Arbitrators Near Jurisdiction Call in Chevron Case

Arbitrators expect to rule as early as next month on whether they can hear a dispute between Chevron Corp and Ecuador related to a marathon pollution liability case, according to a letter to the lawyers involved.

The tribunal, working under The Hague’s Permanent Court of Arbitration (PCA), ordered the Republic of Ecuador in February to suspend enforcement of any judgment in the lawsuit filed by rainforest dwellers against Chevron.

Chevron lost that case a few days later, as the company had expected. A New York judge then sought to freeze the $18 billion judgment against the second-largest U.S. oil company, before he was overruled on appeal.

Chevron, arguing the judicial process in Ecuador was corrupted, is now banking on the arbitrators, who must first decide whether they will become the latest body to weigh in on what has become a landmark international legal battle.

“The current expectation is that the decision will be issued in the course of late December 2011 or early January 2012,” Martin Doe of the PCA wrote in a Nov. 11 letter, which wound up in the filings of related U.S. lawsuits.

“If that goes our way, we can begin arguments on the merits,” a Chevron spokesman said Monday.

The arbitration could then take years, if a previous dispute with Ecuador is any guide. It took four years for a separate international tribunal to rule Ecuador must pay Chevron $96 million in connection with commercial claims made in Ecuadorean courts in the early 1990s.

Chevron filed the latest arbitration case in September 2009 as part of a containment strategy for its anticipated defeat in the Ecuador pollution litigation — inherited when it bought Texaco a decade ago.

The plaintiffs accused Texaco, which left the country in 1992, of dumping oil-drilling waste in unlined pits, polluting the forest and causing illness and deaths among local people.

Yet Chevron says that, in 1998, Ecuador and state-owned Petroecuador released Texaco from further liability after Texaco’s remediation work was done. Plaintiffs contend the release did not deal with private claims against Chevron.

A lawyer for the Ecuadorean plaintiffs believes the tribunal may not have the final word on enforcement of the judgment, arguing in a legal journal late last year that there was no basis to conclude an arbitral order in Chevron’s favor would have a “preclusive effect” on enforcement.

The tribunal was formed under the authority of a bilateral U.S.-Ecuador investment treaty, which was signed on Aug. 27, 1993 — just over two months before the Ecuadorean plaintiffs’ first case against Texaco began in New York. (Editing by Andre Grenon)