**Update January 15, 2010**: The Republic of Ecuador and the class Plaintiffs have both challenged Chevron’s arbitration claim in New York federal court. You can read about it here and here.
The Arbitration Claim
As reported in this article in the Wall Street Journal and in this article in the New York Times, Chevron filed an international arbitration claim before the Permanent Court of Arbitration in The Hague under the Rules of the United Nations Commission on International Trade Law (UNCITRAL). The claim is based on Ecuador’s alleged violation of investment agreements, international law, and its treaty with the United States–the Encouragement and Protection of Investments Treaty.
Chevron’s claims relate to the Amazon oil lawsuit I wrote about in an earlier post. In the arbitration filed in the Hague, Chevron alleges that Ecuador’s judicial process is broken and that the South American nation cannot fairly adjudicate the long-running oil pollution litigation.
Through the filing, Chevron seeks to enforce prior settlement and release agreements that the government of Ecuador entered into with Texaco Petroleum when the consortium was terminated, and to hold Ecuador accountable for its obligations under Ecuadorian law and existing international treaties.
Forum Shopping in the Hague Must be Condemned
Chevron’s latest move is the litigation equivalent of three card monty and is yet another tactic to divert attention away from the trial taking place in Ecuador. Filing an international arbitration campaign at this point in time smacks of desperation and is a clear example of forum shopping, as Plaintiffs counsel Steven Donziger stated in this Reuters article.
Chevron first fought successfully to force plaintiffs to try their lawsuit in Ecuador rather than U.S. courts. Then it sought (unsuccessfully) to win indemnification in U.S. courts from a possible judgment in Ecuador. And now it’s filed for arbitration seven thousand miles across the Atlantic in Holland.
The Hague is arguably the most hallowed institution for the resolution of high-profile international disputes. Chevron’s latest tactic all but mocks the institution’s primary mission to administer justice. The Hague must not be utilized to frustrate legitimate legal proceedings taking place elsewhere.
Forum Shopping Creates Broad Incentives for Abuse
As Chevron’s arbitration claim illustrates, the opportunity for one party to game the system and manipulate the outcome of a case by choosing a specific forum over another creates broad incentives for abuse. Among other things, forum shopping :
- creates legal uncertainty (particularly for the defendant);
- drains resources by imposing substantial additional costs on defendants, who must transport lawyers, documents, and numerous witnesses to the site of the trial – an expense that is multiplied when the trial is located far from the defendant’s place of business.
- undermines the authority of substantive state law by calling into question the equity of the legal system.
Although under extremely limited circumstances forum shopping may prove a legitimate means to achieve a more just result, it is disproportionately utilized to avoid a just result by exploiting the points outlined above–as Chevron has done.
While an attorney’s obligation to zealously advocate his clients’ interest may involve forum shopping as part of the procedural calculus, the obligation must be tempered with a keen understanding of what becomes abusive litigation.
Trend to Watch: Given the High Profile Nature of Chevron’s Claim, Look for an Increase in Similar Filings in the Hague