It was on the same day that “Mad Men” announced that it would split its final season in half that arbitrators in Chevron v. Ecuador split their latest decision in half in 2013. Appropriately, the arbitrators’ sequel came last week, during the lead-up to the show’s final episodes. But unlike “Mad Men,” we know that the latest arbitral ruling ends with a cliffhanger. Herewith, a guide to the next season of the world’s longest-running legal dramedy, which debuts April 20 with the split-screen airing of the Chevron v. Donziger appeal and the Chevron v. Ecuador arbitration trial.
For viewers arriving late: Chevron is arguing everywhere imaginable that Ecuadorean plaintiffs—represented by U.S. lawyer Steven Donziger—used fraud to win a $9.5 billion environmental judgment in the Amazon town of Lago Agrio, Ecuador.
In the arbitration, Chevron began by arguing that Ecuador promised to release the oil company from any collective claims over its operations in the South American country. In September 2013 a tribunal in The Hague agreed—but put off deciding whether the plaintiffs also sought individual relief. Last week, the arbitrators sided with Ecuador and ruled that the Amazon plaintiffs’ 2003 Lago Agrio complaint included individual claims, which were not contractually barred.
The arbitrators will now hold a three-week trial, starting April 20, on the merits of Chevron’s claims under international law. Chevron argues that by colluding in the Lago Agrio farce, Ecuador violated its treaty obligation to let foreign investors enforce their rights effectively, and offended the international law prohibition on Denial of Justice, which equates to a flagrant denial of due process. The main arbitral remedy sought by Chevron is a declaration that the $9.5 billion Lago judgment is null and unenforceable under international law.
U.S. District Judge Lewis Kaplan in Manhattan already held a trial on the same facts under U.S. law. A year ago, he ruled that the Lago Agrio litigation amounted to a racketeering enterprise, and that Donziger and his clients committed multiple frauds on the Ecuadorean court. As a remedy, Kaplan ordered that any worldwide damages collected by the plaintiffs be placed in trust for Chevron. On appeal, Donziger and his clients argue, among other things, that the U.S. racketeering statute cannot support a worldwide injunction. Coincidentally, the U.S. Court of Appeals for the Second Circuit will hear that oral argument on April 20.
Though all eyes are on the Second Circuit, the realend game is the plaintiffs’ effort to collect their massive judgment in Argentina, Brazil and Canada. In Brazil the game has gone slowly. In Argentina, and initially Canada, plaintiffs tripped on the technicality that they’re suing different entities than the one they beat in Ecuador. On that point the case is now pending before the Canadian Supreme Court.
The plaintiffs could theoretically bring new enforcement actions anywhere Chevron has assets. But by forcing one litigation funder to settle a fraud claim in Gibraltar, and pursuing a similar claim against a second funder, Chevron hopes to choke off new funding for the plaintiffs’ enforcement efforts.
If any enforcement action does go forward, Chevron has multiple layers of protection. First, it will argue that the Lago judgment is unenforceable for fraud (and laughability) under the facts found by Judge Kaplan. Second, it will argue that the judgment is unenforceable under international law (pending the arbitration). Third, it will argue that its winnings must be placed in trust (pending the decision of the Second Circuit). And if all that fails, Chevron can go back to to the arbitrators and seek indemnification by Ecuador.
In keeping with older TV traditions, the Chevron in Ecuador showrunners keep us guessing as to which season will be their last. But like “Happy Days,” which famously ran too long, the show is approaching a delicate juncture. Viewers will eagerly wait another year or more for rulings on the merits in the arbitration and Second Circuit. Any longer than that, and Donziger may jump the shark.