Ecuadorian Victims Secure Rights to $96 Million to Compensate Them in Chevron Oil Disaster

Amazon Defense Coalition

Amazon Defense Coalition
Contact: Paul Paz y MiƱo: +1 510.281.9020 x302,

Quito, Ecuador – The plaintiffs in a successful suit against the giant oil company Chevron for contaminating the land and water supplies of 30,000 residents of Ecuador's Amazon region have secured the right to collect $96 million owed to Chevron in Ecuador.

On June 6 a U.S. District Court in Washington, D.C., confirmed an award given to Chevron by an arbitration panel in The Netherlands earlier this year, stemming from a long commercial dispute between the California-based oil company and the state oil company of Ecuador. After years of legal wrangling, the arbitrators awarded $96 million to Chevron on its disputed claim that the Ecuadorian government breached its agreement over the allocation of oil drilled jointly by Texaco (now part of Chevron) and PetroEcuador between 1973 and 1992. The plaintiffs in the environmental contamination suit were not involved in the original commercial dispute between their government and Chevron. 

Today's embargo order in Ecuador in effect transfers the rights to the $96 million arbitral award to the Ecuadorian villagers harmed by Chevron. This means that the villagers and not Chevron are entitled to the payment of the award. The villagers will no longer need to depend on Chevron to pay the first installment of the valid $19 billion contamination verdict to at least start remediating the damage from Chevron's pollution. Instead, the villagers will begin to collect on their judgment with the sums that Chevron is owed under the arbitral award.

Last week Dr. Wilfrido Erazo, presiding judge of the court of Sucumbios province, where the pollution case was also heard, decided that any funds paid by the government to resolve the dispute with Chevron should be paid directly to the Ecuadorian villagers that possess the much larger judgment owed by the oil company – a debt that it has steadfastly refused to pay. Here is his order.

"Fortunately, Ecuador's tax dollars will not flow out of the country to this rich and lawless corporation," said Humberto Piaguaje, coordinator for people who live in the area contaminated by Chevron.  "Instead the funds will be escrowed and, we hope, soon made available to the people to begin the process of remediating our lands and dealing with the health problems of our people caused by Chevron's reckless behavior."

According to the US court order confirming the arbitral award available here, Texaco entered into a contract with Ecuador in 1973, permitting Chevron to exploit oil reserves in Ecuador's Amazon region on the condition that Chevron provide a percentage of its crude-oil production at a reduced price to meet Ecuadorian domestic-consumption needs. The agreement expired in June 1992 and Texaco removed its assets, leaving behind the ruins of decades of environmental despoliation. Texaco's abandonment of Ecuador coincided with the villagers' original lawsuit filed in New York for the oil companies' willful dumping of billions of gallons of toxic pollutants in one of the world's most biodiverse ecosystems.

As Texaco was abandoning its works in Ecuador, the company filed seven breach-of-contract cases there against the government, seeking $553 million in damages for alleged breaches of the agreements.  These suits alleged that Ecuador overstated its domestic oil-consumption needs, and appropriated more crude oil than it was entitled to acquire.  The lawsuits remained pending in Ecuadorian courts and were incorporated over the government's objection into an arbitration – initiated by Chevron, which has maintained that it is not responsible for contamination stemming from the substandard oil operations – provided for under Ecuador's Bilateral Investment Treaty with the U.S. government in 2006.

The embargo is important not only as a significant, albeit initial, step toward collecting on Chevron's huge contamination debt, but also because it demonstrates a major deficiency in Chevron's international litigation strategies. As the Ecuadorian embargo shows, Chevron cannot seek to collect judgments in the US for the debts it claims are owed to its subsidiaries or predecessor companies without also being charged in overseas tribunals with the judgments and debts owed by those same companies.

"Chevron cannot have it both ways," said Pablo Fajardo, lead lawyer for the Ecuadorian plaintiffs. "It cannot act like an integrated multinational giant when collecting debts while at the same time hiding behind its complex web of international companies to avoid paying its liabilities. The embargo shows that we can turn a judicial collection effort that this outlaw corporation pursues into a collection action of our own in any court that sees the hypocrisy and injustices practiced by a company driven by greed, rather than a sense of responsibility for impoverished people in contaminated lands it has left behind."

"The government of Ecuador has strongly disagreed with the BIT arbitration process and has shown no willingness up until now to pay the arbitrators' award," said Fajardo. "But we will pursue the claim within the laws of Ecuador. We will not rest until all claims against Chevron are paid in full."

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