The case of Chevron Corporation in Ecuador has already remade the U.S. law of discovery in aid of foreign suits. As the tribespeople who won a multibillion dollar verdict against Chevron open ever more enforcement fronts, the world’s most intensely-litigated case promises also to revamp the law on collecting foreign judgments around the world. Following their first enforcement efforts in Canada and Brazil, the indigenous plaintiffs moved in August against residual assets in Ecuador. On Nov. 1 they moved to freeze Chevron’s assets in Argentina, and they soon plan to do the same in Colombia. On Nov. 7 they obtained an initial freezing order in Argentina. So far, the plaintiffs say, they’ve targeted assets worth more than half of the $19 billion judgment they won in Ecuador. More actions are under being weighed in Europe, Asia, and Australasia. The plaintiffs have certainly had no trouble hiring top-shelf lawyers despite international arbitrators ordering Ecuador not to finalize its opinion, and despite the conclusion of Manhattan federal district judge Lewis Kaplan that there is substantial evidence of fraud by the plaintiffs. (See here and here.) Remarkably, in each of their first three forays outside Ecuador, the tribespeople have hired the star name partner from a firm rated by Chambers and Partners as among the top three or four litigation firms in its nation, including Lenczner Slaght in Canada, Sergio Bermudes Advogados in Brazil, and Bruchou Fernandez Madero & Lombardi in Argentina. The plaintiffs see this as legitimation. Chevron spokesperson Kent Robertson responds with an analogy to the well-represented Facebook claimant recently charged by the U.S. with fraud: “Paul Ceglia had no trouble finding any number of lawyers but look at him now. Our view is that any enforcement action is an extension of the fraud.” (The plaintiffs deny all fraud claims and make counter-allegations of fraud that have not been adjudicated.) The plaintiffs’ Argentine lawyer, Enrique Bruchou, said that his enforcement action aims to send foreign investors a signal that they cannot apply different environmental standards at home and in vulnerable communities overseas. Bruchou argued that Argentine and Colombian judges will act swiftly under the 1979 Inter-American Conventions on Execution of Preventive Measures and Extraterritorial Validity of Foreign Judgments. He suggested that Chevron can only challenge the attachments in Ecuadorian court, and responded sarcastically to a question about Chevron’s recourse. “As to the rights of defense,” Bruchou said, “I believe they’ve had the right to defend for 20 years now.” An independent expert consulted by The Global Lawyer, Alejandro Garro of Columbia Law School, said that these treaties have been very seldom used, but he believed that the attachments could be appealed within Argentina and Colombia, and that the argument of fraud should always be available. Garro also opined that the $19 billion judgment should not be taken as final under the preventive measures treaty while an appeal is pending in Ecuador. Given the stakes and the history of the case, Garro predicted that it would not move quickly in any enforcing state, whatever treaty may be in place. And while Argentina’s courts are not known for their independence, Garro said, it was not clear where the sympathies of the executive branch would lie. The move to enforce in Ecuador is intriguing because plaintiffs are going after the $96.3 million arbitral award that Ecuador already owes to Chevron. If Ecuador would like to effectively fund the plaintiffs’ litigation, it could simply hand over the funds. However, Chevron is seeking to confirm its award in Washington, D.C., and warns that Ecuador will pay twice if it dares to pay the plaintiffs. In any event, Ecuador seems not to be playing ball. It opposes the plaintiffs’ attachment in Ecuador on the grounds that it would be premature before the Dutch courts rule on Ecuador’s challenge to the arbitral award. Meanwhile, the first enforcement fights are inching forward. While the papers in Brazil have yet to be successfully served, the Ontario court is hearing Chevron’s motion to dismiss for lack of jurisdiction at the end of this month. Chevron’s first defense to enforcement–in Canada as everywhere–is the principle of corporate separateness. Plaintiffs’ lawyers will likely argue at the Ontario hearing that Chevron’s corporate veil should be pierced because the parent extensively controls its subsidiaries, owns no direct assets, and pays dividends from its subsidiaries’ earnings. Just as opponents of broad discovery fear that Chevron’s section 1782 actions will hurt their cause, the proponents of corporate accountability may fear that Chevron’s enforcement defense will undermine their attack on the citadel of corporate separateness. Thanks to the scale of the litigation, Chevron will leave a heavy mark on many areas of jurisprudence. Whether it will make good law remains to be seen. Of course, no part of this tangled case may be analyzed in isolation. This fall, international arbitrators are trying Chevron’s claim that Ecuador released it from all liability when Chevron’s predecessor left the country. (Ecuador and the plaintiffs have a different interpretation of the exit agreements). Given the arbitrators’ receptivity to Chevron’s fraud claims, it seems likely that the tribunal will rule that Ecuador is contractually obliged to reimburse Chevron for any damages collected by the plaintiffs. How this triangle would play out is anyone’s guess. Would Ecuador be joined to the enforcement actions? If plaintiffs collect from Chevron, would Ecuador try to stonewall the arbitral award? Or would Ecuador’s National Court of Justice make it all go away by vacating the original judgment on appeal? Next fall, Judge Kaplan has scheduled the New York trial of Chevron’s RICO and fraud claims against the plaintiffs and some of their advisers. Yes, on the issue of fraud, Chevron already has copious evidence, and the benefit of arbitral orders and U.S. discovery findings. But the fraud evidence seems to have been forgotten in the crush of filings, the discovery findings were preliminary, and the authority of arbitrators is not universally accepted. Could any enforcing court rule for plaintiffs if a final verdict by a U.S. court corroborates fraud after giving a full hearing to the plaintiffs themselves? Chevron thinks not.
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