The Case of Chevron: The Government of Ecuador Has an Opportunity to Combat Corruption and Restore the Country’s Credibility

Early in September, The Hague-based Permanent Court of Arbitration (PCA) issued a decision regarding the conflict between the American oil company Chevron and the Government of Ecuador. The decision, which is binding, rejected a 2011 decision by the Ecuadorian court system that ordered Chevron to pay $9.5 billion in compensation for environmental and other damages that took place in the Amazon region of Ecuador allegedly due to oil operations. The PCA argued that the Ecuadorian court ruling was illegal because it was reached based on fraud, bribery, and corruption.  The tribunal blasted the Ecuadorian court and the judge of the case claiming that they violated “international public policy”.

Contrary to other international organizations, the PCA enjoys a very good reputation. It is not an agency of the United Nations.  It has been in existence for well over a century and has mediated a plethora of cases involving international disputes.

In 1993, a group of Ecuadorian citizens filed a class action lawsuit in US federal court against the American oil company Texaco, which was followed by a similar suit, also in a U.S Federal court by a group of Peruvian citizens. The claim filed in these lawsuits charged that between 1964 and 1992, Texaco contaminated the rainforests and rivers in Ecuador and Peru, which resulted in environmental damage with negative health consequences to local residents. The U.S Courts refused to deal with the case and advised to bring the case before courts in Peru and Ecuador. Such class action was brought before a court in Ecuador in 2003. Two years earlier Texaco was acquired by Chevron.

In 2007 Rafael Correa was elected president of Ecuador. Correa, a revolutionary left-wing president who subscribed to Hugo Chavez’ anti-American doctrine took interest in the case trying to influence the court decision to Chevron’s detriment through a multi-million-dollar propaganda campaign at the expense of public funds, a fact recently denounced by the current Ecuadorian government.

Correa’s motive was basically the left-wing euphoria and the “anti-imperialist” discourse developed by all members of the ALBA alliance led by Venezuela. Ruling against Chevron would have been a material and political victory in the fight against U.S hegemony in the region.

In 2011, an Ecuadorian court ruled against Chevron and ordered the oil company to pay 8.6 billion dollars if Chevron issued an apology. If Chevron refused to apologize, the amount would increase to 18 billion dollars. A year later an Ecuadorian court of appeals upheld the ruling against Chevron. Chevron tried to block the enforcement of the Ecuadorian courts in the Ecuadorian Supreme court and in international tribunals. Ecuadorian plaintiffs filed lawsuits in Canada and Brazil in an effort to target Chevron’s assets there in order to apply pressure on Chevron to comply with Ecuador’s rulings. Meanwhile, Ecuadorian courts doubled down demanding that Chevron pay 19 billion dollars. This decision was upheld by Ecuador’s National Court of Justice. The National Court of Justice reduced the payment to 9 billion dollars. Chevron then in June of this year appealed to Ecuador’s constitutional court, a sort of Supreme Court of Justice. A few weeks later the Constitutional Court upheld the decision of the National Court of Justice.

To be sure, the Ecuadorian Constitutional Court that upheld that decision was not what one would expect from a real constitutional Supreme Court.  Members of the Constitutional Court who made that decision were tied to Correa and obviously responded to his wishes. Indeed, the Constitutional Court never declared unconstitutional any of Correa’s decrees even though they clearly reflected arbitrary and abusive use of executive power.  The Constitutional Court also ignored multiple requests and petitions presented by citizens demanding respect for their rights.

Interestingly enough, this is why a month after the Constitutional Court issued its decision on Chevron, the nine justices of the constitutional court were removed by the transitory Citizens Participation and Social Control Council. The allegations were mostly that the justices had conflicts of interest given their ties to the former president. The removal of the justices is compatible with the actions of the administration of the current Ecuadorian president Lenin Moreno who seems to be eager to slowly remove Correa’s influence from the state apparatus.

Indeed, the PCA in its recent decision on Chevron clearly stated that the Ecuadorian judge that handled the case received bribes. Likewise, he allowed the plaintiffs to “ghostwrite” his decision. The plaintiffs acted with the help of an American attorney Steven Donziger who was instrumental in the corruption scheme.

That view was also held by the U.S court system. In March 2014, a U.S court ruled in favor of Chevron, citing the fact that lawyers for the Ecuadorian plaintiffs had used fabricated evidence, bribed judges and ghost-written court documents. The plaintiffs were therefore barred from collecting the money from Chevron. In August 2016, a US court of appeals agreed with the lower court’s ruling reaffirming its arguments regarding corrupted practices. The plaintiffs appealed to the U.S Supreme Court early in 2017 requesting to overturn the decision but the highest court refused to hear the petition.

Donziger’s license to practice law was suspended as part of the decision of the U.S court of appeals.

The PCA ordered the government of Ecuador to take steps to remedy the situation and compensate Chevron for the fraudulent scheme it was subjected to.

Interestingly enough it was also found that celebrities such as Mia Farrow and Danny Glover were used to support the cause of the plaintiffs and received handsome amounts of money to do so, allegedly from the Correa government.

The Chevron case is not merely a case of litigation over environmental and pollution issues. It uncovers the power of corruption in countries where the leadership has no respect for the rule of law. Corruption is an issue that has become prominent in Latin America as it is generating mass protests. Judges are now beginning to take this issue seriously as it is happening in countries such as Brazil.

Corruption has made state and government institutions into instruments of organized crime and drug cartels and as such, extremely dangerous to citizens’ security. Corruption makes the region unsafe for foreign investment and it hurts American companies that by law cannot engage in bribery or illegal acts.

The current Ecuadorian president Lenin Moreno has an opportunity not only to uphold the decision of the PCA but by doing so he would add to the effort to restore law and order to Ecuador. Lenin Moreno already expressed his support for the PCA’s decision. However, several members of his cabinet refuse to do so. Mr. Moreno is making efforts to change the system and we give him full credit for this. However, he has a difficult task since he cannot get rid of all the apparatus built by 10 years of Correa’s semi-authoritarian rule.

Chevron had the fortune of having the means to fight and expose this perversion of justice. Most individuals do not have such resources. When the rule of law is broken, it is more likely that the small citizens and the powerless could turn into victims. Therefore, the Ecuadorian government must accept the PCA decision on Chevron in order to protect not only its international credibility but also the very law that will provide justice to its own citizens.