MANHATTAN (CN) - An international arbitration panel ordered Ecuador to stop its courts from enforcing an $18 billion judgment against Chevron, on the same day a U.S. federal judge put up a new hurdle standing in between indigenous Ecuadoreans seeking to collect award.
After an 18-year legal battle, an Ecuadorean provincial court found Chevron liable for a massive oil spill allegedly caused by its predecessor Texaco, which had drilled in the Amazon from 1964 to 1992.
Chevron fought the verdict as fraudulent - and claimed it should never have been tried in the first place because of a $40 million settlement agreement its predecessor Texaco signed with the Ecuadorean government in 1995.
A group of Ecuadorean natives claimed that they were not bound by their government's agreement, which they insisted Texaco broke by conducting a "sham" clean up that did not mitigate the pollution's impacts.
Since that time, U.S. and Ecuadorean courts generally have disregarded the 1995 settlement in hearing the case.
But a United Nations trade arbitration panel reached a different conclusion on Thursday, ruling that Ecuador must quash its citizens' case.
Ecuador complained that the arbitration panel's order demands that it defy its constitutional separation of powers.
Karen Hinton, a spokeswoman for the Ecuadoreans suing Chevron, echoed that sentiment in a statement.
"This arbitration panel has just lost the last remnants of its legitimacy by trying to order a sovereign nation to violate its own Constitution and quash the legal claims of citizens who are literally dying off in the rainforest due to Chevron's pollution," Hinton said.
The Ecuadorean judiciary's appeal to its independence took a hit on Thursday, however, after its highest court upheld the criminal convictions of three journalists known for criticizing President Rafael Correa.
The El Universo writers face three years in prison and $40 million in fines, in a verdict that Reporters Without Borders warned would chill a free press in Ecuador.
"The consequences of this decision have implications far beyond the El Universo case," Reporters Without Borders said, referring to the newspaper the reporters represented. "The National Court of Justice has rubber-stamped a license for self-censorship which could well have repercussions on other media organizations in the future, whatever their politics and whatever kind of government is in place."
Roundly criticized by newspapers across the political spectrum, the verdict became more ammunition in Chevron's arsenal against Ecuador's courts.
"The world was given a vivid example of corruption in the courts of Ecuador yesterday when Ecuador's Supreme Court upheld President Correa's $40 million award and confirmed a three-year prison sentence on three directors and a journalist from El Universo - all for criticizing President Correa," Chevron spokesman Kent Robertson said.
Chevron has pointed to the El Universo case as an example of Ecuador's "politicized" courts, which the oil giant claims the Ecuadoreans manipulated to extort the $18.2 billion judgment.
Though dormant for months, Chevron's federal anti-racketeering charges against the Ecuadoreans was revived on Thursday, when U.S. District Judge Lewis Kaplan lifted a stay on the case.
Robertson compared Chevron's position to that of the convicted El Universo journalists.
"The case against Chevron is similarly fabricated, and illegal under Ecuadorian law. The plaintiffs' own documents reveal that they secretly wrote a report by 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."
Meanwhile, the Ecuadoreans have also accused Chevron of dirty dealings.
"Chevron's RICO lawsuit is yet another attempt to distract attention from the company's horrendous misconduct in Ecuador," Hinton said. "Should the case move to trial, we look forward to a full airing of evidence that Chevron tried to sabotage the court the process and bribe Ecuador's government to evade its legal responsibilities. In the end, Chevron runs a huge risk of losing the RICO case and being on the hook for liability far above the $18 billion court judgment in Ecuador for environmental damage."
The parties will report to Judge Kaplan again on March 7.
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