Monday, 13 February 2012

Chevron & Ecuadorian government seek to use arbitration to settle Amazon damages case.

Oil extraction began in Ecuador in 1878, with a number of foreign companies operating in the country ever since. Texas-based oil giant Texaco operated in the country from 1964 till 1992, during which time the company maintains that it complied with Ecuadorian environmental regulations scrupulously; when the company pulled out of Ecuador it invested US$40 million in a remediation program in the country, and signed an agreement with the Ecuadorean government releasing it from further liability claims by the Ecuadorean State.

In 1993 lawyers acting on behalf of Ecuadorean environmental activists launched the first of a four legal actions against Texaco, and later Chevron (who acquired Texaco in 2001, and became liable for the companies debts) in a US court. All of these actions were opposed and subsequently dismissed on the basis that the US was not the correct jurisdiction.

In 2003 lawyers in Ecuador began a court case on behalf of 30 000 residents of the Amazon region, who claim their livelihoods and health have been damaged by oil pollution. Chevron does not deny that there is pollution in the region, but claims that it is the responsibility of Petroecuador, who have been the sole operators in the region since Texaco pulled out.

A waste pool at the Shushufindi 38 well at Orellana in Ecuador in 2010. This site was opened by Texaco in the 1970s, but the company insists that any pollution at the site occurred after it pulled out of the country in 1992. AFP.

In February 2011 the Ecuadorean court ruled that Chevron should pay US$8.6 billion in compensation to the people of the region, to finance a cleanup operation and develop a local healthcare system. Chevron immediately appealed this decision, as well as seeking an injunction against any payments being demanded in the International Court in The Hague, and filing a law suit against the Ecuadorian legal firm involved in a New York court, accusing them of racketeering.

In January this year (2012) the Ecuadorian Appeal Court upheld the original court's decision, with the additional stipulation that the damages would be doubled if Chevron refused to apologize and adding a 10% fine, for a total of US$18.2 billion; a third of Ecuador's annual Gross Domestic Product, or 8% of Chevron's stock market value. Chevron responded by accusing the Ecuadorean judiciary of corruption and politicization, provoking counter-claims by Ecuadorian environmental groups that Chevron has tried to bribe and intimidate Ecuadorian officials, and vows by Ecuadorean lawyers to seek to seize the assets of Chevron in other countries (Chevron has none in Ecuador).

Protestors against Chevron in Ecuador. Link TV.

Chevron have now taken the case back to the US (the country they argued did not have jurisdiction), where they have sort arbitration under the terms of the US-Ecuador Bilateral Investment Agreement. Such arbitration processes have been used in the past to look at the nationalization of US assets in other countries, but not in a case such as this, something the US consumer group Public Citizen has described as 'an effort to expand jurisdiction', and that Ecuadorian groups have raised concern might lead to the Ecuadorian Government being ordered to interfere with the country's judicial system.

The arbitration process will apparently be made up of a three-man panel, an American law expert chosen by Chevron, a British academic from Oxford, chosen by the Ecuadorean Government, and a British lawyer to be chosen jointly. The Ecuadorean environmental groups will not be represented, and it is unclear how they will act to any verdict.

1 comment:

  1. The use of an arbitrator to settle a dispute. News and analysis on international arbitration between foreign investors and their host governments. Thanks for sharing information.

    International Commercial Arbitration

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