By Jeb Blount
RIO DE JANEIRO, Aug 28 (Reuters) - An injunction banning No.
2 U.S. oil company Chevron Corp and its drilling contractor
Transocean Ltd from operating in Brazil was upheld by a panel of
three Brazilian federal judges on Tuesday while charges over a
November oil spill are being considered.
The judges voted 3-0 to reject arguments by Chevron,
Transocean and Brazilian oil regulator ANP that the ANP not the
courts has the statutory right to decide who operates in
Brazil's oil industry.
Normally the ANP's statutory power would prevail over the
courts, the judges said, but the ANP's failures as a regulator
contributed to the 3,600-barrel November spill. Prosecutors
argue the ban is needed to guarantee up to $20 billion in
damages being sought in the courts.
As a result, the ban, published Aug. 1 by another federal
judge, was a reasonable judicial remedy to prevent new accidents
while the courts consider the merits of civil and criminal
charges against Chevron, Transocean and 17 of their employees.
Citing an ANP report on the spill saying Chevron had "an
insufficient culture of safety," judge Ricardo Perlingeiro of
Brazil's 2nd Regional Federal Tribunal said from the bench that
the ANP "contributed to the accident by failing to do its job as
a regulator."
"It's clear that the accidents are the result of drilling
activities under the management of the concessionaire Chevron
and the rig operator Transocean," he said rejecting the appeal.
"The technical incapacity of the petitioners in carrying out the
damage control plan and in controlling oil spills is clear."
The judges also rejected arguments that the courts cannot
ban operations in Brazil as a whole but only in the Frade field.
Expected to take effect in less than a month, the Brazil ban
could cost Chevron and Transocean hundreds of millions of
dollars in lost business.
It will also disrupt the operations of companies such as
Petrobras, Brazil's state-led oil giant, which leases Transocean
rigs to explore one of the world's most promising oil frontiers.
Transocean, the world's largest offshore rig operator, has 10
rigs operating in Brazil, seven leased to Petrobras, according
to the company's latest fleet report.
While the decision will have little immediate effect on
Chevron, which shut its only field in Brazil in March after new
oil was found leaking in the area, the ANP will not decide on
its application to restart operations until the ban is lifted,
ANP officials with knowledge of the case told Reuters.
The ban was requested by independent federal prosecutors who
are seeking nearly $20 billion in damages for the spill and have
charged 17 Chevron and Transocean executives with crimes that
carry jail terms of up to 31 years.
"Until the ban was granted, I really thought this case was
not going to go anywhere," said Eduardo Santos de Oliveira the
prosecutor who launched the civil and criminal cases and asked
for the ban. "We need to make sure these companies understand
that we are very serious about preventing spills."
De Oliveira spoke to Reuters in an interview on Monday.
The ANP has been informed of the decision to uphold the ban
and is considering its legal options, a press spokesman said.
Chevron and Transocean have parallel appeals of the ban
under review by judges in the federal courts. They can also
appeal Tuesday's ruling to the main Federal Appeals Court in the
capital Brasilia.
Chevron said "it was disappointed with the court's decision
and is confident that at all times it acted diligently and
appropriately."
Transocean said it will continue its legal battle against
the ban as well as against the criminal and civil suits. The
ban, which carries fines of 500 million reais ($245 million) per
day, is supposed to take effect 30 days after formal
notification of the companies.
Formal notification, which usually means publication in a
legal announcement or serving of the ruling on the parties, has
not taken place according to people with knowledge of the
Chevron and Transocean cases. That means the companies could
have nearly a month to appeal the ban before it takes effect.
Many federal court employees have been on strike this month
for higher wages, which could have delayed publication of the
notification, federal court press officials said.
Chevron and Transocean deny criminal wrongdoing and say the
proposed damages are excessive. For Chevron, the spill caused no
injury to humans, "no discernible environmental impact to marine
life or human health" and oil never reached shore.
The amount of oil leaked was less than 0.5 percent of the
giant BP Deepwater Horizon spill in the United States in 2010
and smaller than many previous spills in Brazil.
"This case is without merit and Transocean crews acted
responsibly and quickly, following the highest industry
standards. We have a very strong case and we will use every
legal means necessary to prove it," Guy Cantwell, the director
of corporate communications said in an email.
He said Transocean rigs continued to operate in Brazil.
Chevron owns 52 percent of Frade and is the operator.
Petrobras owns 30 percent and Frade Japao, a group made up of
Japan's Inpex Corp and Sojitz Corp, owns 18 percent.
Neither Petrobras, Frade Japao, Sojitz or Inpex have been
named in any of the lawsuits.
(Additional reporting by Leila Coimbra)
Follow us on Twitter @ReutersLegal | Like us on Facebook