A judge overstepped his authority when he tried to ban enforcement around the world of an $18 billion judgment against Chevron Inc. for environmental damage in Ecuador, a federal appeals court said Thursday.
The three-judge panel of the 2nd U.S. Circuit Court of Appeals explained why it lifted the ban last year and blocked a judge from staging a trial to decide if the judgment was obtained fairly.
It said the judge has authority to block collection if Ecuadorean plaintiffs move against Chevron in New York, but law does not give him authority "to dictate to the entire world which judgments are entitled to respect and which countries' courts are to be treated as international pariahs."
The judgment came last February after nearly two decades of litigation that stemmed from the poisoning of land in the Ecuadorean rainforest while the oil company Texaco was operating an oil consortium from 1972 to 1990 in the Amazon. Texaco became a wholly owned subsidiary of Chevron in 2001.
Chevron obtained an order from U.S. District Judge Lewis A. Kaplan in March blocking Ecuadorean plaintiffs from trying to collect the $18 billion until he could stage a trial to determine whether the judgment was fraudulently obtained.
The Ecuadorean plaintiffs appealed Kaplan's ruling to the 2nd Circuit. The appeals court heard oral arguments and then issued an order in September lifting Kaplan's block on collection efforts. On Thursday, it went a step further, tossing out the portion of Chevron's challenge to the judgment that sought to block its enforcement anywhere in the world.
"It is a particularly weighty matter for a court in one country to declare that another country's legal system is so corrupt or unfair that its judgments are entitled to no respect from the courts of other nations," the 2nd Circuit wrote. "In such an instance, the court risks disrespecting the legal system not only of the country in which the judgment was issued, but also of other countries, who are inherently assumed insufficiently trustworthy to recognize what is asserted to be the extreme incapacity of the legal system from which the judgment emanates."
It added that the court issuing such a ban "sets itself up as the definitive international arbiter of the fairness and integrity of the world's legal systems."
The appeals court said Kaplan had not addressed the legal rules that would "govern enforceability of an Ecuadorean judgment under the laws of France, Russia, Brazil, Singapore, Saudi Arabia or any of the scores of countries, with widely varying legal systems, in which the plaintiffs might undertake to enforce their judgment."
In a statement, Chevron said the appeals court decision was "a narrow procedural ruling" that would not affect the ultimate outcome of the case.
"Chevron believes this corrupt judgment will be unenforceable in any country that adheres to the rule of law and we will continue to defend Chevron's interests against any attempts to enforce the fraudulent judgment," it said.
Karen Hinton, a U.S. spokesperson for the Ecuadoreans, said the decision set right "a grave injustice against the Ecuadoreans."
"Once Ecuadorean law allows enforcement of the judgment, it will become even more evident that the only fraud committed in Ecuador in the context of this historic environmental litigation was Chevron's," she said.