Chevron v. Ecuador: Will the Plaintiffs Get Paid?

By Tim Padgett and Stephan Küffner
Tuesday, February 22, 2011


Donald Moncayo almost cried when he heard that a judge in his town of Lago Agrio had just ordered U.S. oil giant Chevron to pay $9 billion to clean up decades of petro-contamination in the Amazon jungle of northeast Ecuador. It was one of the largest environmental-damage awards ever — and the judge even threatened to double the amount if Chevron doesn't formally apologize for the eco-disaster by the end of February. When a TIME reporter contacted Moncayo in Lago Agrio by phone shortly after the ruling was announced on Feb. 14, the environmental activist, who hadn't yet heard the news, asked emotionally, "You mean we won?"

Well, legally, yes. But practically — not so much. Chevron has three levels of judicial appeal to exhaust in Ecuador, a process that could take years. And even if the corporation loses those rounds, the Amazonian plaintiffs aren't likely to collect anything inside Ecuador, where Chevron has no operations. That means they'll have to pursue Chevron's assets in courts in other countries, which also could take years, perhaps as long as the 18 years the case has dragged on so far. Chevron, meanwhile, faces an even longer p.r. debacle than the one it's wrestled with since 2001, when it acquired Texaco — the company originally responsible for the Amazon oil contamination in the 1970s and '80s — and became the lawsuit's defendant.

So at this critical juncture, many are starting to ask an obvious question: Isn't it time for both sides to think again about settling this thing out of court? If BP, for example, was willing to set up a $20 billion fund last year for victims of the Gulf oil spill, shouldn't Chevron realize that the Ecuador effluence is an albatross it would do better to get rid of — if not for $9 billion, then somewhere closer to $5 billion? And since the judge in Lago Agrio awarded the plaintiffs only a third of the $27 billion they'd actually sought, might that indicate that it's time for them to lower the bar and start getting some measure of cleanup secured after all this time? "The plaintiffs and defendants are both right," says Milagros Aguirre, a director at the Fundación Alejandro Labaka, a cultural and environmental foundation in the Ecuadoran Amazon.

Since the suit was filed in 1993 by 47 Amazon residents, the case has seen more twists than a Dickens novel. In 1995, as Ecuador's state oil company, Petroecuador, finished buying out Texaco's operations in that country, Texaco agree to a $40 million cleanup of some of its Amazon sites as part of the deal. When that three-year job ended in 1998, most ecologists agreed, as they still do today, that the cleanup was woefully inadequate for the 200-sq.-mi. (520 sq km) swath of lakes and rivers where Texaco is accused of having dumped crude and wastewater in the 1970s, '80s and early '90s, fouling public health and livelihoods for tens of thousands of people. But to their astonishment, Ecuador's conservative government at the time declared Texaco's cleanup work satisfactory, and the company hoped the Amazon lawsuit would go away.

It didn't. So after the Chevron-Texaco merger, Chevron in 2003 got the trial moved from New York state (where Texaco was headquartered) to Ecuador, thinking the legal landscape there would be more sympathetic. It was a reasonable assumption — until 2006, when left-wing, anti-American Rafael Correa was elected President, vowing a hard line against multinationals. Chevron has complained ever since that the judges in the case have been biased in favor of the plaintiffs.

One of them, Juan Núñez, was caught in 2009 on video released by Chevron discussing the trial with businessmen soliciting oil-cleanup deals and appearing to say he thought Chevron was guilty. Though Núñez accused Chevron of entrapment (at least one of the businessmen is alleged to have ties to Chevron) and denied that he ever asserted Chevron's guilt, he recused himself from the case and was later removed from the court altogether. He was replaced in the trial by Nicolás Zambrano, who issued the Feb. 14 ruling.
More important, one of Chevron's key contentions is that Petroecuador — which has done its own share of seriously sullying Ecuador's Amazon since Texaco left — should assume its responsibility too. Correa, who seems reluctant to admit that a state-run entity could behave as badly as a capitalist multinational, has dragged his feet on the matter, leaving Chevron to complain all the more that it's not getting fair treatment in the country. The bottom line, says Aguirre, is that even though Chevron needs to acknowledge that "there's no price that can be set to fix the disaster" Texaco left behind in Ecuador, "Petroecuador's responsibility in the issue has been left without punishment" as well.

That's why many feel the best hope for settlement still exists not so much between the plaintiffs and Chevron but between Chevron and Correa. To reach an agreement, they would have to sit down, which they unsuccessfully tried to do in 2008, and hammer out a deal to have Chevron and Petroecuador pony up a few billion dollars each to at least raise the $5 billion or more that experts say it will take to secure a safe water supply again for Ecuador's Amazon.

Says Karen Hinton, a Washington-based spokeswoman for the plaintiffs: "We have always been open to a just and fair settlement that provides complete remediation for the contamination." Chevron says a demand of "complete remediation" isn't rhetoric conducive to settlement, but its own rigid stances don't seem all that helpful either. The plaintiffs complain that Chevron's lawyers have told them they'll "never hear the B word," even though it's doubtful an adequate settlement could be kept under a billion dollars. And the company's most recent hardball tactic — filing RICO suits in the U.S. charging the plaintiffs' lawyers and consultants with conspiracy — seems to underscore the notion, as a Chevron spokesman told TIME, that "the prospect of a settlement has been overstated."

Despite the $9 billion judgment and the slim prospects of the plaintiffs' seeing any money anytime soon if ever, each side seems convinced that it can outlast the other. In Ecuadoran Amazon, meanwhile, where many residents can still see oil slicks in their backyards and where most still get their water from sources long polluted by crude and waste, the unemployed keep waiting for cleanup jobs they hope a settlement will bring. As long as that work doesn't materialize, they know they really haven't won.