{"id":17064,"date":"2026-04-21T18:49:14","date_gmt":"2026-04-21T16:49:14","guid":{"rendered":"https:\/\/www.iisd.org\/itn\/?p=17064"},"modified":"2026-04-21T18:49:14","modified_gmt":"2026-04-21T16:49:14","slug":"chevron-collect-over-usd-200-million-decade-old-arbitration-ben-hefter","status":"publish","type":"post","link":"https:\/\/www.iisd.org\/itn\/2026\/04\/21\/chevron-collect-over-usd-200-million-decade-old-arbitration-ben-hefter\/","title":{"rendered":"Chevron to collect over USD 200 million in decade-old arbitration"},"content":{"rendered":"

Chevron Corporation and Texaco Petroleum Corporation v. Ecuador (II)<\/em>, PCA<\/span> Case No. 2009-23<\/strong><\/h2>\n

Following the resolution of the substantive issues in the long-running Chevron\u2013Ecuador arbitration, all that remained was splitting hairs over the gas giant\u2019s damage claims. The tribunal\u2019s November 2025 decision on Track III of the proceeding is, for the most part, a Ulysses-length attempt to pare down Chevron\u2019s colossal bill for attorneys\u2019 fees.<\/p>\n

Background<\/strong><\/h3>\n

In 1964, Ecuador granted oil exploration and production rights in its Oriente Region to TexPet (a subsidiary of Texaco) and the Ecuadorian Gulf Oil Company (a subsidiary of Gulf). In the tribunal\u2019s language, TexPet\u2019s drilling activities caused \u201ccrude oil pollution in the former concession area of the Oriente\u201d [Para. 81]. This is putting it lightly. Over the course of their drilling operations, Texaco allegedly spilled 80 times more oil than was spilled in BP\u2019s 2010 Deepwater Horizon disaster, along with 18 billion gallons of polluted wastewater<\/a>. The locals fought back by initiating a lengthy trial and appellate process, bringing tort claims against Texaco in the Southern District of New York (the Aguinda Litigation). After the Aguinda suit was dismissed, 48 individual plaintiffs lodged another complaint in the Ecuadorian court system against Chevron, which had by that point merged with Texaco. There, the presiding judge, Judge Zambrano, handed down a historic USD 18.2 billion damages award against Chevron on February 14, 2011. The award included USD 8.6 billion as punitive damages, subject to a timely public apology by Chevron. Three successive appeals against the Lago Agrio judgment affirmed the Lago Agrio ruling in the Ecuadorian court system, though the National Court of Justice annulled the punitive damages imposed for Chevron\u2019s failure to apologize.<\/p>\n

A Chevron lawyer famously commented<\/a> that they would fight the Lago Agrio judgment \u201cuntil Hell freezes over\u2014and then we\u2019ll fight it out on the ice.\u201d The corporation did as they had promised, dragging Ecuador into UNCITRAL<\/span> proceedings for breach of the U.S.\u2013Ecuador BIT<\/span>. The UNCITRAL tribunal found the initial and subsequent rulings to be contrary to international public policy and demanded that no part of the judgment should be recognized or enforced by any state with knowledge of Ecuador\u2019s denial of justice. The tribunal concluded that Judge Zambrano acted corruptly in exchange for a bribe promised to him by Lago Agrio Plaintiff\u2019s representatives. The substantial damages award was found to be ghostwritten, likely by the plaintiffs\u2019 lead lawyers, Steven Donziger and Pablo Fajardo (Chevron has since brought an impressive slate of charges<\/a> against the two attorneys). In light of this, the tribunal ordered a compensation for internationally wrongful acts via the Lago Agrio judgment, targeted at wiping out the consequences of the recognition and enforcement of the unremedied Lago Agrio judgment, including removing the status of enforceability, and, subject to further order in Track III, making full reparation and compensation for injuries caused to claimants by the Lago Agrio judgment. The ruling demanded that the Lago Agrio plaintiffs be precluded, whether directly or indirectly, from enforcing any part of the Lago Agrio judgment.<\/p>\n

The December 2025 award<\/strong><\/h3>\n

This award falls at the tail end of a sweeping litigation effort<\/a>. It follows three orders on interim measures, seven awards, two decisions, and 86 procedural orders [Para. 13]. In Track III, Chevron claimed roughly USD 793 million for legal fees and expenses incurred due to respondents\u2019 treaty breaches, USD 85 million for embargoes of Chevron trademarks and intellectual property in Ecuador, and USD 13 million for Argentinian embargoes, as well as moral damages and pre- and post-award interest. In total, these claims comprised 16 distinct categories. Ten categories related to distinct proceedings outside the arbitration, including enforcement proceedings brought by the Lago Agrio plaintiffs in Brazil, Argentina, and Canada. Three categories comprised general defence costs, including costs of planning against enforcement in other jurisdictions. The final three categories related to collateral losses from the enforcement challenges, as well as proceedings against prospective beneficiaries of the Lago Agrio damages award in Gibraltar.<\/p>\n

The extraordinary magnitude of these claims stems mainly from Chevron\u2019s excessive reliance on American law firms, for which Ecuador was purportedly to foot the bill. This was addressed by the tribunal in nearly every subcategory, most notably regarding fees related to the Lago Agrio litigation. There, Chevron claimed fees for eight U.S. law firms hired throughout the litigation efforts, whose compensation amounted to roughly 60 million. Chevron asserted that the remarkable size of this team was necessary to coordinate a complex and multifaceted lawsuit. The tribunal, for its part, was sympathetic to Ecuador\u2019s arguments, writing that eight firms went beyond what could otherwise be considered a reasonable effort to mitigate the consequences of Ecuador\u2019s alleged treaty breach. Of the firms retained for the Lago Agrio litigation, Chevron could only recoup costs for Jones Day and Gibson Dunn\u2014the first two hired to assist Chevron\u2019s local counsel.<\/p>\n

The enforcements in Ecuador, Brazil, Argentina, and Canada saw similar challenges, and the application of a similar kind of arbitral reasoning regarding mitigation. The tribunal declined to award costs in each subcategory beyond the first two international firms contracted, finding Chevron’s reliance on any additional firms to be decidedly unreasonable [Paras. 773, 859, 953, and 1026].<\/p>\n

The tribunal was also compelled by Ecuador\u2019s \u201cbut-for\u201d argument, which asserted that Ecuador had no obligation to pay fees that Chevron would have incurred under treaty-compliant Lago Agrio proceedings. They held that Chevron\u2019s local counsel would not have incurred more than 60% of actual legal fees, and that the international law firms would have been involved to a significantly smaller degree [Para. 734]. For the legal fees under the Lago Agrio litigation, the tribunal levied a further reduction of 60% for the local Ecuador counsel\u2019s fees, 15% for Jones Day\u2019s costs, and 35% for all experts and vendor fees [Para. 739].<\/p>\n

Chevron\u2019s Racketeer Influenced and Corrupt Organizations litigation<\/strong><\/h3>\n

In February 2011, Chevron brought a civil lawsuit in U.S. federal court under the Racketeer Influenced and Corrupt Organizations (RICO) Act against Steven Donziger and his associates to establish that the Ecuadorian judgment was the product of fraud, extortion, and other misconduct. Many have referred to these proceedings as the United States\u2019 \u201cfirst corporate prosecution<\/a>\u201d\u2014Donziger was disbarred at Chevron\u2019s urging and eventually jailed for contempt of court, spending a further 993 days on house arrest. He remains unable to leave the United States, with the Southern District of New York having seized his passport<\/a>.<\/p>\n

In Track III of these arbitration proceedings, Chevron requested USD 323 million \u201cfor 574,335.5 hours expended by ten different law firms, experts, and other vendors spanning nearly a decade.\u201d The tribunal awarded only 15% of legal costs for this category as reasonably incurred in defending against and proving the fraudulent nature of the Lago Agrio judgment. It found that, while RICO claims were a facially reasonable mitigation strategy, Chevron brought two highly complex claims against Donziger that lacked clear precedent. These claims, it argued, were the key factor in the massive litigation costs incurred by Chevron. While declining to weigh in on counterarguments regarding Chevron\u2019s true motivation, the tribunal did acknowledge the possibility that Chevron may, in truth, have intended to distract and\/or bankrupt the judgment creditors in order to thwart enforcement, deter other plaintiffs from undertaking similar actions in the future, or, otherwise, act on a sense of vengeance to individual representatives, including Steven Donziger [Para. 1312].<\/p>\n

Categories excluded by the tribunal<\/strong><\/h3>\n

Several more patterns arose across the primary damages claims related to the international litigation efforts. These included the tribunal\u2019s refusal to dole out costs for legal services rendered before 2011, despite no shortage of resistance from Chevron. Chevron asserted that it had begun preparations for prospective litigation across all subcategories as early as 2007. The tribunal was not moved by Chevron\u2019s theory, declining to levy damages before the Lago Agrio judgment and thus the alleged breach of the -U.S.- Ecuador BIT [Para. 644].<\/p>\n

While the tribunal refused to exclude most categories, opting instead to substantially reduce the amount claimed, it refused outright to assign liability for several of Chevron\u2019s claims. These include moral damages, which Chevron sought in light of Ecuador\u2019s decision to prosecute TexPet\u2019s vice president and legal representative, as well as Ecuador\u2019s public relations campaign against the corporation and its refusal to abide by tribunal awards. Much like the decision to exclude fees incurred prior to 2011, the tribunal reasoned that the only injuries for which it would award compensation were those arising from the Lago Agrio judgment [Para. 2562]. Additionally, Chevron was denied relief for embargo losses in Argentina and intellectual property losses in Ecuador. The tribunal found that, while claimants established they suffered a compensable injury, they failed to establish the extent of the corresponding loss.<\/p>\n

Quirks in the reasoning<\/strong><\/h3>\n

There remains some concern with the consistency of the tribunal\u2019s reasoning regarding efficiency and reasonableness. Here and there, reasonableness is turned from an objective standard to a subjective standard. Instead of a careful calculus, the reasonableness of expenses toward mitigation is haphazardly scaled to the size of the prospective award. For example, the tribunal found that it was reasonable for Chevron to spend over USD 1 million to coordinate a moot court in Houston, Texas, in preparation for Canadian enforcement proceedings. It reasoned that, while such costs would not be recoverable in Canada, the size of the Ecuadorian plaintiffs\u2019 prospective award was large enough to warrant such expenditures [Paras. 1029, 1030]. At the same time, the tribunal excluded the costs and fees of all but one of the U.S. law firms contracted, finding it unreasonable that six non-Canadian, non-Ecuadorean law firms could substantively contribute to the Canadian defence [Para. 1026].<\/p>\n

At times, the tribunal leans on something less logical than a line-by-line analysis with regard to its policy of exclusion. In its decision on costs regarding the Ecuadorean enforcement proceedings, the tribunal provides little rationale behind reducing 80% of the rate for Ecuadorean counsel [Para. 734] and only 15% of the rate for Jones Day [Para. 735]. Its reasoning regarding the RICO litigation, for which Chevron was still awarded tens of millions in attorneys\u2019 fees, is non-transparent at best, and contradictory to the tribunal\u2019s own findings regarding the necessity of complex claims [Paras. 1309\u20131317].<\/p>\n

More importantly, there is the issue of arbitral authority. As IISD<\/span> noted over 14 years ago<\/a>, the tribunal\u2019s orders over the past two decades have consistently interfered in a legal right enjoyed by the Ecuadorian plaintiffs\u2014that is, a judgment that was handed down by and subsequently validated through the Ecuadorian courts. These orders have been published even in light of a 2012 complaint<\/a> lodged with the Inter-American Commission on Human Rights, in which the Ecuadorian plaintiffs established that the relief requested by Chevron would violate their legal and human rights.<\/p>\n

Winners and losers<\/strong><\/h3>\n

There is also, of course, clear concern with Chevron\u2019s \u201cratcheting\u201d approach\u2014bringing an overwhelming amount of claims in order to maximize their damages award and cast the final judgment in a more rational light. While the tribunal whittled Chevron\u2019s take significantly, the final receipt tally remains difficult to stomach. In this sense, Chevron v. Ecuador<\/em> encapsulates the broader political economy of ISDS<\/span> claims, where claimants and their firms have incentives to bring patently unreasonable claims. There are no limits as of yet on the size of prospective claims investors can bring, and only investors can bring claims. In the cases where governments prevail, the best-case scenario is typically the recovery of attorneys\u2019 fees. All of this is exacerbated by a lack of consistency in arbitral reasoning and thus a low pleading standard, incentivizing investors to bring claims without concern for their merit. IISD addresses these issues in much greater detail in the 2025 report, Why Is Investment Treaty and Investor\u2013State Dispute Settlement Reform Needed?<\/a><\/p>\n

With the dust of the damages award having settled, this remains a glass half-full, half-empty scenario. Ecuador has skirted a near-billion-dollar damages claim, while Chevron levied a long-sought punishment against its ennemi jur\u00e9. Yet Chevron is down USD 600 million, while Ecuador is saddled with a USD 200 million debt obligation, one which it must either pay or prepare to fight in foreign jurisdictions. For their part, the U.S. law firms have already been paid. In that sense, Chevron\u2019s impressive retained law firms\u2014including Jones Day, Gibson, Dunn & Crutcher, Rivero Mestre LLP, Gardere Wynne Sewell LLP, Holland & Knight, Boies Schiller & Flexner, Covington & Burling and Stern Kilcullen & Rufolo\u2014are perhaps the sole beneficiaries of this dispute, reaping vast sums of money with little concern as to the ultimate financier. This, too, stands as a stark reminder of the urgent need for ISDS reform; while international dispute settlement may offer the theoretical prospect of ethical repatriation, only Chevron\u2019s small army of lawyers has been made whole. For Chevron, there remains only the satisfaction of a principle of punishment.<\/p>\n

Final note<\/strong><\/h3>\n

The arbitral tribunal was chaired by Albert Jan van den Berg (Netherlands), who was appointed in 2020 in replacement of V.V. Veeder. Horacio A. Grigera Na\u00f3n (Argentina) and Vaughan Lowe (England) served as the claimants\u2019 and respondent\u2019s appointees, respectively, with Grigera Na\u00f3n penning a brief dissent regarding the RICO litigation. The full decision can be found here<\/a>, with past filings available here<\/a>.<\/p>\n

Author<\/em><\/h3>\n

Ben Hefter is a Geneva International Fellow from the University of Michigan Law and an extern with IISD\u2019s Investment Law & Policy Team.<\/p>\n