Dear Gustavo,

The following replies to your comments:

1. Ecuador’s Judiciary. You attribute to me the view that Ecuadorian courts are fair when Chevron wins and unfair when the company loses – a difficult claim to make, considering that I have never suggested that Ecuadorian courts are fair. You contend that they must be fair, because the State loses many private cases, including some against multinationals. Even if one were to assume that those cases were free of the rampant corruption that has long afflicted Ecuador’s judiciary, they are beside the point: the courts today are politically compromised in cases in which President Correa takes a special interest – by necessity a “small minority” of cases. El Universo is one. Lago Agrio is another.

2. Computer Experts. You say that Chevron’s expert could not reply to Ecuador’s latest expert report. But as I explained in my post, the issue of whether Guerra was Zambrano’s ghostwriter (disputed by the computer experts) has become moot – Zambrano now admits that Guerra was his ghostwriter.

3. The “Puppet.” Fajardo in fact sent the email I quoted after Zambrano took over the case. If Donziger has a real explanation for the code language, he’d better come up with something more credible than unspecified “internal staffing problems.”

4. The Bribe Offers. Chevron itself revealed that Guerra first approached the company for a bribe, before he then turned to Donziger. But Chevron turned Guerra down. (The evidence it did so is undisputed.) Donziger wants us to believe that he, too, declined to bribe Guerra. But if so, Donziger needs to explain why he then offered Guerra $5,000 to testify in the U.S. as to the “suitability” of Ecuadoran courts.

5. Plaintiffs’ Internal Documents and the Damage Assessments. I stand by my earlier statements.

6. Collusion Prosecution Act. Under this approach Chevron would be required to lose a fraudulent case, and then to file a collateral attack. Even if the damage done to a company by paying a fraudulent $9 billion judgment could realistically be compensated years later, there is no reason to believe that Ecuadorian courts would be any fairer in the new case than in the old one. And even if Chevron were somehow to win in Ecuador’s courts, does anyone really believe that Correa would reimburse $9 billion to his “enemy of the country”?

7. The International Arbitration. The treaty went into effect in 1997. The subject of the arbitration – the Lago Agrio lawsuit in Ecuador – was not filed until 2003. The arbitration is thus not retroactive. Nor are the arbiters unreasonable: their awards have all been unanimous, including the vote of Ecuador’s appointee (an eminent and well-respected international jurist). Any restriction of sovereignty was voluntarily undertaken by Ecuador when it agreed in the treaty not to perpetrate a denial of justice. Whether it did so in Lago Agrio will be decided by the arbiters, but plainly they have jurisdiction under the treaty to decide that question.

I should have said “direct” evidence instead of “actual” evidence. I agree Chevron can make a circumstantial case. My point is that there is no direct evidence of government interference, as there is direct evidence of private bribery.

Dear Ted,

The evidence indeed shows interference by Correa’s government in the Lago Agrio case. Correa personally offered to intervene with the trial judge. He instigated bogus criminal proceedings against Chevron’s lawyers until the trial was over. He made strident public statements designed to influence reviewing judges (who were already in his pocket). And even as National Court and international enforcement proceedings were pending, his administration bought off the plaintiffs’ star witness – Judge Zambrano. At minimum, from Correa’s first days in office and continuing to the present, his government has violated international law standards of fair trial – which require not only the reality, but also the reasonable appearance, of independence of the judges and the judicial process.

Beginning shortly after he assumed the presidency in 2007, Correa met with Fajardo, Donziger and other plaintiff representatives several times. Plaintiffs’ internal emails report that in one such meeting Correa offered to “call the judge” on their behalf. (Did he? How could anyone know?)

We do know that in 2007 Correa publicly called for criminal prosecution of two of Chevron’s Ecuadorian counsel. He denounced them as “homeland-selling” lawyers – even though several prosecutors had previously dismissed all charges against them for total lack of evidence. Fortunately, despite Correa’s bombast, the Prosecutor General once again dismissed the charges. Subsequently, however, the Prosecutor General was removed and replaced by Correa’s college roommate. Citing the phony Cabrera report, Correa’s crony charged the Chevron lawyers with the crime of “ideological falsity.” Throughout the remaining years of the Lago Agrio trial, the charges hung over their heads. Only after the trial ended, and the judgment was issued, did another Ecuadorian court finally throw out the charges.

For years Correa has fired off verbal salvos on the case that would test the backbone of even an independent judiciary. Singling out Chevron by name, Correa declared in 2009 that he “really loathes the multinationals.” As for the trial, he made clear, “Of course I want our indigenous friends to win.” When the judgment was issued in 2011, Correa called it “the most important judgment in the history of the country.” Most recently in 2013, while National Court review was pending, Correa labeled Chevron an “enemy of the country.” Ecuadorian lawyers and academics who support Chevron, he proffered, are “the nation’s traitors.”

The resulting threat to judicial independence is magnified because, as I have detailed previously, beginning in 2011 Correa carried out a wholesale “reform” which gave him effective control of the judiciary. He packed the National Court and Constitutional Court with partisans. Even if his yes-men (and women) on the National Court had been inclined to vote against his pet judgment (they were not), they, too, would have had to fear being labeled as traitors.

International law requires that justice not only be done, but also that it be seen to be done. Against Correa’s unrelenting record of accusatory rhetoric, vented before a judiciary which lacks independence, justice was neither done nor seen to be done in this case.

Further questions are raised by recent revelations about payments to Judge Zambrano, the supposed author of the Lago Agrio judgment. Recall, first, that plaintiffs make much of Chevron’s substantial payments to its witness, Judge Guerra, for the expenses of moving Guerra and his family out of Ecuador and living in the U.S. (Left unmentioned is the fact that Guerra’s family has been reduced from a large home in Ecuador to a small two-bedroom apartment in the U.S., where they have applied for political asylum.) But at least Chevron (in its press release) and Guerra (in his declaration) disclosed these payments from the outset.

In contrast, Judge Zambrano’s March 28, 2013 declaration made no mention of any actual or anticipated payments by Ecuador to him. Nor did Ecuador. On the contrary, Zambrano swore that he had not been offered any “future remuneration” in exchange for his declaration. Yet, only days later, the Ecuadorian State quietly put the Lago Agrio lawyers’ star witness back on its payroll. Even though Zambrano had been removed from the bench in 2012 for apparent corruption, and was then unemployed for over a year, in April 2013 an affiliate of the Ecuadorian State oil company hired him as its “legal advisor.”

Even by themselves, these facts raise questions as to whether the State bought Zambrano’s testimony, in order to defend the legitimacy of the Lago Agrio judgment before the New York court, as well as to bolster the plaintiffs’ cause in Argentina, Brazil, and Canada, and before the international arbitral tribunal, where Correa’s government openly supports plaintiffs’ efforts to collect on the fraudulent judgment.

But there is more: Zambrano testified in New York that he landed the legal advisor job without disclosing that he was ever a judge, let alone a defrocked career judge. In a small nation like Ecuador, is it credible that the State oil company never heard of the judge who handed down one of the most highly publicized judgments in the nation’s history — against another oil company? Or that they would hire an applicant about whom they knew next to nothing as their legal advisor?

Zambrano further testified in New York that, more than six months into his new job, he had never visited his employer’s web site, and was not even aware that he had a work email address. Yet the State values his services so highly that it pays him more than twice the salary advertised for the legal advisor position.

When Zambrano made his highly publicized declaration, the Lago Agrio case was still pending before the National Court. The case remains pending in various enforcement proceedings. Aside from Correa’s earlier intrusions, then, one must ask whether, by quietly hiring a disgraced former judge, with no questions asked, only days after he rendered testimony helpful to the plaintiffs, and then paying him twice the advertised salary, the State even now interferes with the litigation. The question answers itself.

Mr. Cassel and Chevron find that the courts are fair when they win, and corrupt when they lose. In fact, the state frequently loses in Ecuadorian courts. Since 2008, just in the main provinces of Ecuador the State has lost more than 410 times in private litigations. Instances abound in which the Ecuadorian courts have rule in favor of a foreign multinational. This is the reason why Chevron’s strategy was to bring back the Aguinda case to Ecuador on the basis of “forum non conveniens”. In 2010, Ecuador lost a multimillion dollar case to two foreign oil companies, one of which had international arbitral claims pending against the Republic at that time. An Ecuadorian court dismissed charges against two of Chevron’s lawyers just a couple of years ago. As it relates specifically to the Lago Agrio case, the first instance court actually awarded damages substantially less than that which was requested by the plaintiffs, (wrongly) awarding $19B rather than more than $100B. And that award was reduced by half by the National Court in November. Maybe now it will make sense for a lot of people and understand why Chevron fought for almost 10 years to bring back the Aguinda case to Ecuador … they were too sure of the power of their lawyers in Ecuador!

Re ghostwriting:

It is obvious that Cassel hasn’t seen the Republic’s Rejoinder and the attached exhibits. Of course, Cassel just has his facts wrong, for instance he says:

“and his recent post cites a report, issued by an expert for the Republic of Ecuador, asserting that some documents on Guerra’s computer were supposedly created after Zambrano issued the orders in question. Chevron’s expert—Lynch—explains persuasively why Ecuador’s expert was wrong.” But Chevron’s expert Lynch hasn’t actually responded to the Republic’s expert’s report, which was just filed on 12/16/2013. In other words, he can’t have explained, persuasively or otherwise, why the Republic’s expert was wrong.

Chevron’s “puppet/puppeteer” allegations do not make sense because the emails predate Zambrano’s tenure on the Lago Agrio trial. Pablo Fajardo first used the terms several months before Zambrano came on the bench. Zambrano can hardly be considered a puppet of Guerra (very well paid by Chevron to be their witness) (the puppeteer) as Chevron alleges if Zambrano wasn’t hearing the case. Steven Donziger testified under oath that his understanding was that Fajardo was referring to internal staffing problems the LAPs were facing.
Cassel puts stock in the fact that Donziger admits that Guerra approached the LAPs for a bribe but OMITS the fact that Guerra first approached Chevron multiple times seeking bribes (Well, now Guerra is working for Chevron). That Guerra solicited both sides before Chevron ultimately began paying him is not evidence that the LAPs bribed Guerra. And indeed, Guerra admitted under oath that he was never involved in any actual bribery. Chevron’s position is also inconsistent. If Chevron were right and President Correa has made it his mission to ensure that Chevron loses, why would the plaintiffs pay a bribe? Under Chevron’s theory, plaintiffs’ victory has been politically preordained.

Cassel claims that there is no evidence of some of the LAPs internal documents being submitted to the Lago Agrio court. But Cassel doe not say that both parties indisputably provided documents to the court openly and transparently even though not identified on the court docket.

Cassel also states that the judgments damages assessment relies on data and conclusions whose only record source is the Cabrera report. But this is not so–neither the pit count nor the damages categories are unique to Cabrera’s report–and the Court did not rely on Cabrera’s reports or data in reaching its damages assessment.

Cassel suggests that the National Court simply declined to consider the evidence of Plaintiffs’ fraud even though it could have done so had it wanted to. This is totally incorrect!!! The National Court does not have jurisdiction to consider the evidence of fraud submitted by Chevron, as Claimants (Chevron has the most expensive lawyers in Ecuador) knew or should have known. Of course, this does not leave Chevron without a remedy in Ecuador. Instead, under the Collusion Prosecution Act, referenced by the National Court, and that any law student in Ecuador knows, an action may be brought by an aggrieved party alleging that a proceeding has been tainted by fraud, and “if the grounds for the claim are confirmed, measures to void the collusive proceeding will be issued, invalidating the act or acts, … and redressing the harm caused, … and, as a general matter, restoring the things to the state prior to the collusion.”

I can only suggest that Mr. Cassel should read the rejoinder of the Republic where also it is very clear than even before the first-instant court issued its decision, and in an apparent effort to circumvent any then-prospective judgment from the Ecuadorian courts (notwithstanding that it was Chevron’s decision to have the matter litigated there), Chevron brought the instant international arbitration. Successive decisions of this tribunal have been greeted in Ecuador with indignation, less because of Ecuador’s profound disagreement on the merits—though those disagreements run deep—but even more so because of the tribunal’s aggressive assertion of its jurisdiction and its total disregard of Ecuador’s sovereignty and its laws. Just an example, the treaty expressly provides that its terms apply only to investment disputes existing as of or arising after the date the treaty entered into force. The treaty’s non-retroactivity provision reflects the fact that the State entered into the treaty to encourage future investment, not to grant rights to those who are currently doing nothing for its economy. Chevron left Ecuador in June of 1992. The treaty entered into force five years later, in 1997!

Well, the arbitral tribunals are other subject of discussion and as Lise Johnson says: “arbitral tribunals have interpreted investment treaty rules in a manner far more favorable to the interests of investors than the approaches adopted in U.S. courts” and I will add in any small country’s court.

True, but does your complaint read like a document addressed to a court? (Yes.) And, of course, you kept a copy. In contrast, plaintiffs’ seven unfiled documents in Lago Agrio did not read like court filings (one was even an internal plaintiffs’ email). If plaintiffs ever converted those documents into documents in the form and language suitable for filing in court, they have not been able to produce copies. So I believe you; I don’t believe them — doug

I will look forward to it!

Thanks, Ted. There is indeed evidence of involvement by the Correa government in the Lago Agrio case. I will pull some of it together and post it in a comment in the next few days — Doug

1. Cabrera. I don’t think you meant to suggest this, but in case anyone was unsure, my views on the Cabrera report aren’t new, nor is my criticism of Donziger and the LAPs over the Cabrera matter.

2. Problems with the Judiciary. We’ve hashed this out before. As far as I can tell there really is no evidence of actual interference by the Cabrera government in this case. I want to make it clear that I’m not carrying any water for the Cabrera administration, and it seems clear that the government has used the courts for improper purposes, e.g., in the El Universo case. You could be right to argue that the government doesn’t need to interfere directly; it is so powerful that the judges know they must toe the line, and that’s why there’s no evidence of direct interference. My main reason for doubt is that the story of an all-power executive that bends judges to its whim seems inconsistent with the story Judge Guerra told, even if you believe him: according to Judge Guerra, he approached Chevron first to solicit a bribe. If that’s true, he obviously didn’t feel big brother watching him at the time.

3. Local Remedies. One of your themes has been the unwillingness of the Ecuadoran higher courts to review the evidence of extrinsic fraud. That’s no different, really, then how appellate courts act here. The question in my mind is: is there a remedy in the court of first instance that Chevron could use to offer new evidence of bribery etc., and if so, why has Chevron not used it? I have heard, from other parties in the case, about something called the Collusion Prosecution Act, which, they say, provides a remedy. Do you have a view on whether the CPA is available in this case? I disclaim any knowledge of the substance of the Ecuadoran law on this.

4. Forensics and Other Corroboration. I don’t want to dwell to much on the forensics, since neither your post nor my post goes into detail about this. And neither of us addresses the linguistic expert evidence. Suffice it to say there are competing expert reports. But I do want to say something about the deposit records and other documents Chevron has offered to corroborate Guerra’s story. As you note, I’ve questioned the authenticity of those documents. Here’s why. Judge Guerra claims that he was paid some money to makes stuff up. Now he’s being paid much more money. It seems important to consider that he may be making stuff up now, too, and thus it would have been better for Chevron to find a witness other than Guerra himself to vouch for the supposedly corroborating documents. That’s a very non-technical way to put it. In my prior post, I was a little more technical and said that while I thought there was no authenticity objection to the documents, there might well be a hearsay objection because no proper witness was there to lay a foundation for admission. The main question, in my mind, is what happens if the finder of fact simply discounts Guerra’s testimony, and thus the exhibits that he has authenticated. Is there enough to show the ghostwriting? My basic hunch is that the answer is no, particularly given the gravity of the claim. But I’ve been wrong before!

Dear Mr. Siegel,

Thanks for your comment. I am intrigued by your reference to the last five words. Perhaps you might elaborate or, if you prefer, email or phone me at Notre Dame Law School. I am of course listed on the law school web page. Many thanks – doug