Commercial Law Team
case number/ cause-list number: C/09/477457 / HA ZA 14-1291
Judgment of 20 January 2016
in the case of
the legal entity under foreign public law THE REPUBLIC OF ECUADOR, seated in Quito, Ecuador,
attorney: mr. G.W. van der Bend, practising in Amsterdam, v.
1. the legal entity under foreign law
CHEVRON CORPORATION (USA),
having its registered office in San Ramon, California, United States of America,
2. the legal entity under foreign law
TEXACO PETROLEUM COMPANY,
having its registered office in San Ramon, California, United States of America, defendants
attorney: mr. G.J. Meijer, practising in Rotterdam.
The parties are hereinafter referred to as Ecuador, Chevron and TexPet.
- the writ of summons of 7 January 2014;
- the motion submitting Ecuador's exhibits (1-20);
- the Statement of Defence of 31 December 2014, with Exhibits G1-G27;
- the interlocutory judgment of 25 February 2015 and the decision of 6 July 2015, entailing an order for the parties to appear before a three-judge panel;
- the official report of the parties' appearance on 17 November 2015 (compiled outside the parties' presence) and the documents referred to therein, specifically, the motion submitting Ecuador's Exhibits 21-34 and Chevron and TexPet's Exhibits G28-G39;
- the fax of 8 December 2015 containing comments by Chevron and TexPet related to said official report;
- the fax of 9 December 2015 containing comments by Ecuador related to said official report, with two enclosures.
Said faxes have been attached to the official report of the parties' appearance.
In so far as relevant in these proceedings, the text of the BIT reads as follows:
"The United States of America and the Republic of Ecuador (hereinafter the "Parties"); Desiring to promote greater economic cooperation between them, with respect reinvestment by nationals and companies of one Party in the territory of the other Party; Recognizing that agreement upon the treatment to be accorded suchinvestment will stimulate the flow of private capital and the economic development of the Parties; Agreeing that fair and equitable treatment of investment is desirable in order to maintain a stable framework for investment and maxim effective utilization of economic resources; Recognizing that the development of economic and businessties can contribute to the well-being.
Have agreed as follows: [...]
1. For the purposes of this Treaty,
(a) "investment" means every kind of investment in the territory of one Party owned or controlled directly or indirectly by nationals or companies of the other Party, such as equity, debt, and service and investment contracts; and includes:
(i) tangible and intangible property, including rights, such as mortgages, liens and pledges;
(ii) a company or shares of stock or other interests in a company or interests in the assets thereof;
(iii) a claim to money or a claim to performance having economic value, and associated with an investment;
(iv) intellectual property which includes, inter alia, rights relating to: literary and artistic works, including sound recordings;inventions in all fields of human endeavor; industrial designs; semiconductor mask works;trade secrets, know-how, and confidential business information; and trademarks, service marks, and trade names; and
(v) any right conferred by law or contract, and any license and permits pursuant to law;
3. Any alteration of the form in which assets are invested or reinvested shall not affect their character as investment.
3. (a) [...]
(b) Neither Party shall in any way impair by arbitrary or discriminatory measures the management, operation, maintenance, use, enjoyment, acquisition, expansion, or disposal of investments. For purposes of dispute resolution under Articles VI and VII, a measure may be arbitrary or discriminatory notwithstanding the fact that a party has had or has exercised the opportunity to review such measure in the courts oradministrative tribunals of a Party.
7. Each Party shall provide effective means of asserting claims and enforcing rights with respect to investment, investment agreements, and investment authorizations.
1. For the purposes of this Article, an investment dispute is a dispute between a Party and a national or company of the other Party arising out of or relating to (a) an investment agreement between that Party and such national or company; (b) [...]; or(c) an alleged breach of any right conferred or created by this Treaty with respect to an investment.
4. Each Party hereby consents to the submission of any investment dispute for settlement by binding arbitration in accordance with the choice specified in the written consent of the national of company [...] Such consent, together with thewritten consent of the national or company [...] shall satisfy the requirement for:
(a) written consent of the panties to the dispute [...]; and
(b) an "agreement in writing"
1. This Treaty [..] shall apply to investments existing at the time of entry into force as well as to investments made or acquired thereafter. [...]"
To the extent relevant, Clause 5.1 of this Agreement reads as follows:
"On the execution date of this Contract, and in consideration of TexPet 's agreement to perform the Environmental Remedial Work in accordance with the Scope of Work [...] and the Remedial Action Plan, the Government and PetroEcuador shall hereby release, acquit and forever discharge Texpet, Texaco Petroleum Compagny, [...] Texaco, Inc., and all their respective agents, servants, employees, officers, directors [...] beneficiaries, successors, predecessors, principals and subsidiaries (hereinafter referred to as "The Releasees") of all the Government 's and PetroEcuador 's claims against the Releasees for Environmental Impact arising from the Operations of the Consortium, except for those related to the obligations [..] of the Scope of Work, which shall be released as the Environmental Remedial Work is performed to the satisfaction of the Government and PetroEcuador [...] ".
Clause 9.4 of this Agreement reads as follows:
"Benefits for Third Parties— This Contract shall not be construed to confer any benefit on any third party not a Party to this Contract, nor shall it provide any rights to such third party to enforce its provisions."
"(1) A declaration that under the [...] investment agreements, Claimants have no liability or responsibility for environmental impact [...] or for performing any further environmental remediation arising out of the former Consortium that was jointlyowned by TexPet and Ecuador, or under the expired Concession Contract between TexPet and Ecuador;
(2) A declaration that Ecuador has breached the [...] investment agreements and the [...] BIT […];
(3) An order and award requiring Ecuador to inform the court in the Lago Agrio Litigation that TexPet, its parent company, affiliates, and principals have been released from all environmental impact arising out of the former Consortium's activities and that Ecuador and PetroEcuador are responsible for any remaining and future remediation work;
(4) A declaration that Ecuador or PetroEcuador is exclusively liable for any judgement that may be issued in the Lago Agrio Litigation;
(5) An order and award requiring Ecuador to indemnify, protect and defend Claimants in connection with the Lago Agrio Litigation, including payment to Claimants of all damages that may be awarded against Chevron in the Lago Agrio Litigation;
(6) An award for all damages caused to Claimants, including in particular all costs including attorneys' fees incurred by Claimants in defending the Lago Agrio Litigation and the criminal indictments;
(7) An award of moral damages to compensate Claimants for the nonpecuniary harm that they have suffered due to Ecuador 's outrageous and illegal conduct;
(8) An award to Claimants of all costs associated with this proceeding, including attorneys' fees;
(9) An award of both pre- and post-award interest until the date of payment; and
(10) Any other relief that the tribunal deems just and proper."
"[...] the Tribunal hereby orders:
(i) [Ecuador] (whether by its judicial, legislative or executive branches) to take all measures necessary to suspend or cause to be suspended the enforcement and recognition within and without Ecuador of the judgements [...] of 3 January 2012 and [...] of 14 February 2011 against [Chevron] in the Ecuadorian legal proceedings known as "the Lago Agrio Case";
(ii) in particular, without prejudice to the generality of the foregoing, such measures to preclude any certification by [Ecuador] that would cause the said judgements to be enforceable against [Chevron] ".
"The Tribunal declares that [Ecuador] has violated the First and Second Interim Awards under the Treaty, the UNCITRAL Rules and international law in regard to the finalisation and enforcement subject to execution of the Lago Agrio Judgement within and outside Ecuador, including (but not limited to) Canada, Brazil and Argentina."
- The Concession Agreement does not fall under the temporal scope in Article XII(1) of the BIT;
- The Tribunal also wrongly ruled that the investment on the basis of the Concession Agreement is revived by the 1995 Settlement Agreement and the investment also cannot revive because of the Lago Agrio proceedings, proceedings between the Lago Agrio claimants and Chevron, and thus between parties that were not a party to the Concession Agreement and the 1995 Settlement Agreement;
- It is insufficient for the application of Article VI(1), opening words and under (a) of the BIT that the dispute is related to the Concession Agreement; after all, the arbitration dispute ensues solely from the 1995 Settlement Agreement, and the words "relating to" in Article VI(1), opening words, of the BIT logically pertain only to the ground that follows (c) and not to (a);
- The life-span theory is contrary to the text of the BIT and the objective of the BIT as worded in the preamble;
- Being a Releasee pursuant to Clause 5.1 of the 1995 Settlement Agreement is insufficient to be able to accept jurisdiction by virtue of Article VI(1), opening words and under (a) of the BIT. Incidentally, Chevron is not a Releasee pursuant to the 1995 Settlement Agreement and certainly not a party to the Concession Agreement.
According to Ecuador, moreover, the Tribunal subsequently deprived Ecuadorian citizens of the fundamental right to live in a non-polluted environment (cf. Section 2, Article 19 of the Ecuadorian constitution which already applied in 1995) and, on top of that, the Tribunal decided on the rights of the claimants in the Lago Agrio proceedings without said claimants having been heard. This constitutes an unjustified infringement of third-party rights, also because of the Tribunal's decision, which was of general purport, that diffuse environmental claims were not possible because of the 1995 Settlement Agreement.
a. absence of a valid arbitration agreement;
c. the arbitral tribunal has not complied with its mandate;
e. the award, or the manner in which it was made, violates public policy or good morals."
"For the purposes of this Article, an investment dispute is a dispute between a Party and anational or company of the other Party arising out of or relating to (a) an investment agreement between that Party and such national or company".
- that the Ecuadorian judge who rendered the judgment at first instance was bribed by the attorneys of the Lago Agrio claimants with the promise that he would receive USD 500,000 of the revenues from execution of the judgment he was to render;
- that the attorneys of the Lago Agrio claimants themselves had also drawn up the report by the expert appointed by this Ecuadorian judge, against payment of USD 120,000 in bribes to this expert;
- that the judgment at first instance referred to, which was rendered after an exceptionally brief period, was drawn up by the attorneys of the Lago Agrio claimants, and not by the Ecuadorian judge. Regarding the latter, it was established, for example, by means of discovery proceedings that the contents of a number of the Lago Agrio claimants' attorneys' internal working documents that were not submitted into the Lago Agrio proceedings can be found verbatim - in some cases even including typing errors - in the judgment at first instance referred to;
- lastly, that President Correa of Ecuador, who vehemently supported the case of the Lago Agrio claimants a number of times in public, maintained regular contact during the Lago Agrio proceedings with the attorneys of the Lago Agrio claimants, as did other Ecuadorian government representatives.
1. At the request of either party, the arbitral tribunal may take any interim measures it deems necessary in respect of the subject-matter of the dispute, including measures for the conservation of the goods forming the subject-matter in dispute, such as ordering their deposit with a third person or the sale of perishable goods.
2. Such interim measures may be established in the form of an interim award. The arbitral tribunal shall be entitled to require security for the costs of such measures.
3. A request for interim measures addressed by any party to a judicial authority shall not be deemed incompatible with the agreement to arbitrate, or as a waiver of that agreement.