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Dow Jones Newswires – Ecuador Asks US Court To Pause Chevron Arbitration Bid

Date: Feb 10, 2010

NEW YORK (Dow Jones)–Ecuador asked a U.S. court to pause international arbitration of a dispute with Chevron Corp. (CVX) while the judge considers the country’s request for a permanent halt to the proceedings.

In a petition for preliminary injunction filed late Tuesday with the U.S. District Court for the Southern District of New York, Ecuador’s government said that allowing the international arbitration proceedings to continue would impose an undue burden on the country’s finances.

“It simply makes no sense to force the Republic to expend its public resources to engage in a multi-year, multi-billion dollar arbitration,” the filing said.

The arbitration is tied to a lawsuit taking place in Ecuador in which inhabitants of the country’s Amazon region seek to make Chevron pay $27 billion for environmental damages allegedly caused by Texaco Inc.

San Ramon, Calif.-based Chevron inherited the lawsuit when it acquired Texaco in 2001, and denies the allegations.

In September, Chevron requested arbitration under international law, arguing that the Ecuadorean government should be held responsible for any environmental damage and pay any penalties. Chevron says the Ecuadorean government is interfering in the environmental lawsuit, and is violating an agreement releasing the company from environmental claims.

The Ecuadorean government denies any interference and says the release agreement didn’t cover lawsuits filed by third-parties. In December, Ecuador filed a lawsuit at a U.S. District Court in New York asking it to stop the arbitration, saying that it violated a promise made in 1999 by Texaco to the court to accept the ruling of the Ecuadorean courts in the case. Chevron maintains it is not a party to that lawsuit and that in the final ruling there’s no stipulation from the U.S. court that it must comply with the decision of an Ecuadorean court.

A Chevron spokesman said that Ecuador “wouldn’t need to spend anything defending an arbitration if it had lived up to its contractual obligations.”