Chevron Found Guilty in $8 Billion Ecuadorian Human Rights and Environmental Case

February 15, 2011

By Chip Pitts, Lecturer in Law, Stanford Law School and Oxford University; former Chair, Amnesty International USA

After an eighteen-year, multinational court battle, Chevron was found guilty today in an Ecuadorian court and fined $8 billion for pollution that amounted to an ecological disaster and seriously harmed the human rights of the indigenous inhabitants in a small and sensitive part of the rainforest.

Before human rights, environmental, and corporate accountability advocates celebrate too quickly, however, they should be aware that the litigation – already so reminiscent of Dickens’ Bleak House – is likely to go on for some time yet.

Background to the Case

The heart of the claim – about which you can read much more at the website of the Business and Human Rights Resource Centre — is that the oil company Texaco contaminated the land in question over three decades, dumping oil-drilling waste in unlined pits, contaminating the forest and causing illness and death among the local inhabitants. When Chevron acquired Texaco in 2001, the Ecuadorian plaintiffs say, Chevron acceded to responsibility for the harm done.  Chevron, in turn, argues that a 1998 agreement Texaco signed with Ecuador limits its liability at the $40 million allegedly spent on cleanup, and that any remaining pollution resulted from subsequent operations by state oil company Petroecuador.

The Ecuadorians originally filed a class action in New York federal court way back in 1993, on both toxic tort and Alien Tort Claims Act grounds. The Alien Tort Claims Act is the venerable 1789 statute, passed by the first US Congress, which allows aliens to sue in US federal courts for torts in violation of the law of nations or a treaty. This statute has been used to achieve some measure of corporate accountability in a number of successful settlements and pending actions against businesses involved in egregious human rights violations.

The corporate defendant sought and won a dismissal of the lawsuit on grounds that the US was an “inconvenient forum” – a decision that Chevron may regret at this point – and the litigation was recommenced in Ecuador, ultimately resulting in this $8 billion judgment by the Ecuadorian court in Lago Agrio against Chevron.

Not Exactly a “Civil” Action

The story doesn’t stop there, however.  This lengthy and high-stakes litigation has been characterized, sadly, by ethically dubious action on all sides. There have been strong accusations of dirty tricks and corruption by both the plaintiffs’ counsel, and by Chevron and its counsel. Most recently, the former lead counsel for the plaintiffs, Steven Donzinger, was accused of having authored parts of the report of Ecuadorian court-appointed expert Richard Cabrera that pegged environmental damages at more than $27 billion. New York Southern District Judge Lewis Kaplan last year ordered the disclosure to Chevron and its counsel, Gibson Dunn, of outtakes from the documentary “Crude” pertaining to Donzinger’s conduct. Donzinger ended up reducing his role in the case in favor of the respected D.C.-based law firm Patton Boggs.

Chevron and its counsel have similarly been accused of various improprieties and fraudulent actions, also including ex parte (i.e. involving only one as opposed to both parties) communications with judicial officials, allegedly asking a contractor to switch contaminated soil samples with clean ones to present to the court, and reportedly hiring a journalist to undermine the victims’ claims.

Although ex parte communications are not usually allowed in the US, however, Ecuador allows more scope for them. And in any event Chevron succeeded in getting a new judge appointed in the Ecuadorian case.

More Forum Shopping

Not content with the transfer of the case to the Ecuadorian forum, or the new judge, and seeing that things weren’t going as well as planned in Ecuador, Chevron has sought still further forums in which to wage this battle.

Shortly over a year ago, Chevron invoked a more business-friendly arbitration in The Hague under the US-Ecuador investment treaty. And on February 1, Chevron and its counsel Gibson Dunn filed another suit in New York, this time alleging fraud and racketeering by Donzinger and plaintiffs’ counsel, despite Donzinger’s reduced role. Remarkably, Chevron even accused the new law firm for the Ecuadorians, Patton Boggs, a non-party to the New York action, of being a “non-party co-conspirator” to such actions.

Patton Boggs predictably responded with its own lawsuit in Washington D.C. last week accusing Chevron and Gibson Dunn of engaging in a “smear campaign” that amounted to tortious interference with Patton Boggs’ representation of its clients in Ecuador.

In other words, this litigation remains pretty ugly.

Preemptive Strikes and Countermeasures

Apparently anticipating today’s decision, i.e. even before today’s Ecuadorian decision was announced, Chevron requested and succeeded in obtaining from New York Judge Kaplan last Tuesday February 8th a highly unusual temporary restraining order (TRO) stopping the plaintiffs from attempting to enforce any judgment outside of the United States.

Then, for good measure, Chevron persuaded the arbitral tribunal in The Hague to order Ecuador on the next day, Wednesday February 9th, 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.”

Stating that attempts to enforce the judgment could unreasonably disrupt the worldwide operations of Chevron, a company he considered “of considerable importance to our economy,” Judge Kaplan rejected arguments that his court had no jurisdiction to issue the TRO or to enforce US racketeering laws abroad. He also called the independence of the Ecuadorian judiciary into question, stating that “Ecuadorean courts do not, in general, and have not, in this case, afforded an impartial tribunal.” Ecuador’s Attorney General disagreed with the TRO but will respect it for now.

The TRO is important, since Chevron apparently has no assets in Ecuador now, and in order to begin to get compensation for the victims (and/or pressure Chevron to settle the case), attempts to seize some of Chevron’s extensive assets in other countries would be very helpful to the victims.

Chevron will seek an extension of that TRO at a hearing later this week, on February 17th.

Meanwhile, the Victims’ Right to Remedy?

Chevron’s continued fight against justice in this case is, to say the least, unfortunate – if not tragic. The scientific evidence and record in the case taken as a whole quite compellingly show that the victims have fallen by the wayside in this titanic battle.

Rather than continue these harsh tactics while ongoing environmental damage and disease continue to take their toll on those affected, it certainly would have been preferable for Chevron to have adopted a more accountable and stakeholder-oriented approach consistent with the international legal requirement that victims of gross human rights (including environmental) disasters deserve a remedy. The UN General Assembly, the UN Tripartite “Protect, Respect, Remedy” Framework, fundamental international treaties and human rights and environmental jurisprudence all emphasize the dire need for effective remedies, in the interests of business as well as victims.

But sadly, Chevron plans to appeal this decision, showing no signs yet of adopting a more conciliatory posture toward the victims. Chevron officials, after all, have famously said that the company will litigate this case until “hell freezes over,” and then “fight it out on the ice.”