Response to Ted Folkman

In his various comments on the symposium contributions, our host Ted Folkman makes three points to which I respond here.

Case-Specific Exceptions Generally

First, Ted questions whether case-specific grounds for non-enforcement of foreign judgments are needed, so long as the systemic inadequacy of a foreign judicial system is a ground for non-enforcement. If the foreign system is inadequate, so the argument goes, no judgment emanating from it need be enforceable in the US. Conversely, if the foreign system is adequate, it should be trusted to correct any case-specific problems. Either way, there is no need for a case-specific ground for non-enforcement.

But the world is not that neat. Judicial systems worldwide are not black and white: most do not fall into clearly defined categories of either good enough always to be trusted, or bad enough never to be trusted. At the extremes, yes, such all-or-nothing categories can be defensible. For example, I would support a general rule, or at least a very strong presumption, in favor of enforcing any final judgment from Britain, and against enforcing any final judgment from (today’s) Zimbabwe.

The judiciaries in most countries, however, are not so clearly acceptable or unacceptable. They are mixed bags, often doing a reasonably good job, but with frequent exceptions. In such a world, we should not have to condemn an entire foreign judiciary merely because it might fail to correct serious problems in individual cases. Nor should we be bound to swallow individual judgments contrary to our fundamental principles, on the artificial assumption that since the system of which they are part is deemed adequate in general, therefore every individual judgment it produces must be deemed adequate as well. In the real world, we need not only systemic, but also case-specific, exceptions to enforcement of foreign judgments.

Forum Non Conveniens Cases

Second, Ted argues that whatever the rule on enforcement generally, the grounds for non-enforcement of a foreign judgment resulting from a defendant’s successful forum non conveniens motion should be more limited. Once a defendant vouches for the adequacy of a foreign system for FNC purposes, he argues, the defendant should be barred by a “new kind of estoppel” from a case-specific challenge to any resulting foreign judgment.

The flaw in this suggestion is the same as the flaw in the first: it assumes an all-or-nothing view of the adequacy of a foreign judiciary. More realistic is the approach taken by Texaco (defended by Chevron on appeal) when it agreed to accept jurisdiction in Ecuador: Texaco agreed to be bound by any resulting Ecuadorian judgment—but subject to the grounds for non-enforcement set forth in the New York statute. The implicit representation by Texaco was that it accepted the adequacy of the Ecuadorian judiciary in 2001 in general, but not to the point of extending a carte blanche. Texaco agreed to be sued, not defrauded.

Ted argues that equity “should be flexible enough to deal with new situations.” After all, he adds: “It’s equity, man!” But new or old, the essence of equity is fairness. A defendant which agrees to accept a foreign jurisdiction but only subject to conditions—and whose acceptance on that basis is approved by US courts, as in the Texaco case—should not, in fairness, be held to accept a resulting foreign judgment, no matter how fraudulent and no matter how badly deteriorated the foreign judiciary has subsequently become. (This conclusion is even stronger where the plaintiffs orchestrated or directly participated in the foreign fraud.)

Foreseeability

This brings me to Ted’s third point: that Ecuador’s judiciary has never been that good and that Chevron should have assumed the risk that the “political winds in Ecuador” would not continue to “blow its way.” This is a matter of degree. I agree that Texaco should have assumed the risks that the reformist winds of the period when the FNC motion was decided would not continue to blow in Ecuador, and that future political change might even lead to a retrenchment. Such variability was reasonably foreseeable.

But unless one applies a rule of strict liability, there are limits to foreseeable and assumable risk. By contemporary Latin American standards, the subsequent deterioration of Ecuador’s judiciary was so exceptional as not to be reasonably foreseeable. In the decade since Texaco accepted Ecuador’s jurisdiction, no country in Latin America—except Ecuador—has experienced the wholesale, summary dismissal of all the judges of all its top courts (Supreme Court, Constitutional Court, Electoral Tribunal) even once (let alone twice, as in the case of Ecuador’s Supreme Court). No Latin American judiciary—except Ecuador’s—has been left topless with no Supreme Court at all for over half a year. Nor did Ecuador’s exceptionalism result from a single, aberrational change of government: the independence of its judiciary has now plummeted through several consecutive presidents.

I have worked on judicial reform in Latin America for decades. In 2000, around the time Texaco’s FNC motion was litigated, I was elected by the Organization of American States to serve on the Board of the Justice Studies Center of the Americas, which promotes judicial reform throughout the hemisphere. I visited Ecuador during those years. I know of no one at the time who foresaw or predicted anything like the collapse of Ecuadorian judicial independence that began in 2004 and continues to the present.

One measure of Ecuador’s dramatic descent is reflected in the World Bank’s Rule of Law Index. In 2000 Ecuador ranked respectably—with countries such as Mexico, Brazil and Peru—in the middle of the third quartile of nations worldwide. Ecuador then was well ahead of bottom-feeders like Honduras, Guatemala and Paraguay. By 2010, however, Ecuador had fallen to nearly the bottom of the fourth quartile, and was ranked ahead of only one other Latin American nation (Venezuela, where the “rule of law” has been reduced to the “rule of Chavez”). (See the attached table).

Bottom Line

As Chris Whytock and Cassandra Robertson document, there exists a serious problem of the use of forum non conveniens motions, not to relocate justice, but to delay and defeat justice. Ted Folkman proposes to deal with the problem at the back end: by imposing estoppel (to an unfair degree in my view) and assumption of risk (even of what seem to me to be not reasonably foreseeable risks)—thus ensuring enforcement of foreign judgments (whether or not they are conscionable).

A better approach would be to deal with the problem at the front end, by raising the bar for granting FNC motions. (This is one part of what Whytock and Robertson recommend.) US courts should be more realistic in assessing the adequacy of foreign fora for FNC purposes. Even this, however, will not solve the problem: as my initial post in the symposium outlined, the US District Court that ruled on Texaco’s FNC motion did in fact conduct a realistic review of the adequacy of Ecuador’s judiciary at the time. So W & R’s further recommendation is also important: US courts granting FNC motions should retain jurisdiction, so that where the foreign judgment in a FNC case is so deficient as to be unenforceable, the US courts can resume proceedings on an expedited basis.

About Douglass Cassel

Douglass Cassel is Notre Dame Presidential Fellow and Professor of Law at the University of Notre Dame Law School. He was also an advocate for Chevron in proceedings before the Inter-American Commission on Human Rights.

4 thoughts on “Response to Ted Folkman

  1. Cassel is desperately trying to rewrite history to help Chevron escape the consequences of its actions when it chose Ecuador as it preferred forum for the trial. In 2001, Chevron told the Second Circuit (in a brief signed by “ChevronTexaco, Inc.”) that “Ecuador provides an adequate legal forum” with comprehensive “guarantees [of] due process and equal protection” and “important procedural and substantive rights, and that its judicial system was “independent” and “strong” (for more high praise by Chevron of Ecuador’s judiciary, see http://chevrontoxico.com/assets/docs/affidavit-packet-part2.pdf). At that time, Ecuador ranked in the 14th percentile (raw score 2.3) of countries in Transparency International’s Corruption Perceptions Index. The U.S. federal district court and court of appeals agreed with Chevron that despite these indicators, Ecuador was more than capable of handling the lawsuit. Today, Ecuador has risen to the 34th percentile (raw score 2.7). Ecuador also remains, despite admitted problems in some areas, one of the highest scoring countries in Latin America for judicial independence in the Cingranelli-Richard (CIRI) Human Rights Dataset. The 2010 State Department Human Rights Report notes that, in particular, civilian courts that “handle lawsuits seeking damages for or cessation of human rights violations” are “generally considered independent and impartial.” See http://www.state.gov/documents/organization/160163.pdf. Indeed, the primary problem with such courts was that they were considered “time-consuming and difficult to prosecute, with judges taking up to a decade to rule on the merits”—a problem that Chevron intentionally exacerbated through constant procedural abuses and delays in the Aguinda trial. Last year, Professor Joseph Staats of the University of Minnesota concluded that Ecuador does in fact “provide impartial tribunals and procedures compatible with the requirements of due process of law.” See http://chevrontoxico.com/assets/docs/2011-staats-report.pdf. Ultimately, even the World Bank “rule of law” indicator cited by Cassel does not significantly disagree with this assessment, though it is worth noting that that indicator measures a variety of factors including a country’s problems with police conduct and the “likelihood of crime and violence,” issues with which Ecuador has struggled in recent years but which are not relevant to Chevron’s experience with the civil justice system.

  2. No rewriting of history is needed to answer Mr. Page, who seeks understandably to defend his clients’ ill-gotten Judgment. Much could be said to place the data he cites in context, but one overriding point suffices: In Ecuador, when President Correa is intensely interested in a case, all hope for judicial independence melts into fantasy. We saw that most recently in the El Universo case — where a judge has testified that the $42 million libel ruling against the newspaper was not written by the judge who supposedly entered it, but was instead slipped to that judge on a pen drive by the President’s lawyer. (In fairness, I should add that the President’s lawyer denies this, and has called for criminal action against the whistle-blowing judge!)

    President Correa has likewise made clear, publicly and privately, his intense interest in the Chevron Judgment. And likewise, there is evidence that the judge who supposedly rendered that Judgment was not its entire author. For details, see my April 10, 2012 reply to Mr. Page’s earlier letter, entitled Defrauding Chevron in Ecuador: Doug Cassel’s Reply to Plaintiffs’ Legal Team, accessible at http://douglasscassel.com.

    Correa’s flamboyant disregard of judicial independence is not unique in Latin America, but parallels the abuses of Chavez in Venezuela and Ortega in Nicaragua. Correa’s manhandling of the courts is, however, a continuation of the dramatic deterioration of the state of Ecuador’s judiciary a decade ago, when Chevron represented to US judges that Ecuadorian courts provided an adequate forum.

  3. One other point I wanted to make in response to Doug: I am not saying that I prefer a back-end solution and am really opposed to a front-end solution. The Whytock/Robertson approach has much to recommend it. Indeed, in the future I hope that judges are much more careful about the stipulations they require as a condition of an FNC dismissal, so that everyone will be clear about what the losing party in the foreign proceeding can and cannot claim when the case comes back to the US for recognition and enforcement. But until that happy day, what to do about pending cases that are already past the FNC stage? It seems to me that even if the Whytock/Robertson solution is sound going forward, we need to consider whether the ex post solution of estoppel is appropriate for cases that have already been dismissed on FNC grounds.

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