Chevron takes Ecuador to arbitration

A New York court has declined to block Chevron from taking the nation of Ecuador to international arbitration before UNCITRAL over an ongoing pollution lawsuit brought by Ecuadoreans (not the state itself) against Chevron in 1993.

Basically, Chevron is complaining that it is not getting due process in Ecuador, even though no ruling has yet been issued. After last week’s ruling, Chevron can take Ecuador to international arbitration at The Hague under the Bilateral Investment Treaty (PDF) it signed with the United States in 1997.

This is somewhat ironic, considering Chevron (then Texaco) fought hard when the lawsuit was first filed to move it to Ecuador, a move that a U.S. court granted. Now that it looks like it might lose in Ecuador (an independent expert has recommended the court reward a $27 billion settlement in the plaintiff’s favor), Chevron is arguing that these backward Latin American courts have no concept of the rule of law.

Guess they didn’t get what theyAi?? wanted from those backward Latin American courts.

How will an international arbitration proceeding between Chevron and Ecuador affect a domestic class action lawsuit? It won’t, directly. Indirectly, however, if Chevron is able to win the arbitration, they will have a strong case for arguing in U.S. court against enforcement of any unfavorable ruling in Ecuador. This might be their strategy, according to Roger Alford at Opinio Juris. Also, there’s this:

My sense is that Chevron is bringing this action not only in an attempt to succeed on the merits of its due process claim, but also to send a signal to the Ecuadorian court that any future action that denies Chevron basic due process will be subject to international scrutiny. The Ecuadorian court now faces the unpleasant prospect of knowing that the Ecuadorian government may be on the hook financially for any improper judgment rendered against Chevron.

What I wonder is, in a small, poor, Latin American country, wouldn’t this threat in itself affect due process, in the other direction? I suppose this is the problem small countries face with these kinds of trade and investment treaties: In the end, even when foreign investors have committed gross negligence that has in all likelihood killed people, your whole domestic legal system must defer to the wisdom of three foreigners sitting on an arbitration board half a world away.

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  1. [...] pollution case that’s been crawling along for the last 17 years, and is not – not – the related international arbitration claim filed by Chevron against Ecuador late last year. Reuters explains the whole thing very carefully [...]

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