Tribunal Finds Ecuador in Breach of its Obligations Under International Law and the Bilateral Investment Treaty with the United States

Fri Feb 8, 2013 9:00am EST

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Permanent Court of Arbitration Panel to Determine Whether Chevron Should Be
Compensated for Ecuador`s failure to Prevent Enforcement of Lago Agrio Judgment
SAN RAMON, Calif.--(Business Wire)--
An international arbitration tribunal issued an award yesterday finding that the
Republic of Ecuador has violated the Tribunal`s prior Interim Awards authorized
under international law and a treaty between the United States and Ecuador by
not preventing the attempted enforcement of a $19 billion judgment against
Chevron Corp. (NYSE: CVX). In prior rulings, the Tribunal put the Republic on
notice that if Chevron`s arbitration ultimately prevails, "any loss arising from
the enforcement of (the judgment) may be losses for which the (Republic) would
be responsible to (Chevron) under international law." 

Convened under the authority of the U.S.-Ecuador Bilateral Investment Treaty
(the BIT) and administered by the Permanent Court of Arbitration at The Hague,
the Tribunal found Ecuador in breach of the Tribunal`s prior rulings and ordered
the Republic to explain why it should not be ordered to compensate Chevron for
all harm resulting from the plaintiffs` attempts to enforce a judgment resulting
from an environmental trial against the company in Lago Agrio, Ecuador. 

Almost one year ago, the Tribunal issued a Second Interim Award ordering the
Republic of Ecuador-and all of its branches, including the judiciary-to take all
necessary actions to prevent enforcement and recognition of the Lago Agrio
judgment, both inside and outside of Ecuador. That award expanded upon a prior
award requiring Ecuador to "take all measures at its disposal to suspend or
cause to be suspended the enforcement or recognition within and without Ecuador
of any judgment." 

"The Tribunal`s decision confirms that the enforcement actions being pursued
against Chevron in Argentina, Brazil, and Canada fly in the face of
international law," said Hewitt Pate, Chevron vice president and general
counsel. "Yet Ecuador has consistently aligned itself with American trial
lawyers who have used corrupt courts to advance an unprecedented fraud. It is
not too late for the Republic to reverse course, declare the Lago Agrio judgment
illegitimate, and address the real challenges facing its citizens." 

Despite the Tribunal`s Awards, the Republic of Ecuador has facilitated the
plaintiffs` pursuit of enforcement in Argentina, Brazil, and Canada. These
actions are the result of Ecuador`s failure to meet its international law and
treaty obligations. 

Chevron`s arbitration claim stems from the government of Ecuador`s interference
in the ongoing environmental lawsuit against the company in Ecuador and its
courts` failure to administer justice in a trial that has been marred by fraud.
Additionally, Chevron maintains that the government of Ecuador has failed to
uphold prior settlement and release agreements that the government of Ecuador
entered into with Texaco Petroleum Company (now a Chevron subsidiary) when the
consortium between Texaco Petroleum and Petroecuador was terminated. 

In its ruling, the Tribunal found that "Neither disagreement with the Tribunal`s
orders and awards on interim measures nor constraints under Ecuadorian law can
excuse the failure of the (Republic), through any of its branches or organs, to
fulfil its obligations under international law imposed by the Treaty, the
UNCITRAL Rules and the Tribunal`s orders and awards thereunder, particularly the
First and Second Interim Awards on Interim Measures." 

In August 2011, a different international arbitration tribunal convened under
the BIT awarded Chevron and Texaco Petroleum $96 million, plus interest, in a
claim against the Republic of Ecuador related to past oil operations. The
Tribunal found that Ecuador's courts violated the BIT and international law
through their decade-long delays in ruling on certain commercial disputes
between Texaco Petroleum and the Ecuadorian government. A court in the
Netherlands has upheld the award and Ecuador has filed a second appeal. 

Chevron is one of the world`s leading integrated energy companies, with
subsidiaries that conduct business worldwide. The company is involved in
virtually every facet of the energy industry. Chevron explores for, produces and
transports crude oil and natural gas; refines, markets and distributes
transportation fuels and lubricants; manufactures and sells petrochemical
products; generates power and produces geothermal energy; provides energy
efficiency solutions; and develops the energy resources of the future, including
biofuels. Chevron is based in San Ramon, Calif. More information about Chevron
is available at www.chevron.com.

Chevron Corp.
Kent Robertson, San Ramon, California, +1-925-790-3819 

Copyright Business Wire 2013

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