Chevron 2014 Annual Report Download - page 54

Notes to the Consolidated Financial Statements
Millions of dollars, except per-share amounts
Priu, requiring shares of both companies to be “embargoed,” requiring third parties to withhold 40 percent of any payments
due to Chevron Argentina S.R.L. and ordering banks to withhold 40 percent of the funds in Chevron Argentina S.R.L. bank
accounts. On December 14, 2012, the Argentinean court rejected a motion to revoke the Freeze Order but modified it by
ordering that third parties are not required to withhold funds but must report their payments. The court also clarified that the
Freeze Order relating to bank accounts excludes taxes. On January 30, 2013, an appellate court upheld the Freeze Order, but
on June 4, 2013 the Supreme Court of Argentina revoked the Freeze Order in its entirety. On December 12, 2013, the Lago
Agrio plaintiffs served Chevron with notice of their filing of an enforcement proceeding in the National Court, First Instance,
of Argentina. Chevron filed its answer on February 27, 2014. Chevron intends to vigorously defend against the proceeding.
Chevron continues to believe the provincial court’s judgment is illegitimate and unenforceable in Ecuador, the United States
and other countries. The company also believes the judgment is the product of fraud, and contrary to the legitimate scientific
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 filed an arbitration claim in September 2009 against the Republic of Ecuador before an arbitral tribunal
presiding in the Permanent Court of Arbitration in The Hague under the Rules of the United Nations Commission on
International Trade Law. The 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. Through 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 obligations 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 filed a renewed application for further interim measures on
January 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
mandating 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 recognition within and without Ecuador of the judgment
against Chevron and, in particular, to preclude any certification by the Republic of Ecuador that would cause the judgment to
be enforceable against Chevron. On February 27, 2012, the Tribunal issued a Third Interim Award confirming its jurisdiction
to hear Chevron’s arbitration claims. On February 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 finalization and enforcement subject to execution of the Lago Agrio Judgment within and
outside Ecuador, including (but not limited to) Canada, Brazil and Argentina.” The Republic of Ecuador filed in the District
Court of the Hague a request to set aside the Tribunal’s Interim Awards and the First Partial Award (described below).
Chevron filed its answer to the set aside request on December 31, 2014.
The Tribunal has divided the merits phase of the proceeding into three phases. On September 17, 2013, the Tribunal issued
its First Partial Award from Phase One, finding 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 “diffuse” rights arising
from Texpet’s operations in the former concession area and precluded third parties from asserting collective/diffuse rights
environmental claims relating to Texpet’s operations in the former concession area but did not preclude individual claims for
personal harm. Chevron awaits a ruling from the Tribunal about whether the claims of the Lago Agrio plaintiffs are
individual or collective/diffuse. The 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 procedural hearing on January 20-21,
2014. The Tribunal held a hearing on April 29-30, 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. The Tribunal has not set a date for Phase Three, which will
be the damages phase of the arbitration.
Through a series of U.S. court proceedings initiated by Chevron to obtain discovery relating to the Lago Agrio litigation 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 plaintiffs. In February 2011,
Chevron filed a civil lawsuit in the Federal District Court for the Southern District of New York against the Lago Agrio
plaintiffs and several of their lawyers, consultants and supporters, alleging violations of the Racketeer Influenced and
Corrupt Organizations Act and other state laws. Through the civil lawsuit, Chevron is seeking relief that includes a
52 Chevron Corporation 2014 Annual Report