The Rising Influence of Rising Affluence

[DewDiligence]

Chevron’s Ecuador Case Could Last Years

[The key to CVX’s economic defense: it owns no assets whatsoever in Ecuador. See #msg-54460930 and #msg-59968547 for related stories.]

http://online.wsj.com/article/SB10001424052970203513604577140390135731010.html

›JANUARY 5, 2012
By ANGEL GONZALEZ

The plaintiffs who won an appeal in a multibillion-dollar environmental case against Chevron Corp. in an Ecuador court Tuesday are gearing up to go after assets in all corners of the global oil firm's empire. But the fight, experts say and participants acknowledge, is likely to add years to a dispute that has lasted nearly two decades.

Plaintiffs are working on a strategy for legal action in "several continents and countries the world over where Chevron has assets," Pablo Fajardo, the plaintiffs' lead lawyer, said in a conference call with reporters on Wednesday. Even though the plaintiffs regard a local court's upholding of an $18 billion award against Chevron as a victory, "there's still a long way to go in this trial," Mr. Fajardo said.

Tuesday's ruling doesn't mark the end of the judicial road for the case, in which residents of Ecuador's Amazon region accuse the second-largest U.S. oil company of polluting their land. Chevron still has the option of appealing to a higher court in Ecuador. But the plaintiffs say the ruling gives them the right to pursue the seizure of Chevron's assets abroad after the judges post an explanation of their decision in the next few weeks. The only way Chevron could forestall their move, the plaintiffs say, is by appealing and posting a sizable bond.

"No decisions have been made" on the company's next legal step, Chevron spokesman Kent Robertson said. But he added "there's no requirement for Chevron to post a bond" if it decides to appeal to a higher court in Ecuador.

Experts say that even if the plaintiffs attempt to grab some of Chevron's property in its sprawling international operations, it might take years for local courts to reach a resolution.

Moreover, the judiciary systems of many oil-producing countries in which Chevron operates—such as Nigeria and Angola—may be reluctant to rule against a company that is an important source of government revenues, said Wayne R. Wilson, an international arbitration consultant with Houston-based UHY Advisors. But, "it wouldn't surprise me they'd be able to seize some assets" in remote places, Mr. Wilson said. He added that Chevron's environmental dispute in Brazil increased the risk that a court would seek to enforce the Ecuadorean ruling there—but that risk wasn't any higher than the one it already faces with its pending oil-spill case.

The plaintiffs' attorney, Mr. Fajardo, said at a press conference in Quito, Ecuador, that it could take up to five years to get the ruling enforced.

Fitch Ratings said Wednesday that the latest ruling isn't expected to affect Chevron's credit profile. "Risks of a large near-term payout are mitigated by the potential for legal challenges to go on for years, as well the fact that Chevron has no significant assets in Ecuador," the credit ratings firm said in a press release.

Chevron, which inherited the case in 2001 with its purchase of Texaco, vehemently denies the charges and has vowed to put up fierce resistance. On Tuesday it called the court's decision "illegitimate," and has launched vigorous legal offensives against the plaintiffs in U.S. courts and against the Ecuadorean government, which it accuses of meddling in the case, in international tribunals. Ecuador denies Chevron's allegations of interference.‹