Goliath’s nasty ways

Print edition : November 29, 2013

Residents of the Ecuadorian Amazon region protest in New York on October 15 against the counter case brought by Chevron in the long-running battle against the pollution caused to the Amazon by its operations. Photo: CARLO ALLEGRI/REUTERS

BIG multinational oil companies usually do an impressive public relations job. Advertisements and laudatory media reports show how “green” and people-minded these companies are, and how their technicians and professional employees are concerned with the rights of local communities and with bringing to everyone access to safe, clean energy.

The oil major Chevron is no exception. Its website declares: “The foundation of our business success and world-class performance is operational excellence, which we define as the systematic management of process safety, personal safety and health, environment, reliability, and efficiency. Safety is our highest priority.” Chevron can afford to put its money where its mouth is. In 2012, its operating revenues were more than $244 billion, net income was nearly $27 billion and return on equity was 27 per cent.

But when it has come to the crunch, when there have been genuine demands for compensation from people whose health and safety have been affected by its operations, its response has been both cynical and unsavoury: denying any wrongdoing, lobbying to avoid legal consequences and aggressively pursuing those who have sought to protect the rights of the affected parties.

A little history first. Between 1964 and 1990, the oil company Texaco, which Chevron acquired in 2001, drilled for oil in the Ecuadorian Amazon. In order to cut costs, it employed environmental practices that were obsolete and were even illegal in both the United States and Ecuador. The company admitted to dumping around 16 billion gallons of toxic wastewater into the rivers and streams that were a source of drinking water and in which people also bathed and fished. It abandoned around the rainforest hundreds of unlined open pits filled with hazardous waste such as toxic sludge and oil drilling chemicals and spilled around 17 million gallons of crude oil.

What made it worse was that this was not because nobody knew any better at the time. In fact, the company need not have done any of this. In several other countries where it was operating at that time, including in the U.S., its home country, the company re-injected wastewater and used available technology to deal with toxic byproducts.

The environmental consequences and the impact on the health and safety of local communities have been huge. There has been an epidemic of oil-related birth defects, cancers, miscarriages and other illness. It has been estimated that the contamination directly led to at least 1,400 human deaths and the destruction of thousands of species of plants and animals.

Class action lawsuit

In 2003, a class action lawsuit involving 40,000 indigenous rainforest residents of the Lago Agrio region was brought against Texaco, alleging severe environmental contamination of the land and water and the consequent increased rates of cancer as well as other serious health problems among the residents of the region. The case had originally been filed in a U.S. court in the mid-1990s, with the assistance of a human rights lawyer who visited Ecuador and was shocked by what he saw. However, the company managed to shift the case out of U.S. courts to Ecuador, where they apparently hoped to get a better deal, possibly because of the greater ability to “influence” the legal system there.

But as the trial proceeded, it became clear that the proceedings were indicating the culpability of Chevron (formerly Texaco). Then, the multinational company tried to work on other channels to ensure that it would not have to face liability. For example, it lobbied the U.S. government to end Ecuador’s trade preferences, apparently over this lawsuit.

Other efforts to have the case dropped included arbitration claims by Chevron in 2006 and 2009 under an old U.S.-Ecuador bilateral investment treaty. This counter-case alleged that the government of Ecuador “unduly influenced” the judiciary because the President, Rafael Correa, met the affected people and promised to help them. The arbitration council in the Hague, well known to come up with pro-investor judgments, made a wishy-washy ruling, which did not actually deny the allegations against Chevron but said the case overlapped with a 1995 settlement about an oil spill by Texaco-Chevron. The Ecuadorian government denounced these arbitration proceedings as “a forum by and for Chevron”.

Despite all these impediments, the case filed by the litigants of the Lago Agrio region eventually resulted in a landmark judgment against Chevron in an Ecuadorian court in 2011. The company was ordered to pay around $19 billion for the clean-up of widespread contamination, as well as compensatory and punitive damages. This would be an important precedent for holding companies accountable for the conscious damage that is done by their operations, as well as acting as a preventive against future such actions.

Chevron’s counter suit

But instead of paying up, the company launched a counter lawsuit for fraud in New York against 47 local residents and their lawyers (especially the human rights lawyer, Steven Donziger, who had been helping the Ecuadorians since 1993), alleging that the entire case is a conspiracy to extort the company and seeking huge damages of $60 billion—more than three times the Ecuadorian villagers’ award!

There have been allegations of partial behaviour against the judge in this new case, in terms of blocking most lines of questioning about environmental contamination, blocking evidence of Chevron’s surveillance of Donziger and refusing to allow him damages over misrepresentations that adversely affect his reputation, and other expressions of partiality. Most significantly, Chevron was able to win a significant victory by preventing a jury trial that would have been more objective. (At one point, the company even declared that it would drop billions of dollars in damages claim to avoid a jury trial, where the evidence could be weighed objectively by an impartial group of citizens. Instead, Chevron wanted the proceedings held in secret and managed to ensure that. It has also ensured that the case will be decided only by the judge, whose leanings are apparently already evident.)

The counter-trial has been murky in the extreme. Ecuadorian villagers and their lawyer turned over evidence that Chevron engaged in a “pattern of misconduct and corruption” by offering illicit payments and outright bribes to judges in Ecuador over the years in order to secure a favourable testimony. Chevron has countered that the judgment against it in Ecuador was ghostwritten by the plaintiffs, and has produced an already disgraced former judge to testify on the company’s behalf even though he has already admitted to taking bribes throughout his career.

Meanwhile, while this farcical but deadly fencing continues, the villagers have still not received their compensation. But for Chevron’s lawyers, it seems that they do not matter anyway. The chief lawyer in this case was recently quoted as saying, “The plaintiffs are really irrelevant. They always were irrelevant.... There will be no prejudice to [the rainforest communities] or any individual by holding up enforcement of the judgment.”

The implications of this case go well beyond Ecuador and this particular company because they go to the heart of ensuring some minimal accountability to global firms that have not just economic clout and political lobbying power but also very deep pockets with which to keep fighting legal cases and use different methods to prolong them and seek favourable outcomes. Since such firms by their nature only respond to profits and shareholder value, it is only too likely that there would be incentives for the management to use all possible resources and strategies to ensure that these profits and share values remain unaffected, regardless of the damage and cost to others. It is really not enough anymore for people to say that the law has taken its course. Is it not time that such companies are also tried in the court of public opinion?