Chevron Corp. has filed an international arbitration claim against the government of Ecuador citing violations of the country's obligations under the United States-Ecuador Bilateral Investment Treaty, investment agreements, and international law. The complaint stems from the government of Ecuador's exploitation of the ongoing lawsuit against Chevron in Ecuador, as well as the government's failure to uphold its duties under decade-old contracts. The arbitration proceeding has been commenced before the Permanent Court of Arbitration in The Hague under the Rules of the United Nations Commission on International Trade Law.

Chevron's claims relate to the lawsuit currently pending against the company in Lago Agrio, Ecuador, where Chevron's subsidiary, Texaco Petroleum Company participated until 1992 as a minority member of a consortium that explored for and produced oil under contracts with Ecuador and Ecuador's government-owned oil company, Petroecuador. Through the filing, Chevron seeks to enforce prior settlement and release agreements that the government of Ecuador entered into with Texaco Petroleum when the consortium was terminated, and to hold Ecuador accountable for its obligations under Ecuadorian law and existing international treaties.

"As has been widely recognized, the government of Ecuador has seriously diminished the independence and integrity of its own judiciary. The government is using the legal process in Lago Agrio to avoid the environmental obligations of its state-owned oil company," said Hewitt Pate, Chevron's vice president and general counsel. "Because Ecuador's judicial system is incapable of functioning independently of political influence, Chevron has no choice but to seek relief under the treaty between the United States and Ecuador."

After its participation in the consortium ended in 1992, Texaco Petroleum negotiated a settlement agreement with Ecuador and Petroecuador whereby Texaco Petroleum assumed responsibility for specified environmental remediation projects in proportion to its minority ownership interest. In 1998, after the requisite remediation work was performed and independently validated, Ecuador and Petroecuador released Texaco Petroleum and its affiliates from further liability. Ecuador assumed responsibility for any remaining impact caused by the consortium's pre-1992 activities as well as any future impact caused by Petroecuador's own ongoing operations in the former concession area. Since Texaco Petroleum's departure, Petroecuador has drilled over 400 new wells in the concession area, compared to the 321 wells that were drilled during the consortium. Compounding the situation, Petroecuador's environmental record as an operator has been notoriously poor, with more than 1,400 oil spills since 2000 alone.

Tags: Chevron Corporation