Chevron loses bid against $18bn Ecuador fine

US Supreme Court rejects oil giant’s attempts to block an $18bn judgment in a case over pollution in the Amazon jungle.

Decision is latest in a drawn-out dispute between the oil giant and residents of Ecuador's Lago Agrio region [Reuters]
Decision is latest in a drawn-out dispute between the oil giant and residents of Ecuador's Lago Agrio region [Reuters]

Oil giant Chevron has lost a US Supreme Court bid to block an $18.2bn judgement against it in Ecuador in a case over pollution in the Amazon jungle.

The court did not give any explanation for Tuesday’s decision, which rejected Chevron’s appeal of a lower court ruling.

The lower court in January had thrown out an injunction blocking enforcement of the Ecuadorean judgement.

The decision is the latest in a nearly two-decade conflict between the second largest oil company in the US and residents of Ecuador’s Lago Agrio region over claims that Texaco, bought by Chevron in 2001, contaminated the area from 1964 to 1992.

The battle has spawned litigation cases in numerous courts both inside and outside the US.

Oil companies are watching the case closely because it may affect other cases accusing companies of polluting the areas where they operate.

Chevron claims that the judgement, imposed by an Ecuadorean court in February 2011, was fraudulent and unenforceable under New York law.

In March 2011, a federal judge in New York issued a worldwide injunction blocking enforcement of the judgement.

But on January 26, the 2nd US Circuit Court of Appeals in New York overturned the ban, finding that Chevron had been premature to challenge the judgement.

No authority

The 2nd Circuit court said Chevron, based in San Ramon, California, could challenge it “only defensively, in response to attempted enforcement,” which the Lago Agrio residents had not attempted, and might never attempt, in New York.

The appeals court also said that the US judge did not have the authority to stop courts in other countries from enforcing the judgement.

The Ecuadorean plaintiffs are currently trying to enforce the judgement in Canada and Brazil.

In its appeal to the Supreme Court, Chevron said it was entitled to raise an anticipatory defence in US courts to
pre-empt any enforcement efforts.

It also said such defences are necessary in light of the “disturbing trend” in which lawyers win big money judgements
against US companies in corrupt foreign courts, and then seek to enforce them in countries where the companies operate.

“While Chevron is disappointed that the Court denied our petition, we will continue to defend against the plaintiffs’ lawyers’ attempts to enforce the fraudulent Ecuadorean judgement, and to further expose their misconduct,” Chevron said in an emailed statement.

The company is pursuing a racketeering suit against Steven Donziger, a New York lawyer, and a group of Ecuadoreans and environmental groups that helped win the judgement, accusing them of intimidation and extortion.

Lower profits

Chevron has also challenged the judgement before an international arbitration panel under a trade agreement between the US and Ecuador.

The panel is scheduled to begin hearing the dispute in November.

The judgement included $8.6bn of environmental damages, which an Ecuador court more than doubled because Chevron failed to make a public apology.

In July, damages in the case were increased to $19bn.  

Meanwhile, Chevron warned that third-quarter profits would be “substantially lower” than the previous quarter as a hurricane and maintenance curbed its oil and gas output, and a fire hit its refining arm.

The company said that the key crude unit at its oldest refinery in Richmond, California, would remain offline through the fourth quarter after it was badly damaged in an August 6 fire.

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