Chevron v. Ecuador - Can Chevron Get A Fair Trial? Appellate Court Screws Up

As some of you know, we've been following the Chevron - Ecuador story for some time now.  To recap, the problem is that in the 1960s Texaco produced oil out of that country and through 1990 and in partnership with the Country of Ecuador .  During that time, there were oil spills and economic damage due to oil production.  Texaco spent $40 million in "environmental remediation" which is another term for carrying out a cleanup program.  


Chevron purchased Texaco in 2001 for 46.3 billion, thus assuming Texaco's work and responsibilities in Ecuador.  By that time, Ecuador's then-new state-owned petroleum organization Petroecuador assumed responsibility for the oil wells that were once the product of the partnership.  But the problem is that since that time and through today, oil spills and environmental damage have continued, but Petroecuador has done nothing to either prevent the occurrence of or clean up what was done.  


Meanwhile, the Country of Ecuador has moved to work on three fronts: 


1) Nationalize the oil industry via Petroecuador
2) Kick out American oil companies like Occidental Petroleum and take over their production facilities.
3. Sued Chevron Texaco to get money to pay for environmental damage that their own state-owned oil company, Petroecuador, caused



The third point is the focus of my blog.  Ecuador's suing Chevron to have them pay the afforementioned damange.  To that end, they were assisted by a lawyer by the name of Steve Donziger, who had been working on the case as an "American Legal Advisor",  but who has also admitted his own financial ambitions as he could gain $5 billion from a victory .  The lawsuit -- valued at $16.5 billion by one estimate -- has been the focus of much legal movement.  The latest action by Chevron had it file an appeal to have Ecuador enter into arbitration discussions regarding the level of liability each party is responsible for.  But there's one large problem. 


The appellate court doesn't understand the contractual relationships. It calls Chevron a "third party."  


What!?!


When Chevron purchased Texaco it essentially became Texaco, with all of its obligations and problems. Thus, it's not a third party.  But even with this fact, the U.S. Court of Appeals for the Second Circuit in New York took the step of ignoring Chevron's claims of being able to pursue arbitration by seeing it as a "third party" when it's not.


The result of this failure means that Chevron now must seek other legal tools to get Ecuador to pay its fair share, but the other problem is more sinister: Ecuador's rich continue to cover-up their behavior and irresponsibility toward that country's poorest people.  Making it look like it was just Chevron's fault does not erase the fact that Ecuador has been harming its poorest people.


The bottom line here is that just because a firm's an oil company does not mean it should be treated unfairly, especially when the lives of the poor of Ecuador are at stake.  Chevron / Texaco has paid and does its share; the Country of Ecuador, which by the way will never give Chevron a fair trial, has not done so.