Ecuador Lands a Victory in Chevron’s Hague Challenge

(CN) - Ecuador persuaded an arbitration tribunal in The Hague on Thursday that its settlement with Chevron did not necessarily preclude rainforest residents from suing over the same pollution that decades of oil drilling wrought in the rainforest city of Lago Agrio.

In a 60-page ruling, the tribunal sidelined what had been Chevron's longstanding contention: that the environmental lawsuit responsible for a $9.8 billion judgment against it should never have been heard in Ecuador in the first place.

Calling the decision an "important step in the right direction," Ecuador's attorney general Diego Garcia Carrion said in a statement that the decision "appropriately vindicates this office's longstanding position" that its judiciary provided "the appropriate forum" for the case.

For a time, Chevron put its faith in the Ecuadorean court system, too.

The lawsuit against Chevron began as a 1993 federal class action against Texaco, the company responsible for the drilling, in Manhattan.

When Chevron acquired Texaco in 2001, the San Ramon-based oil giant convinced the 2nd Circuit to dismiss the New York lawsuit because Ecuador's courts provided a more convenient forum.

Once in Lago Agrio, named after Texaco's former headquarters of Sour Lake, Texas, Chevron reversed course.

Though the oil giant argued that a settlement agreement Ecuador signed with Texaco in 1995 made the new case redundant, a provincial court for the rainforest city found that the settlement resolved only claims by the Ecuadorean government.

The court allowed Ecuador's citizens to prosecute their case separately in 2003.

Shortly before the Lago Agrio court handed down its Feb. 14, 2011, multibillion verdict against Chevron, the oil giant returned to New York to accuse lawyers for the Ecuadoreans of perpetrating a "shake down" against the company.

Chevron sued the Ecuadorean government separately for alleged violations of a bilateral investment treaty at The Hague. The first track of Chevron's claims attacked the origins of the lawsuit under the settlement agreement, and the second contended that a "denial of justice" took place in Ecuador.

Thursday's decision at The Hague rejects key claims within the first track of Chevron's action.

The second track revisits the allegations of the New York case, where a federal judge ruled last year that the verdict against Chevron had been "procured by corrupt means."

Chevron's spokesman Morgan Crinklaw highlighted that decision in a statement.

"The Ecuadorean judgment against Chevron has been found by a U.S. federal court to be the product of fraud, corruption and bribery," Crinklaw said. "Today's interim decision by the tribunal does not change that fact. It merely defers the question of whether in issuing that judgment Ecuador also breached its contractual agreements with Texaco."

Meanwhile, The Hague proceeding continues to heat up as Chevron and the Ecuadorean government examine the hard drive of the judge who signed the 2011 ruling against Chevron.

As Courthouse News exclusively reported, Ecuador believes that a still-confidential forensic analysis of Judge Nicolas Zambrano's computer proves the legitimacy of verdict against Chevron, based on evidence that never made it into the New York trial.

The Ecuadorean government must submit its final brief to the tribunal on Monday.

Chevron and Ecuador will then meet at The Hague again for a hearing on April 20.

That same day, the 2nd Circuit will hear the appeal of the ruling in Chevron's favor.

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