Tag Archives | arbitration

Lago Agrio: Update on the BIT Arbitration

Update: I updated this post to include an editorial comment about the Fourth Interim Award.

I haven’t written about the arbitration between Chevron and Ecuador in quite a while, so here is very brief post just to bring folks up to date. I highly recommend Luke Eric Peterson’s International Arbitration Reporter for additional and sometimes more timely coverage.

  • On February 7, 2013, the tribunal issued its Fourth Interim Award, which held that Ecuador should show cause why it should not be liable to Chevron for damages arising from its violation of the earlier interim awards that ordered Ecuador to suspend the effectiveness of the Lago Agrio judgment against Chevron. The tribunal’s decision to seek to force Ecuador to suspend the judgment has been controversial to say the least, but it seems to me that whether the decision ultimately is right or wrong, and indeed whether Ecuador ultimately wins or loses on the merits, it is bound by the tribunal’s decision. In a regular US litigation we would call the principle at stake the collateral bar rule: you have to obey an injunction even if it is wrong until you persuade the court, or an appellate court, to vacate it.
  • On February 18, 2013, Ecuador submitted a counter-memorial that lays out its arguments against Chevron’s claims of denial of justice. It’s a long document, and a full review of it would be a significant undertaking. I do want to highlight one argument Ecuador makes that I think has legs. The Lago Agrio judgment is still on appeal in Ecuador. Ecuador’s lawyers write: “a claim cannot be sustained where, as here, the claimant has failed to exhaust local remedies that would have or have in fact addressed the grievances of which it complains.” Chevron points to the fact that under Ecuadoran law the judgment is enforceable abroad to show that it has exhausted its local remedies or should be excused from further efforts to exhaust them. But is this reasonable? For one thing, Chevron could have prevented the judgment from becoming enforceable by posting a bond—a procedure that is part of the law in many jurisdictions including the United States. For another thing, it seems incorrect for Chevron to characterize the judgment as enforceable in any jurisdiction other than in Ecuador, since, as we have seen in Canada, it will be up to each state in which the LAPs seek recognition and enforcement to determine whether to give effect to the judgment. Anyway, it’s an interesting brief worth your time.
Continue Reading · 3 ·

Tags: , , ,

Case of the Day: Marker Völkl (International) GmbH v. Epic Sports International, Inc.

The case of the day is Marker Völkl (International) GmbH v. Epic Sports International, Inc. (S.D.N.Y. 2013). Marker Völkl, a Swiss corporation, had a license agreement with Epic, a Nevada corporation, under which Epic distributed Marker Völkl’s tennis equipment. In a separate agreement, Capstone Business Credit, LLC, a New York company, guaranteed Epic’s performance of its financial obligations to Marker Völkl. Both agreements had an arbitration agreement providing for arbitration under the Swiss Rules of International Arbitration.

In 2011, Marker Völkl terminated the license agreement and demanded payment of unpaid royalties. Epic and Capstone refused to pay, and Marker Völkl initiated an arbitration in Switzerland. Epic counterclaimed in the arbitration and filed an action in the New York Supreme Court, alleging that after Marker Völkl terminated the agreement, it misappropriated Epic’s intellectual property by continuing to sell tennis racquets manufactured from molds created by Epic. Epic later withdrew its counterclaims in the arbitration.

The arbitrator found in favor of Marker Völkl and awarded € 300,000 in damages. The New York court dismissed Epic’s action for lack of personal jurisdiction and insufficient service of process. Marker Völkl then petitioned for confirmation of the award. Epic reasserted its counterclaims and sought to stay confirmation pending resolution of the counterclaims. The court confirmed the award. Epic had not shown any of the exceptions to confirmation permitted by Article V of the New York Convention. The counterclaims were not related to any of the NYC exceptions and were irrelevant.

The decision is straightforward and seems plainly correct. Easy case.

Continue Reading · 0 ·

Tags: , , ,

Case of the Day: Republic of Ecuador v. Connor

The case of the day is Republic of Ecuador v. Connor (5th Cir. 2013). I love this case. After Chevron initiated the BIT arbitration against Ecuador, Ecuador sought discovery from GSI Environmental and its owner, John A. Connor, under 28 U.S.C. § 1782. Although Chevron had previously argued around the country that the BIT tribunal was an “international tribunal”, as required to bring its own discovery requests within the scope of the statute, here it argued that the BIT tribunal was not an international tribunal in light of Fifth Circuit precedent. The district court agreed, but the Fifth Circuit has now reversed. I’m not going to go into the details of why the Fifth Circuit determined that Chevron was judicially estopped. The essence of the decision is in the following observation the court made in its discussion: “Why shouldn’t sauce for Chevron’s goose be sauce for the Ecuador gander as well?”

The Fifth Circuit’s decision supports my notion that it would have been wise to consolidate the many § 1782 cases arising out of the Lago Agrio litigation filed around the country in a single district for purposes of deciding whether the subpoenas should have issued in the first instance, if not for purposes of deciding whether particular subpoenas were unduly burdensome, or sought privileged matter, or whatever was particular to individual targets of the subpoenas. In a single sprawling dispute such as this, there should be a single answer to such questions as whether a BIT tribunal is an international tribunal for purpose of the statute.

Continue Reading · 0 ·

Tags: , ,