Tuesday, 11 September 2018 15:37

The Hague rules in favour of Chevron in Lago Agrio spat

The Permanent Court of Arbitration at The Hague has ruled in favour of Chevron in a long-running dispute with the government of Ecuador, determining that a $9.5bn judgment against the US oil company in 2011 was procured through fraud, bribery and corruption.

The Ecuadorian judgment claimed that Chevron and its subsidiary Texaco Petroleum (TexPet) had caused environmental damage during oil extraction in the country’s Lago Agrio region.

However, the tribunal at The Hague ruled that the fraudulent Ecuadorian judgment “violates international public policy” and “should not be recognised or enforced by the courts of other states,” Chevron said in a press release.

As a result of the ruling, and as a matter of international law, Chevron is not obliged to comply with the Ecuadorian judgment.

“An esteemed international tribunal, including an arbitrator appointed by Ecuador, has unanimously confirmed that, following completion of an agreed environmental remediation program, Chevron was released by the Republic of Ecuador from the environmental claims that the fraudulent Ecuadorian judgment purports to address,” Chevron vice president and general counsel R. Hewitt Pate said.

The case dates back to 1995, when TexPet agreed to remediate environmental impacts in the former concession area while state-owned oil company Petroecuador assumed responsibility for performing any remaining environmental clean-up.

In 1992, Petroecuador had taken over TexPet’s minority share in an oil production consortium operating in Lago Agrio.

In 2009, Chevron filed an international arbitration claim against Ecuador, pursuant to the US-Ecuador Bilateral Investment Treaty, seeking to hold Ecuador accountable for breaching the settlement agreement with TexPet and to enforce its release from claims against the two companies relating to alleged environmental damage in Lago Agrio.

However, in 2011 an Ecuadorian tribunal ruled that Chevron was liable to pay $9.5bn in damages as a result of the environmental impact.

TexPet engaged an engineering firm specialising in environmental remediation and the Ecuadorian government oversaw and certified the successful completion of TexPet’s remediation, after which it fully released TexPet from further environmental liability, according to Chevron.

However, Petroecuador failed to conduct the clean-up it had pledged to undertake and has continued to operate and expand its oil operations in the area for more than 25 years, the US oil company said.

Chevron had amended the claim in 2012 to include the denial of justice that occurred through the Ecuadorian court’s fraud and corruption during litigation. and the resulting fraudulent $9.5bn judgment. claiming the Lago Agrio litigation was marred by fraud, bribery, and coercion perpetrated by the plaintiffs’ attorneys in collusion with Ecuador’s courts.

The Hague tribunal concluded that the fraudulent Ecuadorian judgment “violates international public policy” and “should not be recognised or enforced by the courts of other States.” As a matter of international law, this award confirms Chevron is not obliged to comply with the Ecuadorian judgment.

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