Chevron & Texaco v Ecuador – Denial of Justice Reaffirmed

The UNCITRAL tribunal in Chevron v Ecuador has released its first partial award on the merits, holding in favour of the oil company. This is the first part of a multi-stage arbitration that disposes of claims for US$ 700 million, with claims in total amounting to US$ 27 billion to be eventually decided by the tribunal.

Chevron claimed that they had been manifestly denied justice by the Ecuadorian courts, in violation of the ‘access to justice’ provision of Art II(7) of the USA – Ecuador BIT.

The tribunal agreed that the specific language of the BIT imposed a less obligation than the customary international law standard of a denial of justice, and that this was ‘lex specialis’ that grew out of a particular US practice and found only in US treaties and the Energy Charter Treaty. This practice was subsequently dropped when the US was satisfied that the denial of justice standard was now sufficiently developed to protect its investors abroad.

The tribunal considered that the obligation was to provide an effective method to claim rights and obligations through the local courts system. This necessarily included a margin of appreciation to the host state, but could not be interpreted to mean that it would require unreasonable state interference before the claimant could have any remedy. They tribunal relied on the fact that the cases had been pending 13 years since the commencement of the US – Ecuador BIT, were not especially complex nor was the delay justified by any behaviour of the claimant.

Accordingly,  it  was the length and nature of the delay, and the unwillingness of the courts to let the cases proceed that made the delay in the cases amount to a breach of the BIT and an ineffective means of pursuing rights and obligations.

Ecuador countered the allegation of a denial of justice with the allegation that the arbitral proceedings should not be permitted because the claimant themselves in various other judicial proceedings in the US had taken the position that the courts of Ecuador were properly functioning and capable of giving an adequate remedy.

The tribunal noted the significant changes that took place  in  Ecuador  in  2004,  affecting  the  Ecuadorian  judiciary.  These  events occurred after the Claimants’ statements in 2000, as well as after the termination of the litigation in 2002. Consequently the Claimant’s statements did not constitute a “clear  and unequivocal” repetition of previous statements and were not estopped from making the claim.

Read the full text of the decision (all 265 pages) here. Some reaction on PIL blog Opinio Juris here. Some history on this monstrous multi-jurisdiction claim here.

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