Arbitration Panel Slashed Chevron Damages Claim by 87%, Granting Oil Giant Only 13 Cents On the Dollar

Award Fails to Offset Chevron's $18 Billion Liability in Ecuador

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Amazon Defense Coalition
2 September 2011 - FOR IMMEDIATE RELEASE
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New York, NY – An international arbitration tribunal this week slashed a Chevron damage claim against Ecuador in a series of commercial disputes by 87%, granting the oil giant a paltry 13 cents on the dollar and failing to offset the company's $18 billion liability in a separate environmental case in the South American nation, according to an analysis of the decision.

Chevron General Counsel Hewitt Pate on Wednesday issued a press release trumpeting the $96 million arbitral award in a handful of commercial disputes with Ecuador's state-owned oil company as a major victory for the oil giant. But in a separate lawsuit brought by private citizens, an Ecuador court in February found Chevron liable for $18 billion in environmental clean-up costs for deliberately dumping billions of gallons of toxic waste and causing what experts believe is one of the worst oil disasters ever.

The arbitral award represents roughly 0.5% of the money owed by Chevron in the environmental lawsuit, which is now under appeal in Ecuador.

Pate did not disclose in the Chevron press release that the recent arbitral decision in the commercial cases actually represented at best a mixed result for the oil giant, and would not come close to offsetting the company's overall liability from its Ecuador operations, said Karen Hinton, the spokesperson for the Ecuadorian indigenous groups in the separate environmental case. Chevron operated in Ecuador from 1964 to 1992.

Hinton accused Pate of engaging in "puffery" when describing the arbitral decision, which granted Chevron $45 million on its underlying claim and $96 million total with accrued interest – about 13 cents on the dollar compared to the $700 million Chevron was awarded last year on interim basis by the same panel.

"Pate cannot use a relatively minor arbitral award as cover to hide Chevron's far bigger problem in Ecuador that threatens the lives of thousands of vulnerable people and puts the company's shareholders at significant risk," said Hinton.

Pate tried to link the arbitral award in the commercial cases to the separate pollution case, arguing that Chevron cannot receive due process in Ecuador's courts. But Pate failed to disclose that Chevron has won multiple lawsuits in Ecuador in recent years and that the arbitral award was based on particular delays in the commercial cases rather than a broad indictment of Ecuador's judiciary.

Ecuador announced this week that it is appealing the arbitral decision to a Dutch court on the grounds the bilateral investment treaty that Chevron used as the basis for its claim was not in effect at the time of the dispute.

In the separate environment lawsuit, Chevron fought for years to have the case shifted to Ecuador from U.S. federal court by heaping lavish praise on Ecuador's judicial system. Only when scientific evidence in the subsequent trial pointed to Chevron's culpability did the oil giant shift gears and mount an attack on Ecuador's court system.

Chevron currently has a separate arbitration case pending against the government Ecuador over the environmental liability, but the arbitral panel in that case has yet to grant the company jurisdiction.

Hinton also rejected Chevron's claims that Ecuador's judicial system is inadequate, noting that the U.S. State Department Human Rights Report in 2010 found Ecuador's courts were "generally considered independent and impartial".

In a separate report submitted to a U.S. federal court in a related litigation, a prominent expert on the judicial systems of Latin America found that Ecuador's courts "fared considerably better" than most neighboring court systems in Latin America, according to various objective measures.

"It is my expert opinion that Ecuador provides impartial tribunals and procedures compatible with the requirements of due process of law," said Dr. Joseph L. Staats, the author of the report and a professor of political science at the University of Minnesota.

"Chevron’s animating principle is to praise Ecuador's courts when it feels it can win, and criticize them when it loses," said Hinton.

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