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CHEVRON CASE/SUMMARY OF MARCH 2015 SUPPLEMENTAL REJOINDER

Jurisdiction

The Tribunal does not have jurisdiction over either Chevron’s denial of justice claim or its treaty claims. First, there is no link between Chevron’s claims and an “investment agreement,” as required by the BIT. The Tribunal has already found that the 1995 Settlement Agreement does not qualify as an “investment agreement” within the meaning of the Treaty. And unlike TexPet, Chevron was not a party to the 1973 Concession Agreement, nor has Chevron ever invested even one dollar in Ecuador. Second, there is no connection between the 1995 Settlement Agreement and the Lago Agrio Litigation. While the Tribunal found in its First Partial Award that the 1995 Settlement Agreement resolved so-called diffuse claims under Article 19.2 of Ecuador’s Constitution, the Lago Agrio Litigation concerned individual rights based in tort, as this Tribunal expressly found in its Decision of March 12, 2015. Accordingly, Chevron’s claims, all of which relate to the Lago Agrio Litigation, are unrelated to its rights under the 1995 Settlement Agreement.

Moreover, the Tribunal does not have jurisdiction over TexPet claim’ because it is neither a party to nor potentially affected by the Lago Agrio Litigation.

Exhaustion

Chevron’s denial of justice claim must be rejected for the additional reason that it has failed to exhaust local remedies that are available to redress the alleged judicial misconduct. It is a well-accepted principle of customary international law that a denial of justice claim cannot prevail where local remedies have not been exhausted. Even assuming Chevron’s allegations were true, which they are not, its denial of justice claim fails because the Lago Agrio judgment is still under review before the Constitutional Court of Ecuador. Further, Chevron allegedly knew of the alleged misconduct of Judge Zambrano and could have moved to recuse him or otherwise report him to the Judicial Council. It chose not to. It cannot sit idly by, fail to take any action, lie in wait, and use the alleged misconduct as an insurance policy in the event of an adverse decision. Further still, Chevron could have and may still pursue an action under the Collusion Prosecution Act (“CPA”), which is specifically designed to provide a remedy in the event a judicial decision has been procured by fraud. The presiding judge in such an action retains the right to nullify the supposedly corrupt judgment. Chevron argues that such remedies are futile because the judiciary lacks independence from the executive branch, which, Claimants allege, is openly adverse to Chevron. But numerous Ecuadorian courts have ruled in favor of Chevron, both in the Lago Agrio case and in other cases.

Denial of Justice/Treaty Claims

Claimants have alleged that the Republic has breached the fair and equitable treatment provision, the duty to provide effective means to investors to enforce rights, the duty to provide full protection and security, and the duty to refrain from imposing arbitrary or discriminatory measures. All of these alleged treaty breaches fail for one uniform reason, namely, that all these breaches ultimately depend on the conduct of Ecuador’s judicial system, and thus they are barred by the doctrine of exhaustion.

Even if the Tribunal were to find that the principle of exhaustion does not apply to Claimants’ treaty claims, the Tribunal must still interpret each substantive treaty provision in accordance with the standards of customary international law such as the minimum standard of protection. In other words, the substantive provisions at issue are not lex specialis standards that can be read independently from principles of international law.

Finally, regardless of the standard employed, Chevron has failed to establish that the actual conduct of the Republic has breached the substantive provisions of the treaty. In other words, the ghostwriting allegations have not been established, and the remaining allegations even if true (such as the political speeches provided by President Correa) do not give rise to a treaty breach.

Ecuadorian Law

Claimants seek to turn the Arbitral Tribunal into a supra-national court of appeals, and have thus challenged every conceivable aspect of the Lago Agrio Litigation with unmeritorious and, at times, even frivolous claims. The Republic fully addressed and refuted each of Claimants’ complaints, and further exposed Chevron’s strategy to disrupt and delay the Lago Agrio proceedings while simultaneously creating a synthetic record of purported due process violations for later use in the arbitration and enforcement proceedings outside of Ecuador. In their latest submission, Claimants bifurcated their complaints regarding the application of Ecuadorian law between so-called “legal absurdities” and “due process violations.” Regarding the first, the Republic established that the Lago Agrio Court expressly and appropriately applied Ecuadorian law and judicial precedent appropriately in all respects. Regarding the second, the Republic established that Claimants’ claims were based on gross misrepresentations of fact and applicable law, and demonstrated that the Court addressed every one of Chevron’s allegations correctly under Ecuadorian procedural and substantive law.

Finally, responding to Claimants’ recurrent challenge that the review performed by the Appellate and Cassation courts was improper, the Republic explained that the Appellate Court properly examined the claims raised in the parties’ appellate motions, citing the trial record to verify that the lower Court’s decision was amply supported. Relying on Ecuadorian law and ample judicial precedent, the Republic also refuted Claimants’ allegation that the Appellate Court and the National Court were obligated to examine and rule upon Chevron’s purported evidence of fraud, establishing that Chevron impermissibly sought to rely on new evidence not found in the trial court record. Accordingly, neither the Appellate nor the National Court had competence to rule upon Chevron’s alleged evidence of fraud because reliance on inadmissible evidence by any court in Ecuador constitutes a violation of due process to the party against whom the evidence is admitted and is grounds for nullification of the resulting judgment.

Ghostwriting

The Republic’s latest filing demonstrates how Claimants’ accusation that the Lago Agrio Plaintiffs “ghostwrote” the first-instance Judgment fails in light of the available evidence. To begin, none of Claimants’ documentary evidence has independent significance. Rather, it depends on the testimony of Alberto Guerra to link it together and narrate Claimants’ story. But as the Republic has explained previously and addressed again in its Supplemental Rejoinder, Guerra is inherently unreliable. Guerra’s hard drive reveals that his story is a lie. His computer contained no draft or portion of the Judgment, no orders issued during Judge Zambrano’s second tenure, no email correspondence with Judge Zambrano of the Plaintiffs, and no copies of any of the Plaintiffs’ allegedly unfiled work product. Moreover, none of the orders Guerra claims to have authored for Judge Zambrano actually originated on Guerra’s computer. He is nothing more than a testimonial mercenary, whom Claimants have paid and trained to say whatever best serves their case.

The objective, contemporaneous evidence, on the other hand, refutes Claimants’ allegations. This evidence falls generally into three categories. First, Plaintiffs’ counsel traded numerous internal emails in the months and weeks leading up to the Judgment’s issuance, indicating that they did not know when or how Judge Zambrano might rule. Second, the forensic evidence proves that the Plaintiffs did not ghostwrite the Judgment. Judge Zambrano’s hard drives contain evidence consistent with the conclusion that he drafted the Judgment on his computers, relying on Internet legal research and translation websites in the process. The document that eventually became the Judgment was created on Judge Zambrano’s computer when he resumed jurisdiction over the case and that document was saved, edited and contained increasing percentages of final Judgment text over the appropriate time period. Claimants’ other contentions—including that the Judgment copied from the Plaintiffs’ unfiled work product—rest on false premises and are contradicted by contemporaneous evidence, including additional emails from the Plaintiffs’ counsel and video evidence of documents being submitted to the Lago Agrio Court during judicial site inspections.

Pollution

The evidence — both in the Lago Agrio Court Record and gathered by the Republic’s independent environmental experts — shows that the Lago Agrio Court appropriately held Chevron responsible for toxic contamination Claimants left in the region. The evidence taken during the Lago Agrio Litigation shows that the amount of oil left in the Oriente is massive. Based solely on the data collected by Chevron, the Republic’s environmental experts, LBG, estimated that there is approximately 22 million kilograms of crude oil in the rainforest’s soil. And in contrast to Chevron’s claims that any toxic crude it left behind is “safely” buried in pits, a full 94% of the crude in the soil is located outside of pits. Chevron’s environmental disaster in Ecuador is equivalent to six Exxon Valdez spills.

At sites where Chevron was the only producer of oil, the Republic’s experts found that the majority of soil, sediment, and groundwater samples contain crude oil contamination exceeding relevant thresholds. The presence of this contamination poses a health risk to the people who live close to the contamination. Chevron essentially argues, incredibly, that the carcinogens in the crude oil pose no health risk in the circumstances here. The Republic’s expert, Dr. Harlee Strauss, has evaluated the risk at a handful of Chevron’s sites and found both cancer and non-cancer risks exist for people living nearby. Dr. Philippe Grandjean has shown that Chevron’s evidence of a lack of cancer impact is based on faulty studies. And Dr. Blanca Laffon has demonstrated through her own independent research that exposure to oil results in damage to individuals’ DNA (a marker of increased cancer risk) after only a few months of exposure — the people in the Oriente have been exposed to Chevron’s contamination for decades.