Chevron 2013 Annual Report Download - page 52

50 Chevron Corporation 2013 Annual Report
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
jurisdiction to hear Chevron’s arbitration claims. On Febru-
ary 7, 2013, the Tribunal issued its Fourth Interim Award in
which it declared that the Republic of Ecuador “has violated
the First and Second Interim Awards under the [BIT], the
UNCITRAL Rules and international law in regard to the
nalization and enforcement subject to execution of the Lago
Agrio Judgment within and outside Ecuador, including (but
not limited to) Canada, Brazil and Argentina.” e Tribunal
has divided the merits phase of the proceedings into three
phases. On September 17, 2013, the Tribunal issued its First
Partial Award from Phase One, nding that the settlement
agreements between the Republic of Ecuador and Texpet
applied to Texpet and Chevron, released Texpet and Chevron
from claims based on “collective” or “diuse” rights arising
from Texpet’s operations in the former concession area and
precluded third parties from asserting collective/diuse rights
environmental claims relating to Texpet’s operations in the
former concession area but did not preclude individual claims
for personal harm. Chevron expects that the application
of this ruling will be considered by the Tribunal in Phase
Two, including a determination of whether the claims of the
Lago Agrio plaintis are individual or collective/diuse. e
Tribunal had set Phase Two to begin on January 20, 2014
to hear Chevron’s denial of justice claims, but on January
2, 2014, the Tribunal postponed Phase Two and held a pro-
cedural hearing on January 20-21, 2014. e Tribunal set
a hearing on April 28-30, 2014 to address remaining issues
relating to Phase One. It also set a hearing on April 20 to
May 6, 2015 to address Phase Two issues. e Tribunal has
not set a date for Phase ree, which will be the damages
phase of the arbitration.
rough a series of U.S. court proceedings initiated by
Chevron to obtain discovery relating to the Lago Agrio litiga-
tion and the BIT arbitration, Chevron obtained evidence that
it believes shows a pattern of fraud, collusion, corruption, and
other misconduct on the part of several lawyers, consultants
and others acting for the Lago Agrio plaintis. In February
2011, Chevron led a civil lawsuit in the Federal District
Court for the Southern District of New York against the Lago
Agrio plaintis and several of their lawyers, consultants and
supporters, alleging violations of the Racketeer Inuenced and
Corrupt Organizations Act and other state laws. rough the
civil lawsuit, Chevron is seeking relief that includes a declara-
tion that any judgment against Chevron in the Lago Agrio
litigation is the result of fraud and other unlawful conduct
and is therefore unenforceable. On March 7, 2011, the Federal
District Court issued a preliminary injunction prohibiting
the Lago Agrio plaintis and persons acting in concert with
them from taking any action in furtherance of recognition or
enforcement of any judgment against Chevron in the Lago
Agrio case pending resolution of Chevron’s civil lawsuit by
the Federal District Court. On May 31, 2011, the Federal
District Court severed claims one through eight of Chev-
ron’s complaint from the ninth claim for declaratory relief
and imposed a discovery stay on claims one through eight
pending a trial on the ninth claim for declaratory relief. On
September 19, 2011, the U.S. Court of Appeals for the Second
Circuit vacated the preliminary injunction, stayed the trial on
Chevron’s ninth claim, a claim for declaratory relief, that had
been set for November 14, 2011, and denied the defendants’
mandamus petition to recuse the judge hearing the lawsuit.
e Second Circuit issued its opinion on January 26, 2012
ordering the dismissal of Chevron’s ninth claim for declara-
tory relief. On February 16, 2012, the Federal District Court
lifted the stay on claims one through eight, and on October
18, 2012, the Federal District Court set a trial date of
October 15, 2013. On March 22, 2013, Chevron settled its
claims against Stratus Consulting, and on April 12, 2013
sworn declarations by representatives of Stratus Consulting
were led with the Court admitting their role and that of
the plainti’s attorneys in drafting the environmental report
of the mining engineer appointed by the provincial court
in Lago Agrio. On September 26, 2013, the Second Circuit
denied the defendant’s Petition for Writ of Mandamus to
recuse the judge hearing the case and to collaterally estop
Chevron from seeking a declaration that the Lago Agrio
judgment was obtained through fraud and other unlawful
conduct. e trial commenced on October 15, 2013 and
concluded on November 22, 2013. Post-trial brieng has
concluded, but no decision has been rendered by the Federal
District Court as of the date of this report.
e ultimate outcome of the foregoing matters, including
any nancial eect on Chevron, remains uncertain. Manage-
ment does not believe an estimate of a reasonably possible
loss (or a range of loss) can be made in this case. Due to the
defects associated with the Ecuadorian judgment, the 2008
engineer’s report on alleged damages and the September 2010
plaintis’ submission on alleged damages, management does
not believe these documents have any utility in calculating
a reasonably possible loss (or a range of loss). Moreover, the
highly uncertain legal environment surrounding the case
provides no basis for management to estimate a reasonably
possible loss (or a range of loss).
Note 14 Litigation – Continued
Notes to the Consolidated Financial Statements
Millions of dollars, except per-share amounts