Chevron files arbitration claim in dispute with Ecuador

By OGJ editors
HOUSTON, Sept. 24
-- Saying it has “no choice,” Chevron Corp. has filed an international arbitration claim citing treaty violations in a long-running environmental dispute with Ecuador.

The company says the government of Ecuador has violated the US-Ecuador Bilateral Investment Treaty, investment agreements, and international law in pressing litigation involving Texaco Petroleum (Texpet) operations that ceased in 1992. Texpet was merged with a Chevron subsidiary in 2001.

Chevron characterizes the legal struggle as an attempt by contingency-fee lawyers to enrich themselves, complicated by an Ecuadorian judiciary that has lost independence under a regime that its background documents call “autocratic.”

Originally filed in 1993 and now before a court in Lago Agrio, the lawsuit claims environmental degradation resulting from Texpet’s work in Ecuador during the 1970s and 1980s as a partner in a concession with the old Gulf Oil and, later, the state oil company. Texpet became operator in 1976 when Gulf withdrew from the concession and left the state company, now Petroecuador, as the majority partner.

Petroecuador became operator in 1990, and the concession ended in 1992.

Chevron says the government controlled activities while the concession was in effect. When the concession ended, it argues, the parties conducted an environmental audit, after which Texpet spent $40 million as its share of environmental remediation, which the government approved, releasing Texpet from further liability.

Environmental claims
The lawsuit has spiraled into claims for more than $27 billion for environmental and other damage.

Chevron argues that the claim covers environmental, health, and social issues far beyond the oil-producing area, damage to which it says results from mismanagement by Petroecuador.

Since Texpet left the country, it says, “Petroecuador has drilled over 400 new wells in the former concession area, compared to the 321 wells that were drilled during the consortium.”

It calls Petroecuador’s environmental record as operator “notoriously poor, with more than 1,400 oil spills since 2000 alone.” The lawsuit, it says, represents “an effort to force Chevron to pay for Petroecuador’s own misdeeds.”

In its announcement of the international arbitration claim, Chevron charged that:

• President Rafael Correa publicly committed to support the plaintiffs.

• Representatives of the attorney general’s office conspired with plaintiffs’ lawyers to undermine integrity of 1995 and 1998 contracts.

• The prosecutor general has “manufactured illegitimate criminal indictments against Chevron counsel.”

• The trial judge “has publicly revealed his bias and prejudgment of the case in media interviews and recorded meetings with individuals who had been solicited by officials of Ecuador’s ruling political party to pay a bribe in exchange for the award of contracts to be funded with the proceeds of an anticipated verdict against Chevron.”

Hewitt Pate, Chevron vice-president and general counsel, said the government is using the legal process to escape environmental obligations of Petroecuador.

“Because Ecuador’s judicial system is incapable of functioning independently of political influence, Chevron has no choice but to seek relief under the treaty between the United States and Ecuador,” he said.

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