Chevron in Ecuador

The archive of the Clean Up Ecuador campaign website

Chevron's Arbitrator Suffers from Acute Ethical Problems, Ecuadorians Assert

Grigera Noan's "Business Relationship" With Chevron Lawyer Raises Questions

Amazon Defense Coalition

Amazon Defense Coalition
23 February 2012 - FOR IMMEDIATE RELEASE
Contact: Karen Hinton at +1.703.798.3109

New York, NY – Horacio Grigera Noan, Chevron's arbitrator in a secret investor proceeding related to an $18 billion environmental judgment in Ecuador, has what amounts to a "business relationship" with the oil giant's lead American lawyer and therefore should be disqualified and sanctioned under the ethical rules governing international arbitrators, said representatives of the rainforest communities in a letter to Ecuador's Attorney General.

"We are informing the parties that Grigera Noan has acute ethical issues related to his close ties to Chevron's counsel and his obvious bias against the government of Ecuador, and that he therefore should be disqualified as an arbitrator," said Karen Hinton, the U.S. spokesperson for the 30,000 Ecuadorians who recently won an $18 billion judgment against the oil giant over an environmental catastrophe in the Amazon.

"We have evidence that in numerous arbitral proceedings Grigera Noan has twisted and stretched international law to rule against Ecuador and its citizens, including this latest effort by Chevron to avoid its environmental liability," Hinton said.

A review of the limited public records in the opaque and tightly controlled investor arbitration world – whose 40 or so members are overwhelmingly white males and who call themselves the "club" – shows that Grigera Noan has what amounts to a functional business relationship with R. Doak Bishop, Chevron's lead outside lawyer in the Ecuador arbitration and a partner in the Houston office of the American law firm King & Spalding.

Chevron stripped its assets from Ecuador and is now trying to use the secret investor arbitration to try to block enforcement of the Ecuador judgment. The three arbitrators, all private sector lawyers, have been harshly criticized by international law jurists for acting outside the scope of their authority, for violating international law protecting human rights and the sovereignty of independent judicial systems, and for not disclosing their conflicts of interest. See here, here and here.

The letter from Fajardo to Ecuador's Attorney General, Diego Garcia Carrion, asserted the following:

  • Bishop, who manages a lucrative arbitration practice at King & Spalding, ensures that many of his corporate clients appoint Grigera Noan as their "arbitrator" over investment disputes against foreign governments. Grigera Noan then invariably rules in favor of Bishop's clients, even if it means taking extreme positions that have little or no basis in international law.
  • Grigera Noan has been appointed by clients of Bishop to sit on at least five arbitration panels where the government of Ecuador was the defendant – including one that began after the Chevron arbitration over the environmental judgment. In each of these cases he has ruled against Ecuador, even as the other two arbitrators in two instances ruled in favor of the country.
  •  In all, Grigera Noan has been appointed to sit on 12 different arbitration panels as the represenative of King & Spalding and other firms' corporate clients. A review has found only one instance in which Grigera Noan ruled against the corporate investor – in a case where the investor dared to try to run the case on the cheap by hiring a law firm from Milwaukee instead of one of the high-priced Washington or London based elite firms who run in "the Club."
  • In two cases, Grigera Noan sent shock waves through the international legal community by taking what is considered extremist and legally indefensible positions in favor of King & Spalding clients who sued the government of Ecuador. In one of the cases, brought by the Canadian energy firm Encana, Grigera Noan ruled that private international arbitrators can interfere whenever they want in domestic court cases – a radical reinterpretation of international law. "This decision is akin to an American judge voting to re-segregate public schools," said Hinton.
  • In a second case, Grigera Noan ruled in a dissenting opinion that the American oil company City Oriente had a legal right to continue operating an oil concession in Ecuador even after the government expelled it for violating its operating contract – an unprecedented intrusion on the sovereignty of the country that has no basis in international law, said Fajardo.
  • The appointments as arbitrator for the King & Spalding clients ensure a steady flow of millions of dollars of fees for Grigera Noan. Arbitrators are really private lawyers who bill at top rates that can average $800 per hour. The arrangement creates enormous economic incentives for arbitrators to take an expansive view of their own power and to grant jurisdiction where no basis exists. (Grigera Noan and his colleagues have refused to disclose how much they have earned in the Chevron arbitration or details about their contacts with King & Spalding lawyers, despite demands from civil society organizations.) See here.
  • While Grigera Noan earns a significant income as an arbitrator – Hinton said the Chevron case could result in payments of $5 million if the panel takes three or four years to rule – he holds himself out to the public as a modestly-paid professor at the Washington College of Law in Washington, D.C. The school, which ironically has a strong reputation for its commitment to human rights law, gave Grigera Noan a special appointment where he maintains a light teaching load while spending most of his time billing for arbitration cases filed by King & Spalding.

In his letter to the Attorney General, Fajardo said there was sufficient evidence in the Chevron case "to doubt the impartiality" of the panel. "The panel has shown an absolute disrespect for the principles of sovereignty and for internationally recognized human rights protections," he wrote.

Fajardo asked that Ecuador's government move to disqualify Grigera Noan and each member of the panel on the grounds of the conflict. It is unclear why Winston & Strawn, Ecuador's American law firm, apparently never moved to disqualify Grigera Noan given his evident bias against their client.

Fajardo said that Grigera Noan and his colleagues have violated the ethical rules governing international arbitrations, which are promulgated by the International Bar Association and are available here, see 3.1, 3.3, 3.5, 4.5.

Those rules prohibit the appearance of bias – which occurs when an arbitrator "favors one of the parties" or where a "dependence arises from relationships between an arbitrator and one of the parties, or someone closely connected to one of the parties" – in this case, Grigera Noan's relationship to Bishop and the King & Spalding law firm, said Hinton.

Just last week, several distinguished international law jurists sent a letter to the United Nations asking for a review of Chevron's "egregious misuse" of the U.S.-Ecuador Bilateral Investment Treaty to launch the arbitration against Ecuador. The jurists concluded that Chevron's attempt to undermine the case "stands in direct violation of international law" and threatens to "quash" the fundamental human rights of the 30,000 citizens who initially brought suit against the oil giant in the United States in 1993. See here.

In ruling against Chevron, the Ecuador court found that the company deliberately dumped billions of gallons of toxic waste into Amazon waterways that local inhabitants relied on for drinking water, decimating indigenous groups and causing an outbreak of cancer, spontaneous miscarriages, and other oil-related diseases. See here and here. Chevron operated in Ecuador under the Texaco brand from 1964 to 1992.

Lawyers for the Ecuadorians assert that Ecuador's government is obligated to ignore its orders given its own binding legal obligations under the Ecuador Constitution and various international treaties protecting the human rights of its citizens. Some commentators have likened the secret arbitration panel to a "kangaroo court" imbued with a pro-business culture. See this article and this lawsuit filed before a noted human rights court.

"This is obviously a situation where the lawyers for Chevron and at least one of the arbitrators are scratching each other's backs behind closed doors," said Hinton. "Their goal is to earn fees by blocking the claims of thousands of rainforest residents who are dying of cancer and other diseases because of Chevron's contamination.

"It is clear that Doak Bishop has become the sugar daddy of Grigera Noan in what has become a closed system of private justice for King & Spalding clients," said Hinton. "This is an outrageous abuse of power and violation of the ethical rules."

For a background document explaining the many legal problems with the Chevron arbitration, including its role as a secret court used by corporations to avoid their legal responsibilities, see here.