By Justin Ling, VICE
13 January 2015
Two decades. Seven countries. Hundreds of lawyers. Scores of public relations specialists. Billions of dollars. Tens of thousands of barrels of oil.
That's the scorecard of the Lago Agrio case.
In what may well be one of the world's more complex and far-reaching lawsuits, the legal battle between 47 Ecuadorians, represented by their dogged American lawyer, and one of the world's biggest oil companies has stretched into its second decade. And the venue for one of its most important showdown is, surprisingly, Canada.
What's left in the middle of this battle is the environmental disaster known as the "Amazon Chernobyl."
A consortium made in heaven
The story begins in 1964, when Ecuador's military junta decided to get into the oil-drilling business. Looking to boost a flagging economy, they partnered with American-based Texaco Petroleum to develop the Lago Agrio region of the Amazon.
They set up a consortium – state-owned Petroecuador would own two thirds of the partnership, and Texaco, which would later be acquired by Chevron, controlled the rest. Texaco was chiefly responsible for the dirty work of extracting the oil and doing away with the toxic wastewater.
They developed the area over 30 years, drilling hundreds of wells and filling nearly 1,000 pits full of toxic waste in an area that is, otherwise, largely untouched. In the process, they spilled roughly 17 million gallons of crude oil, thanks to pipeline ruptures. The return on the project has been some $25 billion.
The consortium's contract was up in 1992, and Petroecuador bought out Texaco's one-third stake in the company. Texaco agreed to clean up a third of the wells and pits it had helped create.
A Texaco report says it remediated 161 of the 430 oilfield pits and seven oil spill areas for which it was responsible: "a proportion that was equal to their share in the consortium." The whole package ran the company about $40 million.
By way of comparison, a ruptured line in Michigan, which unloaded less than 900,000 gallons (roughly five percent of the size of the Lago Agrio spills), had a price tag of $1 billion.
Nevertheless, Petroecuador signed off on the deal and released Texaco from liability.
"It's really almost apocalyptic to look at."
Environmentalists allege that Texaco didn't live up to its pledge. Not even close. They point to a 2006 report from the Ecuadorian government that found 85 percent of the pits Texaco claims to have cleaned up are still dangerously toxic.
"These pits continue to pollute the environment, contaminating the water table and polluting the rivers and streams that 30,000 people depend on for drinking, cooking, bathing, and fishing," reads a report for AmazonWatch, an environmentalist NGO which has followed development in the region.
"It's really almost apocalyptic to look at," lawyer Steven Donziger says of the area. He began his work as a journalist, reporting on the Lago Agrio fields, before getting involved in the legal side of the story. Now he represents the Ecuadorians in their fight against Chevron.
He argues that Texaco deliberately cut corners in order to reduce costs, like choosing to burn off the chemicals from the pits, rather than remediate them responsibly. "This was a deliberate engineering project to externalize the cost of production to some of the most vulnerable people in the world," he told VICE.
Chevron doesn't dispute that there might be some problems in the area, but contests that it's not their fault.
"Petroecuador has been slow to remediate its majority share of pre-1992 impacts and has amassed a poor environmental record since that time," reads a statement on a Chevron website. "All remaining environmental conditions in the region are the sole legal responsibility of Petroecuador."
The Ecuadorians disagree, and say that signing a waiver with the company doesn't absolve Chevron of its, supposedly, shoddy work.
So, in 1993, 47 Ecuadorians filed a class-action lawsuit in a New York City court, on behalf of the 30,000 who they say have been affected by the contamination. The legal history that ensued is fraught and complicated – Texaco, which was acquired by Chevron in 2001, argued that the case should be heard in Ecuador, not America. When they finally won, and the case restarted in Ecuador, they continued trying to have it thrown out.
The 2011, an Ecuadorian court found that the contract that waived Texaco's responsibility for the cleanup didn't protect the company from litigation, as it was signed with Petroecuador, not the government itself. The court found Chevron liable for $8.6 billion, and ordered the sum to be doubled if the company didn't apologize within 15 days.
Chevron tried to throw a wrench into the machine: they went to an international trade arbitration panel in the Hague to declare the judgement void, because it violated a trade agreement between the United States and Ecuador. An Ecuadorian appeal court and the country's Supreme Court ignored the tribunal and subsequently upheld the ruling, albeit cutting the judgment from the initial $17 billion to $9.5 billion.
What may have seemed like a victory for the Ecuadorians was really just a small step forward. They now faced the gargantuan task of trying to collect the money. Since Chevron had no significant assets left in Ecuador left to seize, that left one option: go abroad.
"And then we'll fight it out on the ice."
Since 2011, when the Ecuadorian court ordered Chevron to pay the nearly $10 billion damages, Donziger and company have been going to foreign courts to try and enforce the ruling. Brazil, Argentina and Canada – three countries where Chevron has significant assets – were the prime targets. Chevron has been with them every step of the way.
Speaking to Newsweek in 2008, one Chevron lobbyist swore: "we're going to fight this until hell freezes over – and then we'll fight it out on the ice."
That prediction has, ironically, come true.
The American courts were forbidden from hearing the case, after an American judge sided with Chevron in finding that Donziger and his associates ran the gambit of shady legal practises in order to obtain a favourable judgement in the initial Ecuador ruling, everything from bribing judges to ghostwriting experts' reports.
Donziger rejects those claims and says Chevron is merely continuing its drawn-out attempts to destroy his credibility. He points out that the judgement was reviewed and upheld by two subsequent courts. Donziger is appealing that case in a New York court.
The cases in Brazil and Argentina, meanwhile, have been moving at a glacial pace. Donziger and his team don't exactly have time on their side – Chevron has aggressively pursued its financial backers, most of whom are based in Gibraltar, accusing them of funding a shakedown operation. It's succeeded against some, and scared off others. That's left the Ecuadorian side cash-strapped.
That leaves the Canadian courts. Chevron moved to have the case thrown out from the get-go, arguing that the Great White North has no jurisdiction to hear the case. A lower court sided with Chevron, while an appeal court found that the Ecuadorians did, indeed, have standing.
That leaves the Supreme Court to play the role of tiebreaker.
On a frigid day in Ottawa, with 20 centimetres of fresh snow on the ground, Canadian lawyers for both sides jousted before the nine justices of the Canadian Supreme Court. Chevron, and its Canadian subsidiary, argued that Ecuador and America, where Chevron is based, are the only two appropriate forums for the lawsuit. Donziger's Canadian counterparts rebutted that Canada has an obligation under international law to enforce Ecuador's ruling.
There is a litany of legal issues here. The Ecuadorians' lawyers are asking the Canadian court to enforce a judgment that has been declared illegal in both an international tribunal and an American court. Beyond that, Chevron doesn't actually have a penny in Canada – everything is owned by its Canadian subsidiary, which runs a sizeable operation in Alberta's oil sands. Under Canadian law, companies can't be held liable for the actions of their subsidiaries. In theory, the principle should also work in reverse.
Chevron Canada, however, sends billions back to its American parent every year. If the Ecuadorians win the case, even if they are forbidden from sending repo guys to seize Chevron's equipment in Alberta, they might be able to seize the cross-border profit before it reaches Chevron's hands.
The Supreme Court could issue its ruling anytime in 2015. The justices, during the hearing, seemed inclined to let it go forward. If they do, the case will begin in earnest and the fight will just be getting started.