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Cases & Deals

September 7, 2018

Tribunal Rules That $9.5B Judgment Against Chevron Was Fraudulent

King & Spalding successfully represented Chevron and its indirect subsidiary, Texaco Petroleum Company, in an international arbitration against the Republic of Ecuador administered by the Permanent Court of Arbitration in The Hague.  In a complete victory for our clients, the tribunal held that the Republic of Ecuador violated its obligations under the U.S.-Ecuador bilateral investment treaty, settlement and release agreements and international law and committed a denial of justice under customary international law.

The tribunal unanimously found that a US$9.5 billion judgment rendered against Chevron in Lago Agrio, Ecuador in 2011 was procured through fraud, bribery and corruption and was based on environmental claims that the Republic of Ecuador had previously settled and released. The tribunal concluded that the fraudulent Ecuadorian judgment “violates international public policy” and “should not be recognised or enforced by the courts of other States.”

The tribunal found that the Ecuadorian judge purported to have drafted the Lago Agrio judgment did not in fact draft the judgment but rather, “in return for his promised reward, allowed certain of the Lago Agrio Plaintiffs’ representatives, corruptly, to ‘ghostwrite’ at least material parts of the Lago Agrio Judgment.” The tribunal described this conduct as “grossly improper by any moral, professional and legal standards” finding that “judicial bribery must rank as one of the more serious cases of corruption.”

The tribunal’s award orders Ecuador to take immediate steps to remedy its internationally wrongful conduct, including rendering the US$9.5 billion judgment unenforceable, precluding enforcement of the judgment, and ensuring that Chevron has no liability for the judgment. It also orders Ecuador to abstain from receiving any proceeds from the fraudulent judgment. Finally, the award holds Ecuador liable for any damages to Chevron should the judgment ever be enforced anywhere in the world.