UPDATE 2-U.S. judge rules for Chevron in Ecuador case

* Issues in long-running case go to international tribunal

* Chevron wins round in lawsuit over pollution allegations

* Ecuador government tried to stop arbitration claim
(Adds Chevron, plaintiff reaction; background, byline)

By Grant McCool

NEW YORK, March 11 (BestGrowthStock) – Chevron Corp (CVX.N: ) may
pursue an international arbitration claim over environmental
pollution allegations in Ecuador, a judge ruled on Thursday,
part of a long-running case that carries a potential $27
billion liability for the second-largest U.S. oil company.

The government of Ecuador had asked Manhattan federal court
Judge Leonard Sand to prevent Chevron from taking the
17-year-old case to arbitration under the U.S.-Ecuador
Bilateral Investment Treaty.

U.S. courts had previously sent the litigation to be heard
in Ecuador, where Chevron said last year that it had uncovered
a $3 million bribery plot linked to the case. A lawyer for the
government said Thursday’s ruling does not halt the litigation
in the South American country, where a court has yet to render
a judgment.

Chevron has complained of government interference in the
case, in which indigenous communities accused Texaco, bought by
Chevron in 2001, of damaging their health and the Amazon rain
forest and causing river pollution while operating petroleum
facilities in the region.

The original lawsuit was brought by farmers and residents
in 1993. One of their lawyers, Jonathan Abady, said the judge’s
decision means “delay but not defeat.”

Sand said it would be up to the arbitrators to determine
the timing and parameters of any proceeding by a tribunal,
whose members have been selected but which has not yet held a
hearing.

“The court finds that there is at least one arbitrable issue in Chevron’s petition,” Sand said in his ruling after
hearing hours of oral arguments on Wednesday and Thursday.

Last September, Chevron made the claim in U.S. District
Court for arbitration under the treaty, opening a new defense
of the potential $27 billion liability lawsuit. Three months
later, the government of Ecuador asked the court in New York to
stop Chevron from pursuing a claim that the company had been
denied due process rights in Ecuador.

“Chevron is pleased that Judge Sand denied a stay and the
Bilateral Investment Treaty arbitration can proceed,” Chevron
general counsel Hew Pate said outside the courtroom. “Chevron
is seeking to hold Ecuador and its government oil company to
the promise it made to complete the environmental cleanup, a
promise that Texaco made to clean up and did clean up under
government supervision.”

A spokeswoman for the Amazon rain forest communities who
sued 17 years ago said they believe the cleanup was a sham.

Lawyer Abady argued in court that Chevron’s notice for
arbitration “is a wolf in sheep’s clothing to devour the
litigation.” He said the communities would have no standing or
rights before an arbitration panel.

Chevron cited violations by Ecuador under the U.S.-Ecuador
Bilateral Investment Treaty. The company said Ecuador breached
the treaty by not forcing an Ecuadorean court to dismiss the
environmental lawsuit.

Chevron lawyer Randy Mastro argued that the government and
the plaintiffs were “acting in concert” in their hopes of
receiving a multibillion-dollar judgment.

“We need a level playing field … to decide our rights
vis-a-vis the Republic of Ecuador,” Mastro told the judge.

The cases are Republic of Ecuador v Chevron Corp and Texaco
Petroleum Company, U.S. District Court for the Southern
District of New York, No. 09-9958 and Yaiguaje et al v Chevron
Corp and Texaco, No. 10-0316.

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(Reporting by Grant McCool, editing by Maureen Bavdek and
Gerald E. McCormick)

UPDATE 2-U.S. judge rules for Chevron in Ecuador case