Chevron asks arbitration in Amazon dispute


As it fights a US$27 billion lawsuit here charging it with responsibility for decades of oilfield pollution in the Ecuadorian Amazon, Chevron is pursuing two courses: challenging the trial’s fairness and trying to force Ecuador’s government into arbitration.

The oil giant’s efforts on the first front intensified last month, when Chevron publicized secretly recorded videos two businessmen shot of the judge handling the case, Juan Nuñez, and a governing-party political operative in separate meetings. Chevron claims the tapes prove Nuñez is bent on ruling against it and that the businessmen, who it says were not acting at its behest, were asked by the political operative to pay bribes for environmental-remediation contracts.

Nuñez says he did nothing wrong, asserting the videos were altered; but amid a government investigation of the secret tapings, he requested recusal. Chevron, meanwhile, called for nullification of all the judge’s rulings in the case. (See “Chevron wants Ecuadorian judge’s orders nullified”—EcoAméricas, Sept. ’09.) On Oct. 21, however, the new judge handling the case, Nicolas Zambrano, rejected the request.

Petition in The Hague

As debate about the videos raged, Chevron on Sept. 23 sought to push back on a second legal front, requesting international arbitration. The petition, filed with the Permanent Court of Arbitration in The Hague, Netherlands, marks the latest attempt by Chevron to ensure Ecuador shoulders the liability. Two earlier attempts failed, the latest in June when an effort by Chevron to seek arbitration in the United States was rejected on appeal by the U.S. Supreme Court.

In its new petition, Chevron accuses Ecuador of exploiting the lawsuit rainforest Indians are pressing here against the oil company and of ignoring contractual agreements the government made concerning oilfield pollution underlying the litigation. That litigation, launched in 2003 in the Amazon-region city of Lago Agrio, concerns vast quantities of toxic drilling waste that a Texaco subsidiary allegedly released into the environment in the area from 1972 to 1992. By virtue of Chevron’s 2001 acquisition of Texaco, the plaintiffs want Chevron held responsible for pollution, health impacts and poor oilfield practices that according to a court investigator produced $27 billion in damages.

Chevron argues the Texaco subsidiary, Texaco Petroleum (Texpet), met the terms of remediation accords it signed with Ecuador after turning oilfield operations over to the state-run company Petroecuador, its consortium partner in the project, in 1992. It notes authorities certified the work was complete in 1998, releasing it from further responsibility.

Chevron asserts Ecuador’s government is pressuring the courts to hold it responsible for environmental problems caused subsequently by Petroecuador. It claims Petroecuador drilled over 400 new wells in the concession area after Texpet left the consortium—compared to 321, it says, when Texpet was the consortium’s managing partner—and accuses the company of causing 1,400 spills since 2000.

To justify its arbitration request, the company contends the government has colluded with attorneys for the plaintiffs, violating the agreements Ecuador made with Texpet and ignoring investor protections in the United States-Ecuador Bilateral Investment Treaty.

No choice, company says

“The government is using the legal process in Lago Agrio to avoid the environmental obligations of the state-owned oil company,” Hewitt Pate, Chevron’s vice president and general counsel, said in a prepared statement issued by the company. “Because Ecuador’s judicial system is incapable of functioning independently of political influence, Chevron has no choice but to seek relief under the treaty between the United States and Ecuador.”

The administration of Ecuadorian President Rafael Correa dismisses the arbitration request. Attorney General Diego García said the government will defend itself “with integrity and juridical firmness,” charging Chevron is trying to accomplish by way of arbitration what it has not been able to achieve in the courts.

Plaintiffs’ attorneys, meanwhile, counter that Chevron’s remediation agreements are invalid because the company did not carry out the cleanup it promised, leaving pits of toxic drilling wastes that have caused ongoing contamination of soils and water sources. They also assert the accords do not shield Chevron from third-party lawsuits. Chevron’s effort once again to force Ecuador into arbitration, these attorneys argue, is a sign of desperation.

“The company feels its case in Lago Agrio is lost, so it wants to litigate in The Hague,” says Julio Prieto, a lawyer for the plaintiffs. “Given the abundant evidence, it’s impossible that a judge would rule against this evidence, to which even they [Chevron] have contributed.”

Analysts believe an initial ruling in the Chevron case could be forthcoming in the first half of next year. Nobody expects the decision to end the battle, however, since under current law it could be appealed in Lago Agrio court and subsequently in the National Court of Justice and Ecuador’s Constitutional Court. Experts forecast that a definitive judgment in the case is unlikely to be reached before 2011.

James Craig
Communications Advisor
Chevron Latin America
New York, NY, United States
Tel: (646) 416-0191
Pablo Fajardo
Lead plaintiffs’ attorney
Lago Agrio, Ecuador
Tel: +(593) 9397-7811
María Fernanda Baca
Ecuadorian Attorney General’s Office
Quito, Ecuador
Tel: +(59 32) 255-9308
Julio Prieto
Plaintiffs’ attorney
Quito, Ecuador
Tel: +(59 32) 254-5781