The Lago Agrio Plaintiffs Win Another Round (The Last?) In Ecuador

Member of the Cofán Dureno community in northern EcuadorIn a not-unexpected development, the Lago Agrio plaintiffs won the latest round in Ecuador’s courts. An appellate court rejected Chevron’s request to be excused from the ordinary requirement of posting a bond in order to suspend the operation of the lower court’s $18 billion judgment while it pursues its appeal. This is not a surprise, since, as I understand it at least, Ecuadoran law provides no exception to the bond requirement. I am told that Chevron’s opportunity to post the bond under Ecuadoran procedural law has now expired.

The most interesting aspect of the new appellate decision is the court’s discussion of the recent arbitral decision reaffirming Ecuador’s obligation, under the US/Ecuador bilateral investment treaty, to suspend operation of the judgment. According to a translation provided by the plaintiffs’ advocates, the judges said:

A simple arbitration award, although it may bind Ecuador, cannot obligate Ecuador’s judges to violate the human rights of our citizens. That would not only run counter to the rights guaranteed by our Constitution, but would also violate the most important international obligations assumed by Ecuador in matters of human rights

I have emphasized what I think is the key language in the decision, which illustrates the heart of the problem. The Ecuadoran courts have now said that the arbitrators’ interim awards cannot compel the Ecuadoran courts to suspend operation of the judgment. But the judges seem to recognize that the arbitral awards may bind Ecuador itself under international law. So Ecuador is in the same position as the United States was in the Medellín case: obligated by international law to take certain actions, but unable, under its internal law, to take them.

The difference between the two cases is that the Ecuadoran plaintiffs are likely going to seek to enforce the Ecuadoran judgment in a third country (there was no similar issue in Medellín, a US death penalty case). So the $18 billion question is what the courts of a third country will do, assuming the Ecuadoran judgment is entitled to recognition and enforcement under that country’s law. Will it recognize the arbitral awards, as the New York Convention most likely requires? If so, what force will the recognition have? Will the courts of the third country find that they are required, by the New York Convention, to suspend enforcement of the Ecuadoran judgment? Or will they instead enforce the underlying judgment on the theory that the Ecuadoran plaintiffs themselves were not parties to the arbitration and the award can have no preclusive effect as to them? I hope to share some thoughts on this in the coming days.

Photo credit: Caroline Bennett / Rainforest Action Network

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 2012), 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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