On Wednesday, Marissa noted that the Lago Agrio plaintiffs – the 30,000 victims of Chevron’s toxic legacy in the Ecuadorian Amazon – had taken the step of filing a petition against the Ecuadorian government with the Inter-American Human Rights Commission, asking the Commission to ensure that Ecuador compels Chevron to pay the court-ordered costs of cleaning up its mess. Yesterday, a private arbitration panel demonstrated exactly why this petition is necessary. The arbitrators’ award orders the Ecuadorian government, including the court system, to take all measures to prevent enforcement of the court judgment against Chevron.
This is an egregious and apparently unprecedented decision. These arbitration panels, convened under investment treaties, are supposed to decide whether a government has treated a foreign investor fairly – usually in the context of a state expropriation of assets, for example. Never before has such a panel, which is made up of private lawyers who act as arbitrators in a lucrative side business, attempted to reach into a country’s judicial system and order the domestic courts around.
The worst aspect of the new award is that it completely fails to take into consideration the rights of the Lago Agrio plaintiffs, who continue to suffer from the toxic contamination. Until the judgment is enforced, the contamination won’t be cleaned up. Chevron is claiming that it was mistreated by the Ecuadorian government in the Lago Agrio lawsuit, but this award doesn’t affect the rights of the Ecuadorian government; it only affects the rights of the victims themselves.
This is an extremely troubling development in investment arbitrations.
Update: According to the Lago Agrio plaintiffs’ lawyers, the Ecuadorian courts have put due process and human rights above the investment treaty arbitration. Today the judgment against Chevron was certified by the court, which specifically rejected the notion that the investment treaty could override Ecuador’s human rights obligations. A rough translation of part of the court’s order:
[T]he American Convention on Human Rights, signed at the Specialized Conference on Human Rights, Article 29, concerning Rules of Interpretation, tells us that nothing in this Convention shall be construed to permit any person (such as Chevron Corp. or the Arbitral Tribunal) to suppress the enjoyment or exercise of the rights and freedoms recognized in the Convention, precluding other rights or guarantees that are inherent in the human personality or derived from representative democracy as a form of government (Art. 29) and that no restrictions may apply except in accordance with laws “enacted for reasons of general interest and in accordance with the purpose for which such restrictions have been established.” Thus, given that Ecuador is part of this Convention, we face a binding and mandatory rule, and recognizing that the award is based on international standards created for the purpose of protecting investments, we find no place to enforce the arbitration award beyond our prevailing human rights obligations.
This may prove to be a landmark ruling on the respective authority of human rights law and investment treaty law.