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Lago Agrio: Ecuadoran National Court of Justice Affirms Lago Agrio Judgment In The Main, But Reverses on Punitive Damages

Just a quick note for those who haven’t heard: the National Court of Justice has affirmed the Lago Agrio judgment in part, but reversed on the punitive damage award. The Wall Street Journal has early coverage, and, courtesy of Roger Parloff, I have a copy of the very lengthy opinion.

I don’t think it makes sense to comment too much on the decision until I’ve been able to digest it, but here is what I will be looking for:

  • Did the court consider Chevron’s arguments about corruption in the lower court—either attempts at corruption by the LAPs (e.g. the Cabrera issue) or corruption on the bench itself? If not, did Chevron make those arguments to the court, or was there some other procedural avenue for Chevron to make them?
  • What account, if any, did the court take of the arbitral award that requires Ecuador to suspend the operation of the judgment?

More to come!

Lago Agrio Update

Washington Crossing the Delaware
Letters Blogatory wishes its readers a Happy Independence Day!
I have some updates for you in the Lago Agrio case.

First, the Lago Agrio plaintiffs have won a victory in Ecuador. Recall that Chevron had won a $96 million award against the Republic of Ecuador in an investment treaty arbitration in the Netherlands; a court in Washington has just confirmed the award. Now the Lago Agrio plaintiffs have obtained an order from the Ecuadoran court that (if I understand it correctly) requires Ecuador to pay the $96 million to the LAPs rather than to Chevron in partial satisfaction of the Lago Agrio judgment. Now, before you complain that this seems like some sort of trick, it’s worth remembering that Chevron has tried essentially the same tactic, twice, when it tried to attach Donziger’s interest in the Lago Agrio judgment. We will keep track of this development.

Second, we have been following proceedings relating to the renewal of Ecuador’s trade preferences under the Andean Trade Preference Act. Well, we will be following this no more, as it seems that Ecuador has said it no longer wants the preference, angered by American pressure not to grant asylum to the NSA leaker, Edward Snowden. Incidentally, I had an exchange on Twitter earlier this week on the Snowden affair with Keven Jon Heller that ended with me saying I couldn’t give my (generally negative) view about Snowden in 140 characters.

Third, here is the Lago Agrio plaintiffs’ brief in its appeal of the Superior Court of Ontario’s decision in Yaiguaje v. Chevron, the LAP’s suit seeking recognition and enforcement of their $19 billion Ecuadoran judgment in Ontario. I am not going to comment on the brief (or on Chevron’s brief, when I see it) in too much detail. The key point in the brief is that the Canadian court should not have refused to decide the case merely because it found—erroneously, the LAPs would say—that Chevron had no assets in the jurisdiction. I have expressed a view that is similar but not quite the same as this view with respect to recognition and enforcement proceedings in the United States: even if a court would not have personal jurisdiction over a judgment debtor under ordinary rules of personal jurisdiction, it should at least be able to exercise jurisdiction over a judgment debtor to the extent of the judgment debtor’s assets in the jurisdiction, so that a judgment debtor cannot shield assets that ought to be available to satisfy the judgment. I don’t know what I think about the case where the judgment debtor has no assets in the jurisdiction, but I welcome comments from readers on that point!

The Lago Agrio Plaintiffs Win Another Round (The Last?) In Ecuador

Member of the Cofán Dureno community in northern EcuadorIn a not-unexpected development, the Lago Agrio plaintiffs won the latest round in Ecuador’s courts. An appellate court rejected Chevron’s request to be excused from the ordinary requirement of posting a bond in order to suspend the operation of the lower court’s $18 billion judgment while it pursues its appeal. This is not a surprise, since, as I understand it at least, Ecuadoran law provides no exception to the bond requirement. I am told that Chevron’s opportunity to post the bond under Ecuadoran procedural law has now expired.

The most interesting aspect of the new appellate decision is the court’s discussion of the recent arbitral decision reaffirming Ecuador’s obligation, under the US/Ecuador bilateral investment treaty, to suspend operation of the judgment. According to a translation provided by the plaintiffs’ advocates, the judges said:

A simple arbitration award, although it may bind Ecuador, cannot obligate Ecuador’s judges to violate the human rights of our citizens. That would not only run counter to the rights guaranteed by our Constitution, but would also violate the most important international obligations assumed by Ecuador in matters of human rights

I have emphasized what I think is the key language in the decision, which illustrates the heart of the problem. The Ecuadoran courts have now said that the arbitrators’ interim awards cannot compel the Ecuadoran courts to suspend operation of the judgment. But the judges seem to recognize that the arbitral awards may bind Ecuador itself under international law. So Ecuador is in the same position as the United States was in the Medellín case: obligated by international law to take certain actions, but unable, under its internal law, to take them.

The difference between the two cases is that the Ecuadoran plaintiffs are likely going to seek to enforce the Ecuadoran judgment in a third country (there was no similar issue in Medellín, a US death penalty case). So the $18 billion question is what the courts of a third country will do, assuming the Ecuadoran judgment is entitled to recognition and enforcement under that country’s law. Will it recognize the arbitral awards, as the New York Convention most likely requires? If so, what force will the recognition have? Will the courts of the third country find that they are required, by the New York Convention, to suspend enforcement of the Ecuadoran judgment? Or will they instead enforce the underlying judgment on the theory that the Ecuadoran plaintiffs themselves were not parties to the arbitration and the award can have no preclusive effect as to them? I hope to share some thoughts on this in the coming days.

Photo credit: Caroline Bennett / Rainforest Action Network