A Dutch appellate court has rejected Ecuador’s attempt to set aside a 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 a September 2020 decision by a 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.
Background
In its unanimous 2018 award, issued pursuant to the U.S.-Ecuador Bilateral Investment Treaty, the international arbitral tribunal found that a $9.5 billion Ecuadorian judgment against Chevron was procured through egregious fraud and corruption by the plaintiffs’ legal team, including bribery of the presiding judge and ghostwriting of the judgment. It held the judgment unenforceable under international law.
The tribunal also rejected the underlying environmental allegations against Chevron. In its award, the tribunal found that a Chevron subsidiary completed an environmental remediation program supervised and approved by the Republic of Ecuador and that the Republic released the environmental claims on which the fraudulent Ecuadorian judgment was based. Any responsibility for current environmental conditions in Ecuador lies with the state-owned oil company, which continues to operate in the same area today.
In its 2020 ruling, the District Court of The Hague upheld the award in full and rejected the Republic of Ecuador’s attempt to set it aside, noting that “the fraudulent character of the Lago Agrio judgement and the proceedings preceding it is common ground between the parties.” The court 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 international 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.” The court’s ruling follows decisions from courts in Argentina, Brazil, Canada, Gibraltar, and the U.S. rejecting the fraudulent Ecuadorian judgment against Chevron. In July, 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 finally admitted in a public filing earlier this year 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.
