Chevron 2012 Annual Report Download - page 52

50 Chevron Corporation 2012 Annual Report
Note 13 Litigation – Continued
Notes to the Consolidated Financial Statements
Millions of dollars, except per-share amounts
and amplify the appellate decision on January 6, 2012, and
the court issued a ruling in response on January 13, 2012,
purporting to clarify and amplify its January 3, 2012 ruling,
which included clarication that the deadline for the com-
pany to issue a public apology to avoid the additional amount
of approximately $8,600 in punitive damages was within
15 days of the clarication ruling, or February 3, 2012.
Chevron did not issue an apology because doing so might be
mischaracterized as an admission of liability and would be
contrary to facts and evidence submitted at trial. On January
20, 2012, Chevron appealed (called a petition for cassation)
the appellate panel’s decision to Ecuador’s National Court of
Justice. As part of the appeal, Chevron requested the suspen-
sion of any requirement that Chevron post a bond to prevent
enforcement under Ecuadorian law of the judgment during
the cassation appeal. On February 17, 2012, the appellate
panel of the provincial court admitted Chevron’s cassation
appeal in a procedural step necessary for the National Court
of Justice to hear the appeal. e provincial court appel-
late panel denied Chevron’s request for a suspension of the
requirement that Chevron post a bond and stated that it
would not comply with the First and Second Interim Awards
of the international arbitration tribunal discussed below. On
March 29, 2012, the matter was transferred from the provin-
cial court to the National Court of Justice, and on November
22, 2012, the National Court agreed to hear Chevron’s cas-
sation appeal. On August 3, 2012, the provincial court in
Lago Agrio approved a court-appointed liquidator’s report on
damages that calculated the total judgment in the case to be
$19,100.
Chevron has no assets in Ecuador, and the Lago Agrio
plaintis’ lawyers have stated in press releases and through
other media that they will seek to enforce the Ecuador-
ian judgment in various countries and otherwise disrupt
Chevron’s operations. On May 30, 2012, the Lago Agrio
plaintis led an action against Chevron Corporation,
Chevron Canada Limited, and Chevron Canada Finance
Limited in the Ontario Superior Court of Justice in Ontario,
Canada, seeking to recognize and enforce the Ecuadorian
judgment. On June 27, 2012, the Lago Agrio plaintis led
an action against Chevron Corporation in the Superior Court
of Justice in Brasilia, Brazil, seeking to recognize and enforce
the Ecuadorian judgment. On October 15, 2012, the provin-
cial court in Lago Agrio issued an ex parte embargo order that
purports to order the seizure of assets belonging to separate
Chevron subsidiaries in Ecuador, Argentina and Colombia.
On November 6, 2012, at the request of the Lago Agrio
plaintis, a court in Argentina issued a Freeze Order against
Chevron Argentina S.R.L. and another Chevron subsidiary,
Ingeniero Nortberto Priu, requiring shares of both compa-
nies to be “embargoed,” requiring third parties to withhold
40% of any payments due to Chevron Argentina S.R.L. and
ordering banks to withhold 40% of the funds in Chevron
Argentina S.R.L. bank accounts. On December 14th, 2012,
the Argentinean court rejected a motion to revoke the Freeze
Order but modied it by ordering that third parties are not
required to withhold funds but must report their payments.
e court also claried that the Freeze Order relating to bank
accounts excludes taxes. On January 30, 2013, an appellate
court upheld the Freeze Order. Chevron continues to believe
the provincial court’s judgment is illegitimate and unenforce-
able in Ecuador, the United States and other countries. e
company also believes the judgment is the product of fraud,
and contrary to the legitimate scientic evidence. Chevron
cannot predict the timing or ultimate outcome of the appeals
process in Ecuador or any enforcement action. Chevron
expects to continue a vigorous defense of any imposition of
liability in the Ecuadorian courts and to contest and defend
any and all enforcement actions.
Chevron and Texpet led an arbitration claim in Sep-
tember 2009 against the Republic of Ecuador before an
arbitral tribunal presiding in the Permanent Court of Arbi-
tration in e Hague under the Rules of the United Nations
Commission on International Trade Law. e claim alleges
violations of the Republic of Ecuador’s obligations under
the United States–Ecuador Bilateral Investment Treaty
(BIT) and breaches of the settlement and release agreements
between the Republic of Ecuador and Texpet (described
above), which are investment agreements protected by the
BIT. rough the arbitration, Chevron and Texpet are
seeking relief against the Republic of Ecuador, including a
declaration that any judgment against Chevron in the Lago
Agrio litigation constitutes a violation of Ecuador’s obliga-
tions under the BIT. On February 9, 2011, the Tribunal
issued an Order for Interim Measures requiring the Republic
of Ecuador to take all measures at its disposal to suspend or
cause to be suspended the enforcement or recognition within
and without Ecuador of any judgment against Chevron in
the Lago Agrio case pending further order of the Tribunal.
On January 25, 2012, the Tribunal converted the Order for
Interim Measures into an Interim Award. Chevron led a
renewed application for further interim measures on Janu-
ary 4, 2012, and the Republic of Ecuador opposed Chevron’s
application and requested that the existing Order for Interim
Measures be vacated on January 9, 2012. On February 16,
2012, the Tribunal issued a Second Interim Award mandat-
ing that the Republic of Ecuador take all measures necessary
(whether by its judicial, legislative or executive branches) to
suspend or cause to be suspended the enforcement and recog-
nition within and without Ecuador of the judgment against
Chevron and, in particular, to preclude any certication
by the Republic of Ecuador that would cause the judgment
to be enforceable against Chevron. On February 27, 2012,
the Tribunal issued a ird Interim Award conrming its