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Arbitration, Enforcement & Other Actions – The Amazon Post

International Arbitration Claims Against Ecuador

2009: Chevron Files Arbitration Claim Against Ecuador

Seeking to hold Ecuador accountable for its role in denying Chevron justice, the company in September 2009 filed a complaint against the Republic before the Permanent Court of Arbitration at The Hague,under the authority of the U.S.-Ecuador Bilateral Investment Treaty. After reviewing extensive evidence of fraud and corruption in the Ecuadorian proceedings, the arbitration tribunal in 2012 ordered the Ecuador to suspend enforcement of any judgment against Chevron until it resolved the denial of justice claim the company brought against the Republic. For six years, Ecuador defied the tribunal’s awards and did nothing to suspend enforcement efforts. Instead, it embarked on a global campaign against Chevron to discredit the international arbitration system.

2018: Tribunal Rules in Chevron’s Favor

In August 2018, the arbitration tribunal issued an award in favor of Chevron, finding Ecuador violated its obligations under international treaties, investment agreements and international law. The tribunal unanimously including the arbitrator appointed by Ecuador held that the 2011 Lago Agrio judgment against Chevron was procured through fraud, bribery and blackmail and based on claims settled and released by Ecuador years earlier. The tribunal concluded the fraudulent judgment “violates international public policy” and “should not be recognized or enforced by the courts of other States.” As a matter of international law, the award confirmed Chevron is not obliged to comply with the Ecuadorian judgment.

The tribunal also held that Ecuador breached its obligations under a 1995 Settlement Agreement releasing TexPet and its affiliates from public environmental claims—the same claims on which the $9.5 billion Ecuadorian judgment is exclusively based. The tribunal found “TexPet spent approximately $40 million in environmental remediation and community development under the 1995 Settlement Agreement” carried out by a “well-known engineering firm specializing in environmental remediation” and that Ecuador in 1998 executed a final release agreement “certifying that TexPet had performed all of its obligations under the 1995 Settlement Agreement.”

The tribunal found “no cogent evidence” supporting Ecuador’s claim that TexPet failed to comply with the terms of the remediation plan approved by Ecuador. To the contrary, the award recites the sworn testimony of Ecuadorian officials that TexPet’s “technical work and environmental work was done well,” while Ecuador’s national oil company “during more than three decades, had done absolutely nothing” to address its own environmental remediation obligations in the area, even though Ecuador and its national oil company received 97.3% of the oil production revenues from the project.

The award recounts in detail the testimony of numerous former members of the plaintiffs’ environmental team and scientific experts who admitted under oath that they found no evidence to support the plaintiffs’ environmental claims against Chevron and TexPet.

Any responsibility for current environmental conditions in Ecuador lies with the state-owned oil company, which continues to operate in the same area today.

2020: Dutch Court Upholds Award in Favor of Chevron

Ecuador filed a petition with the District Court in The Hague seeking to nullify the arbitration award in Chevron’s favor.On Sept. 16, 2020, the District Court of The Hague ruled in favor of Chevron to uphold the 2018 arbitral award.

The District Court of The Hague upheld the arbitral award in full and rejected Ecuador’s attempt to set it aside, noting that Ecuador and Chevron both agree that the Ecuadorian judgment against the company is fraudulent. “The fraudulent character of the Lago Agrio judgement and the proceedings preceding it is common ground between the parties,” the court said.It also found that the international tribunal acted within its remit when issuing the award, and that the award was well reasoned and complied with the applicable law and public policy.

The court concluded that the tribunal’s orders properly sought to “remove the consequences of a fraudulent judgment that was rendered by a corrupt judge.” The court held that “because none of the setting aside grounds brought forward by Ecuador succeed, the claims will be denied.”

2022: Dutch Appellate Court Rejects Ecuador’s Bid to Set Aside Chevron Arbitration Win

The Dutch appellate court rejected Ecuador’s attempt to set aside the 2018 arbitral award that held the Republic liable under international law for issuing a fraudulent, meritless $9.5 billion judgment against the company more than a decade ago. This decision reinforces the integrity of arbitral proceedings under bilateral investment treaties and ensures that Ecuador will be held to account for violations of its international commitments.

The June 28, 2022, decision by Court of Appeal of The Hague upheld the September 2020 decision by the Dutch district court, which found that the international tribunal acted within its remit in issuing the award, and that the award was properly reasoned and consistent with applicable law and public policy. 

The appellate court affirmed that Ecuador will be liable if any other country decided to enforce its corrupt Lago Agrio judgment against Chevron. “The mere statement by Ecuador that it cannot be held liable for the actions of other sovereign states is insufficient in this context,” the court said in its decision. “Ecuador ignores the fact that the underlying cause of the situation that has arisen is the fraudulent Ecuadorian judgement.” 

Ecuador has been petitioning the Dutch courts for more than a decade to set aside several Hague-seated arbitral awards favorable to Chevron. Ecuador has failed at each turn, including twice before the Dutch Supreme Court. 

Courts in Argentina, Canada, Brazil and Gibraltar Reject Fraudulent Ecuador Judgment

Courts in Argentina, Brazil, Gibraltar, and the U.S. have rejected the fraudulent Ecuadorian judgment against Chevron. In Canada, Donziger’s team voluntarily dismissed their case with prejudice following a string of adverse decisions.

Argentina

In July 2020, Argentina’s highest court unanimously rejected the plaintiffs’ bid to enforce the corrupt judgment, bringing to an end the last pending recognition proceeding against Chevron.

Even Ecuador has finally admitted in a public filing in 2020 that the $9.5 billion judgment issued by its courts against Chevron is “fraudulent.” Chevron’s arbitration against the Republic of Ecuador is now in its final stage, where the company is seeking to recover from the Republic of Ecuador costs it has incurred to expose and defend against the fraud.

Canada

In Canada, in November 2017 the Ontario Court of Appeals dismissed the attempts by Donziger’s team to enforce the fraudulent Ecuadorian judgment in Canada. This decision affirmed a January 2017 ruling of the trial court that dismissed all claims against Chevron Canada, finding that Chevron Canada is an entity separate from Chevron Corporation and that its shares and assets could not be used to satisfy a judgment against Chevron Corporation. On July 5, 2019, after the Supreme Court of Canada denied the request by Donziger’s team to appeal the decision, Donziger’s team consented to an order dismissing the recognition and enforcement action with prejudice, and awarding costs in favor of Chevron.

Brazil

Brazil’s highest court, in November 2017, unanimously rejected on jurisdictional grounds Donziger’s team’s attempts to enforce the corrupt Ecuadorian judgment. The Court found that Chevron Corporation is a foreign corporation with no assets or points of connection with Brazil and that the Ecuadorian judgment could not be enforced against Chevron’s indirect subsidiary in Brazil because the subsidiary is a separate and distinct legal entity. This followed a May 2015 opinion issued by Brazil’s MPF (Attorney General’s office) that recommended that the Ecuadorian Judgment be denied recognition in Brazil. The Attorney General’s Office concluded that “the recognition of the foreign sentence is not viable, which, as everything seems to indicate, was issued in an irregular manner, especially under deplorable acts of corruption that represent an offense against the international public order and even to good morals, in total disrespect for what is established in” Brazilian law.

Gibraltar

In 2018, the Supreme Court of Gibraltar issued a judgment against Pablo Fajardo, Luis Yanza, Ermel Chavez, Frente de Defensa de la Amazonia (the “Front”) and Servicios Fromboliere for their role in the conspiracy to procure and attempt to enforce the fraudulent Ecuadorian judgment against Chevron. The court awarded Chevron $38 million in damages and interest and issued a permanent injunction against the defendants, preventing them from assisting or supporting the case against Chevron in any way. Fajardo, Yanza and Chavez are Directors at Amazonia Recovery Ltd. (“Amazonia”), a Gibraltar-based company set up to receive and distribute funds that the co-conspirators hoped to obtain from the corrupt Ecuadorian judgment. The company was established in 2012 by Steven Donziger and his associates. The Front, which has long been involved in peddling a dishonest public relations campaign against Chevron aimed at extorting a settlement from the company, and Servicios Fromboliere, an Ecuadorian law firm established by Fajardo, are both shareholders in Amazonia and part of the extensive web of obscure entities established by the participants in the fraud against Chevron to attempt to hide their misconduct and profit from it.