By Angel Gonzalez and Ben Casselman, The Wall Street Journal
15 January 2010
Houston, TX – Plaintiffs suing Chevron Corp. for $27 billion in alleged environmental damages in Ecuador are asking a U.S. court to halt the company's bid to bring the case to international arbitration.
In a lawsuit filed Thursday, the plaintiffs say Chevron broke a promise Texaco Inc. made in 1999 to a New York federal court to abide by the Ecuadorean legal system if the court dismissed the environmental case. Residents of Ecuador's oil-producing region sued Texaco in the U.S. court for damage allegedly caused by the company during its tenure there from 1964 to 1990.
Chevron, which inherited the dispute when it bought Texaco in 2001, denies the allegations. It has said it expects an unfavorable court ruling in Ecuador due to political pressure from the government. Ecuador has denied interfering with the lawsuit.
In September, the U.S. oil giant brought the suit to an international arbitration court in The Hague, arguing that Ecuador, not the company, should pay any damages awarded, because the country's government released Texaco from liability in 1995. Plaintiffs claim Texaco lied about the cleanup of the oil-producing site to obtain the release deal; they also say that the deal doesn't cover third-party claims.
Neither the New York court proceedings nor Chevron's arbitration claim directly affect the Ecuadorean court proceedings, which are ongoing. A ruling is expected in the first half of this year.
The plaintiffs' latest move brings the multibillion-dollar case back where it started more than 17 years ago: the U.S. District Court for the Southern District in New York. Last month, the Ecuadorean government filed a similar lawsuit with the U.S. court asking it to stop Chevron's arbitration proceedings.
The lawsuit also opens a new episode in an already murky legal saga. In August, Chevron, the second-largest U.S. oil company after Exxon Mobil Corp., released videos that it said reveal a bribery scheme possibly involving the Ecuadorean judge who had been overseeing the environmental lawsuit. Ecuador says it is investigating Chevron's allegations, as well as any potential involvement by Chevron in the scheme. The judge, who recused himself from the case, denied any wrongdoing, and the videos don't show him accepting or soliciting a bribe.
The plaintiffs have questioned the authenticity of the videos and Chevron's role in their production. Chevron maintains that the recordings are authentic and that it didn't prompt the makers of the videos—two businessmen seeking remediation contracts in the area where Texaco operated—to record them.
Steve Donziger, a U.S. adviser to the plaintiffs, says that Chevron is seeking to override the private-party claim by taking the case to a court where the plaintiffs aren't represented. "Chevron sees this international arbitration panel as an escape hatch," Mr. Donziger said in a phone interview.
When Ecuador filed a suit to stop the international arbitration, Chevron said that the promise it made to the U.S. court didn't apply to the arbitration process, and accused Ecuador of stalling.
Chevron spokesman Kent Robertson said that Texaco "never waived its rights to resist a verdict that is the product of fraud and a broken legal system," nor to seek the enforcement of valid contracts with the government of Ecuador.