The Rising Influence of Rising Affluence

[DewDiligence]

FT.com captures the essence of the Ecuador-vs-Chevron suit…

http://www.ft.com/cms/s/3/478b926a-3915-11e0-b0f6-00144feabdc0.html

›Chevron and Ecuador

February 15, 2011

Planning to sue a multinational corporation? Citizens of developing countries have as much right to do so as those from the first world but they have their work cut out. Here are some practical tips, learnt the hard way over the past 18 years by Ecuadorean plaintiffs seeking billions in damages from Chevron for allegedly poisoning their rainforest.

Rule one is to make sure the company has local assets. Texaco, which Chevron later bought, left Ecuador in 1992 and has nothing of value there, making local judgments impossible to enforce without the co-operation of foreign jurisdictions.

Which brings us to rule two: compliant local courts can be a double-edged sword. Both international arbitrators and a federal judge temporarily barred Ecuador in the past week from enforcing a verdict against Chevron due to numerous irregularities.

Rule three is not to make a documentary about the alleged crime or, if you do so, to have the film-maker burn whatever falls to the cutting-room floor. The 2009 film Crude bolstered public sympathy for the plaintiffs. But an American judge was not impressed after Chevron successfully subpoenaed the film-maker for footage that showed the lead plaintiff’s attorney calling the Ecuadorean courts corrupt, deeming environmental evidence “smoke and mirrors” and admitting expert testimony was ghostwritten.

Local courts delivered a $17bn judgment anyway on Monday. It created not a ripple in the oil company’s share price. Chevron is far more likely to receive damages in a US civil racketeering lawsuit than to pay a cent in Ecuador.

This does not mean corporate miscreants from rich countries have carte blanche in poor places. Many will lose cases they would consider laughable or transparently political back home. But compliance is only necessary if they have immovable assets or local business aspirations.‹