Chevron Boosted in Bid To Get $18 Bln Ecuador Judgment Reversed

  on February 28 2012 12:12 PM
Ecuador Chevron
Humberto Piaguaje, a tribal leader of the indigenous Secoya people of Ecuador, holds up a letter to the American people, in Washington in May 2011. The letter denounces environmental damage caused by Texaco, now owned by Chevron. Reuters

Chevron Corp. (NYSE: CVX) said a decade-long pollution case against it brought by aboriginal peoples in Ecuador could be moving closer to an end. The company seeks to void an $18 billion judgment brought against it.

An international arbitration panel in The Hague administered by the Permanent Court of Arbitration determined that it has jurisdiction over the case, Chevron announced Tuesday.

Chevron shares rose to $110.18, up 53 cents, in midday trading, just shy of their 52-week high. The stock has gained nearly 4 percent this year.

The case stems from pollution allegations against Texaco,  which Chevron acquired in 2001. The pronouncement is the latest in an ongoing legal chess match between the No. 2 U.S. energy company and those seeking to hold it accountable for polluting swaths of the Amazon jungle.

Chevron claims that court proceedings that resulted in the $18 billion judgment against it violate Ecuador's investment treaty with the United States. The company also argued that the case is fraudulent and has tried for a year to bar plaintiffs' collection of the damages. The Hague arbitration panel had twice enjoined Ecuadorean officials from collecting.

Chevron's claim will now proceed to the merits phase of the arbitration,  the San Ramon, Calif., company said.

Last week, a court in Ecuador rejected the international court's injunction. The aboriginal plaintiffs said that court had no say over how a country upholds its own legal system.. 

Lawyers for the plaintiffs said last week that the Hague arbitration panel is using the U.S.-Ecuador Bilateral Investment Treaty for situations the agreement was never intended to cover and therefore its decisions are nonbinding. The plaintiffs could start enforcing the judgment now but are waiting for it to be certified by a court in Ecuador, their lawyers said.

The panel's ruling is unenforceable and illegitimate. It will have no legal impact in Ecuador, the United States or in any country that observes the rule of law, said Karen Hinton, a U.S. spokeswoman for the Ecuadoreans.

Chevron officials said Friday that they expected Ecuadorean officials to uphold the Hague court's order. The company still has a pending appeal with Ecuador's Supreme Court. Last year,the 2nd U.S. Circuit Court of Appeals in New York threw out an injunction barring collection of the $18 billion judgment. The same court, on Jan. 19, denied Chevron a similar worldwide injunction.

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