Arbitrators Issue First Interim Award Against Ecuador

Peace PalaceWhile our attention has been focused over the past few days on developments in the Second Circuit, there have been developments in the BIT arbitration between Chevron and Ecuador pending in the Hague. Back in February 2011, the tribunal, though it had not then ruled on its jurisdiction, issued a procedural order under Article 26 of the UNCITRAL Rules requiring Ecuador:

to take all measures at its disposal to suspend or cause to be suspended the enforcement or recognition within and without Ecuador of any judgment against [Chevron] in the Lago Agrio Case.

At the time of the order, the tribunal noted that it could later decide to confirm its order “in the form of an interim award under Article 26 and 32 of the UNCITRAL Rules.” After the Ecuadoran appellate decision affirming the trial court’s judgment against Chevron, Chevron requested that the tribunal convert the procedural order into an interim award. Chevron argued that Ecuador had not complied with the earlier order. Of particular interest, Chevron argued that Ecuador had failed to take steps to relieve Chevron from requirement of posting a bond in order to suspend operation of the judgment during its appeal to Ecuador’s highest appellate court and that Ecuador had failed to enjoin “the Lago Agrio Plaintiffs, the Amazon Defense Front, and any trusts established either pursuant to the Judgment or by agreement of the Plaintiffs or their lawyers and representatives, from seeking to recognize or enforce the Judgment anywhere in the world, by the appropriate Government branch or organ.”

Following Chevron’s request, the tribunal issued its earlier procedural order in the form of an interim award.

I haven’t seen Ecuador’s brief, but I imagine one of its main positions has to be that on separation of powers grounds the Ecuadoran government cannot compel the Ecuadoran courts to take the kind of measures Chevron is seeking. Chevron, on the other hand, will have pointed out that as a matter of international law Ecuador is responsible for all branches of its government.

I don’t think Chevron would have asked to have the order converted into an interim award for no purpose, so I think we should be on the lookout for attempts by Chevron to obtain recognition and enforcement of the award in the United States or elsewhere under the New York Convention. It’s not exactly clear, though, what recognition and enforcement of this award would look like. The award essentially orders Ecuador to take governmental action in Ecuador, and it’s not really clear to me what a foreign court could do to compel Ecuador directly. Perhaps Chevron could seek to tie up Ecuador’s assets in order to compel compliance? Pass the popcorn!

Photo Credit: International Court of Justice

About Ted Folkman

Ted Folkman is a shareholder with Murphy & King, a Boston law firm, where he has a complex business litigation practice. He is the author of International Judicial Assistance (MCLE 2d ed. 2016), a nuts-and-bolts guide to international judicial assistance issues, and of the chapter on service of process in the ABA's forthcoming treatise on International Aspects of US Litigation, and he is the publisher of Letters Blogatory, the Web's first blog devoted to international judicial assistance, which the ABA recognized as one of the best 100 legal blogs in 2012, 2014, and 2015.

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