Arbitrators Say They Can Hear Chevron-Ecuador Case

An international tribunal has found that it has jurisdiction to decide if Ecuador violated a treaty with the United States requiring it to guarantee a fair trial to Chevron Corp in an environmental lawsuit that ended in an $18 billion judgment against the oil company.

A Tuesday posting on Chevron’s website attributed to the tribunal read: “The tribunal declares that it has jurisdiction to proceed to the merits phase of these arbitration proceedings.”

The panel was set up through The Hague’s Permanent Court of Arbitration (PCA), and works under rules established by the United Nations Commission on International Trade Law.

Ecuador’s attorney general has argued that the tribunal has no jurisdiction because the bilateral trade agreement between the United States and the Andean country went into effect five years after Texaco ended operations in Ecuador in 1992.

“We disagree… but Ecuador will continue to present all the claims, arguments and proofs, and will make use of all the necessary resources to demonstrate that the complaints made by Chevron-Texaco are baseless,” Attorney General Diego Garcia said in a statement.

On Feb. 17, the three-person arbitration panel reinforced its interim order from February 2011 that Ecuador should suspend court awarded payments of claims against Texaco, accused of polluting the rain forest and sickening people living there. Texaco was taken over in 2001 by Chevron, which has claimed the trial in Ecuador was unfair.

The plaintiffs awarded $18 billion a year ago have said they will try to collect in countries where Chevron still has assets, and the panel’s ruling will not affect those plans.

“The panel’s ruling is unenforceable and illegitimate,” Karen Hinton, a Washington D.C.-based spokeswoman for the plaintiffs, said in a statement on Tuesday. “It will have no legal impact in Ecuador, the United States, or in any country that observes the rule of law.”

The legal team for the Ecuadoreans has also argued the panel’s interim ruling violates provisions of Ecuador’s constitution prohibiting interference in its courts.

But Chevron has said that it has uncovered in the U.S. courts evidence of fraud by lawyers for the Ecuadorean plaintiffs, which they deny. The company is pursuing a separate racketeering lawsuit against the Ecuadorian plaintiffs and their attorneys.

“Rather than allow… plaintiffs’ lawyers to cause even more damage for which Ecuador may ultimately be held responsible, the Republic should take this opportunity to pursue a more constructive course,” Chevron’s general counsel, Hewitt Pate, said in a statement.

Anticipating defeat in the marathon pollution trial, Chevron filed for arbitration in September 2009, a few months after hiring Pate, a former assistant attorney general at the U.S. Department of Justice. The litigation has taken place over two decades.

A ruling from the arbitrators could take a while. It took four years for another tribunal working under the PCA to rule last August that Ecuador had to pay Chevron $96 million in connection with commercial claims made by Texaco in the 1990s.

The current panel includes one member named by Chevron, Horacio Grigera Naon of the American University law college, another named by Ecuador, Oxford Professor Vaughan Lowe, and London-based lawyer V.V. Veeder, chosen by Naon and Lowe.