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Chevron fights justice in Ecuador on two fronts, but needs to win everywhere

Since February, Chevron has been facing what is probably the largest environmental judgment in history-- an $8 billion award from an Ecuadorian court for contaminating the Ecuadorian Amazon.  (That judgment is now available in English, below, courtesy of Chevron.)  They've gone on the offensive against this judgment on two fronts.  But they need to win not just these cases, but every other one that the plaintiffs might file.

The plaintiffs' strategy has become known through the release of the so-called "Invictus" memo.  That memo, drafted by law firm Patton Boggs for the Ecuadorian plaintiffs, outlines a global enforcement strategy.  The Ecuadorians can go after Chevron in the US, but they can also try to enforce the judgment in Argentina, Brazil, Venezuela, and dozens of other countries where Chevron operates or has assets.  Not surprisingly, Chevron is working hard to prevent that.

Chevron's first assault on the Ecuadorian case was an international arbitration against Ecuador, filed in September 2009.  (Although such arbitrations are typically secret, Chevron posted its complaint to its website.)  Under the guise of international investment law, Chevron wants to have the Ecuadorian government interfere in its own court system, to tell the courts that Chevron's not responsible for the pollution in the Amazon.

I think Chevron's case in the arbitration is thin.  Working with the International Institute for Sustainable Development and the Ecuadorian indigenous rights group Fundacion Pachamama, ERI filed an amicus brief with the arbitration tribunal last fall, arguing that the tribunal shouldn't even hear the case.  We learned last week that the arbitration tribunal rejected our brief, unfortunately--but it still hasn't decided whether it will hear Chevron's case.

(The amicus process in arbitrations is far from transparent. Both Chevron and Ecuador apparently made several submissions to the arbtirators concerning whether our brief should be accepted, but we were not able to see or respond to any of them.  Chevron even claimed that ERI has "a longstanding record of asserting baseless claims against Chevron."  Note to Chevron: just because you keep getting accused of environmental and human rights abuses does not mean the charges are baseless.)

Chevron's second attack is in its lawsuit against the Ecuadorian plaintiffs and their lawyers in New York.  So far they've had some success--federal district court judge Lewis Kaplan has issued a preliminary injunction prohibiting the Ecuadorians and their lawyers from taking steps to enforce the Ecuadorian judgment.  But that success may not last.

As a preliminary injunction, Judge Kaplan's order is subject to immediate appeal to the Second Circuit Court of Appeals, and the plaintiffs' lawyers have already filed their notice of appeal.  At this stage of the case, Chevron is entitled to some presumptions in its favor, so even if they ultimately have no grounds to attack the Ecuadorian judgment, it is possible that a preliminary injunction will stand.  But Chevron's entire case is premised on the notion that Judge Kaplan has jurisdiction over the Ecuadorian plaintiffs and other members of the plaintiffs' class action.  That is a highly questionable position, and one that will receive considerable scrutiny from the Second Circuit.  Even if Judge Kaplan can prevent the American lawyers from proceeding to enforce the judgment, if he doesn't have jurisdiction over the Ecuadorians, he cannot prevent them from going to other countries to seek enforcement (as outlined in the "Invictus" memo).

The Second Circuit may also be concerned with the propriety of interfering with foreign countries' judicial processes.  I'm not aware of any case where a court has ever even tried to restrain foreign plaintiffs from enforcing a foreign judgment in foreign jurisdictions.  Chevron has every opportunity to challenge the judgment in the Ecuadorian courts; Chevron chose to litigate in Ecuador over the plaintiffs' objection, and the Second Circuit may well hold them to that choice.  In fact, in a recent decision in a related case, the Second Circuit said that Chevron was bound by its original promise "to satisfy any judgments in Plaintiffs' favor, reserving its right to contest their validity only in the limited circumstances permitted by New York's Recognition of Foreign Country Money Judgments Act.

Chevron argued, and Judge Kaplan accepted, that the judgment is unenforceable under that law for two reasons: because Ecuador does not provide due process, and because the judgment was obtained by fraud.  But Chevron's own predecessor, Texaco, argued that the case should be sent to Ecuadorian courts in the first place, even though the plaintiffs then objected that those courts did not provide due process; Chevron may not be able to complain about that now.  And what Chevron calls "fraud" was fully aired in the Ecuadorian court--all of the supposedly fraudulent evidence that Chevron is now presenting to Judge Kaplan was also presented in Ecuador, so Chevron can't really say that the plaintiffs defrauded the court.

Ultimately, even if Chevron wins the enforcement battle in the US, that doesn't end the matter, because the plaintiffs will go to other countries to enforce the judgment.  The plaintiffs only need to win once or a few times, while Chevron needs to win everywhere.  Even Chevron wins twenty cases, just one loss could cost the company hundreds of millions or billions of dollars.