Lago Agrio: Dutch Supreme Court Affirms Decision In BIT Arbitration

The Hoge Raad (the Dutch Supreme Court) has affirmed a lower court’s decision refusing to annul the interim awards in favor of Chevron in its investment treaty arbitration against Ecuador arising out of the Lago Agrio case. I covered one of the interim awards in February 2012, if you can believe that, as well as the first instance judgment on the request for annulment in January 2016 and the decision of the Court of Appeals of the Hague in July 2017.

There is no official translation of the decision yet, as far as I know, but as best as I can tell, the court rejected Ecuador’s argument that enforcement of the award would be contrary to public order, on the grounds that the award was merely an interim award meant to preserve the status quo.

The timing of the decision is no doubt coincidental but is interesting in light of my speculation a few days ago. If, as I speculate, the Ecuadoran government’s decision to turn over Julian Assange to the UK authorities was related to a larger deal that could involve a settlement of the dispute between Chevron and Ecuador, I would not be surprised if, after this latest decision, Ecuador takes steps to make the Lago Agrio judgment unenforceable. After all, Ecuador has taken the position that it pays when required by a final and binding arbitral award, and it has followed through. As Diego Martinez, the head of Ecuador’s central bank, said in 2016, when the country paid a $96 million award to Chevron:

We don’t agree with how these international mechanisms work … however, we are respectful and we fulfill our international obligations.

So the latest Dutch decision provides an opportunity for Ecuador to suspend the judgment without losing face. I think the effect of such a move would be to bring the enforcement proceedings in Canada to a halt, so whatever happens next may be a big deal.

Oil barrels in Ecuador

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