Chevron’s Recent Setbacks In U.S. Courts Forced Its Hand On Arbitration Claim, Lawyers Say
Latest Move to Avoid $27 Billion Environmental Liability Contains Risks for Oil Giant
Amazon Defense Coalition
24 September 2009 - FOR IMMEDIATE RELEASE
Contact: Karen Hinton at +1.703.798.3109
New York (September 24, 2009) -- Chevron’s filing of an arbitration claim against Ecuador’s government over a potential $27.3 billion environmental liability in Ecuador can best be explained by an embarrassing string of legal defeats the company has suffered in U.S. and Ecuadorian courts on several of the same issues the company will bring before the arbitration panel, lawyers for the Amazonian communities said today.
“Filing an arbitration claim smacks of forum shopping and is one of Chevron’s last cards to avoid paying for a half-century of environmental contamination in Ecuador’s Amazon,” said Steven Donziger, an American lawyer who advises the plaintiffs. The plaintiffs include dozens of indigenous and farmer communities in the Amazon rainforest who charge Texaco (now Chevron) discharged billions of gallons of toxic waste onto their lands and waterways.
“Over the last three years every public court that has looked at this case – from the lowest trial court in Ecuador to the United States Supreme Court -- has rejected some or all of Chevron’s fundamental claims,” said Donziger. “There is no reason to think the arbitration panel will conclude differently.”
Donziger emphasized the filing of the claim – under a trade pact between Ecuador and the U.S. – will have no impact on the underlying case or on the chances of recovery by the plaintiffs. If the plaintiffs win a judgment against Chevron in Ecuador’s courts, they plan to move “expeditiously” to seize Chevron’s assets in the U.S. and other countries given that Chevron has publicly announced it will never pay, he said.
Whether Chevron succeeds in getting a judgment against Ecuador’s government for the environmental liability in Ecuador will have no impact on the strategy to seize the company’s assets, said Donziger. The environmental case is a private litigation between the indigenous groups and Chevron, while the arbitration case is between Chevron and Ecuador’s government, he added.
“Chevron operates in more than 100 countries and has numerous oil tankers that troll the world’s waterways and dock in any number of ports,” Donziger said. “This could end up being one of the biggest forced asset seizures in history and it could have a significant disruptive impact on the company’s operations.
“This is not something we would delight in doing,” he added. “But it appears seizing Chevron’s assets is the only way to uphold the rule of law. Chevron obviously believes it is bigger than the laws of the country where it wanted the trial to be held. It is also clear that the indigenous people in the Amazon who are suffering from cancers and other oil-related diseases are not a factor in the company’s analysis.”
Chevron faces a number of legal obstacles in bringing the arbitration claim, said Donziger. First, the company fought for ten years in U.S. federal court to have the environmental case (which was filed in 1993) moved to Ecuador, praising the country’s courts in 14 sworn affidavits by legal experts. After winning that argument over the objections of the plaintiffs, Chevron then tried to discredit Ecuador’s courts when the evidence began to demonstrate 100% of the company’s 378 former production sites are extensively contaminated – a finding recently confirmed by a review of the evidence by a court-appointed Special Master.
In one of the more surprising findings in Ecuador, the Special Master found that Chevron’s own evidence corroborated claims by the plaintiffs that the sites were contaminated. “Chevron helped us prove our case, which is hugely embarrassing for Chevron’s legal team and helps explain the company’s strategy to focus on the politics of Ecuador rather than on the evidence at trial,” said Donziger.
Donziger also pointed to Chevron’s recent legal setbacks in the U.S. to help explain the company’s timing in filing the arbitration claim:
- The U.S. Supreme Court in June of this year rejected a Chevron petition designed to reverse a lower court ruling that Chevron did not have a right to arbitrate against Ecuador’s government over the environmental liability, based on a 1965 operating contract that allowed Texaco (now Chevron) to drill for oil in the Amazon.
- In June 2007, a highly regarded U.S. federal judge – Leonard B. Sand – handed Chevron a stunning rebuke when he ruled that Chevron knew or should have known that Ecuador was not bound by an arbitration provision in Chevron’s operating agreement (this is distinct from the recent arbitration claim, which is made under a bilateral treaty entered into by Ecuador).
- In October 2008, a three-judge panel from a U.S. federal court rejected Chevron’s appeal of the Sand decision in a unanimous summary order – probably the most embarrassing type of decision one can receive in U.S. federal court. Such a decision demonstrates the judges thought Chevron’s concerns were not important enough to warrant even a full written decision.
- In December 2008, Chevron suffered another defeat when the full panel of the U.S. Court of Appeals denied its motion for an en banc hearing to review the unanimous summary order.
- In July of this year, Chevron dealt itself another setback when it voluntarily withdrew a claim before Judge Sand that its controversial legal release from Ecuador’s government – secured by fraud, according to the plaintiffs – absolved of it all clean-up responsibility. Chevron apparently was worried it would lose on that issue and thereby prejudice its ability to bring up the release argument in the arbitration action filed yesterday, said Donziger.
Donziger also said Chevron’s arbitration claim suffers from a number of defects. These include the fact the company has not exhausted domestic remedies in Ecuador (a requirement in the treaty), given that the case is not over; the fact Chevron’s own executives and lawyers could be subject to sworn depositions over recently released videos that the plaintiffs believe likely were contrived by Chevron to taint the trial; and, the fact that Chevron, by claiming its domestic remedies in Ecuador are exhausted, is accelerating the time frame for a final judgment in Ecuador.
In addition, one of the main arguments Chevron will use in the arbitration – that it was released by Ecuador after a remediation in the mid-1990s – is “a total non-starter” given there is express language in that release excluding private claims of the type being pressed in the lawsuit, said Donziger.
“One of the interesting wrinkles is that Chevron’s own legal team could be exposing itself to personal liability if it is found that it played a role in the purported bribery scheme in Ecuador to create evidence for the arbitration proceeding,” said Donziger. “That’s just one scenario where this could blow up for Chevron. Everybody from the CEO on down could be forced to answer questions about whether Chevron manipulated the video and was trying to destabilize a foreign nation’s judicial system to evade a judgment in a private litigation.”
“More to the point,” added in Donziger, “if the court in Ecuador rules against Chevron on the environmental case, we think Chevron’s latest move to file the arbitration claim enhances our prospects of getting that trial judgment satisfied sooner rather than later.”