Lago Agrio: Ecuador’s Latest Brief In The BIT Arbitration

A few weeks ago, Ecuador filed its Track 2 Supplemental Counter-Memorial in the BIT arbitration against Chevron. The brief covers some interesting ground. I want to draw attention to two points in particular.

First, the Republic has really gone on the offensive on the merits of the underlying environmental issues. The results of the Louis Berger Group environmental testing, which as far as I know no one has claimed to be corrupt, give us reason to agree with a point Michael Goldhaber made in his recent book, and which I recounted in my review:

In a section of his book titled “The Underlying Truth,” he basically takes the position that due to the fraud in the Ecuadoran proceedings, the question of Chevron’s true liability has yet really to be determined.

In other words: wouldn’t the LAPs have been better off if their team had commissioned a report like the Louis Berger report from the outset, rather than engineering a report that, in the end, had little credibility given its provenance?

The upshot of the report is that based on recent site investigations, the Louis Berger team concluded that pollution existed that could only have been caused by TexPet, and not later by PetroEcuador. Here is an excerpt discussing the AG-06 site, with footnotes removed:

  1. AG-06 was drilled by TexPet in 1974 and closed in 1986. No further oil production occurred there after 1986. TexPet identified two of its former pits at this site. In 1992 TexPet investigators found both pits were “seeping oil” and “contamina[tion] ha[d] migrated beyond the confines of the pit” and was being discharged into a nearby stream. Not long after TexPet’s departure, a sample taken at this site by a TexPet contractor showed the presence of crude oil over twenty-five times the Judgment Cleanup Standard. Although only TexPet extracted oil from this site and the site was designated for cleanup during the RAP [the remediation plan agreed between TexPet and the government], neither pit was remediated because both were designated by TexPet’s auditors as “closed” since sometime earlier the pits had been covered with dirt without being remediated.
  2. LBG has identified at least seven TexPet pits at this site. Two of these pits site [sic] buried next to the well platform at the top of a steep slope. About forty meters downslope of these buried pits, a wetland in a densely wooded area coalesces into a small stream. Crude oil from the two TexPet-buried pits flows with the groundwater down the hillside creating oil seeps that collect in the wetland. Over time, a tar cover has formed overtop crude oil-soaked sediments. LBG’s 2014 sampling found that the wetland contains petroleum contamination by as much as 140 times the Judgment Cleanup Standard, and the small stream formed by the wetland was contaminated with crude in exceedance of the Judgment Cleanup Standard and Ecuadorian regulations.
  3. The groundwater is also contaminated. LBG installed six groundwater monitoring wells at AG-06, all of which revealed crude oil at levels as high as twelve times the limits specified by Ecuadorian regulations. LBG’s groundwater monitoring wells also revealed napthenic acids, a toxic water-soluble crude oil component that does not occur naturally, removing all doubt that the groundwater is contaminated. What is more, barium—a chemical that according to Mr. Connor is used during drilling operations and therefore an indicator of TexPet’s contamination—was found in amounts eight times the limits in Ecuadorian regulations.

The brief goes on to discuss the Republic’s view of the health effects of the contamination that the brief attributes to TexPet. Perhaps the most important paragraph is the summary:

  1. While Claimants argue that the evidence does not link specific contamination to specific injury for any particular plaintiff, Claimants do not contest that the Republic’s experts—largely relying on the record evidence—have adequately demonstrated health risks sufficient to warrant a massive clean-up of the region. In particular, Claimants’ expert Dr. Thomas McHugh distinguishes between a health risk sufficient to trigger clean-up versus “an actual health effect.” Dr. McHugh effectively concedes that the Republic has proven the former, justifying remediation. This alone establishes that the Judgment’s required remediation is supported by the evidence and rebuts the claim that the damages are not based on science.

I’m not a scientist and don’t really know how to evaluate the competing claims of the scientists about health effects. I can only discuss this issue impressionistically, based on my own experience visiting a polluted site: if I lived near a site such as the one I saw that contaminated my water supply, I would think it unsafe and demand remediation for the sake of my health and safety. Of course, this raises I point I’ve discussed before: even if Chevron is liable for the cost of the remediation, should the Ecuadoran government go ahead and remediate anyway, particularly in light of the principle of subsidiary responsibility in Article 397 of its Constitution? There is no doubt a strategic element to all this. Suppose that the government did remediate now, and suppose that the plaintiffs ultimately recover damages from Chevron. Would they have to pay the cost of the remediation over to the government?

The second, point from the brief I want to note is way the brief pulls together reasons for disbelieving Judge Guerra’s testimony about the supposedly ghostwritten judgment. Some of this is redacted, so we can’t really know just how strong the arguments are here. But readers will know that I have long noted the inherent incredibility of Judge Guerra’s highly-rehearsed, highly-compensated testimony (though I’ve also noted that I don’t see grounds to substitute my judgment here for Judge Kaplan’s, I don’t need to make that point again here, since Judge Kaplan’s factual findings are not conclusive in the BIT arbitration). I particularly like the following explanation of one of Chevron’s favorite “gotcha!” moments from the New York trial, Judge Zambrano’s failure to remember what “TPH” (“total petroleum hydrocarbons”), an important term from his judgment, meant:

  1. The Tribunal also cannot discount the difficulty and confusion Judge Zambrano faced being cross-examined in a hostile, “gotcha” manner in a foreign language in a foreign court. In just one example, Judge Zambrano obviously struggled with the English term “draft,” which can mean both the writing process (as a verb) and an early version of a document (as a noun). Despite two attorneys bringing this translation issue to the RICO court’s attention, the questioning style did not change materially. Indeed, confusion—not an attempt to get away with lying—is the only explanation for instances in which Judge Zambrano would answer the same question differently in quick succession. Claimants, for example, crow over Judge Zambrano’s inability to define “TPH” (total petroleum hydrocarbons). But in Spanish, the acronym is not TPH; it is HTP. Consequently, it is understandable that Judge Zambrano was not immediately familiar with the English acronym presented to him by Claimants’ counsel.

The brief as a whole is well worth a read. Ecuador is very well-represented in the Hague.

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.

3 thoughts on “Lago Agrio: Ecuador’s Latest Brief In The BIT Arbitration

  1. I have followed your coverage of the Chevron case. As it is with most commentators on the case, it is not your professional focus; thus, it is understandable that you are often unfamiliar with the details of the case and thus susceptible to the disingenuous arguments made by the Lago Agrio Plaintiffs and the Republic of Ecuador that seek to exploit that unfamiliarity. Your post today provides a perfect example: You are apparently impressed by the Republic of Ecuador’s argument that Judge Zambrano was unfamiliar with the term “TPH” because “the Spanish acronym is ‘HTP'”. But a simple review of the original Spanish version of the judgment reveals that its author(s) did not use “the Spanish acronym ‘HTP’” as the Republic implies; the author(s) of the judgment (who any objective and informed observer knows was not Zambrano) used the English acronym “TPH”, and he/she/they used it more than 40 times throughout the judgment. Thus, while some Spanish-speakers might be unfamiliar with the term, the author of the judgment certainly would not be. The Republic’s argument on this point is disingenuous and specious. This is but one example of how the Lago Agrio Plaintiffs’ lawyers and their colleagues representing the Republic of Ecuador seek to deceive courts, the media, and the public regarding the corruption of the Chevron case. Any objective observer with the time and patience to review and critically assess the evidence and arguments of both sides (such as Judge Kaplan) would come to the same conclusion about the corrupt nature of the case and the unprecedented attempt to shake down Chevron. Those without such time, patience, and objectivity do not serve the public by credulously endorsing the plaintiffs’ and the Republic’s dishonest rhetoric.

    1. Tom, thanks for your comment—I try my best. I wrote about the “TPH” issue to illustrate a “gotcha!” aimed at a “gotcha!” Elsewhere I have given my reasons for thinking that Judge Guerra is not really worthy of belief.

      You are right that the case is “not my professional focus.” Is it your professional focus? It’s clear you’re pretty familiar with the case.

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