Indigenous Villagers Plan to Seize Chevron's $106 Million Arbitral Award In Ecuador

Quito, Ecuador – In what could be a huge boost to their campaign to force Chevron to comply with a $9.5 billion environmental judgment in Ecuador, rainforest villagers plan to enforce a court order directing them to take possession of a $106 million arbitral award won recently by the oil giant from Ecuador's government in a case that recently became final in Dutch courts.

The planned seizure of Chevron's arbitral award – part of a global effort by the villagers to step up their enforcement of the judgment – is an example of the oil company's rising business and legal risk related to its environmental contamination in Ecuador's rainforest, said Pablo Fajardo, the lead lawyer for the communities that hold the judgment.

After an eight-year trial, an Ecuador court in 2011 found that Chevron had deliberately dumped billions of gallons of toxic waste into the rainforest when it operated hundreds of well sites from 1964 to 1992. The dumping caused a wave of cancers and other environmental problems that have decimated indigenous groups, according to the court decision.

Locals call the disaster the "Chernobyl of the Amazon" and have vowed to fight Chevron until the entire judgment is collected.

"The Ecuadorian victims of Chevron's toxic dumping have a lawful right to obtain this arbitral award and other company assets until their judgment is fully satisfied," said Fajardo. "Our people are suffering from a humanitarian crisis and many lives are at stake because Chevron – unlike BP in the United States – refuses to pay to clean up its pollution."

The $106 million figure comes from the amount of an arbitral award that Chevron won from Ecuador under the U.S.-Ecuador Bilateral Investment Treaty in an unrelated series of commercial disputes dating to the early 1990s between the American company and Ecuador's state-owned oil company, Petroecuador. A Dutch court last week denied Ecuador's last appeal of the award, rendering the arbitral decision final.

That award is now colliding with a local court order (here and here) from June 2013 that allows the villagers to collect any Chevron assets in Ecuador to satisfy the judgment in the separate environmental case. Chevron years ago sold off its main assets in Ecuador, including several Texaco service stations, in anticipation of losing the case. (For a summary of the overwhelming evidence against Chevron in Ecuador, see here).

The $106 million arbitral award is thus Chevron's only substantial asset in Ecuador other than some trademarks that the villagers have in their possession but have been unable to monetize, said Fajardo.

The court order secured by Fajardo requires ministers in Ecuador's government to turn over the Chevron arbitral award given the final order in the environmental case. Chevron's appeal of the environmental judgment was denied unanimously by two separate appellate courts in Ecuador, including the country's highest court in a 5-0 decision issued in November of last year.

The Ecuador court order redirecting payment from Chevron to the villagers names Ecuador's Attorney General and Minister of Finance as individuals who must comply, among others. Such an order is considered routine under Ecuador law to collect on a judgment from a party that refuses to pay, said Fajardo.

The latest move sets up another showdown between Chevron and the pesky indigenous and farmer communities who have done battle with no fewer than 60 law firms and 2,000 legal personnel hired by the oil company. The villagers first filed the environmental case in U.S. federal court in 1993, but it was moved to Ecuador at Chevron's request in 2002 after the company praised the independence and fairness of the nation's courts and promised to accept jurisdiction there.

As evidence against it mounted in the subsequent trial, Chevron started to attack Ecuador's courts as unfair and sued Fajardo and U.S. lawyer Steven Donziger under a federal racketeering statute in the same New York court where it originally argued the case should not be heard. Chevron this year won a controversial non-jury decision in that case that led to an injunction blocking Donziger (who has worked on the case since its inception) from collecting his fees, but the order does not stop the villagers from enforcing their judgment in other jurisdictions. (Donziger is appealing that decision; his appellate brief is available here and a summary of how Chevron abused the trial process and dropped all damages claims to avoid a jury of impartial fact finders is here.)

With interest, the Ecuador environmental judgment has risen to close to $10 billion, said Fajardo – an amount he called "modest" compared to BP's $46 billion liability for its smaller spill in 2010 in the Gulf of Mexico. Chevron grosses roughly $250 billion per year, making it the third largest company in the United States.

In Canada, where Chevron has $15 billion of assets held by various wholly-owned subsidiaries, the villagers hope to be in trial in 2015 to collect the entirety of the Ecuador judgment, said Fajardo. Argument before Canada's Supreme Court on a relatively narrow jurisdictional question is scheduled for Dec. 11 in Ottawa.

The argument in Canada – an appeal by Chevron of an intermediate appellate court decision in favor of the Ecuadorians – will determine whether jurisdiction over Chevron can be established for judgment enforcement purposes. The villagers are represented by Alan Lenczner, one of the country's top litigators.

Relevant briefs from the Canada case before the Supreme Court are available here and here.

In a related issue, and in what might portend difficulty for Chevron, the Canada Supreme Court recently denied an attempt by the U.S. Chamber of Commerce to intervene on Chevron's behalf with an amicus brief. In the meantime, an effort by the corporate law group at the Canadian Bar Association to file an amicus brief in favor of Chevron has caused a minor revolt from indigenous and aboriginal lawyers in the country, according to this article in the Toronto Globe & Mail.

The villagers also have an enforcement action proceeding before Brazil's Supreme Court, which just assigned a new judge to the case. In Argentina, a lower court order to embargo revenues from Chevron's local subsidiary was overturned last year on technical grounds by the country's Supreme Court, but local counsel plans to re-file the action shortly, said Fajardo.

Donziger, the longtime U.S. legal advisor to the Ecuadorian communities, said the issue regarding the arbitral award that Chevron claims it is owed is simple.

"Chevron cannot on the one hand refuse to pay a valid final court judgment in its chosen forum of Ecuador, and on the other hand pretend to collect a separate judgment against Ecuador's government in an unrelated case," he said.

"Such selective enforcement would show favoritism toward a wealthy litigant and would undermine the rule of law for everybody," he added.

For more on Chevron's increasing business risk stemming from the Ecuador judgment, see this article by Donziger published recently in Inside Counsel magazine.

For background reporting on the case, see this recent article from Rolling Stone; this segment describing Chevron's deliberate dumping on 60 Minutes; this profile of Fajardo in Vanity Fair; and this photo essay on the human impact of Chevron's contamination in the Huffington Post.