Panel reinforces Ecuador award halt in Chevron case

Reuters News
Posted: Feb 17, 2012 2:33 PM
Panel reinforces Ecuador award halt in Chevron case

By Braden Reddall

(Reuters) - An arbitration panel reinforced an order that Ecuador's government seek to suspend an $18 billion court award against U.S. oil company Chevron Corp over pollution in the South American country's rainforest.

A year after its original order, the three-person panel, working under The Hague's Permanent Court of Arbitration, told the Republic of Ecuador on Thursday to "take all measures necessary" through its judicial, legislative or executive branches to suspend enforcement of the award at home and abroad.

It is the latest sign that the landmark litigation, which has run almost two decades, could go on for years longer as it works its way through legal channels outside the country where the pollution occurred.

Chevron has also appealed last February's ruling against it to Ecuador's top court. The California company inherited the case with its 2001 takeover of Texaco, which left Ecuador nine years earlier after three decades in the country.

The arbitrators, who previously ordered Ecuador to take measures to suspend the damages without specifying how, are weighing whether they should decide if Ecuador violated a U.S.-Ecuador treaty by failing to ensure Chevron had a fair trial.

But the plaintiffs awarded the $18 billion a year ago say they could try to collect in countries where Chevron has assets, and believe the panel's ruling will not affect those plans.

Pablo Fajardo, lead lawyer for the local communities in that case, argued in a statement on Friday that the panel's ruling violated provisions of Ecuador's constitution prohibiting interference in its courts, as well as treaties obligating the government to protect citizens' rights to seek legal redress.

"The United States would never abide by such a ruling," said Karen Hinton, Washington D.C.-based spokeswoman for the Ecuadorean plaintiffs. "Nor will Ecuador or any other country that has a system based on due process of law."


The plaintiffs accused Texaco of dumping oil-drilling waste in unlined pits, causing illnesses among local people. They began the case in 1993 in New York, before it was moved to a court in the Amazonian town of Lago Agrio nearly a decade later.

Anticipating defeat in Lago Agrio, Chevron filed to set up the arbitration tribunal in September 2009, and the company's general counsel, Hewitt Pate, said on Friday it would seek opportunities with Ecuador to resolve the arbitration.

"Chevron welcomes the constructive steps that Ecuador has recently taken, such as the announcement that Petroecuador will remediate sites impacted by oil production and the acknowledgement that the tribunal's award applies to all (government) branches," Pate said in a statement.

Working under rules set by the United Nations Commission on International Trade Law, the panel includes an arbitrator named by Chevron, Horacio Grigera Naon of the American University law college, and one by Ecuador, Oxford Professor Vaughan Lowe. Naon and Lowe agreed on a third, London-based lawyer V.V. Veeder.

While the treaty giving them authority was signed on August 27, 1993, just months before the first Texaco case, Ecuador argued it does not apply since it only took effect in 1997.

The panel must now decide whether it has jurisdiction in the case. Arbitration could then take years, if the last Chevron dispute with Ecuador is a guide. It took four years for that panel to rule Ecuador must pay Chevron $96 million in connection with claims made in its courts in the 1990s.

Chevron has also filed a civil racketeering lawsuit in New York accusing the plaintiffs and their U.S. supporters of extortion. That court initially froze the $18 billion award, in a decision which was later overturned on appeal.

But on Thursday, the judge in the racketeering case lifted a stay on the proceedings and ordered the two sides to meet to discuss how to move ahead, before filing a report by March 7.

(Reporting by Braden Reddall in San Francisco, editing by Dave Zimmerman)