Ecuadorians mounted a small victory in Manhattan last week. After a brusque hearing in the 2nd U.S. Circuit Court of Appeals, two of the three presiding judges ruled that the plaintiff (a group of Ecuadorian citizens) and their legal team would be allowed to meet to strategize and that the plaintiffs could continue to raise funds to enforce the $18.2 billion verdict in question at a later time. Both courses of action had been previously barred by a temporary restraining order and a preliminary injunction handed down by Judge Lewis Kaplan in March, 2011. The plaintiff’s legal team, which includes lawyer John Tyrrell, celebrated this win despite failing to delay the early trial which has been set to determine if the plaintiffs can collect the $18.2 billion in question from Chevron Corporation.
This decision is just the latest development of an epic 18 year legal battle whose roots date all the way back to 1964. It was then that Texaco, now a subsidiary of Chevron Corporation, first entered Ecuador and began an oil drilling operation. In 1972 Texaco began exporting oil and officially became the operator and minority partner in the operation, owning 37.5%. PetroEcuador, the state owned oil company, was the majority partner and owned the remaining 62.5%. Texaco worked in conjunction with PetroEcuador through 1992 when PetroEcuador took full operational control and ownership; Texaco then left the country. Until Texaco left the country, they were in charge of all operational designs and decisions. In all, over 440 wells were drilled and the operation was yielding about 220,000 barrels of crude oil each day.
During this time it has been reported that that 16.8 million gallons of oil spilled from the main pipeline and that 18 billion gallons of polluted formation water were dumped into waterways. The toll taken on the region cannot be denied: this part of the amazon is terribly polluted and thousands of inhabitants and their offspring have developed a range of critical health problems. Birth defects and cancer have run rampant in this region where the long-term, disastrous effects of the operation remain visible today. In 1993 local residents of Shushufindi, the oil producing region in northern Ecuador, filed a lawsuit for damages in a New York federal court. Eventually, after an independent environmental audit of the effected area, Texaco struck an agreement with the government in Ecuador and PetroEcuador to conduct a 3 year cleanup program costing $40 million. This remediation concluded in 1998, and under the agreement the Ecuadorian government granted Texaco a full release from any future environmental liability.
In 2001 Chevron Corporation acquired Texaco while litigation was still pending. However, Chevron holds that because the Ecuadorian government had already released Texaco from any future related litigation, all subsequent allegations are illegitimate. Chevron also reports that PetroEcuador never provided remediation for their share of the pollution that has been released since they became 100% owners and operators in 1992.
Despite Chevron’s efforts, war has continued to rage as Ecuadorians feel that the $40 million clean up program was completely inadequate. In 2009 a landmark decision was handed down by an Ecuadorian court: Chevron was responsible to pay over $18.2 billion in damages. Chevron argued that the Ecuadorian legal system was fraught with corruption and brought its case back to New York to Judge Lewis Kaplan. Kaplan’s decision earlier this year prevented the plaintiffs from attempting to collect any of Chevron’s assets outside of Ecuador, where Chevron has no assets. However, due to complicated issues of international law and sovereignty, it remains unclear if a U.S. court actually has the authority to bar the Ecuadorians from litigation outside of the U.S.
Now that the plaintiffs have been granted the ability to meet with their counsel, both sides will be looking to prepare for what may be the ultimate showdown in this long and complicated battle. Unless the Ecuadorians and their counsel are successful in their quest to push back the date, a trial to determine the legitimacy of the damages is set to begin this fall.
Photo credit: mcgovern.house.gov/index.cfm?sectionid=15§iontree=4,15&itemid=169