Chevron Hides Behind Legal Fiction; Ecuador Fight Far From Over

Supporters of the heroic 20-year effort to hold Chevron accountable for its indisputable toxic dumping and destruction in Ecuador should not despair over recent court rulings in Argentina and Canada. The fight is far from over.
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Supporters of the heroic 20-year effort to hold Chevron accountable for its indisputable toxic dumping and destruction of the Amazon rainforest in Ecuador should not despair over recent court rulings that have slowed the seizing of the oil giant's assets in Argentina and Canada.

The fight is far from over.

First and foremost, the evidence and the science are on the Ecuadorians' side. Texaco, now owned by Chevron, dumped 16 billion gallons of toxic water into streams from the early 1970s until 1992, harming the environment and the people who used them for drinking water, cooking and cleaning. Texaco never tried to prevent this from happening, never cleaned up the contamination or compensated victims. That is a fact even Chevron does not deny.

Secondly, court appeals are underway in both countries, and the chances of winning them are excellent.

In Toronto, in an unusual decision without any precedent in Canadian law, a court found that because Chevron operates only through subsidiaries, the case must be stayed. The vast majority of Chevron's assets lie with its subsidiaries, not in its corporate shell. Meanwhile, a recent Argentine court decision to lift a freeze on Chevron's assets will have little impact on a parallel judgment recognition action, which is proceeding. That action will allow the rainforest communities to seize up to $3.5 billion of assets if successful.

Chevron has roughly another $15 billion in assets in Canada and another $4 billion in Brazil that are being targeted in court actions based on the valid Ecuador judgment. That's real risk no matter how Chevron's management team -- including its conflicted CEO, John Watson -- try to spin it.

Under oath in court, where company officials are obligated to tell the truth, a Chevron comptroller recently claimed such asset seizure actions will cause the oil giant "irreparable harm" and will disrupt its global business operations. Chevron also operates via its subsidiaries in dozens of countries around the world that could be targeted.

There also is a deeper reality to the reasoning behind the recent Canada and Argentina decisions that should disturb concerned citizens everywhere. In effect, based on legal technicalities, these courts are flirting with a total grant of impunity to human rights violators like Chevron.

Let me explain.

In Canada, a trial judge ruled that Chevron is a separate company from its local subsidiary even though that subsidiary is 100 percent owned by Chevron. Yet Chevron itself operates only through its many subsidiaries around the world. The company does not even own its own building housing its headquarters near San Francisco.

It was also Chevron officials (operating under the Texaco brand) who made the decision to deliberately dump billions of gallons of toxic waste in Ecuador, decimating indigenous groups and farmer communities. Chevron itself stripped almost all of its assets from Ecuador in recent years in anticipation of losing the case. It then refused to pay the judgment.

The upshot is this: when Chevron wants to increase its profits by dumping toxic waste, it can deliver a high level of fake value to its shareholders by externalizing the costs of pollution to impoverished local residents. But when it comes time to pay the hefty tab for that dumping, it plays the corporate shell game and hides behind its subsidiaries.

That's Chevron's conception of impunity.

The cultural mindset that it produces in a large oil company leads to excessive risk-taking and arrogance. And that explains why Chevron always seems to be dealing with a massive number of environmental problems around the world, including in the U.S. where it is currently under criminal investigation for a recent refinery fire in Richmond, CA.

Courts in most countries would not allow Chevron to get away with this brazen mockery of the rule of the law. Many of Chevron's own shareholders are also disturbed enough to have sternly rebuked Watson for mishandling the fallout from the Ecuador judgment.

Knowing it cannot win the Ecuador battle on the merits, Chevron also cleverly tries to exercise improper political influence over governments and courts. In Argentina, after the freeze order became a viable possibility, Chevron suddenly decided to "invest" $1.5 billion in a large gas field with the local state-owned oil company, YPF.

Chevron also took out full-page advertisements in Argentine newspapers claiming impending national doom if the Ecuador judgment were to be enforced. Its local representative publicly announced Chevron would only follow through on its investment if the freeze order was lifted.

Suddenly, after some furious behind the scenes lobbying, Argentina's Attorney General recommended the freeze order be lifted. Voila!

We think Canada's appellate court will see Chevron's rope-a-dope for what it is: a sneaky attempt to play the corporate shell game to escape justice. Ultimately, we feel Argentina's courts will see it the same way.

Chevron should not take too much comfort from these latest rulings.

The evidence against Chevron for committing a horrific level of environmental contamination in Ecuador is strong. It has been documented not only by the company's internal files and a 220,000-page trial record, but also by independent journalists the world over who have visited the disaster zone.

Only in an unjust world can a corporation get away with murder by hiding behind legal fictions created by bean counters. As this battle rages on, everybody concerned about accountability for corporate human rights abusers should take note and demand that judges stand up for the fundamental principle that polluter pays.


Disclosure: I work pro-bono for a group of indigenous Ecuadorians and their U.S. legal adviser, Steven Donziger, to help hold Chevron accountable for one of the world's largest environmental disasters in the Amazon rainforest. From May 2008 to March 2013, I was paid by Donziger to represent the Ecuadorians as their U.S. media spokesperson.

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