on Ecuador's courts."

Kaplan granted Chevron a preliminary injunction that, in theory, prevents the Ecuadorean plaintiffs from seeking to enforce the ruling outside of Ecuador.

Chevron has no assets in Ecuador, so the plaintiffs, who question whether Kaplan's ruling binds anyone other than their U.S.-based lawyers, are reliant on overseas courts if they want to collect any damages.

Chevron persuaded Kaplan that the legal system in Ecuador and the way in which the judgment was reached were questionable. "There is abundant evidence before the court that Ecuador has not provided impartial tribunals or procedures compatible with due process of law," Kaplan wrote.

The Ecuadorean government "continues to threaten and pressure judges at all levels, particularly those hearing suits that implicate government interests," he added.

Although the legal system in Ecuador has been corrupt for years, "the situation has worsened" since Correa took office in 2007, Kaplan said.

In his statement, Gallegos pointed out that the case was heard in Ecuador only because Texaco had requested it be moved there from the Southern District of New York.

Kaplan's lengthy opinion "does not accurately reflect upon or credit the independence of the Ecuadorian judiciary," Gallegos said.

The statement, which stressed that the Ecuadorean government was not commenting on the merits of the Lago Agrio case, included examples of what the embassy called the judiciary's "history of independent judgments."

Several of the cases mentioned featured Chevron or Texaco as a party.

One was a win for Texaco in 2000 in an income tax case. Another was a 2002 case in which Chevron won motions to dismiss against the Ecuadorean government in what the statement described as three "civil cases." Chevron also won $1.5 million in a case against the government, the statement said.

Chevron spokesman Kent Robertson said the cases could not be compared with the Lago Agrio litigation because none of them involved hot-button political issues.

"Ecuador's courts are not independent when the cases have political implications," Robertson said.

Expert report questioned

In its court filings in New York, Chevron relied in part on an expert report written by Vladimiro Alvarez Grau, a lawyer, politician and newspaper columnist in Ecuador. Kaplan made numerous references to that report in his opinion, describing Alvarez as "impressively credentialed."

Alvarez, who is known in Ecuador as a vocal critic of Correa, wrote that since 2004, "the government has continually violated the rule of law" and that, since Correa took office, "the country is experiencing a severe institutional crisis."

His report contains various references to statements made by Ecuadorean legal commentators, including former members of the country's Supreme Court, that are critical of government interference.

When a new Ecuadorean constitution went into effect in 2008, the Supreme Court was renamed the National Court of Justice and, for the first time, its rulings made subject to review by a "constitutional court" that the government exerts control over, Alvarez added.

Chevron also points to the fact that a World Bank ranking of countries based on rule of law puts Ecuador in the lowest 10 percentile.

The Lago Agrio plaintiffs responded to Alvarez's report with a declaration from Ecuadorean attorney Juan Pablo Saenz, who claimed that the reason Texaco, before being acquired by Chevron, wanted to move the case to Ecuador was because it believed the judiciary "was too weak to handle these claims" at that time.

"Chevron believed it could manipulate any perceived tendency toward corruption to its benefit," Saenz wrote.

Karen Hinton, a spokeswoman for the plaintiffs, today said Kaplan's "derogatory and dismissive comments" were made "with only Chevron's word as evidence."

The embassy's statement conceded that there have been "aggressive" judicial reforms in Ecuador but said the changes were overwhelmingly positive.

Developments include improving access to justice for "marginalized sectors of society, including women and indigenous communities," the statement said.

The budget for the judiciary has also been increased and, along with other reforms, "the judiciary is more independent and better qualified than it had been" at the time Chevron wanted to move the case to Ecuador, the statement concluded.

The plaintiffs plan to appeal Kaplan's ruling. In the meantime, the Lago Agrio case is also on appeal in Ecuador.