The Chevron Ecuador Lawsuit Trial | Chevron's Views & Opinions

The Chevron Ecuador lawsuit and Correa’s libel suit discussed by Theodore J. Boutrous, Jr. in Forbes.

The scandal that engulfed Ecuadorian President Rafael Correa’s $42 million criminal libel judgment against the newspaper El Universo (and the three-year prison sentences for its editors and directors) provides powerful new evidence why courts around the world should reject efforts by U.S. plaintiffs’ lawyers to enforce a fraudulent $18.2 billion Ecuadorian judgment against Chevron. While the two cases involve different types of legal claims, they are products of the same corrupt judiciary and trials marred by remarkably similar violations of the rule of law.

As detailed in a Washington Post editorial, the handling of the case was “alas, worthy of a banana republic. After four changes of judge, a ‘temporary’ magistrate took over the case, held one hearing, and—33 hours after his appointment—issued the 156-page ruling. A subsequent independent investigation determined that he did not write it, and that the author was probably Mr. Correa’s attorney.”

Recently, a judge previously assigned to the case provided further details corroborating that the President’s attorney wrote the judgment against the paper. She also revealed that she had been offered a bribe by Mr. Correa’s attorney to rule in his favor (which she refused). After going public, she immediately fled the country fearing for her safety.

Last week, Nobel laureate Mario Vargas Llosa wrote that these developments show, “how unreliable the Ecuadorian courts are in matters of justice due to their feudal ties to political power.”

In the face of that condemnation and mounting international outrage, Mr. Correa issued “pardons” in the case – but Mr. Correa already got what he wanted out of the El Universo affair. He sent a clear message to the press and everyone else that he controls the courts, and can use them as a weapon whenever and however he wants, including to punish and chill free speech by his critics. It is ironic that, in pursuing a lawsuit he brought to attack a newspaper for calling him a “dictator,” Mr. Correa demolished two key pillars of a democracy: a free press and an independent judiciary.

Meanwhile, American plaintiffs’ lawyers are pursuing fraudulent environmental claims against Chevron in Ecuador. The parallels to the El Universo and Chevron cases are striking.

Court rulings and documents establish that the Chevron case, like El Universo’s, features direct interference by President Correa, a judicial bribery scheme, superhuman judicial speed reading, a judgment ghostwritten by the plaintiffs’ lawyers, bogus criminal charges, irregular selection of temporary judges, and an offer to eliminate part of the judgment in exchange for a coerced “apology.” In both the El Universo and Chevron cases, international bodies have ordered Ecuador to prevent enforcement of these improper judgments.

Seven U.S. federal courts have found that the record shows fraud tainting the Ecuadorian proceedings against Chevron. One court said evidence of “inappropriate, unethical and perhaps illegal conduct” by the Ecuadorian plaintiffs’ representatives has sent “shockwaves through the [United States’] legal communities.” Another judge remarked, “what has blatantly occurred in this matter would in fact be considered fraud by any court.”

These courts were reacting to videotaped evidence obtained through discovery showing that the plaintiffs’ representatives ghostwrote the report of a purportedly “independent” court expert to support their baseless claims for billions of dollars, and evidence of secret payments made to the expert. When details of this scheme emerged, the plaintiffs’ attorneys admitted in internal emails that they could all “go to jail.”

Chevron’s case is now pending before the same Ecuador court that affirmed the judgment against El Universo. Anticipating that the fix is in and they will win, the plaintiffs’ lawyers already are threatening to bring multiple foreign actions to enforce their fraudulent judgment against Chevron, which has no assets in Ecuador. But courts that respect the rule of law should refuse to enforce a judgment procured by fraud in a judicial system lacking due process and impartial judges.

The Chevron case exemplifies a disturbing phenomenon: U.S.-based plaintiffs’ lawyers colluding with corrupt foreign courts to fabricate whopping civil judgments against American companies, and then using the bogus judgments to try to coerce a big settlement. Federal courts in Florida recently refused to enforce a $97 million Nicaraguan judgment against Dole Food and other U.S. companies.

The lawyers suing Chevron are well aware that the Ecuador judiciary is plagued by corruption, as the U.S. State Department and multiple international organizations have recognized. Indeed, the Ecuadorians’ lead U.S. lawyer is caught on tape declaring all the Ecuadorian judges are “corrupt! It’s – it’s their birthright to be corrupt” and admitting that he and his team engaged in “dirty” tactics, which they “would never do . . . in the United States.”

The lessons of the El Universo debacle should help thwart the fraud underway against Chevron and bolster its ongoing international arbitration with the Republic of Ecuador over the case. Hopefully, it will also curb the appetite of U.S. plaintiffs’ lawyers seeking to exploit corrupt and politicized foreign courts for their own personal gain.

Permanent Court of Arbitration Panel Establishes Jurisdiction Over Claims Against Republic of Ecuador

Chevron Corp. (NYSE: CVX) today announced that an international arbitration tribunal, convened under the authority of the U.S.-Ecuador Bilateral Investment Treaty (the “BIT”) and administered by the Permanent Court of Arbitration at The Hague, ruled that it has jurisdiction to hear Chevron’s claims against the Republic of Ecuador. Chevron filed its request for arbitration in 2009, claiming that the Republic violated its obligations under the BIT and international law.

Chevron’s arbitration claim stems from the government of Ecuador’s exploitation of the ongoing environmental lawsuit against the company in Ecuador and its courts’ failure to administer justice in a trial that has been marred by fraud. Additionally, Chevron maintains that the government of Ecuador has failed to uphold prior settlement and release agreements that the government of Ecuador entered into with Texaco Petroleum Company (now a Chevron subsidiary) when the consortium between Texaco Petroleum and Petroecuador was terminated.

“With today’s decision, Chevron will proceed to the merits of its arbitration to hold Ecuador responsible for the fraud being committed through its judicial system. The documentary and video evidence of that fraud is irrefutable. The dysfunction of Ecuador’s judiciary is well documented in both the Lago Agrio case and the recent El Universo case involving a ghostwritten judgment against journalists,” said Hewitt Pate, Chevron vice president and general counsel. “Rather than allow American plaintiffs’ lawyers to cause even more damage for which Ecuador may ultimately be held responsible, the Republic should take this opportunity to pursue a more constructive course.”

Chevron’s claim will now proceed to the merits phase of the arbitration. In prior rulings, the tribunal has put the Republic on notice that if Chevron’s arbitration ultimately prevails, “any loss arising from the enforcement of (the Lago Agrio judgment) may be losses for which the (Republic) would be responsible to (Chevron) under international law.”

On Feb. 16, 2012, the tribunal issued a Second Interim Award ordering the Republic of Ecuador—and all of its branches, including the judiciary—to prevent enforcement and recognition of the $18.2 billion Lago Agrio judgment, both within and without Ecuador. The award expands upon a prior award requiring Ecuador to “take all measures at its disposal to suspend or cause to be suspended the enforcement or recognition within and without Ecuador of any judgment.”

In August 2011, a different international arbitration tribunal convened under the BIT awarded Chevron and Texaco Petroleum $96 million in a claim against the Republic of Ecuador related to past oil operations. The tribunal found that Ecuador’s courts violated the BIT and international law through their decade-long delays in ruling on certain commercial disputes between Texaco Petroleum and the Ecuadorian government.

The tribunal’s decision on jurisdiction may be accessed here. A copy of Chevron’s 2009 arbitration claim may be accessed here.

Chevron is one of the world’s leading integrated energy companies, with subsidiaries that conduct business worldwide. The company is involved in virtually every facet of the energy industry. Chevron explores for, produces and transports crude oil and natural gas; refines, markets and distributes transportation fuels and lubricants; manufactures and sells petrochemical products; generates power and produces geothermal energy; provides energy efficiency solutions; and develops the energy resources of the future, including biofuels. Chevron is based in San Ramon, Calif. More information about Chevron is available at www.chevron.com.

In the past week, there have been notable developments in the various Ecuador cases: the international tribunal hearing Chevron’s arbitration claim issued a Second Interim Award directing the Republic of Ecuador and all of its branches—including the judiciary—to prevent the Lago Agrio judgment from being enforced, Chevron’s RICO claims  were restarted, and Chevron’s appeal is advancing to Ecuador’s National Court of Justice.  The appellate court in Lago Agrio also declined Chevron’s request to suspend the bond requirement and declined to abide by the tribunal’s First Interim Award instructing the Republic to take measures to prevent enforcement.  And while these events have been widely covered, there are additional aspects to the overall Ecuador story worth noting:

• Impact of the Second Interim Award: While the Sucumbíos court has defied the First Interim Award issued by the international tribunal, it did not address the Second Interim Award issued on February 16.  It remains to be seen what the Republic will do to comply with the tribunal’s Award, but the tribunal has put Ecuador on notice that if Chevron is ultimately successful in its arbitration, the Republic may ultimately be liable for any damages Chevron incurs.
• The President’s Control of Ecuador’s Judiciary: The world was given a vivid example of corruption in Ecuador courts last week when Ecuador’s National Court of Justice upheld President Correa’s $40 million award and confirmed a three-year prison sentence for three directors and a journalist from El Universo—for criticizing President Correa.  “The handling of the case by the judiciary was,” in the words of the Washington Post, “alas, worthy of a banana republic.  After four changes of judge, a ‘temporary’ magistrate took over the case, held one hearing, and—33 hours after his appointment—issued the 156-page ruling.  A subsequent independent investigation determined that he did not write it, and that the author was probably Mr. Correa’s attorney.”
• Ghostwriting of the Lago Agrio Judgment: The case against Chevron is similarly fabricated and illegal under Ecuadorian law.  The plaintiffs’ own documents reveal that they secretly wrote a report by a purportedly “independent” court expert upon which the judgment is based, and then ghostwrote the judgment itself, all the while admitting internally that the evidence did not support their allegations and that they could “all go to jail” if their wrongdoing was revealed.  The plaintiffs’ lawyers have never provided an explanation as to how their internal work product found its way into the Lago Agrio judgment.
• Enforcement: The plaintiffs’ representatives have repeatedly stated that they intend to proceed with enforcement of their fraudulent judgment around the world.  Yet, contrary to past assertions, the plaintiffs’ representatives are cooling to the idea of enforcement in the U.S.  Perhaps that’s because eight federal courts that have found the plaintiffs’ representatives engaged in fraud during the Lago Agrio trial.  That theory is reinforced in the plaintiffs’ lawyers’ Invictus strategy memo suggesting the most efficient approach is to focus on countries that don’t have the authority to consider doubts about “the integrity of the rendering court.”  The memo also discusses a preference to keep any funds recovered “outside the reach of Ecuadorian law.”
• Collusion with the Government: While the plaintiffs’ lawyers don’t seem to trust Ecuador with their money, they’ve happily solicited the government’s interference with “Ecuador’s independent courts.”  A 2007 e-mail between the plaintiffs’ spokeswoman in Ecuador and lead American lawyer Steven Donziger recaps a meeting the plaintiffs’ representatives held with President Correa, the Attorney General, and the Minister of the Environment.  The report to Donziger relays that the President “asked the Attorney General to do everything necessary to win the trial” and stated that the President “would call the judge” presiding over the case.  According to the e-mail, the President gave the plaintiffs “fabulous support.”

The plaintiffs’ lawyers’ documented fraud and the acknowledged interference of Ecuador’s government long ago compromised the integrity of the Lago Agrio trial.  But these facts raise a new set of questions.  If the plaintiffs’ lawyers had confidence in their judgment, why wouldn’t they seek to enforce it in the U.S.?  Likewise, if there was merit to their case, why engage in fraud?  Finally, does attempting to enforce a fraudulent judgment in a new jurisdiction constitute another fraud on a new court?

The answers appear self evident but it seems the plaintiffs’ representatives have evaded answering these questions so far.  It would be interesting to know what they have to say.

Yesterday an international arbitration tribunal issued a Second Interim Award ordering Ecuador to prevent enforcement and recognition of the $18.2 billion Lago Agrio judgment, both within and without Ecuador. The tribunal, convened under the authority of the U.S.-Ecuador Bilateral Investment Treaty (the “BIT”) and administered by the Permanent Court of Arbitration at The Hague, is considering the claims of Chevron Corporation and TexPet (a Chevron subsidiary) that Ecuador has breached its obligations under the BIT and international law through the Lago Agrio litigation, the resulting judgment, and the appellate decision upholding the judgment.

“Both Chevron and the Republic of Ecuador benefit from today’s award, which upholds the rule of law and prevents enforcement of the fraudulent Lago Agrio judgment. Chevron welcomes the constructive steps that Ecuador has recently taken, such as the announcement that Petroecuador will remediate sites impacted by oil production and the acknowledgement that the tribunal’s Award applies to all branches of the Ecuadorian State,” said Hewitt Pate, Chevron vice president and general counsel. “We will continue to seek opportunities for constructive discussion with the Republic of Ecuador to resolve this pending BIT arbitration. Rejecting the fraudulent claims and misconduct of the corrupt American plaintiffs’ lawyers is the best way to end the harm they are causing to the people and reputation of Ecuador.”

The Second Interim Award directs the Republic of Ecuador, including “its judicial, legislative, or executive branches” to “take all measures necessary to suspend or cause to be suspended the enforcement and recognition within and without Ecuador” of the Lago Agrio judgment. In particular, the tribunal states that these measures must “preclude any certification” by Ecuador or its courts that would cause the judgment to become enforceable (referring to a procedural step in Ecuador in which a party must obtain a certification from the courts in order to enforce a judgment). Yesterday’s Award is “immediately final and binding” on the parties and Chevron will promptly post a $50 million bond required by the tribunal. The Award expands on the tribunal’s prior Interim Measures Order dated February 9, 2011 and First Interim Award dated January 25, 2012, which remain in effect.

The tribunal’s Second Interim Award can be accessed at http://www.chevron.com/ecuador/ .

Chevron is one of the world’s leading integrated energy companies, with subsidiaries that conduct business worldwide. The company’s success is driven by the ingenuity and commitment of its employees and their application of the most innovative technologies in the world. Chevron is involved in virtually every facet of the energy industry. The company explores for, produces and transports crude oil and natural gas; refines, markets and distributes transportation fuels and other energy products; manufactures and sells petrochemical products; generates power and produces geothermal energy; provides energy efficiency solutions; and develops the energy resources of the future, including biofuels. Chevron is based in San Ramon, Calif. More information about Chevron is available at www.chevron.com .

Filing Asks National Court of Justice to Review and Overturn Appellate Judgment

Chevron Corporation today announced that it has filed an appeal seeking review by Ecuador’s National Court of Justice of the adverse appellate judgment issued against the company in early 2012 by a panel of three temporary judges in the environmental lawsuit in Ecuador.

“Today’s appeal gives the National Court of Justice an opportunity to correct the grave injustices that have occurred in this case.”

Chevron’s appeal, called a petition for cassation, details multiple legal grounds for reversal of the January appellate court decision. The appeal establishes that the lower courts violated the Ecuadorian constitution by refusing to take any corrective action in response to the extensive fraud and corruption committed by plaintiffs’ lawyers and their representatives. The filing goes on to outline several other fundamental points, including: that the lower court’s judgment is unlawfully premised on fraudulent and scientifically baseless evidence; that the judgment is illegally based upon the retroactive application of law; that it ignores the releases of liability granted to Texaco Petroleum Co. (Tex Pet) by the government of Ecuador following a cleanup of Tex Pet’s share of remediation sites in the 1990s; and that the judgment awarded punitive and other damages never requested in plaintiffs’ complaint and not allowed under Ecuadorian law.

“Throughout the course of this litigation, judges corruptly operating in concert with the plaintiffs’ lawyers have created, rather than corrected, injustice,” said Hewitt Pate, Chevron vice president and general counsel. “Today’s appeal gives the National Court of Justice an opportunity to correct the grave injustices that have occurred in this case.”

In addition to the cassation appeal filing today, Chevron continues to seek recourse through legal proceedings outside of Ecuador. In the arbitration proceedings Chevron instituted against Ecuador in The Hague under the U.S.-Ecuador Bilateral Investment Treaty (BIT), the Tribunal issued an order on February 9, 2011, requiring Ecuador to take all measures at its disposal to suspend enforcement of the Lago Agrio judgment until further order of the Tribunal. The Tribunal also recorded that if it were established that any judgment made by an Ecuadorian court in the Lago Agrio case was a breach of an obligation Ecuador owed to Chevron as a matter of international law, any loss arising from the enforcement of such judgment (within and without Ecuador) may be losses for which Ecuador would be responsible to Chevron under international law.

Based on the Tribunal’s order, Chevron has asked that the Ecuadorian appellate court take all steps to suspend enforcement of the Lago Agrio judgment until further order of the Tribunal, including suspension of any requirement that Chevron post a bond to prevent enforcement of the judgment during the cassation appeal. Any demand that Chevron post a bond in this case would be a violation of Ecuador’s international obligations under the order of the BIT Tribunal, and Chevron has no obligation to post such a bond.

The plaintiffs have indicated that they will seek to have Ecuador defy the BIT Tribunal’s order by pursuing enforcement of the corrupt judgment outside of Ecuador before the BIT Tribunal has an opportunity to review the merits of the case. In the event the plaintiffs carry through on their threats to file enforcement actions against Chevron affiliates in other countries, Chevron will take appropriate steps to defend against this fraud.

Chevron also is pursuing an action in the U.S. District Court for the Southern District of New York against the Lago Agrio plaintiffs’ representatives for violations of the federal racketeering statute, common-law fraud and other relief based upon the overwhelming evidence of their fraud and corruption.

A copy of Chevron’s cassation appeal can be accessed here.

Chevron Corporation today announced there has been an adverse ruling by the panel of three temporary judges presiding over appellate proceedings in the Provincial Court of Justice of Sucumbios in Lago Agrio, Ecuador in an environmental lawsuit involving Texaco Petroleum Company, upholding a lower court’s ruling from February 2011.

Chevron continues to seek recourse through legal proceedings outside of Ecuador. In the arbitration proceedings Chevron instituted against Ecuador in The Hague under the U.S.-Ecuador Bilateral Investment Treaty, the Tribunal issued an order on February 9, 2011 requiring Ecuador to take all measures at its disposal to prevent enforcement of the Lago Agrio judgment until further order of the Tribunal. The Tribunal also recorded that if it were established that any judgment made by an Ecuadorian court in the Lago Agrio case was a breach of an obligation Ecuador owed to Chevron as a matter of international law, any loss arising from the enforcement of such judgment (within and without Ecuador) may be losses for which Ecuador would be responsible to Chevron under international law. Chevron also is pursuing an action in the U.S. District Court for the Southern District of New York against the Lago Agrio plaintiffs’ representatives for violations of the federal racketeering statute, common-law fraud, and other relief based upon the overwhelming evidence of their fraud and corruption.

In response to the ruling, Chevron issued the following statement:

“Today’s decision is another glaring example of the politicization and corruption of Ecuador’s judiciary that has plagued this fraudulent case from the start. The Lago Agrio judgment was procured through a corrupt and fraudulent scheme, much of which was captured on film and memorialized in the plaintiffs’ representatives’ own emails and correspondence. Their misconduct includes fabricating expert reports, manufacturing evidence, bribing and colluding with court officials, waging a campaign of intimidation against judges, and even ghostwriting parts of the verdict itself.

“Evidence of these crimes has been provided to Ecuador’s courts and prosecutors, but authorities there have taken no corrective actions. In the United States, however, no less than eight federal judges have found that the trial in Ecuador has been marred by the fraud and misconduct of the plaintiffs’ representatives. And an international Tribunal presiding in the Permanent Court of Arbitration in The Hague has ordered Ecuador to take all measures at its disposal to suspend enforcement of the Lago Agrio judgment within and without Ecuador.

“Chevron does not believe that the Ecuador ruling is enforceable in any court that observes the rule of law. The company will continue to seek to hold accountable the perpetrators of this fraud.”

Background:

Chevron is defending itself against false allegations that it is responsible for environmental and social harms in the Amazon region of Ecuador. Chevron has never conducted oil production operations in Ecuador, and its subsidiary, Texaco Petroleum (TexPet), fully remediated its share of environmental impacts arising from its participation in an oil producing consortium with Petroecuador prior to 1992. After the remediation work was certified by all agencies of the Ecuadorian government responsible for oversight, TexPet received a complete release from Ecuador’s national, provincial and municipal governments prior to being acquired by Chevron in 2001. Petroecuador was the majority owner of the consortium in which TexPet participated until 1992 and has been the sole owner of greatly expanded oil operations in the former concession area over the past two decades. Last month, Petroecuador announced it will complete its remediation of the sites it is responsible for at a cost of $70 million. This figure stands in contrast to the multi-billion dollar judgment affirmed today.

Company Submits Evidence of Fraud and other Crimes to Ecuador’s Prosecutor General

Chevron Corporation today published a letter submitted to Galo Chiriboga, Ecuador’s Prosecutor General, documenting evidence of fraud and corruption in the litigation against Chevron in Ecuador.  The company called on Ecuadorian authorities to investigate the misconduct of the plaintiffs’ lawyers and the presiding judge, Nicholas Zambrano, in the drafting of the fraudulent judgment rendered against Chevron earlier this year.

Chevron submitted evidence showing that plaintiffs’ representatives—including Steven Donziger, Pablo Fajardo, Juan Pablo Sáenz, Julio Prieto, and Luis Yanza—covertly worked with Judge Zambrano to draft the judgment.  The letter states that the fraudulent conduct “is causing serious, ongoing harm to Chevron Corporation and to the Republic of Ecuador.”

“To date, the plaintiffs’ representatives have failed to offer any explanation for how their internal, never-filed documents came to appear in the fraudulent Lago Agrio judgment,” said Hewitt Pate, Chevron vice president and general counsel.  “Nor has the Judge explained how the plaintiffs’ private work came to be included in the decision bearing his name.  In the interest of justice and due process, it is incumbent upon the authorities in Ecuador to investigate the full extent of this misconduct.”

There is substantial and unrefuted evidence that the judgment against Chevron is fraudulent. The evidence provided to the Prosecutor General includes:

• The judgment copies exact language from a June 2009 email that Fajardo sent to Donziger, Sáenz, and Prieto.  The body of the email includes a short memo from a not-yet identified third party and a “transcri[ption]” of a published Ecuadorian court opinion.  That “transcription” contains numerous mistakes not found in the published court opinion itself.  The judgment repeats all of these mistakes, exactly, as well as a citation error Fajardo made in his email.
• The judgment also refers to several test samples by names that are not found in the record, but rather in private spreadsheets created by the plaintiffs, which contain information from the plaintiffs’ own database.  The judgment replicates errors contained in the plaintiffs’ database and replicates errors in the database attributing data to the wrong experts and confuses measurement units.
• The judgment contains language from a private memorandum authored by plaintiffs’ attorney Juan Pablo Sáenz and other members of plaintiffs’ legal team around November 2007 regarding a Chevron subsidiary’s merger with Texaco.  No fewer than fifteen instances, significant portions of the Sáenz memorandum, including entire sentences, appear verbatim or nearly verbatim in the judgment.

Much of this evidence is corroborated by expert analyses commissioned by Chevron that found the similarities between the plaintiffs’ documents and the judgment are too great to be coincidence, and concluded that either plaintiffs wrote at least part of the judgment, or the author(s) of the judgment had access to documents prepared by the plaintiffs’ representatives and lawyers that were never submitted during the trial.

“This evidence raises disturbing questions about who is really behind the Lago Agrio judgment,” added Pate.  “This is just the latest chapter in an established pattern of fraud being carried out by plaintiffs’ lawyers and their representatives.”

In addition to the letter, Chevron has submitted corresponding evidence including video outtakes, emails, and other documents to prosecutors in Ecuador.

Chevron Corporation today released the following statement from Hewitt Pate, vice president and general counsel, regarding the recent announcement by Ecuador’s state oil company, Petroecuador, that the company will complete its remediation of the sites it is responsible for under a 1995 agreement entered into with Texaco Petroleum Co. (TexPet) at the conclusion of an oil-producing consortium:

“Chevron welcomes Petroecuador’s announcement that it will remediate the remaining sites it is responsible for under the remediation agreement. Petroecuador’s $70 million remediation budget, which covers an area larger than that of TexPet’s remediation, is within a reasonable cost range under U.N. standards. This figure stands in contrast to the multi-billion dollar claim fabricated by American plaintiffs’ lawyers to extort money from Chevron through a ghost-written judgment.

“The Ecuadorian government deserves credit for taking positive steps to help the people and environment of the Oriente and to break the cycle of corruption and misinformation caused by the fraudulent case against Chevron.

“Petroecuador’s remediation should be completed without further interference, and the perpetrators of the fraudulent litigation — who have lobbied to delay the remediation — should be brought to justice. Chevron would welcome a constructive dialogue with the government of Ecuador on both topics.”