Chevron hit with motion for preliminary injunction in Federal Court to stop arbitration

Amazon Defense Coalition | Feb. 10, 2010

Chevron Hit with Motion for Preliminary Injunction in Federal Court to Stop Arbitration

Ecuador Accuses Oil Giant of Reneging on Promises to US Federal Court and ’Triple Forum Shopping’

NEW YORK, Feb 10, 2010 — In a blistering attack against Chevron, lawyers for the government of Ecuador accused the oil giant of "triple forum shopping" and reneging on legally-enforceable promises in a motion asking a federal judge to shut down an international arbitration that Chevron is using to try to escape a potential $27 billion environmental liability.

The motion came in a lawsuit filed in U.S. federal court by the Republic of Ecuador to enjoin Chevron from participating in an arbitration under the U.S.-Ecuador bilateral investment treaty. Chevron is seeking to use the arbitration to shift to Ecuador’s government any liability for clean-up that might result from a final judgment in the separate environmental lawsuit, Aguinda v. ChevronTexaco, which has been pending against the oil giant in Ecuador since 2003.

The Ecuador government motion says Chevron has tried "to whipsaw this [U.S. Federal] Court and the affected parties, searching for a haven, whether in the United States or abroad, to avoid liability" for deliberately dumping billions of gallons of toxic waste into Ecuador’s Amazon. Representatives of the 30,000 plaintiffs in the Aguinda case say the dumping has caused more than 1,400 cancer deaths and decimated indigenous groups. A court-appointed Special Master found the oil giant could be liable for up to $27.3 billion in clean-up costs and damages.

The Aguinda lawsuit alleges that Chevron designed and built a system of oil extraction that deliberately discharged billions of gallons of toxic waste into streams and rivers over an area roughly the size of Rhode Island. The Aguinda case originally was filed in the same US federal court in 1993, but it was ultimately sent to Ecuador on the express promise by Chevron to submit to jurisdiction there and pay any judgment.

Ecuador’s preliminary injunction motion references Chevron’s repeated, express representations "to satisfy any ’final judgment’ against it ... subject only to possibly exercising its right to defend against enforcement of any adverse Ecuadorian judgment under specific defenses set forth under NY federal law," not international arbitration.

"The stark reality," Ecuador asserts in the motion, "is the respondents (Chevron and its local subsidiary), having moved the case to Ecuador ... are reneging on a key condition of the dismissal — their promise to satisfy any judgment. Not only are they refusing to satisfy a key condition... they are asking an not-yet-constituted arbitral tribunal to prevent the Ecuadorian court from deciding a case which it has been hearing for more than six years, by ordering the Republic to force its court to dismiss the plaintiffs’ claims — all without the participation of the plaintiffs themselves."

According to the motion: "This is Texaco-style justice."

Chevron is trying to use the arbitration in a more favorable forum to resolve many of the same legal issues currently being heard by the Ecuador court in the Aguinda trial, but without the presence of the plaintiffs who would be barred by rule from participating, said Steven Donziger, an American legal advisor to the Amazonian communities. Chevron’s goal is to have the arbitral panel order Ecuador’s government to contravene its own Constitution to mandate that its local trial court find that Chevron has "no liability" in the Aguinda case, he added.

Donziger said that Chevron’s action, if successful, would make it virtually impossible for victims of corporate misconduct to ever bring claims in their own courts against foreign investors. Further, it is unclear if the arbitral panel has the power to order Ecuador to violate its own Constitution and quash a legal case, he added.

"This is a radical attempt by Chevron to re-write the rules of the game because it is losing a trial where it faces a large potential liability," said Donziger.

The Ecuador government motion states that Ecuador would be "irreparably harmed" if it is "forced to arbitrate the substantive merits of a 16-year environmental case to which it has never been a party, which has not yet gone to judgment, and which eventual judgment Texaco expressly represented it would satisfy" as a condition of its dismissal to Ecuador from U.S. federal court several years ago.

Chevron in 2004 attempted to arbitrate the same issues against Ecuador before another private forum, the American Arbitration Association in New York. In that case, Chevron suffered a string of devastating setbacks in the federal trial court, a federal appeals court, and ultimately the U.S. Supreme Court which denied review of the case even after Chevron had hired former U.S. Solicitor General Paul Clement to represent the company. That arbitration was permanently stayed in 2007.

Ecuador describes Chevron’s latest arbitration filing as "a prime example of triple forum shopping." The three courts are the AAA arbitration in U.S. federal court (where Chevron lost), the trade arbitration before an international arbitration panel (subject of the motion described above), and the Ecuador trial itself (which has yet to reach judgment).

If granted, the injunction will stop Chevron from proceeding to arbitration while the court considers Ecuador’s request to permanently enjoin the proceeding. The Ecuadorian plaintiffs also have filed a separate motion before the same federal court asking that the arbitration be enjoined.