Tuesday, August 11, 2015

Chevron's Ecuador Strategy Backfires As Villagers Move to Seize $106m From Company

Reposted from The Chevron Pit

If you want a vivid example of how Chevron CEO John Watson and General Counsel R. Hewitt Pate continue to step on themselves in Ecuador, look no further than the company's recent arbitration "victory" against the government of Ecuador in a case involving a dispute over oil royalties.

This supposed Chevron "victory" – in the amount of a $106 million award – is likely to help Ecuadorian indigenous villagers collect their separate $9.5 billion environmental judgment against the oil giant. It could also disrupt Chevron's operations in other countries where the villagers are trying to seize company assets to force compliance with the environmental judgment.

The villagers won the larger judgment in 2011 in a civil case in Ecuador after Chevron insisted the trial be held in the South American nation. Chevron's attempts to sabotage and corrupt Ecuador's court system throughout that trial have been well-documented; ultimately, Ecuador's Supreme Court affirmed the judgment in 2013 in a unanimous 222-page opinion that meticulously documented the company's wrongdoing at hundreds of different well sites throughout the Amazon.

(For examples of Chevron's attempts to corrupt the Ecuador proceedings, see this affidavit and how the company falsified evidence by paying a corrupt witness.)

Chevron launched the arbitration case against Ecuador's government in the middle of the environmental trial to gain leverage. It tried to claim its "damages" over the distribution of oil royalties dating from the 1980s were a preposterous $700 million.

The company's goal was to use the risk of a large judgment over the royalties to pressure Ecuador's government to "disappear" the historic environmental case, where the company faced an enormous multi-billion dollar liability. Chevron's plan was an illegal attack on the rule of law and a blatant attempt at extortion. Ecuador's government did not buckle, further infuriating the company.

In the meantime, because Chevron refused to abide by the environmental judgment, the villagers in 2012 quietly secured a court order in Ecuador entitling them to seize company assets to help pay for the remediation of their ancestral lands. Chevron had no real assets in Ecuador at the time, having sold off its Texaco gas stations in 2007 in anticipation of losing the case.

Here's where the law of unintended consequences kicks in. Watson and Pate's "victory" over the issue of royalties has now created Chevron's only real asset in Ecuador. The asset is a debt owed Chevron by Ecuador. And make no mistake about it, that asset is now subject to the jurisdiction of the courts in the very country where Chevron insisted the dispute be heard and resolved.

We believe that by Ecuadorian court order, the full amount of the $106 million arbitral award must be diverted to the villagers. They no doubt plan to use some of the funds to help seize Chevron assets in other jurisdictions such as Canada and Brazil, where collection actions are pending.

The clean-up in Ecuador clearly will require far more resources than the amount of the arbitral award. Chevron abandoned roughly 1,000 toxic waste pits that continue to contaminate soils, streams and groundwater. Each of those sites is akin to a Superfund site in the United States. And by way of comparison, BP has already paid out $54 billion to repair damage and to compensate victims after the much smaller Gulf of Mexico spill in 2010.

The 1,000 or so waste pits are not the only problem. Chevron also discharged billions of gallons of benzene-laden formation waters into streams and rivers relied on by locals for their drinking water. Cancer rates in the area have skyrocketed and untold numbers of people have perished, as this photo essay by journalist Lou Demettais documents.

(For a summary of the overwhelming evidence against Chevron in Ecuador, see here. For a 60 Minutes segment documenting the company's deliberate dumping of oil waste, see here.)

Pablo Fajardo, who represents the villagers, said that any funds collected from the arbitral award will be placed in a trust account set up to administer the clean-up. Under the law, he says the Ecuador government has no choice but to comply. (Actually getting the funds into the account will require a line item in Ecuador's budget. It is unclear how that might play out given Chevron's many prior attempts to disrupt the case in Ecuador, but we are hopeful.)

Fajardo was clear about his intentions, saying in a press release:

The Ecuadorian victims of Chevron's toxic dumping have a lawful right to obtain this arbitral award and other company assets until their judgment is fully satisfied. Our people are suffering from a humanitarian crisis and many lives are at sake because Chevron – unlike BP in the United States – refused to pay for a clean up of its pollution.

We might add that the Ecuador court order is not the only bad news lately for Chevron.

Chevron's central defense in the Ecuador matter – that the trial court judgment was "ghostwritten" – has been unraveling for several months, as this article in The Huffington Post explains. And Chevron's retaliatory "racketeering" case also faces a major risk of reversal, as this brief and this article by American lawyer Steven Donziger and his representatives explain.

Also hurting Watson is the stunning disclosure of internal Chevron whistleblower videos that show company field technicians trying to hide evidence of contamination from Ecuador's courts. These videos were published by VICE News and Amazon Watch and can be seen here and here.

The bottom line is that Chevron is suddenly at risk of becoming the leading financier for its adversaries in Ecuador. Some might call that the very definition of poetic justice.

No comments:

Post a Comment