Chevron in Ecuador

The archive of the Clean Up Ecuador campaign website

Ecuadoran Court Slaps Chevron With $8 Billion Fine

By David R. Baker, San Francisco Chronicle
14 February 2011

An Ecuadoran judge today fined Chevron Corp. $8 billion in a bitter, 18-year-old lawsuit over oil-field contamination in the Amazon rain forest.

The judgment, however, does not mark the end of the marathon court case, closely watched by environmentalists and oil executives worldwide.

Chevron, based in San Ramon, calls the lawsuit a shakedown and a sham, and the company on Monday vowed to keep fighting. In the last week, Chevron has won rulings in courts outside of Ecuador that will block, at least temporarily, the enforcement of today's judgment. The company no longer has assets in Ecuador, meaning the plaintiffs will need to seek enforcement of the judgment elsewhere.

Still, the Ecuadorans who sued Chevron - many of them poor members of the area's indigenous tribes - hailed today's decision as a historic first.

The fine was far smaller than the $27 billion to $113 billion they wanted. But they welcomed the judge's decision to hold Chevron, the world's fourth-largest international oil company, responsible for cleaning up a swath of the Amazon polluted by decades of oil production.

"We believe today's judgment affirms what the plaintiffs have contended for the past 18 years about Chevron's intentional and unlawful contamination of Ecuador's rain forest," said Pablo Fajardo, the plaintiffs' lead attorney in Ecuador. "Rather than accept that responsibility, Chevron has launched a campaign of warfare against the Ecuadoran courts and the impoverished victims of its unfortunate practices."

Chevron has argued for years that the lawsuit was tainted by fraud and political interference. Earlier this month, the company even sued the plaintiffs and their lawyers in U.S. federal court, accusing them of extortion under a law typically used to prosecute the Mafia.

The judge presiding over the extortion lawsuit agreed last week to block, temporarily, enforcement in the United States of any judgment against the company in Ecuador. And on Friday, an international arbitration court in The Hague ordered the Ecuadoran government to block enforcement within its country.

"The Ecuadoran court's judgment is illegitimate and unenforceable," read a statement that Chevron released today. "Chevron will appeal this decision in Ecuador and intends to see that justice prevails. ... Chevron does not believe that today's judgment is enforceable in any court that observes the rule of law."

Rather than continue the fight in one court after another, the plaintiffs today called on Chevron to settle. The company refused.

The roots of the complicated suit stretch back decades.

Texaco drilled for oil in the Oriente, a corner of northeastern Ecuador, from 1964 to 1992, working as a partner of state-owned Petroecuador. As part of its operations, Texaco dumped a mixture of petroleum and water into open pits near the oil wells. When Texaco pulled out of the country, it agreed to clean up a portion of the wells, while Petroecuador continued to operate the rest.

The first version of the lawsuit against Texaco was filed in 1993 in New York. Chevron bought Texaco in 2001 and argued successfully to have the case moved to Ecuador in 2003.

Chevron says that it fulfilled its clean-up obligations under the agreement with the Ecuadoran government. Any remaining pollution, according to the company, is Petroecuador's fault. The plaintiffs counter that Texaco designed the oil field's operations, making the company liable for ongoing contamination. The plaintiffs also call the clean-up a sham, consisting of little more than dumping dirt on open pits.

The suit became an international cause celebre, with luminaries such as Daryl Hannah slamming Chevron and voicing their support for the plaintiffs. Fajardo won the prestigious Goldman Environmental Prize in 2008 for his work on the case.

Environmentalists saw in the suit an opportunity to set a precedent, one that other international companies would have to notice.

"I think we're going to see shockwaves from this decision in boardrooms, among shareholders," said Kevin Koenig with Amazon Watch, a nonprofit organization that works with the plaintiffs in the Chevron suit. "Because what we're seeing is that a U.S. corporation can be held accountable for environmental crimes abroad."

But today's judgment may not unleash a flood of litigation.

Chevron has mounted an aggressive defense that has drained the plaintiffs' coffers and forced them to reshuffle their legal team.

Working through U.S. courts, the company has subpoenaed and made public a trove of private e-mails, letters and diary entries written by the plaintiffs' lawyers. The company last year also convinced a federal judge to give it access to outtakes from a 2009 documentary film about the case, a move opposed by many media companies including Hearst Corp., which owns The Chronicle.

Some of the film clips show the plaintiffs' lawyers discussing ways to pressure Ecuadoran court officials, saying the country's judges respond only to fear. Some of the letters reveal a rift among members of the legal team, with one lawyer who has since left the suit blasting his colleagues for "potentially improper and unethical, if not illegal" conduct. Those comments provided fodder for the racketeering lawsuit that Chevron filed against the plaintiffs on Feb. 1.

Chevron's tough tactics may discourage copy-cat suits, said Sean Hecht, executive director of the Environmental Law Center at UCLA.

"This is a particularly complex case for someone who might have a similar claim, in part because it's been extraordinarily difficult for the lawyers and plaintiffs," Hecht said. "It's hard to image that there are many plaintiffs and attorneys who would want to put themselves through that. And that was part of Chevron's message with its strategy."

Today's judgment in the case didn't hurt Chevron on Wall Street, where the company's stock inched upward 1.27 percent to close at $96.95 per share.

"I think right now investors are looking past it," said Brian Youngberg, senior energy analyst with investment company Edward Jones. "Ultimately, I don't think (Chevron) will end up paying anything at all. But this has gone on for 18 years, and it'll go on for a few more years, at least."