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.”