Chevron in Ecuador

The archive of the Clean Up Ecuador campaign website

US Court's Decision in Ecuador Case Could See Chevron Assets Seized: Analyst

21 September 2011

New York, NY – A recent decision by a US appeals court in the years-long dispute between Chevron and indigenous groups in Ecuador's Amazon region opens the possibility that Chevron assets could be seized elsewhere if the company does not make a settlement, Oppenheimer analyst Fadel Gheit said Tuesday.

Chevron CEO "John Watson is not a happy camper today," he said. "It's definitely not good news" for Chevron, Gheit added, though he also noted that "the market does not seem to take it very seriously."

The US Court of Appeals for the 2nd Circuit on Monday vacated a previous ruling by US District Judge Lewis Kaplan that would have effectively prohibited the enforcement of any award that plaintiffs might eventually win in jurisdictions outside Ecuador.

The underlying court case in Ecuador has the plaintiffs arguing that Texaco, which Chevron acquired in 2001, left behind a massive sprawl of oil pollution that sickened residents in the Lago Agrio area. Chevron has said that it has remediated for the pollution and it also has argued that a lawyer for the plaintiffs pressured members of the Ecuador judicial system to make a ruling favorable to the plaintiffs.

Ecuador's highest court has not yet made a final ruling in the case. A lower court decision has awarded $18.2 billion to the plaintiffs.

Chevron went to court in the US early in 2011 to dispute the legality of the Ecuador case. The Court of Appeals ruling arose from that suit.

Gheit said that the most-recent ruling in the US court could see Venezuela, for instance, allowing a lien on Chevron's assets.

"Venezuela is very anti-American," Gheit noted, adding that a seizure of Chevron's assets "will be Chavez's day in the sun," referring to Venezuela President Hugo Chavez.

The justices with the US Court of Appeals, Rosemary Pooler, Richard Wesley, and Gerard Lynch, did not present an opinion with their ruling issued late Monday, saying one would follow in "due course."

Jim Tyrrell, a lawyer with Paton Boggs, which represents the plaintiffs, said in a statement that the judges' decision "represents a triumph of the rule of law over the sensationalism created by Chevron's PR department."

In a statement, Chevron said there "is no legitimate evidence supporting any finding of liability against Chevron because Texaco Petroleum Company cleaned up its share of environmental impacts in Ecuador and the remaining impacts are the responsibility of the government of Ecuador and its state-owned oil company, Petroecuador."

A spokesman for Chevron was unavailable to comment on whether the company fears that its assets in other jurisdictions might be vulnerable to seizure.

Venezuela's state-owned oil company PDVSA in 2007 expropriated ConocoPhillips' stakes in two Orinoco projects after the US company rejected PDVSA's bid for greater ownership. ExxonMobil also had its Orinoco stake nationalized after rejecting PDVSA's bid.

In response, ExxonMobil secured court orders in February 2008 to freeze more than $36 billion of Venezuelan assets around the world. ConocoPhillips has asked the International Centre for Settlement of Investment Disputes to require Venezuela to pay compensation for its Orinoco heavy oil assets. In April, the company said a settlement was likely "several years" away.

Chevron stock closed down 92 cents or 0.93% at $97.79/share at 4:00 p.m. EDT (2000 GMT) Tuesday on the New York Stock Exchange.