Lago Agrio: Update On The Arbitral Award

As I suggested a few days ago, the Lago Agrio plaintiffs have trumpeted their intention to seek to compel the government of Ecuador to pay the $100+ million arbitral award in favor of Chevron, which is now final, to the LAPs rather than to Chevron. I am still trying to determine what happened to the Ecuadoran court’s order requiring the government to pay the funds to the LAPs—I believe the order was appealed by the government. But let’s assume that the order is in effect as a matter of Ecuadoran law, and consider how this might play out.

  1. I suppose the Ecuadoran government could disobey its domestic court’s order and pay the award to Chevron. This seems unlikely. If it happened, then a potential international dispute would be transmuted into a purely Ecuadoran dispute.
  2. The Ecuadoran court could pay the award to the LAPs and assert that it had discharged its obligation. Because a US court has already confirmed the award, this possibility raises shades of Argentina. Recall that Argentina has argued that it discharged its obligations to bondholders by making payments to intermediaries that did not result in money reaching its bondholders’ hands.1 The question, I suppose, is whether the Ecuadoran judgment ordering payment to be made to the LAPs would be entitled to recognition in the United States. And it would be Ecuador itself, rather than the LAPs, that would be making the arguments. This possibility also could lead to further developments in the fight about renewal of Ecuador’s trade preferences, since compliance with international arbitral awards is one of the relevant factors.
  3. If Ecuador is feeling sufficiently flush, it could pay the same award twice. The question: is avoiding the choice between a domestic political brouhaha and a showdown with the United States worth $100 million?
  1. Of course, the two situations are not entirely alike. Argentina is subject to an injunction and can arguably be punished for disobeying the US court’s orders. Ecuador is merely a judgment debtor at law.

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