Here are the most recent factual developments in the interminable litigation between Chevron and thousands of Ecuadoreans who have obtained an $18 billion dollar judgment against the oil company for allegedly despoiling the Lago Agrio region of the Ecuadorean rainforest. A bilateral investment treaty panel, after a round of hearings earlier this month, issued a ruling on Thursday. The Republic of Ecuador must "take all measures necessary to suspend or cause to be suspended the enforcement and recognition within and without Ecuador" of the $18 billion judgment and appellate affirmation of it, the ruling said. The arbitration panel gave no weight to the Republic's argument that the executive branch may not interfere with the Ecuadorean judiciary under the country's constitution; indeed, the arbitrators said their ruling applied to Ecuador's "judicial, legislative or executive branches." They also ordered the Republic not to certify the $18 billion judgment, which would permit the Ecuadorean plaintiffs to act to enforce it internationally.
Also on Thursday, U.S. District Judge Lewis Kaplan of Manhattan federal court lifted a stay on Chevron's racketeering suit against the Ecuadorean plaintiffs and many of their lawyers and experts. Kaplan, who most recently denied Chevron's motion for a pretrial attachment order that would effectively preclude the Ecuadoreans from collecting on their judgment but said Chevron could revisit the issue, called for a joint status report on developments in Ecuador, including the enforceability of the judgment and additional appellate proceedings.
Now for the spin. A Chevron spokesman said that, particularly in combination, the two developments put the oil company "back on offense." The arbitration panel's ruling, he said, "establishes an expectation of specific actions on the part of the Republic of Ecuador... The order makes it unlikely that the Lago Agrio plaintiffs' lawyers will be able to pursue enforcement of the fraudulent judgment for the time being." And the resumption of the New York racketeering suit, he said, will permit Chevron to air "the overwhelming evidence of fraud that's been collected over the past few years... We believe the RICO case will demonstrate that the plaintiffs' lawyers' case has been meritless from the outset."
The Ecuadoreans, meanwhile, asserted that neither the arbitration panel ruling nor Kaplan's ruling is a problem. I'll spare you most of the rhetoric about Chevron's own fraud and underhanded conduct in its 18-year attempt to evade justice, but the plaintiffs' spokesperson said the RICO suit before Kaplan faces strong dismissal motions. And even in the unlikely event that Chevron someday manages to obtain a judgment, she said, that won't affect the Ecuadoreans' enforcement of their own judgment against Chevron elsewhere in the world.
The arbitration panel's ruling would present a more immediate problem for the Ecuadoreans -- if they considered the panel and its instructions legitimate. They do not, according to spokesperson Karen Hinton, who said in an email statement that the ruling "violates international law and will have little or no impact on any potential enforcement action against the oil giant in countries around the world."
Indeed, the Ecuadorean plaintiffs believe the Republic should -- nay, must -- disregard the arbitration panel's bar on certifying and enforcing their $18 billion judgment because compliance would violate Ecuador's constitution. There is a long history of sovereign nations refusing to comply with directives from international tribunals, the Ecuadoreans said. Argentina, for instance, has ignored at least seven judgments against it by international arbitrators, all in cases stemming from its financial crisis. Ecuador has also previously declined to follow arbitration panel orders in unrelated cases. Even the United States has refused to comply with directives by international tribunals. In 2005, for instance, the International Court of Justice ordered the United States to intervene in Texas's enforcement of the death penalty against a Mexican defendant who was allegedly not permitted access to consular officials, in violation of the Vienna Convention. The defendant was nevertheless executed.
Lori Wallach of Public Citizen's Global Trade Watch told me that Ecuador should not comply with the panel's most recent order. (Wallach went to law school with Steven Donziger, the architect of the Ecuadorean plaintiffs' case, but is not a paid consultant for the plaintiffs.) Wallach agreed that countries regularly ignore orders from private arbitrators, whom she derided as "three private lawyers in a hotel room." She said that the directive from the Chevron panel, however, is "the most outlandish one I've seen." It's unprecedented for a panel to order an injunction that calls for an executive to interfere with a domestic court system, she said. "It would be as if one of these panels ordered Obama to act contrary to the Supreme Court," said Wallach, who has been tracking international arbitration since 1994. "Ecuador shouldn't follow it." (Public Citizen put out a press release Friday asserting that the Chevron panel's "obscene" award "could lead to the implosion of the entire investor-state system, which international companies are increasingly using to try to evade justice worldwide.")
Chevron counsel Randy Mastro of Gibson, Dunn & Crutcher said suggestions that the Republic should ignore the arbitrators' instruction are absurd. "Any country ignoring the ruling of an arbitration panel would be doing so at its peril," he said. Chevron's underlying claim in this arbitration, he pointed out, is for a judgment that under an old agreement with Chevron predecessor Texaco, the Republic of Ecuador is responsible for bearing all the costs associated with cleanup of the Lago Agrio region -- including Chevron's liability to the Ecuadorean plaintiffs. With that part of the arbitration pending, the Republic would be risking an adverse result if it flouted the panel's interim order.
"Typically, nations with treaty obligations honor those obligations or face the consequences," Mastro said.
I left a message for the Republic's lawyer in the arbitration, Eric Bloom of Winston & Strawn, but didn't hear back.
(Reporting by Alison Frankel)
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