Chevron Corporation and Texaco Petroleum Company v. The Republic of Ecuador

In 1993 Ecuadorean citizens brought a class-action suit against Texaco Petroleum Company (Texaco) (plaintiff) in United States federal district court, alleging that Texaco’s oil operation in Ecuador (defendant) had polluted the rain forests and rivers in violation of Ecuadorean law. The action was dismissed for forum non conveniens. During those proceedings, Chevron Corporation (plaintiff) acquired Texaco. Once the proceedings in the United States were dismissed, the Ecuadoreans pursued litigation against both Chevron and Texaco in Ecuadorean court (the Lago Agrio case). The Ecuadorean court issued an $18.2 billion judgment against Chevron in the Lago Agrio case. While the Ecuadorean proceedings were ongoing, Chevron initiated arbitration against the Ecuadorean government, claiming that Ecuador had breached its obligations under the bilateral investment treaty between Ecuador and the United States. In particular, Chevron pointed to the Ecuadorean government’s alleged violations of Chevron’s procedural and due-process rights in Ecuadorean court. Chevron sought interim measures from the arbitral tribunal enjoining the Ecuadorean government from allowing the Lago Agrio judgment to become enforceable. The Lago Agrio plaintiffs had threatened to seek international enforcement, which would disrupt Chevron’s operations worldwide.