Lago Agrio: Update on the BIT Arbitration
Posted on May 21, 2013
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.