The major players have now all spoken in Chevron’s high-stakes litigation battle against plaintiffs who seek to enforce an $18.2 billion judgment issued by an Ecuador court based on charges that Chevron is responsible for environmental damages in the Ecuadorean Amazon.  The action is now likely to shift to court systems around the world, where plaintiffs have vowed to attempt seizure of Chevron assets to collect on the judgment.  One can only hope that in the interests of preserving the rule of law, those court systems will rebuff enforcement efforts based on overwhelming evidence that the judgment was the product of a massive fraud.

Soon after the Ecuadorean judgment was issued early last year, Chevron took its case before a federal judge in New York.  After an extensive hearing, the judge issued preliminary findings that both the plaintiffs and their lawyers had defrauded and corrupted the trial court in Ecuador.  Among the judge’s findings:

  1. The plaintiffs submitted “environmental assessments” to the Ecuador court under the name of Dr. Charles Calmbacher, but Dr. Calmbacher disavowed having prepared the reports or espousing the views expressed therein;
  2. They blackmailed the trial judge to appoint Dr. Richard Cabrera to conduct an “independent” assessment of environmental issues;
  3. They ghost-wrote Dr. Cabrera’s “independent” assessment, but concealed that fact from the court and Chevron;
  4. When Chevron learned the source of Dr. Cabrera’s report, the plaintiffs purported to compile new, “cleansed” expert reports for the court – but those who compiled the reports never visited Ecuador but rather relied solely on the findings in Dr. Cabrera’s fraudulent report;
  5. They intentionally sought to intimidate Ecuadorean judges, including efforts to convince judges that they might be killed if they ruled in favor of Chevron; and
  6. They pressured prosecutors to bring criminal charges against Ecuadorian attorneys who had represented Chevron.

Although the U.S. federal courts ultimately ruled that they lack jurisdiction to issue orders preventing courts in other countries from enforcing the Ecuadorean judgment, the district court retains jurisdiction over Chevron’s lawsuit for damages, and the district judge seems unlikely to reconsider his previous finding regarding the fraudulent nature of the Ecuador proceedings.

Also seeing things Chevron’s way is a panel of three arbitrators, convened under the authority of the U.S.-Ecuador Bilateral Investment Treaty (BIT) and administered by the Permanent Court of Arbitration at The Hague.  Earlier this month, it ordered Ecuador to prevent enforcement and recognition of the $18.2 billion judgment, both within and without Ecuador.  It ordered the Ecuador courts not to take any steps that would cause the judgment to become enforceable.  And today, the artibrators ruled that they have jurisdiction to hear Chevron’s claims against Ecuador for any damages it incurs in connection with the judgment.

The Ecuador courts have shown no signs of backing down, however.  In January, an appellate court in Ecuador affirmed the massive judgment.  And in a decision made public on February 21, the appellate court said that the BIT panel had no authority to interfere with court proceedings in Ecuador.  Also, although it referred Chevron’s latest appeal to the Ecuador Supreme Court, the appellate court rejected Chevron’s request that the posting of an appeal bond be waived, and it held that in the absence of a bond, the judgment could be enforced immediately.  Counsel for the Ecuador plaintiffs responded by indicating that they will initiate steps to collect the judgment in courts throughout the world.

It is difficult to predict accurately how courts around the world will respond to those enforcement efforts.  But any court that purports to adhere to the rule of law will have a difficult time ignoring the findings of a federal judge in New York that the $18.2 billion judgment was the product of a massive fraud – as well as the order from the BIT panel that Ecuador is required to “take all steps necessary to suspend” enforcement of the judgment.  Moreover, both the Ecuador plaintiffs and their lawyers continue to be subject to the jurisdiction of the New York court.  They cannot expect the New York judge to look kindly on any role they play in efforts to enforce a judgment that the New York judge determined was the product of their own fraud.

Related Legal Pulse post: Second Circuit Ruling: All Is Not Lost for Chevron in Ecuador Battle