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From the Editors: Corporate Responsibility on Trial
The oil industry goes on trial in a US Court of Appeals in New York today (Monday).
On the table will be a class-action suit on behalf of some 30,000 Ecuadorians, claiming $1.5 billion from Texaco for some of the worst pollution ever committed in the Amazon.
In many respects the case goes to the heart of the debate currently raging over globalization and corporate responsibility. Texaco went into the Amazon like a twentieth century conquistador. It struck gold in the form of oil and exploited it with utter ruthlessness for 20 years before pulling out, leaving a trail of destruction behind.
Instead of accepting responsibility for the damage, Texaco has done everything possible to shift the blame and wriggle off the hook. First its lawyers argued that the company broke no laws in Ecuador and merely followed the terms of its agreement with the government. This failed to intimidate the Ecuadorians, who sued Texaco in a U.S. court. For the last nine years, Texaco has been maneuvering to get the case returned to Ecuador, knowing that Ecuador's frail legal system could not possibly handle a case so complex.
No one disputes that environmental protection was virtually nonexistent in Ecuador in the 1970s and 1980s; the first environmental impact assessments were only introduced in Latin America in the 1990s. It is also true that the government leased out the land for exploitation. Even so, the terms of the lease did not give companies a free hand to pollute.
The real issue is corporate responsibility. For most of the time that Texaco was in Ecuador, the government was unrepresentative and corrupt. Local people, whose forest was leveled and whose water was polluted, were completely unaware of what oil exploration would do to them. This was a fabulous environment for a robber baron whose only interest was to make money.
The issue before the U.S. Court of Appeals is not simply a technical legal debate about laws that did not exist. It is about the international corporations' concern for the welfare of the societies in which they operate. It is about their willingness to be accountable -- not just to their board members and stockholders, but those most directly affected by their operations.
Such issues have been widely discussed in the United States in the wake of the Enron scandal. It is thoroughly dismaying to see that another 'star' corporate performer has conducted itself so reprehensibly in a far-off country where there is much less oversight.
Texaco has become a poster child for all that is wrong with globalization. Its operations in Ecuador will be discussed in law classes for years to come -- as a case study of recklessness.
Whatever good has returned to Ecuador from oil sales -- and as we argued in the earlier issue this cannot be entirely discounted -- it is dwarfed by the fact that this mighty company went into a fragile land and tore it apart. What a legacy!
The good thing about the Texaco debacle is that it has toughened the laws, put the fear of God into oil companies that followed, and radicalized Ecuador's indigenous movement to the point where they will not easily be duped. Oil companies now enter Ecuador apologetically, explaining that 'we are not like Texaco.'
But that is little consolation to those whose lands were destroyed. Nor does it minimize the importance of the case that is being heard today. If the ruling goes against the plaintiffs, it will give international corporations a free hand to act with impunity and make a mockery of 'corporate responsibility.'
Peter Lippman examines another critical legal question in the fifth issue of this series. As the last four issues have shown, Ecuador's indigenous people no longer submit without protest, as they did when Texaco first began exploring for oil. Thanks largely to their experience with oil, they now have the power to bring down governments.
But they still face a legal dilemma. Under Ecuador's constitution and international law, indigenous people enjoy the right to be consulted about decisions that affect them. They also have the right to decide their own model of development. This is laid out clearly in Convention 169 of the International Labor Organization (ILO), which Ecuador ratified in 1998.
The problem is that under the constitution, the actual resources -- including oil -- still belong to the state. If the government decides to auction off their land to oil companies, local indigenous residents must certainly be consulted. But does that mean they actually have the right to veto exploration, any more than a neighborhood that is facing forcible eviction to make way for a motorway?
We may soon have an answer. In a landmark case that has set lawyers scurrying in all directions, the Inter-American Court of Human Rights recently issued a ruling on behalf of a small indigenous group in Nicaragua that could provide some badly needed legal support for beleaguered indigenous people throughout Latin America. It will definitely put more pressure on governments not to let companies like Texaco destroy their precious resources and then move onto the next hunting ground. The case is examined briefly below.
Day of Reckoning for Texaco as Pollution Lawsuit Moves to US Court of Appeals
In a landmark case that could determine whether international oil companies are free to pollute developing countries and then leave without paying for the clean-up bill, the Second US Circuit Court of Appeals will today hear a case that seeks $1.5 billion from Chevron-Texaco for the damage caused by Texaco's operations in Ecuador. (Texaco merged with Chevron last fall.)
The case is being brought by lawyers acting on behalf of 30,000 Ecuadorians under the 1789 Alien Tort Claims Act (ATCA), which allows crimes that have been committed on foreign soil to be prosecuted in a U.S. court if either the victim or the defendant is located in the United States. The defendants argue that as a U.S.-based company, Texaco's policy was determined at the company's home office in White Plains, New York.
The case was originally brought against Texaco in 1993 and has been through several dismissals, appeals, and reversals. Over the last nine years Texaco has stalled the case by trying to have it sent back to Ecuador, where it would stand little chance of success.
Observers expect that today's hearing will represent the final, decisive stage of this long process, because the Ecuadorian government has made it clear that the case would not return to Ecuador if it were rejected in this country. Cristobal Bonifaz, the attorney who represents the plaintiffs, told On the Record that the government's position puts more pressure on the Court to find on behalf of his clients because the appellate judges have already acknowledged that the case must be heard.
Mr. Bonifaz and others are deeply concerned that if the case is lost in the United States, it will set a legal precedent that appears to allow U.S. companies absolute freedom to despoil the rainforests. Whatever the result, the case has galvanized grassroots opposition to oil development in Ecuador and put the spotlight squarely on the damage caused by oil exploration.
The background to the case is examined below. Any future developments will be reported in future issues of this series of 'On the Record.'
Legal Victory for Indigenous Rights in Nicaragua Could Open New Avenues for Activists in Ecuador
A landmark decision by the Inter-American Court of Human Rights late last year has affirmed that indigenous peoples have collective rights not just to the land they occupy but also to its resources, based on their traditional ownership. This has raised hopes that indigenous activists in countries like Ecuador could exploit the judgment as they struggle to oppose predatory oil corporations.
On September 17, 2001, the Inter-American Court, found in favor of a small Mayagna (Sumo) community of Awas Tingni, located on the forested area of Nicaragua's Caribbean coastal regional. The justices declared that the community's rights to property and judicial protection had been violated by the Nicaraguan government when it granted concessions to a Korean lumber company to log on the community's traditional land without even consulting with the community, let alone obtaining its consent. The decision is widely seen as affirming that indigenous people have a collective right to their lands, resources, and environment.
The ruling is also notable because it is the first binding decision that holds that indigenous peoples have communal property rights to land and natural resources based upon traditional patterns of use and occupation (Para. 149), and that 'as a result of customary practices, possession of the land should suffice for indigenous communities lacking real title to property of the land to obtain official recognition of that property...' (Para. 151). Of equal relevance to Ecuador is the fact that the Court's judgment requires the state to adopt legislative, administrative, or other measures to create an effective mechanism for delimitation, demarcation, and titling of the property of indigenous communities. This portion of the judgment also requires the government of Nicaragua to abstain from granting any concessions for natural resource extraction and to take action to prevent third parties from doing so in the territories in dispute until these measures are implemented.
The bases for the Court's ruling are Articles 1, 2, 21, and 25 of the American Convention on Human Rights. Ecuador is a state party to the convention and has accepted the jurisdiction of the Inter-American Court as binding upon it. The decision could be a useful framework for national legislation to protect indigenous territories and provide solid precedent if the communities pursue litigation.
Legal Battles
Contempt for the Law
From the day that Texaco started drilling for oil in Ecuador, there were laws to protect the Amazon. But they were weak and badly enforced.
The first law, passed in 1971, simply required oil companies to prevent pollution. Texaco's contract required it to 'prevent contamination of water, air, and soil.' But the 1971 law contained no specific standards. As such, it was practically an invitation to pollute.
A 1976 law was passed to control pollution, but regulations interpreting this law were not adopted for 13 more years, and then they only applied to water quality. In 1981, a new law established environmentally protected zones. But the oil companies still maintained that the law permitted the extraction of subsoil minerals.
Throughout these years, courts and governmental agencies took the side of the companies. Ecuador's courts decided that the companies did indeed have a right to extract subsoil minerals from protected areas. The main environmental protection agency was placed under the Ministry of Energy and Mines, where it received little support. In fact, the agency's staff was reduced to the point where it was useless.
The Ecuadorian Congress established a committee to supervise the exploitation of resources in protected areas, but this failed to curtail oil development. The Ministry of Health and other implementing agencies also avoided the problem of pollution. The state-owned oil company Petroecuador formed an internal environmental unit, but it primarily acts as a public relations service.
Petroecuador proved to be as indifferent to the environment as foreign-owned companies. It acquired a 62.5 percent share of the Texaco consortium drilling in Ecuador in 1977. When Texaco departed from Ecuador in 1990, Petroecuador picked up where Texaco left off and continued to disregard the environment.
Stricter regulations were passed in 1992 that required re-injection of production water, lining of waste pits, and restricted access to new settlers, but these have not been enforced. A 1994 report from the Center for Economic and Social Rights (CESR) on pollution in the Oriente found that Petroecuador showed little interest in upgrading its facilities. [1]
In 1999, then-president Jamil Mahuad decreed that large sections of the rain forest would be protected from drilling, mining, and cutting of trees. But Mahuad was deposed in a coup the next year, and the practices resumed.
Ignoring the Right to Consultation
With the courts and government solidly in the companies' corner, the only hope for the environment lay with civil society. But the 1994 report from CESR found that ordinary people had no way of getting the information they would need to take their case to the Ecuadorian courts, and that the country's constitutional court has had little sympathy for their complaints.
This was in spite of the fact that on paper at least, the residents of the Amazon would seem to enjoy rights that give them protection against pollution and arguably even the power to veto the oil invasion.
These rights come partly from international laws, which Ecuador has ratified, and the Ecuadorian constitution.
Many international documents protect the right of all people to shelter, livelihood, and a safe environment. The 1976 International Covenant on Economic, Social, and Cultural Rights, ratified by Ecuador, declares that 'In no case may a people be deprived of its own means of subsistence,' and proclaims the 'right of everyone to the enjoyment of the highest attainable standard of physical and mental health.'
The UN Declaration on the Right to Development (1986) reaffirms the 'right of peoples to self-determination, by virtue of which they have the right ...to pursue their economic, social, and cultural development.'
Turning more specifically to environmental protection, the 1992 Rio Convention on Biological Diversity calls on signatory governments to conduct an environmental impact assessment for development projects and for this process to be open to public participation. The treaty calls for preservation of traditional practices and ways of life that are pertinent to the conservation of biodiversity.
In 1997 the Ecuadorian government sponsored a preparatory meeting to send recommendations to the 'Rio + 5' conference, concluding that Ecuador lacked legislation to promote public participation in evaluation of development projects. This legislation arrived the next year, with the new Constitution.
The Ecuadorian Constitution of 1998 protects the environment of the Amazon and explicitly safeguards the right of its inhabitants to consultation on decisions regarding the environment. Article 86 promises to protect the public's right to live in a healthy environment and to prevent contamination.
Article 84 guarantees the 'nontransferable ownership of communal lands, which will be inalienable and indivisible.' The same article specifically guarantees indigenous participation in the use and administration of nonrenewable resources and in the benefits resulting from exploitation of those resources, as well as indemnification for damages caused by that exploitation. And Article 88 guarantees community participation in state decisions that may affect the environment.
The ILO's 1989 Indigenous and Tribal Peoples Convention, known as ILO 169, was ratified by Ecuador in May 1998. This treaty reinforces Ecuador's Constitution by stating clearly that indigenous populations have the right to be consulted regarding administrative decisions that affect them, particularly when it comes to the use of natural resources. It specifies that 'the peoples concerned shall have the right to decide their own priorities for the process of development as it affects their lives, beliefs, institutions, and spiritual well-being.'
Article 15 of ILO 169 declares that where the state retains control over subsoil resources, governments must consult with affected populations to determine what impact exploitation of such resources may have. This is of critical relevance to Ecuador, because Article 247 of the Ecuadorian Constitution preserves the state's claim over subsoil resources, including oil. At the same time, however, the constitution requires that these resources will be exploited in the national interest.
Few countries in the world have such extensive provisions. On paper their intention is clear: indigenous people have a legal right to be consulted about any development of natural resources, like oil, in their territory. Whether or not that allows them to block any oil exploration is less clear, because the state retains ownership of subsoil resources.
Even so, there are legal safeguards. It is clearly understood that the government and the indigenous people should decide together whether any exploitation is in the national interest. If the government had made a good faith effort to engage the indigenous communities in such a dialogue, indigenous activists could have made the case that protecting the Amazon and its indigenous culture are not only in Ecuador's interest, but arguably more important to the country than oil. The problem is they were never given the chance. Oil has won out over everything -- including law and rights.
In the New York Courts
In 1993, attorneys representing 30,000 Ecuadorians filed a class-action lawsuit against Texaco in a New York federal court. The suit charged Texaco with causing massive damage to the Oriente and called for a $1.5 billion fine to cover the cost of cleaning up the destruction.
The plaintiffs chose New York because it was the home of Texaco's international headquarters, where so many destructive decisions had been made. The lawsuit was filed under the 1789 Alien Tort Claims Act, a federal law allowing crimes that took place in foreign countries to be prosecuted in the United States.
The case against Texaco was filed by a team of lawyers headed by Ecuadorian-American Cristobal Bonifaz, together with Joseph C. Kohn of Philadelphia. The plaintiffs are some 70 mestizo settlers and members of the Cofan, Siona, and Secoya indigenous communities of Sucumbios and Orellana provinces, in the north of the Oriente.
The lawsuit seeks damages for Texaco's environmental destruction of the rain forest and of the health and livelihood of the people who live in it. It asserts that Texaco used inferior oil production technology and dumped millions of gallons of hazardous waste into the forest every day for 20 years. This 'production water' then leached into all the water sources of the region, making it impossible for the Amazon's residents to avoid cancer, birth defects, and other maladies described earlier in this series.
Cristobal Bonifaz, formerly a chemical engineer, described the destruction as an 'apocalyptic environmental nightmare unlike any the rainforest has ever seen.'
The suit calls for three main actions to correct the wrongs committed by Texaco: the cleanup of contamination in the Oriente; replacement of inferior and obsolete oil production technology with modern equipment; and compensation for the victims of the pollution. The cost of cleanup alone is estimated at $600 million. Together with compensation costs and punitive damages, Texaco could face a fine of more than $1 billion. A victory for the plaintiffs would certainly create a powerful human rights precedent.
In late 1994 lawyers representing Peruvian individuals and indigenous communities filed a companion suit based on the same grievances. Their lawsuit asserted that Texaco's pollution spread downstream all the way to Peru, creating similar health hazards for indigenous people there.
Shifting the Blame
Texaco has responded to the lawsuit with nine years of stalling. The corporation hopes to block prosecution of the case in the United States entirely.
The company did not deny that it had dumped production wastes into the environment. Rather, it claimed that the dumping had not hurt the environment. Texaco also denied responsibility for the damage, saying that the Ecuadorian government -- in the form of the state-owned oil company and TexPet (Texaco's subsidiary in Ecuador) -- was responsible. Texaco also asserted that it had obeyed Ecuador's environmental laws. Finally, Texaco tried mightily to have the venue of the case returned to Ecuador.
Texaco insisted that the case should be dropped because the company had obeyed Ecuadorian law. It is also true, as was noted above, that during Texaco's time in Ecuador environmental laws were almost non-existent. But Texaco's contract with the Ecuadorian government certainly required the company to prevent contamination of the environment.
It is also true that the Ecuadorian government, through the state oil company Petroecuador, collaborated in the oil-extraction process with Texaco. Given this, the government bears some of the responsibility for the damage. But Ecuador did not possess the technology and skills to construct wells, refineries, and pipelines. It was Texaco that built them, trained local technicians, and proceeded to employ horrendous environmental practices.
Texaco maintains that its only involvement in Ecuadorian oil development was through 'indirect investment' in its subsidiary TexPet. However, depositions by witnesses for the plaintiffs have proved that all the important decisions regarding the operation of the oil project were made at the Texaco headquarters in White Plains, New York. This includes the decision to use unlined waste pits for production water. Even expenses as low as $5,000 had to be approved at the U.S. headquarters.
Ecuador's Deficient Legal System
In the beginning, the Ecuadorian government did not support the filing of the lawsuit against Texaco, because it feared that the legal case would deter further international investment in oil development. But activists from Ecuadorian environmental and human rights organizations fought to win the government around, to the point of physically occupying the Attorney General's office on several occasions.
After several changes of administration, the Ecuadorian government decided to support the lawsuit. It then sent representatives to New York to testify that it had not been aware of the extent of the pollution, laying the blame on Texaco for the damage.
Texaco, meanwhile, insisted that the case should be tried in Ecuador, as the more 'convenient forum' for its prosecution. This would have created enormous obstacles, because most of the documents pertinent to the case are located in the United States. The expert witnesses are U.S. residents, and Texaco is no longer operating in Ecuador.
If the case is ultimately dismissed in the United States and goes to Ecuador, it would have to be tried in Lago Agrio, capital of Sucumbios province. The Lago Agrio courthouse has only one room, and the judge there has no assistants. There is no such thing as a class action suit in Ecuador, so each case would have to be presented individually. The costs for filing each case are prohibitive, and would exclude thousands of aggrieved persons from seeking justice. However many plaintiffs were eventually able to file, they would create an impossible backlog in the overstretched court. The judge who would take the case would have to handle the paperwork of all these plaintiffs alone.
Another serious obstacle would arise from the fact that the Ecuadorian government does not compel witnesses to testify or subpoena documents. Moreover, violence has increased in the Lago Agrio area as a result of the war just across the border in Colombia. This increases the hazard to foreign travelers in the area.
Expert witnesses are not allowed in the Ecuadorian court, and no individual has ever won a court decision for environmental damage. If a decision were to be awarded to the plaintiffs, the largest fine for failure to comply with a court order is $50.
In November of 2001, representatives of the Ecuadorian government filed a brief with the U.S. court in which the case is now under appeal. The brief stated that the government will not allow the case against Texaco to be heard in Ecuador.
Out-of-Court Maneuvering
Over the years, Texaco has attempted to weaken or nullify the lawsuit through out-of-court settlements on at least two occasions. In 1995 Texaco negotiated an 'Agreement for Environmental Reparations' with the Ecuadorian government. This agreement provided for $10 million toward the repair of environmental damage -- a paltry amount, considering the estimated costs of the cleanup alone. The resulting 'cleanup' did little more than cover up some of the unlined waste pits with dirt.
Texaco used this 'settlement' as a basis to file a motion to dismiss the lawsuit. Meanwhile, the company also attempted to weaken the lawsuit by influencing community organizations within Ecuador. Texaco paid $1 million to two organizations that represent communities of the northern provinces of the Oriente. This purchased their promise to support the agreement. Put differently, it effectively bribed them to withdraw from participation in the lawsuit.
In late 1999 Texaco proposed to the Amazon Defense Front (FDA) an out-of-court settlement involving payment of damages, including lawyers' fees. Presumably, the company counted on pressure from the lawyers to push this arrangement through. But both the lawyers and the plaintiffs deemed it more important to have the case settled in court, in order to establish legal precedent for environmental protection. This would also ensure court imposition of indemnification payments. Without this, there would be no guarantee that the chronically corrupt Ecuadorian government would enforce payments of damages.
Attorneys for the lawsuit find it ironic that Texaco should deny responsibility for the damage, on one hand, and on the other, seek an out-of-court agreement that would let the company off the hook from large reparations.
Overall, Texaco's response to the lawsuit has been a strategy of stalling. The company has filed six motions for dismissal, and the case has in fact been dismissed several times, only to be resurrected on appeal. If Texaco loses, the damages could be enormous. The judgment in the Exxon Valdez case was $5 billion. Moreover, that was for an accident. It can clearly be argued that the much more damaging contamination in Ecuador was largely intentional.
It is not surprising that Texaco is willing to spend millions of dollars to fight the case -- resources that are much more available to the corporation than to the defendants.
Charges of Bias
So far, the case has survived through two judges and five changes in the Ecuadorian government.
In the United States, the case has been heard three times in the US Circuit Court, and twice in the US Court of Appeals. Judge Jed Rakoff has ruled against the plaintiffs, and on behalf of Texaco, three times. His second ruling, in 1997, was reversed by the U.S. Court of Appeals a year later. [2]
Plaintiffs then accused Judge Rakoff of bias after it became known that he attended a six-day expenses-paid 'educational conference' in the summer of 1998 at a Montana resort. One of the speakers at the conference, which was organized by the Foundation for Research on Economics and the Environment (FREE), was Alfred DeCrane, a former Texaco CEO. [3]
Texaco has been a major private contributor to FREE, and DeCrane was still affiliated with the company at the time of the conference. From 1996 to 1998, Texaco donated $125,000 to FREE. The title of the conference was 'Real and Alleged Environmental Crisis -- Seminar for Federal Judges.' Ten federal judges attended. The Community Rights Council, a public interest law firm, conducted a study that between 1992 and 1998 almost 100 members of federal courts had participated in seminars at luxury resorts, with expenses paid. [3]
Judge Rakoff failed to disclose his attendance at the seminar to the attorneys who were acting on behalf of the plaintiffs, and this provoked anger and incredulity among the plaintiffs. Luis Yanza, president of the Frente de la Defensa de La Amazonia (Front for the Defense of the Amazon), was reported as saying: 'We are finding it more and more difficult to have faith in the US judicial process with Judge Rakoff's actions.' [2]
Cristobal Bonifaz, the lawyer for the plaintiffs, filed a motion requesting the judge to recuse himself on grounds of conflict of interest. Judge Rakoff denied this motion, explaining that he had not known that Texaco had helped finance FREE, and that his attendance at the seminar was perfectly legal. 'Nothing in judicial ethics requires a judge to be a hermit, or to closet himself from ideas,' he said in his ruling. On May 31, 2001 Judge Rakoff dismissed the lawsuit against Texaco for the third time.
Chevron Buys Texaco's Liabilities
In 1999, Texaco and Chevron initiated a merger. Attorneys who were pressing the lawsuit against Texaco, together with Ecuadorian activists, mounted a campaign to educate Chevron stockholders about the case. Their hope was to alert the stockholders to the fact that they may find themselves paying for Texaco's damage. The intention was also to prevent the merger, or at least delay it until Texaco paid reparations for the environmental damages it had caused.
The Amazon Defense Front aired television advertisements in Washington DC, San Francisco, and New York. In the advertisements, an oil delivery truck arrived at a well-kept suburban home and began spraying oil all over the front lawn, as horrified residents looked on. The residents were white. The advertisement said, 'This is what Texaco did to thousands of people of color in the rainforest in Ecuador.' In other words, the difference between oil processing techniques in Ecuador and those in the United States amounted to racial and ethnic discrimination. This is not the first time Texaco has been accused of racism. Two years ago the company paid a record $176 million fine for racial discrimination against 1,400 of its own employees.
Lawyers for the lawsuit also sent a letter of complaint to the Securities and Exchange Commission (SEC). The complaint asserted that Chevron failed to inform shareholders about Texaco's liability when it initiated the merger.
In spite of these efforts, the merger was approved and became a fact in October 2001. With a market value of over $100 billion, the new Chevron Texaco Corporation is the fourth largest energy company in the world. It also maintains one of the largest records of environmental and human rights abuse. In addition to Texaco's misdeeds in Ecuador, Chevron has been accused of committing similar abuses in Nigeria and Indonesia.
Uncertainty Follows Another Dismissal
On May 31, 2001 Judge Rakoff dismissed the lawsuit against Texaco. The case then went back to the Appeals Court, where it will be heard, starting today.
In his 46-page decision, Judge Rakoff rejected the assertions of the plaintiffs. He disagreed that the important decisions about the Ecuador operations had been taken in the United States. He also cited some minor settlements made in Ecuador as proof that the Ecuadorian court system could handle the case fairly. He downplayed the absence of class action suits in Ecuador, and said it was 'insulting' and 'absurd' to allege that Ecuador's judicial system was inadequate. As a result, the Texaco lawsuit is once again in the U.S. Court of Appeals.
Attorneys for the Ecuadorians disagree. They insist that corruption and bureaucratic obstruction in the Ecuadorian court system amount to 'overwhelming impediments.' Cristobal Bonifaz wrote in his appeal that the ruling must not only concern itself with the functionality of those courts. In his opinion, any judgment that ignores the fact that some of the violations took place on US soil, is an invitation to US corporations to 'violate the Law of Nations with impunity.'
Some think that Judge Rakoff's dismissal will be upheld and that the case has run its course in US courts. But Mr. Bonifaz has certainly not given up on the US Court of Appeals. He points out that in recent years the Court has leaned towards favoring the lawsuit. However, according to Mr. Bonifaz, with the Ecuadorian government promising to reject the case, the Court is left with no choice but to allow it to go forward in the United States.
One thing is certain: the long and drawn-out legal struggle has been tiring, but it has strengthened the campaign to save the Oriente. Organizations have been galvanized around the lawsuit. The Amazon Defense Front itself was created to monitor and lobby for the lawsuit, which has spawned countless other programs and projects for building local capacity and legal counseling in Ecuador.
The lawsuit has drawn international attention to the destructive practices of the oil industry. As a result, oil companies have been forced to tread more softly in the region. They can no longer rape the environment and then walk away.
References and Resources
[1]. Rights Violations in the Ecuadorian Rainforest: The Human Rights Consequences of Oil Development, March 1994 (CESR)
[2]. 'Amazon Tribal Leaders Blast U.S. Judge for Blocking Texaco Pollution Case'
[3]. 'Texaco Judge's Expense-Paid Trip Creates Conflict, Lawyer Says'
Glossary
Block--A concessionary piece of territory where exploration and drilling rights are leased by the Ecuadorian government to an oil company.
CONAIE--Confederation of Indigenous Nationalities of the Amazon, led by Antonio Vargas.
CONFENIAE--Confederation of the Nationalities Indigenous to the Amazon of Ecuador.
FDA--Amazon Defense Front (Frente de Defensa de la Amazonia).
HUAORANI, ZAPARA, SIONA, COFAN, AND SECOYA--Pre-Incan indigenous communities of Ecuador whose numbers are threatened by oil development.
IMF--International Monetary Fund.
Manta--Port city on the Pacific, location of U.S. air base covering operations for Plan Colombia.
Mindo--A small Andean town not far from Quito, on the slope of Mt. Pichincha. Location of the Mindo Cloud Forest Reserve, through which the new pipeline is set to pass.
OCP--Oleoducto de Crudos Pesados, the consortium of companies that is constructing the new pipeline across Ecuador.
OPIP--Organization of Indigenous Peoples of Pastaza.
Oriente--The Ecuadorian Amazon; eastern half of Ecuador.
Pastaza--A central province of the Oriente.
Plan Colombia--An economic and military plan to eradicate drug activity in Colombia and strengthen the state. The United States has contributed $1.3 billion to this plan since 2000. Spillover effects are being felt in Ecuador.
Yasuni Park--A national park in the central Oriente inhabited by Huaorani; part of it is protected.
In the next issue: Dining with the Devil, The Dilemma of Negotiating with Oil Companies
Issue 5: Legal Battles
On the Record - The Fight for the Amazon
Vol. 16, Iss. 5
March 11, 2001
Legal Battles
Contents:
- From the Editors: Corporate Responsibility on Trial
- In the News:
- Day of Reckoning for Texaco as Pollution Lawsuit Moves to US Court of Appeals
- Legal Victory for Indigenous Rights in Nicaragua Could Open New Avenues for Activists in Ecuador
- Legal Battles
- Contempt for the Law
- Ignoring the Right to Consultation
- In the New York Courts
- Shifting the Blame
- Ecuador's Deficient Legal System
- Out-of-Court Maneuvering
- Charges of Bias
- Chevron Buys Texaco's Liabilities
- Uncertainty Follows Another Dismissal
- References and Resources
- Glossary
From the Editors: Corporate Responsibility on Trial
The oil industry goes on trial in a US Court of Appeals in New York today (Monday).
On the table will be a class-action suit on behalf of some 30,000 Ecuadorians, claiming $1.5 billion from Texaco for some of the worst pollution ever committed in the Amazon.
In many respects the case goes to the heart of the debate currently raging over globalization and corporate responsibility. Texaco went into the Amazon like a twentieth century conquistador. It struck gold in the form of oil and exploited it with utter ruthlessness for 20 years before pulling out, leaving a trail of destruction behind.
Instead of accepting responsibility for the damage, Texaco has done everything possible to shift the blame and wriggle off the hook. First its lawyers argued that the company broke no laws in Ecuador and merely followed the terms of its agreement with the government. This failed to intimidate the Ecuadorians, who sued Texaco in a U.S. court. For the last nine years, Texaco has been maneuvering to get the case returned to Ecuador, knowing that Ecuador's frail legal system could not possibly handle a case so complex.
No one disputes that environmental protection was virtually nonexistent in Ecuador in the 1970s and 1980s; the first environmental impact assessments were only introduced in Latin America in the 1990s. It is also true that the government leased out the land for exploitation. Even so, the terms of the lease did not give companies a free hand to pollute.
The real issue is corporate responsibility. For most of the time that Texaco was in Ecuador, the government was unrepresentative and corrupt. Local people, whose forest was leveled and whose water was polluted, were completely unaware of what oil exploration would do to them. This was a fabulous environment for a robber baron whose only interest was to make money.
The issue before the U.S. Court of Appeals is not simply a technical legal debate about laws that did not exist. It is about the international corporations' concern for the welfare of the societies in which they operate. It is about their willingness to be accountable -- not just to their board members and stockholders, but those most directly affected by their operations.
Such issues have been widely discussed in the United States in the wake of the Enron scandal. It is thoroughly dismaying to see that another 'star' corporate performer has conducted itself so reprehensibly in a far-off country where there is much less oversight.
Texaco has become a poster child for all that is wrong with globalization. Its operations in Ecuador will be discussed in law classes for years to come -- as a case study of recklessness.
Whatever good has returned to Ecuador from oil sales -- and as we argued in the earlier issue this cannot be entirely discounted -- it is dwarfed by the fact that this mighty company went into a fragile land and tore it apart. What a legacy!
The good thing about the Texaco debacle is that it has toughened the laws, put the fear of God into oil companies that followed, and radicalized Ecuador's indigenous movement to the point where they will not easily be duped. Oil companies now enter Ecuador apologetically, explaining that 'we are not like Texaco.'
But that is little consolation to those whose lands were destroyed. Nor does it minimize the importance of the case that is being heard today. If the ruling goes against the plaintiffs, it will give international corporations a free hand to act with impunity and make a mockery of 'corporate responsibility.'
Peter Lippman examines another critical legal question in the fifth issue of this series. As the last four issues have shown, Ecuador's indigenous people no longer submit without protest, as they did when Texaco first began exploring for oil. Thanks largely to their experience with oil, they now have the power to bring down governments.
But they still face a legal dilemma. Under Ecuador's constitution and international law, indigenous people enjoy the right to be consulted about decisions that affect them. They also have the right to decide their own model of development. This is laid out clearly in Convention 169 of the International Labor Organization (ILO), which Ecuador ratified in 1998.
The problem is that under the constitution, the actual resources -- including oil -- still belong to the state. If the government decides to auction off their land to oil companies, local indigenous residents must certainly be consulted. But does that mean they actually have the right to veto exploration, any more than a neighborhood that is facing forcible eviction to make way for a motorway?
We may soon have an answer. In a landmark case that has set lawyers scurrying in all directions, the Inter-American Court of Human Rights recently issued a ruling on behalf of a small indigenous group in Nicaragua that could provide some badly needed legal support for beleaguered indigenous people throughout Latin America. It will definitely put more pressure on governments not to let companies like Texaco destroy their precious resources and then move onto the next hunting ground. The case is examined briefly below.
Day of Reckoning for Texaco as Pollution Lawsuit Moves to US Court of Appeals
In a landmark case that could determine whether international oil companies are free to pollute developing countries and then leave without paying for the clean-up bill, the Second US Circuit Court of Appeals will today hear a case that seeks $1.5 billion from Chevron-Texaco for the damage caused by Texaco's operations in Ecuador. (Texaco merged with Chevron last fall.)
The case is being brought by lawyers acting on behalf of 30,000 Ecuadorians under the 1789 Alien Tort Claims Act (ATCA), which allows crimes that have been committed on foreign soil to be prosecuted in a U.S. court if either the victim or the defendant is located in the United States. The defendants argue that as a U.S.-based company, Texaco's policy was determined at the company's home office in White Plains, New York.
The case was originally brought against Texaco in 1993 and has been through several dismissals, appeals, and reversals. Over the last nine years Texaco has stalled the case by trying to have it sent back to Ecuador, where it would stand little chance of success.
Observers expect that today's hearing will represent the final, decisive stage of this long process, because the Ecuadorian government has made it clear that the case would not return to Ecuador if it were rejected in this country. Cristobal Bonifaz, the attorney who represents the plaintiffs, told On the Record that the government's position puts more pressure on the Court to find on behalf of his clients because the appellate judges have already acknowledged that the case must be heard.
Mr. Bonifaz and others are deeply concerned that if the case is lost in the United States, it will set a legal precedent that appears to allow U.S. companies absolute freedom to despoil the rainforests. Whatever the result, the case has galvanized grassroots opposition to oil development in Ecuador and put the spotlight squarely on the damage caused by oil exploration.
The background to the case is examined below. Any future developments will be reported in future issues of this series of 'On the Record.'
Legal Victory for Indigenous Rights in Nicaragua Could Open New Avenues for Activists in Ecuador
A landmark decision by the Inter-American Court of Human Rights late last year has affirmed that indigenous peoples have collective rights not just to the land they occupy but also to its resources, based on their traditional ownership. This has raised hopes that indigenous activists in countries like Ecuador could exploit the judgment as they struggle to oppose predatory oil corporations.
On September 17, 2001, the Inter-American Court, found in favor of a small Mayagna (Sumo) community of Awas Tingni, located on the forested area of Nicaragua's Caribbean coastal regional. The justices declared that the community's rights to property and judicial protection had been violated by the Nicaraguan government when it granted concessions to a Korean lumber company to log on the community's traditional land without even consulting with the community, let alone obtaining its consent. The decision is widely seen as affirming that indigenous people have a collective right to their lands, resources, and environment.
The ruling is also notable because it is the first binding decision that holds that indigenous peoples have communal property rights to land and natural resources based upon traditional patterns of use and occupation (Para. 149), and that 'as a result of customary practices, possession of the land should suffice for indigenous communities lacking real title to property of the land to obtain official recognition of that property...' (Para. 151). Of equal relevance to Ecuador is the fact that the Court's judgment requires the state to adopt legislative, administrative, or other measures to create an effective mechanism for delimitation, demarcation, and titling of the property of indigenous communities. This portion of the judgment also requires the government of Nicaragua to abstain from granting any concessions for natural resource extraction and to take action to prevent third parties from doing so in the territories in dispute until these measures are implemented.
The bases for the Court's ruling are Articles 1, 2, 21, and 25 of the American Convention on Human Rights. Ecuador is a state party to the convention and has accepted the jurisdiction of the Inter-American Court as binding upon it. The decision could be a useful framework for national legislation to protect indigenous territories and provide solid precedent if the communities pursue litigation.
- Thanks to Professor Michael Willis for this information.
Legal Battles
Contempt for the Law
From the day that Texaco started drilling for oil in Ecuador, there were laws to protect the Amazon. But they were weak and badly enforced.
The first law, passed in 1971, simply required oil companies to prevent pollution. Texaco's contract required it to 'prevent contamination of water, air, and soil.' But the 1971 law contained no specific standards. As such, it was practically an invitation to pollute.
A 1976 law was passed to control pollution, but regulations interpreting this law were not adopted for 13 more years, and then they only applied to water quality. In 1981, a new law established environmentally protected zones. But the oil companies still maintained that the law permitted the extraction of subsoil minerals.
Throughout these years, courts and governmental agencies took the side of the companies. Ecuador's courts decided that the companies did indeed have a right to extract subsoil minerals from protected areas. The main environmental protection agency was placed under the Ministry of Energy and Mines, where it received little support. In fact, the agency's staff was reduced to the point where it was useless.
The Ecuadorian Congress established a committee to supervise the exploitation of resources in protected areas, but this failed to curtail oil development. The Ministry of Health and other implementing agencies also avoided the problem of pollution. The state-owned oil company Petroecuador formed an internal environmental unit, but it primarily acts as a public relations service.
Petroecuador proved to be as indifferent to the environment as foreign-owned companies. It acquired a 62.5 percent share of the Texaco consortium drilling in Ecuador in 1977. When Texaco departed from Ecuador in 1990, Petroecuador picked up where Texaco left off and continued to disregard the environment.
Stricter regulations were passed in 1992 that required re-injection of production water, lining of waste pits, and restricted access to new settlers, but these have not been enforced. A 1994 report from the Center for Economic and Social Rights (CESR) on pollution in the Oriente found that Petroecuador showed little interest in upgrading its facilities. [1]
In 1999, then-president Jamil Mahuad decreed that large sections of the rain forest would be protected from drilling, mining, and cutting of trees. But Mahuad was deposed in a coup the next year, and the practices resumed.
Ignoring the Right to Consultation
With the courts and government solidly in the companies' corner, the only hope for the environment lay with civil society. But the 1994 report from CESR found that ordinary people had no way of getting the information they would need to take their case to the Ecuadorian courts, and that the country's constitutional court has had little sympathy for their complaints.
This was in spite of the fact that on paper at least, the residents of the Amazon would seem to enjoy rights that give them protection against pollution and arguably even the power to veto the oil invasion.
These rights come partly from international laws, which Ecuador has ratified, and the Ecuadorian constitution.
Many international documents protect the right of all people to shelter, livelihood, and a safe environment. The 1976 International Covenant on Economic, Social, and Cultural Rights, ratified by Ecuador, declares that 'In no case may a people be deprived of its own means of subsistence,' and proclaims the 'right of everyone to the enjoyment of the highest attainable standard of physical and mental health.'
The UN Declaration on the Right to Development (1986) reaffirms the 'right of peoples to self-determination, by virtue of which they have the right ...to pursue their economic, social, and cultural development.'
Turning more specifically to environmental protection, the 1992 Rio Convention on Biological Diversity calls on signatory governments to conduct an environmental impact assessment for development projects and for this process to be open to public participation. The treaty calls for preservation of traditional practices and ways of life that are pertinent to the conservation of biodiversity.
In 1997 the Ecuadorian government sponsored a preparatory meeting to send recommendations to the 'Rio + 5' conference, concluding that Ecuador lacked legislation to promote public participation in evaluation of development projects. This legislation arrived the next year, with the new Constitution.
The Ecuadorian Constitution of 1998 protects the environment of the Amazon and explicitly safeguards the right of its inhabitants to consultation on decisions regarding the environment. Article 86 promises to protect the public's right to live in a healthy environment and to prevent contamination.
Article 84 guarantees the 'nontransferable ownership of communal lands, which will be inalienable and indivisible.' The same article specifically guarantees indigenous participation in the use and administration of nonrenewable resources and in the benefits resulting from exploitation of those resources, as well as indemnification for damages caused by that exploitation. And Article 88 guarantees community participation in state decisions that may affect the environment.
The ILO's 1989 Indigenous and Tribal Peoples Convention, known as ILO 169, was ratified by Ecuador in May 1998. This treaty reinforces Ecuador's Constitution by stating clearly that indigenous populations have the right to be consulted regarding administrative decisions that affect them, particularly when it comes to the use of natural resources. It specifies that 'the peoples concerned shall have the right to decide their own priorities for the process of development as it affects their lives, beliefs, institutions, and spiritual well-being.'
Article 15 of ILO 169 declares that where the state retains control over subsoil resources, governments must consult with affected populations to determine what impact exploitation of such resources may have. This is of critical relevance to Ecuador, because Article 247 of the Ecuadorian Constitution preserves the state's claim over subsoil resources, including oil. At the same time, however, the constitution requires that these resources will be exploited in the national interest.
Few countries in the world have such extensive provisions. On paper their intention is clear: indigenous people have a legal right to be consulted about any development of natural resources, like oil, in their territory. Whether or not that allows them to block any oil exploration is less clear, because the state retains ownership of subsoil resources.
Even so, there are legal safeguards. It is clearly understood that the government and the indigenous people should decide together whether any exploitation is in the national interest. If the government had made a good faith effort to engage the indigenous communities in such a dialogue, indigenous activists could have made the case that protecting the Amazon and its indigenous culture are not only in Ecuador's interest, but arguably more important to the country than oil. The problem is they were never given the chance. Oil has won out over everything -- including law and rights.
In the New York Courts
In 1993, attorneys representing 30,000 Ecuadorians filed a class-action lawsuit against Texaco in a New York federal court. The suit charged Texaco with causing massive damage to the Oriente and called for a $1.5 billion fine to cover the cost of cleaning up the destruction.
The plaintiffs chose New York because it was the home of Texaco's international headquarters, where so many destructive decisions had been made. The lawsuit was filed under the 1789 Alien Tort Claims Act, a federal law allowing crimes that took place in foreign countries to be prosecuted in the United States.
The case against Texaco was filed by a team of lawyers headed by Ecuadorian-American Cristobal Bonifaz, together with Joseph C. Kohn of Philadelphia. The plaintiffs are some 70 mestizo settlers and members of the Cofan, Siona, and Secoya indigenous communities of Sucumbios and Orellana provinces, in the north of the Oriente.
The lawsuit seeks damages for Texaco's environmental destruction of the rain forest and of the health and livelihood of the people who live in it. It asserts that Texaco used inferior oil production technology and dumped millions of gallons of hazardous waste into the forest every day for 20 years. This 'production water' then leached into all the water sources of the region, making it impossible for the Amazon's residents to avoid cancer, birth defects, and other maladies described earlier in this series.
Cristobal Bonifaz, formerly a chemical engineer, described the destruction as an 'apocalyptic environmental nightmare unlike any the rainforest has ever seen.'
The suit calls for three main actions to correct the wrongs committed by Texaco: the cleanup of contamination in the Oriente; replacement of inferior and obsolete oil production technology with modern equipment; and compensation for the victims of the pollution. The cost of cleanup alone is estimated at $600 million. Together with compensation costs and punitive damages, Texaco could face a fine of more than $1 billion. A victory for the plaintiffs would certainly create a powerful human rights precedent.
In late 1994 lawyers representing Peruvian individuals and indigenous communities filed a companion suit based on the same grievances. Their lawsuit asserted that Texaco's pollution spread downstream all the way to Peru, creating similar health hazards for indigenous people there.
Shifting the Blame
Texaco has responded to the lawsuit with nine years of stalling. The corporation hopes to block prosecution of the case in the United States entirely.
The company did not deny that it had dumped production wastes into the environment. Rather, it claimed that the dumping had not hurt the environment. Texaco also denied responsibility for the damage, saying that the Ecuadorian government -- in the form of the state-owned oil company and TexPet (Texaco's subsidiary in Ecuador) -- was responsible. Texaco also asserted that it had obeyed Ecuador's environmental laws. Finally, Texaco tried mightily to have the venue of the case returned to Ecuador.
Texaco insisted that the case should be dropped because the company had obeyed Ecuadorian law. It is also true, as was noted above, that during Texaco's time in Ecuador environmental laws were almost non-existent. But Texaco's contract with the Ecuadorian government certainly required the company to prevent contamination of the environment.
It is also true that the Ecuadorian government, through the state oil company Petroecuador, collaborated in the oil-extraction process with Texaco. Given this, the government bears some of the responsibility for the damage. But Ecuador did not possess the technology and skills to construct wells, refineries, and pipelines. It was Texaco that built them, trained local technicians, and proceeded to employ horrendous environmental practices.
Texaco maintains that its only involvement in Ecuadorian oil development was through 'indirect investment' in its subsidiary TexPet. However, depositions by witnesses for the plaintiffs have proved that all the important decisions regarding the operation of the oil project were made at the Texaco headquarters in White Plains, New York. This includes the decision to use unlined waste pits for production water. Even expenses as low as $5,000 had to be approved at the U.S. headquarters.
Ecuador's Deficient Legal System
In the beginning, the Ecuadorian government did not support the filing of the lawsuit against Texaco, because it feared that the legal case would deter further international investment in oil development. But activists from Ecuadorian environmental and human rights organizations fought to win the government around, to the point of physically occupying the Attorney General's office on several occasions.
After several changes of administration, the Ecuadorian government decided to support the lawsuit. It then sent representatives to New York to testify that it had not been aware of the extent of the pollution, laying the blame on Texaco for the damage.
Texaco, meanwhile, insisted that the case should be tried in Ecuador, as the more 'convenient forum' for its prosecution. This would have created enormous obstacles, because most of the documents pertinent to the case are located in the United States. The expert witnesses are U.S. residents, and Texaco is no longer operating in Ecuador.
If the case is ultimately dismissed in the United States and goes to Ecuador, it would have to be tried in Lago Agrio, capital of Sucumbios province. The Lago Agrio courthouse has only one room, and the judge there has no assistants. There is no such thing as a class action suit in Ecuador, so each case would have to be presented individually. The costs for filing each case are prohibitive, and would exclude thousands of aggrieved persons from seeking justice. However many plaintiffs were eventually able to file, they would create an impossible backlog in the overstretched court. The judge who would take the case would have to handle the paperwork of all these plaintiffs alone.
Another serious obstacle would arise from the fact that the Ecuadorian government does not compel witnesses to testify or subpoena documents. Moreover, violence has increased in the Lago Agrio area as a result of the war just across the border in Colombia. This increases the hazard to foreign travelers in the area.
Expert witnesses are not allowed in the Ecuadorian court, and no individual has ever won a court decision for environmental damage. If a decision were to be awarded to the plaintiffs, the largest fine for failure to comply with a court order is $50.
In November of 2001, representatives of the Ecuadorian government filed a brief with the U.S. court in which the case is now under appeal. The brief stated that the government will not allow the case against Texaco to be heard in Ecuador.
Out-of-Court Maneuvering
Over the years, Texaco has attempted to weaken or nullify the lawsuit through out-of-court settlements on at least two occasions. In 1995 Texaco negotiated an 'Agreement for Environmental Reparations' with the Ecuadorian government. This agreement provided for $10 million toward the repair of environmental damage -- a paltry amount, considering the estimated costs of the cleanup alone. The resulting 'cleanup' did little more than cover up some of the unlined waste pits with dirt.
Texaco used this 'settlement' as a basis to file a motion to dismiss the lawsuit. Meanwhile, the company also attempted to weaken the lawsuit by influencing community organizations within Ecuador. Texaco paid $1 million to two organizations that represent communities of the northern provinces of the Oriente. This purchased their promise to support the agreement. Put differently, it effectively bribed them to withdraw from participation in the lawsuit.
In late 1999 Texaco proposed to the Amazon Defense Front (FDA) an out-of-court settlement involving payment of damages, including lawyers' fees. Presumably, the company counted on pressure from the lawyers to push this arrangement through. But both the lawyers and the plaintiffs deemed it more important to have the case settled in court, in order to establish legal precedent for environmental protection. This would also ensure court imposition of indemnification payments. Without this, there would be no guarantee that the chronically corrupt Ecuadorian government would enforce payments of damages.
Attorneys for the lawsuit find it ironic that Texaco should deny responsibility for the damage, on one hand, and on the other, seek an out-of-court agreement that would let the company off the hook from large reparations.
Overall, Texaco's response to the lawsuit has been a strategy of stalling. The company has filed six motions for dismissal, and the case has in fact been dismissed several times, only to be resurrected on appeal. If Texaco loses, the damages could be enormous. The judgment in the Exxon Valdez case was $5 billion. Moreover, that was for an accident. It can clearly be argued that the much more damaging contamination in Ecuador was largely intentional.
It is not surprising that Texaco is willing to spend millions of dollars to fight the case -- resources that are much more available to the corporation than to the defendants.
Charges of Bias
So far, the case has survived through two judges and five changes in the Ecuadorian government.
In the United States, the case has been heard three times in the US Circuit Court, and twice in the US Court of Appeals. Judge Jed Rakoff has ruled against the plaintiffs, and on behalf of Texaco, three times. His second ruling, in 1997, was reversed by the U.S. Court of Appeals a year later. [2]
Plaintiffs then accused Judge Rakoff of bias after it became known that he attended a six-day expenses-paid 'educational conference' in the summer of 1998 at a Montana resort. One of the speakers at the conference, which was organized by the Foundation for Research on Economics and the Environment (FREE), was Alfred DeCrane, a former Texaco CEO. [3]
Texaco has been a major private contributor to FREE, and DeCrane was still affiliated with the company at the time of the conference. From 1996 to 1998, Texaco donated $125,000 to FREE. The title of the conference was 'Real and Alleged Environmental Crisis -- Seminar for Federal Judges.' Ten federal judges attended. The Community Rights Council, a public interest law firm, conducted a study that between 1992 and 1998 almost 100 members of federal courts had participated in seminars at luxury resorts, with expenses paid. [3]
Judge Rakoff failed to disclose his attendance at the seminar to the attorneys who were acting on behalf of the plaintiffs, and this provoked anger and incredulity among the plaintiffs. Luis Yanza, president of the Frente de la Defensa de La Amazonia (Front for the Defense of the Amazon), was reported as saying: 'We are finding it more and more difficult to have faith in the US judicial process with Judge Rakoff's actions.' [2]
Cristobal Bonifaz, the lawyer for the plaintiffs, filed a motion requesting the judge to recuse himself on grounds of conflict of interest. Judge Rakoff denied this motion, explaining that he had not known that Texaco had helped finance FREE, and that his attendance at the seminar was perfectly legal. 'Nothing in judicial ethics requires a judge to be a hermit, or to closet himself from ideas,' he said in his ruling. On May 31, 2001 Judge Rakoff dismissed the lawsuit against Texaco for the third time.
Chevron Buys Texaco's Liabilities
In 1999, Texaco and Chevron initiated a merger. Attorneys who were pressing the lawsuit against Texaco, together with Ecuadorian activists, mounted a campaign to educate Chevron stockholders about the case. Their hope was to alert the stockholders to the fact that they may find themselves paying for Texaco's damage. The intention was also to prevent the merger, or at least delay it until Texaco paid reparations for the environmental damages it had caused.
The Amazon Defense Front aired television advertisements in Washington DC, San Francisco, and New York. In the advertisements, an oil delivery truck arrived at a well-kept suburban home and began spraying oil all over the front lawn, as horrified residents looked on. The residents were white. The advertisement said, 'This is what Texaco did to thousands of people of color in the rainforest in Ecuador.' In other words, the difference between oil processing techniques in Ecuador and those in the United States amounted to racial and ethnic discrimination. This is not the first time Texaco has been accused of racism. Two years ago the company paid a record $176 million fine for racial discrimination against 1,400 of its own employees.
Lawyers for the lawsuit also sent a letter of complaint to the Securities and Exchange Commission (SEC). The complaint asserted that Chevron failed to inform shareholders about Texaco's liability when it initiated the merger.
In spite of these efforts, the merger was approved and became a fact in October 2001. With a market value of over $100 billion, the new Chevron Texaco Corporation is the fourth largest energy company in the world. It also maintains one of the largest records of environmental and human rights abuse. In addition to Texaco's misdeeds in Ecuador, Chevron has been accused of committing similar abuses in Nigeria and Indonesia.
Uncertainty Follows Another Dismissal
On May 31, 2001 Judge Rakoff dismissed the lawsuit against Texaco. The case then went back to the Appeals Court, where it will be heard, starting today.
In his 46-page decision, Judge Rakoff rejected the assertions of the plaintiffs. He disagreed that the important decisions about the Ecuador operations had been taken in the United States. He also cited some minor settlements made in Ecuador as proof that the Ecuadorian court system could handle the case fairly. He downplayed the absence of class action suits in Ecuador, and said it was 'insulting' and 'absurd' to allege that Ecuador's judicial system was inadequate. As a result, the Texaco lawsuit is once again in the U.S. Court of Appeals.
Attorneys for the Ecuadorians disagree. They insist that corruption and bureaucratic obstruction in the Ecuadorian court system amount to 'overwhelming impediments.' Cristobal Bonifaz wrote in his appeal that the ruling must not only concern itself with the functionality of those courts. In his opinion, any judgment that ignores the fact that some of the violations took place on US soil, is an invitation to US corporations to 'violate the Law of Nations with impunity.'
Some think that Judge Rakoff's dismissal will be upheld and that the case has run its course in US courts. But Mr. Bonifaz has certainly not given up on the US Court of Appeals. He points out that in recent years the Court has leaned towards favoring the lawsuit. However, according to Mr. Bonifaz, with the Ecuadorian government promising to reject the case, the Court is left with no choice but to allow it to go forward in the United States.
One thing is certain: the long and drawn-out legal struggle has been tiring, but it has strengthened the campaign to save the Oriente. Organizations have been galvanized around the lawsuit. The Amazon Defense Front itself was created to monitor and lobby for the lawsuit, which has spawned countless other programs and projects for building local capacity and legal counseling in Ecuador.
The lawsuit has drawn international attention to the destructive practices of the oil industry. As a result, oil companies have been forced to tread more softly in the region. They can no longer rape the environment and then walk away.
References and Resources
[1]. Rights Violations in the Ecuadorian Rainforest: The Human Rights Consequences of Oil Development, March 1994 (CESR)
[2]. 'Amazon Tribal Leaders Blast U.S. Judge for Blocking Texaco Pollution Case'
[3]. 'Texaco Judge's Expense-Paid Trip Creates Conflict, Lawyer Says'
- Background and updates on the Texaco lawsuit available on the Texaco Rainforest website.
- 'Texaco on Trial' by Eyal Press, Nation Magazine
- For a very useful map of Ecuador with provinces, towns, indigenous areas, and the block system, see PetroEcuador's website. Click on 'mapas,' then on 'Mapa Catastral,' then on 'Provincias,' 'Bloques,' and 'Novena Ronda' (Ninth Round).
- For more sources see our Ecuador resource list.
Glossary
Block--A concessionary piece of territory where exploration and drilling rights are leased by the Ecuadorian government to an oil company.
CONAIE--Confederation of Indigenous Nationalities of the Amazon, led by Antonio Vargas.
CONFENIAE--Confederation of the Nationalities Indigenous to the Amazon of Ecuador.
FDA--Amazon Defense Front (Frente de Defensa de la Amazonia).
HUAORANI, ZAPARA, SIONA, COFAN, AND SECOYA--Pre-Incan indigenous communities of Ecuador whose numbers are threatened by oil development.
IMF--International Monetary Fund.
Manta--Port city on the Pacific, location of U.S. air base covering operations for Plan Colombia.
Mindo--A small Andean town not far from Quito, on the slope of Mt. Pichincha. Location of the Mindo Cloud Forest Reserve, through which the new pipeline is set to pass.
OCP--Oleoducto de Crudos Pesados, the consortium of companies that is constructing the new pipeline across Ecuador.
OPIP--Organization of Indigenous Peoples of Pastaza.
Oriente--The Ecuadorian Amazon; eastern half of Ecuador.
Pastaza--A central province of the Oriente.
Plan Colombia--An economic and military plan to eradicate drug activity in Colombia and strengthen the state. The United States has contributed $1.3 billion to this plan since 2000. Spillover effects are being felt in Ecuador.
Yasuni Park--A national park in the central Oriente inhabited by Huaorani; part of it is protected.
In the next issue: Dining with the Devil, The Dilemma of Negotiating with Oil Companies
Back
- News Service
- Multimedia
- Global Issues
- On The Record Archive
- Youth Against AIDS
- Palestine - Civil Society Under Siege
- Bosnia - Postwar Refugee Return
- Ecuador – The Fight for the Amazon
- Issue 1: Series Launch
- Issue 2: Ecuador's Troubled History
- Issue 3: The Poisoning of San Carlos
- Issue 4: Risky Business: the Oil Industry in Ecuador
- Issue 5: Legal Battles
- Issue 6: The Dilemma of Negotiating with Oil Companies
- Issue 7: Profiles of Resistance
- Issue 8: Profiles of Resistance II
- Issue 9: The Colombia Connection
- Issue 10: Debt and Development
- Issue 11: Democratizing Communications for Ecuador
- Kosovo – The Birth and Rebirth of Civil Society
- Nigeria – Girls for Sale
- Kosovo – Rebuilding After the War
- Cambodia - Civil Society and the Tribunal
- Central America - Life After Hurricane Mitch
- Guatemala – The Rio Negro Campaign
- Southeast Asia – Violence Against Women
- Covering the UN
- Civil Society in Albania
- Afghanistan's Women & Girls
- Africa – Pygmies
- Bangladesh – Empowering the Blind
- Bosnia – War and Recovery
- Ecuador and Oil
- Guatemala – Indigenous Advocacy
- India – The Global Movement for Children
- Kosovo – Civil Society after the War
- Nepal – Democracy and Discrimination
- Nigeria – Trafficking to Europe
- Occupied Palestinian Territories
- Peru – The Search for Truth and Justice
- Roma and Gypsies
- Serbia – Fighting Repression
- Sri Lanka – Rebuilding After the Tsunami
- The World Bank and Human Rights
- UK Travellers and Dale Farm
- AP Diaries and Staff Blogs
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