September 24, 2009 4:43 PM

From Lago Agrio to The Hague: Chevron Looks East for New Venue

Posted by Brian Baxter

By David Hechler, Corporate Counsel

UPDATE: Sept. 25, 8:30 a.m. The Ecuadorian government says that it will 'vigorously" defend itself in an international arbitration claim filed by Chevron.

Chevron filed an international arbitration claim Wednesday against the government of Ecuador, essentially arguing that its judicial process is broken and cannot fairly adjudicate the long-running oil pollution litigation that plaintiffs brought in the South American country against Texaco (now a Chevron subsidiary). Last year a court-appointed special master said damages in the case, which is being tried in Lago Agrio, Ecuador, could run as high as $27.3 billion.

The arbitration claim, filed in the Permanent Court of Arbitration in The Hague, cites Ecuador's violation of investment agreements, international law, and its treaty with the United States.

Earlier this month, Chevron posted on its Web site a secretly recorded video of the Ecuadorian judge hearing the pollution case. The judge appeared to acknowledge that he had already decided Chevron was guilty. (He has denied he'd prejudged the case.) A second recording allegedly showed a member of Ecuador's ruling party soliciting bribes for remediation contracts in anticipation of a favorable verdict.

Chevron's new general counsel, Hewitt Pate, released a statement that accompanied the announcement of the new claim. "Because Ecuador's judicial system is incapable of functioning independently of political influence, Chevron has no choice but to seek relief under the treaty between the United States and Ecuador."

The company's press release emphasized that Chevron is not alone in highlighting "the demise" of Ecuador's judiciary. It quoted from a recent State Department report: "Systemic weakness and susceptibility to political or economic pressures in the rule of law constitute the most important problem faced by U.S. companies investing in or trading with Ecuador."

A lawyer representing Ecuador says he's seen Chevron's tactic before. "What Chevron is doing is forum shopping," argues Eric Bloom, a partner in the Washington, D.C., office of Winston & Strawn, who has represented the country for four years. Chevron first fought (successfully) to force plaintiffs to try their lawsuit in Ecuador rather than U.S. courts. Then it sought (unsuccessfully) to win indemnification in U.S. courts from a possible judgment in Ecuador. And now it's filed for arbitration. "They've got buyer's remorse," Bloom says, and they're essentially asking for a "do over."

"These are all different mechanisms for avoiding a multibillion judgment," Bloom adds. He notes that any judgment is "still prospective because the court in Ecuador certainly has not ruled."

Bloom expects that the arbitration will be "a multiyear process" and doesn't believe it will have any effect on the trial in Ecuador.

The new claim comes as no big surprise to officials in Ecuador. The country's solicitor general, Diego García, said in a prepared statement: "Chevron has signaled for years its intention to file the instant arbitration, although only after an adverse judgment had issued and the appellate process completed.

"The environmental case should be resolved by the courts," Garcia added, "not in an arbitration in which the private parties are not even represented."

This story originally appeared on the Web site of sister publication Corporate Counsel.

Related Stories:

Chevron Accuses Ecuadorian Judge of Soliciting Bribes in Mammoth Tort Case

Former Chevron GC Speaks Out On Ecuadorian Recordings

Turning the Tables: Chevron Takes the PR Offensive in Ecuador Case

Plaintiff's Lawyer in Chevron Environmental Lawsuit Speaks Out

Chevron's Slugfest in Ecuador Showing No Signs of Slowing in the Late Rounds

New Chevron GC Has Attention of Law Firm Leaders

Men Behind Alleged Ecuador Bribery Videos Lawyer Up

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