Chevron in Ecuador

The archive of the Clean Up Ecuador campaign website

Chevron Refusing to Contest Ecuador Appellate Court Decision Upholding $18 Billion In Damages

Court Confirms Oil Giant Must Post Bond to Suspend Enforcement Actions

Amazon Defense Coalition

Amazon Defense Coalition
Contact: Karen Hinton at +1.703.798.3109

Quito, Ecuador – In a stark departure from its normal litigation practices, Chevron has refused to request that the Ecuador appellate court that recently affirmed the $18 billion judgment against the oil major reconsider or clarify its decision.

Chevron last week let a deadline pass that allowed either party to contest or clarify the decision, which was issued on January 3. The appellate court on Friday reaffirmed its original decision in response to ten separate clarification requests submitted by lawyers for the rainforest communities. A translated copy of the clarification ruling is here. A translated copy of the original ruling is here.

Normally in Ecuador, the losing party in an appeal seeks clarification of an appellate court decision unless it decides it is withdrawing from the litigation or simply accepting the result. Asking for clarification in Ecuador is roughly similar to filing a motion for reconsideration in the United States.

It is unclear why Chevron did not contest or seek clarification of the appellate court decision, but its failure to do so could be seen as a disadvantage as the case moves forward both in Ecuador and potentially in other jurisdictions where the rainforest communities might seek enforcement, said Pablo Fajardo, the lawyer for the Ecuadorian communities who brought the lawsuit.

Chevron, which requested that the trial take place in Ecuador, stripped its assets from the country and has announced it will not pay the judgment.

"By not contesting the appellate court decision, Chevron is essentially conceding that it has no problem with the court's reasoning or logic," said Fajardo.

"Chevron also is effectively abandoning its argument that it exhausted all legal remedies in the courts of Ecuador before it tries to block any possible enforcement actions," he added.

Chevron normally "litigates to the hilt" in Ecuador while simultaneously attacking Ecuador's courts as unfair, a charge vigorously rejected by the plaintiffs based on expert testimony, said Karen Hinton, the U.S. spokesperson for the Ecuadorians.

"Failing to take advantage of every right afforded it by procedural law is a real departure from the Chevron's normal litigation practice in courts around the world," said Hinton. "It might reflect a new strategy, or it might reflect simple confusion as the company's legal options narrow."

The trial court decision, issued in February 2011, found that Chevron deliberately dumped billions of gallons of toxic waste into the Amazon, poisoning waterways that local inhabitants use for drinking water and causing a spike in cancer rates. See here and here. Damages were set at roughly $18 billion.

Chevron operated in Ecuador from 1964 to 1992 under the Texaco brand.

The trial court in Ecuador also repeatedly sanctioned Chevron's legal team for filing frivolous motions and threatening a judge if he did not rule in favor of the company, leading to a punitive award that constitutes roughly half of the total damages.

In response to the request by the plaintiffs for clarification, the three-judge appellate panel in Ecuador issued a second opinion on January 13 that rejected several Chevron arguments but also made clear that the company could stop enforcement of the judgment if it posts a bond during the pendency of any appeal to the nation's highest court.

That court, called the National Court of Justice, is similar to the Supreme Court in the U.S. and is located in the capital of Quito.

Chevron must decide by Friday of this week if it will file a notice of appeal to the higher court, which has the discretion to accept or reject it much like the Supreme Court in the U.S., said Hinton.

The request for the appeal must be made to the intermediate appellate court that affirmed the trial court decision, which then has the discretion to set a bond before sending the case to the National Court of Justice for consideration. Chevron must request the bond as a way to suspend enforcement of the judgment pending further appeal, said Hinton.

A bond is customarily set by the intermediate appellate court at approximately 8% of the amount of the judgment, or in this case approximately $1.6 billion. Chevron reported annual revenues in 2011 of close to $240 billion, with profits expected to be roughly $30 billion based on its latest quarterly earnings report.

The Ecuador appellate court also made the following points in its second ruling on Jan. 13:

  • Chevron has 15 business days (tolled from Monday of this week) to eliminate a punitive damages component of the award by issuing a public apology, considered a key component of accountability under international human rights law. Such an apology could effectively cut the $18 billion award in half.
  • The appellate court provided detailed guidance as to the nature and scope of the apology that Chevron would need to make. Among other things, the court said Chevron must admit that it used unacceptable waste disposal practices in Ecuador that caused harm to the rainforest and its inhabitants. It also must publish its apology in newspapers in Ecuador and the U.S.
  • The appellate court reiterated that its judgment represents the "final and definitive step" under the Ecuadorian legal system to settle the dispute of the parties. An appeal to National Court of Justice is considered "extraordinary" under Ecuador law and will not block a potential enforcement action unless a bond is posted. The bond in Ecuador is designed to compensate the winning party for any further delays in collecting its judgment – similar to a running interest rate, which is often used by courts in other countries during the pendency of any appeal. If Chevron were to prevail at the National Court of Justice, the bond monies would be returned to the company.
  • The appellate panel also said it "rejects… definitively and as unfounded, [Chevron's] affirmation … that the judgment has been based on information foreign to the record, or with secret assistance."
  • The appellate also found that the trial court ruling was "firmly rooted" in the voluminous 220,000-page evidentiary record, which included thousands of chemical sampling results from both Chevron and the plaintiffs that proved extensive contamination at hundreds of former Chevron oil production sites.

In its original judgment affirming the trial court decision, members of the panel were clearly outraged at Chevron's abuse of the judicial process in Ecuador. The court found that many of Chevron's legal filings were "abusive" and "clearly designed to obstruct the administration of justice."

Inhabitants from dozens of rainforest communities filed the class action case in 1993 in U.S. federal court. Chevron had the trial shifted to Ecuador after heaping praise on that country's judicial system. See pages 4-6 of this document.

Once the evidence in the subsequent trial started to point to Chevron's guilt, the company shifted gears and tried repeatedly to attack the courts it had previously praised. In the meantime, several courts have sanctioned Chevron's lead outside firm in the U.S., Gibson Dunn & Crutcher, for engaging in ethical violations on behalf of Chevron's campaign to evade the Ecuador judgment.