OIL AND GAS:

Chevron allegations about justice system strike a nerve in Ecuador

Second of a three-part series.

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."

Justice on trial

This fall, the Ecuadorean justice system is scheduled to go on trial before a federal judge in New York.

U.S. District Judge Lewis Kaplan has agreed to determine whether the Ecuador court's judgment against Chevron should be recognized in U.S. courts and possibly elsewhere.

It is all part of a federal racketeering lawsuit Chevron filed against the plaintiffs, in which it alleged that the entire case in Ecuador was a shakedown.

What Kaplan and other overseas judges think is vital as Chevron has no assets in Ecuador.

Therefore, the plaintiffs' lawyers -- representing indigenous people who live in and around Lago Agrio -- have no option but to look elsewhere for the oil company's cash.

There is a sense of unease within the legal community here that a U.S. judge will be casting judgment on their country.

"This is very serious, very unpleasant," said Fabian Corral, a conservative lawyer and law professor in Quito.

Some legal experts say Chevron has no right to criticize the Ecuadorean courts because it was Chevron that asked the case to be transferred here in the first place.

The original complaint was filed in the Southern District of New York, the same court where Kaplan sits, in 1993.

Texaco argued that a U.S. court was not the proper venue for deciding the case and that Ecuador would be the appropriate forum.

That was then.

Julio Cesar Trujillo, a constitutional law professor and former left-leaning congressman, said Kaplan's intervention "represents a serious damage to justice around the world."

Courts regularly enforce rulings handed down by overseas judges, he added.

Indeed, Trujillo says he has successfully sought enforcement of U.S. court rulings in Ecuador.

Kaplan could set a bad precedent because "a judge here could decide not to execute a judgment from the U.S. for whatever reason," he added. "If a U.S. judge has the capability of judging our institutions, then why can't we do the same?"

'State of severe institutional crisis'

Most experts nevertheless agree that there are problems with the judicial system in Ecuador.

Long before Correa came into power in 2007 the executive branch had been known to meddle in the judiciary, but it has only become more common.

The judiciary "has been in a state of severe institutional crisis for some time," Kaplan wrote in his March opinion in which he ordered the preliminary injunction. "Matters have deteriorated recently."

Kaplan based his conclusion on expert witnesses put forward by Chevron, but few lawyers in Ecuador would disagree with him.

Concerns about how long it takes to resolve cases and perennial angst about the independence and integrity of the courts have not been helped by constant changes to the way judges are appointed and other reforms to the system, experts say.

Between 1998 and 2008, the constitution required that judges on the Supreme Court -- then the nation's top court -- serve life terms and the court would itself appoint replacements.

In 2004 and 2005, the Ecuadorean Congress replaced 27 of the 31 Supreme Court justices with new justices picked by lawmakers, at the urging of then-President Lucio Gutierrez, who was elected as a leftist but quickly lost the backing of his supporters for supporting free-market economic policies.

Under even more pressure, Gutierrez removed all the Supreme Court justices before he was ousted from office in 2005.

Upon taking power, Correa ordered the creation of a new Constituent Assembly to draft a new constitution.

The Supreme Court was renamed the National Court of Justice and, for the first time, its rulings could be subject to review by a "constitutional court" that the government exerts control over.

Not content with those reforms, the two referendum questions relating to the judiciary put before voters May 7 would set up a temporary council of three to restructure the justice system over the next 18 months and then replace the judicial council that oversees the judiciary with a new five-member group.

Critics say the government is likely to have a major say in who is appointed.

Corral, who says he has seen corruption in the justice system firsthand, doesn't think the reforms will improve matters.

"Has anything been solved?" he said. "No."

The Correa factor

Despite Chevron's role as the foreign multinational seeking to evade the jurisdiction of local courts, some influential figures in Ecuadorean society are generally supportive of some of the company's pronouncements.

One is Rene Ortiz, who, admittedly, as a former secretary-general of the Organization of Petroleum Exporting Countries, is an oil industry insider.

From his perspective, it's not so much the institution of the judiciary that should raise questions about whether the Lago Agrio ruling should be enforced but rather the actions of Correa's government.

"This got very political," he said in an interview.

Correa "should trust the institutional framework" that is already in place, but instead he "practically intervened" in the Chevron case by indicating his support for the plaintiffs' plight, Ortiz said.

"He is a crook, in my opinion," he added.

In response to these accusations, the plaintiffs have sought to distance themselves from the president, who has visited some of the affected sites that have been litigated over.

"We suffer every time Correa opens his mouth," said Donald Moncayo, a member of the Amazon Defense Coalition.

The Ecuadorean government now finds itself forced into a position where it has to defend the judiciary against Chevron's attacks even while Correa himself has been calling for further reforms.

It's a task left to Diego Garcia, Ecuador's attorney general.

In an interview in his Quito office, closely watched by advisers, Garcia carefully defended Ecuador from Chevron's attacks while admitting that improvements could be made.

"What we cannot accept is that the Ecuadorean justice system is not the right forum to guarantee litigants the handling of their cases or that it is a justice system that only favors the Ecuadorean state," he said.

The government's position does not, though, "imply that Ecuador is not conscious and is not looking for an improvement of its justice system," he added.

He also claimed Chevron has not made any formal complaints of illegal acts relating to the Lago Agrio case.

"The reality is that Chevron knows perfectly the legal system in Ecuador. It knows perfectly that in order to file a formal complaint, it would have to appear in front of the prosecutor general and file it, and it has never done that," he said.

Chevron disputes that statement. Spokesman Jim Craig said the company has made numerous complaints to various government officials, including the prosecutor general.

To suggest otherwise, he added, "ignores the facts and the law and amounts to nothing more than excuse-making on the part of a government that has worked hand-in-glove with the plaintiffs to railroad Chevron in the hope of obtaining a multibillion-dollar windfall."

The Lago Agrio plaintiffs, of course, are scornful of Chevron's attempts to undermine the judgment.

"There has been no intimidation," said attorney Pablo Fajardo. "We have strong evidence of what Chevron doesn't want to talk about, which is the damage to the people and the Amazon."

Judge Kaplan, he added, is "a victim of Chevron's lies."

Judicial reform

After a lengthy vote-counting process, Correa won on all 10 questions put to the Ecuadorean people in the referendum.

The tinkering with the judicial appointment process is further evidence to some of an attempt by the president to increase control over the judiciary.

Ortiz described it as "clear intervention in the judicial system."

Corral believes the government should stop introducing reforms and instead focus on investing more money in the judiciary, which he says is chronically understaffed and unfunded.

"It's the Cinderella of the state," he said, referring to its neglected status compared with other branches of government.

It is a fact recognized by those sympathetic to the plaintiffs, such as Trujillo, who revealed that he initially advised them to sue in the United States.

"I said that in that case, it was better to bring it in the U.S., because it was a very big suit and in the Amazon region there isn't the same infrastructure you can find in the States," he said. "The lack of infrastructure would make it take longer."

Back at the sun-drenched rally in Quito, Gustavo Cachimuel -- who used to work for Petroecuador, the state-owned oil company -- said he isn't so sure Correa's reforms to the judiciary will work, either.

But he does believe something needs to be done.

"History will tell whether the referendum can change this problem," he said. "Changes are necessary. It is undeniable."

Independent journalist Irene Caselli contributed.

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