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Hague Court Won’t Nix Chevron Awards In Fight With Ecuador – Law360

Date: Jan 25, 2016

The District Court of The Hague has ruled in favor of Chevron Corp. in a challenge to international arbitration awards it secured against Ecuador in a long-running dispute over alleged drilling pollution in the Amazon rain forest, according to documents released on Friday.

Ecuador was attempting to nullify several awards issued by a Permanent Court of Arbitration tribunal favoring Chevron, but the court panel roundly rejected arguments that the tribunal had lacked the authority to hear Chevron’s claims and that its awards violated public policy, according to the Jan. 20 ruling.

“None of the grounds for the setting aside of the arbitral awards put forward by Ecuador hit their mark,” the panel wrote.

According to the judgment, the PCA tribunal had properly found it had jurisdiction under the authority of the U.S.-Ecuador Bilateral Investment Treaty and that several interim awards it had granted were warranted in light of “serious indications” that a $17.2 billion judgment against Chevron by an Ecuadorean court — which was later reduced to $9.5 billion — had been tainted by fraud.

Chevron lauded the decision in a Friday statement.

“Today’s decision reinforces the integrity of the arbitral proceedings and ensures that Ecuador will be held accountable for violations of its international commitments,” the oil company said. “We look forward to the tribunal’s final award on the merits, which should hold Ecuador responsible for the multiple frauds committed against Chevron throughout the Lago Agrio case.”

The first interim awards ordered by the PCA tribunal required Ecuador to take all measures to suspend the enforcement or recognition of the award and rejected Ecuador’s arguments that the tribunal lacked jurisdiction over the dispute. In a fourth award issued in February 2013, the tribunal concluded that Ecuador had violated the previous awards by attempting to enforce the judgment in Canada, Brazil and Argentina.

Ecuador claimed that the arbitrators had wrongly intervened in their judicial process and hadn’t backed their awards with facts, violating the country’s sovereignty. But the tribunal concluded that Ecuador had bound itself to the terms of the bilateral investment treaty, including the provisions concerning arbitration.

So too did the tribunal reject Ecuador’s claim that the tribunal had deprived Ecuadorean citizens of the fundamental right to live in a nonpolluted environment, in light of the “special circumstances” of the case.

The “interim measures taken by the tribunal cannot be explained otherwise than by the fact that at the time those measures were taken, the tribunal apparently had serious indications that the judgment rendered at first instance in the Lago Agrio proceedings, which is the basis for (the suspended) enforcement by the Lago Agrio claimants, came into being fraudulently — including on the side of the Lago Agrio claimants — and under political pressure,” according to the opinion.

An attorney representing Ecuador did not immediately respond to a request for comment on Saturday.

Texaco Petroleum Co. allegedly dumped crude oil into the region over the course of a decadeslong oil drilling operation, causing residents to develop cancer and destroying natural resources. Chevron acquired Texaco’s liability when it purchased the company in 2001, and the Court of Lago Agrio subsequently slapped the company with an unprecedented $17.2 billion judgment.

Ecuador’s high court in 2013 upheld the judgment against Chevron but slashed the damages to $9.5 billion.

D.R. Glass, D. Aarts and J.W. Boekwinkel sat on the panel for the District Court of the Hague.

Chevron is represented by G.J. Meijer.

Ecuador is represented by G.W. van der Bend.

The case is Republic of Ecuador v. Chevron Corp. USA et al., case number C/09/477457 / HA ZA 14-1291, in the District Court of the Hague.

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