Chevron Wins Lawsuit In Argentina Relating To Ecuador Environment Damages; Court Removes Freeze On Chevron Assets

Argentina’s Supreme Court has ruled in favor of Chevron Corp. (NYSE:CVX) and against the Ecuadorian government, which saw its effort to freeze the U.S. company's assets in Argentina fail. Ecuador has employed lawyers in numerous other countries to help it collect billions in a long-standing but so-far ill-fated pollution case.

The Buenos Aires court’s decision on Tuesday was the latest setback for Ecuador in its legal battle to get Chevron to pay $19 billion for an oil spill in an area known as Lago Ario. Ecuador's government has pursued the litigation in U.S., Canadian and Argentine courts, the latter of which has now tossed the case.

The assets and future income of Chevron's Argentina subsidiary were frozen last November by Argentine judge Adrian Elkuj, following a lawsuit by the winners of the $19 billion judgment in Ecuador. But the Argentine court accepted Chevron’s appeal against the November ruling saying the “the appealing parties have not participated in the case against Chevron Corporation (in Ecuador) and are legally distinct units.

"The decision from Argentina's Supreme Court confirms that the Ecuadorian embargo should not have been issued in the first place," Chevron said in a statement. "This is a significant development further demonstrating the illegitimacy of the Lago Agrio plaintiffs' attempt to enforce their fradulent judgment. The Lago Agrio plaintiffs' corrupt judgment will not be enforced by any legal system that observes the Rule of Law."

Texaco Corp, which was acquired by Chevron in 2001, operated in Ecuador from 1964 to 1992, during which it dumped more than 16 billion gallons of toxic waste into water bodies used by local inhabitants for drinking. The toxicity of water was later linked to increased incidence of diseases including cancer.

After an extended trial held over a period of eight years, an Ecuador court in 2011 ordered Chevron to pay $19 billion to clean up the mess and restore the Amazon rainforest.

However, Chevron has been appealing the decision, arguing that Texaco was causing environmental damage in Ecuador prior to Chevron’s takeover and that the litigation was initiated against Texaco in 1993 by Ecuadorian Indians and farmers.

Since Chevron no longer has any significant assets in Ecuador, the plaintiffs have taken the case to Canada, Brazil, the U.S. and Colombia, apart from Argentina -- countries where the company does have assets -- to get courts there to enforce the Ecuador court’s ruling.

On May 1, a Canadian court ruled in favor of Chevron saying it was “not the place” for the case.

During the protracted legal battle, both sides accused each other of presenting fraudulent evidence to the public and the court, and Chevron also tried to exploit a bilateral investment treaty signed jointly by the U.S. and Ecuador. The treaty allows U.S. investors to seek monetary damages from the government of Ecuador if they can show unfair treatment.

Environmental advocacy groups alleged that Chevron tried to take advantage of the treaty to immunize itself from liability in a private litigation.