On June 19 US District Judge Leonard Sand of the Southern District of New York ruled against Chevron Corp.'s efforts to have the American Arbitration Association settle its dispute with Ecuador and the Ecuadoran state oil company Petroecuador. This was a significant setback for Chevron, which is trying to avoid paying for the cleanup of environmental damage in Ecuador's Amazon region caused by Texaco Petroleum Co.'s operations there from 1964 to 1992. Texaco left the country in 1992; it merged with Chevron in 2001.

Some 30,000 indigenous people in Ecuador and the neighboring region of Peru sued Texaco in US courts in 1993 and 1994, charging that the company had contaminated water supplies and had caused cancer and other diseases among the residents. The cases dragged through US courts for a decade, with several dismissals and accusations that a US judge had accepted favors from the company. In June 2004 Chevron started arbitration proceedings against Ecuador on the grounds Texaco and Petroecuador had a joint operation and therefore shared liability for the damage; Chevron claimed that according to a 1965 agreement a US arbitrator should decide how much of the liability was Chevron's.

Judge Sand ruled that under Ecuadoran law Petroecuador wasn't bound by the 1965 agreement. He didn't rule on the extent of Chevron's actual liability in the case, and he gave Ecuador and Chevron 60 days to confer before deciding how or whether to proceed on that issue.

Chevron told Associated Press that it was "disappointed" with the ruling on arbitration. Luis Yanza, coordinator of the Amazon Region Front, which represents the residents, said they were "satisfied" with this "triumph for the Ecuadoran people," which "strengthens the legal case that we, the affected people, are pursuing." (Dow Jones, June 21; Noticias Aliadas, June 28; El Diario-La Prensa, NY, June 23 from AP)

On June 23 Ecuadoran president Rafael Correa denied press reports that Ecuador was accepting arbitration of another dispute, this one with the US-based Occidental Petroleum Corporation (Oxy). Ecuador rescinded its contract with Oxy in May 2006, and the company brought a suit against Ecuador for some $1 billion in alleged losses. The dispute is in arbitration with the World Bank's International Center for Settlement of Investment Disputes (ICSID). On June 20 the Ecuadoran daily Universal reported that Foreign Minister Maria Fernanda Espinosa had said that "Ecuador welcomes the arbitration." President Correa said the paper had misunderstood the foreign secretary. Ecuador was arguing its case before the ICSID, he said, but still didn't accept the group's jurisdiction.

In April Correa announced that Ecuador was cutting back its reliance on the World Bank and might even sue the entity for past actions. (ED-LP, June 24 from AP)

From Weekly News Update on the Americas, July 1

See our last post on Ecuador.