Chevron Case: Ecuador’s Defense

Written by Ira Ryk-Lakhman, MPhil/PhD candidate (UCL Laws)

On Friday, 13 November 2015, Dr Diego Garcia Carrion, the Attorney General for Ecuador came to UCL to present his book “Chevron Case: Defense of Ecuador”, and discuss the Ecuadorian position in one of the most important and controversial international dispute settlement cases at the moment – Chevron v. Ecuador. Importantly, the event was not intended to constitute a full and exhaustive legal or factual discussion of the case and the parties’ contentions, but merely a presentation of the main points of the Ecuadorian perspective.

The Ecuadorean Attorney General’s presentation was co-organised by UCL Laws and UCL Global Governance Institute and Investment Law and Policy. Dr Martins Paparinskis, convenor of International Law of Foreign Investments course at UCL Laws, chaired the event. The event was filmed by the Ecuadorian Embassy, and complimentary copies of the book were handed to the participants.

In brief, in September 2009 Chevron brought its claim against Ecuador to an investor-State arbitration tribunal under the US-Ecuador BIT. The claim primarily alleges denial of justice by Ecuador’s courts in a domestic dispute relating to environmental and social harms due to contamination resulting from oil production in Lago Agrio region (Chevron’s position on the dispute). The case is still pending, and raises hard questions about international investment arbitration, which are of considerable conceptual and practical importance. Can international investment arbitration successfully address the public elements of private disputes? What is the role of parties, non-parties, and participants in investment arbitration? Can investment arbitration resolve the interplay between different substantive and procedural regimes of domestic and international law? Is ad hoc arbitration an appropriate regime of dispute settlement for dealing with legal and factual issues of such complexity? How do States’ representatives think and act upon these issues?

The Ecuadorian perspective and answer to some of these questions is outlined in Dr Carrion’s book:

“[T]he story of the Chevron case forms part of the Ecuadorian State’s difficult experience with the investment dispute resolution system, which we have criticized throughout the last years.  The Ecuadorian State has had to defend itself—although under protest in the majority of cases— within an international investment arbitration system that was founded on Bilateral Treaties… negligently negotiated and executed, that have served as the basis to operate an irrational application of international legal standards, with little respect for sovereign States, their regulatory power and their systems for administration of justice.”

Dr Diego Garcia Carrion presented the Ecuadorian position to an audience of over 150 people, among whom were the Ecuadorian Ambassador to UK, his excellency Carlos Abad Ortiz, other Ecuadorian governmental officials, students and practitioners from different fields of international law. The presentation commenced with a short film that depicted the time-line of the relevant events and the main Ecuadorian contentions in the case, all elaborated in detail over some 270 pages in Dr Diego Garcia Carrion’s book. The Attorney General then outlined the top ten points of the Ecuadorian position, amongst these are the contentions that – Chevron’s claim was premature as it failed to comply with the prerequisite to exhaust local remedies; Chevron made no ‘investment’ and thus had no recourse to investment arbitration under the BIT; and, the tribunal was not impartial and treated the parties unevenly.

Dr Diego Garcia Carrion also offered a detailed analysis concerning the connection between the Lago Agrio claims, Chevron, and Ecuador. In this framework, he discussed the Ecuadorian interpretation to the 1995 Release Agreement between Ecuador and Chevron’s predecessor; the treaty provision on ‘denial of justice’; and Chevron’s litigation tactics in the parallel proceedings and claims of forum non conveniens, mainly arguing that:  “this arbitration is nothing more than Chevron Texaco’s attempt to evade the fulfillment of a judicial judgment in the Lago Agrio case.”

In the Q&A portion of the event, the Attorney General addressed several pertinent issues of international law. As for investment disputes, he noted that Ecuador is among the states advocating for a regional dispute settlement mechanism in the framework of UNASUR. Nonetheless, he stressed that it is not the Ecuadorian position that investment arbitration is to be abolished, but it should be re-examined and modified, thus the institution of an Investment Court is not necessarily reflective of the Ecuadorian position. As for the investment instruments to which Ecuador is or was a party to, Dr Diego Garcia Carrion noted that the early BITs signed by Ecuador, and since terminated, were erroneously concluded without due consideration of their practical ramifications on the State. In the matter of the current case vis-à-vis Chevron, the Attorney General noted that Ecuador is struggling to find support in its battle for the protection of the environment, and is currently supported by some NGOs. He also argued that it is the protracted legal battle with the oil companies that prevents the remediation of the already caused environmental damage to the Amazon.

The Attorney General addressed the changes in the Ecuadorian practice and approach to investment arbitration, noting that Ecuadorian practice has developed substantially since the mid-2000s, and Ecuador is now better succeeding in defending its positions in investment arbitration. Finally, Dr Diego Garcia Carrion addressed the recent successful partial annulment in the Occidental v. Ecuador case. He noted that indeed it is rare to succeed in the annulment of ICSID awards, and indeed Ecuador was often not victorious in annulment proceedings. He attributed this recent development to Ecuador’s repeated status as Respondent in investment claims, which contributed to the ‘Ecuadorian learning curve’ of investment arbitration, and this type of litigation. Nonetheless, he stressed that the grounds for the annulment of 40% of the award are unsatisfactory both under the Ecuadorian domestic (contract) law, as well as under international law.

Watch the full video of the event: