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Ecuador court rejects Chevron arbitration ruling


QUITO, Ecuador (Reuters)—A court in Ecuador has rejected an order by arbitrators that an $18 billion pollution ruling against Chevron Corp. should be frozen, but the judges referred an appeal by the U.S. oil company to the country's Supreme Court.

A year after the landmark decision against Chevron, a panel working for The Hague's Permanent Court of Arbitration told Ecuador last week to take all necessary measures to suspend enforcement of the award at home and abroad.

But in a ruling made public on Monday, the court that has been considering the case in the remote Amazon jungle region of Sucumbios said Ecuador should not comply with that order.

"A simple arbitral award...cannot force judges to infringe the human rights of our citizens," said the court, adding that abiding by the panel's order would be unconstitutional and would lead to the breach of international human rights conventions.

The court said it had accepted an appeal filed by Chevron, however, and referred it to the Supreme Court in the clearest sign yet that the litigation, which has already run nearly 20 years, could drag on for several more years.

The plaintiffs say The Hague panel's ruling will not affect their plans to collect on the $18 billion award in other countries where Chevron has assets.

"We intend to do everything in our power to ensure Chevron's management team meets the company's legal obligations and pays the full amount of the judgment," said Pablo Fajardo, the lead lawyer for the plaintiffs.

The Sucumbios court also said the original ruling was now enforceable because Chevron did not offer to pay a bond, which would have suspended the ruling during the company's appeal.

Plaintiffs' spokeswoman Karen Hinton said a judge at the court now needed to certify the ruling formally.

"Once he does that (could be next three weeks or so), we can enforce," she told Reuters by email.

California-based Chevron inherited the case with its 2001 takeover of Texaco, which had left Ecuador nine years earlier.

The plaintiffs accused Texaco of causing illnesses among the local population by dumping drilling waste in unlined pits. They launched their case in 1993 in New York, before it was moved to the court in the town of Lago Agrio, Ecuador, nearly a decade later.

Chevron denies the accusations. It says Texaco did not pollute the jungle, and that it properly cleaned up all the pits for which it was responsible. The case is being watched closely by the oil industry for precedents that could influence other claims by states accusing multinational companies of pollution.

Activists portray the long legal battle as a fight for justice. Chevron says the proceedings have been driven more by opportunism and greedy lawyers. The saga has spawned lots of accusations of dirty tricks and bribery.

"Chevron is prepared to defend against any effort by the plaintiffs to commence enforcement actions, and to hold the plaintiffs' lawyers accountable for their fraud," said Chevron spokesman James Craig.

Working under rules set by the U.N. Commission on International Trade Law, the panel must decide whether it has jurisdiction in the case and could also consider whether Ecuador violated an investment treaty with the United States, given Chevron's allegations that it did not receive a fair trial.

Arbitration could then take years, if the last Chevron dispute with Ecuador is any guide. It took four years for the panel to order Ecuador to pay Chevron $96 million in connection with claims made in its courts in the 1990s.

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