Chevron launches investment-treaty claim against Ecuador

By Damon Vis-Dunbar
2 October 2009

Correction: The original headline in this article stated that Chevron Corporation alleges a denial of justice on the part of Ecuador. Chevron explains that this is incorrect. While Chevron claims that Ecuador « abuses the criminal justice system », its notice of arbitration does not assert a denial of justice.

The world’s second largest oil company, Chevron Corporation, has served the government of Ecuador with a notice of arbitration for alleged breaches of the United States-Ecuador Bilateral Investment Treaty.

Chevron’s claim relates to a multi-billion dollar lawsuit lodged in an Ecuadorian court, in which Ecuadorian citizens seek compensation for health and environmental harm in connection with oil-drilling in the Amazon.

Since 1993, inhabitants of the Amazon have filed a number suits against Texaco, and then Chevron, claiming that the participation by its Ecuadorian subsidiary, TexPet, in exploration and production activities has left a legacy of cancer, birth defects, and miscarriages. Chevron inherited these claims when it bought Texaco in 2001.

In its defense, Chevron argues that it is released from liability under a series agreements from 1994-98, in which TexPet agreed to fund remediation in the affected areas of the Amazon. Chevron charges that Ecuador has colluded with the Ecuadorian plaintiffs, in breach of these agreements. The company also complains that Ecuador has abused the criminal justice system.

In its notice of arbitration, dated 23 September 2009, Chevron alleges that Ecuador’s actions amount to numerous breaches of the U.S.-Ecuador BIT, including it obligations on fair and equitable treatment, national treatment, most favoured nation treatment, and the treaty’s umbrella clause. In addition to an award of damages, Chevron seeks declarations stating that it has not breached its agreements with Ecuador, and an order requiring Ecuador to inform the court that Chevron is released from environmental impacts related to TexPet’s activities in the country.

Chevron has elected to arbitrate the dispute under the UNCITRAL rules of arbitration, and has already appointed its arbitrator: Horacio Grigera Naón, Director of the Center on International Commercial Arbitration at the American University’s Washington College of Law.

Previous ITN reporting:

“Chevron warns Ecuador on BIT claim as contract and environmental disputes persist”, By Damon Vis-Dunbar, July 26, 2006, available here: http://www.iisd.org/pdf/2006/itn_july26_2006.pdf