In Key Setback, Chevron Abandons Last Legitimate Legal Claim in Ecuador Against $10B Pollution Judgment

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

Quito, Ecuador – Chevron has decided to abandon the last legitimate legal challenge to its $10 billion pollution liability in Ecuador, dealing yet another blow to the company's strategy to evade a clean-up of billions of gallons of toxic waste that courts found were deliberately dumped into the country's rainforest.

Chevron CEO John Watson's decision to give up a critical Ecuadorian law claim – available under the country's Collusion Prosecution Act (CPA) – follows a series of devastating legal setbacks for Chevron, including defeats before 18 separate appellate judges in Ecuador and Canada. It also represents a major step forward for rainforest villagers as they try to seize Chevron's assets in Canada and Brazil to pay for a clean-up of toxic waste discharged by the company into the rivers and streams of their ancestral lands, decimating indigenous groups and causing an outbreak of cancer.

Leaders of the affected communities, who have fought Chevron's scorched-earth litigation strategy for two decades, assert the company abandoned the CPA claim because it knew it would lose on the merits. "This is another example of Chevron bailing out of any court where it knows its incredibly weak evidence will not carry the day," said Luis Yanza, Goldman Prize winner and the representative of the Amazon Defense Coalition, the group representing the 80 indigenous and farmer communities who won the judgment.

Paul Paz y Miño, a director with the environmental group Amazon Watch, characterized Chevron's decision as a major victory for the affected communities.

"It is obvious that Chevron believes that its legal position in the Ecuador case is weakening," said Paz y Miño, who works with the rainforest communities to hold Chevron accountable. "Watson needs to stop the greenwashing and comply with the law so vulnerable indigenous communities can receive immediate relief to stave off more cancer deaths and possible extinction."

Although Chevron's abandoned legal claim is technical in nature, it is hugely significant in terms of the overall dynamics of the case.

Lawyers for the company recently let lapse a five-year deadline that allows the losing party in an Ecuadorian civil case to use the CPA to file a separate lawsuit to reverse a judgment on the grounds that it was obtained illegally. The CPA allows a collateral claim similar to a habeas corpus proceeding in the United States for a person trying to overturn a conviction. Experts believe the CPA is tailor-made for procedural claims like those Chevron has made against the environmental judgment; a win by Chevron on the CPA claim in theory would erase all of the company's liability.

Chevron's abandonment of the CPA claim follows the almost total collapse in recent months of its evidence and the disclosure of an internal whistleblower video showing company technicians hatching an elaborate plot to try to hide oil field pollution from Ecuador's courts.

Chevron's star witness, Alberto Guerra, admitted under oath earlier this year that he lied about key evidence and testified falsely in a U.S. federal court after being coached for 53 days by company lawyers. Separately, a forensic computer analysis demanded by Chevron ended up destroying the company's claim the judgment was "ghostwritten" by the plaintiffs and led to charges the company falsified evidence before a U.S. federal judge. (The forensic report proved the trial judge wrote the judgment on his computer, saving it in a Word document 484 times.)

In Canada, where courts are considering the seizure of Chevron's assets, the abandonment of the CPA claim likely will be viewed with disfavor and will prompt more scrutiny of the company's flawed evidence, said Aaron Page, a U.S.-based lawyer for the villagers. "Chevron's failure to pursue the CPA claim is surely to be seen by enforcement courts as another flagrant example of the company's bad faith," said Page.

In a separate international arbitration action brought by Chevron against Ecuador's government – an attempt by the company to obtain a taxpayer-funded bailout in Ecuador of its pollution liability – the failure to file the CPA claim could in effect nullify the oil giant's entire case. In that matter, a panel of private lawyers recently rejected Chevron's main defense that a remediation agreement in the 1990s absolved it of responsibility for the clean-up.

Under international law governing the arbitration proceeding, the party bringing the claim (Chevron) is required to exhaust all local remedies in Ecuador – including use of the CPA – before being allowed to obtain relief. Chevron's decision therefore could be fatal to its plan to shift the pollution liability to Ecuador's government.

"Chevron's failure to exhaust the remedies available to it … renders its denial of justice claim deficient as a matter of international law," said Ecuador's government in a recent submission to the arbitrators. (For detailed background on how Chevron is faltering in the arbitration, see this legal brief.)

Chevron has had a terrible run of late in the case, which the villagers filed in U.S. federal court in 1993. At the time, Chevron praised Ecuador's judicial system and agreed to accept jurisdiction in the South American nation. It also promised to abide by any adverse judgment that might issue. As a result of Chevron's commitments, a U.S. judge sent the case to Ecuador for trial in 2001.

As the scientific evidence against Chevron mounted in the ensuing trial, the company stripped its remaining assets from Ecuador in anticipation of losing the case. Chevron later was found liable at the trial level and before two separate appellate courts, including the country's highest court. In all, 24 separate appellate judges in Ecuador, Canada, and the United States have issued unanimous opinions against Chevron in the last few years.

Those rulings include a 5-0 decision in 2013 by Ecuador's Supreme Court affirming the environmental judgment and a 7-0 decision in 2015 by Canada's Supreme Court denying Chevron's attempt to block the collection action. Three other intermediate appellate panels – one in Canada, one in New York, and one in Ecuador – each ruled unanimously in favor of the villagers. In the meantime, interest is running on the judgment at an estimated $275 million annually.

The Canada Supreme Court decision – in a country where Chevron has an estimated $15 billion worth of assets – has created enormous difficulties for the oil giant. Chevron and its Canadian subsidiary have hired four law firms to defend the asset collection action and overall the company has used at least 60 law firms worldwide on the case, considered by many to be one of the most significant corporate accountability battles ever.

Chevron has openly engaged in an abusive strategy of "perpetual litigation" against the villagers, trying to inundate courts with frivolous motions and at one point threatening a trial judge in Ecuador with jail time if he did not throw out the case. CEO Watson's legal team has repeatedly promised that Chevron will fight the case "until hell freezes over, and then fight it out on the ice."

Chevron's decision to abandon the CPA claim is not the first time the company has used the trick of bailing out of a court case at the last minute to avoid an embarrassing loss.

In 2007, after years of litigation, Chevron suddenly withdrew a key argument it was using in U.S. federal court over a purported remediation in Ecuador after the judge (Leonard B. Sand) indicated that he thought the company's position was meritless. Chevron later rolled out the same discredited argument the U.S. judge found unconvincing to fuel years of additional litigation in the aforementioned international arbitration dispute, whose panel also ultimately rejected the same argument. That process forced Ecuador's government to spend years of effort and tens of millions of dollars in legal fees.

In 2013, Chevron suddenly abandoned a $60 billion money damages claim against the villagers on the eve of its retaliatory civil "racketeering" trial when it concluded a jury of impartial fact finders might rule against it. The dropping of the damages claim allowed the company's favored U.S. judge (Lewis A. Kaplan) to decide the case alone. Kaplan refused to admit any evidence of Chevron's wrongdoing in Ecuador, repeatedly disparaged the villagers and their counsel in open court, and failed to disclose that he held personal investments in Chevron. Chevron later falsified evidence in that case, according to court filings.

Kaplan's decision in favor of Chevron resulted from a "farcicial" proceeding and has no impact on any of the enforcement actions, said Page. It is currently under appeal before the same federal court in New York where Chevron unanimously lost a similar appeal in 2011.

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