Ex. 95 2010 11-23 jurisd hrg day 2 condensed

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IN THE MATTER OF AN ARBITRATION BEFORE A TRIBUNAL CONSTITUTED
IN ACCORDANCE WITH THE TREATY BETWEEN THE U.S.A. AND THE
REPUBLIC OF ECUADOR CONCERNING THE ENCOURAGEMENT AND RECIPROCAL
PROTECTION OF INVESTMENT, SIGNED AUGUST 27, 1993
(THE "TREATY")
and
THE UNCITRAL ARBITRATION RULES 1976
- - - - - - - - - - - - - - - - - -x
:
In the Matter of Arbitration :
Between: :
:
CHEVRON CORPORATION (U.S.A.), :
TEXACO PETROLEUM COMPANY (U.S.A.), :
:
Claimants, : PCA Case No.
: 2009-23
and :
:
THE REPUBLIC OF ECUADOR, :
:
Respondent. :
:
- - - - - - - - - - - - - - - - - -x Volume 2
HEARING ON JURISDICTION
Tuesday, November 23, 2010
International Disputes Resolution Centre
70 Fleet Street
Second Floor Conference Room
London, United Kingdom
The hearing in the above-entitled matter convened at
10:00 a.m. before:
MR. V.V. VEEDER, Q.C., President
DR. HORACIO GRIGERA NAÓN, Arbitrator
PROFESSOR VAUGHAN LOWE, Q.C., Arbitrator
Worldwide Reporting, LLP
529 14th Street, S.E. Washington, DC 20003
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Permanent Court of Arbitration:
MR. MARTIN DOE, Registrar
Court Reporters:
MR. DAVID A. KASDAN
Registered Diplomate Reporter (RDR)
Certified Realtime Reporter (CRR)
529 14th Street, S.E.
Washington, D.C. 20003
United States of America
(202) 544-1903
worldwide.reporting@verizon.net
SR. VIRGILIO DANTE RINALDI, S.H.
D.R. Esteno
Colombres 566
Buenos Aires 1218ABE
Argentina
(5411) 4957-0083
Interpreters:
MR. JOSE ANTONIO CARVALLO-QUINTANA
MR. THOMAS GONZÁLEZ CASTRO
237
APPEARANCES:
On behalf of the Claimants:
MR. JAMES R. CRAWFORD, S.C.
Matrix Chambers
Gray's Inn
London, England WC1R 5LN
MR. R. DOAK BISHOP
MR. THOMAS CHILDS
MR. DAVID H. WEISS
MS. ZHENNIA R. SILVERMAN
MS. CAROL TAMEZ
King & Spalding, LLP
110 Louisiana, Suite 3900
Houston, Texas 77002 U.S.A.
(713) 751-3200
MR. EDWARD G. KEHOE
MS. KRISTI JACQUES
1185 Avenue of the Americas
New York, New York 10036-4003 U.S.A.
MR. TIMOTHY SULLIVAN
1730 Pennsylvania Avenue, N.W.
Washington, D.C. 20006 U.S.A.
MR. THOMAS CHILDS
125 Old Broad
London, EC2N 1AR
England
On behalf of LCIL:
DR. THOMAS GRANT
Representing Chevron Corporation and Texaco
Petroleum Company:
MR. HEWITT PATE
MR. DAVID B. MOYER
MR. RICARDO REIS VEIGA
238
APPEARANCES: (Continued)
On behalf of the Respondent:
DR. DIEGO GARCÍA CARRIÓN,
Attorney General
DR. ALVARO GALINDO CARDONA,
Director of International Disputes,
Attorney General's Office
DR. JUAN FRANCISCO MARTINEZ C.
Counsel, Attorney General's Office
Procuraduría General del Estado
Robles 731 y Av. Amazonas
Quito, Ecuador
MR. ZACHARY DOUGLAS
MR. LUIS GONZÁLEZ
Matrix Chambers
Gray's Inn
London, England WC1R 5LN
MR. ERIC W. BLOOM
MR. TOMÁS LEONARD
Winston & Strawn, LLP
1700 K Street, N.W.
Washington, D.C. 20006-3817 U.S.A.
(202) 282-5000
MR. BRUNO LEURENT
Winston & Strawn
25 Avenue Marceau
75116 Paris France
+33 1 5364-8282
MR. RICARDO UGARTE
Winston & Strawn, LLP
35 West Wacker Drive
Chicago, Illinois 60601-9703 U.S.A.
(312) 558-5600
239
C O N T E N T S
PAGE
REBUTTAL ARGUMENTS
ON BEHALF OF THE RESPONDENT:
By Mr. Douglas 240
By Mr. Bloom 257
By Mr. Leonard 286
By Mr. Ugarte 294
By Mr. Galindo 300
ON BEHALF OF THE CLAIMANTS:
By Mr. Bishop 318
By Mr. Kehoe 333
By Professor Crawford 336
By Mr. Kehoe 358
OTHER MATTERS:
ON THE ORDER OF PROVISIONAL MEASURES 376
ON THE AMICAE APPLICANTS 400
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1 P R O C E E D I N G S
2 PRESIDENT VEEDER: Good morning, ladies and gentlemen.
3 We will start day two of this hearing.
4 In accordance with the timetable agreed with the
5 parties last night, we now hand the floor to the Respondent for
6 their Reply oral submissions up to two hours. We will take a
7 break midmorning at a time when the Respondent's convenience.
8 REBUTTAL ARGUMENT BY COUNSEL FOR RESPONDENT
9 MR. DOUGLAS: Members of the Tribunal, good morning.
10 Your jurisdiction over all the claims in this
11 arbitration ultimately depends upon the Claimants demonstrating
12 that the '95 Release extends to the claims of third parties,
13 and in particular the claims of the Lago Agrio Plaintiffs.
14 The Claimants have not discharged the burden of
15 persuasion on the scope of the '95 Release for the purposes of
16 the jurisdictional phase.
17 I'm going to dedicate some part of my presentation to
18 those two points, but I will address two other points. So,
19 first, the standard of scrutiny that must be applied to
20 jurisdictional issues; second, the proposition that the scope
21 of the Release agreement is the key to unlocking the mystery in
22 respect of all the claims submitted to the Tribunal. Third, I
23 will touch briefly upon the Claimants' contention that the '95
24 Release is an independent investment in its own right; and
25 fourth, I'll address the Tribunal's questions on issue
241
10:01 1 estoppel.
2 So I'll move first to the threshold, the burden of
3 persuasion.
4 The Claimants' approach in their written pleadings and
5 even more dramatically at this Hearing is to try to convince
6 the Tribunal not to look at the foundation upon which all the
7 jurisdiction in respect of all its claims rest. That is, the
8 scope of the '95 Release. Not a single word--not a single
9 word--was said by the Claimants yesterday about the terms of
10 the '95 Release until questions were put to Professor Crawford
11 in the eleventh hour of the final presentation.
12 Now, it's safe to assume, I think, that but for the
13 Tribunal's questions, the Claimants had not intended to say a
14 single word about the scope of the '95 Release.
15 Is this Tribunal going to accept on the basis of
16 Professor Crawford's answers that the Claimants have discharged
17 the prima facie test?
18 The prima facie test cannot be satisfied by complete
19 silence. It's as if the Claimants have delivered the '95
20 Release Agreement to you in a sealed envelope with the note,
21 "Do not open until the merits," but not even this does justice
22 to their approach because what the note actually says is that
23 assume everything we say about it is true, but don't open this
24 envelope until we get to the merits.
25 The '95 Release Agreement does not extend to third
242
10:03 1 parties. They say sometimes about their submission on the
2 scope being on the face of the document. We were never even
3 shown the face of the document. The document remained hidden
4 throughout the course of their submissions yesterday.
5 We don't accept as a matter of Ecuadorian Law that
6 they could release the third-party claims; but even if Ecuador
7 and the law did allow that, then surely the best way of
8 expressing that intention in the '95 Release was to say so in
9 express terms. You won't find them.
10 The prima facie test is actually employed for quite a
11 limited purpose in investment arbitration. It's to test
12 whether allegations of fact give rise to a colorable claim for
13 breach of a treaty obligation, and we would accept--and this is
14 your Question 3--that it's a 51 percent chance of success.
15 But the Claimants--and this is the critical point--the
16 Claimants are relying upon their assertion in relation to the
17 scope of the '95 Release for much more than that, for much more
18 than that. It's the only link that they've asserted between
19 the original investment and their allegations concerning the
20 Lago Agrio proceedings. As such, the scope of the '95 Release
21 has critical significance for this Tribunal's Decision on
22 Jurisdiction.
23 So, we would submit, Members of the Tribunal, that
24 we're not in the domain of the Oil Platforms prima facie test.
25 We're in the realm of a question of contractual interpretation
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10:05 1 that must be decided conclusively at the jurisdictional phase.
2 I will quote from the Mikula and Romania Case at
3 Paragraph 66, "There is common ground at the jurisdictional
4 stage is not the appropriate time to enter the merits of the
5 case. Indeed, it is not for the Tribunal to examine the claim
6 in detail at the stage of jurisdiction. The Tribunal concurs
7 with Claimants that the Tribunal need not go beyond determining
8 whether the facts alleged by Claimant, if established, are
9 capable of constituting violations of the provisions that are
10 invoked."
11 So far, so good.
12 "However, when a jurisdictional issue hinges on a
13 factual determination that may also relate to the merits of the
14 claims, the Tribunal must proceed to a determination of the
15 facts that are presented to it to the extent necessary for
16 jurisdictional purposes. Therefore, a tribunal can make
17 definitive factual findings at the jurisdictional stage, too."
18 Sir Frank Berman in the Lucchetti and Peru Annulment
19 Case, very much the same sentiment, and I will quote
20 Paragraph 17: "It is one thing to say that factual matters can
21 or should be provisionally accepted at the preliminary phase
22 because there will be full opportunity to put them to the test
23 definitively later on. But if particular facts are a critical
24 element in the establishment of jurisdiction itself so that the
25 decision to accept or to deny jurisdiction disposes of them
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10:06 1 once and for all for this purpose, how can it be seriously
2 claimed that those facts should be assumed rather than proved?"
3 Bayview and Mexico is a good example. There the
4 Tribunal interpreted a treaty between the United States and
5 Mexico to determine whether or not the Claimant had a right to
6 water flowing into a river that provided irrigation to the
7 Claimants' land. That issue was determined conclusively as a
8 preliminary issue; and, as a result, all the claims were
9 disposed of as a matter of jurisdiction.
10 Now, it's our position that you can and must resolve
11 the narrow question of the scope of the '95 Release now on the
12 basis of the extensive pleadings and submissions that are
13 before you.
14 Now, as I hardly need to remind this Tribunal, under
15 Article 15 of the UNCITRAL Rules, you have four plenary powers
16 to shape this procedure as you deem fit and ask for further
17 guidance from the parties should you need it. If you do
18 require any further guidance--this is entirely a matter for
19 you--then we would submit the proper course is to ask the
20 parties very specific questions and set a very specific page
21 limit and to respond to those particular questions. You can do
22 that at any stage. You can do that while you're writing the
23 Award.
24 So, our position is that you must decide this narrow
25 issue conclusively now. Alternatively, if you are minded to
245
10:08 1 apply the prima facie test, then as I said at the beginning,
2 they have not come near to discharging this threshold.
3 Briefly on your question one, Article 21(4) of the
4 UNCITRAL Rules, at least as in the version that applies to this
5 arbitration, creates a strong presumption in favor of disposing
6 of jurisdictional issues as preliminary questions. It's the
7 presumption that we submit would be especially fortified in
8 this case because if jurisdiction is joined to the merits, and
9 certainly this has never been debated because it's always been
10 assumed that it would be decided as a preliminary issue, it
11 would involve opening the proverbial can of worms to a whole
12 range of claims which, by definition, fall away if you decide
13 this one narrow jurisdictional issue against the Claimants.
14 This is the paradigm case where we submit these issues must be
15 resolved as preliminary issues.
16 So, I will move on now to the next point, and that is
17 the relationship between the scope of the '95 Release and all
18 the other claims, and I want to test this with the Tribunal by
19 first considering the situation if the '95 Release didn't exist
20 at all. So, I'm considering a hypothetical situation. If
21 there were no '95 Release, would the Claimant--would the
22 Tribunal have jurisdiction to entertain treaty claims in
23 respect of anything happening in the Lago Agrio proceedings.
24 This depends upon the nexus between the original investment and
25 the Lago Agrio proceedings. It would be our submission that
246
10:10 1 there clearly would be no sufficient nexus. The Lago Agrio
2 Plaintiffs are making claims founded upon the general law of
3 Ecuador against the Claimants, so we are within the Amco/Saluka
4 principle. There would be no basis for the Tribunal to
5 exercise supervisory jurisdiction over the Lago Agrio Court
6 because there would be no investment dispute under Article VI.
7 The Claimants' life-span theory would not assist them.
8 Now, assume arguendo that as a matter of fact the
9 original investment contemplates, as it's memorialized in the
10 Concession Contract between TexPet and the Government. Suppose
11 arguendo that as a matter of fact the original investment
12 contemplates remediation as between TexPet and the Government.
13 The original investment cannot contemplate potential
14 liabilities to private parties. Surely, there is a distinction
15 between environmental remediation within the context of the
16 relationship between the State and the Concessionaire, on the
17 one hand, and liability to third parties for an injury caused
18 them on the other.
19 Remediation vis-à-vis the State might be a natural
20 part of an investment in oil extraction. Responding to claims
21 by private parties for failing to do so is not. It cannot be
22 said--
23 ARBITRATOR LOWE: Can I just ask why that is. It is
24 presumably a question of fact whether at the outset of the
25 investment this is contemplated as a risk which has to be taken
247
10:12 1 into account in deciding whether or not to go forward. Why
2 would an Operator not take account of all foreseeable potential
3 liabilities? And if the fact of pollution is contemplated at
4 the beginning, why should they then not take account of all the
5 potential litigants who might institute claims in relation to
6 that fact of pollution?
7 MR. DOUGLAS: Because it cannot be said that an oil
8 company legitimately sets out to injure private individuals as
9 part of its investment operations.
10 ARBITRATOR LOWE: Nobody is suggesting that that's the
11 case. Accidents happen. Everybody knows that accidents
12 happen. That's why you have insurance on cars, ships, and
13 everything else. When you're setting off on a commercial
14 venture like this, why would you not take into account the
15 possibility of accidental harm and litigation arising from that
16 and, in that category of litigation that you take into account,
17 contemplate all possible Plaintiffs?
18 MR. DOUGLAS: You might do so as a matter of
19 insurance, for example, but you cannot do so in terms of the
20 investment treaty protection. The investment treaty cannot
21 simply superimpose itself over any potential claims on the
22 basis of any type of liability in respect of any operations
23 conducted by the investment, lawfully or unlawfully. It simply
24 can't go that far.
25 Take the hypothetical example of British Petroleum in
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10:13 1 the Gulf of Mexico. Now, suppose, on the one hand you say that
2 remediation vis-à-vis the Government in respect of oil spills
3 is part of the life span of the investment. Now, I think there
4 is a real stretch there to say that any cleanup operations that
5 occur as a result of an oil spill is part of the original
6 investment. There's a real stretch there. But it's quite
7 another thing to say that any claims by the shrimp fishermen
8 against British Petroleum for their own loss is covered within
9 this concept of an investment dispute and the original
10 investment. There is a clear distinction there.
11 So, we would say without the '95 Release Agreement,
12 the Lago Agrio Plaintiffs would be in exactly the same position
13 as the shrimp farmers in Louisiana. Under no circumstances
14 would this Tribunal have jurisdiction to entertain treaty
15 claims in respect of the Lago Agrio proceedings because there
16 wouldn't be an investment dispute. There wouldn't be any
17 investment rights implicated in that litigation.
18 So, let's move on to consider what happens then if we
19 put the '95 Release into the frame. According to the
20 Claimants, this provides the link between the original
21 investment and the Lago Agrio proceedings because the life-span
22 theory extends to remediation vis-à-vis the Government--and
23 this is the critical part--and part of its agreement with the
24 Government third-party claims in respect of injuries caused by
25 failure to remediate are barred. That's how they attempt to
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10:15 1 bring what happened to Lago Agrio to this Tribunal.
2 Alternatively, of course, they say the '95 Release is
3 a separate free-standing investment, and since it's been
4 invoked in the Lago Agrio proceeding, then any aspect of those
5 proceedings become an investment dispute. I'll say a bit more
6 about that later.
7 But the point is that on either of the Claimants'
8 theory, life span or separate investment, the '95 Release must
9 be binding upon the third parties for there to be an investment
10 dispute under Article VI, because if the Lago Plaintiffs are
11 not prevented from bringing their claims against the Claimants
12 by the '95 Release Agreement, and they're not prevented--it's
13 not asserted that prevented by anything else, then this
14 Tribunal cannot order any of the relief requested by the
15 Claimants in their Memorial.
16 First, you certainly can't order or make a declaration
17 about the alleged res judicata effect of the Settlement and
18 Release Agreements because, by definition, they don't apply to
19 the third parties in question. Res judicata--the whole res
20 judicata claims go away.
21 Second, the treaty claims relating to lack of
22 effective means to assert their res judicata rights, that falls
23 away because they've got no res judicata rights to assert.
24 Third, the due process violations fall away because
25 the process in question, the Lago Agrio proceedings, is not
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10:16 1 concerned with any investment rights.
2 If the Claimants have no right under their investment
3 to be released from claims brought by the Lago Agrio Plaintiff,
4 then no investment right is the subject of the Lago Agrio
5 proceedings. If there is no investment right being adjudicated
6 upon in the Lago Agrio proceedings, then there is no investment
7 dispute. Exactly the same considerations apply to the criminal
8 proceedings. There is no investment right being adjudicated.
9 No investment dispute, no jurisdiction. This Tribunal is not a
10 Human Rights Court. It has no general jurisdiction to police
11 due process standards in national courts.
12 Fourth, the treaty claims in relation to the criminal
13 proceedings fall away, and I would submit on an entirely
14 different basis as well because there is no conceivable link
15 between the criminal responsibility of individual employees to
16 Claimants and rights attaching to their investment. There
17 wouldn't be an investment dispute unless and until the
18 Settlement and Release Agreements were annulled, an assertion
19 that they might be undermined some way by the institution of
20 criminal proceedings is just not good enough. That cannot turn
21 the criminal proceedings into an investment dispute, and it
22 cannot turn this Tribunal into a court of criminal appeal or
23 first instance.
24 ARBITRATOR LOWE: Can I test that--I'm sorry--
25 PRESIDENT VEEDER: No, go ahead.
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10:18 1 ARBITRATOR LOWE: Would you accept that if a host
2 State were using criminal proceedings in order to harass
3 managers of an investing company, that that could amount to an
4 investment dispute?
5 MR. DOUGLAS: In the instances where tribunals have
6 made Orders in relation to criminal proceedings, as far as I'm
7 aware they're being relating to injunctive relief to preserve
8 the efficacy of the Tribunal's procedure, if it could be
9 established--and it has been established in the Quiborax and
10 Bolivia case, I believe, that criminal proceedings were
11 directed against the company to prevent it from asserting
12 claims in international arbitration, then as a matter of
13 injunctive relief the Tribunal does have power to intervene.
14 But it's very interesting to note in that decision the
15 Tribunal was at pains to emphasize that it was asking for the
16 suspension of the criminal proceedings as that would not be an
17 infringement of the host State's sovereignty just to suspend.
18 What they did not do is dismiss, and that's what you are being
19 asked to do. You're being asked to dismiss on the merits. And
20 unless you find that they have immunity from the criminal
21 courts in Ecuador or the criminal laws of Ecuador, how can you
22 dismiss those proceedings unless you adjudge their criminal
23 responsibility.
24 But, Members of the Tribunal--and this is where the
25 scope of the Release also affects the criminal
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10:20 1 proceedings--they say that the criminal proceedings undermine
2 the Settlement and Release Agreements. Well, if they don't
3 extend to the third parties, what difference does it make if
4 they're undermined? So, again, everything hinges upon the
5 scope of the '95 Release.
6 We say that they haven't overcome the prima facie test
7 in relation to this critical issue. They didn't talk about it.
8 They did so under duress yesterday. You can and must decide
9 that single question of Ecuadorian Contract law now.
10 In response to your Question 11, if the jurisdictional
11 issue of the scope of the '95 Release is resolved under Article
12 VI(1)(a) of the Treaty, then no--there is no conceivable
13 jurisdictional basis under VI(1)(c) to entertain treaty claims,
14 as I've just demonstrated.
15 Now, to address another question from the Tribunal,
16 what is the relationship between the Lago Agrio judgment on
17 this issue of this scope of the '95 Release and the judgment
18 and the Tribunal's own appreciation of this issue? This is
19 complicated, but we submit that there are two possibilities.
20 The first is that you find that the Claimants, by raising the
21 issue in Lago Agrio, have triggered the fork in the road. If
22 they've triggered the fork in the road, then the Tribunal has
23 no jurisdiction over this issue; as a result, everything else
24 falls away. The alternative is that they haven't triggered the
25 fork in the road, or you decide to resolve that issue, and that
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10:21 1 makes the fork in the road submission redundant.
2 Now, yesterday I said that there might be a
3 possibility of stay as a question of admissibility, but,
4 Members of the Tribunal, I would accept that you have
5 jurisdiction to decide the issue now, that a stay is purely
6 discretionary. You have the jurisdiction to decide the issue
7 now. You can decide that issue before entertaining a
8 fork-in-the-road objection. If it's resolved against the
9 Claimant, then the fork-in-the-road objection becomes
10 redundant.
11 Now, what happens if the Lago Agrio Court renders a
12 judgment on the same issue? We would submit at that point when
13 it becomes final and binding, there might be an argument as to
14 its potential res judicata effect. But we accept that because
15 we say the issue must be resolved in our favor--in other words,
16 it doesn't extend to third parties--there probably wouldn't be
17 identity of parties on our submission; but, of course, on the
18 Claimants' submission, there would be.
19 So, we would see the position as follows: You can
20 proceed to adjudge the issue subject to your discretion on the
21 stay. In the event that the judgment is rendered, then we can
22 have a discussion about its potential res judicata effect at
23 that point. But I don't think anything as a matter of
24 jurisdiction prevents you from deciding it now.
25 I move on to the next point that I want address very
254
10:23 1 briefly, and that's the notion that the '95 release is an
2 independent investment. And Mr. Kehoe, on behalf of the
3 Claimants, yesterday properly conceded at Page 148 of the
4 transcript, and I quote, "We accept that if the claims and the
5 rights were associated with a mere commercial sales
6 transaction, a lottery ticket or a bus ticket that Ecuador
7 referenced, then that would not be protected by the Treaty; we
8 have no quarrel with that."
9 But, Members of the Tribunal, the problem with
10 Mr. Kehoe's concession and his attempt to restrict his
11 concession to commercial sales Contracts is, of course, that
12 Article I doesn't expressly exclude commercial sales Contracts.
13 I'm not even sure that a bus ticket is a commercial sales
14 Contract. I'm certain that an American lawyer's suitcase is
15 tangible property. I'm far from certain that if the American
16 lawyer leaves it behind accidentally in Heathrow that that's an
17 investment in the United Kingdom. I am certain that that
18 accident is not a commercial sales Contract.
19 The point is that once you accept that a thing having
20 a legal form of one of the examples of an investment listed in
21 Article I might not be an investment as the Claimants have now
22 accepted, then have you to determine--you have no choice--you
23 have to determine the characteristics of that thing that make
24 it an investment. These characteristics, as we submit it, are
25 simply derived from the ordinary meaning of the word
255
10:25 1 "investment."
2 Now, Mr. Kehoe presented the task in identifying the
3 characteristic as if you need to stare long into the abyss and
4 wait for the abyss to stare back at you. But Professor
5 Paulsson managed to do it all on his own as a Sole Arbitrator
6 in Pantechniki and Albania, with the assistance of a certain
7 book that I would recommend to the Tribunal very highly.
8 The commitment of capital or resources coupled with
9 the assumption of risk and expectation of a commercial
10 return--they're the characteristics, yes, they are all
11 required, they must be satisfied cumulatively, and, yes, they
12 are jurisdictional requirements because unless you've got an
13 investment, you don't move through the gateway of Article I to
14 the substantive and procedural protections. They are clearly
15 jurisdictional. A contractual Release from environmental tort
16 claims doesn't satisfy any of them. Nor does it even have a
17 situs.
18 I move finally to your res judicata questions. We
19 heard a lot about the doctrine of issue preclusion in the
20 abstract. I heard nothing on the issues that are said to be
21 precluded. And if you say nothing about the issues that are
22 said to be precluded, then preclusion can transcend into
23 delusion.
24 What was actually decided by the Commercial Claims
25 Tribunal? What was decided was that pending claims in the
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10:26 1 Ecuadorian Courts for debts arising under the 1973 Concession
2 Contract are part of that investment until resolved. That's
3 what it decided. It said nothing about environmental
4 remediation. It said nothing about the Settlement and Release
5 Agreements. It said nothing about the Lago Agrio proceedings.
6 The Claimants appear to say that if the Tribunal found
7 the life span, that the life span extended to debt claims under
8 the very Concession Contract that memorialized the investment,
9 then the life span covers everything else that they assert
10 comes within the life of this investment. It's the life-span
11 theory very much taking on a life of its own. Issue estoppel
12 cannot apply to issues that were not raised, that were
13 irrelevant, and that were not decided by the Commercial Cases
14 Tribunal.
15 Now, I confess to not having a lengthy conference with
16 a Dutch lawyer since yesterday. However, it is our
17 understanding of the position, as a matter of Dutch law, as it
18 is the same in many other civilian jurisdictions, that issue
19 estoppel doesn't work, and issue estoppel doesn't work because
20 it's only the claims and the dispositif relating to the claims
21 that are said to have a res judicata effect, and that is the
22 import of and effect of Article 1059 of the Code. That is our
23 understanding.
24 There was a question on the UNCITRAL Rules,
25 Article 32(2) and Article 32(3).
257
10:28 1 Now, 32(3), I'll start with 32(3): "The Arbitral
2 Tribunal shall state the reasons upon which the award is based,
3 unless the parties have agreed that no reasons are to be
4 given." That is a free-standing requirement to provide reasons
5 which can be dispensed with.
6 Subsection 2 of Article 32 says, "The Award shall be
7 made in writing and shall be final and binding on the parties.
8 The parties undertake to carry out the Award without delay." A
9 final and binding Award for the purposes of Subsection 2 can be
10 an award without reasons, as we've just seen.
11 It seems, on our submission, that Subsection 2 must
12 be, by definition, entirely neutral as to whether or not the
13 reasons are binding because it includes final awards with no
14 reasons as awards that can be binding. So, Article 32(2) is
15 entirely neutral on the possibility of issue estoppel. You're
16 governed by this issue by Dutch law.
17 Members of the Tribunal, unless you have any further
18 questions, I'm going to try to pass the conch this time on to
19 my colleague, Eric Bloom.
20 MR. BLOOM: Mr. President and Members of the Tribunal,
21 when I ask my colleague to pass out one more packet and perhaps
22 the last packet of slides, and while that is being done, let me
23 remind the Tribunal that yesterday I challenged the Claimants
24 to identify for the Tribunal where in the Settlement Agreement
25 do the words "indemnity," "indemnify," or "indemnification"
258
10:30 1 exist, and the Claimants pointed to nothing because the
2 document imposes no such duty on the Republic in any such way.
3 I then challenged the Claimants to identify for the
4 Tribunal where in the Settlement Agreement is there a
5 contractual provision imposing on the Republic the duty to
6 assist Texaco in litigation against environmental Plaintiffs or
7 otherwise point us to a provision in the Settlement Agreement
8 whereby the Republic was contractually committing to withhold
9 cooperation from any litigants against Texaco, and again they
10 pointed to nothing.
11 The 1995 Settlement Agreement that is the subject
12 matter of this litigation and is the subject matter of the Lago
13 Agrio Litigation as well, is very different in the Settlement
14 Agreement the Claimants are suggesting exists. And when the
15 Settlement Agreement makes clear in black and white, for
16 example, that the Government's and PetroEcuador's claims are to
17 be released and only the Government's and PetroEcuador's claims
18 are to be released, they divine a broader Release that is again
19 nowhere to be found in that Agreement.
20 Indeed, the only time that I recall to which Claimants
21 courageously tried to justify their proposed expansive
22 interpretation was when Professor Crawford, in response to a
23 Tribunal question, pointed us to Paragraph 5.2 of the
24 Settlement Agreement. Well, let's take a look at
25 Paragraph 5.2. It reads that "the Government and PetroEcuador
259
10:32 1 intend claims to mean any and all claims"--and this is a very,
2 at first blush, expansive definition of claim--"rights to
3 claims, debt, liens," et cetera, et cetera, et cetera, then we
4 jump down to the red, "Government or PetroEcuador have or ever
5 may have against each Releasee for or in any way related to
6 contamination." It comes back to PetroEcuador and to the
7 Government.
8 Now, yesterday I walked you through some reasons why
9 we submit it is beyond clear that the Release contained in
10 Paragraph 5.1 of the Settlement Agreement did not and did not
11 purport to release or waive third-party rights at all, and
12 let's just briefly enumerate the reasons here.
13 Number one, the plain language of 5.1 could not be
14 more clear as to what claims are being released. 5.1 of the
15 Release.
16 Second, Article 8 of the 1994 MOU which served as the
17 predicate and the framework for the 1995 settlement could not
18 be more clear as the parties then stipulated that the Agreement
19 "would not prejudice rights possibly held by third parties."
20 Third, I offered for this Tribunal for its
21 consideration the deposition testimony under oath of Rodrigo
22 Pérez, counsel for Texaco, who negotiated the argument and who
23 testified that the MOU and the Settlement Agreement did not
24 affect third-party rights one way or the other, so that's from
25 the drafter.
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10:34 1 Fourth, I pointed out that the Settlement Agreement
2 was negotiated in the midst of an active third party
3 environmental litigation against Texaco, the Aguinda action.
4 And clearly if Texaco's sophisticated lawyers had wanted to
5 apply the Release to third parties and if the Republic agreed,
6 though by law it could not have, surely the language would have
7 made that clear.
8 Now, this point was adopted by Judge Sand in the
9 Southern District of New York in 2005. He says, "It is highly
10 unlikely that settlements entered into while Aguinda was
11 pending would have neglected to mention third-party claims
12 being contemporaneously made in Aguinda if it had not been
13 intended to Release those claims or create an obligation to
14 indemnify against them.
15 And it is for this reason, by the way--it is for this
16 reason--that Claimants so strenuously argue the impossible,
17 that the Lago Agrio claims is something materially different
18 than the Aguinda claims.
19 And on that point, we have Slides, I think it was 28
20 to 31, of my fact presentation yesterday. I would also refer
21 this Tribunal to our appendix in our opposition to the request
22 for interim measures that we submitted the end of April or
23 beginning of May of this year.
24 But in addition to all of those reasons, let me spend
25 just a couple of brief minutes on the fact that Ecuadorian law
261
10:36 1 forbade and still prohibits the Government from waiving
2 third-party rights. The State is thus constitutionally
3 prohibited from entering into any Contract whereby it purports
4 to waive fundamental rights of its citizens, nor can the State
5 arrogate to itself the right to act for its citizens in
6 bringing a civil action in their name against those responsible
7 for violating their fundamental right to a clean environment.
8 The Government surely has certain rights, but it's not in place
9 of the rights of third parties, and third parties who
10 themselves are claiming that they, themselves, are being
11 harmed.
12 Now this is, I think, a critical point. There were
13 both private and public lands at issue, but these Plaintiffs
14 were saying that they, themselves, were being harmed by
15 pollution in the air, in the water, in the land. And
16 independent of that and of the Constitution, they have the
17 right to seek relief for the public lands as well.
18 Next slide.
19 "The State may represent its own interests even in a
20 manner intended to benefit all of its citizens, but it has no
21 authority to act in litigation or in Contract in lieu of or in
22 exclusion of its citizens. The State may therefore act along
23 with, but not instead of, its citizens."
24 And the next slide, please.
25 The Republic of Ecuador cannot enter into a contract
262
10:38 1 whereby it waives or abridges the rights of its citizens to
2 bring a claim for environmental harm.
3 Now, a Question 8 that the Tribunal transmitted to the
4 parties last night, the Tribunal asked what law characterizes
5 the nature of the Lago Agrio proceedings as to diffuse, et
6 cetera, in these proceedings. We believe that the law under
7 Ecuador is as we have identified it.
8 Could the Respondent--this is Question 9--settle
9 claims of the Lago Agrio Plaintiffs without their consent? And
10 for all of the reasons I just outlined below, we believe that
11 the answer is perfectly obvious: The State absolutely cannot.
12 These foreign declarations I should add--
13 ARBITRATOR LOWE: Could I clarify the response that
14 you gave earlier. You said that the--"we believe that the law
15 under Ecuador is as we've identified it." Are you also saying
16 that it is Ecuadorian Law which characterizes the matter and
17 not international law?
18 MR. BLOOM: That's correct.
19 ARBITRATOR LOWE: Thanks.
20 MR. BLOOM: That is correct.
21 Let me just add that these declarations are from
22 Genaro Eguiguren and Ernesto Alban, two former Supreme Court
23 Justices of Ecuador.
24 Let me transition, if I may, to the Monetary Gold
25 issue.
263
10:39 1 Professor Crawford said the doctrine applies only when
2 the State is a nonparty, and he says that it's never been
3 applied when the third party is not a State. Well, let me just
4 add that no Tribunal has ever held that the Monetary Gold
5 principle is inapplicable to third parties. This is an issue
6 of first impression. But the history of the Monetary Gold
7 cases, I think, are quite interesting because it begins with an
8 ICJ case and a number of ICJ cases, and then there is a
9 question as to whether it could be expanded beyond ICJ, and
10 that's one of the questions that was before the In re: Larsen
11 Case. And In re: Larsen, and I quoted from that case
12 yesterday, the answer is, of course, it can.
13 And I want to go back to the fundamental principle of
14 Monetary Gold. It is a question of consent. Third parties do
15 not consent--absent third parties do not consent to having a
16 tribunal adjudicate and resolve their issues, and that is what
17 is being asked about today.
18 In my earliest days of legal training, I was always
19 taught that litigants are to be treated equally. They are to
20 be treated the same. It does not matter if a Plaintiff is
21 wealthy or if a Plaintiff is destitute. And while I understand
22 that on occasion there may be immaterial or marginal deference
23 given to certain parties rather than others, I think it is
24 quite a stretch to conclude that the fundamental due process
25 rights of being heard and to participate to have your claims
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10:41 1 decided could ever be jettisoned because you're a nonsovereign.
2 Professor Crawford also said that the Monetary Gold
3 and its progeny can apply only where you have a bona fide third
4 party, but like Claimants' Rejoinder, he is again putting the
5 cart before the horse. Undisputed is that Claimants have
6 brought claims under the Ecuadorian Constitution and under its
7 Civil Code provisions. The Lago Agrio Plaintiffs are not
8 asserting rights under the Settlement Agreement. They're
9 extra-contractual rights. Do they have an opportunity to argue
10 why they have standing, or is that to be determined by a
11 tribunal who has no jurisdiction over them and who cannot hear
12 their argument.
13 ARBITRATOR LOWE: Can I just interrupt there. You're
14 indulging me wonderfully, Johnny.
15 PRESIDENT VEEDER: Go ahead.
16 ARBITRATOR LOWE: It might be said that the Monetary
17 Gold principle should not apply because, unlike a case where we
18 have litigants on the same level of law in a State-non-State
19 arbitration, the State's nationals are in some way represented
20 by the State itself, so they are not on the same--on a par.
21 If that were the case, you now seem in the last
22 remarks that you made to be suggesting that there's another
23 principle at work, which is giving the private litigants, Lago
24 Agrio plaintiffs in this case, the opportunity to be heard, so
25 you're not basing it so much on consent as on some kind of due
265
10:43 1 process obligation towards the absent third party in this case.
2 Could you say a bit more about that at some point,
3 about the proposition that even if their consent is not
4 necessary or their participation in Monetary Gold terms, there
5 is still a duty that the Tribunal has towards them on some
6 other basis.
7 Thanks.
8 MR. BLOOM: In our Reply, we actually cited to some
9 cases for the proposition that fundamental principles of due
10 process, and these are international principles--I'm familiar
11 with them in the United States case law, but they're
12 international principles, but they do require that a party be
13 given the right to be heard as a fundamental issue before their
14 issues are resolved. It's that simple.
15 So, in our view, there are really two bases. One is a
16 fundamental due process issue, and the other is consensual
17 issue. I would submit, however, that they're not totally
18 independent and apart. I suspect that the premise of the
19 consensual requirement is precisely because that, in and of
20 itself, is tied in with the due process issue.
21 What struck me yesterday is the discussion as to what
22 claims and prayers for relief must be struck reminded me of an
23 exercise that the United States Court of Appeals for the Second
24 Circuit recently discussed with the parties. And by way of
25 background--and I believe you all had been kept fairly informed
266
10:45 1 of the litigation in the United States--the Republic of Ecuador
2 back last December and then subsequently the Lago Agrio
3 Plaintiffs brought a petition to stay this arbitration on the
4 grounds that the Claimants had committed to have their dispute
5 litigated against the Lago Agrio Plaintiffs in Ecuador subject
6 only to the right to contest a potential adverse decision in an
7 enforcement court. The trial court ruled against Ecuador and
8 the Lago Agrio Plaintiffs, I should add, on grounds that not
9 Claimants defended on appeal. And in August the appeal was
10 heard.
11 And let me share with you some of the statements by
12 the Court. And again, no decision has been rendered, so these
13 are simply some insights.
14 Judge Lynch, and this is directed at Claimants'
15 counsel, but what if you're saying is our due process rights
16 are having violated in the Ecuadorian Courts? They're behaving
17 unfairly and outrageously and litigating the Plaintiffs' case.
18 That is something that the U.S. courts can deal with. They can
19 deal it under the express reservation of rights that you made
20 to have those very issues decided as they come up under the New
21 York and enforcement of judgments provisions.
22 Judge Raggi, again directing her comments to counsel
23 for Chevron and TexPet, "When courts make forum non conveniens
24 decisions, it usually is in comparison to another forum and
25 usually with the Court understanding that the other forum will
267
10:46 1 not be challenged, that there would be. And so, my concern is
2 that we have a representation to the United States Court that
3 the case should be allowed to be litigated in Ecuador. Only
4 the argument is, as soon as you find yourselves in front of the
5 Ecuadorian Courts, you say no, no, the forum we want is the
6 Hague Tribunal."
7 Then Judge Lynch tried to clarify Judge Raggi's
8 question, and again directing this directly to Chevron's
9 counsel, Judge Raggi's question was, are you representing to
10 us, and we now know we have to make very clear what you're
11 representing or what you're not representing, are you
12 representing to us that you are not asking the arbitrators to
13 have the Ecuadorian Courts shut down this litigation by these
14 Plaintiffs, but instead that you have no objection to the
15 Ecuadorian Court proceeding to judgment and to enter a judgment
16 in the case? Who pays it, what happens after that, whether
17 there is indemnification is a different question. Is that a
18 representation that you are making to us or not?
19 "ANSWER: I want to be crystal clear, Your Honor,
20 we have not.
21 "JUDGE RAGGI: Good.
22 "COUNSEL FOR CHEVRON: Okay, we have not asked
23 the arbitration panel to shut down the proceeding.
24 "JUDGE LYNCH: Have not or will not?
25 "COUNSEL FOR CHEVRON: We are not intending to
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10:48 1 ask, and we are not, we have not, we are not intending
2 to. We have no present intention to ask them to shut
3 down their proceedings.
4 "JUDGE LYNCH: And no present?
5 "COUNSEL FOR CHEVRON: We do intend--
6 "JUDGE LYNCH: No present intention is different
7 from a promise and a commitment. That's part of the
8 problem we had with what's happened before. Is there
9 a commitment that nothing that's going on in this
10 arbitration will shut down the Ecuadorian Court
11 proceeding to judgment as opposed to questions of who
12 pays ultimately the judgment or whether there is
13 indemnification."
14 And just two more excerpts.
15 "JUDGE LYNCH: And are you asking--are you
16 asking, then, I think, and tell me if I'm wrong,
17 you're asking the folks in The Hague, the arbitrators,
18 to effectively decide that you will never be liable to
19 the Plaintiff, period, not just that you have a right
20 to indemnity, but that the judgment in Lago Agrio
21 should say Chevron is not liable--not Chevron liable,
22 but Ecuador has to indemnify Chevron.
23 "And finally, I'm asking you, are you really
24 asking the Court, the arbitral court in The Hague, to
25 make a judgment that you're not in fact liable to the
269
10:49 1 Plaintiffs, not just that you have a right to
2 indemnity but that you are not liable to Plaintiffs,
3 and Ecuador is going to have to say that to its courts
4 and its courts should really follow that answer? Is
5 that the relief you're asking for?"
6 So I think you can see--
7 PRESIDENT VEEDER: Finish the answer to that question.
8 Maybe you left out the next line.
9 MR. BLOOM: You want the answer then? That was the
10 end.
11 "MR. MASTRO FOR CHEVRON: Your Honor"--
12 And this is a page turner
13 --"Your Honor, we're asking the arbitration panel
14 there to direct Ecuador to meet its obligation to
15 indemnify and release. On the liability question Your
16 Honor is asking, we are raising with the arbitration
17 panel issues that go to the Government corrupting both
18 civil and criminal processes, including that trial
19 and"--
20 Interrupted.
21 "JUDGE LYNCH: But it's one thing, too, to say
22 Ecuador should stop corrupting the trial," and then
23 he's interrupted, so this goes back and forth.
24 And if you would like copies, we can certainly make
25 copies and submit it up.
270
10:50 1 ARBITRATOR LOWE: Is that in the record already?
2 MR. BLOOM: I think it is, actually. Yes, it is at
3 R-160. And I do believe it's better than Grisham.
4 ARBITRATOR LOWE: And can you tell us which pages
5 roughly you were quoting from.
6 MR. BLOOM: Sure. 39 to 40, 44, 53 to 54, 63, and 64.
7 You know, what's also interesting, and let me just
8 take a moment and then perhaps it would be a good time to take
9 the morning break, Claimants do, I think, a phenomenal job
10 taking sentences from different Court decisions and suggesting
11 based on these different sentences that there is uniformity in
12 how at least the U.S. courts are perceiving this litigation.
13 Allow me to at least share with you a slightly different
14 perspective.
15 There have been three sets of litigations, as I can
16 think of them, as it relates to this case in the United States.
17 The first was the AAA arbitration action, and that was
18 initiated by the Claimants in an effort to compel or obtain an
19 order saying that Ecuador had an obligation to indemnify them
20 for any expenses or costs relating out of a possible Lago Agrio
21 judgment against them, and they argued that Ecuador was party
22 to a 1965 Joint Operating Agreement that had both an
23 indemnification provision and an arbitration provision.
24 Ecuador moved in first state Court, and it was subsequently
25 removed to Federal Court on the grounds that Ecuador was not a
271
10:52 1 party to the Joint operating Agreement and, therefore, it has
2 no indemnification obligation, and there is also no arbitration
3 provision.
4 I should also add in that case that Claimants argued
5 time and again collusion, collusion, collusion. They also
6 argued that our positions were frivolous. They publicly said
7 so. They said that Ecuador was seeking to escape its
8 contractual obligations, as they have said publicly when they
9 launched this arbitration.
10 In fact, the District Court rejected Claimants'
11 argument. They granted summary judgment in favor of Ecuador.
12 That was affirmed three to nothing by the Court of Appeals.
13 The Supreme Court declined to hear that case.
14 One footnote to that case. While it was Ecuador who
15 sought Court action to stop the AAA arbitration, at some point
16 Claimants filed counterclaims raising the Settlement Agreement
17 issues. Mr. Bishop said at some point Ecuador had a change of
18 heart; and rather than having those issues go to the merits,
19 Ecuador filed a motion to dismiss. I litigated that case. I
20 can fill you in a little bit more on what really happened.
21 We had cross-motions. Both sides had motions on the
22 merits for summary judgment that would have dealt with the
23 issue of Contract interpretation, the same question that's
24 before this Tribunal. But the only reason why Claimants had an
25 opportunity to even seek that counterclaim, file that
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10:54 1 counterclaim, is because our predecessor counsel was found to
2 have waived sovereign immunity by making certain affirmative
3 claims, but they were conditional claims.
4 Once the Court found that Ecuador was not party to
5 that 1965 Joint Operating Agreement and that there was no
6 obligation for Ecuador to arbitrate, the conditional claims
7 went away, and it raised the serious jurisdictional question
8 whether or not the Court had jurisdiction to hear the
9 counterclaims now that Ecuador's affirmative claims went away.
10 The change of heart came from Claimants because the
11 Claimants wanted to go ahead and litigate that issue even
12 during the appeals of the other part of the case. From 2007 to
13 2009, they wanted to litigate the merits of that with all these
14 pending motions. What happened was, in July of 2009, after the
15 Supreme Court resolved the question as to whether Ecuador was a
16 party to the 1965 Joint Operating Agreement, Chevron decided
17 that it would withdraw its opposition to our motion to dismiss
18 for lack of subject-matter jurisdiction. About 55 days later
19 they filed the instant Notice of Arbitration. So,
20 procedurally, that's what happened.
21 Anyway, so, that's the first set of litigation in the
22 United States. The second set relates to the petition to stay
23 the instant arbitration which I just informed the Tribunal of.
24 In the lower court, the Republic lost. That issue is on
25 appeal, and the decision could come tomorrow. It could come
273
10:56 1 six months from now. We don't know.
2 The third set of issues relates to the 1782 actions;
3 and under U.S. law, a party can go ahead and seek discovery,
4 deposition, or subpoena for use in a foreign litigation.
5 Last I recall, and I believe this is correct,
6 Claimants have filed 23 applications to take 23 depositions.
7 They've also had the counsel for Mr. Reis Veiga and Mr. Pérez
8 do the same, so this way they get two days of depositions, in
9 14 different judicial districts. The issue before each of
10 those courts is a very narrow one, and that is whether
11 discovery is justified in those circumstances.
12 I should also add in 21 out of 23 of those cases, the
13 Republic has not opposed the discovery. In fact, we, by and
14 large, have chosen not even to appear.
15 So, when you have District Courts going beyond the
16 narrow issue, those--in fact, the specific quotes cited by
17 Claimants are from judges who did not hear anything from the
18 Republic of Ecuador.
19 The Republic more recently has also sought two
20 discovery depositions, and we too to date have been granted
21 that right, although they are also subject to further motion.
22 Now, everything is not quite as clear as the Claimants
23 make it out to be. In one of these 1782 actions, and I'm
24 quoting, this is a case in Tennessee, an order of September 21,
25 2010, "The Magistrate Judge believes it is important to note at
274
10:58 1 the outset that this proceeding initiated pursuant to 28 USC
2 1782 is not an opportunity to put on a full trial."
3 Later, he says, "Chevron has attached to its Reply
4 e-mails that purport to show quarrels. One of the Lago Agrio
5 Plaintiffs' experts not only ghost-wrote portions of the
6 Cabrera Report, thereby committing an intentional fraud on the
7 Ecuadorian Court. The Magistrate Judge believes these e-mails
8 are not so clear on their face."
9 I was in San Francisco about two weeks ago on one of
10 these 1782 applications to get permission to take the
11 deposition of Diego Borja. He is the contractor, one of the
12 Contractors for Claimants in Lago Agrio who surreptitiously
13 videoed, if you recall, Judge Nunez and a couple of other
14 folks, and counsel for Mr. Borja in their papers says that this
15 shows clear fraud, clear bribery.
16 The Judge says, "You quote from the Borja Declaration
17 in which he claims Novella asked for $3 million to be divided.
18 A million dollars for the Judge, which is an assertion of the
19 payoff, the bare-knuckle kind of payoff to the Judge, a very
20 serious allegation."
21 And I read the transcript. At least of the two
22 transcripts you provided me. And while I could see why the
23 judicial authorities in Ecuador found Judge Nunez in violation
24 of his ethical duty by exposing and discussing his opinion,
25 there was no hints in there about him taking a bribe or payoff,
275
11:00 1 and I did not see anything in the two transcripts provided to
2 me on that.
3 I make this point just to reinforce what we said in
4 some of our papers, and that is when Claimants offer a quote or
5 offer a little excerpt from Crude, in every instance, I would
6 ask that we view the entire excerpt because what we have seen,
7 and what we perceive, and what we submit, is it's inappropriate
8 to take one sentence here and one sentence here and one
9 sentence here, especially out of 600 hours of tape, cobbled
10 together a story.
11 With that, let me ask if we could take a short break,
12 and I would be ready to resume after the break.
13 PRESIDENT VEEDER: Let's take 15 minutes' break, and
14 we'll come back at 11:15.
15 (Brief recess.)
16 PRESIDENT VEEDER: Let's resume.
17 MR. BLOOM: Thank you, Mr. President.
18 Let me transition to a word that you've heard much
19 about in these proceedings primarily from the Claimants, and
20 that's the word collusion, collusion. We keep hearing it. In
21 the AAA arbitration litigation Judge Leonard Sand heard it,
22 too, and this is what he had to say.
23 In a telephonic hearing that we had, he said to
24 Chevron's counsel, "I know Chevron is enamored with the word
25 collusion. They never meet, and they never talk, and they
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11:17 1 never write. They collude. And, you know, I think maybe
2 they--that's overworked."
3 I have a question: Did the Republic collude with
4 Texaco in the 1990s when the Republic of Ecuador submitted a
5 Diplomatic Note at Texaco's request or when it filed
6 submissions in the Aguinda Case at Texaco's request? Collude,
7 is it to an unlawful end?
8 Are the Claimants now seriously arguing that a common
9 interest or joint defense privilege agreed to by U.S. counsel
10 in 2006, after Claimants sued Ecuador, does that constitute
11 collusion? What is the unlawful end?
12 Now, twice yesterday, Mr. Pate and Mr. Bishop
13 referenced a declaration that I executed last Friday, and I'm
14 going to ask my colleague to provide it for the Tribunal to
15 read at your leisure because it provides the context in which
16 the joint defense or common-interest privilege has been
17 asserted, and I believe this document will speak for itself,
18 but let me add this.
19 PRESIDENT VEEDER: Before you read it, is this a new
20 document?
21 MR. BLOOM: Yes, it is.
22 PRESIDENT VEEDER: Is there any objection to our
23 seeing this document? Have you sent it to the Claimants
24 before?
25 MR. BLOOM: Well, they referenced to it yesterday.
277
11:18 1 PRESIDENT VEEDER: They did indeed.
2 Is there any objection?
3 MR. BISHOP: We have no objection.
4 PRESIDENT VEEDER: Let's give it a name so we can find
5 it again.
6 SECRETARY DOE: Would it be possible for the PCA to
7 have a hard copy for the archive?
8 MR. BLOOM: Yes, and perhaps at the conclusion I'll
9 get a number for it.
10 Now, let me just represent this: I have entered into
11 during the course of my career a number of common-interest
12 privilege agreements before. Is the Republic of Ecuador to be
13 Treaty treated differently than every other litigant? Is it
14 prohibited from entering into such a agreement when it
15 determined it would benefit its defense?
16 And again, think about the circumstances here. It was
17 Claimants who decided time and again to bring Ecuador into this
18 litigation and to inject into the litigations and arbitrations
19 against Ecuador issues that are at the heart of the Lago Agrio
20 Case. I would submit that any litigator would go ahead and
21 seek out information from counsel for the Lago Agrio Plaintiffs
22 in order to represent his client rather than to take at face
23 value what your party opponent is saying in their papers.
24 And let me ask this: If the Lago Agrio Plaintiffs had
25 been entitled to, let's say, legal aid, State-sponsored legal
278
11:20 1 aid--after all, the Plaintiffs are destitute--would that
2 constitute unlawful collusion?
3 Now, let's contrast the reception that Texaco received
4 in the 1990s from the Republic and from its officials with the
5 reception that the Lago Agrio Plaintiffs counsel received from
6 the Government in 2004, and this is from one of the 1782
7 depositions of Alberto Wray. I don't know if you gentlemen
8 know Alberto Wray. He's a former Supreme Court Justice of
9 Ecuador, and at the time early in 2004, he was representing the
10 State with respect to three international arbitrations.
11 And he says, in light of PetroEcuador's favoring the
12 Respondents and Chevron's legal team receiving the clear
13 support of the Government, Wray spoke with an assistant to the
14 Attorney General, Dr. Intriago. "I told him about the problem
15 and gave my opinion to him regarding--that PetroEcuador should
16 appear before the proceeding in order to defend
17 itself--Dr. Intriago promised me that he would consult the
18 Attorney General about the subject, and a few days later he
19 told me that the Government's decision was to keep neutral in
20 this case and vis-à-vis the trial in general."
21 And mind you, and I may turn to it if I have time, the
22 e-mail that the Claimants point to, the 2005 Martha Escobar
23 e-mail, in that document it is noted that Texaco and Chevron
24 were seeking meetings with the Attorney General, I believe had
25 met with the President, in an effort to get Ecuador to
279
11:22 1 intervene in the Lago Agrio Case and to say that all liability
2 belonged to PetroEcuador, and the Attorney General said no.
3 Here, it was the Lago Agrio Plaintiffs who were
4 seeking intervention by the Government. The Attorney General
5 said no.
6 "QUESTION: During this time period, 2004, was it
7 your understanding that the Government was acting on
8 behalf of the Lago Agrio Plaintiffs in any way?"
9 And at this time Alberto Wray was the lead counsel for
10 the Lago Agrio Plaintiffs.
11 "ANSWER: On the contrary, as I mentioned, I was
12 convinced that the Government was not happy with our
13 complaint, and when I asked about a clear intervention
14 in the case, the answer is, no, we want to remain
15 neutral in the case."
16 So, how else is the Republic colluding? Well, this
17 goes to the Tribunal's Question 10, what I refer to as the
18 90 percent issue. And Article 43 is now on the screen:
19 "Without prejudice to any other legal actions that might be
20 available, the Judge shall order the party responsible for the
21 damage to pay compensation in favor of the community directly
22 affected and to repair the harm and damage caused. The Judge
23 shall also order the responsible party to pay 10 percent of the
24 value of the compensation in favor of the Plaintiff. In the
25 event that the community directly affected cannot be identified
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11:23 1 or such community is the entire community, the Judge shall
2 order that payment of damages be made to the institution that
3 performs the remediation work. It is not going to the
4 Government."
5 Instead, what Claimants have done--and again, it's
6 something they do well. They have a clipping service. I
7 mentioned this in May, and they will pick up every statement of
8 anyone, and if it's a misstatement, they'll use it. So, the
9 Fiscalia, the General Prosecutor made a comment once that it
10 goes to the State. That's legally incorrect. It was not an
11 official position. It was a response to some press inquiry as
12 best as I can recall.
13 Now, as Claimants themselves acknowledged during the
14 Hearing on Interim Measures last May, the Lago Plaintiffs have
15 requested that any damages be paid to a nongovernmental
16 organization, the Amazon Defense Front. Quote, and this is
17 apparently from Mr. Kehoe in May, "The Amazon Defense Front has
18 been designated by the Claimants to receive the money that will
19 come from an ultimate judgment in the Lago Agrio Court to
20 remediate the public lands and the like that is at issue."
21 Dr. Wray was asked about this under oath in his
22 deposition. He's asked:
23 "Do you understand that the Government of Ecuador
24 intends to receive 90 percent of the proceeds from
25 the--
281
11:25 1 "ANSWER: That's not true. That's a
2 misunderstanding. That's not true."
3 He goes on to say:
4 "In my understanding the Government of Ecuador is
5 not going to receive anything because it depends all
6 on the decision of a Judge. But if the Judge decides
7 for the Plaintiffs, us, in the way that is requested
8 so that money will be--and it's cut off--will be used
9 in the remediation but not--but cannot be claimed by
10 the Government."
11 So, now let me go to the 2005 e-mail of that we've
12 heard a fair amount about already, and they've argued earlier
13 in this proceeding that as proof positive that Ecuador breached
14 its contractual legal and treaty obligations. And this
15 document, for the record, is at C-166.
16 The first four paragraphs of Dr. Escobar's e-mail
17 explains that it was Texaco, not the Lago Agrio Plaintiffs, who
18 sought Government intervention to terminate the Lago Agrio
19 Litigation. In meetings with the President and other high
20 officials of the State--and now I'm going to quote--"Texaco
21 proposed that the State intervene in the trial and allege the
22 existence of the environmental remediation Contract and the
23 final acta, or that a public declaration be made at the highest
24 levels"--this should be Slide 12--"at the highest levels on the
25 existence and fulfillment of that Contract."
282
11:26 1 And then they go on to say, "In exchange, Texaco would
2 be willing to drop the AAA arbitration."
3 So, we are going to sue you if you don't give us our
4 way.
5 At bottom--and let's just reduce it to its essence:
6 Texaco, having reduced the U.S. Aguinda Court to dismiss the
7 environmental case on forum non conveniens grounds in favor of
8 an Ecuadorian forum, now was asking the Ecuadorian Government
9 to intervene and shut down that very environmental case as a
10 pre-condition to Chevron dropping the AAA arbitration.
11 Second, it is not surprising or wrong for the office
12 of Attorney General to have considered efforts to nullify the
13 remediation Contract, the misallegations that Chevron or Texaco
14 may have secured the Contract through fraud or representation.
15 And we spent a fair amount of time on this during the interim
16 measures Hearing when there were allegations dating back to an
17 audit that I believe commenced in 2001, and there were a series
18 of criminal investigations that had received a lot of
19 publicity.
20 Now, remember at this time, because timing is crucial
21 here, it was in 2004 that Claimants filed their AAA
22 arbitration. So, lawyers being lawyers are going to brainstorm
23 potential defenses, and that's what they were doing.
24 But let's be clear here because there shouldn't be any
25 misunderstanding. Unlike, for example, in the United States,
283
11:28 1 where the Attorney General in the United States is in charge of
2 all criminal and all civil actions on behalf of the State, that
3 is not the case in Ecuador. The Attorney General and the
4 Procurador is responsible for all state litigation arbitration
5 in civil matters and civil matters only. He does not report to
6 the prosecutor. The prosecutor does not report to him. It's
7 the Fiscalia, the General Prosecutor, who has the obligations
8 to make prosecutorial decisions, and I will be corrected by my
9 Ecuadorian colleagues if I'm misspeaking in any way. I
10 believe, and I'm fairly certain, that the Attorney General, the
11 Procurador, has zero--zero--prosecutorial discretion. So, the
12 idea that a former Attorney General had missed all these
13 allegations of fraud, wanted to criminally try those who
14 executed the Contract, presumably reflected evidence that he
15 had gathered or not that he had gathered, but that may have
16 been brought to him perhaps from the Lago Plaintiffs.
17 Let me turn to just one or two more issues.
18 Critical to Claimants' argument that the criminal
19 proceedings are being used in conjunction with an investment
20 dispute, the premise of that is that the criminal proceedings
21 could be used to nullify the Settlement Agreement, and I want
22 to be clear about this. We're aware of no evidence, and we
23 have seen no excerpts that have been provided to us by
24 Claimants in which the State ever talks about a criminal
25 proceeding in the context of nullification. They have been
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11:30 1 separate discussions, but they're conflated here for a tactical
2 purpose.
3 But it's also premised by the notion that the statute
4 of limitations for nullification has not yet run. And you
5 heard Mr. Bishop yesterday say it's a 15-year statute of
6 limitations. But that's not what Claimants' counsel said on
7 Day 2 of the Interim Measures Hearing. At that point, and this
8 is on Slide 14, Mr. Bishop said, "I think I can answer that.
9 My understanding is that there's a four-year limitations period
10 and certainly not more than 10 years, so the period for any
11 such claim has already expired." According to the Attorney
12 General's Office the five-year statute of limitations
13 applicable to public contracts would be applicable and
14 therefore preclude a nullification action. "According to what
15 I'm understanding from the Attorney General's Office, they are
16 bound by the provisions of the law of public contracts, which
17 provides that the actions must be filed within five years after
18 the execution of the Contract and that under that provision it
19 wouldn't be proper to file any action."
20 And, finally, Mr. Alexis Mera, the President's
21 Juridical Secretary, says, "I don't see a nullity suit as a
22 very sustainable issue."
23 ARBITRATOR LOWE: Could you just tell us what the
24 period runs from. Is it from the date of the instrument, or
25 would it be from the date of the discovery of the circumstances
285
11:32 1 that might invalidate it?
2 MR. BLOOM: If I may consult my Ecuadorian colleagues
3 and perhaps get back to you after lunch on that, thank you.
4 Finally, Claimants have relied on an excerpt from the
5 movie "Crude" in which Chevron claims President Correa's highly
6 influential Juridical Secretary, the gentlemen I just
7 mentioned, Alexis Mera, had a meeting with the Plaintiffs'
8 legal team and a delegate from the Ecuador's Attorney General's
9 Office, and again this is an excerpt I would encourage you to
10 actually review because I think it makes it perfectly clear
11 there is no collaboration or collusion. There was no
12 conspiracy.
13 Again, it's interesting, when you're the Government,
14 all sides are asking things from you, and I think what this
15 really shows is these Plaintiffs were very excited to get this
16 meeting, and I think transparently they're lobbying the
17 government, but it's pretty evident from the tape that these
18 people are not pals, and they're not in a conspiracy.
19 The Lago Agrio Plaintiffs believed that they had
20 discovered a fraud, or at least that was their representation,
21 and they wanted Mr. Mera to do something about it. And I will
22 tell you what he did not do. He did not say, great idea, let's
23 criminally try these guys. I'm going to go ahead and call the
24 prosecutor, or don't worry about it, I will talk to the
25 President, we will get this done.
286
11:33 1 What he said is, in his own way, "Go talk to the
2 prosecutor, pick at the prosecutor, do whatever you want." But
3 he essentially said, "Get out of my office. Go to him."
4 That's essentially what happened.
5 And he says a couple of other things I thought were
6 interesting. He says, "I'm here as an attorney." He
7 recognizes there may be political overtones, but he underscores
8 "I'm an attorney here."
9 If I may just have a moment to confer...
10 (Pause.)
11 MR. BLOOM: Just a couple of housekeeping matters.
12 The Bloom declaration--I've never before had anything named
13 after me--is going to be R-191.
14 PRESIDENT VEEDER: R-191, thank you.
15 MR. BLOOM: And then with respect to the question
16 posed by the Tribunal as to when the Statute of Limitations
17 runs, we are going to confirm it. We believe it is from the
18 date that the document is executed to provide certainty under
19 the law, but we will confirm that.
20 Unless the Tribunal has any questions for me, I will
21 pass this on to Tomás Leonard.
22 Thank you.
23 PRESIDENT VEEDER: Thank you.
24 MR. LEONARD: Thank you, Mr. Bloom.
25 I will take a few minutes to address Question Number 2
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11:35 1 posed by the Tribunal last night. If I may re-read the
2 question to remind us, the two-sentence question distinguished
3 between CT, Claimant one Chevron and Claimant two TexPet, see
4 prior in Claimants' Memorial merits, which is which? There is
5 a citation to Page 279 of the Memorial referring to the prayer
6 for relief.
7 This question seems more proper to the Claimants.
8 After all, it's their burden to persuade the Tribunal that the
9 respective claims do constitute investment agreements within
10 the terms of Article VI, and specifically to identify which of
11 the various prayers for relief refers to which Claimant. I
12 will attempt, nonetheless, to offer views on the question posed
13 from the Republic's perspective.
14 First of all, if I understand this question correctly,
15 it is not really a two-part question, but rather one that seeks
16 to shed some additional light onto the issue of ratione
17 materiae jurisdiction by taking a closer look at the actual
18 relief that each party seeks from this Tribunal. I suppose
19 that if the relief sought concerns only one of the two
20 Claimants, perhaps that would somehow confirm my suspicion that
21 the second Claimant may have no cognizable claim against the
22 Respondent.
23 Before I go there, I would like to take the
24 opportunity provided by the first sentence of this question and
25 offer a quick review of the cast of characters in a further
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11:37 1 attempt to distinguish them and distinguish their claims, and
2 at the same time I will also try to briefly address one pending
3 matter, one follow-up matter, and clarify a topic raised by the
4 Claimants yesterday.
5 Very briefly, TexPet is a Shell Corporation, and has
6 been a Shell Corporation for the last 18 years. The sole
7 purpose of its existence was to conduct Texaco, Inc.'s
8 operations in Ecuador. According to Claimants' own admissions,
9 including recent representations to U.S. courts, TexPet has no
10 assets, no commercial activities, and no financial and
11 accounting documents. And on this I refer the Tribunal to
12 Claimants' Notice of Arbitration at Paragraph 22, and there's
13 also additional information on this topic at Paragraph 95 of
14 the Republic's Memorial on Jurisdiction.
15 The shell corporation is not involved in Lago Agrio,
16 even though liability for its alleged conduct is at issue
17 there. That's still not involved and does not stand to benefit
18 or suffer harm in any conceivable way as a result of the
19 outcome of the litigation against one of its indirect parent
20 corporations.
21 Under Ecuadorian law, TexPet would not have the right
22 to seek enforcement of third-party rights, assuming Chevron
23 could be deemed a third-party beneficiary in this agreement,
24 nor would it have an action to seek a binding interpretation of
25 the Contract before the obligor, the State in this case, is
289
11:39 1 legally deemed in MORA. MORA has been explained in our written
2 submissions as somehow as an equivalent to default or a failure
3 to promptly comply with an obligation.
4 However, TexPet nonetheless claims to have a legal
5 dispute within the Republic or with the Republic concerning the
6 1995 Settlement Agreement, and seeks that binding
7 interpretation of that Contract through arbitration.
8 Now, Chevron, second Claimant, is a U.S. corporation
9 that acquired TexPet more than nine years after TexPet had
10 ended all involvement in the concession with PetroEcuador. I
11 refer the Tribunal to some background history on Paragraphs 90
12 and 97 on this point. Chevron was never involved in any
13 operations in Ecuador, by its own admission, and is not a
14 party, also by its own admissions, to the 1995 Settlement
15 Agreement.
16 For the last seven-and-a-half years, Chevron has
17 argued before the Lago Agrio Court that it is not TexPet's
18 successor--there was a question posed on this topic
19 yesterday--nor has it acquired any rights or obligations of
20 TexPet; and that if there is any legal basis for the Court in
21 Lago Agrio to conclude that Chevron should be held liable for
22 TexPet's alleged conduct, then TexPet--and this is Chevron's
23 argument--then TexPet, not Chevron, has been released from
24 liability by way of the 1995 Settlement Agreement.
25 Chevron further submitted to the Lago Agrio Court that
290
11:40 1 if the Court were to find that Chevron is, in fact, TexPet's
2 successor, a term that counsel for the Claimants was trying to
3 avoid yesterday, then Chevron--this is the argument--will also
4 have to be deemed released under the category of successor, not
5 under the category of principal. Seven-and-a-half years
6 pursuing this argument, and it never occurred to them to raise
7 the argument that they raised before this Tribunal. But in
8 this arbitration, Chevron is required to show a link, a direct
9 link, between it and the 1995 Settlement Agreement, so it
10 decided to argue that not only TexPet, but also Chevron was
11 released from liability as objectively established by the use
12 of the term "principals," supposedly included there to refer to
13 future parent corporations of TexPet.
14 But not having rights under the 1995 Settlement
15 Agreement would not seem to present an obstacle to this
16 Claimant because it also argues that the Treaty through its,
17 and I quote, own system of protection creates an extraordinary
18 exception to all known principles of Contract law and allows it
19 to assert rights under a contract between third parties only
20 because of its status as an indirect Shareholder of TexPet.
21 Chevron offers a number of authorities in support of
22 this uncontested proposition that indirect Shareholders may
23 bring treaty claims on their own, names their own right and for
24 harm suffered by them. But Claimants also offered a total of
25 zero cases in support of the proposition that a third party can
291
11:42 1 assert rights for an indirect Shareholder, can assert rights
2 directly arising out of the Contract to which only its
3 subsidiary is a party.
4 All right. That concludes the brief summary or
5 overview of the cast of characters.
6 Now, one clarification and one follow-up on a question
7 raised yesterday.
8 First, yesterday Claimants repeated an argument raised
9 in their Rejoinder on Jurisdiction, which--it asserts that
10 Ecuador concedes that the municipality Settlement Agreements
11 cover Chevron, but then insists that the 1995 Settlement
12 Agreement did not include parent corporations. And I referred
13 to Paragraph 149 of Claimants' Rejoinder on Jurisdiction. In
14 that paragraph Claimants cite to Footnote 122 or Paragraph 122,
15 Footnote 261 of the Republic's Reply. There we stated
16 Claimants submit--Claimants submit that the terms "affiliated
17 company" and "related company" both are inclusive of parent
18 corporation. It's not the Republic's statement. This is
19 Claimants' submit that the terms "affiliated company" and
20 "related company" both are inclusive of parent corporation.
21 From that contention we build upon and suggest that if
22 affiliate corporation or related corporation, indeed, are
23 inclusive of parent corporations, then a fortiori one must
24 assume that TexPet's counsel knew exactly how to write an
25 all-encompassing release provision. But that's it. We do not
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11:44 1 concede that the municipality Agreements cover Chevron. That's
2 one point.
3 And the follow-up question, yesterday I was asked by
4 Professor Lowe as to whether I could articulate any reason why
5 TexPet's counsel did not include parent corporations or the
6 term "parent corporations" within the scope of Article 5.1. My
7 response was a little dusty, in Claimants' terms.
8 Essentially, as I stated yesterday, the answer falls
9 within the realm of speculation. I did quote, however, one
10 statement from Claimants' Rejoinder that I would like to
11 requote here verbatim and cite to Paragraph 152 of the
12 Rejoinder, and this is Claimants' own statement. It's not the
13 Republic's, and I quote, "There is no basis whatsoever for
14 TexPet's future parent companies to be held responsible for
15 TexPet's past conduct or liabilities."
16 And what I stated yesterday is that this could
17 probably suggest that this could have been the thought process
18 at this time and possibly explained why they decided not to
19 include, "parent corporation," but again this is all within the
20 realm of speculation.
21 Within the realm of speculation, also there is another
22 statement that I could quote here in response to Claimants'
23 suggestion that the reference to the term "principals" would
24 refer to no party at all. And this what the State at
25 Paragraph 145--say the Claimants at 145 of the Rejoinder on
293
11:46 1 jurisdiction: "An agent acting within the scope of its agency
2 binds its principal and does not bind itself personally." Here
3 is another statement that we could probably presume was in
4 TexPet's counsel, U.S. counsel's mind at the time.
5 So, on the one hand, we have a suggestion or possible
6 belief that there is no basis to attribute to a future parent
7 corporation the conduct of TexPet at the time, and, on the
8 other hand, the principle that an agent acting within the scope
9 of its agency binds its principal and does not bind itself,
10 which it said that TexPet was a Shell Corporation after it left
11 Ecuador, but before it left Ecuador it served one purpose, and
12 that was to conduct Texaco's operations in Ecuador. It also
13 shared the same Board of Directors with Texaco.
14 So, we don't need to take a position here, but it is
15 conceivable that someone at the time might have thought that a
16 few years down the road somebody might have raised the argument
17 that perhaps TexPet was Texaco, Inc.'s agent, and Texaco, Inc.,
18 was TexPet's principal. That, again, speculating, could
19 explain the rationale behind the absence of an express
20 reference to "parent corporations" within the scope of
21 Article 5.1.
22 Now, if I may turn to the precise question of the
23 Tribunal, see prior Claimants' Memorial on the Merits, which is
24 which, and I was prepared to go over every single one of the
25 items in the prayer for relief all the way down to item number
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11:48 1 14, but in the interest of time I will just make a general
2 statement. Again, as I stated at the beginning, it is
3 Claimants' duty or Claimants' burden to address this question,
4 but I would like to point out that only the first item concerns
5 both Chevron and TexPet. In fact, Chevron, the only named
6 Defendant in Lago Agrio, stands to benefit from a finding in
7 this regard. But this is also the kind of relief that TexPet
8 asserts it has a right to invoke, which is a binding
9 declaration interpreting the exact terms and scope of the
10 Agreement.
11 Every single other item, many of which would probably
12 call for adjudication of third-party rights, but at the end of
13 the day every single item either expressly or implicitly refers
14 exclusively to Chevron or concerns Chevron exclusively as the
15 only named Defendant in the Lago Agrio Litigation.
16 With that, I will conclude. Perhaps--I don't know if
17 my colleague Ricardo Ugarte would like to say a few words.
18 MR. UGARTE: Mr. President and Members of the
19 Tribunal, I will try to be brief. I will roughly make two
20 essential arguments here.
21 First, on the discussion by Claimants' counsel
22 yesterday concerning the fork-in-the-road objection, Claimants'
23 counsel mischaracterized the purpose for which the Republic
24 draws your attention to the Pantechniki versus Albania Award
25 suggesting that we were citing it with respect to the
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11:50 1 distinction that Claimants make as to whether or not the
2 fork-in-the-road Clause does not apply to so-called "defensive
3 measures" taken by an investor.
4 You can see that position taken by Claimants' counsel
5 yesterday at transcript Pages 183.
6 Now, the Respondent does not cite that case for the
7 purpose of determining whether or not so-called "defensive
8 measures" taken in the local proceedings by the investor are
9 exempt from application of the fork-in-the-road clause.
10 Indeed, the Pantechniki Case says nothing about this issue at
11 all.
12 Now, let me take you a step back. We cite the
13 Pantechniki Award for purposes of identifying the fundamental
14 basis test, which is not a novel test at all, and I will
15 explain what that means in a moment, but you don't need the
16 fundamental basis test to see that the Claimants cannot
17 relitigate the same contractual issue that they submitted
18 before the Lago Agrio Court and this Tribunal. We say they
19 submitted the dispute concerning the scope and effect of the
20 Release to the Lago Agrio Court. They have been litigating
21 that for seven years and determining that the fork-in-the-road
22 objection applies to that dispute involves a straightforward
23 comparison to the claims that arise under the Release that
24 they've submitted to you here.
25 Where we do cite, take to you the fundamental basis
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11:51 1 test described in the Pantechniki Award is for the purpose of
2 examining the treaty claims that have been submitted by the
3 Claimants here. We believe the fundamental basis test is
4 simply a useful test when you're determining whether those
5 treaty claims are really at their core nothing more than the
6 same contractual claim.
7 At Paragraph 64 of this Award, which is at RLA-17, the
8 Tribunal states--let me explain that the Claimant in that
9 particular case suggested that its treaty claims were not--that
10 its claims in the investment tribunal were founded upon the
11 Treaty and not on the Contracts, and there the Tribunal found
12 that, "There comes a time"--this is at Paragraph 64 of the
13 Award--"There comes a time when it is no longer sufficient
14 merely to assert that a claim is founded on the Treaty. The
15 Tribunal must determine whether the claim truly does have an
16 autonomous existence outside the Contract; otherwise, the
17 Claimant must live with the consequences of having elected to
18 take its grievance to the national courts." That's the purpose
19 for which we cite the Pantechniki Award. You have a duty to
20 assess the treaty claims submitted here to determine whether or
21 not they rise and fall on the issue of the scope and effect of
22 the Release.
23 Now, I also need to correct the record insofar as
24 Claimants have completely mischaracterized one of the holdings
25 in the Pantechniki Award, and they're at Paragraph 268 of the
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11:53 1 Counter-Memorial on Jurisdiction. They state as follows: "The
2 Sole Arbitrator held that the fork in the road barred
3 relitigation of the Contract claims but not the claims arising
4 out of the substantive treaty violations."
5 At Paragraph 87 of the Pantechniki Award, you can see
6 quite clearly that the Claimants' fair and equitable treatment
7 claim is being discussed and was being invoked on the basis,
8 according to the investor, that their Contract claims had been
9 violated by arbitrary measures in violation of the Fair and
10 Equitable Treatment Clause to which Paragraph 87 the Tribunal
11 states, "It transpires on examination that the alleged
12 arbitrariness is said to arise by reason of Albania's refusal
13 to compensate. That is precisely the issue which the Claimant,
14 to its current regret, took to the Albanian Courts. I could
15 not rule on it without violating my own jurisdictional
16 constraints."
17 I also think it's instructive for the Tribunal to take
18 a review of this Award for purposes of determining on what
19 basis the Tribunal in the Pantechniki Case upheld its
20 jurisdiction over the full protection and security clause to
21 see an application of this test and how it may be useful for
22 the Tribunal here.
23 At Paragraph 72, which I won't read in its entirety,
24 but the first sentence says, "The claim for failure to ensure
25 full protection and security is distinct from the contractual
298
11:56 1 claim."
2 And later on in that very same paragraph, drawing the
3 key distinction, "A failure of one claim would not
4 automatically entail the failure of the other." And that's
5 precisely our submission here as to the treaty claims that the
6 Claimants have brought before you now. Every and every one of
7 them depends inexorably upon them satisfying the
8 Tribunal--excuse me, satisfying--proving their case on the
9 issue of the scope and effect of the Release. That issue was
10 submitted to the Lago Agrio Court and, therefore, all of the
11 treaty claims are barred by the fork-in-the-road provision.
12 Finally, the last point. Yesterday I ended my
13 submissions on the Republic's fork-in-the-road objection by
14 noting that, "If for any reason the Tribunal were to find that
15 the fork-in-the-road Clause does not apply as a bar to the
16 entire Treaty arbitration, clearly it may nevertheless find
17 that the fork-in-the-road Clause applies to our certain
18 disputes included in the Notice of Arbitration, including
19 Claimants' dispute with the Republic of Ecuador over the scope
20 and effect of the Release at issue."
21 The President asked me to identify which of the
22 prayers for relief in the Claimants' Merits Memorial would be
23 subject to that latter point.
24 And the short answer is that as articulated, which is
25 very broadly, all of the prayers for relief are barred by the
299
11:57 1 application of the fork-in-the-road clause. I would turn your
2 attention to Paragraph 547 of the Claimants' Merits Memorial
3 which lists each of the prayers for relief. And as I
4 mentioned, the dispute over the scope and effect of the Release
5 is the foundation and is inescapably intertwined with each and
6 every one of the players for relief. I won't take you through
7 each of them, but I do want to highlight two in particular.
8 First of all, prayer for relief number one. In
9 essence, prayer for relief number one seeks a declaration that
10 under the purported investment agreement, Claimants have no
11 liability for any environmental claims. This is precisely the
12 relief sought by the Claimants in the Lago Agrio courts on the
13 very same basis; i.e., the scope and effect of the Release.
14 PRESIDENT VEEDER: How would that apply in regard to
15 the second Claimant in these proceedings, TexPet?
16 MR. UGARTE: Well, we would submit that since before
17 you you have a group of companies that are a hundred percent
18 owned by the parent corporation, Chevron. That principle of
19 fork in the road cannot clearly be circumvented by using
20 corporate separateness to do so, if, in fact, they are a
21 hundred percent owned subsidiary. In that situation, there is
22 no distinction for the purposes of fork in the road.
23 And I would also direct your attention to Prayer for
24 Relief Number 5, which is the other side of the same coin. In
25 Prayer 5, Claimants seek a declaration that Ecuador or
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13:06 1 PetroEcuador are "exclusively liable" for any judgment rendered
2 in the Lago Agrio Litigation. To say that Respondent is
3 exclusively liable is simply to seek the same relief as is
4 sought in prayer for relief number one; i.e., that Claimants
5 cannot be liable for any environmental claims.
6 The remainder of the prayers for relief, in our view,
7 are inexorably tied to the scope and effect issue that we have
8 been discussing concerning the Release; and, for that
9 proposition, and because of that basis, we are, as written,
10 because the prayers for relief are so broad, it is our
11 submission that all of them are barred by the fork-in-the-road
12 objection.
13 That concludes my submission, Mr. President.
14 And I will now turn the word to our final speaker,
15 Dr. Galindo.
16 MR. GALINDO: Thank you, Mr. President, Members of the
17 Tribunal. Just a few words as concluding remarks.
18 In closing, the Republic urges this Tribunal to deny
19 Claimants' efforts to have an international investment Tribunal
20 intervene in private nongovernmental environmental litigation
21 that has not viable connection to an investment dispute.
22 Claimants cannot make a prima facie case on the merits.
23 Claimants seek to hide behind the prima facie test assuming
24 that if they assert something as true, the Tribunal must accept
25 it as true, even if it is a contested, critical, and
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12:02 1 contradicted by the documents before this Tribunal.
2 This Tribunal does not need to close its collective
3 eyes to the terms that do exist in the Contract, nor does the
4 Tribunal need to divine terms as if they are part of the
5 Contract when they are not there. The Release contained in the
6 1995 Settlement Agreement explicitly limits its scope to the
7 Republic's and PetroEcuador's claims. That is all that was
8 ever released, and the Republic has no obligation under
9 Ecuadorian Law to do anything more than that. And if the
10 intent were anything different, don't you believe that this
11 would have been spelled out in the settlement, especially given
12 the pendency of the Aguinda Case?
13 There is no provision in the 1995 Settlement Agreement
14 requiring the Republic to intervene, to file any pleading, to
15 make an appearance, or otherwise take any position at all in
16 private litigation. That language is nowhere to be found in a
17 plain reading of the Agreement and, therefore, this Tribunal
18 may dismiss any claims based on the assumption of such an
19 obligation at this stage of the proceedings.
20 I would like to reiterate that the Republic has not
21 taken any position on the Lago Agrio Court's jurisdiction over
22 Chevron. As acknowledged by Chevron, under Ecuadorian legal
23 procedure, Chevron's motion to dismiss the Lago Agrio
24 Litigation based on lack of jurisdiction would be resolved at
25 the time the Court in that case issues a final judgment.
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12:04 1 Yesterday, Claimants asserted several times that under
2 Ecuadorian Law, the Republic has both the positive obligation
3 to respect the Release and a negative obligation not to
4 undermine the Release. In fact, the Republic and PetroEcuador
5 never asserted any environmental claims against Claimants, so
6 that there has been no breach and could be no breach of their
7 contractual commitments.
8 Under the fork in the road and Monetary Gold, too, the
9 Claimants' attempt to litigate in this forum the same issue
10 that they choose to litigate in Ecuador should be rejected.
11 Once it is understood that the 1995 Settlement Agreement, which
12 language is plain on its face, is not an indemnification
13 agreement or a hold harmless agreement, and not a cooperation
14 or noncooperation agreement, and does not extend to Texaco
15 releases on behalf of third parties, Claimants' continuous
16 jurisdictional hook disappears, not only as it relates to the
17 Settlement Agreement, but for all of their treaty claims as
18 well as for the reasons articulated by Professor Douglas.
19 Mr. President and Members of the Tribunal, what
20 Claimants seek to accomplish in this arbitration is
21 unprecedented and will, as Professor Douglas so eloquently
22 noted yesterday, would put this Tribunal on the path of being a
23 forum of general jurisdiction. The Republic of Ecuador
24 respectfully requests that the Tribunal decline Claimants'
25 invitation to do so, and instead ask that the Tribunal sustain
303
12:06 1 the Republic's Jurisdictional Objection and dismiss this
2 arbitration. This is a request for a message to the
3 international investment community and a message of comfort to
4 the sovereign States that have to deal with international
5 arbitration.
6 Thank you very much, Mr. President, Members of the
7 Tribunal.
8 PRESIDENT VEEDER: Thank you very much, indeed.
9 You've come well within time. I take it that's the end of your
10 Reply submission, but we did have a few questions still to work
11 through together.
12 Question 12, we have, of course, the Respondent's
13 letter of the 12th of November 2010, on the umbrella claims
14 pleaded by the Claimants in their Memorial on the merits. Is
15 there anything else which the Respondents want to say about
16 that?
17 MR. DOUGLAS: Very little, Members of the Tribunal.
18 We still assume that under UNCITRAL Rules we can raise
19 this in our Counter-Memorial on the Merits, as that's what the
20 UNCITRAL Rules say. What we will say at this stage, though, is
21 that the point on privity has been addressed in great detail
22 before you, the simple point being that if Chevron isn't a
23 party to the Settlement Release Agreement, then its implication
24 the Umbrella Clause makes absolutely no different, and the
25 Umbrella Clause would fall away if the Tribunal finds that
00+1+202.544.1903

Ex. 95 2010 11-23 jurisd hrg day 2 condensed

Ex. 95 2010 11-23 jurisd hrg day 2 condensed

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Ex. 95 2010 11-23 jurisd hrg day 2 condensed