Who Wanted Ecuador to Try the Biggest Environmental Case in History? That Would be the Defendant, Chevron

Feb. 18, 2011

On Monday, Valentine’s Day, a judge in Ecuador sent Chevron the opposite of a valentine: it ordered the giant oil company to pay $8.6 billion in damages and cleanup costs for harm caused by exploration and drilling by Texaco (acquired by Chevron in 2001) in a giant tract of rain forest near the headwaters of the Amazon River. The plaintiffs brought the class action on behalf of 30,000 indigenous residents of the region, who have long claimed that by dumping billions of gallons of toxic sludge into local waterways between 1964 and 1990, Texaco destroyed the local environment and caused hundreds of deaths by cancer.   

The award is the latest chapter in one of the longest-running environmental cases ever, but it’s certain not to end the dispute: Chevron immediately called the decision “illegitimate and unenforceable” and appealed on Thursday. Attorneys for the plaintiffs suggested that they might appeal too, since the award was far below the $27.3 billion recommended by an independent expert. That’s a lot of money even by Chevron’s standards – it only earned $19 billion in profit last year. (Ecuador’s GDP, by way of comparison, is $61.5 billion.)   

A couple of interesting points about the case: First, it’s a lesson in being careful what you wish for. The case ended up in an Ecuadorian court only because Texaco fought for years to put it there. Way back in 1993, the plaintiffs first brought their case to U.S. federal court in the Southern District of New York, near Texaco’s headquarters. From the beginning, Texaco argued that the suit should be dismissed on the basis of forum non conveniens, the judge-made doctrine that allows courts to dismiss cases within their jurisdiction on the ground that another forum would be better suited to decide the case. After all, Texaco argued, the events in question occurred in Ecuador. 

Against plaintiffs’ objections that Ecuador’s courts were ill-suited to try a massive environmental class action involving thousands of plaintiffs and billions of dollars in alleged damages, and that the courts could be susceptible to “corrupt influences,” Texaco successfully urged the federal district court to recognize the maturity of the Ecuadorian judicial system. (It may also have crossed Texaco’s mind that Ecuadorian courts, unlike their U.S. counterparts, had no history of making large awards of damages.) After Texaco promised that it would submit to Ecuadorian jurisdiction, in 2002 the Second Circuit Court of Appeals affirmed the lower court’s dismissal of the case in favor of the Ecuadorian courts. In the years since then, Chevron’s attorneys must have occasionally asked themselves whether moving the case to Ecuador was as great an idea as it seemed at the time. 

Second, the case illustrates how international law doesn’t provide much help to plaintiffs in situations involving large-scale environmental damage. Chevron has long since removed its assets from Ecuador, so enforcement of any judgment would depend on courts in other countries where it does have assets. Perhaps unsurprisingly, international law does not generally require other countries to honor awards from other judicial systems. Courts can do so as a matter of comity, but to stop that, last week Chevron convinced a Southern District of New York court to issue a temporary restraining order blocking plaintiffs from trying to enforce the anticipated judgment. The U.S. court stated, with no apparent sense of irony, that “Ecuadorean courts do not, in general, and have not, in this case, afforded an impartial tribunal.”  

But if neither U.S. nor Ecuadorian courts are the right forum, what is? There’s no international tribunal to hear claims by local communities harmed by a multinational company. Nor, for that matter, is there a clear body of international law that sets out rules that such companies should follow to avoid violating the human rights of those affected by their projects, although there have been interesting recent efforts to arrive at some minimum standards. 

International law does, however, allow Chevron to complain about abuses to its rights. Under the bilateral investment treaty between the United States and Ecuador, Chevron has argued to an arbitral tribunal that the Ecuadorian courts have violated international standards. Indeed, only a few days before the Ecuadorian decision, Chevron convinced the tribunal to order Ecuador to suspend the enforcement “within and without Ecuador” of any judgment against Chevron.

If you think all of this could be material for a movie, well, you’re right. A documentary about the case was released in 2009. It was quickly sucked into the expanding vortex of the litigation when Chevron sued the filmmakers to obtain unpublished footage from the film. Chevron argues that the footage shows that the plaintiffs’ attorneys subverted the Ecuadorian judicial system, and on February 1 Chevron filed a RICO case against the attorneys and the named Ecuadorian plaintiffs themselves, accusing them of engaging in an illegal conspiracy to extort Chevron into paying them money. In a sense, the complaint returns the case to square one: it was filed in the Southern District of New York, the same court where the Ecuadorians first filed suit against Texaco nearly two decades ago.

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