August 02, 2015 - Page 1

EJOLT The -Chevron Case in Fact sheet 042

Fossil Fuels & 1. Factual background Climate Justice/ Energy Texaco-Gulf operated in Ecuador for almost thirty years, between 1964 and Keywords – title 1992, in the Ecuadorian Amazon region. 1 The Ecuadorian state’s original > Texaco-Chevron concession to the Texaco-Gulf > Ecuador Amazon consortium included 1,500,000 hectares for exploration and > Oil spill exploitation. 2 However, on 4 August > Oil extraction 1973, the state signed a new contract > Texaco suit with the petroleum companies limiting the area of the concession to 491,355 ha. During this period, Texaco drilled 339 wells in 15 petroleum fields and 627 Map of Ecuador toxic wastewater pits were abandoned, http://www.sarayaku.com/mapa_sarayaku.jpg along with other elements of petroleum infrastructure. Moreover, obsolete and been presented during the legal process highly polluting technologies were used in Ecuador. Some highlights of these during these years of exploitation. The include: deforestation of 2,000,000 hectares of - Higher levels of child malnutrition land is attributed to petroleum operations (43%) compared to the population living in the northern Ecuadorian Amazon, as in areas removed from the petroleum well as massive water contamination activities (21.5%), with an infant mortality with toxic substances and heavy metals. rate of 143/1,000 births. The wastes derived from petroleum - The primary cause of death in the operations and accidental crude oil spills area is cancer, at 32% of total deaths, © 2004 Lou Dematteis – Gas have had a major effect on forests, three times higher than Ecuador’s burning outside the town of rivers, and estuaries: national average of deaths by cancer Shushufindi “It has also been estimated that the (12%) and four to five times higher than company deliberately dumped tons of in Orellana (7.9%) and Sucumbíos 1 Fajardo, Pablo and de Heredia, María toxic drilling and maintenance wastes (5.6%). Gua dalupe, “El Caso Texaco: un trabajo por la restitución de derechos colectivos y and 19 billion gallons of produced - A rate of spontaneous miscarriages de la naturaleza”, in ¿Estado constitucional wastes into the environment without 2.5 times higher in Ecuadorian Amazon de derechos? Informe sobre derechos humanos. Ecuador 2009; Universidad treatment or monitoring, despite oil communities exposed to petroleum Andina Simón Bolívar, Sede Ecuador. industry standards that suggest contamination than in similar Quito, Ediciones Abya-Yala, pp. 181-182. 2 Concessionary contract published in the reinjecting the wastes back into the communities lacking such exposure. Official Registry (RO in Spanish) 186, 21 ground. In addition to routine deliberate - Widespread death of animals from February 1964. 3 discharges, accidental spills were Hurtig, A.K. - San Sebastián, M., drinking water contaminated with crude, “Epidemiology vs. epidemiology: the case of common. During the time that Texaco falling in pits, or by asphyxiation caused oil exploitation in the Amazon basin of operated the main trans-Ecuadorean Ecuador”, Internatio nal Journal of by natural gas. The indigenous Epidemiology , Vol. 34, Issue 5, October pipeline, spills from that line alone sent populations have also lost hunting 2005, p. 1171. 4 an estimated 16.8 million gallons of Fajardo, Pablo and de Heredia, María opportunities, since forest animals are Guadalupe, “El Caso Texaco: un trabajo crude into the environment. By especially sensitive to contamination, por la restitución de derechos colectivos y comparison, the Exxon Valdez spilled de la naturaleza”, in ¿Estado constitucional noise, and deforestation. de derechos? Inform e sobre derechos 10.8 million gallons into the Prince - 75% of the population studied were humanos. Ecuador 2009; Universidad William Sound in the largest oil spill in found to use contaminated water, which Andina Simón Bolívar, Sede Ecuador. 3 Ediciones Abya-Yala, pp. 188-191. All of the history of the United States.” causes numerous types of illness. The this data is rejected by the company on its Several environmental impact studies contaminated water was used for website: 4 http://www.texaco.com/sitelets/ecuador/es/ have yielded specific data which have drinking, cooking, and bathing, not out of PlaintiffsMyths.aspx. See also the critical a lack of awareness of the hazards of commentary authored by a group made up of numerous scientists and published in a the water, but due to a lack of other letter in the Journal of Environmental and options. Occupational Health Vol. 11/No 2, Apr/Jun 2005, entitled “Texaco and its Consultants”; http://chevrontoxico.com/assets/docs/ijoeh- breilh.pdf. August 02, 2015 - Page 2

In addition to environmental impacts, Petroleum Corporation (CEPE), which numerous effects on human rights have would be replaced in 1989 by a new also been identified in the form of sexual petroleum company owned by the nation violence, discrimination, loss of lands, of Ecuador, . On 6 August forced displacement as well as 1973, Texaco and Gulf signed a new considerable effects on the culture concessionary contract with Ecuador, itself 5. through CEPE. This new contract replaced the 1964 concessionary 2. International legal framework contract. It included a substantial Planeta Vital Web - Yasuni reduction in the area included in the National Park The only aspect of this case that has concession, and would remain in effect resorted to international norms is in until 1992. The contract also envisaged relation to the protection of Texaco- the progressive incorporation of CEPE Chevron’s investments in Ecuador, into the consortium, until it had acquired regulated by the Treaty between the holdings of 25%. At the beginning of United States of America and the 1974, CEPE purchased 12.5% of the Republic of Ecuador concerning shares held by Texaco and 12.5% of the Encouragement and Reciprocal those held by Gulf. Later, in December Protection of Investment 6 of 27 August of 1976, it purchased the remaining 1993. In keeping with common practice, shares held by Gulf, thereby reaching this treaty’s Article III establishes that shareholdings in the consortium of these investments will not be directly 62.5%. Texaco held the remaining expropriated or nationalised, except 37.5% of the shares, although it when this is done in the public interest, continued as the operator of the in an equitable manner, and after consortium, meaning that at no point in prompt, adequate, and effective time did either Gulf or CEPE operate in payment. Furthermore, Article II the area. paragraph 7 establishes that: “Each The 1973 contract required Texaco to party shall establish effective means by provide a percentage of its crude oil which to evaluate claims and respect the production to the government, at a price rights related to the investments, set by the government, in order to help investment agreements, and investment satisfy Ecuador’s domestic consumption authorisations.” This treaty and this needs. Texaco was allowed to export the specific stipulation have been cited by remainder of the petroleum it produced both sides in the context of the judicial for sale at the significantly higher process for the case that is the subject international market price. If Ecuador of this report. used any of the petroleum for purposes According to data provided by other than its own internal consumption, Ecuador’s State Office of the Attorney Texaco would have the right to receive General 7, in 1964 Ecuador granted the compensation at the international market company Texaco Petroleum the rights price. On 16 December 1977, the nation for petroleum exploration and production of Ecuador (through CEPE) and Texaco in Ecuador’s Amazonian region, by signed a supplemental agreement with means of a concessionary contract similar terms to the 1973 contract. established with the local Texaco In 1990, PetroEcuador assumed the role subsidiary (Texpet). of operator of the consortium. The Texaco assigned half of its holdings in parties did not agree to extend the the concession to the company validity period of the 1973 contract, Ecuadorian Oil Gulf Company, thereby which had an expiration date set for 6 5 Carlos Martín Beristain, Darío Páez Rovira, and Itziar Fernández, “Las palabras de la forming a consortium in which Texaco June 1992. Texaco, PetroEcuador, and Selva. Estudio psicosocial del impacto de las provided its services as an operator. In the nation of Ecuador therefore began explotaciones petroleras de Texaco en las comunidades amazónicas de Ecuador”; September of 1971, Ecuador created a negotiations to resolve all of the issues Hegoa, Bilbao, 2009 ; available online at government entity, the Ecuadorian State related to the 1973 contract and to effect http://pdf2.hegoa.efaber.net/entry/content/442/ Las_palabras_de_la_selva.pdf its termination. At that time, Texaco also

6 began shutting down its operations in Available at http://www.sice.oas.org/bits/usecu_e.asp. Ecuador. Between December 1991 and 7 www.pge.gob.ec/es/reglamentos.../250- December 1993, Texaco filed seven informacion -ampliada -1.html . August 02, 2015 - Page 3

claims in the Ecuadorian courts for 30,000 Ecuadorian citizens from the 8 alleged non-compliance with the 1973 Oriente region (Aguinda v. Texaco ) was and 1977 contracts, mainly related to presented before the New York federal Ecuador’s acquisition of a larger quantity courts in November 1993, under the of petroleum at the domestic market aegis of the Alien Tort Claims Act 9 price than was actually used for its own (ATCA) . Successful use of the ATCA to consumption. In these claims, Texaco claim reparations derived from human rights violations began with the well- requested over 553 million dollars in 10 compensation for damages. known Filártiga case in 1980. This In December of 2006, the Chevron decision opened up the U.S. federal courts for defending the rights Corporation and Texaco Petroleum recognised under international law. Company agreed to go to arbitration www.chevrontoxico.com - Members of against Ecuador for denial-of-justice The pleading alleged that Texaco’s operations in the region between 1964 the Indigenous Kichwa community of violations related to the cited Article II of and 1992, through its subsidiary Texaco Rumlpamba with Cvevron’s pollution. the bilateral investment treaty, since their seven claims had not been taken Petroleum Company (“Texpet”), had up before the Ecuadorian courts. polluted and destroyed rivers and forests Meanwhile, the suit against Texaco for in an area of 14,000 square kilometres, 8 Rural workers and indigenous people of five and that these operations were directed nationalities (Siona, Secoya, Cofán, Wuaor ani contamination derived from the and Kichwa), as well as two others that had and controlled by the parent company in petroleum operations in the Ecuadorian 11 already disappeared (Tetetes and the U.S.A. The remedy sought was the Sansahuaris). Amazon had been presented in the U.S. 9 funds necessary for redressing the The ATCA was adopted in 1789. Its brief text federal courts. contamination of the waters and the contains the following: “1350. Alien's action for On 1 December 2008, the arbitration tort. The district courts shall have original environment, for recovery of access to jurisdiction of an y civil action by an alien for a tribunal was declared as authorised to potable water, for the reintroduction of tort only, committed in violation of the law of consider Texaco’s claims, and on 30 nations or a treaty of the United States.” Act of fish and game, and for the creation of 24 September 1789 , ch. 20, § 9 (b), 1 Stat. March 2010 it issued a partial binding funds for medical care and the 79; 25 June 1948, ch 646, § 1, 62 Stat. 934; award in favour of the claimant 28 U.S.C. § 1350 (2004). development of tracking and oversight 10 In which Dr. Joel Filártiga, an opponent of companies, determining that a denial of operations, among other aspects. the Stroessner regime in Paraguay, presented a claim for the 1976 kidnapping, torture, and justice had occurred, ruling in favour of However, the responsibility was not killing of his son at the hands of Norberto the object of the demands and requiring exclusively Texpet’s. As described Peña Irala, the police inspector general of the Ecuador to compensate the companies. city of Asunción. In 1980, the Court of Appeals above, in 1974 the Republic of Ecuador ruled that the ATCA was applicable to the On 22 December 2010, the tribunal acquired ’s rights through its case and that a torturer could be tried in the awarded Chevron and the Texaco United States for acts committed in a foreign national petroleum company, country; Filártiga v. Peña-Irala , 630 F. 2d 876, Petroleum Company approximately 700 PetroEcuador, and became a majority 890 (2d Cir. 1980). 11 million U.S. dollars. On 31 August 2011, partner in the consortium in 1976. In any A second suit with similar terms, representing more than twenty-five thousand after an appeal by Ecuador, this amount event, Texpet was the only ground residents of Peru, was presented by Peruvian was reduced to 96 million dollars for operator until 30 June 1990, when citizens in 1994 (Jota v. Texaco). 12 “[f]orum non conveniens is a discretionary reasons related to taxation. PetroEcuador took over operations until device permitting a court in rare instances to On 7 July 2010, the nation of Ecuador 6 June 1992. “dismiss a claim even if the court is a per missible venue with proper jurisdiction over brought an action for nullification of the The case led to numerous rulings in the the claim. In assessing whether forum non various rulings before the The Hague conveniens dismissal is appropriate, courts U.S. courts between 1992 and 2002, engage in a two-step process: The first step is District Court. most of which were related to procedural to determine if an adequate alternative forum However, violation of the bilateral exists. […] If so, courts must then balance a issues. The cases were assigned to series of factors involving the private interests investment treaty was again alleged in Judge Vincent Broderick. In 1993, of the parties in maintaining the litigation in the other judicial proceedings in Ecuador, as competing fora and any public interests at Texaco presented a motion for stake. […]. The defendant has the burden to will be discussed below. inadmissibility in the Aguinda case establish that an adequate alternative forum based upon, among other arguments, exists and then to show that the pertinent 12 factors “tilt[] strongly in favor of trial in the 3. Development of the Texaco- forum non conveniens . In his 1994 foreign forum.” […]. “The claimant's choice of decision, Judge Broderick indicated a forum should rarely be disturbed.” […]” Chevron case before national [omitted references] Wiwa v. Royal Dutch favourable view regarding the courts 13 Petroleum Co., 226 F. 3d 88 (2d Cir. 2000). applicability of forum non conveniens, 13 “[d]isputes over class membership, determination of individualised or common 3.1 United States damages, and the need for large amounts of testimony with interpreters, perhaps often in local dialects, would make effective As Texaco was no longer operating in adjudication in New York problematic at best.” Ecuador, a class-action suit representing Aguinda v. Texaco, Inc., 1994 U.S. Dist. LEXIS 4718 (S.D.N.Y. 1994).

August 02, 2015 - Page 4

although he reserved his decision agreement with Texpet indicating that regarding this issue as he considered it the environmental reparations work, premature, ordering new investigations which cost 40 million dollars to regarding the control of the parent implement, had been completed, Texaco company over the activities in releasing the company Texpet and its Ecuador. The judge also considered that subsidiaries, including its successors, dismissal of the claim on the basis of from any further responsibility or forum non conveniens should be claims. 18 conditioned upon Texaco’s acceptance At the same time, an agreement of the jurisdiction of Ecuador. In a between the government of Ecuador and November 1996 decision, Judge Jed the claimants allowed them to receive Rakoff, who replaced Broderick, Ecuador’s support for their claims, in accepted dismissal on these grounds, 14 exchange for renouncing any claims among others, although no reference 14 against the State of Ecuador or He also considered the fact that Ecuador was made to the acceptance of and the company Petroecuador, in the 15 Petroecuador and its subsidiaries, and consortium with Texaco, were not named as Ecuadorian jurisdiction by Texaco. defendants. He later denied the request to for assuming the costs of any possible appear in the case in support of the claimants, In 1998, the Second Circuit Court of action against these parties by Texaco. but without renouncing h is sovereign Appeals overturned this decision due immunity; Aguinda v. Texaco, Inc., 175 F.R.D 50 (S.D.N.Y. 1997). partially to the fact that Texaco did not 15 Aguinda v. Texaco, Inc., 945 F. Supp. 625 act as such in Ecuador, but rather 3.2 Ecuador (S.D.N.Y. 1996), 627-628. 16 Jota v. Texaco Inc., 157 F. 3d 153 (2d Cir. through a subsidiary, and therefore 1998). 17 could not be directly sued under Aguinda v. Texaco, Inc ., 142 F. Supp. 2d Ecuadorian jurisdiction. Consequently, In 2003, through the Amazon Defence 534 (S.D.N.Y. 2001); Aguinda v. Texaco Inc ., Coalition, the victims filed a class action 303 F. 3d 470 (2d Cir. 2002). the Court of Appeals decided that the 18 Later, however, this agreement was district court must confirm whether or not suit against Texaco (which meanwhile disputed, in the context of criminal had been acquired by Chevron in 2001) proceedings, and two of Texpet’s attorneys Texaco was prepared to submit to the were prosecuted in Ecuador for alleged Ecuadorian courts, in the event that the in Lago Agrio, Ecuador. The complaint involvement in the falsification of documents. alleged serious environmental 19 Articles 2241 and 2256 of the earlier text of forum non conveniens exception was 16 the Civil Code, currently articles 2214 and ruled to be applicable . After various contamination in the locations where 2229, respectively, according to the new procedural occurrences, the District Texaco performed petroleum Codification published in the Official Registry exploitation activities in the Napo of 24 June 2005. Court and the Court of Appeals 20 Articles 41 and 43 of the Environmental confirmed the decision to apply the concession, in an area of more than Management Law; Law No. 37, published in 500,000 hectares, thereby causing Official Registry No. 245 of 30 July 1999. In doctrine of forum non conveniens in particular, Article 43, related to civil actions 2001 and 2002, 17 and Texaco committed increased cancer rates and other serious states: to accepting Ecuador’s jurisdiction. illnesses in the area’s residents. The “Art. 43) Natural or legal persons or human claim was filed under the framework for groups, linked by a common interest and Furthermore, any judicial decision 19 directly affected by the d amaging acts or handed down in Ecuador in the matter civil actions contained in the civil code omissions may present actions for damages and the Environmental Management and losses and for damages caused to health could be executed against Texaco in the 20 or the environment, including to biodiversity U.S. Law passed in 1999 . and its constitutive elements, before the appropriate judge. Without prejudice to the While this litigation was pending in the The claimants demanded from Chevron other legal actions th at may exist, the judge Texaco Corporation: will order those responsible for the damages U.S., Texpet reached an agreement with to pay compensation in favour of the collective group directly affected and for reparation of its partner Petroecuador on 4 May 1995, “ 1. The elimination or removal of the damages and losses caused. Those where it agreed to perform the contaminating elements that responsible for the damages will also be environmental recovery work in ordered to pay ten percent (10%) of the value still threaten the environment and of the compensation in favour of the claimant. exchange for release from Ecuador’s the health of the residents. The Without prejudice to said payments, and in the claims. This agreement covered Texpet, judgment must therefore provide event that the community directly affected is unidentifiable or if the group consists of the Texaco, and other associated for: a) The removal and adequate entire community, the judge will order that the companies, and was considered to treatment and disposal of the appropriate payment for civil reparations be made to the institution that must undertake the represent a response to all claims made waste and contaminating work of reparation in conformity with this Law. by the government and Petroecuador in materials that still exist in the In any event, the judge will determine in the relation to the environmental impact judgment, in conformity with the expert reports pools or pits opened by TEXACO solicited, the amount required to rectify of the derived from the consortium’s and which have been simply damages produced and the amount to be operations. Soon thereafter, on 30 capped, covered, or inadequately delivered to those who make up the community directly affected. The judge will September 1998, Ecuador signed an treated; b) The clean up of the also establish the natural or legal person who should receive the payment and perform the rectification work. Claims for damages and losses originating in environmental impacts will be handled via the verbal process.” August 02, 2015 - Page 5

rivers, estuaries, lakes, wetlands, For more than eight years now the and natural and artificial proceedings have been plagued by watercourses, and the appropriate procedural incidents as well as disposal of all of waste materials; accusations and denials of illegal c) The removal of all of the activities on both sides, in both the structural elements and U.S. 22 and in Ecuador. machinery that remain on the For example, based upon accusations of ground surface at the closed, corruption, supported by recordings shut-down, or abandoned well made in secret by a Chevron manager, stations and substations, as well the original judge in Ecuador, Dr. Juan as the ducts, pipes, inlets and Nuñez, was removed from the case and other similar elements related to © 2004 Lou Dematteis – A boy a new judge assigned. stands on an oil pipeline in the these wells; and, d) The general clean up of the land, plantations, Amazonian jungle near the town of In 2008 an expert designated by the crop areas, street, roads, and judge, the engineer Richard Cabrera, led Lago Agrio buildings where contaminating a team that detected hydrocarbons at wastes produced or generated as levels considered to be unsafe according a consequence of the operations to national standards in 44 percent of the directed by TEXACO are located, water samples they analysed. They also including the tanks for found cadmium, barium, lead, and other contaminating wastes built as part heavy metals in the sludge in of the poorly executed wastewater pits, and said that 80 environmental clean up work; 2. percent of these would have to be The repair of the environmental cleaned up. The team also provided damages caused, in accordance scientific studies that found cancer rates with the stipulations of article 43 almost double Ecuador’s average, with of the Environmental the most common types being cancer of Management Law.” 21 the uterus and leukaemia. Cabrera’s report recommended to the court that Chevron, meanwhile, presented a series Chevron should pay an amount of 27 of rebuttals. First and foremost, it denied billion dollars in reparations. However, the jurisdiction and authority of the based upon the constant filing of Ecuadorian court. Chevron also alleged motions to revoke Cabrera’s nomination that the company was not the successor and Chevron’s accusations of his to Texaco and that the Environmental collusion with the claimants, the judge Management Law could not be applied decided to omit consideration of Richard retroactively. Finally, it cast doubt upon Cabrera’s report in his judgment. the legitimacy of the claimants for their lack of any connection with the Chevron Furthermore, the documentary film Texaco Corporation and because the Crude was released in 2009. 23 In supposed ecological damages in the response, Chevron presented a petition Amazon region, in the area that where before the court in August 2010, the Petroecuador-Texaco consortium requesting dismissal of the case based operated, which they claimed were upon of allegations of fraud committed unjustifiably attributed to the Texaco by the claimants, after having obtained Petroleum Corporation, were legally access through the U.S. courts to 21 Ruling, Trial No. 2003-0002. Ruling judge: subject to settlement agreements that materials related to the documentary Nicolas Zambrano Lozada, Provincial Court of had been signed and granted. Finally, that were not used in the final version. Justice of Sucumbios - Courtroom One - of the company stated that it had not the Provincial Court of Justice of Sucumbios, In September 2010, the claimants p. 2. caused any damage to the claimants, 22 Chevron tried to challenge the open that it was not required to answer for presented a new evaluation of damages pro cess in Ecuador in the U.S. courts, alleging third parties, and that it had no obligation and losses, of between 90 and 113 that the nation of Ecuador had released the billion dollars. In this same month, the company from all liability. However, Ecuador to pay any reparations. The company had made it very clear in this release that the judge closed the period allowed for the also used the arguments that the claims rights of third parties were preserved, and all submission of evidence for the trial. of the U.S. courts were aw are of this when made against it were not supported by Chevron tried to extend the release of liability any credible, scientifically based proof, to third-party claims. Finally, on 14 February 2011, the 23 The documentary Crude, The Real Price of and that in any event the period of President of the Provincial Court of Oil , by Joe Berlinguer, has been shown at prescription for the acts had expired. numerous independent film festivals and has received almost thirty awards; http://www.crudethemovie.com/

August 02, 2015 - Page 6

Justice of Sucumbíos announced a Texpet and its parent company, judgment in favour of the claimants. The Texaco Inc., from all liability for ruling ordered Chevron to pay more than environmental damages that may 8.6 billion dollars in reparations, which have originated in the concession. would be increased to 19 billion if There is not a single piece of legal Chevron did not promptly issue a public evidence in the files indicating apology. In the ruling, the judge that the government of Ecuador considered that the act of the merger had planned this claim or any between the Chevron subsidiary Keepep other against Texaco Inc. in Inc and Texaco brought with it a transfer relation to environmental of Texaco’s rights, but also its damages in the Napo concession, obligations, to Chevron. In regard to the nor that it had acted as a alleged separation between Texaco and procedural party in this trial. Texpet, its Ecuadorian affiliate, the judge Neither is there a legal basis to concluded that: sustain that the existence of this settlement serves to deprive the “Texpet lacked not only claimants of their fundamental administrative independence but right to bring actions and petitions financial independence as well, and for these to be resolved.” since it was Texaco Inc. that not (p.30) only controlled the decisions, but that also authorised the funds that Therefore, it is considered that the cited Texpet needed for the normal agreements cannot limit the individual management of its activities. The rights protected within the Ecuadorian admitted fact that Texpet is a system, and in particular, by Article 42 of fourth-level subsidiary company the Environmental Management Law, owned one-hundred per cent by a which states: “All natural or legal single owner, and that Texpet persons or human groups shall be able operated using funds from Texaco to be heard in criminal, civil or Inc.’s accounts, has demonstrated administrative processes which they that a real separation of assets may initiate for infractions of an did not exist.” (p.22) environmental nature, even if their own rights have not been violated.” For the The ruling considered as justified the judge: need “In this way, the legal basis upon “to entirely lift the corporate veil which the collective right of the that separates Texaco Inc. and its claimants to present this action fourth-level subsidiary, Texaco has been established to the Petroleum Company (Texpet), court’s satisfaction; it is since it has been proven that it summarised in the fundamental was a company with capital much substantive right, irrevocable and lower than its volume of its indispensible, of action and operations, which required petition, and secondly, in the constant authorisations and regulations of the civil code to investments from the parent support the right to request company to carry out its normal reparation for damages, and flow of commercial activity, that thirdly, in the active legitimation of the executives were the same in the claimants to be heard in this both companies, and principally process in defence of collective the manifest fact that failing to lift rights.” (p.33) the corporate veil would imply a manifest injustice. “(p.26) In relation to applicable law, the judgment cites the validity of the In relation to the existence of Regulations for Hydrocarbons settlements, the judgment stated the Exploration and Exploitation (Supreme following: Decree 1185, Official Registry No. 530 “… the Presidency observes that of 9 April 1974), which establishes that it said settlements were effective as is the operator’s obligation to “take all stated in the inquiry, by which the measures and precautions required as government of Ecuador released the case may require in order to perform August 02, 2015 - Page 7

its activities in a manner that prevents Ecuadorian Amazon was not exploited damages or hazards to persons, until 1972, and the region “until then was property, natural resources, and sites of known to be an area free from all archaeological, religious, or tourist industry and human contamination, interest” (art. 41). Moreover, the 1964 except for the ancestral activities of the concessionary agreement itself peoples who lived there, in a manner expressly safeguards the rights of third such that we can [...] reasonably affirm parties and the company’s commitment that there is no doubt regarding the to perform its operations without causing quality of purity of the waters up until difficulties for navigation, or depriving the that year” (p. 64). waters of their qualities of drinkability In the judge’s view, the absence of and purity, or obstructing fishing. regulations establishing environmental The judgment also considered the 1971 standards does not imply that there were health code to be applicable to the case no laws applicable to the case, such as (Official Registry No. 158, 8 February those cited, although he did cede to 1971). It is applicable to public and Chevron that current standards could not private activities and includes, among be applied to operations carried out in others, regulations related to the previous years. In fact, the same prohibition of discharging substances judgment cites specific sanctions that are hazardous to human health into imposed on Texpet by the authorities as the environment, including industrial a consequence of their operations failing wastes. to comply with legal mandates. The judgment also noted: In regard to civil liability, the judgment points out that, in agreement with “Similarly, the Law of Ecuadorian law, three requirements Hydrocarbons published in the must be concurrently present: a damage Official Registry No. 322 of 1 or loss, either material or moral; October 1971 is also applicable, demonstrable or pre-existing culpability; which contains an express and a causal link between the two stipulation imposing the obligation (p. 75). The damage must be clear and to “adopt the measures necessary demonstrable, but may also relate to to protect flora and fauna and future damages, when there are other natural resources”, and “to elements of probability in relation to a avoid contamination of waters, the prior damage. The judge stated that due atmosphere, and the soils” (see to the volume of damages alleged, these article 29, letters s and t), must be subjected to analysis. stipulations which are similar to those found in the later In terms of culpability, the judgment codification of the Law of expresses that this covers both Hydrocarbons, published in intentional liability, when the subject Official Registry No. 616 of 14 desires the action to occur, as well as August 1974 (article 30, letters s culpability “when the agent causes and t), and in Official Record No. damage unintentionally, but while 711 of 15 November 1978, (article operating with imprudence, negligence, 31, letters s and t), being a or ignorance, as well as in violation of constant in the hydrocarbon- legal norms or regulations” (pp. 76-77). related legislation in force in The judge also stated, applying earlier Ecuador.” (pp.63-64) judicial decisions, that as activities entailing risk are involved, strict liability Finally, the Water Law is equally should be considered, “as the benefits applicable (Official Registry of 30 May that derive from such activity have as a 1972), which in its article 22 prohibits “all counterbalance the rectification of contamination of waters that affects damages caused to individuals or their human health or the development of property” (p. 83). flora or fauna,” which is applicable to all use rights granted by means of In terms of causality, and after analysing administrative concessions. various perspectives, the judgment arrives at the consideration that “when a The ruling applied these norms because situation that involves a hazard has been the first barrel of petroleum from the August 02, 2015 - Page 8

created, any damage that occurs should are 2.40 metres deep [...]; 3. The be understood as a causal result of this surface waters used for human risk. For example, in this case, with the consumption have suffered a creation of a hazardous situation, as is considerable impact from the an industrial area related to the dumping of at least 16 billion petroleum industry with the impacts that gallons of produced water during it generates on its surroundings, the Texpet’s operations; and 4. There mere existence of damage should be are risks of filtration from the sufficient to attribute a causal nexus pools that could affect between the damage and the hazard subterranean waters.” (p.125) created” (p. 89), also stating that the The judge also recognised the non- company was fully aware of the risks existence of personalised medical that its activities incurred. reports that provided evidence for In consideration of the acts examined, illnesses suffered by specific persons, the judge made use of a broad concept but after analysing various of environmental damage, characterised epidemiological reports as well as a as “any and all loss, diminishment, large quantity of testimony from the detriment, harm, damage, caused or victims 24 , he estimates that “the natural inflicted upon the environment or any of water sources in the concession area its natural or cultural components” have been contaminated by the (p. 94). Next, he extracts his own hydrocarbon activities of the defendant conclusions from the more than one company, and because of the hazardous hundred expert reports brought to the nature of the substances dumped and all process: of the means of possible exposure, this contamination puts the health and life of “1. The operations at all of the the people in general and the ecosystem petroleum fields operated by at risk” (p. 147). Furthermore, the impact Texpet visited during the judicial on the indigenous people is referred to inspections have used identical specifically in these terms: systems of operation, which allows us to assume that the “It is considered that the only operational practices did not vary impact suffered by the indigenous from one site to another and that people that can be considered as the results have been the same; environmental damage is the 2. The contamination in the area cultural damage provoked by the of the concession affected forced displacement due primarily 7,392,000 cubic metres (m 3), a to the impact suffered by the figure arrived at in consideration lands and rivers and to the of the fact that we have 880 pools diminution of the species that (verified through aerial were used for traditional hunting photographs certified by the and fishing, which has obliged Military Geographical Institute) them to modify their customs...” that have been documented (p. 154). throughout the inquiry and In terms of the relationship of causality analysed in conjunction with with respect to the environmental Petroecuador’s official documents damages, the judgment opines that the as presented by the parties, and system implemented by Texpet for the especially by the expert Gerardo treatment of its wastes “did not eliminate Barros, and aggravated by the or manage the risks in an adequate or fact that the defendant has not sufficient manner” and that “the system presented historical records that was designed to discharge the wastes record the number of pools, their into the environment in an economical 24 criteria for construction, use, or See the study by Carlos Martín Beristain, manner and did not adequately manage Darío Páez Rovira, and Itziar Fernández, Las abandonment, and that the pools the risk of damages, but externalised palabras de la Selva. Estudio psicosocial del are 60 x 40 metres in area, and impacto de las explota ciones petroleras de them” (pp. 165-166). Texaco en las comunidades amazónicas de that because of the possibility of Ecuador; Hegoa, Bilbao, 2009 ; available filtration and spillage at least 5 online at: http://pdf2.hegoa.efaber.net/entry/content/442/ metres around the pools must be Las_palabras_de_la_selva.pdf remediated, and that the pools

August 02, 2015 - Page 9

In regard to damages to health, the dumping of contaminants as judgment states that “there is reasonable described could have been and sufficient proof for both the avoided by the defendant with the existence of impacts on the public use of other technology that was health, as well as the fact that this available at that time, but which impact had a medically reasonable was omitted from the operational probability of being caused by the scheme for the concession, which exposure of the persons who inhabited was under the full responsibility of the concession area to the substances the company Texpet, which discharged by Texpet into the operated as a fourth-level ecosystem” (p. 170). subsidiary of Texaco Inc., which in turn publically merged with In terms of the impact on the indigenous Chevron, thereby creating peoples, while not attributing all of the Chevron Texaco, the defendant cultural changes they had undergone to company in this trial, which would the company’s activities, the judge later change its name to Chevron concluded that the company had Corp. “(p. 174) contributed to these, with the © 2005 Kayana Szymczak - Ermel environmental impacts being a “direct When the time came to establish the Chavez, President of the Frente de causal agent of certain changes forced amount of the reparations, the judge Defensa de la Amazonia (Amazon Defense Front), upon the indigenous cultures that based considered it appropriate to divide the their social system, their cultures, and various applicable measures of their existence on a close relationship reparation among the damages in with nature” (p. 172). evidence, and considered that these measures could be of three types: Finally, the judgment concludes with the following statements: “(1) primary measures, focused upon restoration of the natural “Therefore, after analysing the resources to their original state to various types of evidence the extent possible and as soon presented during the disclosure as possible; (2) compensatory phase for the issues in this measures, created in recognition litigation, it appears clear to this that the principal measures could court that, 1. Contamination be delayed or may not be attributable to the scheme of performed in their entirely, and petroleum operations in the the objective of which is to concession exists, since it was compensate for the fact that the designed to take advantage of the primary reparation does not dumping of effluents into the achieve full restitution of the environment, in spite of the natural resources and to existence of other available compensate for the time that alternative technologies; 2. The passes without reparation; and (3) contamination reported can be measures for mitigation, considered as hazardous, designated to reduce and because of the admitted attenuate the effect of damages possibility that the dumping of impossible to repair. “(pp. 177- fluids such as those that Texaco 178) has admitted to have dumped, under the name of Texpet, causes Based upon all of these considerations, damage to agriculture and to the in the judgment a total amount of health of persons. This possibility reparation is established at 8.646 billion of suffering damage, which in this dollars, distributed in the following case threatens indeterminate manner: 600 million for cleaning up persons, should not cause those subterranean waters; 5.396 billion for threatened by contingent cleaning up contaminated soils, damages to remain without estimated to represent 7,392,000 cubic defence, because the legislature metres; 200 million (10 million per year has wisely anticipated (art. 2236 for 20 years) for recuperation of the flora of the Civil Code) the exercise of and fauna and the aquatic life native to the type of popular action that is the area; 150 million to create a system being exercised [...]; 3. The to bring potable water to the region; 1.4 August 02, 2015 - Page 10

billion to create a health system to concept of reparation of damages, for address the heath-related needs created the Amazon Defence Coalition. by the public health problems; 100 On 9 March 2011, Chevron presented a million for the creation of a community petition of appeal, requesting the reconstruction and ethnic reaffirmation annulment of all of the proceedings for program for the indigenous peoples; 800 lack of the court’s jurisdiction, for lack of million to provide funds for a health plan, authority, for violations of the standards which will have to include treatment for of due process, and for fraud in the people suffering from cancer attributable proceedings. The company claimed, to Texpet’s operations in the concession again, that Chevron never operated in area. Ecuador, that it never accepted the The judgment also imposes a punitive jurisdiction of the Ecuadorian courts, and sanction equivalent to an additional that it is not the legal successor of 100% of the sum of the amounts for the Texaco, and that Texaco did not control reparation measures: the operations of Texpet. “… which is adequate for punitive For their part, the claimants also and deterrent purposes for this presented a petition of appeal on 17 type of compensation, at the February 2011. Although in agreement same time having an example- with the majority of the judgment, they making and dissuasive objective, considered the reparations awarded to providing recognition for the be insufficient because of the omission victims and ensuring the non- of reparations for the economic impact repetition of similar misconduct. on the persons affected by the However, considering that the contamination, as well as for the defendant has already been damages caused by the loss of territory ordered to repair the damages, suffered by the ethnic groups in the and that this serves the same area. example-making and dissuasive On 3 January 2012, the Provincial Court ends, this civil punishment may of Sucumbíos (Ecuador) resolved both be replaced, at the election of the petitions of appeal, confirming the defendant, by a public apology previous decision of the Court of Lago issued in the name of Chevron Agrio in all its aspects and thus Corp., offered to those affected by condemning Chevron to pay more than Texpet’s operations in Ecuador. 18,000 million dollar, as long as the This public recognition of the company does not submit a public damages caused must be request for apologies. Chevron may file published within 15 days, in a petition for clarification of the judgment Ecuador’s main written before the Court. communications media as well as in the defendant’s home country, on three different days, and in the event of compliance, will be 3.3 Further developments considered as a symbolic means of moral reparation and In addition to submitting a petition to recognition of the effects of its appeal in Ecuador and requesting that misconduct, while also ensuring the authorities there open criminal non-repetition.” (pp. 185-186) proceedings against the lawyers for the For purposes of implementing the terms victims and against the judge who of the judgment, a trust would have to be issued the decision, Chevron opened up created on behalf of those affected and two other parallel legal avenues with the administered by the Amazon Defence aim of blocking execution of the Coalition, which would be the judgment. organisation responsible for the The first of these would be dismissed in reparations. In agreement with the the United States. On 1 February 2010, Environmental Management Law, an Chevron filed a civil complaint before the additional 10% was assigned to the total U.S. District Court, Southern District of 25 18 U.S.C. § 1962. reparations established under the New York, under the framework of the August 02, 2015 - Page 11

RICO (Racketeer Influenced and Corrupt company. 29 Organisations) Law 25 , the special U.S. However, this decision was revoked on federal law created to combat organised appeal on 19 September 2011. During crime. Chevron’s new thesis was that the hearings, the Second Circuit Court of the claimants and their legal Appeals judges pointed out the paradox representatives were part of a criminal that while the company claimed in the organisation with the business of first phase of the proceedings that the extorting the company in the amount of U.S. courts lacked authority, in order to 113 billion dollars, by means of bring the trial to Ecuador, it now invoked Ecuador’s legal procedures. Chevron the alleged lack of guarantees of the obtained an unusual temporary Ecuadorian judicial system to ask for the restraining order from the federal judge, protection of the U.S. courts. For the Lewis A. Kaplan, on 8 February 2011, a moment, this decision removed the few days before the judgment in Lago impossibility of executing the judgment Agrio was issued, which blocked the in the United States, although the Ecuadorian claimants and their attorneys © 2005 Kayana Szymczak – Old representatives of the Ecuadorian from requesting execution outside of Texaco oil barrels left o n the side of victims had committed themselves not to Ecuador of the judgment issued in the Aguarico River, near Lago Agrio attempt to do so until the appeals phase Ecuador for 28 days. Judge Kaplan had concluded in Ecuador. based his decision on the contents of a 26 Previously, the same Judge Kaplan had memorandum from the law firm that On 8 January 2012 Judge Lewis Kaplan ordered, based on a petition from Chevron, predicted the presentation of motions of delivery of the unedited shots in the final of the Southern District Court of New montage of the documentary Crude execution for the judgment in various York, refused to block the enforcement mentioned above. This was to look for an jurisdictions, directed towards seizing of the judgment of a court in Ecuador, alleged fraud in the informati on provided in the documentary, allegedly orchestrated by one of the company’s assets, in order to force which condemned the U.S. oil company the Ecuadorian claimants’ attorneys in the the company to negotiate compliance Chevron to pay compensation for U.S., . The memorandum in 26 question was among the documents provided with the judgment. The judge environmental damage in the Amazon. by Mr. Donziger. considered that such a strategy of 27 The second legal avenue Chevron used “All defendants [...] be and they hereby are multiple demands was meant to exert enjoined and restrained, pending the final was raised in The Hague. In September pressure beyond the limits of the law, determination of this action, from directly or of 2009, Chevron presented a demand indirectly funding, commencing, prosecuting, and that it would cause irreparable advancing in any way, or receiving benefit for international arbitration before the damage to the oil company. Another from any action or proceeding, outside the Permanent Court of Arbitration in The Republic of Ecuador, for recognitio n or factor he considered was that “the enforcement of the judgment previously Ecuadorian courts do not generally offer Hague, under the regulations of the rendered in Maria Aguinda y Otros v. Chevron United Nations Commission on Corporation, No. 002-2003, in the Provincial an impartial trial, and they have not done International Trade Law, 30 alleging that Court of Justice of Sucumbios, Ecuador so in this case.” Finally, the judge (hereinafter the “Lago Agrio Case”), or any the government of Ecuador violated the alluded to the public interest. He stated other judgment that hereafter may be bilateral investment treaty between the re ndered in the Lago Agrio Case by that court that Chevron is “a company with great or by any other court in Ecuador in or by importance for our economy,” which United States and Ecuador for two reason of the Lago Agrio Case (collectively, a reasons: the period of validity of the “Judgment”), or for prejudgment seizure or employs thousands of people. The order attachment of assets, outside the Republic of agreement between Texpet and Ecuador was later extended for eight additional Ecuador, based upon a Judgment. [… ] The in terms of the reparation of damages, Court is mindful of the parties’ interest in days in another decision issued on 7 27 and Ecuador’s interference in the having the enforceability and recognizability of March 2011. On 18 April 2011, the the judgment outside of Ecuador determined independence of Ecuadorian judicial without unnecessary delay.” US District Court order was confirmed, despite a motion SDNY Chevron Corp. v. Donziger , F. Supp. for a stay. 28 authority. For its part, the government of 2d, 11 Civ. 0691(LAK), 201 1 WL 778052 Ecuador and the claimants in the (S.D.N.Y. Mar. 7, 2011). 28 Order denying RICO defendants Motion for On 31 August 2011, the judge again Ecuadorian lawsuit presented a demand Relief; US District Court SDNY, Chevron confirmed his perspective based upon in the U.S. federal courts, with the Corporation, Claimant, -against- 11 Civ. 0691 the argument that the commitment made objective of paralysing the arbitration to (LAK) Steven Donziger, et al., Defendants; Memorandum and Order, April 18, 2011. by Texaco at the time to accept the the extent that it could affect their rights 29 Chevron v. Salazar , 11 Civ. 3718 (Lak), jurisdiction and the judgment issued in within the context of the process open in NYLJ 1202513188076, at *1 (SDNY, decided August 31, 2011). Ecuador is not linked to Chevron, which Ecuador, and especially the conditions for such effects is a completely different under which the forum non conveniens

This document should be cited as:

Pigrau, A. (CEDAT, Universitat26 Rovira i Virgili) , 2012. The Texaco-Chevron Case in Ecuador , EJOLT Factsheet 27 29 No. 42, 12 p. 28 30 August 02, 2015 - Page 12

30 “Rules of Arbitration of the United Nations was used in the original U.S. litigation. Commission on International Trade Law”, On 17 March 2010, U.S. District Court, Resolution 31/98, approved by the General Assembly on 15 December 1976. These were Southern District of New York (Judge revised in 2010, and the revision entered into Leonard B. Sand) ruled that Chevron force on 15 August 2010; “2010 Revision of could continue requesting international the Rules of Arbitration of the UNCITL”, 31 Resolution 65/22, approved by the General arbitration in this case. The claimants Assembly on 6 December 2010; avail able at and the government of Ecuador http://www.uncitral.org/pdf/spanish/texts/arbitratio n/arb-rules-revised/arb-rules-revised-s.pdf . appealed this decision, but the court 31 See Republic of Ecuador v. Chevron Corp ., once again ruled in favour of Chevron on Nos. 09 Civ. 9958, 10 Civ. 316, 2010 WL 32 1028349 (S.D.N.Y. 16 March 2010). 17 March 2011. 32 Republic of Ecuador v. Chevron Corp ., 638 F. 3d 384 (2d Cir. 2011). On 9 February 2011, again just a few 33 PCA Case No. 2009-23. In the matter of days before the judgement in Lago Arbitration before a Tribunal constituted in accordance with t he Treaty between the Agrio, the Arbitration Court adopted United States of America and the Republic of interim measures in favour of Chevron, Ecuador concerning the encouragement and reciprocal protection of investments, signed ordering Ecuador to suspend the 27 August 1993 (the “treaty”) and the execution of any judgment against the UNICTRAL Arbitration Eules 1976 between - company in relation to the Lago Agrio 1. (U.S.A.) 2. Texaco Petroleum Company (U.S.A.) The Claimants - case, either within or outside of and - the Republic of Ecuador The Ecuador, 33 and to wait for a ruling Respondent. Order for Interim Measures dated 9 February 2011. The Arbitration regarding the merits of the claim. Tribunal: Dr. Horacio A. Grigera Naón; Professor Vaughan Lowe, QC; V.V. Veeder 4. The voice of the shareholders References QC (President). 34 http://noticias.terra.es/2011/economia/0526/ actualidad/accionistas-piden-a-chevron-que- Meanwhile, and in accordance with what Fajardo, Pablo and de Heredia, María cierre-el-litigio-ecuatoriano.aspx is fortunately becoming an increasingly Guadalupe, “El Caso Texaco: un trabajo

common practice, Chevron’s top por la restitución de derechos colectivos executives witnessed how the case y de la naturaleza”, in ¿Estado came up as a matter of public debate constitucional de derechos? Informe during the company’s shareholder sobre derechos humanos. Ecuador meeting held in California on 25 May 2009; Universidad Andina Simón 2011. A group of shareholders, Bolívar, Sede Ecuador. Qu ito, Ediciones representing twenty investment funds, Abya-Yala. requested that Chevron’s management enter into an agreement with the Hurtig, A.K. - San Sebastián, M., indigenous communities and finally put “Epidemiology vs. epidemiology: the an end to the litigation. According to the case of oil exploitation in the Amazon jointly signed letter, “Chevron has shown basin of Ecuador”, International Journal poor judgement and has caused of Epidemiology , Vol. 34, Issue 5, investors to wonder whether our October 2005. company’s leaders can adequately Carlos Martín Beristain, Darío Páez This publication was developed manage the variety of environmental as a part of the project challenges and risks that they face.” In Rovira, and Itziar Fernández, “Las Environmental Justice palabras de la Selva. Estudio Organisations, Liabilities and the words of Thomas P. DiNapoli, Trade (EJOLT) (FP7-Scien ce in representative of the State of New York psicosocial del impacto de las Society-2010-1). EJOLT aims to pension fund, “It is time for Chevron to explotaciones petroleras de Texaco en improve policy responses to and las comunidades amazónicas de support collaborative research face reality. The effects of this horrible, and action on environmental uncontrolled contamination of the Ecuador”; Hegoa, Bilbao, 2009 conflicts through capacity Amazon forest are still being felt building of environmental justice today.” 34 groups around the world. Visit our free resource library and databa se at www.ejolt.org or follow tweets (@EnvJustice) to stay current on latest news and events.