Chevron notches key win in Ecuador pollution fight

2/11/2011 COMMENTS (0)

SAN FRANCISCO, Feb 11 (Reuters Legal) - International arbitrators ordered Ecuador to suspend enforcement of any judgment against Chevron Corp in a marathon environmental case against the U.S. oil company, according to an order posted on Chevron's website.

The "interim measures" order, dated Feb. 9, came a day after a federal judge in the Southern District of New York issued a temporary restraining order against the Ecuadorean plaintiffs, barring them from seeking enforcement of any ruling against the company in litigation currently pending in Ecuador. Chevron had argued that a memo titled Invictus, which it attributed to plaintiffs' law firm Patton Boggs, showed that the Ecuadoreans planned to disrupt the company's business around the world in an effort to collect any money awarded them by a judge in Ecuador.

The arbitration tribunal, formed under a bilateral U.S.-Ecuador investment treaty, ordered the South American country 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" against Chevron in the case, pending further order by the international tribunal.

The move to the arbitration tribunal in The Hague, made in September 2009 shortly after the appointment of Chevron General Counsel Hewitt Pate, was a key part of the company's containment strategy for litigation seeking billions of dollars in damages.

Chevron expects to lose the case being heard in the Ecuadorean jungle town of Lago Agrio, where a ruling is anticipated in the weeks or months ahead.

The Ecuadoreans, represented by U.S. lawyers, began their litigation against Texaco in 1993 in a Manhattan court. The case moved to Ecuador nearly a decade later, by which time Chevron had acquired Texaco.

BILLIONS IN DAMAGES SOUGHT

The plaintiffs accused Texaco, which left the country in 1992, of dumping oil-drilling waste in unlined pits, polluting the forest and causing illness and death among local people. They sought up to $27 billion in damages, which rose to as much as $113 billion after further input from plaintiffs' experts.

While Texaco lawyers had long pushed for moving the case to Ecuador, Chevron later argued that the judicial process had been corrupted. The company filed its arbitration claim under the Rules of the United Nations Commission on International Trade Law (UNCITRAL), citing unfair judicial treatment. This month it filed a civil racketeering lawsuit against the plaintiffs, accusing them and their U.S. supporters of extortion.

The RICO complaint hinges on evidence of what Chevron calls collusion between the plaintiffs and an expert appointed by the Ecuador court to assess damages in the case. Much of the evidence in the RICO filing, which ran more than 200 pages, was gathered from raw footage of the 2009 documentary "Crude" that a U.S. Court of Appeals for the 2nd Circuit found last year could be used as evidence. Other evidence emerged after a U.S. court forced Steven Donziger, who until recently was the plaintiffs' lead lawyer, to reveal a trove of plaintiffs' documents.

There are more than 15 court proceedings in different locations.

Karen Hinton, a U.S.-based plaintiffs spokeswoman, said the tribunal's "11th hour" ruling, by asking a sovereign nation to interfere with an ongoing trial, was "inappropriate."

"We have confidence that the voluminous, scientific evidence before the court in Chevron's preferred forum of Ecuador will lead to a final judgment that will command international respect and will finally provide a remedy to the thousands of indigenous people and farmers who have suffered for decades because of contamination created by Chevron," Hinton added in an emailed statement.

Donziger believes the tribunal may not have the final word on enforcement of any Ecuadorean judgment.

"There is no basis to conclude that an arbitral order in favor of Chevron would have a preclusive effect on the enforcement of any adverse judgment in another country," he wrote recently in the Human Rights Brief, a student publication at the college of law at the American University, Washington.

The tribunal had three arbitrators, including one 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 V.V. Veeder.

The U.S.-Ecuador treaty giving them their authority was signed on Aug. 27, 1993 -- just over two months before the date of the plaintiffs' first case against Texaco in New York.

The arbitration is In the Matter of an Arbitration Between Chevron Corp et al and the Republic of Ecuador, PCA Case No. 2009-23.

For Chevron: Doak Bishop, Ed Kehoe, Wade Coriell, Caline Mouawad and Isabel Fernandez of King & Spaulding.

For the Republic of Ecuador: Ricardo Ugarte, MacNeil Mitchell, Eric Bloom, Tomas Leonard and Bruno Leurent of Winston & Strawn.

The racketeering case is Chevron Corp v. Steven Donziger et al, U.S. District Court for the Southern District of New York, No. 11-cv-0691.

For Chevron: Randy Mastro, Scott Edelman, Andrea Neuman and William Thomson of Gibson, Dunn & Crutcher.

For Donziger: Gerald Lefcourt.

For the Ecuadorian plaintiffs: Sheldon Elsen of Orans, Elsen, Lupert & Brown.