A recent article in El Comercio, a major Ecuadorian newspaper, exposes a telling increase in the number of lawsuits filed against the country of Ecuador. These lawsuits are being put forward by foreign companies that have invested millions in the South American nation.
It was not until 2001 that the country of Ecuador was sued for the first time by a foreign company. By 2008, the year after President Rafael Correa took office, a large number of foreign companies began to file lawsuits. Currently, Ecuador is 2nd in the world in terms of pending international arbitration claims against the country; so much so that the cumulative sum of the 11 pending lawsuits would now equal nearly one-half of the country’s budget of approximately $21 billion.
It’s no coincidence that the election of Ecuadorian president Rafael Correa coincides with the skyrocketing number of lawsuits being filed. Many of these lawsuits concern breach of contract and denial of justice. Mr. Correa has made no secret of his indignation towards foreign companies with operations in Ecuador. Consequently, he announced on May 30 that his country would be denouncing the International Center for Settlement of Investment Disputes (ICSID), calling the World Bank’s arbitration facility an “atrocity”. Moreover, he has defaulted on debt, seized companies’ assets and attacked businesses with antagonistic rhetoric and draconian regulations. He has even gone as far as tightening government control over dissident media outlets.
Further, in an attempt to divert blame for pollution created by Petroecuador, Mr. Correa has on a number of occasions vocally taken the side of the U.S. trial lawyers suing Chevron for $27 billion in environmental damages.
The hostile business environment detailed above, Ecuador’s inequitable and politically prejudiced judicial system and the serious judicial misconduct and political influence caught on tape has made it impossible for Chevron to receive a fair trial in Ecuador. For this reason, Chevron is the latest to file an international arbitration claim against the government of Ecuador citing violations of the country’s obligations under the United States-Ecuador Bilateral Investment Treaty, investment agreements, and international law.