Ecuador Upholds $18 Billion Ruling Against Chevron, Litigation to Continue
Already in hot water for its November deepwater spill in Brazil, Chevron (NYSE:CVX) now has to contend with the resurfacing of an old legal battle in Ecuador. An Ecuadorean appeals court upheld a prior ruling that ordered the oil major to pay $18 billion in damages for the environmental and health impact of Texaco’s operations in the Amazon rainforests. [1] Chevron acquired Texaco in 2001, inheriting a legal case that accused the company of improperly dumping drilling-related waste that caused pollution in the forests and resulted in the illness of many indigenous people. Chevron has called the ruling illegitimate, accusing the judiciary of corruption and claiming fraud by the plaintiffs. [2] The claims are the largest awarded for an oil-related disaster to date, but will likely be overtaken by the BP (NYSE:BP) spill.
We have a $109 price estimate for Chevron, which is in line with its current market price.
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Lengthy battle
The legal battle over Texaco’s actions in Ecuador has stretched over a period of two decades. With local courts demanding a costly settlement, Chevron turned to the Permanent Court of Arbitration in The Hague, which ordered Ecuador to suspend enforcement of the ruling. [2] Chevron has accused the plaintiffs of starting a fraudulent case and ‘fabricating expert reports, manufacturing evidence, bribing and colluding with court officials, waging a campaign of intimidation against judges, and even ghostwriting parts of the verdict itself’. The company maintains that Texaco cleaned up all the pits for which it was responsible. [1]
This legal battle has seen both parties exchange serious allegations of corruption and attempts to influence the Ecuadorean legal system through unfair means. It has also attracted a lot of attention and is seen as a landmark case involving international disputes. [2] A final resolution to the case is likely years away. Chevron does not hold any significant assets in Ecuador currently, but the plaintiffs have plans to seek enforcement in other countries where the company has operations.
This case marks the third such significant legal issue related to the operations of major U.S. oil firms in Latin America over the past month. We earlier discussed the recent arbitration case between Exxon and Venezuela’s government and the tough stand taken by Brazilian state prosecutors against Chevron for its recent spill. (See: Venezuela Says it Will Pay Only $255 to Exxon Mobil in Arbitration Deal, Chevron Updates: Brazil Ban is Embarrassing But Has Little Impact on Stock)
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- Ecuador court upholds $18bn Chevron ruling, FT [↩] [↩]
- Ecuador court upholds $18 billion ruling against Chevron, Reuters [↩] [↩] [↩]