The Lago Agrio Partial Award: What Next for Chevron?

Although Chevron’s representatives refused to confirm it to me, I expect that if the tribunal hearing the investment treaty dispute between Chevron and Ecuador ultimately decides that the Lago Agrio plaintiffs’ claims in the Ecuadoran lawsuit were barred by the release Ecuador gave to Texaco, Chevron will seek to use the ultimate arbitral award as the basis for an argument against recognition and enforcement of the Ecuadoran judgment. That’s why Chevron’s press release was titled “International Arbitration Tribunal Finds Chevron Not Liable for Environmental Claims in Ecuador” instead of, say, “International Arbitration Tribunal Finds Ecuador Liable To Chevron For Violations of Investment Treaty.”

Unfortunately, the memorials and counter-memorials submitted to the tribunal are not easily available, at least to me, and so I know less than I would like about the arguments the parties made to the tribunal. But if we are asking whether a court should have to give issue-preclusive effect to the tribunal’s awards, I would like to flip the question around for a moment and ask why the tribunal was not required to give issue-preclusive effect to the Ecuadoran judgment. I suppose that the Ecuadoran court decided, implicitly or explicitly, that the release did not bar the Lago Agrio plaintiffs’ claims. So why was that judgment not conclusive on the issue? This is not merely a rhetorical question, and I would welcome thoughts from those more familiar with the arguments made to the tribunal than I am. One possible answer is that the tribunal could find the Ecuadoran judgment unworthy of recognition for the same sorts of reasons Chevron has been saying it is unworthy of recognition—partiality; lack of due process; etc. One of the few submissions to the tribunal that I have seen, Ecuador’s Counter-Memorial of February 18, 2013, shows that the fairness of the Ecuadoran proceedings are indeed before the tribunal, under the heading, for BIT purposes, of denial of justice.

But returning to the preclusive effect of the arbitral award in courts, aside from the ordinary difficulties in applying non-mutual collateral estoppel, it seems to me there is probably another difficulty for Chevron. Remember that as a condition of the forum non conveniens dismissal, Texaco stipulated that it would accept the jurisdiction of the Ecuadoran courts, but it reserved the right to object to recognition and enforcement of an Ecuadoran judgment on the grounds for a challenge permitted by the New York UFMJRA. Could Chevron, consistent with the stipulation, argue that the Ecuadoran judgment should not be recognized because of the release? There’s an issue about whether the stipulation binds Chevron at all (as the stipulation was made by Texaco, not Chevron), but assuming that the stipulation does bind Chevron, my first impression is that the stipulation would not permit Chevron to argue, in effect, that the Ecuadoran court got Ecuadoran law wrong. A source who I believe is close to the LAPs has told me that the LAPs are thinking along these lines, and at least as an initial matter, this seems like a pretty good point for them.

So it seems to me that we are in for some pretty interesting litigation about the effect of the partial award and the awards that it’s reasonable to expect will follow.

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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