A long-running legal battle over oil production in the Ecuadorian Amazon has become the emblematic case in the region concerning investment, environmental protection and the role of the state in enforcing contracts and rule of law.
The case involves US oil giant Chevron and indigenous plaintiffs in the country’s northern jungle. It was initially filed in 1993 in New York against Texaco, which was accused of dumping billions of gallons of toxic waste, contaminating water and soil and poisoning residents, when it operated in the country between 1964 and 1990.
The case was dismissed in 2001, with a US Court of Appeals agreeing with the company that Ecuador, and not the US, was the appropriate venue. Chevron acquired Texaco that same year.
The 30,000 indigenous plaintiffs, and environmental and rights groups backing them, refiled the suit in Lago Agrio, Ecuador in 2003. The original sum demanded was $6 billion in compensation for health problems and environmental damage. The amount ballooned to $27.2 billion when closing arguments were presented.
The court found Chevron guilty in February 2011, fining it $9.5 billion. The ruling was upheld this January. The company was also told it had to pay an additional $8.6 billion if it did not apologize. It refused. The full value of the fine is approximately the same sum Ecuador earned last year from oil exports.
Chevron has appealed to the country’s top court, but the battle is far from over, and it has criticized what it calls “the politicization and corruption of Ecuador’s judiciary”.
Environmental groups said it was time for Chevron to admit defeat. “Chevron is guilty and it needs to accept that fact. They have been trying to delay the verdict for years, but this is the end,” says Paul Paz y Miño, managing director of US-based Amazon Watch.
Chevron is also moving ahead with legal action against the plaintiff’s US supporters, with court cases in US District for the Southern District of New York on fraud and racketeering charges. The case stems from outtakes from 600 hours of film footage used for the 2009 documentary Crude, about oil contamination in the Ecuadorian jungle. Legal representatives for the plaintiffs can be heard on the outtakes discussing efforts to pressurize the Ecuadorian court.
Chevron has also turned to the UN Permanent Court of Arbitration in The Hague, filing motions against Ecuador under the US-Ecuador Bilateral Investment Treaty (BIT). It won an initial victory in February 2011, which was upheld again this year. The ruling ordered Ecuador not to enforce the judgment against Chevron.
The company argues that Ecuador violated the treaty by not guaranteeing a fair and impartial trial, failing to respect contracts signed with Texaco, including the government signing off on Texaco’s $98 million remediation plan in 1998, and colluding with the plaintiffs to undermine Chevron’s case. “Obviously, any investor looking at this scenario has to seriously question whether it is worth investing in Ecuador,” says a Chevron spokesperson.
Environmental groups counter with the criticism that Chevron has played fast and loose with the provisions of the BIT. Ginger Cassady, an action coordinator of the Rainforest Action Network, claims the arbitration “is a grossly unfair process ... that violates any notion of due process and flouts the fundamental human rights of thousands of Ecuadorians to seek legal redress for the contamination.”