Unbeknownst to many, there is now a high stakes legal battle taking place between the Chevron Oil Company and the residents of Ecuador’s Amazonian area called Lago Agrio. The contention is that Chevron was responsible for environmental contamination actually caused by another oil company, Texaco, which operated in the area between 1964 and 1990. Chevron is facing the lawsuit because it purchased Texaco in 2001. Texaco had already pulled out of Ecuador in 1992, handing over their operations to Ecuador’s national company, Petroecuador. The suit was originally filed against the company in 1993 in a New York court as a class action suit, primarily on behalf of the private citizens affected by the pollution.

In 1990, Texaco paid $40 million to clean up the area. That payment was supposed to resolve any environmental liability the company had, while transferring the responsibility for any remaining problem to Petroecuador.

Now Chevron finds itself as the defendant in a $27 billion lawsuit, which is, in fact, against Texaco. The lawsuit has been filed by private citizens who considered the outcome from the 1990 agreement only a deal between Texaco and the Ecuadorian government, and not between the company and area residents.

The lawsuit was filed first in 1993 in the form of a class action suit in a New York Federal court .The plaintiffs alleged that a Texaco subsidiary dumped an estimated 30 billion gallons of toxic waste into their environment while extracting oil from the Ecuadorean Amazon between 1964 and 1992. The argument is that instead of pumping the substances back into emptied wells, Texaco dumped them in local rivers or directly into landfills. The plaintiffs also claim that the Ecuadorean pipeline, constructed by Texaco, leaked large amounts of petroleum into the environment. The residents alleged that they and their families suffered various injuries, including poisoning and development of pre-cancerous growths.

The American trial court had originally dismissed the suits in 1996 and 1997 on grounds that Ecuador would be the best location for the trial since events happened there. Two years later, after review by the Second Circuit, the case was sent back to the trial court for further consideration. The trial court again dismissed the cases in 2001 and local residents appealed. An appeals court upheld the decision, arguing that the United States was not the proper place for the litigation but it would make more sense to try the matter in Ecuador.

This article is not intended to pass legal judgment about who is right and who is wrong.  Rather, it is an attempt to explain some of the political and social circumstances under which this lawsuit is taking place.

While recognizing that corporations seek to maximize their profits and are big and powerful, it is important not to fall into the typical biases that single-issue pressure groups such as some environmentalists bring to the table. If we look at the content of certain U.S-based environmental groups, for them there is no doubt that Chevron is nothing but an aggressive multi-billion dollar corporation, responsible for the contamination and the spread of cancer in the area. For them Chevron is guilty beyond reasonable doubt. [1]

Single-issues groups often tend to see all spheres of life including the judicial one as subordinated to the truth they preach. If that truth is the well being of the environment, thus the concept of innocent and guilty can be easily established: Chevron is the contaminator and the residents are victims. The circumstances, legal responsibility or terms of liability do not matter so much. This same attitude is held by political leaders like Ecuadorian President, Rafael Correa, who is one of the most vocal and hard-line representatives of the new populist Latin American left.

The environment in the Latin American context is not only about the protection of nature. It also reflects an important element of “indigenous rights”. Indigenous groups have made the environment into an issue, which is fully capitalized by these leaders eager to draw political support from the indigenous masses. Most recently in the Peruvian Amazonas area of Bagua, a group of local indigenous residents rebelled against the presence of foreign companies in the area, despite the fact that President Alan Garcia tried to be sensitive to their needs. The rebellion was supported and funded by Hugo Chavez who saw an opportunity to rally these populations against the government on the basis of land and environmental rights. [2]

Correa, like Chavez, is not speaking only on behalf of indigenous interests but on a messianic claim to redeem half a century of European colonialism allegedly characterized by oppression of the indigenous populations. As a Quito law professor pointed out: “the lawsuit is a fight not just about oil companies in the jungle but about 500 years of South American history”. [3] Thus, the fight against Chevron-Texaco might have historical and political connotations that cross the realm of pure legality.

Logically, a verdict in a case must follow right procedure. It should reflect the specific evidence being brought by the parties. It should decide whether Chevron is liable for the damages inflicted in the area. If the case becomes a matter of historical redemption, we are already talking about compassion for the poor. If that is the criteria to be used, true legal justice might be seriously compromised. Very often compassion distorts justice. Just to bring a personal story: a few years ago I was a juror in a case where a worker from a contractor company sued a bigger company on the grounds that he had an accident while working in their facilities. After following the hearings closely more and more members of the jury seemed to be reaching the conclusion that the lawsuit had no merits. During the deliberation it was clear to most jurors that this was the case. However, one juror had a different position. This person stated that the worker is a humble working individual while the company he sued was big and wealthy. Members of the jury rightly rejected that argument stating that the case is about the merits not about who is strong or weak.

Once again without interfering into the merits of the case; what is happening in most countries dominated by Chavez-type regimes, including Correa’s Ecuador is that a perverted concept of justice is spreading around. It is the government that promotes the notion of hatred for the wealthy, the imperialist, and the oligarch. The Correa regime is filled with rhetoric of friend and enemy.

Thus, the desire to attract the indigenous masses provides Correa with a tangible political tool that he can use to his advantage.  As we previously said, the environment has been an important issue to the indigenous communities and thus it has become a rallying issue of the new Latin American populist regimes eager to rally the masses. Since Correa took the reins of power in 2006, the tendency has been to expand the power of the president via a social justice agenda and subjugate all the branches of government including the judicial power.

Ecuador’s constitution is consistent with Correa’s ideology that economic and social justice is more important than the law itself.  According to the new constitution voted in September 2008, “the state claims the rights to manage, regulate, control and negotiate over the strategic sectors according to principles of environmental sustainability, prevention and efficiency. Strategic sectors under exclusive control of the state are those that have vital economic, social, political or environmental influence. Thus, these sectors must be oriented to the development of rights and to the social interest.” [4] In other words, according to the constitution those sectors can be re-oriented to serve “the social interest ” and include: the energy sector, non-renewable natural resources, hydrocarbons, mining, water, bio-diversity and other sectors the law may determine”. [5]

The right of the state to have the ultimate word on social and environmental issues is embedded in the constitution. The social interest is vaguely defined, and thus it provides the state with undefined boundaries. Thus, there is a great chance here that the political logic of the executive power be reflected in the constitutional and legal logic of the judiciary. If this is the case, judicial process based on specific evidence could surrender to the political will of the President that claims to speak on behalf of social interests.  Under these circumstances it is very difficult to expect that the law would not be a political law.

The following is a recent example: in February 2009, the government of Ecuador and Petroecuador began a process to collect $327 million from the French-oil company, Perenco .The claim was made on the basis of a 2006 Ecuadorian law (Law 42) by which the government has a right to 99% of the oil revenues above a certain “reference price”, mostly arbitrary.  Immediately afterwards, Petroecuador began seizing crude oil produced by Perenco. However in May, 2009 an international arbitration tribunal under the auspices of the International Center for the Settlement of Investment Disputes (“ICSID”) unanimously ordered that the government of Ecuador and Petroecuador halt seizures of crude oil against Perenco. The Tribunal made clear that these decisions were binding. [6]

The Ecuadorian Government ignored those rulings. Ecuador auctioned the crude oil it had seized from Perenco and the only buyer was Petroecuador. Thereafter, Rafael Correa proceeded to denounce ICSID, an institution of the World Bank, as being colonialist and biased against small countries, threatening to withdraw from the organization and even calling for its closure. [7]

In other words, Correa’s social ideology and his world of divisions between friends and enemies are likely to determine legal outcomes.  Chevron and Perenco are foreign companies at the service of colonialism that do not care for the well being of Ecuadorians and neither for the environment. Petroecuador on the other hand, is part of the Ecuadorian government. Therefore, it is taken for granted that it cares for Ecuadorian citizens and the environment where they operate. Is this really true?

Most recently, the Ecuadorian Ministry of the Environment fined Petroecuador for failing to prevent the spill of toxic waters in the Amazonas. In addition, the Ministry imposed on Petroecuador guidelines to protect the residents from contamination. [8] Likewise, Petroecuador reported 168 oil spills in the year 2007, which is the equivalent of one spill every 52 hours. [9] Given this reality, why is Petroecuador exempt from a lawsuit in Lago Agrio where they have been operating the oil facilities since Texaco left in 1992?

Thus, it is not a surprise that a government-appointed legal expert established that Chevron needs to pay $27 billion. Nor is it surprising that Chevron does not believe it can get a fair trial since the judge in charge of the case is somebody appointed by Correa who will follow the President’s political will. As the case has unfolded, Correa has been very outspoken about his desired outcome. He has claimed that the plaintiffs are right and that they should win.

Recently, Juan Nunez, the judge in charge of the case recused himself because of video recordings in Chevron’s possession that raised questions about his impartiality. According to the videos, Judge Nunez is seen in a meeting saying that he will rule against Chevron and that appeals to the case will be denied. Likewise, a member of Correa’s party, Alianza Pais, is quoted as saying that lawyers from the executive branch would assist the judge in writing the final verdict.

To conclude, it is clear that the political environment in which this litigation is taking place cannot lead to a just resolution of the case because formal justice and right procedure have been compromised in the name of social, economic and historical justice.  Consequently, the boundaries that separate the judiciary from the executive branches of government have been blurred and perverted.

 

Dr. Luis Fleischman is Senior Advisor for the Menges Hemispheric Security Project at the Center for Security Policy in Washington D.C.

 


[1] See the Campaign for Justice in Ecuador http://chevrontoxico.com/

[2] Nicole Ferrand, “Zeroing On in Peru”, America’s Report, July 16, 2009

[3] Quoted from William Langewiesche, “Jungle Law”, Vanity Fair, May 2007

[4] Constitucion de la Republica del Ecuador, Capitulo Quinto, Articulo 313 (My translation)

[5] ibid

[6] “Perenco Negotiates with Ecuador Government”, Maritime Reporting and Engineering News, July 8, 2009

[7] ICSID in crisis: Straight-jacket or investment protection?” , News Bretton Woods Project,  July 10, 2009

[8] “El Ministerio del Ambiente multa a Ecuador por Derrame de Aguas Toxicas”, EFE< July 21, 2009.

[9] http://archivo.eluniverso.com/2008/02/19/0001/9/8A3A13DC1F184B0E8FD84B10E83573A3.aspx.

 

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