Chevron advocate, professor of law, and friend-of-Letters-Blogatory Doug Cassel weighs in on the new arbitral award in the Chevron-Ecuador investment treaty arbitration.

In his recent post on the new arbitral award in the Chevron-Ecuador investment treaty arbitration, Ted Folkman wondered, first, whether Chevron “will seek to use the ultimate arbitral award as the basis for an argument against recognition and enforcement of the Ecuadoran judgment.” I can’t speak for the company, but public record sources make it pretty clear that the answer is, “Yes.”

The web site italaw.com, created by Professor Andrew Newcombe of the law faculty of the University of Victoria in British Columbia, Canada, includes documents from numerous arbitrations. The site has a significant but incomplete set of documents from the Chevron Ecuador arbitration.

It includes the tribunal’s April 9, 2012 procedural order which bifurcated the proceedings. Paragraph 2 of that order defined track 1 to address “preliminary legal issues arising from the Settlement Agreements.” It left track 2 to address “all extant issues which may be required finally to decide the Parties’ dispute.”

Track 1 was largely but not finally resolved by the tribunal’s First Partial Award of September 17, 2013. There the tribunal determined that Chevron was entitled to enforce the 1995 settlement agreement and the 1998 “final release” granted by the government of Ecuador to Texaco. The tribunal further ruled that the release covered, not only contractual claims, but all legal claims by the government, including claims of “diffuse” or collective environmental harm. Finally, the tribunal decided that, because only the government was entitled under Ecuadoran law as it stood in 1995 and 1998 to bring such claims, the government had the capacity to, and did, release all such diffuse or collective environmental claims, regardless of who might later try to assert them.

In so ruling, the tribunal confirmed the view—not disputed by either party—that the release did not cover individual claims for personal environmental harm. The tribunal deferred to track 2—the oral hearing on which is scheduled for January 2014—the issue of whether the Lago Agrio lawsuit included any such individual claims, or was instead a collective claim for diffuse harm. The tribunal also deferred certain ancillary issues relating to the releases.

So the track 1 partial award narrowed the issues, but still did not finally resolve the legal effect of the 1995 settlement and the 1998 release. Specifically, the award did not decide whether the claims by the Lago Agrio plaintiffs are “diffuse,” so that they have already been settled and are thus barred, or “individual,” in which case they were not settled and could be pursued in the Lago Agrio litigation.

When the tribunal does reach the issue of collective vs. individual claims, however, the prospects for Ecuador do not look encouraging. The Lago Agrio judgment recites the plaintiffs’ express claim that, based on their “collectively recognized” rights, they seek what amount to collective—not individual—remedies, such as cleaning up alleged oil contamination. They also ask that Chevron be ordered to pay money—not to any individuals, in individualized amounts—but to the Amazon Defense Front, to be used “exclusively for the ends determined” in the judgment, namely environmental clean-up and health programs—quintessentially collective relief.

Track 2 will also deal with all other “extant issues.” They may include at least those issues raised by Chevron prior to the bifurcation order. Those issues are plainly relevant to any future recognition or enforcement of the Lago Agrio judgment. Chevron’s September 6, 2010 memorial on the merits (accessible on the italaw web site) argued, among other points, that the Lago Agrio litigation was “permeated with fraud,” the Ecuadorian government colluded with plaintiffs to improperly influence the court, the court “succumbed to corruption,” the Ecuadorian judiciary lacks independence, and Ecuador denied due process to Chevron.

Chevron’s March 20, 2012 supplemental memorial (also on italaw) added arguments (among others) that the Lago Agrio judgment was “fraudulent,” that Ecuador is incapable of providing Chevron an “impartial” tribunal, and that the Lago Agrio litigation amounts to a “denial of justice.”

So if Chevron wins on some or all of these issues before the tribunal, the company will have plenty of ammunition to oppose recognition and enforcement of the Lago Agrio judgment. Lest there be any doubt as to its intentions, the track 1 award notes that, among other relief, Chevron asks the tribunal to “[d]eclare that enforcement of the Lago Agrio Judgment within or without Ecuador would be inconsistent with Ecuador’s obligations under the Settlement Agreements, the BIT and international law.”

Ted also asked “why the tribunal was not required to give issue-preclusive effect to the Ecuadoran judgment,” in light of Texaco’s agreement to accept Ecuadoran jurisdiction. The short answer is that while the legal effect of Texaco’s agreement has been argued by the parties before the arbitral tribunal, the issue has not yet been decided by the tribunal. So it, too, may possibly be ruled on in track 2.

Wholly aside from the New York UFMJRA statutory exceptions to recognition of a judgment based on fraud, denial of due process or lack of an independent court, Chevron argues that Texaco agreed to accept Ecuadoran jurisdiction only over the same claims as in the Aguinda litigation, namely individual damage claims (albeit presented in a class action). Texaco did not, Chevron argues, agree to accept Ecuadoran jurisdiction over “diffuse” or collective claims of environmental damage, which the government of Ecuador asserted in the Aguinda litigation were solely its rights to assert, and not those of the private plaintiffs. In contrast, Ecuador now argues that the Aguinda and Lago Agrio litigations are essentially the same.

It could be, then, that in deciding on whether the Lago Agrio lawsuit includes individual claims, for purposes of deciding whether it was barred by the 1998 release, the tribunal may consider the same issue in order to pass on the legal effect of Texaco’s acceptance of Ecuadoran jurisdiction. But there is no guarantee that it will. As noted above, track 2 will address only those issues which, in the judgment of the tribunal, are “required” in order to decide the dispute between Chevron and Ecuador.

I have never taken a position on the legal effect of the release; my focus as a human rights advocate has been on the gross violations of due process in the Lago Agrio litigation. But reading the arbitral tribunal’s recent decision in light of the assertedly “collective” rights recognized in the Lago Agrio judgment, it appears that Chevron has good reason to celebrate the tribunal’s unanimous decision.