Publish in Special Reports - Thursday, September 13, 2018
The Peace Palace in The Hague, Netherlands, which houses the Permanent Court of Arbitration (PCA), as well as the International Court of Justice. (Photo: International Court of Justice)
International Court in Hague rebukes 2011 Ecuador verdict, fraud.
BY LATINVEX STAFF
US-based oil producer Chevron has won a ruling at the Permanent Court of Arbitration in The Hague against a $9.5 billion verdict against the company in Ecuador in 2011.
The ruling is the latest victory for Chevron, which also recently secured favorable outcomes in Brazil, Canada and Gibraltar related to its Ecuadorian verdict (see Ecuador: Chevron Secures Legal Victories).
Texaco (which was acquired by Chevron in 2000) operated a joint venture with Ecuador’s state oil company Petroecuador from 1964 to 1990, when the Ecuadorian company took over management of the oil field (although serious oil drilling didn’t start until the early 1970s). Texaco continued with a minority stake in the consortium until 1992. When Texaco left Ecuador completely in 1992 it undertook a $40 million remediation and in 1998, the government of Ecuador declared that the remediation was completed according to the terms and parameters agreed upon and released Texaco from any future liability.
However, in 2011 a court in Ecuador ruled that Chevron was guilty of pollution and fined it $9.5 billion after using what Chevron deemed was a fraudulent process.
The arbitration tribunal in Hague unanimously held that the judgment rendered against Chevron in Lago Agrio, Ecuador was procured through fraud, bribery and corruption and was based on claims that had been already settled and released by the Republic of Ecuador years earlier.
The court also judged that Ecuador has to compensate Chevron for any damages arising from the fraudulent judgment – a move that has led to the government of President Lenin Moreno to start considering how to force ex-President Rafael Correa to pay for any expenses.
The Hague tribunal concluded that the fraudulent Ecuadorian judgment “violates international public policy” and “should not be recognized or enforced by the courts of other States.” As a matter of international law, this award confirms Chevron is not obliged to comply with the Ecuadorian judgment.
The Hague tribunal held that Ecuador breached its obligations under the 1995 settlement agreement releasing TexPet and its affiliates from public environmental claims.
The Hague tribunal found “no cogent evidence” supporting Ecuador’s claim that TexPet failed to comply with the terms of the remediation plan approved by Ecuador. To the contrary, the award recites the sworn testimony of Ecuadorian officials that TexPet’s “technical work and environmental work was done well,” while Ecuador’s national oil company “during more than three decades, had done absolutely nothing” to address its own environmental remediation obligations in the area, even though Ecuador and its national oil company received 97.3 percent of the oil production revenues from the project. The award further recounts in detail the testimony of numerous former members of the plaintiffs’ environmental team and scientific experts who admitted under oath that they found no evidence to support the plaintiffs’ environmental claims against Chevron and TexPet.
“An esteemed international tribunal, including an arbitrator appointed by Ecuador, has unanimously confirmed that, following completion of an agreed environmental remediation program, Chevron was released by the Republic of Ecuador from the environmental claims that the fraudulent Ecuadorian judgment purports to address,” R. Hewitt Pate, Chevron vice president and general counsel, said in a statement. “Following years of litigation, including visits to the former area of operations by the tribunal, the tribunal found that Ecuador violated the final release agreement that had certified the successful completion of TexPet’s remediation.”
The tribunal found extensive evidence of fraud and corruption by members of the Ecuadorian judiciary acting in collusion with American and Ecuadorian lawyers, he added.
“This award is consistent with rulings by courts in the United States, Argentina, Brazil, Canada and Gibraltar confirming that the Ecuadorian judgment is unenforceable in any country that respects the rule of law,” said Pate. “Indeed, the tribunal explicitly found that it would be contrary to international law for the courts of any other State to recognize or enforce the fraudulent Ecuadorian judgment.”
In more than 500 pages, the tribunal’s award details the evidence of the Lago Agrio plaintiffs’ legal team’s fraud and corruption in Ecuador, finding the evidence to be “overwhelming.” The tribunal concluded: “Short of a signed confession by the miscreants . . . the evidence establishing ‘ghostwriting’ in this arbitration ‘must be the most thorough documentary, video, and testimonial proof of fraud ever put before an arbitral tribunal.’”
The tribunal found that Nicolas Zambrano, the Ecuadorian judge purported to have drafted the Lago Agrio judgment, did not in fact draft the judgment but rather, “in return for his promised reward, allowed certain of the Lago Agrio Plaintiffs’ representatives [including attorneys Pablo Fajardo and Steve Donziger], corruptly, to ‘ghostwrite’ at least material parts of the Lago Agrio Judgment.” The tribunal described the conduct as “grossly improper by any moral, professional and legal standards.” Finding that “judicial bribery must rank as one of the more serious cases of corruption, striking directly at the rule of law, access to justice and public confidence in the legal system; and also, as regards the foreign enforcement of a corrupt judgment, at the law of nations,” the tribunal held Ecuador responsible for denying justice to Chevron.
The tribunal also found that the plaintiffs’ legal team had inappropriate secret meetings with several judges who presided over the litigation, blackmailed one of the presiding judges, bribed the supposedly independent court-appointed environmental expert Richard Stalin Cabrera, ghostwrote the Cabrera report on which the judgment relies for environmental findings, orchestrated collusive criminal proceedings against TexPet’s lawyers, paid bribes to former judge Alberto Guerra to draft orders for Zambrano, and devised and implemented a “covert” and “nefarious” plan to ghostwrite the judgment which then Judge Zambrano issued under his name in exchange for a promised $500,000 bribe payable from enforcement proceeds.
Comprised of three preeminent international arbitrators, the tribunal issued its award unanimously. The tribunal’s award aims to “wipe out all the consequences” of Ecuador’s internationally wrongful actions, and it grants Chevron several forms of relief.
The tribunal orders Ecuador to take immediate steps to remedy its internationally wrongful conduct, including rendering the $9.5 billion judgment unenforceable, precluding the Plaintiffs or any interested party from enforcing the judgment, and ensuring that Chevron has no liability or responsibility for the judgment. It also orders Ecuador to abstain from receiving any proceeds from the fraudulent judgment, and to promptly return any such proceeds that come into its possession. The award holds Ecuador liable for any cost or damage to Chevron should the judgment ever be enforced anywhere in the world. Finally, the tribunal orders Ecuador to compensate Chevron for any damages arising from the fraudulent Judgment. The tribunal will address the extent of damages for which Ecuador must compensate Chevron in the next and final phase of the arbitration.
“Ecuador’s executive and judicial branch officials are now different from those involved in the events at issue in this award,” Pate said. “Chevron takes no pleasure in any dispute with a sovereign nation. The company invites the government of Ecuador to repudiate the fraudulent scheme and make constructive efforts to meet its own long unfulfilled environmental obligations.”
The Ecuadorean government is now, in fact, doing just that. Moreno’s office last week said that “the government recommends taking legal actions against Rafael Correa. Correa’s regime used the Chevron case to gain political and media stature….and manipulate national and international public opinion.”
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