Ecuador Found Liable for Violating International Law, Supporting
Fraud and Corruption
SAN RAMON, Calif.--(BUSINESS WIRE)--Sep. 7, 2018--
An international tribunal administered by the Permanent Court of
Arbitration in The Hague has issued an award
in favor of Chevron (NYSE: CVX) and its indirect subsidiary, Texaco
Petroleum Company (TexPet), finding that the Republic of Ecuador
violated its obligations under international treaties, investment
agreements and international law. The tribunal unanimously held that a
$9.5 billion judgment rendered against Chevron in Lago Agrio, Ecuador,
in 2011 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 tribunal concluded that the fraudulent
Ecuadorian judgment “violates international public policy” and “should
not be recognised 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 tribunal held that Ecuador breached its obligations under a 1995
settlement agreement releasing TexPet and its affiliates from public
environmental claims—the same claims on which the $9.5 billion
Ecuadorian judgment is exclusively based. The tribunal found “TexPet
spent approximately $40 million in environmental remediation and
community development under the 1995 Settlement Agreement” carried out
by a “well-known engineering firm specializing in environmental
remediation” and that Ecuador in 1998 executed a final release agreement
“certifying that TexPet had performed all of its obligations under the
1995 Settlement Agreement.” The 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% 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,” said R. Hewitt Pate, Chevron
vice president and general counsel. “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 also reached the same conclusion as U.S. courts regarding
the issue of judicial fraud. “The tribunal found extensive evidence of
fraud and corruption by members of the Ecuadorian judiciary acting in
collusion with American and Ecuadorian lawyers. 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 ‘ghosting’ 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
Fajardo and 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.
Pate concluded: “Ecuador’s executive and judicial branch officials are
now different from those involved in the events at issue in this award.
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.”
Background information
As found by the tribunal, Chevron has never operated or had assets in
Ecuador. Texaco Petroleum (TexPet), which became an indirect subsidiary
of Chevron following Chevron’s acquisition of Texaco Inc. in 2001, was a
minority partner in an oil production consortium in Ecuador along with
the state-owned oil company, Petroecuador, from 1964 to 1992.
Petroecuador took over TexPet’s share of the oil operations in 1992.
Pursuant to a 1995 agreement with Ecuador, TexPet agreed to remediate
certain environmental impacts in the former concession area while
Petroecuador assumed responsibility for performing any remaining
environmental cleanup.
To perform the remediation work, TexPet engaged a well-known engineering
firm specializing in environmental remediation. The government of
Ecuador oversaw and certified the successful completion of TexPet’s
remediation and fully released TexPet from further environmental
liability. Petroecuador failed to conduct the cleanup it promised and
has continued to operate and expand its oil operations for more than 25
years.
Chevron filed an international arbitration claim against the Republic of
Ecuador in 2009 pursuant to the U.S.-Ecuador Bilateral Investment Treaty
seeking to hold Ecuador accountable for breaching the settlement
agreement with TexPet and to enforce the releases. Chevron then amended
the claim in 2012 to include the denial of justice that occurred through
the Ecuadorian court’s fraud and corruption during litigation and the
resulting fraudulent $9.5 billion judgment. The tribunal, administered
by the Permanent Court of Arbitration in The Hague, said the Republic of
Ecuador violated its international law and treaty obligations by
issuing, affirming, and enforcing a fraudulent judgment against Chevron,
because the Lago Agrio litigation was marred by fraud, bribery, and
coercion perpetrated by the Plaintiffs’ attorneys in collusion with
Ecuador’s courts. The award was issued unanimously by all three members
of the tribunal, including Ecuador’s appointed arbitrator.
In 2014, a U.S. federal court found that the Ecuadorian judgment was the
product of fraud and racketeering activity, including extortion, money
laundering, wire fraud, witness tampering, Foreign Corrupt Practices Act
violations and obstruction of justice. The court also prohibited
enforcement of the Ecuadorian judgment in the United States. That
decision is now final after having been unanimously affirmed by the
court of appeal and denied review by the Supreme Court.
Other attempts to enforce the judgment in jurisdictions around the globe
have also failed:
-
In January 2017, a Canadian court rejected an attempt to enforce the
Ecuadorian judgment against Chevron’s Canadian subsidiary. An appeals
court upheld this decision in May 2018.
-
In November 2017, Brazil’s Superior Court of Justice unanimously
rejected an attempt to enforce the Ecuadorian judgment in Brazil.
Brazil’s Deputy Prosecutor General stated the judgment was “issued in
an irregular manner, especially under deplorable acts of corruption.”
-
In October 2017, a court in Argentina denied recognition of the
Ecuadorian judgment. An appeals court upheld the decision in July 2018.
-
In December 2015, the Supreme Court of Gibraltar issued a judgment
against Amazonia Recovery Ltd., a Gibraltar-based company set up by
the plaintiffs’ attorneys to receive and distribute funds resulting
from the Ecuadorian judgment, awarding Chevron$28 million in damages,
and issued a permanent injunction against Amazonia to prevent the
company from assisting or supporting the case against Chevron in any
way. The court issued a similar ruling in May 2018 against directors
of Amazonia, Frente de Defensa de la Amazonia, Ecuadorian attorney
Pablo Fajardo, and Servicios Fromboliere for their role in attempting
to enforce the ruling, this time awarding $38 million in damages to
Chevron.
Chevron Corporation is one of the world's leading integrated energy
companies, with subsidiaries that conduct business worldwide. The
company is involved in virtually every facet of the energy industry.
Chevron Corporation’s subsidiaries explore for, produce and transport
crude oil and natural gas; refine, market and distribute transportation
fuels and lubricants; manufacture and sell petrochemical products;
generate power and produces geothermal energy; provide energy efficiency
solutions; and develop the energy resources of the future, including
biofuels. Chevron Corporation is based in San Ramon, California. More
information about Chevron is available at www.chevron.com.
View source version on businesswire.com: https://www.businesswire.com/news/home/20180907005266/en/
Source: Chevron Corporation
Chevron Corporation
Sean Comey, +1-925-842-5509
