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  HOME | Ecuador (Click here for more)

Ecuador High Court Upholds Verdict Against Chevron, Lowers Penalty

QUITO – Ecuador’s National Court of Justice has upheld a pollution verdict against U.S. oil supermajor Chevron Corp., although it cut in half the $19 billion penalty imposed by a lower tribunal.

In 2011, a court in the northeastern Amazon province of Sucumbios found that Texaco, acquired by Chevron in 2001, dumped millions of gallons of crude residue and toxic waste water in the rainforest between 1964 and the early 1990s and thereby spoiled the lands and damaged the health of the local population.

That ruling – upheld on appeal in January 2012 – ordered Chevron to pay a $9.5 billion penalty, which was to be raised to $19 billion if the oil company did not issue a public apology for the environmental damage.

Although the company vehemently denies responsibility for and refuses to apologize for the pollution, the high court on Tuesday eliminated that contrition clause and thus reduced the penalty in half.

Chevron, for its part, slammed the high court’s decision in a press release on Wednesday.

The judgment is “just as illegitimate and unenforceable today as it was when it was issued almost three years ago,” Hewitt Pate, Chevron’s vice president and general counsel, was quoted as saying.

“The government of Ecuador should be investigating the lawyers who are using its courts to commit fraud, rather than issuing another court opinion in furtherance of that fraud.”

Attorneys for the 47 named Ecuadorian plaintiffs in the case, who represented some 30,000 rainforest villagers and Indians, have sought to enforce the court rulings in countries such as Argentina, Canada and Brazil because Chevron has few assets in Ecuador.

One of those lawyers, Pablo Fajardo, said that in the coming weeks and months legal action would be taken in other unspecified countries, saying those proceedings would be “more forceful” than before.

Earlier judgments in Ecuador were already enforceable because Chevron had refused to post a bond with the National Court of Justice, based in Quito.

The pollution case was initially filed against Texaco in New York in 1993, but after inheriting the lawsuit Chevron succeeded in having it moved from the United States to Ecuador in 2003, four years before President Rafael Correa came to power amid voter anger at corruption and traditional politicians.

Chevron, however, later said the case had become politicized under the leftist Correa and that it could not receive a fair trial.

Although the oil company maintains that Texaco was cleared of any liability for damages, plaintiffs say that mid-1990s agreement with the Ecuadorian government of the time did not release it from third-party claims and that Chevron is reneging on its pledge to abide by whatever decision was handed down by Ecuadorian courts.

In its press release Wednesday, Chevron recalled that an international arbitral tribunal recently “released the company of any liability for all public interest or collective environmental claims” and that that award “should have led to a complete dismissal of the case” in Ecuador.

Chevron said on its Web site after the initial 2011 verdict that state oil company Petroecuador should be the target of local communities’ legal action.

It noted then that Texaco ceased operating in Ecuador in 1992 and that Petroecuador has been “the sole and exclusive owner and operator of greatly expanded operations in the area from (that year) to the present.”

Chevron has appealed the Ecuador pollution verdict to the World Bank’s International Center for the Settlement of Investment Disputes, or ICSID.

The San Ramon, California-based company also has brought legal action in a U.S. federal court in New York against the plaintiffs’ lawyers and consultants for violations of the federal racketeering statute, accusing them of engaging in fraud and trying to extort a financial settlement from the company.

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