Lago Agrio: Tribunal Says US Decision Has No Preclusive Effect
Posted on September 5, 2016
Chevron won a victory when the tribunal hearing its investment treaty claim against Ecuador granted its application to add the Second Circuit’s recent decision to the record in the arbitration. But the tribunal’s order is, in an important sense, a much bigger victory for Ecuador.
In a recent post, I noted: “Because the arbitral proceedings are not really public, it’s difficult to know whether Chevron has sought to give Judge Kaplan’s findings of fact preclusive or persuasive effect in the arbitration.” Perhaps the tribunal had already made rulings on the issue, but for me at least its recent order is the first indication of how the tribunal views the issue. It wrote:
[T]he Tribunal notes that the legal issues and the respondent parties in these US proceedings remain materially different from the Respondent and the legal issues before this Tribunal. Accordingly, for want of sufficient privity under international law, there can be no issue estoppel or res judicata applicable to these arbitration proceedings arising from the decisions and results of these US legal proceedings.
This is, in my view, a big deal. I’ve suggested that there’s a chance Ecuador will be able to much better than Donziger and the LAPs did in rebutting Chevron’s argument that the Lago Agrio judgment was ghostwritten. And the ghostwriting is the main claim that, if true, shows that the Ecuadoran state and its agents acted wrongfully. The other main example of wrongdoing in the case, the deceptive Cabrera report, was a fraud perpetrated by the LAPs on Chevron and on the Ecuadoran court. So I think Chevron is significantly worse off if it can’t prove that the Ecuadoran court itself was corrupt—its claim, remember, is against Ecuador itself, not against the LAPs. And in light of what the tribunal has now said, it won’t be able to prove the judgment was ghostwritten simply by pointing out that Judge Kaplan found that it was.
Chevron has a better chance of persuading the court in Canada to give preclusive effect to the Ecuadoran judgment, because some of the LAPs themselves were litigants in New York and preclusion typically requires that the party to be precluded, if not identical to the party that litigated the issue to its conclusion, at least be in privity with that party. But I don’t know the Canadian law on this and thus can’t speculate on what is likely to happen in Canada.