CHEVRON VICTORY IN ECUADOR ARBITRATION CASE – May Force PetroEcuador To Pay For Clean Up In Amazon Region

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Actress Daryl Hannah shows off fresh oil spilled
by Ecuadorian State-owned oil company PetroEcuador

Chevron (CVX) may become the greenest oil company in the world now that the San Ramon-based company won a significant court victory in the legal fight over oil-field contamination in Ecuador.

U.S. District Judge Leonard Sand ruled earlier this month that Chevron can pursue arbitration in the case. The government of Ecuador and attorneys representing Amazon Watch and Amazon Defense Coalition had asked the judge to reject arbitration in the almost two-decades old legal case.

Little noticed in the ruling favoring Chevron was a statement that may come back to haunt Ecuador and Amazon Watch attorneys–and could make Chevron Corporation not only the most beloved corporation in Ecuador, but perhaps the greenest oil company ever.

Chevron made it clear that should it lose the $27 billion case in Ecuador that it will turn around, under the arbitration ruling, and force PetroEcuador to pay for Chevron’s losses and remediate the damages that PetroEcuador has caused in its own country.

Everyone, including Chevron, is anticipating that the Ecuadorian courts, which have been scandalized by bribery and corruption, will rule against it.

Chevron has maintained that Texaco, which it purchased in 2001, fully complied with Ecuadoran laws to clean up and remediate sites where Texaco operated as a minority partner to drill oil with the country of Ecuador. Chevron has presented proof that Texaco met clean up provisions, and that PetroEcuador, the majority partner in the deal, operated in a dangerous and environmentally-unsafe manner after Texaco’s departure from the partnership in 1992.

In his arguments in the arbitration case, Chevron’s attorney Randy Mastro of the law firm of Gibson, Dunn & Crutcher, made a significant but overlooked statement. Mastro told the court that “I just wanted to make the point that our client (Chevron) are actually here trying to hold the Republic of Ecuador responsible for not only ultimately that they are going to be responsible to pay for any judgment, but also to remediate.”

The statement, in combination with Chevron’s victory in the case, must have sent Amazon Watch, Government of Ecuador and PetroEcuador reeling. They are now in a no-win situation.

Here’s why:

The arbitration ruling, unless it is overturned, means that the case will be decided in a neutral forum, not in the courtrooms of Ecuador, which are controlled by the corrupt administration of President Rafael Correa. Additionally, the victory means that when the $27 billion judgment in Ecuador comes down against Chevron, that the Government of Ecuador and their partners Amazon Watch and Amazon Defense Coalition won’t be able to collect a dime until the arbitration is concluded.

For plaintiffs Amazon Watch, Amazon Defense Coalition, attorney Steve Donziger and their funders at the Philadelphia law firm of Kohn Swift & Graf, it has two devastating consequences:

First, this legal case will go on for many more years, but, more importantly, Chevron has just made the greatest Jujutsu move in environmental and legal history. They have made it a win-win situation for the oil company—and the people of Ecuador—even when Chevron loses in a corrupt Ecuador courtroom.

Chevron will seek through arbitration for PetroEcuador to pay for the damages that it caused to the Amazon region. If Chevron is successful, it will be more than just a legal victory, it will be an environmental and reputational victory that will put Chevron first among all corporations in the World for doing the right thing environmentally.

As the testimony ended in Judge Sand’s court, Chevron’s attorney chided Amazon Watch, Amazon Defense Coalition and Steve Donziger that “I would have expected the plaintiffs to be here supporting us (Chevron) because we’re actually here seeking to make sure that there will be payment by the Republic of Ecuador, that there will be remediation finally by the Republic of Ecuador.

“I’m surprised that they (Amazon Watch, Amazon Defense Coalition, and Donziger) come in here attacking our clients when the fact of the matter is, they should be suing the Republic of Ecuador. That’s the party that’s run the consortium for the past few decades. That’s the one that’s made $70 billion off those drilling activities. Yet for some reason those plaintiffs won’t go near the Republic. This is exactly why, your Honor, all these questions should be going to arbitration,” said Mastro of Gibson, Dunn & Crutcher.

See Related: CHEVRON ECUADORAN JUDICIAL SCANDAL ARCHIVE


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