Chevron v. Ecuador
The arbitral tribunal in Chevron v. Ecuador has heightened concerns about the legitimacy of the proceedings after it closed them off to the public.
On April 18, 2011 the arbitral tribunal in Chevron v. Ecuador issued a procedural order rejecting the application made by two non-governmental organization petitioners—the International Institute for Sustainable Development and Fundación Pachamama—to serve as amici curiae in the jurisdiction phase of that dispute brought pursuant to the U.S.-Ecuador investment treaty. This action by the tribunal is a disconcerting development in the interrelated, long-running and high-stakes disputes among Ecuador, U.S. oil companies, and residents of the Ecuadorian Amazon regarding environmental pollution, personal injury and liability for those harms. Notably, the order heightens concerns that, within the controversial system of investor-State arbitration, tribunals are resolving matters of significant public interest, but are doing so without giving those affected an opportunity to access all relevant information or provide relevant input regarding the disputes.
The Underlying Domestic Litigation
In 1993 residents of Ecuador sued Texaco (which subsequently merged with Chevron) in a U.S. court seeking compensation and damages for environmental harms and personal injuries allegedly caused by the company’s earlier oil operations in the Ecuadorian Amazon. Texaco urged the case be dismissed from that U.S. court, based on the argument that Ecuadorian courts, not U.S. courts, provided the proper forums to hear the dispute. After approximately 10 years of litigation, the issue was decided. In 2002 the U.S. courts dismissed the case in light of Chevron’s promises to submit to the jurisdiction of the Ecuadorian judicial system if the Ecuadorian plaintiffs were to bring their claims there. The Ecuadorian plaintiffs re-filed their claims in 2003 in Lago Agrio, Ecuador.
The International Arbitration: Chevron v. Ecuador
While the Ecuadorian plaintiffs’ (or “Lago Agrio Plaintiffs”) claims were being heard in Ecuador’s courts, Chevron filed an investor-State dispute against Ecuador. It argued that the Ecuadorian lower court’s handling of the ongoing litigation between the Lago Agrio Plaintiffs and Chevron was unjust and unfair and therefore constituted a violation of Chevron’s rights under the U.S.-Ecuador Bilateral Investment Treaty (BIT). As relief, Chevron requested, among other items, that the arbitral tribunal order Ecuador to prevent enforcement of any judgment issued by its courts in favour of the Lago Agrio Plaintiffs against Chevron, thus creating a potential new obstacle to the plaintiffs’ ability to get an award for damages suffered.
At the time of Chevron’s filing, no judgment had been issued by the Ecuadorian court hearing the Lago Agrio case. However, many speculated that the judgment was forthcoming and that it would order Chevron to pay billions of dollars in damages to the Lago Agrio Plaintiffs. In fact, the lower court decision has now been issued, with a finding against Chevron/Texaco and an award of US$8.6 billion in favour of the plaintiffs. Chevron has appealed that judgment. The domestic litigation in Ecuador therefore remains ongoing and there do not appear to be any factual allegations by Chevron (as opposed to innuendo) that the appellate process is corrupt or corrupted.
The Petitioners’ Application
In October 2010 the International Institute for Sustainable Development and Fundación Pachamama (the petitioners) filed an application with the tribunal, seeking to participate as amici curiae in the Chevron v. Ecuador arbitration. In part, they argued that such participation was crucial in this case in order to highlight the human rights dimension of the dispute, and to provide a perspective and legal arguments not provided by the parties themselves. The petitioners attached a brief on jurisdiction and justiciability with their petition in which they argued that the tribunal should reject jurisdiction over the dispute.
More specifically, according to the petitioners, Chevron’s claims and requests for relief involve extending the governing BIT beyond its intended function and proper boundaries. The claims and relief sought by Chevron would have the tribunal and the Ecuadorian government interfere in ongoing judicial proceedings between the Lago Agrio Plaintiffs and Chevron.
The petitioners’ brief also asserted that the Lago Agrio Plaintiffs are not and cannot be parties to the investment arbitration. Since plaintiffs are not represented—legally or otherwise—by Ecuador, it would be improper for the tribunal to hear Chevron’s claims involving the allegations of one party in the underlying and centrally figured domestic litigation in the absence of the other party to it.
The Order Rejecting the Petitioners’ Application
In its April 18, 2011 Procedural Order No. 8, the tribunal, composed of V.V. Veeder, Horacio A. Grigera Naón and Vaughan Lowe, stated that it had decided to “exercise its discretion” to reject the petitioners’ application to provide input on the issue of whether the tribunal should accept jurisdiction over the dispute. Apart from noting the parties’ comments on the matter, the tribunal does not appear to have provided its own reasoning for the decision, or an indication of the legal criteria on which it based the decision. Rather, its decision encompasses a series of statements or views attributed to the parties to the arbitration.
According to the order, Chevron was clearly opposed to civil society participation, though it indicated it was prepared to bow to the wisdom of the tribunal if the tribunal thought otherwise. Ecuador, on the other hand, did not appear to express the same opposition and stated it did not object to the petitioners’ presence at hearings. The order also noted, however, that the disputing parties “agree that they do not believe that the amicus submissions will be helpful to the Tribunal and neither side favours the participation of the petitioners during the jurisdictional phase of the arbitration, in which the issues to be decided are primarily legal and have already been extensively addressed by the Parties’ submissions” (para. 18).
The parties’ opinion, as reflected in the tribunal’s decision, creates a troubling background for those who consider submitting an amicus brief in investment arbitration disputes. It suggests that amici curiae should not participate at the jurisdictional level and that they should not provide submissions related to issues of law. It fails to consider that amici curiae may offer perspectives that neither party addresses, but that impact the arbitration proceedings nonetheless.
First, the suggestion that it is not the role of an amicus curiae to provide input at the jurisdictional phase does not give proper weight to that stage. Input on jurisdiction issues can be particularly important because a tribunal’s decision on whether or not an investor can use a BIT to bring a treaty claim has significant practical impacts for states’ defense costs, liability risk and exposure to future similar claims.
In this case, the issue of jurisdiction is key for the scope and meaning of BITs and their relationship with other areas of law, such as domestic environmental law and international human rights, both areas dealt with in submissions by amicus curiae during the substantive phases of other investment arbitration cases. These issues are of no lesser importance at the jurisdictional phase.
If an arbitration tribunal were to accept jurisdiction to review and possibly interfere with ongoing domestic proceedings between the foreign investor and other private parties, the damage to the affected private parties would in large part done at that stage. It would be the moment when the tribunal declares its authority to effectively serve as an appellate court or court of contemporaneous review that the foreign investor may privately turn to, and to which the other private litigant cannot be a party.
A decision by the Chevron v. Ecuador tribunal to accept jurisdiction—irrespective of what may eventually happen on the merits—would foreseeably inspire other companies to use investment arbitration as a strategy to prevent or nullify unfavourable decisions in any ongoing litigation in foreign countries in which they have been sued. International tribunal interference would jeopardize domestic court proceedings and limit the fundamental human right to access justice and pursue effective remedies.
Additionally, it is improper to suggest that amicus participation is not necessary when the issues to be decided are primarily legal. This perspective significantly minimizes the role of amici curiae. Previous amici submissions to investment tribunals have addressed legal matters in detail. In fact, amici play an important role in providing factual information and advancing legal arguments at both the jurisdictional and substantive phases of disputes.
Moreover, a lack of transparency in disputes means that non-parties are generally unable to access full information on the particular facts involved in the case. The suggestion that an amicus curiae should address factual issues, and not pure issues of law, would seem to deny the amicus curiae much of any role. This may not be the intent of this decision, but the tribunal’s lack of reasons and criteria leave much open to doubt.
Finally, the legal arguments presented by the petitioners inject considerations of universal human rights; specifically, rights of indigenous peoples. These elements may not be adequately addressed by the parties themselves, and may even be adverse to the legal arguments advanced by the parties. A related issue is that the respondent government has no legal authority to represent in the arbitration the legal interests of those private parties involved in the underlying and separate legal proceedings. This leaves parties who are involved in private litigation against the foreign investor with no avenue to make their own arguments to the tribunal, even though their rights may be impacted by the tribunal’s decision.
These dynamics raise the importance of non-party participation by amici curiae in investment arbitration disputes like the one initiated here by Chevron. The tribunal’s order, however, foreclosed such participation at the important jurisdictional phase. And although the tribunal did not provide its own reasons for the decision, it implied that it was basing its conclusion on the parties’ wishes, the fact that the submission dealt with jurisdiction and that it involved legal issues. None of these factors should have prevented acceptance of the petition.
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