In the decades-spanning lawsuit between the government of Ecuador and the Chevron corporation, a legal arbitration panel has put a provisional halt on a recently ordered award for Ecuador. This halt is pending further investigation by the panel on the case between Chevron and Ecuador, and depending on the results of their findings, the award may or may not be given. This case is significant because it gives rise to several very important questions in global arbitration.
The Background of This Corporation vs. Government Arbitration
From 1964 to 1992, the Texaco petroleum company drilled for oil in Ecuador. Allegedly, they improperly disposed of their drilling waste, which caused petroleum related illnesses among the indigenous population and polluted the environment. Shortly after leaving Ecuador, Texaco paid Ecuador a $40 million settlement.
In 2001, Chevron purchased Texaco and inherited their legal problems with Ecuador. Ecuador has held Chevron accountable for Texaco's negligence ever since. The 1995 settlement between Texaco and Ecuador has had little consideration in Ecuadorian and US courts, but Chevron continues to hold it up as proof that the continued litigation and the resulting $18 billion award are fraudulent. In fact, between both sides, accusations of fraud and corruption are being exchanged.
What This Case Means to Global Commercial Arbitration
There can be no doubt that this is a landmark case in global business. On one hand, Ecuador and its supporters claim that both the halt on the award and any potential ruling against them violates not only their rights as a sovereign nation, but it undermines the integrity of international legislation and the efficacy of rule of law.
On the other hand, Chevron believes that the 18 billion dollar award was fraudulent, and that any ruling against them would be just as fraudulent. They believe that Ecuador's case is illegitimate and rife with corruption. They believe that a ruling against them would essentially validate corrupt governments attempting to bilk corporations.