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Tribunal Finds Ecuador In Breach Of Its Obligations Under International Law And The Bilateral Investment Treaty With The United States

An international arbitration tribunal issued an award yesterday finding that the Republic of Ecuador has violated the Tribunal’s prior Interim Awards authorized under international law and a treaty between the United States and Ecuador by not preventing the attempted enforcement of a $19 billion judgment against Chevron Corp. (NYSE: CVX). In prior rulings, the Tribunal put the Republic on notice that if Chevron’s arbitration ultimately prevails, “any loss arising from the enforcement of (the judgment) may be losses for which the (Republic) would be responsible to (Chevron) under international law.”

Convened under the authority of the U.S.-Ecuador Bilateral Investment Treaty (the BIT) and administered by the Permanent Court of Arbitration at The Hague, the Tribunal found Ecuador in breach of the Tribunal’s prior rulings and ordered the Republic to explain why it should not be ordered to compensate Chevron for all harm resulting from the plaintiffs’ attempts to enforce a judgment resulting from an environmental trial against the company in Lago Agrio, Ecuador.

Almost one year ago, the Tribunal issued a Second Interim Award ordering the Republic of Ecuador—and all of its branches, including the judiciary—to take all necessary actions to prevent enforcement and recognition of the Lago Agrio judgment, both inside and outside of Ecuador. That award expanded upon a prior award requiring Ecuador to “take all measures at its disposal to suspend or cause to be suspended the enforcement or recognition within and without Ecuador of any judgment.”

“The Tribunal’s decision confirms that the enforcement actions being pursued against Chevron in Argentina, Brazil, and Canada fly in the face of international law,” said Hewitt Pate, Chevron vice president and general counsel. “Yet Ecuador has consistently aligned itself with American trial lawyers who have used corrupt courts to advance an unprecedented fraud. It is not too late for the Republic to reverse course, declare the Lago Agrio judgment illegitimate, and address the real challenges facing its citizens.”

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