Lago Agrio: Fajardo Turns On Donziger?

Marcus Junius Brutus
Et tu, Calmbacher Reyes the Huaorani people Burford Capital Stratus Consulting Beltman Maest Bogart Patton Boggs DeLeon H5 Pablo Fajardo?
Credit: Marie-Lan Nguyen

I didn’t see this one coming! Recall that after winning the Lago Agrio case, the plaintiffs had attached Chevron’s assets in Ecuador to satisfy the judgment. One of those assets was the right to payment of $96 million on account of a treaty arbitration pending between Chevron and Ecuador. As I noted last week, Ecuador, out of options to challenge the award, finally paid up. My view was that this was not necessarily detrimental to the LAPs, since the attachment still stood, and whatever payments the Ecuadoran government made to Chevron, it would still be on the hook to the LAPs. I figured that in making the payment to Chevron, Ecuador was probably assuming the risk that it would have to make the payment twice.

Not so fast! Apparently the government is not that eager to pay Chevron and the LAPs. According to a press release that Roger Parloff reported on yesterday, the lead Ecuadoran lawyer for the Amazon Defense Coalition, Pablo Fajardo, “lifted the embargo order … against Chevron assets in Ecuador to make it easier for Ecuador’s government to make a controversial payment of $112 million to the company.” He acted “without the permission” of the group, the Coalition said. It has “suspended ties” with Fajardo.

What happened? I reached out to Fajardo and his (erstwhile?) colleague, Steven Donziger, for a comment but did not hear back. The press release says that Fajardo was acting “at the behest of individuals in Ecuador’s government that wanted to pay Chevron.” It probably would be unjournalistic to speculate, but how can one avoid assuming that Fajardo was either pressured by the government or paid off? Either way, it’s bad news for the LAPs. For one thing, they may have lost their entitlement to some money in Ecuador, which was the easiest money available to them in the case. For another thing, it’s difficult to see how the LAPs themselves can really go after the Ecuadoran government or even Fajardo too vigorously, because they surely don’t want to to prove that the government acted badly, as that could influence the perception of the Ecuadoran judiciary and government in foreign countries whose courts are being asked to recognize and enforce Ecuadoran judgment over Chevron’s claims of fraud, political interference, and the like.

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.

13 thoughts on “Lago Agrio: Fajardo Turns On Donziger?

  1. Pablo Fajardo gave an interview in which he seems to say his motive was patriotic: he did not want the Ecuadoran government to be in the position to have to pay twice. Or at least that’s what I glean from Google Translate. But curiously there is no real mention of his clients, and no affirmative statement that they agreed with his action. It’s all very strange.

  2. Here is an article that quotes the decision of the Ecuadoran court lifting the embargo. According to the article, the order read:

    The aim of the injured parties was that the money would be given to them in compensation for the alleged damages caused by the company to them. The legal representative of the victims, Pablo Fajardo, submitted a written statement to the Court of Sucumbios desisting from the embargo and it was accepted. The judge’s ruling, issued on July 21, in summary states: “serving the will of the litigant, that once required the embargo of $ 96,355.369.17 Ecuador owes to Chevron, the embargo is canceled.”

    1. I found an article which maybe sheds some light on the position Fajardo was in (it suffers a bit from google translate!).

      Not sure if it justifies him signing away his clients money, and if it was indeed Kaplans order that put this money out of reach, then surely there is a strong argument to delay payment until the appeal process has run its course?

      The payment was made after it was unsuccessful a proposal from Ecuador to create an escrow account for the deposit of that amount, since the country is in effect a garnishment order against the assets of Chevron, which in another private judgment was ordered to pay 9,500 million for serious environmental damage in the Amazon.

      According to the Ecuadorian president, the State’s proposal to deposit the funds in an escrow account, which the company did not respond, was because he could not ignore the garnishment delivering 112 million to the oil, nor disregard the US court resolution.

      The measure was intended to leave the funds on deposit in the escrow account until the dispute is resolved by environmental damage.

      But Correa said the oil giant wanted to “liquidate Ecuador”, so the government asked the Amazonian affected by environmental damage desist embargo, to which they agreed “in a very patriotic action and will be eternally grateful; if not, we would be in very serious trouble, “said the president.

      With the withdrawal of the embargo “could pay Chevron, we could place the bonds, we were able to obtain such financing badly needed the Republic and that was thanks to the Amazon that despite having clear their rights, temporarily renounced them for the benefit of the country “he added.

      http://www.elconfidencial.com/ultima-hora-en-vivo/2016-08-03/el-presidente-de-ecuador-dice-que-chevron-boicoteo-emision-de-bonos_980908/

      1. My understanding from reading the article is that the Ecuadorian government is currently looking into options of financing the country’s debt; that Chevron threatened to block that (god knows how) and the government asked the LAPs to lift the embargo on the funds based on this threat. Maybe I’m wrong.

      2. This may be right, but what about the clients? I don’t know what the law governing lawyers in Ecuador is like, but I have to assume that Ecuadoran lawyers are required to put the interests of their clients first.

  3. The way it looks is that Chevron had Ecuador tied up every way, and Ecuador responded by persuading Fajardo to make a patriotic decision without consulting his clients. We can only speculate on how they persuaded him, but it looks like an unenviable position.
    I guess Chevron had this covered all along, as they would not have pushed for a judgement against Ecuador had they thought there was a chance it would be paid to the LAPs.

    1. Peter, I’m not sure I see a basis for your second paragraph. Chevron would say that Ecuador couldn’t satisfy the arbitral award by paying the amount due to the LAPs rather than to Chevron.

      On the question of Fajardo, I hope for his sake that your speculation is incorrect. Assuming that Ecuadoran lawyers are supposed to act in their clients’ interests, and assuming that he really didn’t have his clients’ approval to act, I would say he is or at least should in some deep trouble with whomever regulates the practice of law in Ecuador.

      1. Well the LAPs had an embargo on the award and I think they expected to be able to enforce it. I don’t think Ecuador would have ever anticipated paying twice, so presumably would have argued that in paying the LAPs the debt to Chevron had been satisfied as their $9.5 billion judgement was reduced accordingly. Surely the embargo would never have been put in place otherwise.
        The release put out by the LAPs states that Fajardo acted without their consent and that they have suspended ties with him. I have huge admiration for Fajardo and all that he has achieved, but something has gone wrong here and it’s really disappointing. I hope it can be resolved.

          1. Sorry for the delayed response – I’ve not looked at this for a while, and other events have since overtaken this issue anyway. However, for the record, no I didn’t ever expect that this money would somehow become available with the embargo lifted. What I meant was that I hoped the Fajardo and Donziger teams would be able to resolve their differences moving forward, since I don’t think Fajardo would have acted as he did if he felt he had a choice.

            1. Thanks, Peter, for the perspective. One twist: it seems to me that the more one points to the possibility that Fajardo was pressured, the more one calls the Ecuadoran judgment itself into doubt. If things are so bad in Ecuador that the government threatens lawyers with truncheons, waterboarding, or whatever, then yikes! If, on the other hand, the threats were not in that league, then Fajardo’s conduct becomes more difficult to understand let alone excuse.

  4. Point taken. Of course we can only guess as to why Fajardo acted as he did, but he has worked long and hard on this case, so it seems unlikely that he would willingly give up so much money.

    Whilst I would not want to speculate on threats of waterboarding etc, I can imagine his position to be very difficult given that President Correa told him Chevron could “liquidate Ecuador”. With or without threats of torture, the choices are difficult.

    Whilst the fact remains that Fajardo went out on a limb and made decisions without consulting his clients or colleagues, the circumstances were quite unique. Has there ever been a case where a lawyer has to choose between his client and the economy of his country?

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