Chevron in Ecuador

The archive of the Clean Up Ecuador campaign website

Chevron Ecuador Risk Analysis Report

An Analysis of the Financial and Operational Risks to Chevron Corporation from Aguinda v. ChevronTexaco

An independent report commissioned by Amazon Watch & Rainforest Action Network
May 2011

By Simon Billenness, Strategy for Corporate Responsibility and Social Investment
and Sanford Lewis, Strategic Counsel on Corporate Accountability

Drawing on the unusually rich and revealing publicly available legal filings in this case, this report examines the potential damage and disruption to Chevron's operations from enforcement of the $18 billion Ecuador court judgment that was delivered on February 14, 2011. This report also assesses the risk that Chevron's aggressive counter-litigation and public relations campaign against the Ecuadorian plaintiffs' will backfire and prove to be a long-term barrier to the company's obtaining the legal right and social license to explore and operate in new regions.

Chevron has chosen to downplay the risk associated with the Ecuador litigation in its public filings and statements to shareholders. The company has made one-sided public statements of about the legal particulars of the case that could be misleading to some investors without additional clarification. These choices may lead investors to question the accuracy of the company's public assessments of the financial and operational risk it faces.

Key Findings:

  • Chevron is facing a number of financial and operational risks with regard to litigation in Ecuador in Aguinda v. ChevronTexaco concerning the company's liability for alleged widespread contamination of soil and water.
  • At present, Chevron is facing an $18 billion judgment that remains under appeal in the Ecuadorian courts. This is a historically high judgment that is comparable in size only to BP's promised $20 billion fund to compensate victims of the 2010 Gulf of Mexico oil spill.
  • Chevron's principal legal defense to immediate enforcement of the recent $18 billion judgment from an Ecuadorian court was to obtain a preliminary injunction from U.S. District Court. Over the long term, it is not clear that such an injunction in U.S. court would protect Chevron from enforcement efforts outside the United States. The injunction is also subject to appeal.
  • Chevron has also sought to defend itself though international arbitration against the government of Ecuador under the provisions of the Bilateral Investment Treaty (BIT) between the U.S. and Ecuador. At present, these arbitral proceedings are running concurrently with the Aguinda case in Ecuador. Although Chevron could conceivably obtain money damages from the Ecuadorian government from this process, the arbitral panel has no jurisdiction over the Aguinda plaintiffs or the Ecuadorian court system.
  • While Chevron has admitted in sworn legal statements that the company is at risk of "irreparable injury to [its] business reputation and business relationships" from potential enforcement of the Ecuadorian court judgment, the company has failed to characterize these risks to the company in its public filings and statements to shareholders.
  • These choices may lead some investors to question the adequacy of the company's public statements and disclosures and whether the board and management are fulfilling their fiduciary duties to properly manage this significant risk to the company's business and value.