FACTBOX-Chevron’s $27 bln Ecuador damages case

By Hugh Bronstein

LAGO AGRIO, Ecuador, Aug 24 (BestGrowthStock) – U.S.-based Chevron
Corp (CVX.N: ) faces a $27 billion environmental damages lawsuit
in Ecuador, a case that has already dragged on for years and
could last many more if it gets bogged down in appeals.
[ID:nN23244474]

The amount in requested damages, assessed by an Ecuadorean
court appointee, makes it the biggest case of its kind.

An initial decision is expected in the months ahead, though
there is no fixed timetable for a ruling.

If the judge hearing the suit in the provincial court of
Sucumbios rules against Chevron, the company vows to appeal
rather than pay out what would be an unprecedented award.

Investors and the world petroleum industry are watching the
case closely to see what precedent could be set for other
mega-lawsuits against oil companies.

Here are some facts on the case:

THE ACCUSATIONS

Residents of Ecuador’s Amazon region say that Texaco, which
was bought by Chevron in 2001, wrecked wide areas of the jungle
with faulty drilling practices in the 1970s and 1980s.

They say the company also dumped contaminated water in the
area, creating a health hazard. Rather than cleaning up oil
waste pits, plaintiffs say the company left them open or simply
spread dirt on top of the areas, allowing contamination to seep
into the ground and ruin the local water supply.

President Rafael Correa, who has a troubled relationship
with foreign investors, has said he hopes the plaintiffs win.

THE DEFENSE

Chevron denies the accusations.

It says that Texaco did not pollute the jungle and that it
properly cleaned up all the pits that it was responsible for.

If there is any pollution in the area, the company says it
is the responsibility of the Ecuadorean state, which in 1998
released Texaco of liability, a legal point disputed by the
plaintiffs.

HISTORY

Texaco first struck oil in Ecuador in 1967 and started
pumping in 1972 as part of a consortium with the state. The
company operated in Ecuador until 1990. Soon after, it turned
its share of the consortium over to the Ecuadorean government.

State oil company Petroecuador has continued drilling in
the area over the last 20 years since Texaco pulled out.

The legal saga began in 1993 when a suit was filed against
Texaco in a U.S. federal court. The case was tossed out on
appeal in 2002 on condition that Texaco agree to Ecuadorean
jurisdiction if sued there. A suit was filed in Lago Agrio the
next year, this time against new owner Chevron.

The case has been filled with intrigue.

A previous judge stepped down from hearing the suit last
year after he was recorded discussing the case with a couple of
shadowy figures who video-taped him with secret cameras stuck
inside a wristwatch and a pen.

One of the men who taped the meeting, a former Chevron
contractor, was whisked out of Ecuador by the company.

GOING FORWARD

If the judge rules against the company — as is widely
expected in political, diplomatic and industry circles — the
first level of appeal available to Chevron would be the full
provincial court in Sucumbios province, which has three judges.

If that panel upholds the ruling, Chevron’s next stop would
be Ecuador’s Supreme Court.

Chevron says Correa has interfered in the case by publicly
siding with the plaintiffs. The plaintiffs say Correa has done
nothing more than U.S. President Barack Obama has done to
defend victims of the BP oil spill in the Gulf of Mexico.

The company also says it has been robbed of its right to a
fair trial in part by Ecuadorean geologist Richard Cabrera, a
court-appointed expert who came up with the $27 billion damages
figure. Chevron says he colluded with the plaintiffs’ lawyers
and technical consultants to develop a fraudulent assessment.

The plaintiffs say that Texaco and Chevron submitted
fraudulent testing samples to U.S. and Ecuadorean courts, and
that the company’s criticism of Cabrera is an attempt to
distract attention from its own misconduct.

Chevron’s complaints could end up before Ecuador’s
Constitutional Court as part of the appeals process.

The plaintiffs would meanwhile likely seek enforcement by
going to courts around the world where Chevron has seizable
assets in a bid to collect damages, widening the legal battle.

MULTIPLE CASES

The case in Lago Agrio has spawned an array of legal
actions in the United States and Europe.

Chevron last year filed an arbitration complaint in The
Hague saying that Ecuador violated an investment treaty through
government interference in the case. The complaint also says
Ecuador failed to live up to contracts signed with Texaco
Petroleum to clean up its share of oil-impacted areas.

Chevron this year filed nine petitions in federal courts
across the United States in which it claims it has discovered
evidence of misconduct and fraud by the plaintiffs’ lawyers.

Attorneys for the plaintiffs dismiss the allegation,
charging that Chevron is “forum shopping” and wants to distract
attention from evidence against it of illegal contamination.
(Editing by Kieran Murray)

FACTBOX-Chevron’s $27 bln Ecuador damages case