International Arbitration: Chevron Files in the Hague in Ecuador Environmental Case (Web)

Chevron, the second-largest U.S. oil company, filed a petition with the Permanent Court of Arbitration in Hague, Netherlands, on Wednesday in an effort to force Ecuador to pay part of an estimated $27 billion in environmental damages in the Amazon rainforest, allegedly caused by Chevron operations’ activities..

The Sept. 23 petition against Ecuador cites violations of the country's obligations under the United States- Ecuador Bilateral Investment Treaty, investment agreements, and international law, according to a Chevron press release.

According to Chevron's petition, the treaty has a provision that allows a party to settle a dispute by binding arbitration in accordance with the United Nations Commission on International Trade Law’s arbitration rules.

A suit alleged that from 1964 to 1990, Chevron contaminated the Amazon rainforest when it operated a consortium which included Ecuador's state-owned oil company, Petroecuador. According to the Associated Press, a court-appointed expert estimated the potential damages for cleanup and illnesses at $27 billion.

A group of Ecuadorean indigenous people initially sued Texaco, which is now owned by Chevron, in a New York federal district court in 1993. The suit alleged the company polluted the rainforest and rivers, causing environmental damage and personal injuries as a result of its business. Chevron then requested that the case be resolved in an Ecuadorian court, and it was refilled in Lago Agrio, Ecuador.

Now Chevron does not feel it can get a fair trial in Ecuador due to political pressure on the judiciary. See “Amazon Crude,” 60 Miinutes (May 3, 2009)(available here).

Earlier this month, Chevron released video which it believes reveals a bribery scheme between the executive and judiciary branches in Ecuador. According to Bloomberg News, the video shows a presidential adviser trying to influence Judge Juan Nunez's opinion, and Nunez indicating that he'd already decided to rule against Chevron.  Nunez had recused himself from the case last month, but Bloomberg reported yesterday that he had been reinstated.

Chevron's filing “should not come as a surprise,” said Hewitt Pate, Chevron's vice president and general counsel in the company’s press release. “The overt conduct of Ecuador's government and judicial branch disregards Ecuadorian law, international obligations, and Chevron's basic right to a fair hearing, Ecuador's actions violate Texaco Petroleum's agreements with Ecuador as well as the Bilateral Investment Treaty's guarantee of fair and equitable treatment for U.S. investors.”

According to the petition, Chevron is seeking, among other things, “a declaration that Ecuador or Petroecuador is exclusively liable for any judgment that may be issued in the Lago Agrio Litigation.”  Additionally, Chevron is seeking “an award of moral damages to compensate [Chevron] for the non-pecuniary harm that they have suffered due to Ecuador's outrageous and illegal conduct.”

The Sept. 23 petition will mark the third time Chevron has tried to force Ecuador into binding arbitration over the 1993 suit. The U.S. Supreme Court rejected Chevron's appeal to force Ecuador into arbitration.

Ecuador's prosecutor general, Diego Garcia responded that “the environmental case should be resolved by the courts between the parties, not in an arbitration in which the private parties are not even represented,”

Chrevon requested a panel of three arbitrators which would be chosen by the Uncitral Arbitration Rules. As its party-appointed arbitrator, Chervon chose Dr. Horacio A. Grigera Naon, the director of the Center on International Commercial Arbitration at American University’s Washington College of Law in Washington, D.C..

Here is an additional source:

Wall Street Journal::  Ecuador:To Defend 'Vigorously' From Chevron Arbitration Claim.

--Erika Myrill, CPR Intern