Chevron May Proceed With Arbitration Over Ecuador (Update3)
March 11, 2010, 6:08 PM EST(Adds Chevron statement in ninth paragraph.)
By David Glovin
March 11 (Bloomberg) -- Chevron Corp., the second-largest U.S. oil company, may proceed with an arbitration stemming from a court fight over an environmental cleanup in Ecuador that might cost as much as $27 billion, a judge ruled.
U.S. District Judge Leonard Sand in New York today ruled in favor of San Ramon, California-based Chevron and said that an international arbitration panel may decide whether the company is getting “due process” in a court case in Ecuador. Lawyers for Ecuador had asked Sand to block the arbitration.
“There is a strong presumption in favor of arbitration,” Sand said today after two days of arguments.
Separately, a court in Ecuador is weighing a ruling in the underlying lawsuit, which began more than 16 years ago in the U.S. Amazon Basin residents sued Texaco Inc., which Chevron acquired in 2001, alleging damage to the Amazon rainforest from chemical waste produced in oil drilling.
An expert for the Ecuadorean court has estimated damages of as much as $27 billion. An earlier case filed by Ecuadoreans in New York against Texaco was dismissed after a U.S. judge said it should be litigated in Ecuador.
The parties to today’s dispute were Chevron and Ecuador, which will also be the parties at the arbitration. The Amazon plaintiffs won’t be involved in that proceeding.
Possible Delays
Jonathan Abady, a lawyer for the Amazon plaintiffs, said today’s ruling may lead to delays in his case, adding that he was “confident” that his clients would ultimately prevail. Lawyers for the Amazon residents claim Chevron is using the arbitration as a way to defeat the proceeding in Ecuador.
R. Hewitt Pate, Chevron’s general counsel, said the company was pleased with Sand’s ruling. Among issues to be considered by the arbitration panel will be whether there was “misconduct” tied to court proceedings in Ecuador, including the filing of “unfounded criminal charges” against company lawyers, he said. Chevron said last year it uncovered a $3 million bribery plot linked to the case.
“Texaco Petroleum did its share of the cleanup as promised,” Pate said in a statement, adding that Ecuador is now “wrongly” seeking to blame environmental problems on Chevron. The Amazon residents said the cleanup was inadequate.
Kent Robertson, a spokesman for Chevron, said the republic approved the cleanup on “multiple occasions.”
Eric Bloom, a lawyer for Ecuador, said that the government hadn’t decided whether to appeal today’s ruling, which won’t halt proceedings in the country.
The case is subject to arbitration under the U.S.-Ecuador Bilateral Investment Treaty, Sand said. The presence of a single issue subject to arbitration defeats an effort to block it, he said, adding that arbitrators will decide the scope and timing of the proceeding.
The case is Republic of Ecuador v. Chevron Corp., 09-09958, U.S. District Court, Southern District of New York (Manhattan).
--Editors: Glenn Holdcraft, John Pickering.
To contact the reporter on this story: David Glovin in New York federal court at dglovin@bloomberg.net.
To contact the editor responsible for this report: David E. Rovella at drovella@bloomberg.net.
