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Tribunal Finds Ecuador in Breach of Legal Obligations in Chevron Dispute

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Tribunal Finds Ecuador in Breach of Legal Obligations in Chevron Dispute

An arbitration panel in The Hague said Ecuador should have prevented plaintiffs in a $19 billion award against Chevron Corp. from taking their battle to other countries, and needs to justify why its government shouldn't be held responsible for the costs.

In 2012, an Ecuadorian court ruled Chevron was responsible for environmental damages in that country's Amazon region, a decision the oil company is contesting. The international tribunal, which is studying the issue of whether the ruling constitutes a violation of a bilateral investment treaty between the U.S. and Ecuador, had asked the country to keep the plaintiffs from suing Chevron in foreign courts while the appeal was pending. But the plaintiffs filed lawsuits against Chevron assets in Canada, Argentina and other countries--a move the tribunal decided was a breach of Ecuador's obligations and of its previous rulings. Now the tribunal is asking the country's government why it shouldn't be held responsible for the harm done by the lawsuits filed by the plaintiffs outside Ecuador.

The decision, issued Thursday, comes a few days after an Argentine court of appeals upheld an embargo, requested by the Ecuadorian plaintiffs, on Chevron assets in that country. It underscores the high stakes of a multidecade legal battle emmeshing one of the world's largest oil companies, a national government and Amazonian plaintiffs.

The ruling is a boost to Chevron's theory that if it loses the lengthy legal tussle with Amazonian plaintiffs, the Ecuadorian government should end up paying the costs. The company has said the ruling is fraudulent, and accused the Ecuadorian government of exerting pressure in favor of the plaintiffs in local courts.

"From the Chevron viewpoint, this makes sure that, at the end of the day, if they're on the hook, Ecuador is on the hook with them," said Ted Folkman, a litigator with Murphy & King who has followed the case.

Ecuador argues the international tribunal's order violates its constitution, because local courts are independent. A representative of the Ecuadorian government wasn't immediately available to comment. The Ecuadorian plaintiffs view the tribunal's decision as "unenforcebale."

"It arrogantly orders Ecuador's government to violate its own Constitution and quash a private civil litigation that resulted in the judgment against Chevron," said Karen Hinton, spokeswoman for the Ecuadorian communities.

Chevron said the tribunal's decision "confirms that the enforcement actions being pursued against Chevron in Argentina, Brazil, and Canada fly in the face of international law," said Hewitt Pate, Chevron vice president and general counsel. "It is not too late for the Republic to reverse course, declare the Lago Agrio judgment illegitimate, and address the real challenges facing its citizens."

The case stems from a decades-old dispute over environmental contamination in Ecuador allegedly produced by Texaco Inc., a company Chevron bought in 2001. Chevron denies the accusations and says it is the victim of fraud, while the plaintiffs say it is the oil company that committed fraud.

Copyright (c) 2012 Dow Jones & Company, Inc.

WHAT DO YOU THINK?

Post a Comment Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
Tom Smith | Mar. 9, 2013
This is all about money, nothing to do with actually cleaning up the environmental damage. The work performed to remediate the old reserve pits left behind by Texaco was inadequate. The technology exists to clean up these pits which is the real problem that should be addressed. These types of pits are all over Latin America and unfortunately few if any oil companies want to spend the funds to properly clean them up. The end result for Chevron/Texaco is this huge legal mess that could have been prevented if they used the proper technology.

Alain Guevara | Feb. 11, 2013
WHO IS GOING TO CLEAN THE MESS CREATED/ LEFT THERE? PAID FOR IT! MAY BE THE LOCAL ABORIGENES? THE LOCAL PEOPLE NOW CAN BE LIVING VERY HAPPY, THEY JUST NEED GOING TO THE BED WITH CRUDE OIL SLUDGE IN THE FACES / BODY! WHERE ARE THE PEOPLE FROM GREEN PACE? SOME BODY OF INTERNATIONAL LEVEL SHOULD TAKE A GOOD LOOK ON THIS AND NOT PUT THE DIRTY DOWN THE CARPET AS IS NOTHING HAD HAPPENED.... DIOS MIO SANTO!

Jason | Feb. 11, 2013
Now, this is just sad.... People should really take responsibility for their actions!

Alan | Feb. 8, 2013
So what do we learn from this? Countries actually fighting private companies? My, my. How long did you say this has been going on? This sounds like a lawyer joke. What did Shakespeare have Henry VI say.....?


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