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« Contrary to Obama’s Claim, the Three U.S. Free Trade Agreements Passed a Year Ago Today Have not Boosted U.S. Exports | Main | Tribunal Slams Ecuador with Largest Ever Investor-State Penalty »

October 16, 2012

U.S. Supreme Court Refuses to Hear Chevron's Case to Block $18.2 Billion Penalty for Amazon Pollution

In the most recent development in the historic case against Chevron’s appalling pollution in the Amazon, the U.S. Supreme Court refused to hear Chevron’s appeal of a lower court ruling last week.  In so doing, the Supreme Court produced yet another denial of the company’s attempt to block an $18.2 billion dollar judgment against the company in Ecuador. Chevron is trying to avoid paying the judgment that resulted from a successful lawsuit filed in Ecuador by residents of Lago Agrio in the Ecuadorian Amazon for massive contamination of the region between 1964 and 1992.

Earlier this year, the U.S. Second Circuit Court of Appeals threw out a ruling by a federal judge in New York, which had temporarily blocked enforcement of the judgment.  The appellate court asserted that U.S. law does not permit “disappointed litigants in foreign cases” to ask the court to “restrain efforts to enforce those foreign judgments against them, or to preempt the courts of other countries from making their own decisions about the enforceability of such judgments.”  The appellate court chastised the lower court’s attempt to block the Ecuadorean judgment, saying the move “risks disrespecting the legal system” of Ecuador and wrongly presumes that a U.S. court can act as “the definitive international arbiter of the fairness and integrity of the world’s legal systems.”  The U.S. Supreme Court’s decision to not hear Chevron’s appeal suggests that they did not see a compelling reason to question the appellate court’s reasoning.  

Despite having lost on the merits in the highest courts in Ecuador, and having been continually thwarted by U.S. courts in its attempts to halt enforcement, Chevron is not finished with its threat of a “lifetime of appellate and collateral litigation” to avoid complying with the judgment. The company is using the extreme foreign investor rights in the U.S.-Ecuador Bilateral Investment Treaty (BIT) to continue its campaign to evade justice via an "investor-state" case to be decided by an ad hoc tribunal of three private lawyers.

This is not the only instance of corporations using international trade and investment pacts to bypass the justice system of sovereign nations. In August, the Australian High Court (equivalent to the U.S. Supreme Court) upheld the country’s landmark “plain packaging” laws against an attack from Big Tobacco. Despite this, Australia’s landmark tobacco control law remains under threat as Big Tobacco company Philip Morris is challenging the law under the Hong Kong-Australia BIT. The U.S. company incorporated a subsidiary in Hong Kong in order to launch the attack.

The details of the cases are different - the Australian High Court ruled to uphold its law on the merits of the case, while the U.S. Supreme Court refused to hear Chevron’s appeal of a lower court ruling.  However, in both instances, deep-pocketed corporations are using trade and investment pacts to bypass and belittle the highest courts, even in countries with highly respected and independent judiciaries.

Under the investor-state dispute settlement system enshrined in U.S. Free Trade Agreements (FTAs) and BITs, private tribunals have awarded more than $2.5 billion in taxpayer compensation to corporations to compensate them for “lost profits.”  Despite such damage, these same rules are being expanded through the Trans-Pacific Partnership (TPP). A leaked investment chapter from the TPP reveals that the pact would require all TPP countries, including the United States, to allow foreign investors to launch investor-state attacks on their governments, to be decided by unaccountable foreign tribunals. Understandably, Australia has so far refused to be subjected to the investor-state dispute settlement in the TPP, but the U.S. is still pushing TPP negotiating countries to put investor "rights" before their own public interests.

The conclusion of the Chevron case is being closely monitored, and will have consequences beyond Lago Agrio. Reuters reports that “oil companies are watching the case closely because it may affect other cases accusing companies of polluting the areas where they operate.” If Chevron is successful in its attempts to avoid paying damages for egregious pollution, other companies will have affirmation that they have a chance to circumvent responsibility for environmental destruction by using the extreme investor-state system. 

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