Tribunal: Chevron's Ecuador Arbitration May Proceed

Chevron Corp. announced that an international arbitration tribunal, convened under the authority of the U.S.-Ecuador Bilateral Investment Treaty (BIT) and administered by the Permanent Court of Arbitration at The Hague, ruled that it has jurisdiction to hear Chevron's claims against the Republic of Ecuador. Chevron filed its request for arbitration in 2009, claiming that the Republic violated its obligations under the BIT and international law.

Chevron's arbitration claim stems from the government of Ecuador's exploitation of the ongoing environmental lawsuit against the company in Ecuador and its courts' failure to administer justice in a trial that has been marred by fraud. Additionally, Chevron maintains that the government of Ecuador has failed to uphold prior settlement and release agreements that the government of Ecuador entered into with Texaco Petroleum Company (now a Chevron subsidiary) when the consortium between Texaco Petroleum and Petroecuador was terminated.

"With today's decision, Chevron will proceed to the merits of its arbitration to hold Ecuador responsible for the fraud being committed through its judicial system. The documentary and video evidence of that fraud is irrefutable. The dysfunction of Ecuador's judiciary is well documented in both the Lago Agrio case and the recent El Universo case involving a ghostwritten judgment against journalists," said Hewitt Pate, Chevron vice president and general counsel. "Rather than allow American plaintiffs' lawyers to cause even more damage for which Ecuador may ultimately be held responsible, the Republic should take this opportunity to pursue a more constructive course."

Chevron's claim will now proceed to the merits phase of the arbitration. In prior rulings, the tribunal has put the Republic on notice that if Chevron's arbitration ultimately prevails, "any loss arising from the enforcement of (the Lago Agrio judgment) may be losses for which the (Republic) would be responsible to (Chevron) under international law."

On Feb. 16, 2012, the tribunal issued a Second Interim Award ordering the Republic of Ecuador—and all of its branches, including the judiciary—to prevent enforcement and recognition of the $18.2 billion Lago Agrio judgment, both within and without Ecuador. The award expands upon a prior award requiring Ecuador to "take all measures at its disposal to suspend or cause to be suspended the enforcement or recognition within and without Ecuador of any judgment."

In August 2011, a different international arbitration tribunal convened under the BIT awarded Chevron and Texaco Petroleum $96 million in a claim against the Republic of Ecuador related to past oil operations. The tribunal found that Ecuador's courts violated the BIT and international law through their decade-long delays in ruling on certain commercial disputes between Texaco Petroleum and the Ecuadorian government.


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