Lago Agrio: The Louis Berger Group Report—Letters Blogatory Cops Out

I set out to write a post about both sides’ evidence on Texaco’s responsibility for pollution in the Oriente based on recent memorials submitted to the arbitrators in the BIT arbitration between Chevron and Ecuador.

According to Ecuador’s papers, the Louis Berger Group, a consultancy, visited the region in mid- to late-2013 and concluded that the area where Texaco formerly operated is contaminated with petroleum today and, importantly, that the “pollution is directly attributable to TexPet’s operations.” By way of example, LBG visited the Lago Agrio 2 well, which was surrounded by three oil pits and one water pit. Two of the pits “had been closed for years” when PetroEcuador took over operations in 1992. Thus, LBG concluded that the contamination it found in those sites “the pollution that has affected and continues to affect the residents [in the area] was unquestionably put there by TexPet via their initial pits.” According to LBG, Chevron’s judicial inspection report, which was a part of the Ecuadoran legal proceedings, only identified one of the four pits. Much of this discussion, unfortunately, is redacted, but the redactions are suggestive:

Chevron’s JI Report … identified just one pit for the Court. Based on its PI results (which Chevron did not file or discuss with the Court), Chevron misleadingly elected to avoid identification of those locations it knew would demonstrate the existence of its contamination. For example, during the judicial inspection Chevron chose not to take any samples of the sediment in the nearby stream because its PI revealed [Redacted]. And Chevron chose to take only shallow surface samples at Pit 3—which Chevron did not even disclose as being a pit—because during the PIs Chevron found [Redacted].

Chevron, for its part, has challenged the LBG report on a variety of grounds. It notes that it had no notice of LBG’s investigation, and it lcaims that LBG’s choice of sites to investigate was unfair because LBG “focused on sites where it thought there was likely to be easily detected hydrocarbon contamination and readily available human exposure pathways.” This criticism is good as far as it goes—it seems to tally with another of Chevron’s points, namely, that LBG says nothing to justify the amount of compensatory damages the Lago Agrio court awarded. Another of Chevron’s criticisms seems less sound. Chevron complains that “LBG tried to avoid sits that Petroecuador operated and altered after TexPet left the Concession.” Of course it did—one of the main points of the LBG report is to try to rebut Chevron’s argument that much of the contamination that exists is attributable not to Texaco but to Petroecuador. Chevron also points out that the remediation plan was intended to leave pollutants in the pits “in a properly stabilized state.” Chevron also makes some legal arguments, e.g., that one of the pits at the Lago Agrio 2 site was to be remediated by Petroecuador, not Texaco, under the settlement agreement that Texaco reached at the end of its operations, and that LBG’s evidence of contamination above “current Ecuadorian standards” is irrelevant because those standards were not enacted until after the settlement, and Texaco was not required to meet them at the time of the remediation.

Though I’ve read the two memorials carefully, I find it’s difficult to evaluate the competing claims. It’s noteworthy that Chevron doesn’t accuse LBG of fraud or incompetence, as it has the Ecuadoran judiciary, the Ecuadoran plaintiffs, and many third parties that have played a role in the case. But I agree with what Allison Frankel wrote when considering the same questions: “I don’t possess the expertise to pass judgment on the validity of the Ecuadorians’ testing protocol or the conclusions the government has drawn from the work of its experts.”

Hence the cop-out in the title of this post. I want to turn to another point in the brief, and one that I’m able to understand better. The issue is exhaustion of local remedies. Ecuador points to two Ecuadoran procedures Chevron has not undertaken. I’ve discussed these issues here with Doug Cassel before. Ecuador’s argument is that Chevron’s claims about fraud and the ghostwritten judgment could be pursued in a proceeding under the Collusion Prosecution Act, which provides that if the plaintiff proves the fraud, “measures to void the collusive proceedings will be issued, invalidating the act or acts …” Chevron says that as a matter of international law, it is not required to “pursue ancillary actions for relief before additional judges who stand outside the path of direct appellate review for the purpose of demonstrating ‘exhaustion’ of local remedies.” But Chevron seems to concede that that Ecuador’s highest court is a court of cassation that lacked the authority to decide the points Chevron was raising: in 2012 it wrote that

Filing an extraordinary appeal or ‘cassation’ before the National Court of Justice (the Supreme Court of Ecuador), is not a relevant remedy for Chevron’s purposes because … cassation is limited to legal issues and cannot be brought on the basis of factual matter on which either the first-instance court or the appellate court may have erred.

Given the limitations of the Ecuadoran appellate courts, can Chevron’s view on exhaustion be right? Imagine that Chevron was complaining about fraud in a US District Court proceeding. I suppose that if the appeal relied on evidence outside the record, the Court of Appeals would say that the proper remedy was not an appeal, but rather a motion for relief from the judgment made to the District Court, and that an appeal could be taken from the District Court’s decision on that motion if Chevron were not satisfied. Why does this kind of analysis not apply in this case?

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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