Chevron Corporation (NYSE:CVX): An Ecuadorean Tangle

Boston, MA 03/05/2014 (wallstreetpr) – A U.S. judge has ruled in favor of Chevron Corporation (NYSE:CVX) in a case that may have international ramifications. The judgment covers the charges leveled by Ecuadorean villagers against the company.

The issue at stake:

The issues relates to the pollution caused by Texaco, acquired by Chevron Corporation (NYSE:CVX). Villagers in north east Ecuador accused Texaco with contaminating an oilfield here between 1964 and 1992. They took the services of an American lawyer and fought in the Ecuadorean high court. The court ruled in their favor and awarded them damages of $18 billion in 2011. However, it was later revised to $9.5 billion.  The company approached the United Sates Judiciary against the ruling and alleged that the opposing lawyer had used unlawful means including bribery, fraud and extortion to secure the judgment in its favor. The U.S. District Court upheld the company’s contention and barred the villagers from enforcing the Ecuadorean ruling in the United States. The court did not comment on the pollution issue.

The ramifications:

As Chevron Corporation (NYSE:CVX) does not hold substantial assets in Ecuador, the villagers have approached other countries to enforce the judgment. The American court orders are binding in the U.S. and the villagers may not be able to enforce the ruling here. However, other countries are not restricted and as such cannot be restricted. However, Chevron will have sufficient fodder to use in cases in other countries. Apart from this issue, the judgment also seems to question the legality of the Ecuadorean judicial system. It will depend on the judiciary of other countries whether to rely on Chevron or respect the judgment of an independent country’s highest court. The villagers have tried to enforce the ruling in Argentina, Brazil and Canada.

Chevron Corporation (NYSE:CVX) is already engaged in arbitration proceedings in international courts with the Ecuadorean government for the clean up. It feels that Texaco has already cleaned up the site, known as Lago Agrio, satisfactorily and handed it over to a state controlled entity.

Published by Pushpa Naresh

Pushpa Naresh has done MBA (Finance) and an avid market tracker. She is a technical analyst who closely tracks US markets along with other global markets like India. She has been expressing her views about markets and also advises various clients.

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