Chevron Case: Public Respondent's Supplemental Counter Memorial on the Merits Annex A

Annex A: Claimants’ Allegations Of Legal Error Have No Basis In Ecuadorian Law 1.

Claimants continue to press this Tribunal to act as if it were a supra-national court

of appeal. Unleashing a barrage of frivolous complaints about every conceivable aspect of the appellate and cassation proceedings in Ecuador, they obviously hope that at least some of their misrepresentations of Ecuadorian law will move this Tribunal to adopt the illegitimate role that Claimants demand.

Chevron’s scorched-earth litigation tactics in Ecuadorian courts have

included two levels of appellate review of virtually every single finding and procedural decision made in the Lago Agrio Litigation. None of Chevron’s claims of legal and/or procedural error withstood scrutiny and all were appropriately dismissed. Similar claims are now pending before both the Constitutional Court in Ecuador and this Tribunal.

2.

But international tribunals are not courts of appeals.1

It is not within this

Tribunal’s mandate or competence to decide whether it agrees or disagrees with the substantive and procedural rulings of Ecuador’s municipal courts applying Ecuadorian law. A finding of denial of justice requires “a conclusion of law or fact outside of the spectrum of the juridical[ly] possible, in light of the procedural and substantive law applied by the relevant national court at the relevant time.”2 Claimants cannot clear this high bar.

3.

The Republic has demonstrated previously how Chevron developed a synthetic

record of purported procedural irregularities in the Lago Agrio Litigation, with the apparent goal

1

See generally Respondent’s Track 2 Counter-Memorial ¶¶ 320 et seq. (citing, inter alia, RLA-304, Barcelona Traction, Light & Power Co. Case (Belgium v. Spain), 1970 I.C.J. 3 (Award of Feb. 3, 1970) at *158 (“If an international tribunal were to take up these issues and examine the regularity of the decisions of municipal courts, the international tribunal would turn out to be a ‘court de cassation’, the highest court in the municipal law system.”) and RLA-159, Ian Brownlie, PRINCIPLES OF PUBLIC INTERNATIONAL LAW 39 (Oxford Univ. Press 2008) (“Interpretation of their own laws by national courts is binding on an international tribunal.”)).

2

R-172, Excerpt from Opinion of Jan Paulsson submitted on behalf of Claimants in Chevron Corp. and Texaco Petroleum Co. v. Republic of Ecuador, PCACase No. AA277 ¶ 70.

1

of laying a foundation for their claims against the Republic.3

This submission addresses

Claimants’ most recent iterations of their claims of legal error by Ecuador’s courts. Once again, the Republic respectfully urges the Tribunal to look beyond Claimants’ incendiary language and carefully assess each of Claimants’ allegations against the record evidence (or lack thereof) and applicable Ecuadorian law.

A.

The Ecuadorian Courts Properly Rejected The Claims Of Corporate Separateness Between Chevron And Texaco And Between Texaco And TexPet

4.

Chevron’s dominance and control over Texaco in every respect, from its iron grip

on Texaco’s purse strings to overlapping executive board members, provided the Ecuadorian courts with sound justification for piercing the corporate veil to impute Texaco’s actions to Chevron. Similarly, the record reflects Texaco’s domination over TexPet during the Concession period, with Texaco exercising complete control over TexPet’s day-to-day business activities including minutiae as insignificant as whether to hire a particular caterer. Tellingly, Texaco’s executives referred to TexPet as the “Ecuadorian division” of Texaco. Here, too, solid evidence supports the Ecuadorian courts’ decision to pierce the corporate veil between these alter egos.

5.

None of Chevron’s arguments to the contrary withstands scrutiny. First, Chevron

is estopped from arguing that the Ecuadorian courts improperly relied on veil piercing to assert jurisdiction over Chevron and to find it liable to the Lago Agrio Plaintiffs. To obtain a dismissal of the Aguinda lawsuit in New York, Chevron (like Texaco) promised the Second Circuit Court of Appeals it would submit to the jurisdiction of the Ecuadorian courts to litigate the environmental claims and would recognize the binding nature of the judgment rendered against it in Ecuador. It was primarily those promises that persuaded the Second Circuit to dismiss the

3

Respondent’s Track 2 Counter-Memorial ¶ 147.

2

case so that it could be litigated in Ecuador. Having achieved that procedural victory, Chevron is estopped from challenging the Ecuadorian courts’ reliance on veil piercing to establish jurisdiction and, ultimately, liability. Second, the courts properly applied the governing legal principles to evaluate the evidence and determine the relevant facts. The courts’ decisions to pierce the veils between Chevron and Texaco, and Texaco and Texpet, were appropriate, and most definitely fall within the “juridically possible.”

1.

6.

Claimants Are Estopped From Challenging The Ecuadorian Courts’ Exercise Of Jurisdiction Over Chevron

Claimants’ lead argument is their most offensive:

“Chevron itself never

submitted to jurisdiction in the Ecuadorian courts, nor did it represent to any court or tribunal that the Ecuadorian courts are a fair and impartial forum. It was Texaco Inc. — not Chevron — that committed to submit to the jurisdiction of the Ecuadorian courts pursuant to the Second Circuit’s forum non conveniens dismissal of the Aguinda case.”4 The Second Circuit rejected Chevron’s argument, expressly and emphatically: Chevron Corporation claims, without citation to relevant case law, that it is not bound by the promises made by its predecessors in interest Texaco and ChevronTexaco, Inc. However, in seeking affirmance of the district court’s forum non conveniens dismissal, lawyers from ChevronTexaco appeared in this Court and reaffirmed the concessions that Texaco had made in order to secure dismissal of plaintiffs’ complaint. In so doing, ChevronTexaco bound itself to those concessions. In 2005, ChevronTexaco dropped the name “Texaco” and reverted to its original name, Chevron Corporation. There is no indication in the record before us that shortening its name had any effect on ChevronTexaco’s legal obligations.

Chevron Corporation therefore remains accountable for the promises upon which we and the district court relied in dismissing Plaintiffs’ action.5 4

Claimants’ Track 2 Reply ¶ 121 (footnotes omitted).

5

CLA-435, Republic of Ecuador v. Chevron Corp., 638 F.3d 384, 389 n.3 (2d Cir. 2011) (emphasis added).

Moreover, the federal appellate court explained that “Chevron’s contention that the Lago Agrio litigation is not the refiled Aguinda action is without merit. The Lago Agrio plaintiffs are substantially the same as those who brought

3

7.

The same holds true for the promise to “recognize the binding nature of any

judgment issued in Ecuador.” As the Second Circuit found, “that promise, along with Texaco’s more general promises to submit to Ecuadorian jurisdiction, is enforceable against Chevron in this action and any future proceedings between the parties, including enforcement actions, contempt proceedings, and attempts to confirm arbitral awards.”6 8.

The Lago Agrio Appeals Court similarly rejected Chevron’s plea to be released

from its promises: “Nor will this Division be deceived only having to consider that it was the same company sued in this trial, Chevron Texaco Corporation — who later changed its name to Chevron Corp. — that appeared before the North American court to ratify the promises that Texaco Inc. made[.]”7 The appellate court recognized, moreover, that Chevron’s continued “refusal to comply with the [Ecuadorian] judgment — and therefore its promise to the North American court — is an undeniably certain and proven fact[.]”8 9.

Even if the Second Circuit had not said so outright, Claimants nevertheless are

estopped. It is not the Second Circuit’s 2011 opinion that binds Chevron, but rather the promises themselves. As the Second Circuit noted, “lawyers from ChevronTexaco appeared in this Court and reaffirmed the concessions that Texaco had made in order to secure dismissal of plaintiffs’ complaint.”9

So it is no answer to say, as Chevron does, that “the Second Circuit’s

opinion . . . post-dates the [Lago Agrio] Judgment by a full month. Accordingly, it could not

suit in the Southern District of New York, and the claims now being asserted in Lago Agrio are the Ecuadorian equivalent of those dismissed on forum non conveniens grounds.” Id. at 390 n.5.

6 7 8 9

Id. at 389-90 n.4 (emphasis added).

C-991, Lago Agrio Appellate Decision at 6.

Id. CLA-435, Republic of Ecuador v. Chevron Corp., 638 F.3d 384, 389 n.3 (2d Cir. 2011).

4

have served as the basis for the Judgment’s finding on this point[.]”10 That all three judges of the Second Circuit who decided Chevron’s appeal reached the same conclusion as the Ecuadorian courts confirms, at a minimum, that the Ecuadorian courts’ decisions comfortably satisfy the international standard.

10.

Claimants argue that “Chevron succeeded before the Second Circuit — i.e. the

court held that the conditions of the forum non conveniens dismissal did not preclude Chevron from seeking to arbitrate its claims before this Tribunal.”11 Claimants imply that the fact that it won that issue on appeal renders the court’s other findings mere dicta. Even if that were so, the fact that the Second Circuit found — in dicta or otherwise — that the judicial promises could be enforced against Chevron serves as clear proof that the Ecuadorian courts’ identical findings are well within the “juridically possible.” In any event, the Second Circuit’s findings are not mere dicta; as shown below, the court instead relied on its findings that Chevron was bound to the judicial promises specifically to reach its holding in the case.

11.

As this Tribunal knows, Claimants’ notice of arbitration sought to prevent an

adverse Ecuadorian judgment. The Republic asked the U.S. courts to stay this arbitration on the contention that the very purpose of it was inconsistent with Texaco’s and Chevron’s promises given in exchange for dismissal of the Aguinda action, that is, that they would abide by any final decision from the Ecuadorian system of justice subject only to the right to defend enforcement actions.12 In response, Chevron argued, first, that only Texaco — not Chevron — made the representations, and that Chevron was therefore not bound by them, and second, that even if

10 11 12

Claimants’ Track 2 Reply ¶ 122.

Id. ¶ 123 (emphasis in original).

CLA-435, Republic of Ecuador v. Chevron Corp., 638 F.3d 384, 390 (2d Cir. 2011).

5

Chevron were bound to the judicial promises, the commencement of the international arbitration was not inconsistent with those promises.13 12.

In deciding the Republic’s request to stay the arbitration, the Second Circuit

rejected Chevron’s first argument — that it was not bound by Texaco’s promises. It was only because the Second Circuit found against Chevron on this issue that the court then found it necessary to consider Chevron’s second argument — whether Chevron’s (and TexPet’s) judicial promises were inconsistent with their decision to commence the international arbitration.14 While the Second Circuit identified certain potential problems inherent in Claimants’ commencement of the arbitration, depending on how the arbitration proceeded and the nature of any relief potentially granted, it found that the arbitration itself was not necessarily incompatible with the judicial promises.15 13.

What is clear is that Chevron raised as a defense to the Republic’s petition its

claim that the judicial representations did not bind the company. The issue was litigated, and the Second Circuit decided the issue, finding Chevron’s position without merit: Texaco had been trying to convince the district court that Ecuador would serve as an adequate alternative forum for resolution of its dispute with Plaintiffs. As part of those efforts, Texaco assured the district court that it would recognize the binding nature of any judgment issued in Ecuador. Doing so displayed Texaco’s wellfounded belief that such a promise would make the district court 13 14

See generally CLA-435, Republic of Ecuador v. Chevron Corp., 638 F.3d 384 (2d Cir. 2011).

CLA-435, Republic of Ecuador v. Chevron Corp., 638 F.3d 384, 396 (2d Cir. 2011).

15

“A conflict may arise if the Ecuadorian courts do issue a final judgment, and the arbitrators subsequently enter an award that is inconsistent with that judgment. Any such conflict, should it arise, could be resolved in any resulting proceedings to enforce the judgment. In such a proceeding, Plaintiffs would be free to argue that Chevron is estopped from refusing to pay that judgment based solely on the force of its release claim. New York's Recognition of Foreign Country Money Judgments Act, which is the sole reserved route for Chevron to challenge any final judgment resulting from the Lago Agrio litigation, provides only limited ways to attack a judgment based on a prior agreement. . . . At this point, however, we need not address the merits of any such argument. Any conflict between the outcomes of the BIT arbitration and the Lago Agrio litigation remains purely hypothetical.” CLA-435, Republic of Ecuador v. Chevron Corp., 638 F.3d 384, 399 (2d Cir. 2011).

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more likely to grant its motion to dismiss. Had Texaco taken a different approach and agreed to participate in the Ecuadorian litigation, but announced an intention to disregard any judgment the Ecuadorian courts might issue, dismissal would have been (to say the least) less likely. We therefore conclude that the district court adopted Texaco’s promise to satisfy any judgment issued by the Ecuadorian courts, subject to its rights under New York’s Recognition of Foreign Country Money Judgments Act, in awarding Texaco the relief it sought in its motion to dismiss. As a result, that promise, along with Texaco’s more general promises to submit to Ecuadorian jurisdiction, is enforceable against Chevron in this action and any future proceedings between the parties, including enforcement actions, contempt proceedings, and attempts to confirm arbitral awards.16 14.

The federal appellate court’s phrasing (“we therefore conclude”) belies Chevron’s

contention that what follows in the court’s opinion was non-binding dicta.17

The Second

Circuit’s conclusion instead establishes collateral estoppel and cannot be reversed by a lower court or a separate juridical body.18 More fundamentally, the Second Circuit was correct: “ChevronTexaco” did file a brief in that appellate court in opposition to the Aguinda plaintiffs; it represented therein, unambiguously, that “Texaco merged with Chevron Inc.,” and, in an effort to persuade the court that there was no nexus between the judicial district (in New York) and the merged entity, it further represented that ChevronTexaco was “in the process of closing down what remains of Texaco’s former offices in White Plains, New York.”19 Unquestionably, the

16

CLA-435, Republic of Ecuador v. Chevron Corp., 638 F.3d 384, 389-90 n.4 (2d Cir. 2011) (emphasis

added).

17

See Claimants’ Track 2 Reply ¶ 123 (“Indeed, the court’s statement that Chevron was bound by Texaco’s jurisdictional representation in the Aguinda litigation was not necessary to the court’s ultimate dismissal of Ecuador’s action.”).

18

See, e.g., RLA-591, Newsom-Lang v. Warren Int’l, 129 F. Supp. 2d 662, 664 (S.D.N.Y. 2001) (“[L]ower courts in this [Second] Circuit are bound by applicable Circuit precedent.”). Thus, it is irrelevant that “the RICO Court has more recently held that Chevron and Texaco did not merge.” Claimants’ Track 2 Supp. Merits Memorial ¶ 130. Judge Kaplan’s resistance to a higher court’s findings may speak more to his pronounced predisposition than it does to established law. In any event, Judge Kaplan’s decision is on appeal to the Second Circuit.

19

R-1280, Appellee’s Br., Aguinda v. Texaco, Inc., No. 2001-7756, 2001 WL 36192276, at *10 (2d Cir. Dec. 20, 2001).

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Second Circuit properly relied on Chevron’s judicial promises. Having secured the benefit of that judicial promise (forum non conveniens dismissal of the Aguinda action after ten years of litigation), Chevron had no legal basis to seek dismissal of the Lagro Agrio Litigation on jurisdictional grounds in contradiction of its judicial representation.

And as a matter of

Ecuadorian law, the Ecuadorian courts had a sound legal basis to hold Chevron to its promise to submit to their jurisdiction. Unquestionably, that decision falls within the “juridically possible.”

Consequently, Claimants’ argument that the exercise of that jurisdiction violated international law is baseless.20 2.

15.

Well-Settled Legal Principles Justified Piercing The Corporate Veil Under These Circumstances

Claimants object that “the bases for a judgment that imposes US$ 19-billion in

liability should certainly be far more than ‘juridically possible.’”21 Not so. First, the amount of the Lago Agrio Court’s judgment is plainly irrelevant to the question whether its jurisdictional decision is acceptable as a matter of international law.22 Second, “juridically possible” is the relevant legal standard, and not, as Claimants would have it, a pejorative comment on “the true

20

Moreover, “[t]he rule of estoppel has been repeatedly applied by the Supreme Court of Justice of Ecuador.”

R-1282, Jorge Zavala Egas, La Regla de los Actos Propios y su Aplicación en el Derecho Administrativo Ecuatoriano ¶ 25. Under Ecuadorian law, the doctrine of estoppel is based on the principle of good faith and “the duty of every citizen to . . . keep one’s own word.” Id. ¶ 10. Three elements comprise estoppel under Ecuadorian law, all of which are satisfied by Chevron’s promises to the U.S. Court of Appeals for the Second Circuit: (1) “The conduct (behavior) must further have legal relevance and must generate reliance by a third party”; (2) “unity of the legal situation,” in that “the actions of a new intervening business are produced in the framework of one same legal relationship with respect to the others”; and (3) “contradictory conduct” — “[a]dmitting a claim when it contradicts the first relevant behavior is not legally lawful, when it is manifested within the same legal relationship in which it was performed.” Id. ¶¶ 21-23.

21

Claimants’ Track 2 Reply ¶ 125.

22

Incidentally, the now US$ 9.5-billion judgment is still only a fraction of the US$ 28-billion British Petroleum has paid already for damages claims and cleanup costs relating to the 2010 DeepWater Horizon Gulf Spill, and it faces the prospect of billions of dollars more in fines. R-1290, Campbell Robertson and Clifford Krauss, BP May Be Fined Up to $18 Billion for Spill in Gulf, NEW YORK TIMES (Sept. 4, 2014).

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quality of the [Lago Agrio] Judgment’s analysis.”23

Moreover, Claimant’s position is

contradicted by their former expert (current counsel) Professor Paulsson: “[W]hat international law requires for a finding of denial of justice based on gross incompetence is a conclusion of law or fact outside of the spectrum of the juridical possible, in light of the procedural and substantive law applied by the relevant national court at the relevant time.”24 16.

Ignoring the applicable international law, Claimants devote their Reply and

Supplemental Memorial to arguing, unconvincingly, that the Judgment’s analysis of the relevant corporate-separateness principles is incorrect.25 Claimants assert that the Lago Agrio Court disregarded the “legal and factual realities” of Chevron’s corporate relationship with Texaco, and that the Judgment’s analysis is so “deeply flawed that it could only have been the product of bias or corruption.”26 But the Ecuadorian courts’ decision to pierce the corporate veil mirrors the analysis employed by a U.S. court that reached the same conclusion regarding the same corporate entities on the basis of the same facts.27 Accordingly, the Lago Agrio Court’s findings fall comfortably within the ambit of the “juridically possible”; moreover, they were in fact correct in all respects. a.

17.

The Ecuadorian Courts Reasonably Applied Ecuadorian VeilPiercing Law To Impute Texaco’s Conduct to Chevron

Chevron nowhere disputes that the Lago Agrio Court had discretion to pierce the

corporate veils between and among Chevron, Texaco and TexPet. Indeed, the decision to do so 23

Claimants’ Track 2 Reply ¶ 125.

24

R-172, Excerpt from Opinion of Jan Paulsson submitted on behalf of Claimants in Chevron Corporation and Texaco Petroleum Co. v. Republic of Ecuador, PCA Case No. AA277 ¶ 70 (emphasis added).

25

See generally Claimants’ Track 2 Reply ¶¶ 125-135, Claimants’ Track 2 Supp. Memorial ¶¶ 127-133.

26

Claimants’ Track 2 Reply ¶¶ 118-19, 126. In making this inflammatory accusation, Claimants ignore that even courts in the United States have dismissed those “factual realities” and found that Texaco is Chevron’s alter ego. See RLA-337, Simon v. Texaco, Case No. 2007-110, Final Judgment, Miss. Cir. Ct. (Aug. 11, 2010).

27

See infra § A.2.b.

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was consistent with well-established precedent embodied in Ecuador’s Civil Code and Law of Companies, as well as the authorities of other Latin American nations.28 The Lago Agrio Judgment appropriately referenced settled principles of good faith and protection against abuse of rights, with citation to authority.29 The Lago Agrio Court explained, correctly, that “no one can benefit from bad faith,” and established that piercing the corporate veil is an exceptional measure, to be resorted to when a court is “faced with abuses of the corporate form.”30 Claimants’ protestations that neither the Appellate Court nor the National Court addressed the point are unfounded; both courts reviewed and affirmed the bases for the Lago Agrio Court’s decision.31 The National Court specifically explained that the decision to pierce the corporate veil was predicated on Chevron’s “predisposition to avoid liability by means of the Chevron Corp-Texaco Inc. merger.”32

28

See RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶ 96.

29

C-931, Lago Agrio Judgment at 14 (citing R-649 Diners Club del Ecuador v. Mariscos de Chupadores CHOPMAR, S.A., S. Ct. Case No. 2003-0002 (Mar. 21, 2001) (“Given these abuses, we must react to dismiss the legal personality, this means, drawing back the veil that separates the third parties from the real recipients of the results of any agreement until it reaches them, in order to prevent that the company figure be used wrongly as a mechanism to harm others.”).

30

C-931, Lago Agrio Judgment at 13, 14. The Lago Agrio Judgment referred to the “basic principle of law” that a person cannot “benefit from [malicious statements]” in accordance with the Law of Companies (art. 17(2)), which provides that “[f]or acts of fraud, abuse or other improper conduct committed on behalf of companies and other individuals or legal entities, the following shall be held solitarily liable: . . . 2. Those who obtained benefit to the extent of its value.” Id. at 11.

31

Claimants’ Track 2 Supp. Merits Memorial ¶ 127. See C-991, Lago Agrio Appellate Decision at 6-8 (“[I]t can be seen that the defendant seeks to create doubt, through confusion, about the lack of jurisdiction through evasive corporate structures. The purpose . . . appears with unmistakable tendency to avoid responsibility through the merger between Chevron Corp. and Texaco Inc., hiding behind the corporate veil the company that inherited the assets, leaving behind the obligations for the damages.”); id. at 8 (“[P]recisely in order to prevent [the corporate form] being used as a means to defraud; it is necessary to apply the doctrine of piercing the corporate veil.”); C1975, National Court Decision at 59 (“Given the contacts of businesses in the international arena, many corporations, multinationals, and companies generally, have in turn created other companies, sometimes only on paper, to operate in different legal systems, sometimes resulting in legal fraud, abuse, unfair practices, avoidance of liability; these actions thus lead to a piercing of the corporate veil, as Hurtado Cobles explains when citing Niboyet, ‘the figure of a legal personality is reduced to the veil that hides its members, for reasons of legal expediency.’”).

32

C-1975, National Court Decision at 61.

10

18.

Claimants’ expert, Dr. Coronel, acknowledged the discretionary authority of the

Ecuadorian courts to pierce the corporate veil, the exceptional nature of that doctrine, and the relevance of general legal principles in determining whether Ecuadorian law permits piercing the veil in particular circumstances.33 Dr. Coronel further identified instances in which Ecuadorian courts have pierced the corporate veil and made no attempt to dispute the various factors that the Lago Agrio Court considered in making its determination.34 In sum, Dr. Coronel provides no support for Claimants’ attack on the Lago Agrio Judgment’s veil-piercing analysis.

19.

As elaborated further below, the Ecuadorian courts’ findings are sufficiently

supported by Ecuadorian law and in line with the law and jurisprudence elsewhere, including in the United States. b.

20.

Piercing The Corporate Veils Of Chevron And Texaco Under U.S. Law

As the Republic explained previously, a Mississippi state court recently found

Chevron liable for Texaco’s pre-merger conduct.35 Claimants contend that that decision, Simon v. Texaco, should be limited to its facts, namely, whether “Chevron was either ‘engaged in a joint venture’ with Texaco or was ‘a success-in-interest’ with respect to a single automotive service station in Mississippi, U.S.A.”36 But Claimants ignore the facts37 on which the court and jury

33

See Coronel Expert Rpt. (June 3, 2013) ¶ 20 (implicitly accepting the application of the “abuse of the law” or “abuse of rights” principle).

34

Coronel Expert Rpt. (June 3, 2013) ¶ 20.

35

Respondent’s Track 2 Counter-Memorial, Annex G ¶¶ 35-36; RLA-337, Simon v. Texaco, Case No. 2007110, Final Judgment (Miss. Cir. Ct. Aug. 11, 2010).

36

Claimants’ Track 2 Reply ¶ 130. Chevron also informed the Tribunal that it “is currently appealing this jury verdict (which by itself has no collateral effect under applicable Mississippi law) because, inter alia, the plaintiffs failed to prove any facts upon which Chevron could be responsible for Texaco’s liabilities.” Id. That appears to be highly misleading. Chevron lost its appeal to the intermediate appellate court and on August 15, 2013, the Supreme Court of Mississippi granted an unopposed motion to dismiss the appeal and send it back to the trial court to carry out a settlement agreement between the parties. R-1283, Texaco, Inc. v. Rosalyn Simon, 2010-CA01921-Docket Entry (Miss. 2013). Accordingly, the findings and conclusions established in Simon v. Texaco are indeed relevant precedent with collateral effect under applicable Mississippi law. But even if they were not, the fact

11

relied in that case to conclude that Texaco is Chevron’s alter ego (justifying piercing the corporate veil between them). Those facts — which Claimants nowhere attempt to dispute — apply here with equal force: 

Chevron acquired all of Texaco’s capital stock in the companies’ 2001 reverse triangular merger, and Chevron remains Texaco’s only shareholder.



Since 2002, Chevron and Texaco have shared at least fifteen officers and directors.



Chevron holds Texaco’s purse strings: 

Texaco transfers all of its money daily to one of Chevron’s corporate accounts;



Texaco thus requires financing from Chevron for any number of purposes (including satisfying judgments);



Chevron pays Texaco’s U.S. tax liabilities; and



Chevron’s treasury department handles all wire transfers for both Chevron and Texaco.



After the merger, Chevron sold Texaco’s former headquarters in New York and moved all operations to its own California facility.



Chevron designates Texaco as a “non-operating” company with no ongoing commercial enterprises.



Texaco does not conduct a physical shareholder meeting.

21.

As further evidence of comingled funds, Texaco’s legal representative signed

multiple checks to satisfy Chevron’s legal expenses in the Lago Agrio Litigation.38

that both the first instance and appellate courts found it appropriate to pierce the corporate veil speaks at least to the reasonableness of the decision of the Ecuadorian courts to do the same.

37

See Respondent’s Track 2 Counter-Memorial, Annex G ¶ 35 (citing authorities); R-1284, Simon v. Texaco, Pls.’ Resp. in Opp. to Defs.’ Mot. to Dismiss, Case No. 2007-110, Circuit Court of Jefferson County, Miss. (Feb. 6, 2009).

38

See C-931, Lago Agrio Judgment at 12 (“Also considered is the existence in the case file of various checks . . . that have been signed by Dr. Rodrigo Perez Pallarez, legal representative of the company Texaco in Ecuador, to satisfy the obligations that the defendant party, Chevron Corporation, has had to pay as part of the expenses generated by this lawsuit.”).

12

22.

Delaware law (the law of the state where Chevron is incorporated) is fully

consistent with the principles applied by the Ecuadorian courts to pierce the corporate veil. “For example, if those in control of the corporate enterprise have not treated it as a distinct legal entity — have ignored the ‘corporateness’ of the corporate and have themselves treated it as their ‘instrumentality’ — courts will be less inclined to regard the corporation as an effective limitation on liability.”39

“Particularly where the [parent and subsidiary’s] boards are

substantially if not wholly identical, an inference emerges that the [parent] is operating the [subsidiary] as its instrumentality,” an “inference [which] is strengthened by [the subsidiary’s] resolution to pay its corporate officers from [the parent’s] payroll account.”40 23.

Delaware courts have articulated several factors relevant to the alter-ego analysis

(below in the context of a corporation and its dominant shareholder, but equally applicable to a corporation and its subsidiary), all of which counsel in favor of imputing Texaco’s conduct to Chevron: [A]n alter ego analysis must start with an examination of factors which reveal how the corporation operates and the particular defendant’s relationship to that operation. These factors include whether the corporation was adequately capitalized for the corporate undertaking; whether the corporation was solvent; whether dividends were paid, corporate records kept, officers and directors functioned properly, and other corporate formalities were observed; whether the dominant shareholder siphoned corporate funds; and whether, in general, the corporation simply functioned as a façade for the dominant shareholder.41 24.

The Lago Agrio Court noted similar factors when it explained that TexPet was

undercapitalized in relation to Texaco, as was Texaco in relation to Chevron. The court thus 39 40

RLA-592, Irwin v. Leighton, Inc. v. W.M. Anderson Co., 532 A.2d 983, 987 (Del. Ch. 1987).

RLA-593, Mabon, Nugent & Co. v. Tex. Am. Energy Corp., 16 Del. J. Corp. L. 829, 839 (Del. Ch. 1990).

41

RLA-594, Harco Nat’l Ins. Co. v. Green Farms, Inc., 15 Del. J. Corp. L. 1030, 1038-39 (Del. Ch. 1989) (emphasis added) (quoting United States v. Golden Acres, Inc., 702 F. Supp. 1097, 1104 (D. Del. 1988)).

13

observed “that the capital of the subsidiary company shall be consistent with the amount of business done and the obligations to be met, because it is understood that business people acting in good faith risk in their affairs a capital rationally adequate to face their potential responsibilities.”42 And the Court explained further, consistent with the Delaware law just recited, that “[t]he capital of the subsidiary can be considered insufficient if it requires constant authorizations and transfers of funds to proceed with the normal course of business, since in that case, those really making the decisions and exercising control over the activities are the people who provide the authorizations and the funds.”43 The Lago Agrio Court recognized that it “must analyze this control by the parent firm over its subsidiary in its context, taking into account also that the Board of Directors of Texaco Inc. also delivered the ‘allocations’ of money with which Texpet operated, which implies that Texpet lacked not only administrative autonomy, but also financial, since it was Texaco Inc. that controlled not only the decisions, but that also authorized the funds that Texpet needed for the normal course of activities.”44 25.

This Tribunal previously has failed to defer to Ecuadorian law and precedent. In

this instance, however, even Chevron’s own courts have rebuffed Chevron’s plea that the courts honor corporate formalities when the companies themselves have failed to do so. c.

26.

Claimants’ Reliance On Decisions Of Other U.S. Courts Is Misplaced

Claimants argue that “several U.S. courts have reviewed the issue of Chevron’s

relationship with Texaco Inc. and confirmed the continuing independence of these companies.”45 The cases Claimants cite, however, are not instances of courts confirming the corporate 42 43 44 45

C-931, Lago Agrio Judgment at 19.

Id. at 19-20.

Id. at 22.

Claimants’ Track 2 Reply ¶ 131.

14

separateness of Chevron and Texaco. Rather, those cases generally have rejected an alter ego finding on procedural grounds because the plaintiffs did not properly plead the theory. In Bonnifield v. Chevron Corp., for example, the plaintiff estate raised alter ego for the first time in an attempt to defeat summary judgment. The appellate court explained: A plaintiff may not rely on unpleaded theories to defeat a motion for summary judgment, without first seeking leave in the trial court to amend the complaint. . . . As there were no alter ego allegations in the first amended complaint, and the estate does not claim to have sought leave to amend, it may not rely upon their theory now.

Further, alter ego was not identified as an issue in the estate’s statement of undisputed facts, no facts regarding alter ego appear in the statement, and the estate did not raise this contention in the trial court. Under such circumstances, the estate may not assert this issue for the first time on appeal.46 27.

Long v. Chevron Corp is even further afield. In that case, the court explained that

the plaintiff “ha[d] not addressed [imputation] in her briefs or at oral argument.”47 What is more, the Long court found that the plaintiff failed to establish a basis for personal jurisdiction over Texaco, making any question of imputation irrelevant.48 28.

Claimants also cite a Canadian case, Yaiguaje v. Chevron Corp., as an example of

a court “refus[ing] to pierce the corporate veil to attach the assets of a Canadian subsidiary of Chevron in satisfaction of the [Lago Agrio] Judgment.”49 But that court’s decision not to pierce the veil between Chevron and Chevron Canada Ltd. illustrates plainly why it is perfectly 46

CLA-389, Bonnifield v. Chevron Corp., 2009 WL 1111601, *7-8 (Cal. Ct. App. Apr. 27, 2009) (emphasis added) (citations omitted).

47

CLA-388, Long v. Chevron Corp., 2011 WL 3903066, at *10 (E.D. Va. Sept. 2, 2011).

48

See id. at *7 n.5 (“If Plaintiff is arguing that Texaco’s jurisdictional contacts should be imputed to Chevron, the analysis [rejecting jurisdiction over Texaco] makes the imputation of those contacts irrelevant.”). At most, these cases stand for the proposition that different courts have reached different conclusions based on the record evidence presented in each particular case. Compare RLA-337, Simon v. Texaco, Final Judgment, Case No. 2007-110, (Miss.

Cir. Ct., Aug. 11, 2010), with CLA-387, Kehm Oil Co. v. Texaco Inc., 537 F.3d 290, 300 (3d Cir. 2008).

49

Claimants’ Track 2 Reply ¶ 132.

15

appropriate — indeed, necessary — to pierce the veil between Chevron and Texaco. The Canadian court explained the following regarding Chevron Canada Ltd.: 

Chevron Canada “operates its business in a fashion which is separate and distinct from that of its parents up the corporate ‘family tree,’ subject to the direction of its own board of directors, which does not contain any overlapping members with the Chevron board or executive.”



“Chevron Canada employs, trains and directs the activities of its own professional, operational and administrative staff; it pays their salaries and benefits; and it provides Workers’ Compensation coverage as required.”



“As part of a worldwide ‘family’ of companies, Chevron Canada is subject to certain ‘family’ budget reporting requirements and large capital expenditure approval processes, but it initiates its own plans and budgets, it funds its own day to day operations, and the capital expenditures made by it in recent years for [several major projects] were funded from its own operating revenues.”



“Chevron Canada is a fully capitalized corporation which funds its own day to day operations without financial contributions from Chevron Corp. or any other Chevron entity.”



The corporate structure regarding Chevron and Chevron Canada “has been in place since 1966; it was not a recent creation designed to blunt the effect of the Ecuadorean judgment.”



Chevron Canada “files its own tax returns and corporate statements.”



“Chevron Canada operates a business establishment in Mississauga, Ontario. It is not a mere ‘virtual business.’ It runs a bricks and mortar office from which it carries out a non-transitory business with human means.”50

29.

Texaco bears none of these indicators of corporate separateness from Chevron.

In fact, on each metric applied by the Yaiguaje court, Texaco is at the polar opposite end of the spectrum from Chevron Canada. As the U.S. Simon court explained, Chevron and Texaco have shared at least fifteen officers and directors since 2002. Chevron has designated Texaco a “nonoperating” company with no ongoing commercial enterprises. Texaco does not even have its 50

C-1627, Yaiguaje v. Chevron Corp., 2013 ONSC 2527, ¶¶ 87, 99-100, 102 (Ont. Super. Ct. Justice 2013) (Can.) (emphasis added).

16

own corporate headquarters anymore, because Chevron sold that property and moved all of Texaco’s “operations” to Chevron’s own facility in California. And Texaco certainly does not control its own finances: It instead transfers all of its money daily into one of Chevron’s corporate accounts. Moreover, unlike Chevron Canada, Texaco does not handle its own taxes; rather, Chevron pays all of Texaco’s U.S. tax liabilities.

3.

30.

The Ecuadorian Courts Properly Treated Chevron And Texaco As They Presented Themselves To The World — As A Single Corporate Entity

The Ecuadorian courts treated Chevron and Texaco precisely how the companies

held themselves out to the public — as a single corporate entity. The Republic has explained previously the numerous ways in which Chevron and Texaco professed to be one company.51 Claimants could not have been any clearer in 2001 when they argued to the Second Circuit that the Aguinda case be dismissed because, among other things, Chevron and Texaco had merged: “As generally known (and this this Court may take judicial notice), Texaco merged with Chevron Inc. on October 9, 2001, five months after the District Court’s decision,”52 specifically advising the court that they were “in the process of closing down what remains of Texaco’s former offices in White Plains, New York.”53 31.

The Lago Agrio Appellate Court directly addressed and rejected Chevron’s

objection to any reliance on such public pronouncements:

51

See Respondent’s Track 2 Counter-Memorial, Annex G ¶¶ 39-42. Additionally, for example, a “ChevronTexaco History” timeline from Claimants’ own publication notes that in 2000, “Chevron and Texaco reached agreement to combine the two companies,” and that in 2001, Chevron “merged with Texaco Inc. and changed name to ChevronTexaco Corporation.” R-1299, ChevronTexaco Annual Rpt. Supp. 63 (2001) (emphasis added).

52

R-1280, Appellee’s Br., Aguinda v. Texaco, Inc., No. 2001-7756, 2001 WL 36192276, at *10 (2d Cir. Dec. 20, 2001) (emphasis added).

53

Id.

17

As can be seen, the [trial court’s] judgment is based, among other facts, on the verbatim public statements of the highest representatives of both companies (CEO and President of Chevron Corp. and Texaco Inc., respectively), released by the same to all the shareholders and media through their official channels. There is no legal support for stating that these are simple “press releases” without any credibility.

This is the information that the shareholders of Chevron Corp. and Texaco Inc., and the entire world, had knowledge of, and it turns out that it is also the only information that reveals the nature of the true corporate business that took place between Chevron and Texaco. ....

The trial court’s judgment does recognize the demonstrative value of said evidence, and precisely in order to prevent it being used as a means to defraud; it is necessary to apply the doctrine of piercing the corporate veil for which reason it has not been necessary to apply the [Ecuadorian] Corporations Act to a merger carried out abroad, as the defendant claims, but rather, as explained in the clarification of the appealed judgment, and this Division agrees, Ecuadorian law has been simply another factor—together with foreign law and doctrine, as well as universal principles of law—to be considered in order to evaluate the effects of the mentioned merger.54 4.

32.

Similar Evidence Supports Piercing The Veil Between Texaco And TexPet

Claimants observe that the Ecuadorian courts did not adopt wholesale the New

York federal district court’s findings in the Aguinda litigation,55 but to do so would have made no sense given that the Second Circuit’s decision effectively replaced the lower court’s decision.

Most significantly, however, Claimants do not seriously contest the facts underlying the Ecuadorian courts’ findings. According to Texaco’s own documents, Texaco considered TexPet

54

C-991, Lago Agrio Appellate Decision at 7.

55

As the Lago Agrio Court explained, it was not bound to adopt the New York court’s holding because that holding was based on a more limited collection of evidence than what the Ecuadorian court had before it. Thus, the Lago Agrio Court determined, appropriately, that it could “reconsider[ ]” aspects of the New York decision in light of the fact, among others, that “new evidence that has been presented and that is part of this record pursuant to the referenced norms, must be considered, and must necessarily be taken into account to establish the procedural truth.”

C-931, Lago Agrio Judgment at 17.

18

its “Ecuadorian Division,” not an independent, separate entity,56 and in fact treated TexPet as a mere division.

As the Lago Agrio Court noted, “[t]he record contains authorizations for

everyday matters, of routine administration, such as tenders for catering services and the cleaning of the Consortium’s operating sites in Quito and the Oriente region, or the contracting of motion picture entertainment services at the Oriente installations.”57 TexPet employees could neither eat lunch nor watch a movie unless Texaco approved the expenditures. Nor, of course, could they work: “Likewise we find an authorization for the contracting of equipment and personnel for pipeline maintenance and construction of bridges in Aguarico and Coca.”58 Texaco’s control of TexPet’s day-to-day operations is emblematic of corporate sameness. And as with Chevron and Texaco, Texaco and TexPet enjoyed overlapping officers and directors.59 33.

Based on these facts, the Lago Agrio Court properly concluded: “In this case, it

has been proved that in reality Texpet and Texaco Inc. functioned in Ecuador as a single and inseparable operation. Both the important decisions as well as the trivial ones passed through various levels of executives and decision-making bodies of Texaco Inc., to the extent that the subsidiary depended on the parent company to contract a simple catering service.”60

56 57 58 59

C-931, Lago Agrio Judgment at 20.

Id. (citations omitted).

Id. (citations omitted).

See id. at 23-24.

60

C-931, Lago Agrio Judgment at 24. Nor was the Lago Agrio Court ignoring business realities. The Court acknowledged that “it is completely normal that the Board of Directors of a subsidiary company be made up of some officers from its parent company, and it is also normal that the parent company receive periodic reports on its condition, and take certain decisions that for their importance are beyond the reach of the regular administration.”

Id. at 24-25. “However, in the case of Texaco Inc. and [TexPet], the role of the Directors transcends roles that might be considered normal, as they received information and made decisions about the great majority of Texpet’s deeds and acts regarding everyday matters of the operation of the Napo Oil concession, responding to a well-established chain of command, as has been shown in the record.” Id. at 25.

19

5.

34.

Claimants’ Challenges To The Actions Of Enforcement Courts Are Legally Irrelevant And A Result Of Claimants’ Own Strategy

In their latest filing, Claimants also challenge a piercing of the veil with respect to

a so-called third level of corporate separateness, namely, between Chevron and its subsidiaries in the enforcement context.61 Specifically, Claimants assert that the Ecuadorian enforcement court pierced the veil between Chevron and a number of subsidiaries “without providing prior notice to Chevron or these subsidiaries,” and that it did so based on insufficient evidence and without “provid[ing] Chevron or those subsidiaries with an opportunity to defend themselves.”62 35.

Claimants raised these allegations for the first time in a letter to the Tribunal dated

October 16, 2012.63

As the Republic noted in its response to that letter, the key factual

allegations underpinning Claimants’ protest are demonstrably false.64 The Lago Agrio Record shows that the court’s issuance of an order of attachment was preceded by a highly contentious enforcement proceeding that spanned several months and included multiple submissions by Chevron.65 No part of the enforcement proceeding appears to have been conducted “without providing prior notice to Chevron.”

36.

Claimants’ argument suffers from a number of infirmities. First, Claimants’

demands for compensation for purported losses attributable not to them but to their subsidiaries (in Argentina and Ecuador) evince their own disregard for the separateness of those entities.66 Because the corporate separateness Claimants seek to assert here is lacking, Claimants’ 61 62 63 64

Claimants’ Track 2 Supp. Merits Memorial ¶¶ 127, 131-133.

Claimants’ Track 2 Supp. Merits Memorial ¶ 131.

Claimants’ Letter of October 16, 2012, at 2.

Respondent’s letter of November 21, 2012.

65

Id. (citing R-456 through R-467, Chevron’s various submissions in the enforcement proceedings between the months of April and August 2012).

66

Claimants’ Amended Show Cause Pleading ¶¶ 1-4 (June 12, 2013).

20

protestations about a purported third-level piercing of the corporate veil are frivolous. Second, Chevron is barred from asserting claims on behalf of its subsidiaries; it can assert claims on behalf of only itself upon a showing of direct injury to the parent.67 No such effort has been made in these proceedings. Third, if Chevron’s (unidentified) subsidiaries are, as Claimants now allege, separate legal entities, they are not parties in this proceeding and have no standing to assert claims.68

Fourth and finally, even if Claimants’ allegations were admissible, they would

not be ripe for adjudication in this forum.69 B.

The Lago Agrio Courts’ Causation Analysis, As Affirmed By The National Court, Is Based On Well-Settled Law And Sound Legal Reasoning

37.

Claimants question the National Court’s dismissal of Chevron’s appeal from the

Appellate Court’s decision upholding the Lago Agrio Court’s purportedly flawed causation reasoning.70 In their Reply, Claimants argue that the Lago Agrio Court: (1) failed to conduct any coherent causation analysis to establish a sufficient relationship between TexPet’s operations and the alleged harm; (2) failed to distinguish between the harms caused by TexPet and those

67

See, e.g., Total, S.A. v. Republic of Argentina, ICSID Case No. ARB/04/01 (Decision on Jurisdiction of Aug. 25, 2006) ¶81 (distinguishing a shareholder’s claim for breach of its own treaty rights from impermissible claims on behalf or in lieu of the subsidiary); RLA-638, Hulley Enters. v. Russia, Yukos v. Russia, Veteran Petroleum v Russia, PCA Case Nos. 226, 227, 228 (Interim Award on Jurisdiction and Admissibility of Nov. 30, 2009) ¶ 372 (upholding jurisdiction over claims brought by each Claimant for violation of its own rights under the Energy Charter Treaty, i.e., for the direct loss by each claimant of its shares and their value, not for the rights of the enterprise in which it holds shares.). See also CLA-7, Mondev Award ¶ 79 (pointing out the distinction between claims by investors on their own behalf and claims by investors on behalf of an enterprise under NAFTA rules).

68

Any of Chevron’s subsidiaries could have moved the enforcement court to vacate any decision affecting a subsidiary’s assets in enforcement proceedings against Chevron. See RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶ 100. No such action appears to have been taken here. Accordingly, even if Chevron’s subsidiaries were entitled to assert claims in these proceedings, their failure to exhaust local remedies would preclude consideration of their claims as a matter of international law.

69

As Claimants recognize, “th[is] issue was not before the Cassation Court.” Claimants’ Track 2 Supp.

Merits Memorial ¶ 131 (emphasis added). Even assuming legal error, there has been no attempt to correct it in the Ecuadorian court system and Claimants have made no effort to explain how this purported action of the enforcement court — clearly an issue for the municipal courts of Ecuador — is ripe for adjudication by this tribunal. Obviously, it is not.

70

Claimants’ Track 2 Reply ¶¶ 96-108; Claimants’ Track 2 Supp. Merits Memorial ¶¶ 134-136.

21

attributable to PetroEcuador; and (3) improperly apportioned all of PetroEcuador’s liability to TexPet.71 Claimants misapprehend (or otherwise ignore) long-standing legal principles, both inside and outside of Ecuador.

38.

Contrary to Claimants’ contention, the Lago Agrio Judgment shows the Court

conducted a detailed and extensive causation analysis, applying governing Ecuadorian tort law and well-settled precedent.72 Part VII of the Judgment (“Civil Liability, The Basis of the Obligation”) sets forth the bases for the Court’s determination of Claimants’ liability, following — and quoting extensively from — the holding of Ecuador’s former Supreme Court in Delfina Torres, a landmark environmental case that involved (and affirmed in part) claims of joint and several liability against PetroEcuador and certain affiliated companies for environmental harm resulting from exploration and exploitation of hydrocarbons activities.73

Unsurprisingly,

Claimants omit any reference to Delfina Torres or to the principles of objective (strict) liability and joint and several liability governing torts arising from hazardous activities.

39.

Delfina Torres is the leading Ecuadorian Supreme Court precedent establishing

the proper application of the objective (strict) liability test to environmental claims arising from hydrocarbon activities.74 The Supreme Court there held that: (1) the production, manufacture, transport and operation of hydrocarbon substances constitute inherently dangerous and risky

71

Claimants’ Track 2 Reply ¶¶ 98-102.

72

Much like any disgruntled litigant, Claimants simply dismiss the Court’s analysis as incoherent and baseless. Claimants’ Track 2 Reply ¶ 97; Claimants’ Track 2 Supp. Merits Memorial ¶ 134.

73

C-1586, Delfina Torres (Oct. 29, 2002). See also RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶¶ 53 et seq; RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶¶ 13 et seq.

74

See RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶¶ 53 et seq.; RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶¶ 11 et seq.

22

activities;75 (2) under Article 2229 (then Article 2256) of the Ecuadorian Civil Code, those activities are subject to an objective standard of liability and entail a presumption of fault on the party conducting such activities;76 and (3) the respondent, to reverse the presumption of fault, must prove that the ensuing harm was either due to force majeure or unforeseeable circumstances, or the result of the exclusive fault of the victim or a third party.77 The burden of proof in tort cases arising from hazardous activities — and specifically, hydrocarbon operations — thus shifts under Civil Code Article 2229 to the party that engaged in and profited from such activities.78 The Supreme Court has upheld previous applications of objective (strict) liability in similar cases involving other forms of hazardous activities.79 40.

Consistent with Delfina Torres, the Lago Agrio Court examined whether:

(1) TexPet’s oil exploration and exploitation activities in the Concession Area were indeed a hazardous activity posing environmental risk; (2) the risk could have been avoided or limited; and, separately (3) whether the failure to avoid or limit such risk actually caused the alleged (and

75

C-1586, Delfina Torres (Oct. 29, 2002) at 24 (“[Our Court] is in complete agreement with this position, since the production, manufacture, transport and operation of hydrocarbon substances undoubtedly constitute dangerous and risky undertakings.”).

76

Id. at 24-25. Civil Code Article 2229 deals with torts arising from reckless or hazardous activities, for which there exists a particular duty of care and presumption of fault for the resulting harm. See RLA-163, Civil Code of Ecuador, art. 2229.

77

Id. at 21 (“Article 2256 [now Article 2229] of the Civil Code . . . considers tort liability for high risk or dangerous activities, in which negligence is inferred, and which saves victims of a harm from having to show evidence of negligence, lack of care, or incompetence, and where it falls to the defendant to show that the harm occurred due to force majeure, or to an accident or the intervention of something that is beyond the control of the party causing the harm or due solely to the fault of the victim.”).

78

Id.; see id. at 24 (“Most systems of justice require some degree of negligence in order to assign liability.

But since in most cases it is very difficult or nearly impossible for the victim to meet the burden of proof, it became necessary to reverse the concept of burden of proof and it is the responsibility of those who participate or profit from risky activities to demonstrate that the harmful event occurred as a result of a force majeure, chance, the actions of a third party, or solely as a consequence of the victim’s actions.”).

79

RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶ 15 n.19.

23

objectively foreseeable) harm.80 Claimants’ unsupported criticism of the Court’s analysis as contrary to Ecuadorian law is unavailing.81 41.

The National Court, for its part, appropriately affirmed the Lago Agrio Court’s

application of an objective (strict) liability standard as compliant with governing precepts of Ecuadorian law.82 The National Court also relied on Delfina Torres as well as relevant scholarly writings and legislative history.83 Claimants’ protestation that the National Court retroactively “imposed strict liability and a ‘reversed burden of proof’ upon Chevron based on the 2008 Constitution”84 is specious.

80

C-931, Lago Agrio Judgment at 154-155 (“[T]herefore, in the opinion of this [Court] it is appropriate to apply the theory ‘Of the wrongful creation of unjustified risk from a dangerous condition’ in whose context the causal link is confirmed when the causal result preceded the configuration of the unreasonable risk, or else the negligent creation of a condition that certainly involved danger [ ], from there it is appropriate to analyze: 1. If the practices employed by Texpet . . . for developing its industry necessarily involved the generation of dangerous waste; then 2. whether . . . the risk created by that waste could have been prevented or at least reduced by the one who had created it; 3. whether the failure to prevent or diminish the risk, being able to do so, has in fact had the consequence of the occurrence of foreseeable harm.”). See id. at 155-58 (finding that TexPet’s activities necessarily generated waste and environmental impact), 158 (discussion of TexPet’s failure to comply with environmental standards applicable at the time), 166-69 (discussion of disposal of waste by TexPet and resulting harm to environment), 175 (concluding finding on TexPet’s failure to apply due care).

81

For example, Claimants allege that the Court violated Ecuadorian law by construing the “adequate cause” test (causation established not only on a “but for” standard but also on what can reasonably be foreseen to occur after a harmful event) to mean that the Court had unfettered discretion to determine TexPet’s liability. See Claimants’ Track 2 Reply ¶ 104. However, the part of the Judgment Claimants criticize as being contrary to Ecuadorian law is a verbatim quotation from Delfina Torres, where the Supreme Court states that the application of the theory is “entrust[ed] to the discretional power of the Court.” Compare C-931, Lago Agrio Judgment at 88 with C-1586, Delfina Torres (Oct. 29, 2002) at 26. See also RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶ 18.

82

C-1975, National Court Decision at 214 (“Therefore, the lower court’s assertion that this is a case of strict liability, and that it is unnecessary to prove Texpet’s negligence for environmental damage, is correct, as explained above, so it would be pointless to elaborate.”).

83

C-1975, National Court Decision at 210-12 (“Based on this doctrine, the former Supreme Court of Justice, Civil and Commercial Division, in a judgment issued October 29, 2002, stated that a party who engages in economic activity that creates risks must assume responsibility for the damage caused, as a way of compensating society for the activity that generated the profit. . . . Article 2214 of the Civil Code concerns a duty established by law regarding a given situation. The same is true for Article 2229 of the Code, which establishes, as a general rule, an actor must redress any harm caused by his malice or negligence. In light of this, in the present case the concepts of environmental liability combine not only with the Civil Code but also with the Environmental Management Act and, consequently, the court did not improperly apply Articles 2214 and 2229 of the Civil Code, as already established above. . . . In the realm of environmental damage, strict liability applies. This is not novel, and it is based on the risk created.”).

84

Claimants’ Track 2 Supp. Merits Memorial ¶ 137.

24

42.

As the National Court also noted, the Ecuadorian law of strict liability is not

unique.85 The laws of other Latin American countries (e.g., Colombia, Argentina), Europe (e.g., France, England, Germany, Switzerland), and other nations also apply the principle of objective liability to tort claims arising from inherently hazardous activities, and place the burden of overcoming the presumption of fault on the party engaging in such activities.86 Even Dr. Barros (Claimants’ expert) agreed.87 43.

Claimants fail to address the applicable standard of joint and several liability. As

explained in Section VII.F.1 of the Republic’s Track 2 Supplemental Counter-Memorial, Ecuadorian tort law imposes joint and several liability on all tortfeasors, whether the harm was caused by concurrent or successive activities.

Under that standard, the Lago Agrio Court

properly held Chevron jointly and severally liable for all the pollution existing in Texaco’s former Concession Area.88 Ecuadorian courts cannot lawfully assign responsibility to a potential contributory tortfeasor who is not a party to the case. Ecuadorian law requires instead that a

85

C-1975, National Court Decision at 114.

86

See C-931, Lago Agrio Judgment at 83-88; C-1586, Delfina Torres (Oct. 29, 2002) at 24-26 (with references to Colombian, Argentinian and French law). On the law in France, RLA-598, Article 1384 al. 1 French Code Civil, RLA-599, Cass. civ. 2e, 23 janvier 2003, no 00-15597, Bull. civ. 2003, II, no 17, p. 14; RLA-600, Cass. civ. 2e, 27 février 2003, no 01-00659, Bull. civ. 2003, II, no 45, p. 38; on the law in England, RLA-582, Winfield and Jolowicz on Tort, Eighteenth Edition, 2010, by W.V.H. Rogers, Sweet & Maxwell, N° 15-23, p. 791 (“The reader should be aware, however, that recent years have seen the enactment of a number of important statutory forms of liability in particular areas of exceptional risk which go a long way towards avoiding the likelihood of protracted litigation inherent in the ill-defined nature of the rules of strict liability at common law.”), RLA-601, Nuclear Installations Act 1965 section 7(1)(a), RLA-602, Merchant Shipping Act 1995 Section 153 ff.; on the law in Germany, RLA-603 § 1 and 2 Haftpflichtgesetz (HPflG); on the law in Switzerland, RLA-604, Article 3 and 5 Loi sur la responsabilité civile en matière nucléaire (LRCN), RLA-605, Article 40(b)-40(f) Loi fédérale sur les chemins de fer (LCdF). This doctrine has long been a fundamental element of American tort law as well.

87

Barros Expert Rpt. (June 3, 2013) ¶¶ 55-58 (citing to a number of further authorities, including himself).

Dr. Barros’s other opinions on the presumption of fault in the case of hazardous activities are inconsistent with Ecuadorian law and addressed in Dr. Andrade’s Second Expert Report. See RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶¶ 15-19.

88

As Claimants admit, the Lago Agrio Court expressly carved out from consideration environmental harm where the evidence established that the harm was directly attributable to third parties. See Claimants’ Track 2 Supp.

Merits Memorial ¶ 134.

25

judgment be rendered against a first joint tortfeasor before that tortfeasor can seek indemnification from a second potentially responsible party in a separate, subsequent suit.

Claimants’ assertion that the Lago Agrio Court impermissibly failed to distinguish between the harms caused by TexPet and those attributable to PetroEcuador is unsupported — and wrong.89 44.

By any measure, as affirmed by the Appellate Court and National Court, the Lago

Agrio Court’s causation analysis is fully coherent and legally sound.90 Claimants’ cry that it is “convoluted, incoherent, and legally-baseless”91 has no merit.

C.

The Court Properly Assessed The Expert Evidence And Other Technical Evidence Filed By Both Parties

45.

Claimants contend that the Lago Agrio Court failed to follow Ecuadorian law by

dismissing scientific expert reports in its determination of causation;92 criticize the Court for relying on eyewitness testimony;93 and allege that the Court’s discussion of the scientific data is superficial.94 Not one of these criticisms is valid.

89

Also misleading is Claimants’ contention that oral summary proceedings are inappropriate for this case because joinder of third parties (e.g., a joint torfeasor) is not allowed under such proceedings. See Claimants’ Track 2 Reply ¶¶ 179-80. In fact, joinder of third parties is not allowed under any kind of proceedings in Ecuador. This general rule admits but a handful of exceptions, none of which applies here. See RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶ 25.

90

C-1975, National Court Decision at 217 (confirming the consistency of the Court’s causation analysis with existing legal theories in environmental tort law); C-991, Lago Agrio Appellate Decision at 4 (Eng.) (confirming the Court’s causation analysis as sound and based on a examination of the evidentiary record).

91

Claimants’ Track 2 Reply ¶ 108. Nor is there any merit to Claimants’ criticism of the Court’s analysis of causation for harm to the cultural environment. Claimants assert that the Judgment failed to identify any causation theory at all, and discussed only the damage and not whether TexPet had actually caused that harm. Id. ¶ 107. But the Court gave a reasoned explanation as to why the damage from TexPet’s oil exploration and exploitation activities on the Concession Area environment necessarily impacted the living conditions of the residents and cites to corroborating witness testimony of residents who directly observed the dramatic impact of TexPet’s contamination on their everyday lives. See C-931, Lago Agrio Judgment at 171-174 (Eng.).

92

Claimants’ Track 2 Reply ¶ 100; see also Coronel Expert Rpt. (June 3, 203) ¶ 58; Barros Expert Rpt. (June 3, 2013) ¶ 31.

93 94

Claimants’ Track 2 Reply ¶ 101.

Claimants’ Track 2 Reply ¶ 102; see also Coronel Expert Rpt. (June 3, 2013) ¶ 62.

26

46.

Contrary to Claimants’ position, Ecuadorian procedural law did not require the

Court to rely “primarily” on expert evidence to make its findings on the presence of pollution.

As Dr. Andrade explains, the 1978 reforms of Ecuador’s procedural law abandoned the principle of tarifa legal, under which courts had to assess the evidence according to pre-established abstract rules stipulating that one type of evidence prevails over another.95 In its place, Article 115 of the present Code of Civil Procedure requires only that the judge exercise sound judgment in assessing the evidence as a whole,96 assigning relative weight to individual pieces of evidence as he sees fit.97 The Lago Agrio Court adhered to Article 115.

47.

That said, the Court did not (contrary to Claimants’ allegation) dismiss all of the

expert evidence.98

The Court confirmed that in technical matters it did take into account

scientific expert reports.99 As Dr. Andrade observed, the Judgment is replete with discussion of

95

RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶¶ 29-31 (discussing the legislative history of Article 116 of the former 1978 Code of Procedure, now Article 115 of the 2005 Code of Civil Procedure, and the abandonment of the principle of tarifa legal). The June 3, 2013 report of Claimants’ Ecuadorian law expert, Dr. Coronel, fails to address this fundamental provision of Ecuadorian evidentiary law. See generally Coronel Expert Rpt. (June 3, 2013).

96

RLA-198, Ecuador Code of Civil Procedure, art. 115 (“Evidence must be evaluated as a whole, in accordance with the rules of sound judgment [sana crítica], without prejudice to the solemnities prescribed by substantive law for the existence or validity of certain acts.”).

97

RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶¶ 29 (“In Ecuadorian procedural law, one type of evidence does not prevail over another”), 31 (“The judge in any case is obligated to assess the evidence as a whole and according to the rules of sound judgment.”) and 35.

98

The Court did, however, expressly disavow any reliance on Mr. Cabrera’s reports or his data, which in any event were not essential to the Court’s ability to render a decision. C-931, Lago Agrio Judgment at 51 (“[T]he Court accepts the petition that [the Cabrera Report] not be taken into account to issue this verdict”); 99 (“without considering the sampling done by the expert Cabrera”); see also C-1367, Lago Agrio Clarification Order of the Judgment (May 4, 2011) at 8; C-991, Lago Agrio Appellate Decision at 11; C-1975, National Court Decision at 9798, and 156-57; Respondent’s Track 2 Counter-Memorial ¶¶ 16, 178, 296-298; Respondent’s Track 2 Supp.

Counter-Memorial § II.C, § IV.G.2.d. Claimants’ reference to Cabrera’s Reports is thus irrelevant. See Claimants’ Track 2 Reply ¶ 100.

99

C-931, Lago Agrio Judgment at 96 (“In that regard [proposition that environmental harm not only includes direct harm to the ecosystem but also all direct consequence of that harm], it is seen that this is a technical matter; therefore the different expert reports presented throughout this lawsuit are considered.”)

27

the parties’ expert evidence, which the Court not only considered but also relied upon.100 As Article 115 requires, however, the Court exercised its judgment in weighing the expert evidence relative to other record evidence; and Articles 249 and 262 of the Code of Civil Procedure allowed the Court to disregard evidence that it concluded was not credible.101 Accordingly, as the National Court confirmed,102 the Lago Agrio Court did not rely on conclusions it determined were contradictory, biased or otherwise unpersuasive. Rather, the Court looked directly to the data and samples referred to in the expert reports, and searched the record for other evidence (e.g., contemporaneous documents) to evaluate the data before formulating its own findings.103

100

RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶¶ 30-32; accord C-1975, National Court Decision at 169 (confirming the Lago Agrio Court’s reliance on Chevron’s expert evidence for its findings of water contamination); C-931, Lago Agrio Judgment at 95 (“For the complex task of evaluating the presence of environmental harm, the first consideration is that there are more than 100 expert reports in the case file, which constitute an important documented source of evidence, provided by experts nominated by both parties, and also provided by experts of the Court not nominated by either party, such that as a whole their information is reliable and allows the Judge to come to the conclusion that there are different levels of contaminant elements that are from the hydrocarbons industry in the area of the Concession.”) (emphasis added), 99 (listing the thousands of samples and hundreds of expert reports that were filed and were considered by the Court), 106 (“In the opinion of this [ ] Court, the 97 expert reports submitted by experts who performed judicial inspections for Texpet sites, constitute a reasonably representative sample of the universe of sites operated by Texpet when it was in charge of the concession, thus being a sample from which results can be extrapolated.”), 107 (“The degree of dangerousness of these elements [PAH’s and heavy metals and/or anti-corrosive agents used for drilling wells such as chromium VI, barium or mercury] is principally demonstrated by the plaintiffs[’] reports, such as the expert Edison Camino, who refers to this issue in his report of the judicial inspection of the Sacha 10 well.”), 114 (“On the contrary, as reported by Chevron’s experts”), 116 (“All of this information will also be considered in evaluating the possible impacts on human health; however, in the opinion of this Court the findings of Mr. Bermeo [court-appointed expert] are sufficient to give an account of the presence of different types of contaminants in the water sources used by local residents.”)

101

RLA-198, Ecuadorian Civil Code of Procedure, art. 249 (“The judge may decide not to consider the opinion of the expert or experts, when contrary to what he perceived by his senses in the recognition, and order that another inspection be conducted with one or more experts.”); 262 (“It is not the duty of the judge to observe the judgment of experts against his conviction.”). See also RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶ 34 n.49.

102 C-1975, National Court Decision at 160-61 (“Article 249 of the Code of Civil Procedure determines that the judge may or may not review reports submitted by expert witnesses, contrary to what his senses perceive and may even order, without the parties requesting the appointment of other experts, to complement the judicial inspections that judges carry out. It is clearly shown that the trial judge did not arbitrarily weigh the evidence, inasmuch as according to paragraph two of Article 262 ibid. it is not the judge’s obligation to accept, against his convictions, the conclusions of the expert witnesses. . . . The trial judge has justified and assigned the corresponding value to the expert witness- evidence existing in the process, without the Cassation Court having to meddle in the weight given to the expert witness reports individually and as a whole, fulfilling his mission through the correct application of the law, convinced of the procedural truth and the logic of his thought.”).

103

C-931, Lago Agrio Judgment at 81 (discussion of the contradictory expert evidence regarding the standards of good oil exploration at the time Texpet’s activities and persuasive contemporaneous documentary evidence on the

28

Given that Ecuadorian procedural law requires precisely this approach, it is unsurprising that the National Court (and Dr. Andrade) have concluded that the Court’s assessment of the expert evidence comports with Article 115.104 48.

Next, the Court’s extensive analysis in Part IX of the Judgment (determination of

environmental harm) belies Claimants’ allegation that the Court cited only a few randomly selected samples without any scientific reasoning. At the outset, the Court explained the relevant parameters and methodology to establish pollution.105 It then analyzed the indicators of pollution found in the Concession Area, discussing the scientific value of each indicator (Total Petroleum Hydrocarbon) and the harmfulness of each polluting substance (benzene, toluene, Polycyclic aromatic hydrocarbons, mercury, lead, cadmium, chromium VI), the level of pollution found, and by how much those levels exceeded the maximum allowable limits. Each of the many soil and water samples referenced or discussed in the Judgment include a reference to the place the

subject-matter), 112 (again discussion of contradictory conclusions of the parties’ experts and of a persuasive contemporaneous document covering the same subject-matter). In their Reply, Claimants do not even attempt to address the Republic’s analysis of the very rules of civil procedure which, Claimants contend, the Lago Agrio Court violated to deprive Chevron of due process. Claimants instead respond with hyperbole, disregarding the Court’s substantial discretion in managing the proceeding, only to criticize, without support, the manner in which the Court approached and assessed the parties’ evidence. See Claimants’ Track 2 Reply § II.D.6.

104

C-1975, National Court Decision at 162-63 (“Article 115 of the Code of Civil Procedure determines that the evidence must be evaluated as a whole in accordance with the rules of sound judgment. In the decision, the [Court] must state the weight given to all the evidence submitted. Only evidence that has been properly introduced may be admissible in the case. . . . The trial court judgment is 187 pages long, front and back, single-spaced, and it analyzes the arguments presented, weighs the evidence presented by the parties, and mentions each one of the incidents occurring in the process in an exhaustive manner, which has in turn been analyzed by the appeals court previously expressed. . . . So the judge, in adherence to his obligation, has weighed the evidence as a whole, as explained and analyzed, with a correct interpretation and proper application of the law in accordance with his conviction.”); RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶¶ 32-34 (citing C-931, Lago Agrio Judgment at 99-100, 95-96).

105

C-931, Lago Agrio Judgment at 96 (holding that the maximum thresholds of pollution allowable applied by the Court are objective and not based on a retroactive application of current legal standards); 99 (holding that the Court did not approach the analysis of the data as a mere mathematical exercise but as a complex study of the information contained in the evidentiary record and that it applied the reasonable statistical proposition that the thousands of samples taken were representative of the level of pollution in the entire Concession Area). Later on, the proposition is supported by references to Chevron’s counsel’s statements accepting that the data may be extrapolated. See also id. at 106.

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sample was taken, the name of the expert who took the sample, and the number in the evidentiary record.106 49.

The Court’s analysis also includes an extensive discussion of the parties’ (and

particularly Chevron’s) sampling methodology.107 In sum, the Court engaged in a systematic and sound technical analysis — certainly not the “haphazard” approach Claimants allege.108 Here, too, Dr. Andrade confirmed that “an objective analysis of the judgment allows one to see an exercise of overall assessment of the evidence, in accordance with the mandates of Ecuadorian procedural law.”109 And the National Court concluded: “[t]he judge’s weighing of the evidence does not show to be absurd or arbitrary; it is clear from the record which evidence submitted by the parties he relied on to issue his judgment and to reach the corresponding conclusions.”110 50.

Finally, Claimants’ criticism of the Court’s assessment of eyewitness testimony

likewise fails.111 The Judgment discusses dozens of eyewitness testimonials on the harm created to the ecosystem in the Concession Area and, consequently, to human health. Contrary to Claimants’ allegations, there is a clear tie between TexPet’s activities and the harm evidenced by the witness testimonies discussed in the Judgment: The Court took the testimonies in situ during

106 107 108 109

C-931, Lago Agrio Judgment at 100-15.

C-931, Lago Agrio Judgment at 102-03; see also Respondent’s Track 2 Supp. Counter-Memorial § VII. Claimants’ Track 2 Reply ¶ 102.

RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶ 34.

110

C-1975, National Court Decision at 166 (“The judge’s weighing of the evidence does not seem absurd or arbitrary, the evidence provided by the parties is part of the proceeding which he has used as the basis to issue his judgment and to reach the corresponding conclusions.”).

111

Claimants’ Track 2 Reply ¶ 101.

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the judicial inspections, from locals who live near the well sites, where TexPet operated.112 Finding those testimonies consistent with one another, the Court — again following Article 115 — was mindful to consider them together with the scientific/technical evidence.113 Moreover, Article 245 of the Code of Civil Procedure provides that during judicial inspections the court may hear the testimonials and consider such testimonials applying sound judgment provided they become part of the record of the judicial inspection.114 The National Court confirmed that this is precisely what occurred and that the Court’s consideration of the testimonials was thus fully in accord with Ecuadorian law.115 51.

In judicial systems around the globe, trial courts are afforded wide discretion in

managing the cases before them. And appellate courts generally will not even entertain the types of criticisms leveled by Claimants against a first instance court. To do so would handcuff the trial court’s exercise of discretion, in this instance discretion expressly afforded under Ecuador’s

112

C-931, Lago Agrio Judgment at 139-44; 149-53 (discussing that witness testimonies always include the name of the witness, the place of the inspection/residence of the witness, and a reference to the relevant number in the evidentiary record); see also id. at 115, 139, 150, 152, 171-72 (referencing the fact that testimony was heard during a judicial inspection).

113

C-931, Lago Agrio Judgment at 144 (“This [C]ourt recognizes that all these testimonies mentioned before are not decisive and irrefutable evidence that there is a health problem among these citizens; however, they can’t be totally dismissed since we can observe the impressive coincidence between the facts described in all these statements, without a single statement or declaration to the contrary . . . consequently, these statements will be considered with the value they deserve and in accordance with the rules of sound judgment, and together with the other evidence submitted by the parties. . . . we should repeat that this Court will consider such statements, in accordance with sound judgment, and jointly with the rest of the scientific evidence that has been submitted by the parties.”). The Court thus did not, as Claimants allege, base its findings solely “on the strength of a random person’s uncorroborated testimony.” Claimants’ Track 2 Reply ¶ 101.

114

RLA-198, Ecuadorian Code of Civil Procedure, art. 245 (“During the inspection, the judge may also order the reconstruction of events to verify the way they happened, examine practical people who know the place or thing and take any other measures that could be useful to clarify the truth.”); id. art. 244 (“The judge shall immediately issue an acta specifying the place, date and time of the judicial inspection, people who attended, the observations and arguments of the parties, and the description of what the judge has examined.”).

115

C-1975, Lago Agrio National Court Decision at 152-53. See also RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶ 34 n.49.

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Code of Civil Procedure. The trial court’s analysis here was proper and appropriate in all respects — and well within the judge’s discretion.

D.

The Awarded Damages Were Not Extra Petita But Responsive To The Prayers For Relief And Claims Contained In The Plaintiffs’ Complaint

52.

Claimants continue to assert that the Court violated Ecuadorian law by awarding

damages of US$ 100 million for a program of community reconstruction and US$ 150 million for a potable water system.116 Claimants contend that these damages were not requested in the Plaintiffs’ complaint and were thus contrary to Article 273 of the Code of Civil Procedure (which prohibits extra petita awards).117 Claimants are wrong.

53.

The National Court rejected this assertion following a line-by-line comparison of

the Court’s rulings and the Parties’ prayers for relief, and concluded instead that the Court’s damage awards (except the exemplary damages) were based on the Plaintiffs’ prayers for relief.118 54.

The Republic’s Track 2 Counter-Memorial demonstrates that the Court’s damages

awards for community reconstruction and a potable water system are directly related to the Plaintiffs’ asserted harm and prayers for relief, and thus adhere to the principle of congruency (between the relief and the prayers and claims) set forth in Civil Procedure Code Article 273.119 As explained there, the Lago Agrio Complaint seeks two general categories of relief, viz, 116

Claimants no longer list the US$ 800 million awarded for treatment of cancer victims as one of the alleged extra petita rulings. Compare Claimants’ Track 2 Reply ¶ 109 with Claimants’ Supp. Merits Memorial ¶¶ 44-48.

117

Claimants’ Track 2 Reply ¶ 109; see also Coronel Expert Rpt. (June 3, 2013) ¶¶ 84-85.

118

C-1975, National Court Decision at 126-29 (“A comparison between the judgment and the complaint shows that the judgment was consistent with what was requested in the complaint, since the amounts payable as compensation were based on the items claimed, aside from the punitive damages that, as discussed below in this Section, are not admissible because they are not provided for in Ecuadorian law.”).

119

Respondent’s Track 2 Counter-Memorial, Annex G ¶¶ 21-23. As Dr. Andrade explained, the damages awarded by the Court were directly related to the harms alleged in the complaint and comprised by the two general categories of damages listed in the Complaint’s prayer for relief. See RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶ 92.

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(1) “[t]he elimination or removal of the contaminating substances that still threaten the environment and the health of the inhabitants,” and (2) “[t]he remediation of the environmental harm caused, pursuant to Section 43 of the [EMA].”120 The construction of a potable water system as a means to substitute existing sources of contaminated water for human consumption falls well within the general notion of reparation for the consequences of the harm inflicted by TexPet’s operations and is directly related to the second category of requested relief in the Lago Agrio Complaint. Similar considerations apply to the award of damages for reconstruction of the Plaintiffs’ communities directly affected by the harmful effects of the surrounding pollution.121 55.

The Court-ordered reparation complies with numerous provisions of Ecuadorian

law, including: (1) the Ecuadorian legal principle of full restitution;122 (2) Article 2229 of the Civil Code (here one of the legal bases of the Court’s ruling, attaching strict no-fault liability to hazardous activities), which does not in any way restrict or specify the manner of relief that may be granted; and (3) Article 2214 of the Civil Code (setting forth the general principle of liability for tort).123 As Dr. Andrade explains, the principle of congruency is satisfied by consistency between the legal bases of the prayer and the relief granted, which is the case here.124 Finally, congruency exists if the relief granted is consistent with the overall factual allegations in the

120 121 122

Id. (citing C-71, Lago Agrio Complaint §§ VI.1 and VI.2 at 14-16).

RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶ 92.

RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶ 39.

123

RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶¶ 47-49 (citing RLA-163, Civil Code of Ecuador, art. 2229 (“As a general rule, any damages that can be attributed to malice or negligence by another person must be compensated by that person.”) (emphasis added) and art. 2214 (“Whoever commits an offense or tort resulting in harm to another shall indemnify the affected party, without detriment to the penalty provided by law for such offense or tort.”)).

124

RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶ 88.

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Complaint. Dr. Andrade confirms the congruency principle was satisfied in this case.125 As such, the relief in question cannot be deemed extra petita.126 E.

The Environmental Management Act Article 43 Was Correctly Applied To The Case

56.

Article 43 of the Environmental Management Act of 1999 (“EMA”) is a

procedural provision that entered into force on July 30, 1999 — almost four years before the Lago Agrio Complaint was filed and at the same time that Claimants were praising the Ecuadorian legal system in Aguinda. Under Ecuadorian law, procedural rules indisputably are applicable as of their enactment.127 Claimants’ experts expressly admit to this.128 Applying EMA Article 43 to the Lago Agrio Litigation was thus not an improper retroactive application of substantive law, but rather an appropriate application of a procedural law already in force, consistent with Ecuadorian practice.129 57.

Accordingly, there is no merit to Claimants’ position that the summary nature of

the Lago Agrio proceedings and the Court’s decision on Plaintiffs’ standing were based on an

125

Id. ¶¶ 87-92 (citing legal provisions and Supreme Court case law). By contrast, the opinions expressed in the Coronel report, which aim to limit the scope of the prayers for relief, are not supported by any reference to any statutory provision (other than Article 273 of the Code of Civil Procedure), Supreme Court decisions or any other authoritative sources. Cf. Coronel Expert Rpt. (June 3, 2013) ¶¶ 84-87.

126

The Court was careful in avoiding extra petita rulings and rejected claims that were made only after the Complaint had already been filed, a point which was upheld on appeal. See C-991, Lago Agrio Appellate Decision at 4 (dismissing Plaintiffs’ infra petita allegation).

127

C-34, Ecuadorian Civil Code, art. 7(20) (“Laws concerning the hearing of and procedure in lawsuits shall prevail over prior laws from the time at which they take effect. But time periods that have already begun to run, and any proceedings that have already commenced, shall be governed by the law that was in effect at that time.”).

128

R-1304, Aff. Bustamante, et al. (Mar. 24, 2006), at 3-4 (“20- Laws concerning the procedures and solemnities of suits prevail over previous laws as of the moment they become effective . . . Such procedural norms, as they belong to the public order and are of immediate application, take effect in the course of time beginning in the day when they become effective, that is, on the day when they are published in the Official Register no matter if the suit to which they apply began before such adjective or procedural norms were issued”).

129

RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶¶ 42 et seq; RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶¶ 43, 51. RLA-455, Calva v. Petroproducción, Supreme Court, First Civil and Commercial Division, Decision No. 67-2007, published in Official Register No. 486, Dec. 11, 2008.

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impermissible retroactive application of the EMA.130

That position is based on two false

premises, namely that the: (1) EMA Article 43 determines substantive, not procedural, rights; and (2) the Plaintiffs’ operative causes of action depended solely on the EMA.131 The Republic’s previous filings,132 and now the recent decision by Ecuador’s National Court,133 debunk the first premise. And the second flies in the face of longstanding Ecuadorian court practice.134 58.

Indeed, the Republic demonstrated previously that (1) Ecuadorian courts

confirmed the procedural nature of EMA Article 43 long before the Lago Agrio Judgment was issued,135 and (2) the Plaintiffs’ substantive rights — reflected in both the Lago Agrio Complaint and the Judgment — were predicated on Civil Code, Constitutional provisions, and Ecuadorian case law.136 The Appellate Court and the National Court upheld these premises.137

130

Claimants’ Track 2 Reply ¶¶ 136-137.

131

Claimants’ Track 2 Reply ¶ 138; Coronel Expert Rpt. (June 13, 2013) ¶ 93 (“It is also erroneous to say that the LGA [meaning the EMA] is limited to establishing procedural rules.”). Here, however, Dr. Coronel takes down only a straw man. Neither the Republic nor Dr. Andrade maintain that the EMA “is limited to establishing procedural rules.” Rather, our position is (and has always been) that Article 43 of the EMA, is a procedural provision. See RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶¶ 41 et seq.

132

Respondent’s Track 2 Counter-Memorial ¶ 137 & Annex G ¶¶ 5-6; Respondent’s Track 1 Supp. CounterMemorial ¶¶ 82 et seq; RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶¶ 41-58; accord RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶¶ 41 et seq.

133

C-1975, National Court Decision at 199 (explaining that if the EMA “took effect on July 30, 1999, and the complaint was filed on May 7, 2003, four years after the law took effect, it is logical that Law 37 [the EMA] applies.

Therefore the court did not improperly apply the above law, which has a procedural nature.”).

134

See, e.g., C-1586, Delfina Torres (Oct. 29, 2002); RLA-512, Calva v. Petroproducción, Supreme Court, Second Civil & Commercial Div., Dec. No. 67-2008, publ. in Official Register No. 486, Dec. 11, 2008.

135

Respondent’s Track 1 Supp. Counter-Memorial ¶¶ 82 et seq.; RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶¶ 41-58; accord RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶¶ 39 et seq.

136

Respondent’s Track 2 Counter-Memorial ¶ 138 & Annex G ¶¶ 5-6; RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶¶ 41-58.

137

C-1975, National Court Decision at 200-01 (stating that “Article 43 of the Act regulates the procedure in civil actions provided to a collective for environmental harm. The Civil Code regulates, determines, conceptualizes, and explains civil liability; therefore, it is paradoxical to attempt to ignore its concepts and guidelines for determining whether civil liability exists”). See also C-991, Lago Agrio Appellate Decision at 3-4, 9-10, 12 (with discussion of Articles 2236, 2214 and 2229); Respondent’s Track 1 Rejoinder, Annex C ¶¶ 7, 9 (Tab IV.2).

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59.

The National Court further confirmed that EMA Article 43 is procedural and was

applied correctly in the Lago Agrio Litigation,138 affirming both the Lago Agrio first-instance court’s139 and Appellate Court’s140 decisions.

138 139

C-1975, National Court Decision at 75, 201, 207.

C-931, Lago Agrio Judgment at 27-28. The Court expressly explained: [A]rticle 43 clearly establishes that “Claims for damages originating from harm to the environment shall be heard in summary verbal proceedings.” These norms refer to two essential aspects of the formalities of the proceedings: competence and the type of proceeding, that is, they are quite clearly procedural norms, such that, in application of the mentioned rule, the general principle of nonretroactivity does not apply to these provisions of the EMA, in that the complaint is based on this Law for matters regarding the formalities of the proceeding. On the other hand, the substantive right to seek redress for harm is guaranteed by the Civil Code, as stated in the petitions of the complaint, in its articles 2241 [currently 2214] and 2256 [currently 2229], which will be analyzed later in this judgment. Additionally and in concordance, consideration is given to that provided in the OCJB, in the second paragraph of Subsection 2 of article 163, which establishes the same exception to the general principle of nonretroactivity of the law, when it states that “Nonetheless, the laws concerning the manner of hearing cases and their formalities prevail over prior ones as of the time they go into effect.” Based on the above, we find that in law the procedural norms contained in the EMA are fully applicable to this case, even though they were enacted subsequent to the events that are being tried, thus this defense is not accepted.

140

The Appellate Court confirmed the appropriateness of applying EMA Article 43 in the context of denying one of Plaintiffs’ requests for damages. C-991, Lago Agrio Appellate Decision at 3-4: On this matter, which relates to application of the principle of non-retroactivity of the law, we note the difference between the right to the indigenous territories, which was not recognized as a substantive right until subsequent to those that are the basis of this case, and the right to obtain remediation for the damages suffered in various forms, which were recognized by the Civil Code long before the start of Texpet’s activities in the Amazon and which has been the basis of this claim. The Civil Code does not distinguish the types of damage that may occur but deals with very old rules that without a doubt could not have anticipated the situations being faced now. . . . There is no legal basis for the position that the rules of the Civil Code exclude environmental damage from their scope. Beyond this, it is the manner of filing the claim, that is, the formalities or procedure, which is established by the Environmental Management Act of 1999, and as such its application is mandatory, in accordance with rule 20 of Art. 7 of the Civil Code. On this basis it is explained that the loss of territory is not recognized as compensable damage, by application of the principle of non-retroactivity of the law; but the right established by the Civil Code which provides that “as a general rule a popular action is granted in all cases of contingent damage which, due to someone’s imprudence or negligence, threatens unspecified persons,” is recognized. This right was in effect when Texaco operated in Ecuador. This is sufficient legal basis according to Ecuadorian legislation to justify legally ordering the remediation measures that appear in the February 14, 2011 judgment.

36

60.

In so holding, the National Court did not, as Claimants contend, break new

ground. Rather, it confirmed the longstanding practice of Ecuadorian courts, evidenced in particular by Delfina Torres and, as explained below, the Calva v. Petroproducción decision.

61.

Delfina Torres demonstrates irrefutably that private parties had legal standing to

assert a claim vindicating their constitutional environmental rights even before the EMA’s enactment and before the Lago Agrio case was filed.141 Delfina Torres, moreover, is legally and factually analogous to the Lago Agrio Litigation: The complaints in both cases sought to vindicate the same rights — including the constitutional protection of citizens’ rights to live in a clean environment, to health and to life — based mainly on the same legal grounds, i.e., Civil Code provisions regulating tort liability (and in particular liability arising from hazardous activities).142 The cases are also factually similar, i.e., plaintiffs in both cases are private individuals alleging that oil exploration and production activities caused contamination and harmed the people residing in the region.143 Finally, but not least, the Courts in both cases granted the relief requested and ordered the construction of infrastructure works benefitting the community as a whole.144

141

RLA-1188, Delfina Torres Complaint, filed on Aug. 3, 1998 at 3-5 (vindicating the constitutional rights to live in a clean environment free of contamination) (citing arts. 22.2, 23, 44, 47 and 48 of the 1979 Constitution).

142

RLA-1188, Delfina Torres Complaint, filed on Aug. 3, 1998 at 3-5 (citing art. 22 paragraphs 2 and 15, and arts. 23, 44, 47 and 48 of the 1979 Constitution; Civil Code arts. 2241, 2243, 2244, 2247 and paragraph 1 of Article 2256; arts. 2241 and 2256 of the Civil Code are arts. 2214 and 2229 of the current codification).

143

C-1586, Delfina Torres (Oct. 29, 2002) at 14-15 (noting that in their complaint Plaintiffs assert that “the residents of this neighborhood, as well as other inhabitants of the city of Esmeraldas and other outlying areas in the province have been seriously impacted by the environmental and human damages caused by the Esmeraldas refinery . . . the ecosystem of the neighborhood ‘Delfina Torres viuda de Concha Propicio No. 1’ was seriously affected since the state refinery began operations; . . . several homes were destroyed while others were reduced to mere rubble; people have died; the waters of the Teaone and Esmeraldas Rivers have been contaminated; marine species have been asphyxiated due to damage to their bronchial systems; more than any other sector of the city, the neighborhood permanently smells of gas and oil derivatives.”).

144

Id. at 33 (explaining that “In the case under review, the plaintiff . . . does not seek individualized compensation but instead seeks the realization of basic infrastructure projects that would benefit the whole of the community.” And noting that “the defendant companies . . . will not pay any damages at all but instead will simply

37

62.

In Calva v. Petroproducción, the Supreme Court confirmed EMA Article 43’s

procedural nature and affirmed the pre-EMA legal standing of private individuals to bring environmental claims:145 With respect to the application of the Environmental Management Act, although this law was issued in Official Register No. 245 dated 30 July 1999, in other words, after the date of the last oil spill referenced by the complaint (February 1999), under Article 7, Item 20 of the Civil Code: “The laws concerning the procedures and formalities of the cases prevail over the previous ones as of the moment they start to govern”; and Articles 41, 42, and 43 of the Environmental Management Law contain rules governing the procedures of the cases on environmental rights.146 63.

EMA Article 43 merely made obligatory the usual practice of Ecuadorian

provincial courts processing the environmental actions brought before them through summary verbal proceedings, regardless of the substantive source of law.147 64.

In sum, Claimants’ contention that the Lago Agrio Court impermissibly applied

the EMA retroactively is unsupported, and it is both factually and legally wrong.

65.

At an earlier stage of the arbitration, the Tribunal adopted Claimants’ ipse dixit

over the Republic’s supported analysis. The Partial Award concludes that the EMA for the first

be . . . providing the residents of a sector (which is seriously affected by hydrocarbon production activities), with basic services for the protection of life, health, education, and a healthy livelihood, all of which are basic human rights”).

145

RLA-455, Calva v. Petroproducción, Supreme Court, First Civil and Commercial Division, Decision No. 67--2007, published in Official Register No. 486, Dec. 11, 2008 (involving a legal action for environmental damage, processed through a summary verbal proceeding, and based on Articles 2214, 2215, and 2229 of the Civil Code and constitutional provisions providing for the protection of right to live in a healthy environment.). See also RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶ 43, 51.

146

RLA-455, Calva v. Petroproducción, Supreme Court, First Civil and Commercial Division, Decision No. 67--2007, published in Official Register No. 486, Dec. 11, 2008, at 38 (emphasis added).

147

See RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶¶ 42-44. See also RLA-456, Eliécer Cruz Bedón, Director of the Galápagos National Park v. ACOTRAMAR, Guayas Provincial Court, Case No. 06-2001, Dec. 27, 2011; RLA-457, Virgilio Medina v. TECPECUADOR S.A., at 6-7 (the Supreme Court processed a legal action for environmental damage based on Articles 2214 and 2229 of the Civil Code through a summary verbal proceeding, despite the express objection raised by the respondent parties.).

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time entitled Ecuadorian citizens to vindicate their Constitutional right to live in an environment free from contamination through the filing of diffuse claims — a right purportedly reserved to the State until the enactment of the EMA.148

The National Court’s decision refuted that

conclusion — thereby confirming that the Tribunal’s Partial Award prematurely and incorrectly resolved an issue of Ecuadorian law that was still being litigated in Ecuadorian courts.

66.

The National Court explained that: (1) the State has never been the holder of

collective rights149 — a principle conceded by Claimants’ expert at the Track 1 hearing;150 and (2) even without the EMA, other provisions in the Ecuadorian legal system allowed the citizens to vindicate their right to live in an environment free from contamination.151 As the highest Court in Ecuador, the National Court’s authority to interpret and decide Ecuadorian law supersedes the Tribunal’s. The Republic, therefore, respectfully requests that the Tribunal revisit its findings and correct that portion of the First Partial Award.

67.

This Tribunal is not hamstrung by its earlier decision but rather free, and indeed

compelled, to defer to the decision of Ecuador’s highest court out of respect for the principle of comity and its duty to decide disputes regarding municipal law consistently with the

148

See First Partial Award on Track 1 (Sept. 17, 2013) ¶¶ 105, 106.

149

C-1975, National Court Decision at 201 (finding that the State was not the holder of collective rights and that the citizens could file claims to vindicate their collective rights prior to the enactment of the EMA; citing to the Constitutional Court case law to explain that the State could not be the sole holder of collective rights because this would ban any suit against the State for violation of collective rights as the State could not be both the victim and the offender).

150

Track 1 Hr’g Tr. (Nov. 27, 2012) at 312:24-313:8 (Claimants’ expert Mr. Oquendo agreed that “diffuse rights belong exclusively and indivisibly to the community as a whole . . . And not to the Government”).

151

C-1975, National Court Decision at 207 (“If that Act [EMA] had never been issued, other laws would have applied, undoubtedly using a different procedure, but it is not a right that does not exist for want of a procedure—it was recognized long before the 1998 Constitution and the Environmental Management Act came to be.”). See also id. at 71 (explaining that it is not even necessary to have a specific legislation to assert an environmental damages claim because Ecuadorian tort law would suffice).

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pronouncements of the superior courts of the municipal legal system.152 Dutch law in fact presents no barrier to the Tribunal exercising its duty in considering the National Court Decision and revisiting or departing from relevant findings in the First Partial Award.153 68.

Even if the Tribunal declines to correct its error and bring its decision in line with

Ecuadorian law, Claimants’ argument still fails for at least two reasons. First, the National Court held, appropriately, that the Lago Agrio Plaintiffs were entitled to the relief they obtained independent of Article 19.2 of the Constitution. The National Court confirmed that the legal bases for the relief granted were Articles 2236, 2229 and 2214 of the Civil Code,154 and, for procedural matters, EMA Article 43.155 Those conclusions were not considered by the Tribunal in its Partial Award. Second, this Tribunal found that an Article 19.2 claim is “diffuse” only when the plaintiff does not allege personal harm.156 As shown in previous submissions, the Lago Agrio Plaintiffs sought and obtained relief to prevent ongoing and future personal harm, and so their claims could not be deemed “diffuse” under the Tribunal’s First Partial Award, even if the legal basis of such claims had been Constitution Article 19.2.157 Nor could the underlying action be a “collective action” for the purpose of vindicating a “diffuse right.” To the contrary, civil actions filed under the verbal summary proceedings pursuant to EMA Article 43 are expressly

152

Respondent’s Track 1 Supp. Counter-Memorial ¶ 138.

153

Respondent’s Track 1 Supp. Counter-Memorial ¶ 138; Respondent’s Letter (June 12, 2014) (informing the Tribunal that Article 1059 of the new Dutch Arbitration Act expressly states that the principle of res judicata applies only in a proceeding other than the one in which the award was rendered); see also, RE-19, Van Dunné Expert Report (Mar. 27, 2014) ¶¶ 6, 13.

154

C-1975, National Court Decision at 180, 185, 202-05, 218-19. The National Court affirmed the Lago Agrio first-instance and Appellate Court’s decisions in this matter.

155 156 157

C-1975, National Court Decision at 75, 201, 207.

See First Partial Award on Track 1 (Sept. 17, 2013) ¶¶ 100-101.

Respondent’s Track 1 Supp. Counter-Memorial ¶ 132.

40

reserved to only those “directly affected by the harmful [environmental] action or omission.”158 No provision under the EMA sets forth a diffuse right of action.159 69.

It follows that, even if this Tribunal adopted Claimants’ baseless contention that

EMA Article 43 created a substantive, diffuse right of action, there is no factual or legal basis for this Tribunal to disregard the National Court’s finding that the lower courts’ granted relief on the basis of tort provisions in the Civil Code, not on Article 19.2 of Ecuador’s Constitution.

F.

Claimants Misrepresent Applicable Rules Of Procedure To Manufacture Alleged Due Process Violations

70.

Claimants aver that the Lago Agrio Court violated Chevron’s due process rights

“through a pattern of unlawful, improper, and unfair orders.”160 Under scrutiny, however, Chevron’s support is revealed to be drawn from out-of-context, mischaracterized portions of the Lago Agrio record.161 And while Claimants accuse the Republic of being disingenuous for exposing Chevron’s litigation strategy in Ecuador,162 Claimants fall conspicuously short of explaining — much less refuting — the multiple examples of Chevron’s gamesmanship that the Republic has identified.163

158

Respondent’s Track 1 Supp. Counter-Memorial ¶ 85; C-73, 1999 EMA, Art. 43 ¶ 1 (“The individuals, legal entities or human groups linked by a common interest and directly affected by the harmful act or omission may file before the court with jurisdiction actions for damages and for deterioration caused to health or the environment, including biodiversity and its constituent elements.”) (emphasis added); R-54, Eguiguren/Alban Decl. ¶ 99.

159 160 161 162 163

Respondent’s Track 1 Supp. Counter-Memorial ¶ 85.

Claimants’ Track 2 Reply ¶ 174.

Respondent’s Track 2 Counter-Memorial ¶¶ 138-156.

Claimants’ Track 2 Reply ¶ 176.

Respondent’s Track 2 Counter-Memorial ¶¶ 138-156.

41

71.

The Republic’s earlier submission refuted each of Claimants’ allegations of “legal

error” as contrary to applicable Ecuadorian law.164 Claimants’ Reply merely recycles their litany of appellate-type arguments, none of which finds support in Ecuadorian law.165 1.

72.

The Lago Agrio Court Appropriately Addressed Chevron’s Jurisdictional And Res Judicata Defenses At The Time It Entered Its Final Judgment

Claimants’ contention that the Court “prejudicially delayed” adjudication of

Chevron’s jurisdictional and res judicata defenses is unsupported by any evidence of either prejudice or delay. The Republic’s Counter-Memorial demonstrated that under the applicable rules of procedure governing oral summary proceedings such as the Lago Agrio case (conducted in accordance with the procedure set forth in the EMA), the court addresses such procedural defenses at the conclusion of the case and as a part of the final judgment.166 Claimants and their experts identify no legal authority or court precedent that requires a different result.

73.

Claimants erroneously assert that the Republic and its legal expert Dr. Andrade

“admit” that Claimants’ defenses could have been decided at the outset of the case.167 That is false. To be clear, the Republic explained: An Ecuadorian court may decide a motion or exception pleading res judicata or absence of jurisdiction prior to judgment only where the court’s lack of jurisdiction or competence is immediately apparent. Otherwise, the general rule described above

164

Respondent’s Track 2 Counter-Memorial ¶¶ 320-22, Annex G; RE-9, Andrade Expert Rpt. (Feb. 18, 2013).

165

Claimants’ Supplemental Memorial does not elaborate on any of these arguments, and likewise avoids consideration of the many examples of gamesmanship and abuse of the legal process in the Lago Agrio Proceedings exposed in the Republic’s Track 2 Counter-Memorial.

166

Respondent’s Track 2 Counter-Memorial ¶ 322, Annex G ¶ 2 (citing RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶¶ 8 et seq.).

167

Claimants’ Track 2 Reply ¶ 178.

42

applies and the defense must be decided at the time of the judgment.168 74.

Whether a defense is “immediately apparent” is a matter strictly reserved to the

court’s discretion.169

In this case, the Lago Agrio Court did not find that the validity of

Claimants’ jurisdictional and res judicata defenses was readily apparent. To the contrary, the Court ultimately rejected those defenses for the reasons explained in the Judgment.170 Claimants’ due process claim is therefore unavailing.

75.

Moreover, while Claimants reproach the Lago Agrio Court’s exercise of

jurisdiction over the case as “an erroneous and inscrutable decision,” they ignore — and for that reason we again point out — that the United States Court of Appeals for the Second Circuit dismissed Aguinda on the basis of, inter alia, Chevron’s voluntary submission to the jurisdiction of Ecuadorian courts.171

And as Respondent has stated previously, the Second Circuit

subsequently confirmed that all representations made by TexPet and Texaco as a condition for Aguinda’s dismissal are equally enforceable against Chevron.172 76.

Claimants’ argument reduces to the simple complaint that a summary oral

proceeding is inappropriate in a case like the Lago Agrio Litigation.173 Not only is that argument

168

Respondent’s Track 2 Counter-Memorial Annex G ¶ 2 (citing to RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶¶ 8 et seq.).

169 170 171

RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶ 18.

C-931, Lago Agrio Judgment at 4-6, 34.

Respondent’s Track 1 Counter-Memorial ¶¶ 34-36; Respondent’s Track 2 Counter-Memorial ¶¶ 127-128.

172

Respondent’s Track 1 Counter-Memorial ¶ 35; Respondent’s Track 2 Counter-Memorial ¶ 184. Claimants would not only have this Tribunal seat as a supra-national court of appeals, but also second-guess municipal court decisions of not one, but two Sovereign countries. Claimants’ contempt for the limited jurisdictional reach of the Treaty is beyond reason and must be dismissed.

173

See generally Claimants’ Track 2 Reply ¶ 177. Claimants contend that “Ecuadorian law contemplates that [summary verbal proceedings] will be decided within one or two months of their filing.” Claimants’ Track 2 Reply ¶ 177 (citing Coronel Expert Rpt. (Sept. 3, 2010) ¶¶ 108, 116.) However, EMA Art. 43 unequivocally mandates that, “Claims for damages originating from harm to the environment shall be heard in verbal summary proceedings.”

43

unavailing, it is ironic: Claimants appear to forget that this is precisely the procedure that both Texaco and Chevron, backed by over a dozen fervent Ecuadorian legal experts, vehemently extolled before U.S. courts to justify — and obtain — dismissal of the Aguinda action on forum non conveniens grounds.174 2.

77.

Claimants Fail To Rebut The Republic’s Showing That The Joinder Of Tort And Environmental Claims Was Proper Under Ecuadorian Law

Claimants have no basis for continuing to argue that the Lago Agrio Court

improperly joined Plaintiffs’ various claims.175 As the Republic explained previously,176 and as confirmed by the National Court,177 all of Plaintiffs’ claims were predicated on the existing and threatened harm to their rights emanating from the existence of environmental contamination — past, present and persistent — and therefore were required to be heard together in oral summary proceedings.178 EMA Article 43’s mandate is unambiguous: “Claims for damages originating from harm to the environment shall be heard in oral summary proceedings.”179 78.

In Reply, Claimants point to inapposite provisions of Ecuadorian law, asserting

that the Republic “ignores the requirement that Civil Code tort claims, which the Judgment

Claimants and their expert fail to cite to a single environmental case that may have been decided within one or two months of its filing. C-73, 1999 EMA, art. 43.

174 175

Respondent’s Track 1 Counter-Memorial ¶ 36; Respondent’s Track 2 Counter-Memorial ¶¶ 124-126.

RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶¶ 40-54.

176

Respondent’s Track 2 Counter-Memorial ¶ 322 and Annex G ¶¶ 3,4. See also RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶¶ 20 et seq.

177

C-1975, National Court Decision at 67, 69, 72-75.

178

Respondent’s Track 2 Counter-Memorial ¶ 322 and Annex G ¶¶ 3,4. RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶ 41 (“Article 43 of the EMA established the summary verbal proceeding as a special means for processing all legal actions stemming from environmental damage”).

179

C-073, EMA, art. 43.

44

purported to resolve here, must be decided in an ordinary proceeding.”180 Claimants offer no authority for this proposition.181 There is none. The general rule in Ecuadorian civil procedure is that controversies for which no specific procedure is mandated by law shall be heard in an ordinary proceeding.182 However, the National Court found that EMA Article 43 — as per its express and unambiguous language — mandates a specific procedure (i.e., oral summary proceedings) for “claims for damages originating from harm to the environment.”183

The

mandated procedure was correctly applied to all of Plaintiffs’ claims because they all were predicated on the existence of environmental contamination.184 79.

Claimants wish to circumvent this rule, arguing that “Ecuadorian law expressly

states that an ‘ordinary proceeding’ must be used when, as here, actions requiring different types of proceedings are brought jointly.”185 But Claimants’ argument is a non sequitur. None of Plaintiffs’ claims was subject to a mandated procedure, other than the EMA. To the contrary, each and every claim was instead predicated upon Plaintiffs’ allegation that Chevron is 180

Claimants’ Track 2 Reply ¶ 179 (emphasis added).

181

In fact, the National Court explained that “the application of Articles 2214 and 2236 of the Civil Code do not exclusively require the use of an ordinary proceeding.” C-1975, National Court Decision at 69.

182

RLA-198, Ecuadorian Code of Civil Procedure, art. 59 (“Legal disputes for which the law does not prescribe any special proceedings shall be heard in ordinary proceedings.”); see RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶ 23.

183

C-1975, National Court Decision at 67 (“Article 59 of the Code of Civil Procedure states that according to the law, all judicial matters that are not subject to a special procedure shall be tried by the ordinary procedure, which is not the case, since at the time the case was filed, the Environmental Management Act determined in its Article 43, last sentence that: ‘Claims for damages originating from harm to the environment shall be heard in summary verbal proceedings.’”).

184

RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶¶ 25-26. See also RE-20, Andrade Expert Rpt. (Nov. 7, 2014)

¶ 41.

185

Claimants’ Track 2 Reply ¶ 180, citing C-260, Ecuadorian Civil Procedure Code, art. 71, which provides: Different or alternative causes of action may be asserted in one complaint, but contrary or incompatible causes of action may not, nor may causes of action that necessarily must be heard using different forms of procedure, unless in the latter case the plaintiff asks that all causes of action be heard using the ordinary proceeding.

45

responsible for “harm to the environment.” As such, the Court had no choice but to hear all of Plaintiffs’ claims in oral summary proceeding.186 80.

Finally, there is no basis for Claimants’ argument that “summary oral proceedings

are ill-suited to a case of this magnitude.”187 Again, there is no dispute that this is precisely the procedure in force in Ecuador when Claimants so effectively touted the Ecuadorian court system to the United States courts to obtain dismissal of Aguinda in favor of what they argued was a more convenient forum in Ecuador. Having made that bed, Claimants must sleep in it.188 3.

81.

Claimants Misrepresent Applicable Law And Facts To Support Their Allegations Relating To The Cancellation Of The Judicial Inspections

Claimants repeat their allegation that “the Court’s cancellation of the judicial

inspections violated several provisions of the Civil Code and Civil Procedure Code,”189 and now advance four new arguments: (i) the Judge had no authority to cancel his order mandating the judicial inspection;190 (ii) the request for judicial inspections was the product of a binding contract between the litigants;191 (iii) the Judge violated the legal concept of “unity of the act” by accepting the Plaintiffs’ motion to withdraw their earlier request for certain judicial

186

C-1975, National Court Decision at 69-70 (finding that claims based on articles 2214 and 2236 of the Civil Code need not be heard via an ordinary proceeding and that those Civil Code provisions were not in conflict with the EMA but rather complemented it).

187

Claimants’ Track 2 Reply ¶ 179.

188

Claimants further contend that, “By failing to use an ordinary proceeding, the Court denied Chevron an opportunity, inter alia, to bring Petroecuador or the government into the case and cross-claim against them.”

Claimants’ Track 2 Reply ¶ 180. At best, this contention is disingenuous. As stated above, but for a few exceptions inapposite here, joinder of third parties is not allowed in Ecuador under any form of procedure, be it ordinary proceedings, oral summary proceedings or otherwise. See RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶ 25.

Again, Claimants were perfectly aware of this limitation when they sought to have the Plaintiffs’ claims filed in Aguinda tried and adjudicated in Ecuador under applicable procedure (i.e., EMA Article 43).

189

Claimants’ Track 2 Reply ¶ 186. The Republic’s response may be found in Respondent’s Track 2 CounterMemorial ¶ 322, and Annex G ¶¶ 7-10; RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶¶ 29-40.

190 191

Claimants’ Track 2 Reply ¶ 187.

Id. ¶ 188.

46

inspections;192 and (iv) “the Court’s failure to carry out the site inspections should have nullified the Judgment.”193 Each of these arguments fails.

82.

First, there is no support in either law or procedure for Claimants’ allegation that

the Judge lacked authority to grant the Plaintiffs’ request to withdraw certain judicial inspections.194 A Judge is sovereign in his or her court and is vested with ample discretion to manage the evidentiary phase of litigation proceedings.195 Claimants respond with the ineffective and unsupported argument that “once evidence is requested by a party and ordered by the court, one party’s waiver is ineffective.”196 Claimants’ putative basis for their claim is that the Court’s order became “final and irrevocable” because “the parties [did] not request that the judge amend or cancel that order within three days.”197 Not so.

83.

Under Ecuadorian law, only judgments and interlocutory orders (“Autos” or

partial orders addressing substantive claims)198 are final absent appropriate action by the aggrieved party.199 No provision of Ecuadorian law provides that simple procedural orders —

192

Id. ¶ 189.

193

Id. ¶ 190. Claimants assert that the negative results of the court-settling report for Sacha 53 prompted the Plaintiffs to seek to stop the inspection process (id. ¶¶ 183-184). As explained supra § VII.G.2.C, this assertion is demonstrably false; the Plaintiffs’ request to ‘withdraw’ from 26 of their JIs was filed days before the report for Sacha 53 was issued.

194

RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶ 64 (“There is no provision whatsoever in Ecuadorian law that prohibits the party who requested the evidence from renouncing to it”).

195 196 197

RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶¶ 29 et seq.

Claimants’ Track 2 Reply ¶ 187.

Id.

198

RLA-198, Ecuadorian Code of Civil Procedure, art. 270 (“A writ [Auto] is a decision of the judge on incidentals in the proceedings.”); art. 276 (“The matter to be decided and the basis or reasoning for the matter shall be expressed in judgments or writs that decide on a certain incident or resolve on a main action”).

199

See RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶ 64 (citing RLA-198, Ecuadorian Code of Civil Procedure, arts. 296, 298). See also RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶ 32.

47

such as those granting a request for the production of evidence — become irrevocable.

Indeed, such a result would be absurd.200 84.

According to Claimants’ theory, this Tribunal’s denial of Claimants’ original

request for Judge Zambrano’s hard drives would have been irrevocable, notwithstanding that this Tribunal later acceded to Claimants’ request.201 So too, apparently, the Tribunal would have been unable to reverse its subsequent procedural order requiring production of the Zambrano hard drive images, even if the Claimants had withdrawn their request. Claimants’ theory, if applied in this forum, would likewise prevent the Tribunal from modifying its scheduling orders, which have often been issued after discussion with and consent given by the parties, unless both parties so agreed. Respondent seriously doubts that any system of justice operates as Claimants now contend, with the court being afforded no discretion in the management of the cases before it. And to be clear, the Plaintiffs sought to withdraw their own requests for judicial inspections (in an effort to expedite the proceedings given the many delays); at no time did the Plaintiffs request or the Court order the termination of any judicial inspection requested by Chevron. In fact, the Court allowed Chevron to proceed with its own requested inspections,202 which Chevron completed before the Court issued autos para sentencia.203

200 201

Id. Compare Procedural Order No. 20 (Nov. 11, 2013) with Procedural Order No. 22 (Jan. 2, 2014).

202

C-195, Court Order permitting the "Relinquishment" of 64 Judicial Inspections, Aug. 22, 2006 at 1 (“[P]laintiff's waiver of the judicial inspections which it had requested and had been noted in the brief submitted at 9:10 a.m. on July 21, 2006 is to be duly noted; such inspections were not carried out, in spite of their having been ordered within the evidentiary period, for the appropriate legal purposes. - The case shall move on by obtaining the evidence requested by defendant, which was requested and ordered when procedurally appropriate. - Accordingly, the request made by defendants in their brief of July 24, 2006 is hereby denied.”)”

203

R-1278, GSI’s Schedule for Judicial Inspections (last updated July 21, 2010) as GSI_0132034.

48

85.

Second, Claimants’ contention that “in this case the parties agreed to the

inspections through a binding contract”204 is demonstrably false. The Lago Agrio Record shows that the Plaintiffs requested the JIs at issue during the evidentiary phase of the proceedings, approximately a year before the parties submitted the purported contract for the Court’s consideration and approval.205 In fact, even a cursory review of that document (“Terms of Reference For The Performance of the Experts”) (the “Protocol”) reveals that it merely is “a guide document for the orderly and efficient execution of the judicial inspections previously requested by each party and ordered by the Court.”206 The Protocol refers to the inspections previously requested by each party.207 86.

Claimants’ characterization of the Protocol as a binding agreement to carry out JIs

is misdirection and at odds with both parties’ understanding as to the Protocol’s nature.208 As Dr. Andrade explains: The record shows that both Chevron and Plaintiffs understood the Protocol to be a non-binding guideline that could be amended throughout the course of the judicial inspections. In fact, both parties submitted to the court “tentative schedules” for the judicial inspections, which the court adopted as “tentative.” Chevron itself submitted suggestions for conducting the [judicial inspections] that departed from the guidelines set out in the original Protocol.

Likewise, Plaintiffs expressly confirmed with the court that the Protocol and its annexes provided merely a general framework for 204

Claimants’ Track 2 Reply ¶ 188 (emphasis omitted).

205

See C-494B, Plaintiffs’ Motion for Evidence, Oct. 29, 2003, at 5:45 p.m., requesting the execution of judicial inspections. See also RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶ 60 n.87 (explaining that in summary oral proceedings the parties only have a term of six days after the conciliation hearing to identify the evidence that they intend to produce and request; the court follows this request with a procedural order mandating the production of such evidence into the record.)

206 207

RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶ 61.

Id.

208

Under Claimants’ theory, Claimants’ 2012 agreement to Respondent’s request for a site visit constituted a “binding agreement.” Their subsequent opposition to Respondent’s multiple requests constitute breaches of the contract.

49

the performance of the judicial inspections as a framework that was not binding and did not preclude the possibility of amendment.209 87.

Third, Claimants mischaracterize the concept of “unity of the act” by contending

that, under this principle, the production of evidence requested by a party “does not belong to or benefit only the one who provides or requests it, since the evidence may also benefit the opposing party.”210 That is not the law. Rather, Ecuadorian law provides that the ability to proffer evidence is a procedural right of the party who requested it.211 A party can, in turn, waive that right in conformity with Article 66 of the Constitution and Article 11 of the Civil Code — provided, however, that it makes its request to withdraw an earlier request for the production of evidence before the evidence in question has been introduced into the record.212 To that point, the National Court confirmed that until such evidence has been introduced into the record, the opposing party has no right to it.213 Only after evidence has been introduced in the record does the notion of “unity of the act” preclude a party from withdrawing its earlier request for production of such evidence.

88.

Fourth, Claimants offer no support for the proposition that “the Court’s failure to

carry out the site inspections should have nullified the Judgment.”214

209 210 211

There is none.215

RE-9, Andrade Expert Rept. (Feb. 18, 2013) ¶ 33 (citations omitted).

Claimants’ Track 2 Reply ¶ 189.

See RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶¶ 64-65.

212

RE-9, Andrade Expert Rept. (Feb. 18, 2013) ¶¶ 34-35; see also, RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶¶ 64.

213

C-1975, National Court Decision at 84 (explaining that “evidence, as long as it has not been already produced, depends on the free and voluntary initiative of the party concerned (art. 282) who regardless of whether it presents it or not, may withdraw any evidence already proposed and admitted, thereby cutting short measures already underway for said evidence to be presented. At any rate, such abandonment must to take place before the production of the piece of evidence”).

214

Claimants’ Track 2 Reply ¶ 190.

50

Claimants rely on their expert, Dr. Wright, for this sweeping proposition. Yet Dr. Wright’s opinion not only contradicts that of Claimants’ other expert, Dr. Coronel, but also relies on an inapposite provision of the Ecuadorian Code of Civil Procedure.216 4.

89.

The Court Followed Existing Procedure To Appoint Mr. Cabrera As The Global Expert

Claimants continue to argue that the Court’s appointment of Mr. Cabrera as the

global expert violated Ecuadorian procedural law.217 As the Republic explained previously, this allegation is meritless for at least three reasons.218 90.

First, Claimants’ assertion that the Court violated established procedure by

appointing an expert whose name was not on a list of experts registered with the local superior court219 is false. As the Appellate Court explained220 and Dr. Andrade further confirmed,221 the provision requiring that court-appointed experts be listed in a roster maintained by Ecuador’s superior courts had yet to be implemented at the time of Mr. Cabrera’s appointment as the global

215

This is also noted by the National Court, which found that Claimants offered no support to ascertain a procedural nullity, explaining that “a waiver [of evidence] does not affect the validity of these proceedings, all the more so when the parties have had the same time period during which they could request the production of any such evidence.” C-1975, National Court Decision at 83-84.

216

See RE-20, Andrade Expert Rpt. (Nov. 7, 2014) ¶¶ 27, 67 (comparing Dr. Wright’s opinion to that of Dr. Coronel, and explaining that art. 840 of the CPC lends no support whatsoever to the proposition that the practice of judicial inspections is mandatory in this type of proceedings.)

217 218 219

Claimants’ Track 2 Reply ¶¶ 192 et seq.; Claimants’ Track 2 Supp. Memorial ¶¶ 3, 32.

See Respondent’s Track 2 Counter-Memorial, Annex E ¶¶ 18-22.

Claimants’ Track 2 Reply ¶ 192.

220

C-991, Lago Agrio Appellate Decision at 15 (“For example, having been ordered that the expert witnesses acting in these proceedings should be chosen from those that would make up a list of specialists kept by the Provincial Court, it turned out that Chevron demanded the appointment of an expert witness from said list, knowing that it had not been made. The foreseeable logical consequence, in the event of addressing the petition, was the impossibility of having anyone (expert witness), and the following consequence was not to carry out the expert’s activity with the subsequent paralysis of the legal proceeding.”).

221

See RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶ 39.

51

expert. No roster of experts had yet been assembled or adopted.222 In the absence of such a roster, Ecuador’s courts regularly appointed experts in the same manner as they had before 2005.

Claimants do not contend otherwise. Mr. Cabrera’s appointment was no exception.223 91.

Second, Claimants aver that “the parties had agreed at the outset to a process for

naming experts”; that agreement was binding on the judge under Article 252 of the Ecuadorian Code of Civil Procedure.224 Claimants further contend that the judge did not honor the parties’ agreed-upon procedure, and instead “succumbed to public and private pressure to abandon that agreement, and appointed Cabrera.”225 92.

As a threshold matter, the parties’ agreement is binding on the court only where

the parties agree on a particular person to serve as a court-appointed expert (or where the parties agree that more than one expert should be appointed for a particular task).226 That was not the case here.227 In fact, the Lago Agrio Record shows that “[t]he Superior Court of Sucumbíos initially allowed the parties to propose the appointment of a mutually agreed-upon expert, noting that in the absence of such agreement the court would appoint an expert of its choice pursuant to applicable rules of procedure.”228 When the parties failed to reach an agreement, the Court appointed the expert, as mandated by the law.229

222 223 224 225

Id. Id. ¶¶ 39-40.

Claimants’ Track 2 Reply ¶ 193.

Id.

226

See RLA-198, Ecuadorian Code of Civil Procedure, art. 252 (“The judge shall designate just one expert, whom he or she shall choose from among those on the list to be provided by the Judiciary Council. However, the parties may, by mutual agreement, choose the expert or request designation of more than one for the proceeding, which agreement shall be binding on the judge.”) (emphasis added).

227

See Respondent’s Track 2 Counter-Memorial, Annex E ¶¶ 16-17 (explaining that only because the parties failed to reach an agreement did the Court appoint Mr. Cabrera).

228

RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶ 38; see also C-382, Plaintiffs’ Motion to the Lago Agrio Court, June 21, 2010 (explaining that because “That agreement [for the parties to mutually appoint the Global

52

93.

Third, and finally, the Court ultimately declined to rely on Cabrera’s opinion,230

which renders Claimants’ argument moot.

5.

94.

The Court Appropriately Exercised Discretion By Deferring Half Of Chevron’s Repetitive Essential Error Petitions Until The Final Judgment

Claimants do not dispute that Chevron filed no fewer than twenty-six allegations

of essential error.231 Nor do they dispute that the Lago Agrio Court determined that Chevron’s systematic barrage of “essential error” allegations was evidently done for the sole and improper purpose of disrupting and delaying the proceedings.232

With every challenge, Chevron

demanded a hearing to provide evidence of the alleged essential error in the expert’s report at issue. Claimants do not dispute that the Lago Agrio Court granted thirteen of Chevron’s twentysix requests for a hearing, each time opening a separate summary proceeding to examine Chevron’s allegations of “essential error.”233 The Court deferred the remaining petitions only after finding in each instance that Chevron’s allegations were based on largely identical

Damages Expert] never happened, the Court was forced to appoint a single expert pursuant to art. 252 of the Civil Procedure Code”).

229

RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶ 38 (citing C-385, Minute of Appointment of Expert Richard Cabrera).

230

See C-931, Lago Agrio Judgment at 51.

231

See Respondent’s Track 2 Counter-Memorial, Annex G ¶ 25. See also RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶¶ 100-103 (citing Letter from Chevron dated March 12, 2010, Lago Agrio Record at 177, 499-177, 514 (summarizing allegations of essential error submitted to the Court)).

232

RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶ 103. Indeed, it is no coincidence that Chevron challenged each report filed by an expert the Court appointed at Plaintiffs’ request, but none of the reports filed by an expert the Court appointed at Chevron’s request. See Respondent’s Track 2 Counter-Memorial, Annex G ¶ 25. See also RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶¶ 100-103 (citing Lago Agrio Record at 177,499-177,514 (Letter from Chevron dated March 12, 2010, summarizing allegations of essential error submitted to the Court)).

233

See Respondent’s Track 2 Counter-Memorial, Annex G ¶¶ 24-26; RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶ 102 n.125.

53

contentions, sometimes copied verbatim from earlier challenges, which failed to identify any alleged error (much less an essential one).234 95.

Claimants contend — incorrectly, and without support — that “Article 258 of the

Code of Civil Procedure requires a court faced with an essential error petition to hold a summary proceeding,”235 necessarily implying the Court should have halted the Lago Agrio Litigation twenty-six times to humor Chevron. Although Ecuadorian law requires that allegations of essential error be determined “summarily,”236 there is no requirement (and Claimants point to none) that a court hold a hearing for such purpose.

96.

The Court appropriately declined to grant Chevron’s further requests for a

separate evidentiary proceeding, deferring adjudication of Chevron’s motions until final judgment in accordance with Articles 292, 293 and 844 of the Code of Civil Procedure.237 Claimants ignore these provisions in their Reply and again in their Supplemental Memorial.

234

See Respondent’s Track 2 Counter-Memorial, Annex G ¶¶ 24-26. See also RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶¶ 100-103 (citing Letter from Chevron dated March 12, 2010, Lago Agrio Record at 177,499177,514 (summarizing allegations of essential error submitted to the Court)); id. ¶ 102 n.125. Moreover, Civil Procedure Code Articles 292, 293 and 844 plainly support the Court’s decision to defer consideration of Chevron’s onslaught until final judgment. Claimants’ protest that Chevron “merely acted to preserve its right to a defense,” Claimants’ Track 2 Reply ¶ 206, is irrelevant to the timing issue. (Perhaps for that reason, Claimants ignore entirely the relevant Civil Code Articles just cited.)

235

Claimants’ Track 2 Reply ¶ 204.

236

Id. Ecuadorian law does not define “essential error” with precision (see RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶ 101), making such a determination all the more appropriate for the Court’s exercise of discretion.

237

See C-931, Lago Agrio Judgment at 39-42.

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G.

Claimants’ Claims Of Legal And Due Process Violations In The Appellate Process Are Unfounded 1.

97.

Claimants Have Failed To Substantiate Their Claim of Manipulation Of The Appellate Panel Selection Process

“Repetition does not transform a lie into a truth.”238 Rather than address the

Republic’s response to their allegation, Claimants merely repeat their earlier assertions. For the sake of brevity, the Republic respectfully refers the Tribunal to Respondent’s Track 2 CounterMemorial on the Merits, Annex G, ¶¶ 43 et seq., which exposes each of Claimants’ myths for what it is — pure fiction.

98.

Claimants allege that Judge Zambrano manipulated the appellate panel by

appointing Juan Carlos Encarnación and Alejandro Orellana as substitute judges (conjueces) for the Provincial Court of Sucumbíos.239 Claimants assert that Judge Zambrano appointed both substitute judges in his role as Acting Provincial Director of the Judicial Council, and because he knew in advance that at least two substitute judges would eventually be called to sit on an ad hoc panel to hear Chevron’s appeal of his judgment.240 In fact, as previously established, the Judicial Council — not Judge Zambrano — appointed each of the five substitute judges (conjueces) for the Provincial Court of Sucumbíos, in accordance with applicable procedure.241 What is more, each of those five appointments was made before Judge Zambrano assumed the

238

Radio Address by Franklin D. Roosevelt, President of the United States of America (Oct. 26, 1939).

239

Claimants’ Track 2 Reply ¶ 210. Substitute judges are called to replace a judge where the sitting judge is unable to discharge his or her duties. See Respondent’s Track 2 Counter-Memorial, Annex G ¶ 44. Here, two substitute judges were called to substitute (i) Judge Zambrano, who could not sit on the appellate panel because he had issued the judgment, and (ii) Judge Nuñez, who had been recused after Chevron successfully orchestrated an operation to have Judge Nuñez removed from the bench on false allegations of bribery solicitation shortly after he had announced that issuance of a judgment was imminent.

240 241

Claimants’ Track 2 Reply ¶ 210.

Respondent’s Track 2 Merits Counter-Memorial, Annex G ¶¶ 43 et seq.

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Presidency of the Court of Sucumbíos and became Acting Provincial Director of the Judicial Council.242 2.

99.

The Appellate Panel Properly Considered The Evidence And The Issues Raised By The Parties

Claimants proffer two putative bases for their allegation that the appellate panel

affirmed the Judgment without meaningful review and analysis of the trial record: (i) the justices did not have time to review and consider the entire record in the 33 days between constituting the panel and issuing the decision; and (ii) the panel refused to consider Claimants’ evidence of fraud and irregularities, in violation of Ecuadorian law.243 100.

In its Track 2 Counter-Memorial on the Merits, Respondent demonstrated that the

Appellate Court properly examined each claim presented in the parties’ appellate motions. In doing so, the Court examined and cited the trial record properly to verify that the decision below was amply supported.244 In their Reply, Claimants make no attempt to refute Respondent’s evidence and arguments, instead repeating their prior points, often verbatim.245 Respondent reiterates (briefly) below why Claimants’ arguments are contrary to Ecuadorian law. a.

101.

The Appellate Court Examined The Trial Record Correctly And Rendered A Decision According To Statutory Deadlines

If Claimants’ porridge is not too hot, it is too cold: According to Claimants, the

Lago Agrio Court took too long to issue a first instance decision resolving Chevron’s 242

See R-305, Nomination Document for Juan Encarnación (Jan. 6, 2011). In fact, the Judicial Council appointed Messrs. Encarnación and Orellana as substitute judges for the Provincial Court of Sucumbíos on December 7 and 8, 2010. On December 9, 2010, the Secretary of the Judicial Council informed the then President of the Court of Sucumbíos, Dr. Leonardo Ordoñez, of such appointments. Judge Zambrano did not assume the Presidency of the Court of Sucumbíos until January of 2011.

243

Claimants’ Track 2 Reply ¶¶ 214-219.

244

See Respondent’s Track 2 Counter-Memorial ¶¶ 180-190; see also Respondent’s Interim Measures Response (Jan. 9, 2012) at 12-13.

245

See Claimants’ Track 2 Reply ¶¶ 214-219. Claimants abandon these arguments in their Supplemental Memorial.

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jurisdictional and res judicata defenses.246 On the other hand, Claimants complain that the Appellate Court reached its decision too quickly, “just barely over one month after the constitution of the final panel,” allegedly making it impossible for the court to analyze the 237,000 page record.247 Claimants’ conflicting arguments are based on misstatements of the relevant facts, and an incorrect understanding of Ecuadorian law. Both courts got it “just right.”248 102.

First, contrary to Claimants’ implication, the Appellate Court need not review

and analyze every page of the record. Its review properly is limited to the evidence made relevant by the parties’ allegations and defenses on appeal.249 Additionally, the Court reviews only the evidence that has been lawfully requested, ordered and produced during the lower-court proceedings.250 The Appellate Court is therefore barred from reviewing evidence that does not form part of the “merits of the proceedings”251 and cannot rule on an issue not previously raised by the parties in their appellate motions.

246

Claimants’ Track 2 Reply ¶¶ 174, 177.

247

Claimants’ Track 2 Reply ¶ 214. Other than to speculate when the appellate members began to review the record, Claimants offer no proof that the appellate panel’s decision was made without a meaningful review of the trial record.

248

See generally Robert Southey, The Story of the Three Bears, in THE DOCTOR (Longman, Rees 1837) (regarding porridge, chairs, beds and the importance of getting things “just right”).

249

RLA-198, Ecuadorian Code of Civil Procedure, art. 116 (“The evidence should be confined to the matter being litigated and the underlying facts of the proceedings.”); id. art. 117 (“Only properly produced evidence, i.e., evidence requested, presented and examined according to legal requirements, is admissible in court.”).

250

Id. art. 334 (“The judge before whom the referred appeal is lodged may confirm, reverse or amend the ruling under appeal based on the merits of the proceedings, including when the lower court judge has omitted a decision on one or several of the disputed points in his ruling. In this case, the higher court judge shall rule on them and shall set a fine between fifty cents of a US dollar to two US dollars and fifty cents, for said omission.”) (emphasis added); see also id. arts. 273, 274.

251

Respondent’s Track 2 Counter-Memorial, Annex G ¶ 12.

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103.

Second, there is no evidentiary phase or any other procedural stage at the

appellate level in summary oral proceedings.252 As such, Claimants’ assertion that the appellate judges improperly declared autos para resolver (closing the record, with a final decision to be the only further action taken) the same day that the appellate panel was constituted,253 demonstrates once again Claimants’ misrepresentation of Ecuadorian procedural law.

104.

In summary oral proceedings, the appellate process begins when the Court’s clerk

receives the case file and notice of appeal from the lower court.254 The clerk delivers the file to the corresponding appellate panel, which then renders a decision assuming jurisdiction, notifies the parties that the case file was received,255 and issues autos para resolver based on Article 838 of the Code of Civil Procedure.256 That is precisely what happened in this case.257 That said, Chevron had the option to present written alegatos,258 or request a hearing before the Appellate Court,259 at any time before the Court issued a decision.

252

Id. At the appellate level of a summary oral proceeding, there is no sustanciación, as alluded to in Spanish, which means that there are no procedural stages to be followed. Thus, once the appeal is lodged, the Court assumes jurisdiction over the case and must then issue its decision.

253 254

Claimants’ Track 2 Reply ¶ 215.

RLA-606, Regulations on the Arrangement of Proceedings and Judicial Acts, art. 30.

255

RLA-198, Ecuadorian Code of Civil Procedure, art. 58 (“INSTANCE is the conducting of a judicial proceeding, from the time of filing of a complaint to the adjudication of the matter by the judge or elevation of the matter to a higher court due to consultation or the granting of an appeal. Before the higher court, the instance begins with the reception of the case file, and concludes with the return to the lower court for the execution of an enforceable decision.”).

256

Id. art. 838 (“Superior court shall rule on the merits of the case and, judgment pronounced shall admit the motions allowed under the applicable law.”).

257

C-1693, Lago Agrio Appellate Order (Mar. 24. 2011)

258

RLA-198, Ecuadorian Code of Civil Procedure, art. 837. Chevron, in fact, availed itself of this option and presented alegatos before the Appellate Court issued its decision. See, e.g., R-1285, Lago Agrio Court Record at 18,069-86 (Chevron’s Letter to the Appellate Court of Dec. 21, 2011 at 16:28); R-1286, Lago Agrio Court Record at 17,410-16 (Chevron’s Letter to the Appellate Court of Dec. 21, 2011 at 16:25).

259

RLA-198, Ecuadorian Code of Civil Procedure, art. 1016. Although Chevron could have requested a hearing, it chose not to do so.

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105.

Third, it is not true that the appellate panel had only thirty-three days to review

and analyze the trial record. As Claimants point out, appointments to the appellate panel were made as early as March 24, 2011,260 and even considering the changes in the constitution of the panel, each of the judges had at least 147 days to examine and resolve the appeal.261 Because of the limited scope of the appellate review,262 the importance of the Lago Agrio case, and the parties’ constitutional right to a speedy trial,263 it can be presumed that the Appellate Court gave some priority to this case.264 Of note, the Appellate Court’s decision was sixteen pages. By comparison, Judge Kaplan issued a 485-page Opinion and eighty-five-page Appendix just six weeks after receiving the final post-trial memorandum in a case that amassed more than 3,750

260

Claimants’ Track 2 Reply ¶ 215.

261

Judge Legna was a member of the Appellate Panel examining and resolving Chevron’s appeal for a period of 147 days (see C-1065, Certificate of Lottery Assignment for Provincial Court of Justice of Sucumbíos (Nov. 29, 2011); R-302, (Lottery Assignment Minutes (Nov. 8, 2010)). Judge Toral, who was the Presiding Judge in the Panel, spent 287 days as a member of this Appellate Panel, i.e, since the constitution of the panel (see C-1099, Order Signed by Judge Toral (Nov. 29, 2011); R-303, Lottery Assignment Minutes (Mar. 23, 2011)); and Judge Encarnación held this position for 246 days (see C-1065, Certificate of Lottery Assignment for Provincial Court of Justice of Sucumbíos (Nov. 29, 2011); C-1292, Lottery Certificate to Form the Sole Division of the Provincial Court of Sucumbíos (May 3, 2011)).

262

See C-991, Lago Agrio Appellate Decision at 1 (explaining that the appellate briefs filed by both the Plaintiffs and the Defendants “are the parameters of the litigation for deciding the lawsuit at this level”); see also id. at 10 (explaining that “this is not the right procedural time to raise new defenses, or to amend existing ones since, having been raised at the customary procedural time — the conciliation hearing, in this type of case — the preclusion of the stages of the lawsuit prevent one from going back to them to amend them or propose other new ones”).

263

RLA-164, Constitution of Ecuador (2008), art. 75 (“Each individual has the right to free access to justice and effective, impartial and expeditious protection of his rights and interests, subject to the principles of immediacy and celerity. In no case a person shall be left defenceless. Noncompliance with judgments shall be punished by law.”).

264

It is not rare, however, that the Appellate Court in the Lago Agrio Litigation issued its decision in a short period of time. This is in fact common practice in appellate proceedings, where decisions are often delivered within a brief term. Claimants, however, have no complaint about fast-paced rulings issued in other proceedings where they also appear as a party. For example, in the New York action, the Court heard oral arguments on August 5, 2010 and decided on March 17, 2011. See CLA-435, Chevron v. Ecuador, 638 F.3d 384 (2d Cir. 2011) at 1. In the Count 9 Appeal, the argument was held on September 16, 2011, with the Court deciding the appeal and staying Count 9 three days later on September 19, 2011 (in a 1-page decision). See R-258, Order issued by the U.S. Court of Appeals for the Second Circuit, Chevron Corp. v. Donziger 11-1150-CV(L), 11-1264-CV(CON). The actual opinion was issued on January 19, 2012. See R-1287, Order issued by the U.S. Court of Appeals for the Second Circuit, Chevron Corp. v. Hugo Gerardo Camacho Naranjo, et al, 11-cv-691, 11-cv-3718.

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exhibits totaling more than 82,800 pages, and which included a 2,969-page trial transcript, 1,033 pages of written direct testimony, and 7,340 pages of deposition designations.265 Claimants refuse to acknowledge the comparison to Judge Kaplan’s surprisingly quick turnaround in the issuance of his RICO decision.

106.

Claimants further assert, mistakenly, that “only a few hours after Chevron filed its

response to the Plaintiffs’ motion [for clarification and amplification of the appellate decision], the appellate court issued a clarification order that effectively made all of the changes to the appellate decision that the Plaintiffs requested.”266 Implicit in Claimants’ charge is the allegation that the Appellate Court did not spend enough time deciding the motion. That is incorrect. The Appellate Court received the Plaintiffs’ six-page motion on Friday, January 6, 2012. The next working day, Monday, January 9, 2012, the Court served notice of the same to Chevron,267 granting it seventy-two hours to respond.268 Chevron waited the full term, that is until January 12, 2012, to file its fourteen-page response to the Plaintiffs’ motion.269 The panel issued its decision on the motion the following day (not merely a few hours later), January 13, 2012. In sum, the Appellate Panel had an entire week to review and analyze the Plaintiffs’ six-page motion,270 and ample time to review Claimants’ fourteen-page response, before rendering its

265

R-1222, Brief of The Republic Of Ecuador As Amicus Curiae In Support Of Neither Party (excerpt of Section II), filed in Chevron Corp. v. Donziger, Case No. 14-826-CV(L) (2d Cir. July 8, 2014) at 36-37.

266

Claimants’ Track 2 Reply ¶ 216.

267

See RLA-198, Ecuadorian Code of Civil Procedure, art. 282 (“A judgment shall be clarified if obscure and be amplified when any of the points in dispute have not been resolved or if no decision was rendered on civil fruits, interest or court costs and legal expenses.

The denial shall be duly reasoned.

For purposes of such clarification or amplification, the other party shall be heard first.”) (emphasis added).

268

R-1288, Appellate Court Order (Jan. 9, 2012), Lago Agrio Record at 18,211.

269

R-1289, Chevron’s Response to the Plaintiffs’ Request for Clarification of the Appellate Court Decision (Jan. 12, 2012).

270

C-1066, Plaintiffs’ Request for Clarification of the Appellate Court Decision (Jan. 6, 2012).

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five-page order.271 The Appellate Panel’s timing (and adherence to statutory deadlines)272 does not suggest that it did not consider and analyze Chevron’s arguments, but merely that it was not persuaded by them.273 107.

Nor did the clarification order make all of the changes to the appellate decision

that the Plaintiffs requested, as Claimants assert (again misstating the facts).274 As the order reflects, the Court rejected three of the Plaintiffs’ clarification requests and both of their amplification requests.275

271

R-299, Appellate Court Decision on Request for Clarification.

272

RLA-198, Ecuadorian Code of Civil Procedure, art. 288 (“Judgments will be issued within twelve days, court orders within three days; decrees within two days; but if the record has over one hundred pages, the term within which the judgment should be issued will be extended by one day for each one hundred pages.”).

273

On September 19, 2014, the Republic submitted to this Tribunal a 22-page request for recusal. Ten days later, the Tribunal received Claimants’ opposition. The Tribunal informed the parties of its decisions within hours of receiving and acknowledging receipt of Claimants’ opposition.

274 275

Claimants’ Track 2 Reply ¶ 216.

R-299, Appellate Court Decision on Request for Clarification at 1-2, 4-5.

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