Lago Agrio: Update and Correction

A correction to my last post on the Lago Agrio case. An alert reader noted that there is still an enforcement proceeding pending in Argentina’s Supreme Court. In late 2017, I reported on the first-instance decision in Argentina, and although I didn’t cover it, in July 2018 Chevron published an English translation of the appellate decision affirming the lower court’s decision. I cannot find a reference online to the proceeding in the Argentine Supreme Court, but assuming the reader’s account is correct, then it is not right to say that the Lago Agrio case is wholly over. Hope springs eternal in the human breast.

A few more observations about the latest development in Canada:

  • Pablo Fajardo, the lawyer for the Ecuadoran plaintiffs, tweeted:

    This is a little more fulsome than Steven Donziger’s tweet, which cited “procedural reasons” for the consent to dismissal:

    But Fajardo’s explanation is, I confess, a little disappointing, because I thought the whole purpose of continuing to proceed in Canada was to get a Canadian judgment that could then be recognized elsewhere: a real-world example of judgment arbitrage.

  • I asked the Ecuadorans’ representatives whether there was a deal regarding the costs that the Lago Agrio plaintiffs would have to pay after the court assessed them and was told that there was not. With that in mind, it seems to me the motive for agreeing to dismissal of the case was to avoid the possibility of issue preclusion in a third country if they lost in Canada.
  • In light of Donziger’s note that the the Canadian dismissal was without prejudice and that the LAPs would seek to bring claims in other countries, I expect that Chevron will continue to prosecute its investment treaty arbitration against Ecuador, which is aimed at depriving the Ecuadoran judgment of effect under Ecuadoran law. If that effort is successful, then Chevron will have chopped off all of the hydra’s heads at once. Otherwise , in principle the LAPs can continue to bring enforcement actions in country after country.

11 responses to “Lago Agrio: Update and Correction”

  1. […] I made a correction to this story, relating to the pendency of an enforcement case in the Argentine Supreme […]

  2. Paul Wolf

    It will go on and on until Donziger is put in jail for embezzling investor funds in defiance of the courts order.

    1. I think your comment is a little over-the-top, Paul. Conceivably Donziger could face imprisonment to coerce him to comply with the court’s injunction, though I think that is unlikely, but there is no indication (that I know of, anyway) that he is at risk of criminal prosecution for embezzlement.

  3. David

    Mr. Folkman,

    You mentioned that you expect Chevron to continue prosecuting its investment treaty arbitration. That three-person arbitration panel (including the panelist nominated by Ecuador) unanimously ruled last year that Ecuador violated international law when its courts issued a fraudulent judgment against Chevron. This panel’s decision rivals the original decision by Judge Kaplan in its denigration of Donziger and the Ecuadorian courts. Donziger has been revealed as a greedy legal charlatan by every legal system outside of Ecuador that has looked into this case. Moreover, the rationale now being advanced by Donziger and his cronies for the dismissal in Canada is an afront to common sense. For years, Donziger has repeatedly leaned on the Canadian litigation for validation of his “cause,” using this case to create hope for his followers. He now shrugs of the dismissal as a meaningless tactical decision, while intentionally failing to tell his followers that this “tactic” included agreeing to pay damages to Chevron. Indeed, the money owed to Chevron is beginning to build: Donziger owes money to Chevron in the SDNY case, the plaintiffs owed money to Chevron in the Canada case, and the international arbitration panel will soon issue what everyone expects will be a nine-figure award against Ecuador in favor of Chevron. Donziger’s tactics have now become a huge financial liability for those whom he purports to defend. Meanwhile the real culprit in this case – Petroecuador, which is very profitable and still polluting the Amazon – is never mentioned by Donizger or his cronies, choosing instead to remain focused on Chevron, who never operated in Ecuador, notwithstanding defeat after defeat. I wonder why?

    1. Your point about the arbitration is basically correct (see my post from April on the Dutch Supreme Court decision refusing to annul the award), but the award has not been confirmed anywhere to my knowledge, nor has Ecuador to my knowledge complied with the requirement to suspend the operation of the Lago Agrio judgment. Moreover, as you point out, the tribunal has not awarded damages yet. That’s what I mean when I say I expect Chevron to keep pushing on that front.

      I agree that the explanations for the decision to consent to dismissal in Canada are not too convincing.

      I am not sure I know how to apportion moral responsibility (as opposed to legal responsibility) for the pollution between Petroecuador and Chevron. That said, you might ask a related question: why hasn’t the Ecuadoran government cleaned up the pollution? Check out my August 2014 post, which references that issue and quotes Article 397 of Ecuador’s 2008 constitution:

      In case of environmental damages, the State shall act immediately and with a subsidiary approach to guarantee the health and restoration of ecosystems. In addition to the corresponding sanction, the State shall file against the operator of the activity that produced the damage proceedings for the obligations entailing integral reparation, under the conditions and on the basis of the procedures provided for by law.

      1. David

        I believe the state has failed to remediate contamination for two primary reasons: (1) it doesn’t value the Amazon or its indigenous people, and (2) if Ecuador was to use its oil revenue to remediate the Amazon instead of servicing China’s massive debt, China wouldn’t build the new refinery it has promised. I also believe Donziger’s scheme of holding Chevron responsible added to the delay we are seeing. Donziger saw a clear path to fame and fortune. He expected Chevron to roll over and gild both his bank account and ego. When that didn’t occur, he doubled-down (repeatedly) because not getting rich and not being worshipped are two results he couldn’t bear to face. But had he (and others) placed pressure on Petroecuador and the state itself to remediate the Amazon, perhaps we wouldn’t be sitting here in 2019 wondering when the remediation will begin.

  4. David

    Mr. Folkman,

    It may interest you to learn that Judge Kaplan today entered an order requiring Donziger to pay Chevron an additional $3.4 million. This award is designed to reimburse Chevron for the attorney’s fees it incurred in trying to force Donziger to comply with the court’s orders. Because Donziger remains in contempt (for reasons only he can understand), this is probably the first of many attorney’s fee awards we will see in favor of Chevron. Chevron also received the court’s permission to register its judgments against Donziger in other states where he may have assets. This run at Donziger’s personal assets is an interesting twist in this long-running case, and I believe it signals how Chevron will act once the Hague issues its damages award against Ecuador. Given the nature of this case, wouldn’t it be ironic if it were to be finally resolved due to Chevron chasing Donziger and Ecuador for money?

    1. Yes, thanks, I saw the order on fees. I could be wrong, but I believe that if the tribunal awards damages to Chevron and if Ecuador fails to get the award annulled, Ecuador will pay the damages. The government’s position has always been that it complies with final arbitral awards, and it did pay Chevron’s damages in another investment treaty arbitration that I’ve written about.

    2. I should add that I expect but again am unsure that Ecuador will not comply with the arbitral award to the extent it calls for the government to render the Lago Agrio judgment ineffective under Ecuadoran law—for the same reason the United States failed to comply with the arbitral award in the Medellín v. Texas case years ago, namely an inability under domestic constitutional law to comply. On the other hand, I have speculated that Ecuador’s agreement to allow the British government to arrest Julian Assange might be part of a larger deal that could involve a resolution of the Ecuador/Chevron dispute, so we’ll have to wait and see.

      1. David

        Your last comment is very interesting. Moreno has taken fairly dramatic measures to place Ecuador on a far different trajectory than that which was taken by Correa. His decision on Assange is Exhibit A of this behavior. He seems determined to lure non-Chinese investors back to Ecuador, but the Chevron case casts a very big shadow on that goal. My understanding is that even though Chevron does not/cannot purchase oil directly from Ecuador, its refineries process a sizable portion of the nation’s oil production. The shared economic opportunities, coupled with Moreno’s actions to date (especially the flexibility he gets from the CPCCS-T) seem to put enough pieces in place for Moreno to bring an end to this case, and I assume Chevron will be just as eager to end it. I think the panel’s determination on damages must be issued before any deal is struck. Assuming this happens, my hope is that any deal would include a large expenditure for remediation of the Amazon and an upgrading of PE’s safety processes going forward. I think carving out funds for this purpose would benefit both sides.

        I’m not sure if you know Professor Nancy Moore at BU Law or if you’re interested in the study of professional responsibility. If either is true, you may want to pull up the declaration she filed yesterday in the SDNY case. It’s a very interesting read. Good luck with your blog.

        1. Thanks! Stop by anytime.

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