Tag Archives | BIT

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.
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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.

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Lago Agrio: The Wheels of Government Turn Slowly

Here is one for the cautionary tale files. On Sept. 18, I published a post noting that Chevron had not filed an opposition to the renewal of Ecuador’s trade preferences and wondering why that might be. I hedged my bets by noting that “it’s possible … that Chevron has submitted a petition that simply hasn’t appeared on the online docket yet,” but I figured that if the materials didn’t appear online they didn’t exist. That’s pretty much how other government filing systems I use, such as the PACER system in the courts or the SEC’s EDGAR system, work. I mean, come on, it’s 2012!

Well, it turns out that Chevron and others did comment on ATPA renewal, but the USTR did not put the comments online for a week. Why? Your guess is as good as mine, since the notice called for comments to be submitted electronically. But in any case, my prior post turned out to be utterly off-base. Memo to the Letters Blogatory files: in future, don’t assume that the government’s administrative docketing systems work as well as they should! Memo to the USTR: speed up your docketing—you’re making me look bad!

In any event, several commenters submitted comments, all of which are now available at the online docket. I’m only going to address the two most significant comments: Chevron’s petition, and the Ecuadoran ambassador’s comment.

Chevron’s petition recounts its basic story of fraud and corruption and then focuses on Ecuador’s failure to obey the interim award in one of the Chevron/Ecuador investment treaty arbitrations, which requires Ecuador to take “all measures necessary” to suspend the Lago Agrio judgment’s effect. Ambassador Cely’s letter is pretty good. She notes that Ecuador is in precisely the situation the United States found itself in in the Medellin case—obligated as a matter of international law to take an action but unable, for reasons of domestic law, to take it—and she notes that the Ecuadoran courts’ decision not to suspend the judgment relied on countervailing considerations of international law, and that Ecuador had thus acted in good faith. For good measure, she points out that Ecuador has committed in writing to paying the award in the other investment treaty arbitration pending if the Netherlands courts ultimately reject its challenges to the award.

Apologies for the error in my prior post! I will be less naive about the government’s technological capabilities going forward.

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