Hague Ruling Fails to Pull Chevron From the Weeds

(CN) - Setting the stage for the next round in Chevron's attempt to overturn a $19 billion verdict related to oil pollution in Ecuador, a tribunal said the case hinges on possible overlap with an earlier settlement.

Indigenous Ecuadorean peasants and farmers had sued Chevron's predecessor Texaco in 1993 for massive oil spills that they said wrecked their rainforest homes and public health. Two years after that case was filed in New York, the Ecuadorean government separately entered into a $40 million settlement with Texaco in which the oil company agreed to clean up the Amazon.

The indigenous plaintiffs in the New York case rejected the oil company's supposed remediation efforts as a "sham," and insisted that their government's agreement with Texaco had no bearing on their claims.

Chevron inherited the lawsuit in 2001 through its acquisition of Texaco, and the lawsuit was booted to Lago Agrio, Ecuador, where the drilling occurred. That court entered a $19 billion judgment in favor of the rainforest aborigines about a decade later.

Since Chevron no longer has assets in Ecuador, lawsuits to collect the award cropped up in Brazil, Argentina and Canada.

Chevron, meanwhile, decried the ruling as fraudulent. The company's racketeering claims back in New York against the U.S.-based attorneys for its opponents may be headed to trial in October. Chevron also turned to an international arbitration tribunal at The Hague, insisting that Texaco's 1995 settlement agreement absolved it of any liability.

On Thursday, the Permanent Arbitration Court returned a 76-page "partial award" that was elusive enough to have both parties proclaiming victory. Chevron's vice president Hewitt Pate said in a statement: "This award by an eminent international tribunal confirms that the fraudulent claims against Chevron should not have been brought in the first place."

In fact, the tribunal made no finding about the legitimacy about the Lago Agrio judgment, and was limited to dissecting the scope of the 1995 settlement agreement.

The three arbitrators found only that Chevron and Texaco protected the companies from "diffuse" or "collective" claims related to the pollution that they already had settled, but that this shield "does not extend to any environmental claim made by an individual for personal harm." The tribunal also shot down Chevron's request to hold Ecuador liable for its wide-ranging litigation expenses.

These findings prompted the Ecuadorean embassy in Washington to call the ruling a "major setback" for Chevron.

That press release, however, acknowledges that the tribunal remained silent on whether the indigenous plaintiffs "sought the vindication of their individual rights or their diffuse rights, or both."

In the final page of the ruling, the tribunal wrote that it "does not here decide (one way or the other) any part of the formal relief," though it claimed jurisdiction to do so again in the future. (Parentheses in original.)

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