DISPUTE RESOLUTION: International Arbitration: Chevron Tribunal Declares Ecuador in Breach of Interim Awards

by King & Spalding
Contact

On February 7, 2013, an investment arbitration tribunal issued its third interim measures award in the Chevron vs. Ecuador case. The tribunal found Ecuador in breach of its previous award ordering Ecuador to take all measures necessary to prevent enforcement within or without Ecuador of a $19 billion environmental judgment against Chevron in an Ecuadorian court, pending adjudication of Chevron’s arbitration claim that the judgment was procured by fraud and should therefore be nullified. The tribunal further ordered Ecuador to show cause why it should not compensate Chevron for any damages caused by its breach of the earlier award. The Chevron tribunal’s award continues a recent trend of tribunals taking more assertive steps to protect the status quo—and their own jurisdiction—during the pendency of international investment arbitrations.

Chevron (represented by King & Spalding) filed its arbitration proceeding against Ecuador in September 2009, under the terms of that country’s bilateral investment treaty—or BIT—with the United States. It claimed, among other allegations, that the environmental case pending against Chevron in Lago Agrio, Ecuador was irreparably tainted by fraud and corruption on the parts of the plaintiffs’ lawyers and representatives, in collusion with the executive and judicial branches of the Ecuadorian State. According to Chevron, Ecuador’s actions violate various BIT standards, including Ecuador’s obligations to provide fair and equitable treatment and an effective means for U.S. investors to enforce their rights. On February 14, 2011, the Ecuadorian court nonetheless issued a $19 billion judgment against Chevron. In its arbitration against Ecuador, Chevron seeks compensation for Ecuador’s violation of the BIT as well as nullification under international law of the Ecuadorian court judgment.

The merits phase of Chevron’s treaty claim remains pending, but the plaintiffs in the underlying Ecuadorian court case nonetheless are in the process of seeking recognition and enforcement of the judgment in Ecuador, Argentina, Brazil, and Canada, with the promise of additional enforcement efforts in other jurisdictions. In anticipation of such efforts, shortly after filing its claim Chevron requested that the tribunal issue interim measures preventing enforcement of the judgment pending adjudication of the treaty case. Chevron has renewed and reframed its request on several occasions in light of ongoing developments in both the Ecuadorian and enforcement courts, and the arbitration tribunal has conducted five hearings over the course of the last three years at which the parties have debated Chevron’s interim measures requests.

The Chevron tribunal issued a series of three escalating and increasingly targeted interim awards in an effort to preserve the status quo between the parties, as well as its own jurisdiction ultimately to decide the merits of Chevron’s case against the $19 billion Ecuadorian court judgment. In its first award of February 9, 2011, the tribunal ordered Ecuador to take all measures “at its disposal” to suspend or cause to be suspended enforcement of any Ecuadorian court judgment within or without Ecuador, pending adjudication of Chevron’s treaty case. After the Ecuadorian court issued its judgment, and in the face of Ecuador’s argument that it had no measures at its disposal to prevent enforcement of that judgment, the tribunal issued a more strongly worded award on February 16, 2012. In that second award, the tribunal ordered Ecuador to take all measures “necessary” to suspend or cause to be suspended enforcement of the judgment within or without Ecuador. And most recently the tribunal issued its third award, declaring Ecuador in breach of the first two awards and indicating that Ecuador may be liable in damages for harm caused to Chevron as a result of that breach.

The tribunal’s third interim award followed several months of enforcement efforts by the Ecuadorian plaintiffs in Ecuadorian, Argentine, Brazilian, and Canadian courts—efforts that Chevron contends have damaged it in the form of attorneys fees and, in particular, an Argentine freezing order affecting a significant percentage of Chevron’s Argentine subsidiary’s assets. Chevron had argued that Ecuador breached the earlier awards by failing to pursue various means to cause these enforcement actions to be suspended, including revocation of the certification of finality of the Ecuadorian court judgment, and various executive actions available under Ecuadorian law.

The Chevron tribunal’s willingness to issue increasingly targeted and strong interim measures awards over a period of two years indicates, on the one hand, a cautious approach in exercising its jurisdiction pending its adjudication of the merits of the dispute. But it also indicates an ultimate willingness on the tribunal’s part, after giving Ecuador several opportunities to comply with its more general awards, to assert its jurisdiction by issuing more specific interim relief. The cautious but escalating approach taken by the Chevron tribunal could serve as a model for future arbitral tribunals attempting to maintain the status quo and protect their jurisdiction in contentious international investment disputes.

Wade Coriell
Houston
+1 713 751 3272
wcoriell@kslaw.com

View Profile

 

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© King & Spalding | Attorney Advertising

Written by:

King & Spalding
Contact
more
less

King & Spalding on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.