Legal News

Chev-Wronged? Oil Giant Goes on Offensive in Ecuador Flap

By Ashby Jones

When, say, a big U.S.-based oil company gets sued a small country or its residents, it typically sticks to a tightly choreographed script. It plays an aggressive defense, sure, one handled by fancy BigLaw lawyers, but it otherwise takes a “move along, nothing to see here” approach, punctuated by clipped and rote statements to the press.

But this isn’t Chevron’s approach, at least not in regard to a long-running situation in Educador. The oil giant has gone on the offensive, recently suing Ecuador’s government under international trade law. Click here for the WSJ story.

The move is part of a larger situation embroiling the company, which we’ve posted on before (here and here).

The backstory: Chevron is the defendant in a multibillion-dollar lawsuit that seeks to hold the company responsible for environmental damage allegedly caused by Texaco, which Chevron bought in 2001. Chevron has denied the allegations.

Seeking to protect itself from what it says is likely to be an adverse ruling in Ecuador, Chevron said on Wednesday it had filed suit under the terms of a 1997 trade pact between the U.S. and Ecuador.

In its filing, essentially a request to engage in international arbitration, Chevron argues Ecuador’s government is responsible for any environmental damage and should pay any penalties assessed in the lawsuit, which could total $27 billion, according to a court-appointed expert. Chevron also asks that arbitrators force Ecuador’s government to pay the company’s legal fees and to award “moral damages” due to the government’s alleged interference in the case, intimidation of Chevron representatives and other “outrageous and illegal conduct.”

The move seeks to capitalize on the release last month of videos that Chevron says reveal a bribery scheme possibly involving the Ecuadorean judge who has been overseeing the lawsuit. Ecuador says it is investigating Chevron’s allegations, as well as any potential involvement by Chevron in the scheme. The judge, who has sought to recuse himself from the case, has denied any wrongdoing, and the videos don’t show him accepting or soliciting a bribe. On Tuesday, a local court ruled that the judge’s withdrawal petition was “unfounded” and ordered him to stay in the case.

Chevron believes the controversy has given new weight to its claim that it cannot get a fair trial in Ecuador.

“We have believed for some time that it would be impossible for Chevron to get a fair hearing in Ecuador,” Chevron General Counsel R. Hewitt Pate said.

Eric Bloom, a U.S. attorney representing Ecuador in the dispute, said Chevron has been trying to discredit Ecuador’s judicial system for years, and he questioned the videos’ authenticity.

“Chevron either got very, very lucky on the eve of a verdict and actually tripped across a legitimate concern, or they helped to stage-manage a fictitious event,” Mr. Bloom said. “Both possibilities have to be investigated.”

Full post as published by Law Blog - WSJ.com on September 24, 2009 (boomark / email).