Chevron Puts Trade Pressure on Ecuador

Chevron has renewed its effort to put economic pressure on Ecuador to carry out the order of the BIT tribunal requiring Ecuador to suspend operation of the Lago Agrio judgment. To understand the latest moves, a little background is in order.

In 1991, the Andean Trade Preference Act became law. 1The purpose of the ATPA was to help four Andean countries, including Ecuador, to create economic alternatives to drug production and trafficking. The Act provides for reduced duties on Ecuador’s exports to the United States. the ATPA has been renewed and amended several times. As of 2012, for various reasons, Ecuador is the only beneficiary country.

The US Trade Representative is required to submit a report to Congress on the operation of ATPA by June 30 of each year. In April 2012, the USTR requested public comment on whether Ecuador was meeting the eligibility criteria under the ATPA. Chevron submitted a public comment arguing that the Lago Agrio case was “rife with fraud” and pointing to favorable rulings it has obtained in the United States. According to Chevron, Ecuador’s refusal to obey the BIT award, which ordered Ecuador to take steps to suspend the Lago Agrio judgment, was a violation of the mandatory criteria for the ATPA preference, one of which prohibits the preference:

If such country fails to act in good faith in recognizing as binding or in enforcing arbitral awards in favor of United States citizens or a corporation, partnership, or association which is 50 percent or more beneficially owned by United States citizens, which have been made by arbitrators appointed for each case or by permanent arbitral bodies to which the parties involved have submitted their dispute.

Chevron’s criticism was echoed by other commenters; I would like to note in particular the comment submitted by Margaret L. Petitio, president of Friends of Rule of Law in Ecuador, Inc. 2Just what is Friends of Rule of Law in Ecuador, Inc.? According to the records of the District of Columbia’s Department of Consumer and Regulatory Affairs, it was organized in 2001 but its status as a corporation has since been revoked—it’s not clear when. I left a telephone message seeking comment about the organization at its telephone number, which from the voice message seemed to be Ms. Petito’s residence, but I did not hear back before this article went to press. If I had been able to reach Ms. Petito, I would have asked about the corporation’s affiliations and the source of its funds. According to an online biography, Ms. Petito’s comment, in the form of a letter to President Obama, was not exactly temperate:

For the last three years, your efforts have demonstrably failed to present and review the facts about the nation of Ecuador under president Rafael Correa. While we understand your regard for your preferred donors to the U.S. Democratic Party, the profound denial of fact-based updates pertaining to Ecuador remains in abeyance of the U.S. Congressional demands that the U.S. Department of State report factually core details of the removal of rights, legal strictures, treaties, concordances and relational materiel by Ecuador which impacts U.S. relations.

To be sure, your refusal to deliver fact-based Reports regarding Ecuador is of a set piece, even as this matter is no small matter to the victims of the multi-year U.S. brown out of facts. Sadly, if you base your June 2012 U.S. Trade Preference Report on your own stubbornly inaccurate Reports on Ecuador, you might incorrectly conclude again that Ecuador warrants duty and tariff free trade extensions again when every factual indicator, as required under U.S. statute, reveals that it does not qualify. Why continue the embarrassing reward of this false chimera with U.S. monies?

* * *

Furthering your own past senatorial and personal support for the outrageous fraud against Chevron, as commenced during your time as a U.S. senator, your presidency instead would benefit from your termination of withholding facts about Ecuador under Correa.

Yikes!

The USTR’s report does not adopt these concerns wholesale, but it does indicate concern on the part of the Administration. “The Administration is monitoring development in connection with these matters under the relevant ATPA eligibility criteria.” Denial of ATPA eligibility would be a blow to Ecuador’s economy (nearly $2 billion in Ecuadoran goods had an ATPA preference in 2011, though the number appears to have been lower than it would have been but for a temporary lapse in the ATPA program for much of 2011 due to Congressional inaction on an extension).

The idea here is to pressure Ecuador, of course. It remains to be seen whether the pressure will be successful.

Notes:

  1. Most significantly, the ATPA was amended by the Andean Trade Promotion and Drug Eradication Act of 2008.

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.

One thought on “Chevron Puts Trade Pressure on Ecuador

Leave a Reply

Your email address will not be published. Required fields are marked *