Tribunal Rules Against Ecuador

Violated treaty and prior court rulings by failing to prevent enforcement of judgment against Chevron, tribunal finds

Lago Agrio / AP
February 11, 2013

The government of Ecuador violated the terms of an investment treaty with the United States by failing to prevent the enforcement of a multi-billion dollar environmental judgment against American oil company Chevron, according to a tribunal arbitrating the dispute.

The tribunal, part of the Hague’s Permanent Court of Arbitration, ruled Thursday that Ecuador had disobeyed two prior rulings by the Court ordering the South American government to prevent plaintiffs representing environmentalist groups from enforcing the judgment abroad.

The government of Ecuador violated international law and its treaty obligations with the United States, the panel ruled.

Chevron was ordered in 2011 by an Ecuadorian court to pay $18.2 billion to remediate environmental damage at the Lago Agrio oil field. Chevron has alleged that plaintiffs representing environmentalists in Ecuador bribed court officials to issue a judgment in their favor.

The Hague’s arbitration panel directed the government of Ecuador to "take all measures at its disposal to suspend or cause to be suspended the enforcement or recognition within and without Ecuador of any judgment against [Chevron] in the Lago Agrio case."

Ecuador is required to comply with the panel’s judgment as part of its obligations under a U.S.-Ecuador bilateral investment treaty.

The tribunal also suggested that the country could be forced to compensate Chevron for any damage resulting from the country's failure to abide by the panel’s prior rulings.

Ecuador is pushing for Congress to extend provisions of the Andean Trade Preference Act, making conduct perceived as a violation of existing trade laws potentially problematic. The law provides duty-free access for Ecuadorian exports—supporting more than 300,000 jobs in the country—but is scheduled to expire this year.

The Office of the U.S. Trade Representative (USTR) has previously faulted the Ecuadorian government for shirking its obligations under its trade agreements with the United States with respect to the Chevron case.

USTR did not respond to requests for comment on the arbitration panel’s most recent judgment.

Ecuadorian President Rafael Correa has been an outspoken advocate of the environmentalists suing Chevron, even touring the Lago Agrio site with the plaintiffs’ attorneys. Those attorneys, meanwhile, have been open about using Ecuador’s corrupt judicial system to their advantage.

Ecuadorian lawyer and public official Vladimiro Alvarez Grau summarized the depths of that corruption in a 2009 report cited by a U.S. court presiding over a racketeering lawsuit against the Chevron plaintiffs.

"In those cases where President Correa or others in his administration express a view, the judge must either rule accordingly or face the high likelihood of public condemnation, removal from office, and even criminal prosecution," Alvarez found.

According to comments by plaintiff attorney Steven Donziger cited in the suit, Correa’s 2006 election was a "critical event" for the plaintiffs. Donziger later said that his clients and the Correa administration had "been really helping each other."

Outtakes for a documentary about the Lago Agrio lawsuit, commissioned by the plaintiffs, show Donziger advocating the use of political pressure to sway Ecuadorian judges, something, he said, "would never happen in the United States or in any judicial system that had integrity."