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Ecuador Refuses to Comply with International Arbitral Award on Human Rights Concerns

Date: Apr 10, 2012

State fails to comply with international arbitral award alleging human rights concerns

The Republic of Ecuador has refused to enforce an interim arbitral award issued by an international arbitral tribunal. The tribunal had directed Ecuador to halt an ongoing judicial proceeding between a group of Ecuadorian citizens and a multinational corporation until it rules on the merits of the dispute. The court ruled that it would not abide by the arbitral award because the interim award conflicted with human rights treaties of which Ecuador is a signatory. Facts In 2003 a group of Ecuadorian citizens from the Amazonian region of the country filed a lawsuit against Texaco Petroleum Company, a US oil multinational which merged with Chevron Corp in 2001. The plaintiffs alleged in their complaint that Texaco had caused environmental damage during the years when the US company and Petroecuador, the Ecuadorian state oil company, operated fields in the province of Sucumbíos. The plaintiffs sought to recover approximately US$29 billion in damages. The plaintiffs filed their complaint with the Sucumbíos Provincial Court after they had tried unsuccessfully for almost a decade to have their case heard by the New York courts.(1) One of the defences raised by Chevron before the Ecuadorian court was that Petroecuador was bound to appear as co-defendant in the proceeding by virtue of two agreements that it had signed in 1995 and 1998. In those agreements, Petroecuador had released the US company of any environmental liability once the foreign investor had conducted extensive remediation operations in the fields. The proceedings in Ecuador have been marred with controversy. The defendant argued that Petroecuador had colluded with the plaintiffs in order to evade its legal responsibilities and to obtain a financial windfall from Chevron. According to Chevron, the Ecuadorian courts did not guarantee it due process. Furthermore, the defendant claimed that the plaintiffs, experts and judges had committed acts of corruption. The plaintiffs and the Ecuadorian authorities denied any wrongdoing.

In September 2009 Chevron submitted a request for an international investment arbitration under the terms of the US-Ecuador Bilateral Investment Treaty.(2) Chevron argued that Ecuador breached its obligations under the treaty, including the fair and equitable clause.

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