Lago Agrio: One Last Post On The DC Circuit Decision

A final update on the recent DC Circuit decision: the Donziger camp has confirmed to me that the Ecuadoran court order, mentioned in my second post on the case, is still in effect. Thus Ecuadoran law apparently requires the Ecuadoran government to pay the award to the Lago Agrio plaintiffs rather than to Chevron. However, the Donziger folks also tell me that no money can be paid under Ecuadoran law until the National Assembly takes certain steps. (This is sensible and familiar, as US law requires an appropriation before money can be spent from the treasury). I am guessing there will be quite a long delay (and maybe a petition for a rehearing en banc or a petition to the Supreme Court, as suggested in a recent statement from the Ecuadoran attorney general) while the Ecuadoran government figures out what it wants to do, because it is in a pickle.

It’s in a pickle because its obligations under its own law are arguably at odds with its obligations under international law to the United States. Chevron’s PR presents the conflict as one with a clear-cut right and wrong answer. I’m not so sure. If A has a judgment against B and A owes C money, it’s not unusual for C to obtain an order requiring B to pay the judgment amount to C instead of to A. Indeed, that’s exactly what Chevron tried to do when it sought to attach Danziger’s interest in the Lago Agrio judgment to secure its eventual judgment in the RICO case! Maybe this remedy is impermissible here, but it’s hard to know if that’s so without getting into the merits of the underlying Lago Agrio judgment. So your views about whether the Lago Agrio plaintiffs are up to dirty tricks, as Chevron suggests, or whether they’re entitled to the funds, as the LAPs’ PR suggests, depend on what you think about the bigger issues in the case.

The views of the United States government may become important, too, because the United States may regard a failure to pay the arbitral award as a violation of Ecuador’s obligations under the two countries’ bilateral investment treaty. If that is the US government’s view, then we could expect to see some consequences in the bilateral relationship. So look for some more lobbying by Chevron at the State Department.

A failure to pay Chevron the amount of the award might also prove awkward for the Ecuadoran government’s lawyers, who represented to the arbitral tribunal that “the Republic has committed in writing to satisfy any award in the Commercial Cases Arbitration should the Republic’s set-aside actions in the Hague be rejected.” But of course, the Dutch court rejected the set-aside action nearly a year ago, and Ecuador still hasn’t paid, and in any case Ecuador isn’t the first client that left its lawyers holding the bag.

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 2012), 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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