A U.S. appeals court reversed an order freezing enforcement outside of Ecuador of an $18 billion damages award against Chevron Corp over pollution in the Amazonian rain forest.

The order, issued by the 2nd U.S. Circuit Court of Appeals in New York on Monday, is the latest reversal in a 18-year legal battle that has gone all the way to international arbitrators in Europe, who have also sought to block enforcement of the judgment.

In February, an Ecuadorean judge ordered Chevron, the second-largest U.S. oil company, to pay damages to the plaintiffs, but both the company and the residents appealed, and the case has yet to make its way to the country's highest court.

In anticipation of the judgment, however, Chevron filed court papers asking U.S. District Judge Lewis Kaplan to freeze any possible enforcement of payment anywhere outside Ecuador. Kaplan, who presides over a chunk of the litigation still in Manhattan federal court, issued the now-reversed preliminary injunction in March.

We are very excited that the court has reached this decision, Jim Tyrrell, the attorney who argued for the Ecuadoreans before the 2nd Circuit, said in a statement. It represents a triumph of the rule of law over the sensationalism created by Chevron's PR department.

Officials at the San Ramon, California-based company were not immediately available for comment on the order. A Chevron lawyer, Randy Mastro, did not return a call seeking comment.

Appeals court judges Gerald Lynch, Rosemary Pooler and Richard Wesley also granted the plaintiffs' request to stop a November bench trial before Kaplan, who was to determine whether to extend his injunction.

A spokeswoman for the plaintiffs said in a statement the appeals court order meant it recognized that Kaplan had acted too fast in issuing an injunction.

The Ecuadorean rain forest residents say Texaco, bought by Chevron in 2001, is responsible for hazardous oil-drilling waste dumped on their land in the 1970s and 1980s.

Chevron says Texaco cleaned up all waste pits for which it was responsible before turning the sites over to state-owned oil company Petroecuador, which still operates in the area.

ARBITRATION FIGHT

International arbitrators, under the Permanent Court of Arbitration in The Hague, ordered Ecuador in February to suspend enforcement of any judgment in the case as it decides whether Ecuador violated a bilateral U.S.-Ecuador investment treaty by failing to give Chevron a fair trial.

A separate arbitration tribunal in The Hague last month found Ecuador must pay $96 million to Chevron because Ecuador's courts had violated international law through their delays in resolving commercial disputes involving Texaco.

Chevron has accused the Ecuadoreans and their long-time legal advisor, Steven Donziger, of illegally pressuring the Ecuadorean legal system to render a judgment in their favor.

The oil company has pilloried Donziger for his comments on corruption in Ecuador's judicial system and his purported efforts to intimidate officials. The remarks came to light in an acclaimed documentary, Crude, and its outtakes, which were subpoenaed in U.S. litigation.

The appeals court order came after the judges heard oral arguments on Friday. The judges said they would issue a full opinion at a later date.

The case is Chevron Corp v. Hugo Gerardo Camacho Naranjo, 2nd U.S. Circuit Court of Appeals, Nos.11-1150, 11-1264 and 11-2259.

Court California New York Lawyer