Lago Agrio: Tribunal Says US Decision Has No Preclusive Effect

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.

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: Tribunal Says US Decision Has No Preclusive Effect

  1. Dear Ted,

    Your suggestion that the Cabrera report was a fraud on the Ecuadoran court–even if true (I have my doubts)–does not necessarily get Ecuador off the hook. Under international human rights law, at least, states are held liable for the actions of their agents, even when those agents act in violation of the state’s law and in contravention of their instructions. Cabrera was a court-appointed expert and arguably an agent of the Ecuadoran state. Obviously he knew of his participation in the fraud. So his knowing participation alone may suffice to engage Ecuador’s state responsibility for the phony expert report.

    1. I don’t disagree with you that this is a potential issue, though I think you’ll agree with me that it’s not clear that Cabrera would be treated as an agent of the state for these purposes. Suppose a US court appointed an independent expert under FRE 706, and it turned out the expert was corrupt and secretly working for one of the litigants. It seems very strange to me to say that the court would be deemed responsible for the corruption either as a matter of US law or as a matter of international law.

  2. In the post, I noted the difficulty of determining, from the publicly available information, whether Chevron had in fact sought to give the New York judgment preclusive effect. Chevron spokesman Morgan Crinklaw sent me the letter Chevron submitted to the tribunal with the Second Circuit opinion, which does not include a request to give the New York judgment preclusive effect. I will update this with any information I can gather about what positions the parties took. Certainly, Chevron wants the tribunal to give the New York decision persuasive effect if not preclusive effect.

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