Ecuador Lawsuit - Background
Chevron is defending itself against false allegations that it is responsible for alleged environmental and social harms in the Amazon region of Ecuador. This backgrounder on the case is divided into sections on the history of Chevron's Texaco subsidiary's operations in Ecuador, the fraudulent litigation against Chevron, and subsequent legal actions.
Chevron has never conducted oil production operations in Ecuador. Its subsidiary Texaco Petroleum Co. (TexPet) did operate in Ecuador, mostly in minority partnership with Ecuador's state oil company, Petroecuador, which owned 62.5 percent. TexPet left Ecuador in 1992, and at that time it fully remediated its share of environmental impacts arising from oil production. The $40 million remediation operation was certified by all agencies of the Ecuadorian government responsible for oversight, and TexPet received a complete release from Ecuador's national, provincial and municipal governments. Chevron acquired TexPet in 2001.
For more than two decades, Petroecuador has been the sole owner of the operations TexPet left behind, and the state oil company has greatly expanded them. Petroecuador has been slow to remediate its majority share of pre-1992 impacts and has amassed a poor environmental record since that time. All remaining environmental conditions in the region are the sole legal responsibility of Petroecuador, and in December 2011, Petroecuador announced a $70 million remediation program that would address the balance of the necessary clean-up.
In February 2011, a court in Lago Agrio, Ecuador issued an $18 billion judgment—later reduced to $9.5 billion—against Chevron. This judgment is illegitimate because of documented evidence of fraud and unethical action by the plaintiffs' lawyers as well as the Ecuadorian government and judiciary.
A former Ecuadorian judge acknowledged his direct involvement in orchestrating a fraudulent judgment against Chevron. In a sworn declaration (169 KB) filed on January 28, 2013, in New York federal court, Alberto Guerra, who presided over the case when it was first filed in 2003, reveals that he was paid thousands of dollars by the plaintiffs' lawyers and a subsequent judge, Nicholas Zambrano, for illegally ghostwriting judicial orders issued by Zambrano and steering the case in the plaintiffs' favor. Guerra, who is no longer a judge, attests that the plaintiffs' lawyers were permitted to draft the $18 billion judgment in their own favor after they promised to pay Zambrano a $500,000 bribe out of the judgment's enforcement proceeds, and that Guerra then reviewed the plaintiffs' lawyers' draft for Zambrano before the judge issued it as his own.
Guerra's declaration, which is corroborated by computer, bank and shipping records, as well as the plaintiffs' lawyers' own internal e-mails, provides a direct account of corruption that has tainted the trial for years. Read more about Guerra's Admissions.
In addition, the environmental damages claims that underlay the February 2011 judgment have also been proven to be the result of fraud. On April 12, 2013, the plaintiffs' chief environmental consultants, Boulder, Colorado-based Stratus Consulting, filed sworn statements detailing their knowledge of the plaintiffs' lawyers' misconduct and testifying that there is no scientific merit to the allegations against Chevron.
In sworn declarations (here (307 KB) and here) (169 KB), senior Stratus executives detail the role the firm and the plaintiffs' lawyers played in drafting the supposedly independent damages report of Richard Cabrera, which serves as an evidentiary basis of the 2011 judgment against Chevron in Ecuador. The testimony also provides a direct account of lead plaintiffs' lawyer Steven Donziger's control of the "Cabrera Report" process and the pressure Donziger applied to contrive damages attributed to Chevron.
For information on additional evidence of fraudulent behavior by the plaintiffs' representatives, read more (40 KB).
The case went to trial in October 2013. During the seven-week trial, Chevron called 24 witnesses, offered deposition testimony from 21 others, and offered more than 3,000 exhibits into evidence.
Testimony included those formerly aligned with the plaintiffs, who provided firsthand accounts of corruption:
- Environmental Consultants: The plaintiffs' key environmental consultants, from Stratus Consulting, provided sworn testimony disavowing their work for the plaintiffs' lawyers and affirming that there is no scientific merit to the plaintiffs' claims against Chevron.
- Funders: One of the largest financial backers of the plaintiffs, Burford Capital, provided sworn testimony documenting fraud and other misconduct on the part of the plaintiffs' lawyers to secure funding.
- Former Judge: A former Ecuadorian judge who once presided over the case testified that the judge who issued the ruling was promised a half-million dollar bribe from the plaintiffs' lawyers in exchange for ghostwriting the judgment in their favor.
On March 4, 2014, the U.S. District Court for the Southern District of New York ruled that the $9.5 billion Ecuadorian judgment was the product of fraud and racketeering activity, finding it unenforceable.
The nearly 500-page ruling (1.6 MB) finds that Steven Donziger, the lead American lawyer behind the Ecuadorian lawsuit against the company, violated the federal Racketeer Influenced and Corrupt Organizations Act (RICO), committing extortion, money laundering, wire fraud, Foreign Corrupt Practices Act violations, witness tampering and obstruction of justice in obtaining the Ecuadorian judgment and in trying to cover up his and his associates’ crimes.
The ruling prohibits Donziger and his associates from seeking to enforce the Ecuadorian judgment in the United States and further prohibits them from profiting from their illegal acts. This decision was unanimously affirmed by the United States Court of Appeals for the Second Circuit on August 8, 2016. The appeals court stated that Donziger and his team engaged in a "parade of corrupt actions…including coercion, fraud and bribery."
Chevron does not believe that the Ecuador ruling, which has now been proven to be fraudulent by a U.S. court, is enforceable in any court that observes the rule of law. The company will continue to seek to hold accountable the perpetrators of this fraud.
In addition to legal actions taken in the U.S., Chevron is pursuing relief against Ecuador through international arbitration. On September 18, 2013, an international arbitration tribunal, convened under the authority of the U.S.-Ecuador Bilateral Investment Treaty (BIT) and administered by the Permanent Court of Arbitration at The Hague, issued a partial award (2.6 MB) in favor of Chevron and its subsidiary, Texaco Petroleum Company (TexPet). The tribunal found that the settlement and release agreements that the government of Ecuador entered into with TexPet released TexPet and its affiliates of any liability for all public interest or collective environmental claims.
On February 7, 2013, the same tribunal ruled that the Republic of Ecuador had violated the tribunal's prior interim awards by not preventing the attempted enforcement of an $18 billion judgment against Chevron.
The tribunal found that despite its instructions in earlier awards, the Republic of Ecuador has facilitated the plaintiffs' pursuit of enforcement.
In prior rulings (40 KB), the tribunal put the Republic on notice that if Chevron's arbitration ultimately prevails, Ecuador itself could be liable for losses incurred by Chevron as a result of enforcement of the Lago Agrio judgment in other jurisdictions. Chevron filed its request for arbitration in 2009, claiming that the Republic violated its obligations under the BIT and international law. Read more.
The plaintiffs faced yet another setback on June 5, 2013, when Argentina's Supreme Court lifted a freeze on the Chevron's Argentine assets that had been ordered late last year. The high court noted that the appealing parties had no tie the Ecuador litigation and were "legally distinct units." Read more