arbitration
Tuesday, March 30th 2010
SAN RAMON, Calif. – Mar. 30, 2010 – An international arbitration tribunal has ruled in favor of Chevron in a claim against Ecuador related to past oil operations by Chevron’s subsidiary, Texaco Petroleum Company. The tribunal, administered by the Permanent Court of Arbitration in The Hague, found that Ecuador’s courts violated international law through their delays in ruling on certain commercial disputes between Texaco Petroleum Company and the Ecuadorian government.
Today’s ruling is distinct from arbitral claims Chevron and Texaco Petroleum filed against Ecuador in 2009 in connection with the Lago Agrio litigation.
In its decision, the tribunal found that Ecuador had violated the United States-Ecuador Bilateral Investment Treaty by failing to provide effective means of asserting claims and enforcing rights. As a result, the tribunal awarded Chevron and Texaco Petroleum Company approximately US$700 million in principal damages and interest as of December 22, 2006, pending further proceedings to determine applicable taxes, compound interest, and costs.
“This ruling demonstrates that the government of Ecuador is not above the law,” said Hewitt Pate, Chevron vice president and general counsel. “We have maintained for some time that Ecuador’s courts are failing to administer justice when it comes to Chevron and its affiliates, and an international tribunal has now agreed. We hope this ruling will help move Ecuador towards proper treatment of foreign investors and respect for the rule of law.”
The arbitral award partially resolves seven commercial claims that Texaco Petroleum Company, now a Chevron subsidiary, filed in Ecuador between 1991 and 1993. Ecuadorian courts continually delayed and refused to rule on Texaco Petroleum’s cases, which has been found to constitute a breach of Ecuador’s treaty with the United States.
Chevron and Texaco Petroleum Company filed the arbitration in December 2006 under the Rules of the United Nations Commission on International Trade Law (UNCITRAL). The Permanent Court of Arbitration is an intergovernmental organization with over one hundred member countries established by international convention in 1899 to facilitate arbitration and other forms of dispute resolution. The United States acceded to the Court’s founding convention in 1900 and Ecuador acceded in 1907.
The tribunal is not alone in highlighting the Ecuadorian courts’ failure to provide justice to foreign investors. In February 2009, the United States Department of State released its Investment Climate Statement for Ecuador, which stated, “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.” The report went on to state, “corruption is a serious problem in Ecuador,” and that, “the courts are often susceptible to outside pressure and bribes.”
Ecuador is defending the second largest arbitration docket in the world with more than 11 claims seeking more than US$6.5 billion in damages. Ecuador has withdrawn from the World Bank’s arbitration program, making it the second country ever to do so, and has indicated its intention to cancel scores of bilateral investment treaties that provide for international arbitration of investment disputes. The country has also fallen out of favor with international financial markets since defaulting on more than $3 billion of foreign debt after a government-appointed panel declared the debt to be “illegitimate.”
Chevron is one of the world’s leading integrated energy companies, with subsidiaries that conduct business worldwide. The company’s success is driven by the ingenuity and commitment of its employees and their application of the most innovative technologies in the world. Chevron is involved in virtually every facet of the energy industry. The company explores for, produces and transports crude oil and natural gas; refines, markets and distributes transportation fuels and other energy products; manufactures and sells petrochemical products; generates power and produces geothermal energy; provides energy efficiency solutions; and develops the energy resources of the future, including biofuels. Chevron is based in San Ramon, Calif. More information about Chevron is available at www.chevron.com.
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Thursday, March 11th 2010
On Thursday, a U.S. judge granted Chevron’s motion to dismiss the government of Ecuador’s attempt to block the company’s international arbitration claim from proceeding. In his decision, Judge Sand declined to stay international arbitration in a dispute between Ecuador’s government and Chevron. Stating in his ruling that, “a stay of arbitration is inappropriate.”
Chevron is pleased that the Bilateral Investment Treaty arbitration can proceed. Chevron is seeking to hold Ecuador and its government owned oil company, Petroecuador, to the promise they made to complete the environmental cleanup of the Amazon.
Texaco Petroleum did its share of the cleanup as promised, and Petroecuador now needs to own up to its promises and address the environmental problems wrongly being blamed on Chevron.
Only the international arbitration panel can bring Ecuador to the table and compel Petroecuador to do the right thing and clean up its oil fields. With today’s decision, we are one step closer to making that a reality.
Wednesday, January 20th 2010
In 1993 Ecuador and United States inked a bilateral investment treaty (BIT) designed to encourage private sector development in Ecuador and to protect U.S. investment in the country.
But the government of Ecuador has long sought to evade its BIT obligations. In fact, Ecuador clearly broke this treaty when the country pursued a bad-faith, coordinated strategy with the Lago Agrio plaintiffs to use them as “stalking horses” in an attempt to avoid its own remediation responsibilities and contractual obligations, and instead to impose public environmental liabilities on Chevron only a few years after having settled and released Chevron from such liabilities. Chevron was therefore compelled to file an international arbitration claim against Ecuador under the BIT.
This filing likely came as no surprise to Ecuador. In fact, the government of Ecuador is notorious for unilaterally breaking contracts and evading its obligations. It was not until 2001 that the country of Ecuador was sued for the first time by a foreign company. However, since 2008, the year after President Rafael Correa took office, a large number of foreign companies began to file lawsuits. Currently, Ecuador is 2nd in the world in terms of pending international arbitration claims against the country; so much so that the cumulative sum of the 11 pending lawsuits would now equal nearly one-half of the country’s annual budget.
Desperate to avoid arbitration, Ecuador petitioned to have a U.S. court halt Chevron’s BIT claim. In doing so, Ecuador is seeking to delay arbitration and avoid ever having to own up to its treaty obligations. Further, it has become clear that Ecuador is aware that the country’s repudiation of its contractual obligations — combined with its denial of due process to foreign investors litigating in its courts — will not stand up to international scrutiny. Given the volume of international arbitration currently pending against the government of Ecuador, its action was unsurprising and suggests that the government must recognize that it will lose if this case proceeds before a legitimate and impartial forum.
There is no basis in fact or law for Ecuador to get a federal judge to stay arbitration that Ecuador agreed to by treaty with the United States. For that reason, on Jan 19th, Chevron filed a motion to dismiss the government of Ecuador’s opposition to international arbitration. More importantly, Chevron’s arbitration claim should proceed and the government of Ecuador should abide by its treaty and contractual obligations.
Saturday, December 5th 2009
“By commencing the arbitration, it is Chevron that is trying to escape its commitments,” – Eric Bloom, attorney representing the Government of Ecuador
On the contrary, the Republic of Ecuador’s complaint against Chevron in the Southern District of New York is frivolous in much the same way as the lawsuit against Chevron in Ecuador. Both are based on the made-up idea that Chevron agreed in 2001 to submit itself to the jurisdiction of Ecuador’s courts. But Chevron, which was in no way involved in the proceedings in 2001, never consented to anything, and Texaco certainly never agreed to submit to jurisdiction in Ecuador to face fabricated claims, biased courts, and corrupt proceedings being dictated against it by Ecuador’s government. That is precisely why Chevron initiated its BIT arbitration. The arguments made by the Republic in its New York lawsuit ignore these basic truths and are not grounds for enjoining arbitration anyway. Given the extensive docket of international arbitration claims challenging Ecuador’s repeated disregard for its legal obligations and the rights of investors in its country, it is not surprising that Ecuador would seek to evade another reckoning by an honest, international panel.
