Latest in Series of Legal Setbacks for Oil Giant
Amazon Defense Coalition
29 June 2009 - FOR IMMEDIATE RELEASE
Contact: Karen Hinton at +1.703.798.3109
WASHINGTON – The U.S. Supreme Court today refused to hear an appeal by Chevron of a decision by a U.S. federal trial judge that denied the oil giant's attempt to shift a $27.3 billion liability for environmental contamination in the Amazon rainforest to Ecuador's state-owned oil company.
The Supreme Court's move is the latest of several legal and political setbacks recently suffered by Chevron in the 16-year-old case, considered the largest environmental matter in the world. Experts have dubbed the contamination in Ecuador the "Amazon Chernobyl" and say a clean-up would dwarf any decontamination effort ever undertaken.
The dispute before the Court was between Chevron and Ecuador's government, but it was spawned by a private lawsuit for environmental damages brought against Chevron by thousands of private citizens in the country's Amazon region.
Damages in the private lawsuit, expected to end later this year, were estimated in 2008 at up to $27.3 billion by a team of court-appointed experts. Texaco (now Chevron) is accused of dumping billions of gallons of toxin-laden waste water into the Amazon rainforest from 1964 to 1990, when it operated a large oil concession in the area covering a 2,000 square mile area.
Indigenous groups complain their cultures have been decimated, while the Ecuador court report found high cancer rates related to oil contamination have caused roughly 1,400 excess deaths.
Chevron was challenging an order by U.S. federal district court judge Leonard B. Sand that denied its attempt to obligate Ecuador's government to take part in a binding arbitration over the liability from the private lawsuit based on a provision in a 1965 contract signed by Texaco and Gulf to operate a large oil concession in Ecuador's rainforest. Last October, a unanimous three-judge panel for the U.S. Court of Appeals for the Second Circuit found Chevron's argument was "without merit" and denied its appeal, prompting the petition to the Supreme Court.
The narrow legal issue involved whether Ecuador's government could be subject to an arbitration provision under a contract that it never signed, and whose only signatories were two American oil companies. The implications of any arbitration between Chevron and Ecuador's government would have been highly significant given the amount of damages, however.
"From the beginning, the attempt by Chevron to tie up the nation's highest court on a relatively obscure legal issue was more of a delay tactic than anything," said Andrew Woods, an American legal advisor to the Amazonian communities who brought the underlying legal case.
The private lawsuit originally was filed in U.S. federal court in New York in 1993 against Texaco (now Chevron) and is currently on trial in Ecuador at Chevron's request. To transfer the case to Ecuador in 2002, the oil company filed 14 sworn affidavits praising Ecuador's courts and agreed to submit to jurisdiction and be bound by any ruling there.
Once evidence in the Ecuador trial pointed to Chevron's culpability, the oil company began to claim Ecuador's courts were biased against it and tried to shift the liability to Ecuador's government. It also launched a public relations and lobbying campaign in Washington to try to convince the U.S. government to pressure Ecuador's government to quash the case, a strategy that up to this point has backfired.
Among Chevron's recent setbacks:
- Four Democratic Senators (Wyden, Leahy, Casey, Jr., and Durbin), in a letter sent June 25 to the office of the United States Trade Representative, accused the oil giant of meddling in the private lawsuit by lobbying to cancel trade preferences for Ecuador – a move that could cost Ecuador 350,000 jobs.
- Two Chevron lawyers are under criminal indictment in Ecuador, along with seven former Ecuadorian government officials, for lying about the results of a purported remediation in the mid-1990s. One of those lawyers, Ricardo Reis Veiga, had been supervising the case for Chevron but is now unable to travel to Ecuador.
- New York Attorney General Andrew Cuomo has opened a probe of the company to determine if it is misleading shareholders about its financial risk in Ecuador.
- More than $37 billion in Chevron shares (about 28% of all shares outstanding) voted in May to support resolutions criticizing the company's human rights record in Ecuador, Myanmar and elsewhere.
If Chevron had won the right to arbitrate, it would have argued that a provision in the 1965 operating contract required Ecuador to indemnify it for all or part of the losses associated with the environmental lawsuit. A second issue – whether Ecuador breached a 1995 release given to Chevron – will now be litigated before Judge Sand in the coming months.
Ecuador was represented by C. MacNeil Mitchel (NY) and Eric W. Bloom (DC) at Winston & Strawn in Washington, D.C. Chevron was represented by Paul Clement of King & Spalding in Washington, D.C., and Thomas F. Cullen and Louis K. Fisher of Jones Day in Washington, D.C.