By David R. Baker, San Francisco Chronicle
5 January 2012
An Ecuadoran appeals court has upheld last year's landmark $9.5 billion judgment against Chevron Corp. over oil field contamination in the Amazon rain forest.
The ruling, issued Tuesday by a three-judge panel, brings Chevron's opponents in the hard-fought lawsuit one step closer to enforcing the judgment and collecting the money, which would pay for environmental cleanup and health programs. And it adds to Chevron's problems in South America, where the company is facing fines and criminal prosecution over an oil spill off the coast of Brazil.
But the Ecuadorans suing Chevron can't collect just yet.
Chevron has waged a fierce legal campaign to avoid paying, asking courts in the United States and an international arbitration panel in Europe to block enforcement of last year's verdict. The San Ramon company no longer has assets in Ecuador, meaning the plaintiffs must seek enforcement elsewhere.
In addition, Chevron can still appeal to Ecuador's National Court of Justice to overturn the verdict, which the company insists was the result of fraud. Chevron has accused the lawyers suing the company of fabricating reports and colluding with several judges in the case.
"Chevron does not believe that the Ecuador ruling is enforceable in any court that observes the rule of law," the company said Tuesday. "The company will seek to hold accountable the perpetrators of this fraud."
The lawyers suing Chevron acknowledged Wednesday that they still face many hurdles in trying to enforce the judgment. But they were pleased with Tuesday's decision by the appeals court.
"Despite all of the efforts of Chevron to thwart this case, we have won," said Pablo Fajardo, one of the plaintiffs' lawyers, speaking through a translator. "We're happy because after 18 years of battle, and after 40 years of suffering, finally there will be justice and hopefully repair of the Ecuadoran Amazon."
Last year, the company persuaded a U.S. federal judge to issue an order blocking the plaintiffs from enforcing the verdict in the 18-year lawsuit, closely watched around the world for the precedent it could set. But the lawyers suing Chevron questioned the judge's authority to prevent enforcement outside the United States, and an appeals court lifted his order.
Chevron also has taken the case to an international arbitration tribunal in The Hague, Netherlands, basing its appeal on an investment treaty between Ecuador and the United States. The tribunal last year ordered the Ecuadoran government to block enforcement of the judgment against Chevron. But the plaintiffs say they aren't bound by that order, because the Ecuadoran government is not a party in the lawsuit.
The lawsuit's roots reach back to 1964, when Texaco started drilling for oil in a corner of northeastern Ecuador known as the Oriente. The company worked in partnership with state-owned Petroecuador until 1992. When Texaco pulled out of the country, it reached an agreement with the government to clean up a portion of the area, leaving the rest to Petroecuador, which continued to pump oil there.
Oriente residents sued Texaco in 1993 arguing that toxic residue from oil field operations had poisoned their soil and water and triggered a wave of illnesses. Chevron inherited the suit when it bought Texaco in 2001.
Last February, a judge in the oil-patch town of Lago Agrio fined Chevron $9.5 billion, an amount that will jump to $18 billion if Chevron doesn't publicly apologize for its actions within 15 days of the appeals court's decision.
Chevron could still block enforcement in the case, plaintiffs' lawyers said Wednesday, if the company posts a bond while appealing to Ecuador's national court. The size of that bond would be determined by the appeals court judges who issued Tuesday's decision, the lawyers said.
Brazil may play role
The plaintiffs have not indicated where they might seek to enforce the judgment. But a memo from their legal team, obtained by Chevron, in 2010 listed several possible countries - including Brazil. The Brazilian government has grown increasingly critical of Chevron following a Nov. 7 oil spill, issuing fines and indicting several company executives for environmental crimes and obstruction of justice.
Karen Hinton, a spokeswoman for the Ecuadoran plaintiffs, would not say on Wednesday whether they would pursue enforcement in Brazil.
"We're going to be looking at any places where their laws and their history with oil companies might be advantageous for us," she said.