U.S. Court of Appeals Lifts Injunction in Chevron Litigation
by James Foster
lion USD judgment levied against the oil com- pany. The Second Circuit’s decision could prove costly for the Chevron Corporation, although it only represents one of count- less other actions in what has been considered the world’s largest environmental lawsuit.
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n January 2012, the U.S. Court of Appeals for the Second Circuit lifted an injunction awarded to Chevron that blocked the en- forcement of an Ecuadorian court’s $18 bil-
U.S. Appellate Judge Kaplan
In 1964, the government of Ecuador formally invited Tex- aco and Gulf Oil Corporation to conduct exploratory opera- tions in the Oriente region of the Amazonian rainforest. Af- ter the Lago Agrio oil field was discovered, Texaco and Gulf Oil formed a consortium with Ec- uador’s state-owned oil com- pany, Petroecuador, and from 1967 – 1990, they extracted oil from a concession of land granted to them by the Ecuadorian government that covered over 1,700 square miles. During this time Texaco’s fourth-level subsidiary, Texaco Petroleum Co. (TexPet), was responsible for general oversight of operations, but since Petroecuador purchased a majority 62.5 percent stake in the consortium in 1974, Texaco, Inc. remained a minority part- ner. In 1992, Petroecuador acquired 100 percent ownership of the consortium and announced that a Petroecuador subsidiary would take over TexPet’s role in managing operations.
concluded that judgment-debtors like Chevron could challenge a foreign judgment’s validity under the Foreign Judgments Act only
defensively and in response to an attempted enforcement, and since the plaintiffs had not yet sought enforcement in New York, the injunction was impermissible.
By 1992, the tremendous environmental impact of the consortium’s operations in Oriente had become apparent; overflow areas and hundreds of unlined earthen waste pits used to store drill- ing fluid were scattered throughout the region, and residents complained that these contami- nants were polluting the soil and local water supply. In an effort to address these concerns, Texaco, Ecua- dor and Petroecuador signed a Remediation Agreement in May 1995 whereby Texaco agreed to clean up their share of the designated pit and spill areas in exchange for a release of claims from Ecuador and Petroecuador. The Remediation Agreement released Texaco and all related companies (Tex- Pet) from claims arising from environmental degradation as- sociated with the consortium’s activities. Texaco spent $41
million in these efforts and had closed or remedi- ated 161 waste pits and seven overflow areas by 1998. Texaco also made two payments of $1 mil- lion each for socioeconomic projects, as well as additional payments totaling $4.6 million to the municipalities of Lago Agrio, Shushufindi, Joya de los Sachas and Francisco de Orellana in return for their withdrawal of lawsuits and a release from all current and future liability. In September 1998, Texaco, Ecuador and Petroecuador signed the “Act of Final Liberation of Claims and Equip- ment Delivery” (Final Act), which recognized that Texaco had fulfilled its obligations under the
ILSA Quarterly » volume 20 » issue 4 » May 2012
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