The Wall Street Journal published an article today (both in their print edition and online) looking at Chevron's latest maneuver to try to pass any liability stemming from the landmark environmental lawsuit against the company over to the government of Ecuador. This article appeared in print (below) but oddly, appeared originally as a different, longer version on its webpage. It turns out that somewhere in the editing process the Journal edited out quotes from a UC David Law Professor, Andrea Bjorklund, and a complete quote from Steven Donziger, attorney for the plaintiffs. Read below the print version of the story for the complete, original online version of the article:
The print version of the article:
SEPTEMBER 24, 2009
Chevron Files Suit Against Ecuador
Looking to Protect Itself in Longtime Battle, Oil Giant Seeks Aid Through Trade Pact
By BEN CASSELMAN and ANGEL GONZALEZ
Chevron Corp. is stepping up its offensive in its long-running legal battle in Ecuador, suing Ecuador's government under international trade law.
Chevron is the defendant in a multibillion-dollar lawsuit that seeks to hold the company responsible for environmental damage allegedly caused by Texaco Inc., which Chevron bought in 2001. Chevron has denied the allegations.
Associated Press
Ecuadorean community leader Luis Yanza protests following a Chevron shareholders' meeting at the company's headquarters in San Ramon, Calif., last year. A lawsuit accuses Chevron of environmental damage in Ecuador.
Seeking to protect itself from what it says is likely to be an adverse ruling in Ecuador, the California-based oil giant said Wednesday it had filed suit under the terms of a 1997 trade pact between the U.S. and Ecuador. The suit amounts to a request for arbitration through a process set up by the United Nations Commission on International Trade Law to adjudicate disagreements.
The arbitration process is separate from the original lawsuit, which will continue. But under its pact with the U.S., Ecuador must accept the arbitrators' rulings as binding under international law.
In its filing, Chevron argues Ecuador's government is responsible for any environmental damage and should pay any penalties assessed in the lawsuit, which could total $27 billion, according to a court-appointed expert. Chevron also asks that arbitrators force Ecuador's government to pay the company's legal fees and to award "moral damages" due to the government's alleged interference in the case, intimidation of Chevron representatives and other "outrageous and illegal conduct."
The move seeks to capitalize on the release last month of videos that Chevron says reveal a bribery scheme possibly involving the Ecuadorean judge who has been overseeing the lawsuit. Ecuador says it is investigating Chevron's allegations, as well as any potential involvement by Chevron in the scheme. The judge, who has sought to recuse himself from the case, has denied any wrongdoing, and the videos don't show him accepting or soliciting a bribe. On Tuesday, a local court ruled that the judge's withdrawal petition was "unfounded" and ordered him to stay in the case.
Chevron believes the controversy has given new weight to its claim that it cannot get a fair trial in Ecuador.
"We have believed for some time that it would be impossible for Chevron to get a fair hearing in Ecuador," Chevron General Counsel R. Hewitt Pate said.
Eric Bloom, a U.S. attorney representing Ecuador in the dispute, said Chevron has been trying to discredit Ecuador's judicial system for years, and he questioned the videos' authenticity.
"Chevron either got very, very lucky on the eve of a verdict and actually tripped across a legitimate concern, or they helped to stage-manage a fictitious event," Mr. Bloom said. "Both possibilities have to be investigated."
Chevron has denied doctoring the videos or participating in the scheme and has said it took steps to verify the videos' authenticity.
Steven Donziger, an attorney for the plaintiffs in the original lawsuit, said the filing will have "minimal impact" on his case, but he said it is a sign Chevron is becoming desperate.
The plaintiffs in the lawsuit couldn't immediately be reached for comment.
Chevron's decision to seek international arbitration is the latest example of the company's increasingly aggressive strategy in the case, which includes a Web site to rebut plaintiffs' claims and an effort to lobby Congress to revoke Ecuador's trade privileges because of the government's alleged interference in the dispute.
Since Chevron has almost no assets in Ecuador, the plaintiffs will have to seek enforcement of any ruling in their favor in the U.S. or another country where Chevron operates.
Separately, the international arbitration process could take years. In its arbitration filing, Chevron claims that by allowing the lawsuit to go forward, the Ecuadorean government is violating a 1998 agreement that released the U.S. company from environmental liability in return for a $40 million cleanup paid for by Texaco.
The plaintiffs, a group of Ecuadorean residents, argue their case has nothing to do with the Ecuadorean government, so the agreement doesn't apply to their lawsuit. Ecuador's government says it has no control over the judicial process, although Chevron has argued the Ecuadorean judiciary is heavily influenced by President Rafael Correa.
If arbitrators reject Chevron's argument, it could make it harder for the company to fight enforcement of an adverse ruling. But if arbitrators agree that Chevron has no liability, legal experts said, it will be very difficult for plaintiffs to collect on any damages outside Ecuador.
Corporations have increasingly turned to international arbitrators in recent years to resolve disputes with governments. Companies often see the arbitration process as fairer than local courts.
Write to Ben Casselman at ben.casselman@wsj.com and Angel Gonzalez at angel.gonzalez@dowjones.com
Printed in The Wall Street Journal, page B2
The Online Version of the article included quotes from Bjorklund:
Multinational corporations, including energy companies, have increasingly turned to international arbitrators in recent years to resolve disputes with governments. Companies often see the arbitration process as fairer than local courts. But Andrea Bjorklund, a law professor at the University of California, Davis, said companies actually lose slightly more than half of their arbitration cases.
"By no means is it a given that (a company) is going to prevail," Prof. Bjorklund said.
And Donziger:
Steven Donziger, an attorney for the plaintiffs in the original lawsuit, said the filing will have "minimal impact" on his case, but he said it is a sign Chevron is becoming desperate.
"They have suffered a series of consecutive legal defeats in courts in courts in both the United States and Ecuador, which is forcing them to search for an international forum that they think will be more sympathetic," Mr. Donziger said.
The entire, original online version of the article is included in a PDF here.