Chevron Case: Re 20 Public Andrade Expert Report (nov 7, 2014) by Embajada del Ecuador en USA

IN THE ARBITRATION PROCEEDINGS UNDER THE UNCITRAL ARBITRATION RULES, PCA NO. 2009-23 BETWEEN _____________________________________ CHEVRON CORPORATION AND TEXACO PETROLEUM COMPANY, Claimants, -andTHE REPUBLIC OF ECUADOR, Respondent. _______________________________________

SUPPLEMENTAL FOREIGN LAW DECLARATION OF FABIÁN ANDRADE NARVÁEZ I, Fabián Andrade Narváez, declare that what I express here is true and correct. 1. Scope of the statement 1. I submit this supplemental declaration on Ecuadorian Law at the Republic’s request to respond to different aspects of the various reports submitted by Claimants’ experts in support of Claimants’ submissions of June 5, 2013 and May 9, 2014. 1 2. Summary of the conclusions 2. My conclusions are summarized below, and supplement those of my earlier report of February 18, 2013 (“First Declaration”), which I hereby ratify and refer to as appropriate.

Specifically, this declaration addresses several aspects of the following reports: (i)

Dr. Enrique Barros’ Fifth Report (June 3, 2013)

(ii)

Dr. César Coronel’s Fifth Report (June 3, 2013)

(iii)

Dr. Santiago Velazquez’ Report (June 3, 2013)

(iv)

Dr. Jorge Wright’s Report (June 3, 2013)

(v)

Dr. César Coronel’s Sixth Report (May 7, 2014)

a. Piercing of the Corporate Veil In his fifth report, Dr. Coronel reaffirms his disagreement with the way the Provincial Court of Sucumbíos (the “Provincial Court”) addressed the issue of corporate separateness in the first-instance judgment (the “Judgment”). He does not, however, offer any substantive opinion on the principles governing the piercing of the corporate veil in Ecuador that may differ from what I expressed in my First Declaration. Dr. Coronel does, however, advance a new proposition: both TexPet and Texaco should have been heard in the litigations against Chevron (hereinafter, the “Lago Agrio Litigation”) because, in his view, “In a claim requesting the piercing of the corporate veil, all of the companies or persons involved in the alleged abuse of the corporate structure must be joined as parties to the proceedings.” This contention finds no basis in Ecuadorian procedural law. Where an action is sought upon sufficient evidence that a party has abused of the corporate structure of another, it is the former, and no one else, who is called to defend itself at trial. The legal entity whose corporate structure the defendant has abused of is not a necessary participant in the proceeding against such defendant. There is no statute or case precedent that states otherwise. b. Causation Dr. Coronel and Dr. Barros argue that the Provincial Court erred by failing to establish causation between the actions attributed to TexPet (and through it, to Chevron) and the damages alleged in the complaint. Both experts omit, however, reference to two fundamental principles of Ecuadorian law governing tort claims arising from inherently hazardous activities. First, Ecuadorian jurisprudence has fashioned a presumption of liability in cases where the alleged harm arises from a hazardous activity (a category that includes hydrocarbon activities). In those cases, liability attaches by the mere performance of the hazardous activity, not by particular acts. To overcome the presumption, one of the following statutory exemptions from liability must apply: (i) force majeure or unforeseeable circumstances; (ii) the exclusive act of a third party; or (iii) the exclusive fault of the victim. Accordingly, in tort claims involving hydrocarbons operations, the victim is relieved of the burden of affirmatively proving the defendant’s fault; instead, it is upon the latter to show that it is not liable at all. Second, the law of torts in Ecuador mandates that all those who have acted in the commission of a tortious act are jointly and severally liable for the resulting harm. It is the plaintiff’s prerogative to seek damages from one, some or all of the joint tortfeasors. Accordingly, any liability that could possibly attach to PetroEcuador concerning the facts alleged in the complaint here does not prevent the entry of a judgment against Chevron. Chevron is entitled to seek reimbursement or indemnification from PetroEcuador for the latter’s share of the damages as a joint and severally liable tortfeasor. c. Alleged prevalence of expert evidence in the assessment of the evidentiary record Dr. Coronel and Dr. Barros argue that the Provincial Court was required to rely primarily on expert testimony while assessing the evidentiary record. Although a review of the Judgment 2

reveals that the Court did rely on voluminous expert evidence, the Court was entitled to weigh the evidence in accordance with his best judgment. Procedural law in Ecuador does not admit prevalence of any type of evidence over another; it has abandoned the system known as tarifa legal (prevalence of certain evidence of other forms) and instead affords the litigants the freedom to support their case through whichever evidence they deem most appropriate. Claimants’ experts’ contrary opinion has no basis in law. d. Award of extra petita damages in the Judgment Dr. Coronel insists on his view that the following categories of damages in the Judgment are extra petita: (i) [funding for] a community reconstruction and ethnic reaffirmation program; and (ii) creation of a potable water system. Both of these two categories of damages, however, fall directly within the scope of the requested relief. Ecuadorian law adopted the principle of integral reparation (restitutio in integrum), defining the extent of reparation in cases involving environmental harm as the “return of an ecosystem or the affected population to its prior condition.” On the basis of the harm alleged therein, the Lago Agrio Complaint seeks the following relief (i) “the elimination or removal of the contaminant elements that still threaten the environment and health of the residents”, and (ii) “[t]he remediation of the environmental harm caused, in accordance with art. 43 of the [EMA].” These two categories of damages in question are (i) consistent with the requested relief, and (ii) intended to remedy the harm alleged in the complaint. e. Undue joinder of claims Dr. Coronel again states that civil actions under the Civil Code tort provisions, even if the cause of action arises from harm on the environment, cannot be heard jointly in the same proceeding with claims under Article 43 of the Environmental Management Act (“EMA”). But as explained in my First Declaration, EMA Article 43 mandates that all tort civil actions arising from environmental harm, whether seeking to redress actual harm or prevent contingent harm from materializing, be heard in oral summary proceedings. This provision admits no exceptions and is confirmed by the actual court practice in Ecuador. f. Setting the bond to stay enforcement of a judgment Dr. Coronel asserts that the possible amount of a bond to stay enforcement of the Lago Agrio Judgment would, if Chevron had requested it, have ranged between US$ 1.9 billion and US$ 14.6 billion. Dr. Coronel agrees, however, that no legal parameters exist in Ecuador to guide Courts in setting the amount of such bond. In fact, a review of actual court practice in Ecuador reveals that the value of bonds set to stay enforcement of judgments challenged on cassation tends to be a small fraction of the amount in dispute, ranging from less than one percent to five percent of said amount. g. Waiver of judicial inspections Dr. Wright elaborates on Claimants’ contention that the Provincial Court approved and was thus bound by a protocol that the parties adopted by mutual agreement in connection with 3

the performance of the judicial inspections ordered by the Court. 2 Dr. Wright specifically argues that (i) the judicial inspections were the product of a contractual agreement, and (ii) the court acted illegally when it accepted the Plaintiffs’ renunciation to the performance of a number of judicial inspections which had been previously ordered at Plaintiffs’ request. These contentions have no basis in Ecuadorian law. First, the judicial inspections are regulated by applicable rules and are not the product of a contractual agreement between the litigant parties. In the Lago Agrio Litigation, during the evidentiary period each party requested, and the Court then ordered, the production of judicial inspections. The so-called Protocol was executed approximately one year later for the sole purpose of streamlining the process of conducting the judicial inspections. Second, the production of evidence is a procedural right of a litigant, which can be waived so long as the waiver is effected before the evidence in question is actually produced. This waiver (i) affects only the rights of the moving party, and (ii) is allowed by applicable law. h. Assessment of the evidence of procedural fraud presented by Chevron Dr. Coronel argues that the National Court erred by declining to examine Chevron’s purported evidence of fraud, and also by upholding a similar decision by the Provincial Court on appeal. The fact is that neither the Provincial Court nor the National Court had the requisite competence to examine and rule upon such purported evidence, so both courts correctly declined to do so in accordance with applicable rules of procedure. Rules of appellate procedure in respect of judgments issued in oral summary proceedings do not admit the production of any evidence. Rather, the appellate court must rule on the basis of the trial record, so the purported evidence of fraud that Chevron submitted to the Provincial Court on appeal was inadmissible. Identical restrictions apply at the cassation appeal level, where the National Court’s review is limited to legal matters, and applicable rules of procedure expressly rule out any possibility of submitting new evidence. Accordingly, neither court is an available proper forum for Chevron to air its allegations of fraud and proffer new evidence. As elaborated below, Ecuadorian law provides for an action under the Collusive Prosecution Act specifically designed to address cases of judicial fraud such as the one Chevron alleges here. i. The Ecuadorian State is not liable for the conduct of an expert witness Court-appointed experts in Ecuador are not officers of the court or otherwise public servants under Ecuadorian law. Accordingly, the acts of a court-appointed expert are not, and cannot be, imputed to the Judiciary or otherwise trigger any liability for the State. Any liability for the acts of a court-appointed expert, be it civil, administrative and/or criminal, attaches only to the expert at a personal level.

The protocol that the parties executed was styled “Terms of Reference for the Role of Experts” (hereinafter, “Protocol” or “Terms of Reference”).

j. Chevron’s allegation of collusion through Ecuador’s purported “promotion” of the Judgment Claimants allege that certain acts of the State must be construed as collusion with the Lago Agrio Plaintiffs and overt acts in furtherance of enforcement of the Judgment. However, the examples offered by Claimants either (i) are foreign to the legal regime of Ecuador (such is the case of the alleged issuance of a so-called “certificate of enforceability”), or (ii) refer to private acts between private parties not involving the State (such as the case of issuance of a power of attorney before a notary public), or (iii) constitute lawful acts of the State. None of these examples fits the definition of collusive or fraudulent act under Ecuadorian law or could otherwise support allegations of collusion between the Republic and the Lago Agrio Plaintiffs. k. Cassation appeals are extraordinary, inherently technical, and formalistic The cassation appeal is inherently technical and highly formalistic. For example, Ecuadorian jurisprudence has repeatedly held that “[t]he reasoning and support [of a cassation appeal] is the most demanding procedural burden imposed on the appellant” and an essential requirement of admissibility. The Supreme Court (now National Court) has warned that: [I]t must be carried out in a clear and precise fashion, without lapsing into vague accusations, linking the content of the allegedly infringed provisions with the fact and circumstances of the violation. In other words, the infringement must be shown not simply be indicating that the judgment violated a certain legal provision but by demonstrating how, when and in what sense the infringement occurred. Failure to comply with any of these formalities will likely result in the dismissal of the appeal. l. De novo review at the appellate level The scope of review at the appellate level extends to a comprehensive analysis of the record in respect of the matters of fact and law that are subject to appeal. The appellate courts must accordingly conduct an integral review of the factual and legal aspects of the judgment and render a decision on the basis of that record (meritos del proceso) and the allegations of the appellant. Cassation appeals cannot be filed against a trial court judgment, but only in respect of an appellate decision, as required by applicable law. m. The Collusive Prosecution Act Ecuador’s Collusive Prosecution Act (“CPA”) was enacted as a remedy to combat collusive agreements to inflict harm upon a third party. The CPA confers upon the affected person an action to obtain, inter alia, the anullment of the collusive act or judicial proceeding, full reparation of the harm suffered as a result of the collusion, and as far as possible, the restoration of things to the status quo ante. In this case, the CPA provides the only proper remedy in Ecuador for Chevron to air its allegations of fraud and to adduce evidence purportedly in support of those allegations. Neither 5

the Court of Appeal, nor the National Court nor the Constitutional Court, had competence to examine and rule upon evidence not admitted in the Provincial Court. In fact, applicable rules of procedure expressly rule out the possibility of submitting any evidence beyond the trial level, and render Chevron's purported evidence inadmissible as a matter of law. Claimants’ contention that the CPA is available only in respect of collusive transactions affecting real property rights is also error. Such contention is not only belied by the express language of the CPA statute, but also refuted expressly by their expert, Dr. Coronel. As several decades of CPA jurisprudence confirm, the CPA action is an effective mechanism to nullify fraudulent judicial proceedings infringing upon any kind of right of a party. 3. Analysis Piercing of the corporate veil 3. In his supplemental report, Dr. Coronel states that “the [Lago Agrio] Judgment has violated the principle of asset separation [separación patrimonial] of legal persons when it incorrectly applies the doctrine of piercing the corporate veil.” 3 Dr. Coronel renders his opinion on the basis of: (i) the exceptional nature of this doctrine; (ii) his personal assessment of the relevant facts; and (iii) the procedure that he considers should have been followed to protect the right of defense. 4. On a substantive level, Dr. Coronel does not raise any conceptual difference with what I expressed in my First Declaration in respect of the doctrine of piercing of the corporate veil. We both agree that under Ecuadorian Law, courts in Ecuador can avail themselves of this mechanism in exceptional circumstances, to prevent fraud or abuse of the corporate structure to the detriment of third parties. 4 5. The differences raised by Dr. Coronel’s report in respect to mine are limited mainly to his assessment of the facts. In what resembles an appellate brief (alegato), he argues the reasons for which he believes that the application of this doctrine in this particular case was in error. 6. I understand that my role in this matter is limited to providing a description of the Ecuadorian Law applicable to the matters on which my opinion was requested, for the benefit of the Tribunal. As such, there is little to add to what I already explained in my First Declaration concerning the law applicable to this particular subject. I will, however, clarify certain aspects of Dr. Coronel’s additional report that are relevant to the correct understanding of the Ecuadorian legal system. 7. First, Dr. Coronel states that “[i]n a claim requesting the piercing of the corporate veil, all of the companies or persons involved in the alleged abuse of the corporate structure must be joined as parties to the proceeding.” 5 That contention is incorrect. Where an action is 3

Report of César Coronel Jones (June 3, 2013) ¶ 8

Id. ¶¶ 8, 18, 20; Foreign Law Declaration of Fabián Andrade Narváez (“RE-9, Andrade Expert Rpt. (Feb. 18, 2013)”) ¶¶ 94-95, 97. 5

Report of César Coronel Jones (June 3, 2013) ¶ 21.

brought against a party who has abused of the corporate structure of another, it is the former, and no one else, who is called to defend itself at trial. The legal entity whose corporate structure has been abused is not a necessary participant in the proceeding because no liability can attach to it. There is no legal provision or case precedent stating otherwise. Indeed, one of the prerequisites of a successful complaint is that it be brought against the party who is legally obligated to challenge the plaintiff’s allegations, that is, the party whose liability is sought in the complaint (here, only the party who abused of the corporate structure of another to the detriment of third parties). 6 8. The only support that Dr. Coronel offers for his statement is an excerpt, taken out of context, of the judgment issued in the case of Morán vs. Onofre. 7 That case concerns a suit for moral damages against two members of a union, whom the plaintiff claimed were liable for having encouraged the General Assembly of Stakeholders to pass an illegal resolution expelling the plaintiff from the union. The then-Supreme Court found that the plaintiff lacked a cause of action against the union’s stakeholders and should have filed suit instead against the union, as the party who issued the resolution in question.8 The court declined to pierce the union’s corporate veil to reach the private parties based on the factual record, but for reasons that had nothing to do with (as Dr. Coronel argues) any alleged legal rule requiring a plaintiff to name as an additional defendant the entity whose veil it intended to pierce. 9 9. Second, Dr. Coronel maintains that “it is untrue that [Article 17 of the Law on Companies] provides a legal basis for piercing the corporate veil.” 10 In fact I have not stated that this provision is the legal basis for piercing the corporate veil in Ecuador, only that the doctrine and case law that led to the development of this doctrine have expressly referred to Article 17 of the Law of Companies as its antecedent. 11 Dr. Santiago Andrade, who currently is part of Chevron’s legal team in the Lago Agrio case and was a member of the former First Civil and 6

See, e.g., RE-9, Andrade Expert Rpt. (Feb. 18, 2013), Annex 36, Angel Puma v. Importadora Terreros Serrano S.A. (In this case, the claim is directed only against the party whom the Plaintiff considered liable for the obligation.).

Report of César Coronel Jones (June 3, 2013) ¶ 21 n.9, quoting Morán v. Onofre and Morán. See Coronel Annex 268, Supreme Court, First Civil and Mercantile Division, July 8, 1999, published in O.R. No. 273, Sept. 9, 1999 (“Morán v. Onofre”).

Dr. Coronel asserts that in this case “the plaintiff alleged that the defendants, in an attempt to harm him with expulsion from the Union to which he belonged, abused its legal personality, which called for the piercing of the corporate veil to make the defendants personally responsible.” Report of Dr. Coronel Jones (June 3, 2013) ¶ 21 n.9. This contention, however, finds no basis in the language of the decision.

The court found the factual predicate necessary to pierce the corporate veil lacking. Coronel Annex 268, Morán v. Onofre, third whereas consideration (“In this case, the General Union of Professional Drivers of the Province of Guayas, formed years prior to happenings in the present case, cannot be qualified as a fake entity with the intention of violating the law or with the intent of defrauding the interests of third parties, and of the collective decision to expel one of its members, all which could all be a violation of the law, or of the defrauding of the interests of third parties, in which case the legal status may be bypassed and the consequences of the actions of the union may be attributed to its members.”).

Report of César Coronel Jones (June 3, 2013) ¶ 23.

See, e.g., RE-9, Andrade Expert Rpt. (Feb. 18, 2013), Annex 36, Angel Puma v. Importadora Terreros Serrano S.A., Supreme Court, First Civil and Mercantile Division, File No. 20-03, January 28, 2003 (“Puma vs. Terreros”).

Mercantile Division of the Supreme Court that issued the judgments in Diners v. Chupamar case and Puma vs. Terreros, among others, has explained: In our statutory law, the doctrine [of piercing the corporate veil] basically proceeds in light of the provisions of Article 1562 of the Civil Code and Article 17 of the Law on Companies. 12 10. I therefore fail to see the basis or the purpose of Dr. Coronel’s criticism against this aspect of my First Declaration. 13 11. Finally, at paragraphs 33 and 40 of his report, Dr. Coronel attributes certain subjective opinions to me regarding the appropriateness (or lack thereof) of the Provincial Court’s application of the theory of piercing the corporate veil. I have neither “tacitly approved” nor expressly or tacitly rejected any of the factual aspects of the case. That is not the role of the expert who is called to report on the law applicable in Ecuador to certain matters relevant to the case. Causation 12. Chevron’s experts assert that the Judgment (i) does not establish a causal connection between the actions that are attributed to TexPet (and through it, to Chevron) and the damages claimed; (ii) is not based on the technically applicable evidence for determining the causation between an event and a particular harm; and (iii) does not analyze third parties’ participation in the occurrence of the harm, particularly that of PetroEcuador. 14 Both experts commit legal error, and seem to reduce their reports to a piece of advocacy rather than a statement of Ecuadorian Law.

R-1300, Santiago Andrade Ubidia, Lifting the Corporate Veil in Ecuadorian Legal Theory and Case Law, in Foro Revista de Derecho (Forum Law Review), No. 11, UASB-Ecuador / CEN, Quito, 2009 at 17-18. Case law also cites to Article 18, Numeral 7 of the Ecuadorian Civil Code as a basis for this doctrine, establishing that lifting the corporate veil is a universal principle of law. See RE-9, Andrade Expert Rpt. (Feb. 18, 2013), Annex 35, Diners Club del Ecuador S. A. Sociedad Financiera v. Compañía Mariscos de Chupadores, CHUPAMAR S.A. and Leonel Baquerizo Luque, Supreme Court, First Civil and Mercantile Division (March 21, 2001), O.R. No. 350 (June 19, 2001) at 5 (“Diners v. Chupamar”).

Moreover, Dr. Coronel’s statement is not correct in regard to piercing the corporate veil having been applied in only one case in Ecuador. Report of César Coronel Jones (June 3, 2013) ¶ 20 n.7. This statement is contradicted by Chevron’s own counsel in the Lago Agrio cassation proceedings. See R-1300, Santiago Andrade Ubidia, Lifting the Corporate Veil in Ecuadorian Legal Theory and Case Law at 20 (“The principle of lifting the corporate veil was first applied in judgments No. 12—2001, dated 21.03.2000 (Diners Club del Ecuador vs. Mariscos de Chupadores CHUPAMAR S.A.), and No. 20-03 dated 28.01.2003 (Angel Puma Vs. Importadora Terremos Serrano Cia. Ltda.), both issued by the First Civil and Commercial Chamber.”). Santiago Andrade also cites in his book certain authors who have stated that there have been three consecutive rulings upholding the identical standard in this matter and thus it has become binding case law. See id. at 24 (“There is binding cassation case law in Ecuador that accepts the applicability of the Theory of Dismissal.”) (citing Eduardo Carmigniani Valencia and Ortiz García). 14

Report of César Coronel Jones (June 3, 2013) ¶¶ 9, 49-65. See also Report of Enrique Barros (June 3, 2013) ¶¶ 17, 31, 36-51.

In inherently hazardous activities such as the exploitation of hydrocarbons, liability is presumed and the actor’s “fault” need not be proven by the Plaintiff.

13. The opinions of Dr. Coronel and Dr. Barros ignore fundamental principles of Ecuadorian Law in matters of tort liability arising from inherently hazardous activities. Ecuadorian jurisprudence has fashioned a presumption of liability in respect of harm resulting from such activities; this presumption rests on two factors that distinguish it from the general rule: (i) a presumption of liability on the party performing the activity; and (ii) the rule by which this presumption can be rebutted only through evidence that exonerates that party from liability. 15 The elements of this doctrine, as applied to the case at hand, can be summarized as follows: i.

The activity of hydrocarbon exploitation has been deemed a hazardous activity. 16 In this respect, the presumption of liability attaches as a result of the mere performance of the hazardous activity, not by particular acts. 17 To establish liability in this case, a Plaintiff need only prove the adverse environmental impact, and it is for the defendant to refute the causation link between the hazardous activity (here, hydrocarbons exploitation) and said environmental harm. 18

ii.

Under Article 2229 of the Civil Code, to be exempted from liability the defendant who conducted the hazardous activity must allege and prove a statutory exemption from liability, to wit, (i) force majeure or unforeseeable circumstances, (ii) the exclusive act of a third party, or (iii) the exclusive fault of the victim. If none of these exceptions is proven, the presumption of liability is upheld. In this context, it is understood that the victim is relieved of the burden of affirmatively proving the defendant’s fault, which, again, is presumed due to the mere performance of the hazardous activity. 19

14. The presumption of liability applies in all cases involving the extraction of hydrocarbons. Accordingly, Dr. Coronel and Dr. Barros’s analyses start from the false premise 15

C-1586, Delfina Torres (Oct. 29, 2002).

See id. at 24 (“since the production, manufacture, transport and operation of hydrocarbon substances undoubtedly constitute dangerous and risky activities”).

See id. at 23-24 (“[The] risk theory, according to which one who uses and benefits from any technique or method that is profitable, which also causes risks, must for this reason assume liability for damages that these risks entail, since the counterpart to the benefits brought about by such activities is the compensation for harms which said activity cause to persons or their property.”). 18

See id. at 24 (“Negligence and malice are not prerequisites to the existence of tort liability; all that is required is that the harm be a direct result of the event. Liability is an objective concept.”). 19

See id. at 21 (“Article 2256 of the Civil Code [current Art. 2229] considers, as we will see below, 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 is beyond the control of the party causing the harm or due solely to the fault of the victim.”).

that under Ecuadorian Law the victims carry the burden of affirmatively proving causation between TexPet’s hydrocarbon’s operations and the environmental harm resulting from those operations. 15. One cannot assume, as Dr. Barros seems to have done, that Chilean doctrine on the subject matter is applicable mutatis mutandi to Ecuador’s legal regime. Whatever Dr. Barros opines with respect to Chilean law, the Ecuadorian regime on liability for environmental damage is not confined entirely to the Articles of the Civil Code. Quite to the contrary, the principles governing liability for environmental harm in Ecuador have had developed in the Constitution, specialized legislation and jurisprudence, independent of the purely subjective liability concepts incorporated as the general rule in the Civil Code. 20 Thus, Dr. Barros’ theoretical discussion of Chilean Law is irrelevant. 16. Nor is it possible to state, as Dr. Barros has done, that “[w]hen there are two or more dangerous activities which could have caused the damage (in this case, TexPet’s and Petroecuador’s activity)” it is not “possible to apply such a causation presumption,” because in this case “the general rule applies, and the plaintiff must prove causation.” 21 This conclusion is manifestly contrary to Ecuadorian practice and to modern trends in Environmental Law, 22 which have shifted the rules on the burden of proof precisely for the purpose of protecting the victims of the harm. 23 It is not by accident that Chevron’s experts do not offer any foundation in Ecuadorian Law or doctrine in support of their assertion. 17. Dr. Barros states that the Lago Agrio Judgment suffers from two serious problems, i.e., “(a) the description of the theory [of adequate cause] is incorrect because it does not authorize the judge to act with discretion and (b) its application is irrelevant to matters of factual causation.” 24 Once again Dr. Barros’s criticism lacks support in Ecuador’s legal system and runs counter to Ecuadorian case-law. 18. First, the theory of adequate cause gives the judge the discretion to either establish or negate the causal link between the allegedly injurious act and the harm complained of. The Lago Agrio Judgment cites the Delfina Torres case as a precedent to the application of

The Delfina Torres case identified by Chevron’s experts and cited in the Lago Agrio Judgment discusses the subject extensively. See C-1586, Delfina Torres (Oct. 29, 2002) at 21-26.

Report of Enrique Barros (June 3, 2013) ¶ 58.

See R-1301, Evidence of Causation in Environmental Harm, Bonorino y Leal, ACT 1, 39-52, Dec. 2010 at 39, 44-50 (explaining that environmental damage is considered a type of harm that is usually caused by a plurality of agents and generally not the consequence of a single activity or a single actor, and recognizing that objective liability principles apply in lieu of requiring proof of factual causation).

See, e.g., C-1586, Delfina Torres (Oct. 29, 2002) at 24 (“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 majeur, chance, the actions of a third party, or solely as a consequence of the victim’s actions”). 24

Report of Enrique Barros (June 3, 2013) ¶ 40.

this theory of causation. 25 In that case, the then Supreme Court described the theory of adequate cause in the following terms (emphasis added): Theory of adequate cause. This theory, which we agree with, is the one favored by most legal theorists and the jurisprudence of courts of other countries. In this theory, it is left up to the Court to analyze whether a harmful action is capable of supporting a finding of liability for the party responsible for the action. It does away therefore with any generally applicable rule and entrusts the decision to the discretional power of the Court.” 26 19. Second, contrary to what Dr. Barros incorrectly asserts, the Supreme Court (the current National Court) makes no distinction in its decisions between causation in fact and causation in law when applying the theory of adequate cause. 27 Therefore, according to Ecuadorian jurisprudence, it is not necessary for the judge to make any such (purely academic) distinction. 2.

Chevron’s “third-party action” objection

20. As to Chevron’s experts’ criticism of the Court’s supposed lack of analysis of third parties’ participation in the occurrence of the harm, the following legal considerations are relevant. 21. Article 2217 of the Civil Code specifies that all those who have acted in the commission of a tortious act are “jointly and severally liable” for the resulting harm. 28 In light of 25

See C-931, Lago Agrio Judgment at 154 (citing the Delfina Torres case in support of its application of the theory of adequate cause, explaining that this theory is the preferred one in Ecuadorian legal practice). 26

C-1586, Delfina Torres (Oct. 29, 2002) at 26. See also C-998, Andrade Medina v. CONELEC at 6 (“The causal relationship between the illegal act and the damage considered must be classified by the courts on the basis of reasonableness, in each specific case; this Court believes that the different theories on the classification of the causal relationship, which have been set forth by doctrine, are an important guide for the judge, but they do not limit his ability to classify the relevant events on the specific circumstances of the matters place for his consideration.”); RLA-595, Jesús Rodríguez Moreira v. Empresa Eléctrica de Manabí EMELMANABI S.A., Supreme Court of Justice, Second Civil and Mercantile Chamber, R.O. Suppl. No. 349 (May 30, 2008) (“Rodriguez Moreira v. EMELMANABI”); RLA-596, Miguel Fernando Hermida Moreira et. al. v. Municipalidad de Cuenca, Supreme Court of Justice, Adminitrative Contentious Chamber, Cassation Case N0. 414, O.R. Suppl. 620 (June 25, 2009) (“Hermida Moreira c. Municipalidad de Cuenca”) at 8; RLA-597, Félix Gonzalo López Yánez v. República de Ecuador, Supreme Court of Justice, Adminitrative Contentious Chamber, Judicial Gazette Year CVIII, Series XVIII, No. 5, page 2053 (Nov. 16, 2007) (López Yánez c. Republica de Ecuador”) at 5. 27

Report of Enrique Barros (June 3, 2013) ¶¶ 36-37.

RLA-163, Civil Code of Ecuador, art. 2217 (“If an intentional or unintentional tort has been committed by two or more persons, each of them shall be joint and severally liable for any damage stemming from the same intentional or unintentional tort, except for the exceptions in Articles 2223 and 2228.”). The joint and several liability of the tortfeasors of the environmental damage is well supported and explained by doctrine. See, e.g., R1291, Nestor A. Cafferatta, Introduction to Environmental Law, United Nations Program for the Environment, National Institute of Ecology, Mexico, 2004 at 134 (“The consideration and evidence of the causal nexus, difficult and complex in this field, must reasonably lead to the admission of presumptions of causality. . . . For the hypothesis of environmental harm with a collective or plural causation, where groups of companies appear to be involved as possible agents, that makes it materially impossible for the victim or victims to determine the authorship in a reliable

this joint and several liability rule, it is the plaintiff’s exclusive prerogative to file suit against any one, some, or all of the possible parties jointly liable for the tortious act. 29 According to the provisions of Article 1538 of the Civil Code, upon payment of any damages award, the party who has been held legally liable for a joint and several obligation becomes subrogated to the judgment creditor’s claim against each of his co-tortfeasors for their respective share of the debt. 30 22. Thus, the existence of potential joint tortfeasors who may be jointly and severally liable with the defendant does not alter the presumption of liability against said defendant nor does it eliminate or mitigates his/her joint and several liability to the plaintiff. 31 Dr. Barros’s testimony is thus baseless under Ecuadorian Law. 32 23. When there is a multiplicity of agents jointly contributing to the harm (as Chevron asserts in this case), a plaintiff does not have the burden of quantifying the defendant’s share of overall liability or that which corresponds to the other tortfeasors. 33 While Dr. Barros attributes such a burden to the Lago Agrio Plaintiffs as a “basic requirement of the causal relationship in civil law,” 34 the Ecuadorian legal system harbors no such doctrine; to the contrary, it adopts the principle of joint and several liability.

manner, the theory of alternative causality or collective harm enshrining the joint and several liability of the intervening parties must be admitted.”). 29

According to art. 1530 of the Civil Code, the creditor of a joint and several debt (as in the case of the victim of a tort resulting from the activity of various agents) is in a position to file a complaint against all of them, some of them, or just one, at his discretion. RLA-163, Civil Code of Ecuador, art. 1530 (“The creditor can act against all the joint and several debtors jointly, or against any of them, at his discretion, without the latter being able to oppose the benefit of division”). 30

Id. art. 1538 (“The joint and several debtor who has paid the debt, or has canceled it through any of the means equivalent to payment, remains subrogated in the creditor’s legal action with all his privileges and securities, but is limited, vis-a-vis each of the co-debtors, to this co-debtor’s part or share of the debt.”). 31

See RLA-454, Iván Viñán Vásquez v. Federación Médica Ecuatoriana et. al., Supreme Court of Justice, First Civil and Commercial Chamber, Cassation decision (March 19, 2003) (Viñán v. Federación Médica), where the Court declared the joint tortfeasors severally and jointly liable for the damages caused to the plaintiff, since their actions - despite having occurred independently and at different times, contributed to the harmful result. See also C1586, Delfina Torres (Oct. 29, 2002) at 36-37. 32

Report of Enrique Barros (June 3, 2013) ¶ 49 (“When there is a variety of possible causes (as in this case), it is essential that the reasoning take into account technical evidence that each harm is a consequence of the activity of one of the parties and not the other.”). 33

In fact, in cases of joint and several liability for environmental damage, it is very difficult — if not impossible — to apportion the liability among the actors jointly contributing to the damages. See R-1291, Nestor A. Cafferatta, Introduction to Environmental Law, United Nations Program for the Environment, National Institute for the Ecology, Mexico, 2004 at 13, 63, 72, 105-06. See also C-1586, Delfina Torres (Oct. 29, 2002) at 36-37 (“Therefore to a greater or lesser extent, each one of the three cited companies is liable in tort for the damages suffered by the neighborhood ‘Delfina Torres viuda de Concha, Propicia No 1,’ and its residents, which the previous clauses [in this ruling] refer to. For this reason, and in accordance with article 2244 of the Civil Code [current art. 2217], each [of the defendants] is jointly and severally liable for those damages.”). 34

Report of Enrique Barros (June 3, 2013) ¶ 49.

24. Dr. Coronel, on the other hand, maintains that the Judgment attributes liability to Chevron for damages imputable to third parties. 35 However, this is not the conclusion that may be reached from the language of the Judgment. On the contrary, the Judge expressly states that he will not consider any damages that could be attributable exclusively to third parties (in particular, to PetroEcuador). 36 In his report, Dr. Coronel even cites to some fragments of the Judgment which confirm the Court’s assertion. 37 However, he then concludes that the Court has in fact attributed liability to Chevron for damage imputable to third parties. It is, therefore, another subjective statement on the basis of allegations unsupported by the Judgment itself. 25. Claimants further object to the oral summary proceedings as inappropriate for the resolution of the Lago Agrio Litigation because this kind of proceeding does not allow for the joinder of third parties and therefore precluded Chevron from joining PetroEcuador as a thirdparty defendant. 38 This claim has no basis in Ecuadorian Law; in fact, joinder of third parties as a party defendant is precluded as a general rule in every civil proceeding, even ordinary proceedings. Oral summary proceedings are not the exception. The law does allow for the joinder of third parties in few exceptional circumstances not present here. 39 26. The hypothetical liability on the part of PetroEcuador would not prevent Chevron’s liability or affect its obligations to the Lago Agrio Plaintiffs. Instead, Chevron retains the prerogative of instituting an action against PetroEcuador to seek reimbursement of PetroEcuador’s alleged share of the damages as a joint and severally liable tortfeasor, 40 in accordance with the general rules set forth above. As a joint and severally liable co-torfeasor, Chevron cannot foist upon plaintiffs the burden of proving any share of liability purportedly pertaining to another joint tortfeasor. Alleged prevalence of expert evidence in the assessment of the evidentiary record 27. Dr. Coronel and Dr. Barros develop their respective reports on the basis of their personal views about how the Provincial Court should have assessed the evidence to establish whether a causal link exists between the alleged environmental harm and the party found liable. Both experts suggest that the Court should have relied primarily on the expert testimony over 35

Report of César Coronel Jones (June 3, 2013) ¶¶ 51-56.

C-931, Lago Agrio Judgment at 122-24.

Report of César Coronel Jones (June 3, 2013) ¶ 53.

Claimants’ Track 2 Supp. Merits Memorial ¶ 135.

See, e.g., RLA-163, Civil Code of Ecuador, art. 1783 (allowing joinder of the seller of a thing so the court can determine his/her liability for the hidden defects of the thing sold existing at the time of the purchase and sale transaction); RLA-303, Organic Law of the Judiciary, art. 33 (mandating joinder of those public servants who participated in the relevant actions at issue in cases concerning the State’s liability arising from inadequate administration of justice, so that the court can determine the extent of their liability for purposes of subsequent indemnification proceedings by the State against them). 40

RLA-516, Ecuadorian State Modernization Law, art. 38. See also RLA-164, 2008 Ecuadorean Constitution, art. 11(9); RLA-163, Civil Code of Ecuador, art. 1538; RLA-218, Law of Contentious Administrative Jurisdiction, art. 65 (“In cases that are subject to contractual matters and to other jurisdiction of ContentiousAdministrative District Courts, the claim may be filed within a term up to five years.”); C-34, Civil Code of Ecuador, art. 2414; RLA-198, Ecuadorian Code of Civil Procedure, art. 296.

other forms of evidence. 41 Notably, contrary to Dr. Coronel’s and Dr. Barros’ opinion, Dr. Jorge Wright, another expert presented by Chevron, believes that the most relevant evidence in the case would be not the expert testimony but the judicial inspections. 42 28. In addition to contradicting each other, the opinions of Dr. Coronel and Dr. Barros as well as that of Dr. Wright have no legal basis. 29. Procedural law in Ecuador does not admit prevalence of one type of evidence over another. The prevalence of one kind of evidence over another is known as the principle of statutory scale for evidentiary weight (tarifa legal), which subjects “the judge to pre-established abstract rules that tell him the conclusion that he must accept because of the presence or absence of specific types of evidence.” 43 Ecuador’s legal order abandoned the principle of evidentiary weight (prueba tasada) in 1978, with the entry into force of Supreme Decree No. 3070. 44 Ever since, the principle of assessing evidence as a whole according to the rules of sound judgment has prevailed in Ecuador. 30. The first paragraph of Article 115 of the 2005 Code of Civil Procedure (“CPC”) recognizes this principle, expressly providing that: The evidence must be weighed as a whole, according to the rules of sound judgment, notwithstanding the formalities prescribed in substantive law for the existence or validity of certain acts. 45

Report of César Coronel Jones (June 3, 2013) ¶ 58. See also Report of Enrique Barros (June 3, 2013) ¶ 31.

Report of Jorge Wright-Ycaza (June 3, 2013) at 4. Dr. Wright emphasizes the importance of this evidence for the purpose of justifying his observations regarding the judicial inspections requested by the plaintiffs in the case, and the Sucumbíos Court’s decision to accept the later partial waiver filed by the same party.

R-1296, Hernando Devis Echandia, General Theory of Judicial Evidence, Vol. I, Ed. Víctor de Zavalía, Buenos Aires, 1974 at 84.

RLA-611, Supreme Decree No. 3070, O.R. No. 735 (Dec. 20, 1978). Article 116 of the 1960 Code of Civil Procedure stated: Art. 116 - Evidence is conclusive or semi-conclusive. (Legal weight) Conclusive [evidence] is that which shows, beyond any doubt, the truth of the disputed fact; and semiconclusive, is that which does not by itself clearly prove the fact, but rather leaves a doubt about its truth. Article 116 was replaced by the following text: Art. 116 (Reform of 1978). - The evidence must be weighed as a whole, according to the rules of sound judgment, notwithstanding the formalities prescribed in substantive law for the existence or validity of certain acts. The judge shall not be obliged to express in his decision the assessment of all the evidence produced, but only that of the evidence that was decisive in the outcome of the case. 45

RLA-198, Ecuadorian Code of Civil Procedure, art. 115.

31. Therefore, none of the opinions that Chevronâ&#x20AC;&#x2122;s experts offer about the primacy of evidence is supported in the Ecuadorian legal system. The judge in any case is obligated to assess the evidence as a whole and according to the rules of sound judgment. 32. From reading the Judgment, one sees the application of Article 115 of the 2005 CPC. For example, with respect to the scientific evidence regarding the presence or lack of contaminating elements in the environment, the Court observes that: An exhaustive and complicated analysis of the results of the laboratory analyses presented as valid evidence during this lawsuit had to be performed, and the magnitude of this work is underlined in regards to which the experts nominated by Chevron have provided 50,939 results from 2,371 samples, the experts nominated by the plaintiffs have provided the case file with a total of 6,239 results from 466 valid samples; while the experts named by the Court, without nomination by either party, have provided 178 samples and 2,166 results (without considering the sampling done by the expert Cabrera); resulting in a total of 2,311 samples. To this we must add the 608 results presented by expert Jorge Bermeo, and 939 results presented on 109 samples collected by expert Gerardo Barros, which have also been taken into consideration, but with considerations annotated for each case. ... Considering the facts shown in the record, such as the existence of a certain number of wells, stations and pits that were designed, built and operated by Texpet, in conjunction with the quantity or sample of sites inspected, and the results of those inspections, it is considered that the valid samples in the record are representative of the state of the concession area. Thus, with considerations noted, analysis of the results of the samples taken in the field by the different experts who have participated in this lawsuit begins with an overall assessment of the results presented for Total Petroleum Hydrocarbons (TPHs).â&#x20AC;? 46 33. evidence:

Other passages in the judgment also refer to the assessment of the expert For the complex task of assessing the presence of environmental damage, 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. 47

C-931, Lago Agrio Judgment at 99-100.

Id. at 95-96.

34. The Judgment also notes the Court’s evaluation of the field-test results. 48 An objective analysis of the Judgment allows one to see an exercise of overall assessment of the evidence, in accordance with the rules of sound judgment, as required by applicable law. 49 In Ecuador, one type of evidence does not prevail over another. Purported award of extra petita damages in the judgment 35. Dr. Coronel’s report, while attributing to me statements that I have not made, maintains that the Judgment is incongruent for extra petita in that it awards the following categories of damages to remedy environmental harm: (i) a community reconstruction and ethnic reaffirmation program (valued at US$ 100 million); and (ii) a potable water system (valued at US$ 150 million).50 36. No part of my First Declaration can be construed as suggesting (as Dr. Coronel states) that “the analysis for congruency must be based on these two general headings [of removal and remediation], such that the Judgment will be consistent if the remedy that it orders has a vague ‘functional’ or ‘logical relationship’ with such headings.” 51 On the contrary, what I explained therein is that the damages Dr. Coronel objects to fall directly within the realm of the prayer for relief contained in Chapter VI.2 of the Lago Agrio Complaint. 52 37. The relief requested by the Lago Agrio Plaintiffs generally consists of (i) “the elimination or removal of the contaminant elements that still threaten the environment and health of the residents” and (ii) “[t]he remediation of the environmental harm caused, in accordance with Section 43 of the EMA.” 53 38.

The Lago Agrio Complaint explains that: [T]he consequences of the application of the methods and proceedings described above were particularly devastating for the five indigenous human groups of the area, who additionally suffered the violent destruction of their natural habitat and, consequently, of their subsistence

Id. at 100 (“Thus, with considerations noted, analysis of the results of the samples taken in the field by the different experts who have participated in this lawsuit begins with an overall assessment of the results presented for Total Petroleum Hydrocarbons (TPHs).”). 49

Ecuadorian law provides that the judge’s assessment of evidence shall be in accordance with the rules on sound judgment. Other attributions granted to the judges that demonstrate the broad capacities attributed to them regarding the assessment of evidence include the possibility to dismiss the conclusions of an expert against his conviction, and the discretion to carry interviews of the people who know the place or thing examined during a judicial inspection, in search of uncovering the truth. See RLA-198, Ecuadorian Code of Civil Procedure, arts. 249, 262, 244, 245.

Report of César Coronel Jones (June 3, 2013) ¶¶ 84-85.

Id. ¶ 81.

RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶¶ 89-92

C-71, Lago Agrio Complaint at 17-18.

means, their way of life and customs, and have even faced a serious threat to their future and identity as a people. 54 39. In my opinion, it is clear that the damages awarded by the Lago Agrio Judgment are intended to provide the Plaintiffs with remedies to overcome the harm alleged,” and are therefore consistent with (i) the general reparation requested in the Complaint, and (ii) the rule of integral reparation (restitutio in integrum) prevailing in Ecuadorian law, and also reflected in the EMA’s definition of “Restoration” as the “return of an ecosystem or the affected population to its prior condition.” 55 Alleged undue joinder of claims 40. Dr. Coronel again states that the actions based on the Civil Code cannot be joined with those based on the EMA to be heard jointly in the same proceeding. 56 From this postulate he again insists on his argument that the Provincial Court acted in violation of Ecuadorian Law by having heard legal actions based on Articles 2214, 2229, and 2236 of the Civil Code through oral summary proceedings. 57 41. As I have explained in my First Declaration, Article 43 of the EMA established the summary verbal proceeding as a special means for processing all legal actions stemming from environmental harm. 58 Article 43 offers no exceptions to this rule. Therefore, as of the entry into force of this provision, and without making any distinction, every civil action seeking compensation for harm resulting from environmental contamination (Articles 2214 and 2229 of the Civil Code), or to prevent possible future harm (Article 2236 of the Civil Code), must be tried in oral summary proceedings. 59 42. Dr. Coronel’s arguments lack support in Ecuador’s legal order and court practice in this subject. In fact, as of the enactment of the EMA, the Ecuadorian courts have tried claims for damages originating from environmental contamination through oral summary proceedings, 60 including those based on Articles 2214, 2229, and 2236 of the Civil Code. 61

C-71, Lago Agrio Complaint, at 9-10.

C-73, 1999 Environmental Management Act, Glossary of Definitions (emphasis added).

Report of Dr. Coronel Jones (June 3, 2013) ¶ 88.

Id. ¶¶ 88, 92, 94.

RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶ 26.

Id. ¶¶ 20-28.

In light of Article 43 of the EMA, “[c]laims for damages originating from harm to the environment shall be heard in verbal summary proceedings.” 61

See, e.g., RLA-512, Calva v. PETROPRODUCCIÓN, Supreme Court, First Civil and Commercial Division, Decision No. 67--2007, O.R. No. 486 (Dec. 11, 2008) (“Calva v. Petroproducción”). See also RLA-512, Eliécer Cruz Bedón, Director of the Galápagos National Park v. ACOTRAMAR, Guayas Provincial Court, Case No. 06-2001 (Dec. 27, 2011) (“Parque Nacional Galápagos v. ACOTRAMAR”); RLA-612, Virgilio Medina v. TECPECUADOR S.A. at 6, 7 (“Medina v. TECPECUADOR S.A”).

43. For example, in the Calva v. Petroproducción case, the then-Supreme Court examined a legal action for environmental harm based on, among others, Articles 2214, 2215, and 2229 of the Civil Code and processed through oral summary proceedings. With regard to the application of Article 43 of the EMA, the Court stated the following: 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. 62 44. This has also been the practice of the provincial courts, where legal actions for damages arising from environmental contamination have been processed through oral summary proceedings. For example, in the Virgilio Medina v. TECPECUADOR case, the Supreme Court heard a claim for environmental damage based on Articles 2214 and 2229 of the Civil Code through oral summary proceedings, despite the express objection raised by the respondent. 63 45. Dr. Coronel also maintains that Articles 2214 and 2229 of the Civil Code do not establish the right to claim remedy for collective damages of any kind, including environmental damage, since they refer exclusively to individual harm. He further asserts that Article 2236 of the Civil Code only provides a precautionary action and thus, the remediation of collective environmental damages cannot be claimed based on this rule either. 64 46. Dr. Coronel again states his personal views, which was the subject of opinion of another expert of the Republic. 65 At any rate, I shall flag a number of errors in the thesis advanced by Claimants’ expert. 47. First, the Ecuadorian Civil Code’s extra-contractual liability regime does not make any distinction regarding whether the legally protected right is an individual right or a collective one. The most basic principle of liability lies in the notion that anyone who causes harm must remedy it. 66 As a counterpart, he who has suffered harm at the hands of another has the right to seek reparation from the party responsible for having caused such harm. 62

RLA-512, Calva v. Petroproducción at 38 (emphasis added).

RLA-612, Medina v. TECPECUADOR S.A. at 6-7 (The respondent expressly alleged a violation of his due process and the lack of court competence, arguing that civil claims must be heard in an ordinary trial and not oral summary proceedings, and before a civil trial court. The Court rejected these objections, confirming that the appropriate channel was the oral summary proceeding). 64

Report of César Coronel Jones (June 3, 2013) ¶ 92.

See RE-3, Genaro Eguiguren’s Second Statement on Foreign Law ¶¶ 21-29.

66 RLA-163, Civil Code of Ecuador, 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.”).

48. Article 2229 of the Civil Code generally states that “any harm that can be attributed to malice or negligence of another party must be remedied by that party” (emphasis added). 67 As the plain language of this provision reveals, this general rule encompasses any type of harm; it does not make any distinction as to the type of harm or the nature of the right infringed upon. Nor does it limit a party’s ability to seek reparation for the harm suffered on the basis of whether the harm affects an individual or multiple persons. 49. Dr. Coronel’s assertion that “[t]hese provisions refer exclusively to individual damages” 68 has no basis in Ecuadorian Law and is wrong. In fact, the extra-contractual liability regime provided for in the Civil Code has been invoked and applied to resolve cases in environmental matters (Delfina Torres) 69 and as part of a general theory of liability that includes the extra-contractual liability of the State, its concessionaires and delegates (Andrade Medina v. CONELEC), 70 and its strictures have evolved from subjective liability to theories of objective liability. 50. Second, Dr. Coronel also errs in his interpretation of Article 2236 of the Civil Code. Specifically, his contention that this provision cannot be invoked in cases where the threat of contingent harm arises from environmental contamination is unfounded and incorrect. On the contrary, if the existence of contamination in the environment poses a threat of harm to those exposed to such contamination, Article 2236 of the Civil Code confers upon them a popular action (also called “collective action”) precisely to prevent the occurrence of such harm. 72 In this particular case, the Lago Agrio Complaint legitimately requests the removal “of the contaminant elements that still threaten the environment and the health of the residents” based on this provision. 73 71

51. Third, Dr. Coronel also maintains that, “[i]t is also erroneous to state that the EMA is limited to establishing procedural rules.” 74 My statement was not so broad. I stated in my First Declaration only that Article 43 of the EMA (the only provision that is relevant to this case) is a provision of a procedural nature. In case there is any doubt, the Supreme Court made this clear in 2008, five years before it heard the cassation appeal of the Lago Agrio case:

Id. art. 2229 (“As a general rule, all damages that can be attributed to malice or negligence by another person must be compensated for by that person.”). 68

Report of César Coronel Jones (June 3, 2013) ¶ 92.

C-1586, Delfina Torres (Oct. 29, 2002) at 23-38

C-998, Andrade Medina v. Conelec at 5-10.

Report of Dr. Coronel Jones (June 3, 2013) ¶ 92.

RLA-163, Civil Code of Ecuador, art. 2236 (“As a general rule, a popular action is granted in all cases of contingent harm which, due to recklessness or negligence of a party threatens undetermined persons. But if the harm threatened only determined persons, only one of these may pursue the action.”). 73

The second claim of the Lago Agrio complaint seeks the remedy of damages that have already occurred — as a result of the contaminant elements which removal has been requested — founded on the general regimen of extra-contractual liability established by Articles 2214 and 2229 of the Civil Code.

Report of Dr. Coronel Jones (June 3, 2013) ¶ 93.

Articles 41, 42, and 43 of the Environmental Management Law contain rules governing the procedures of the cases on environmental rights. 75 52. Fourth, and finally, Dr. Coronel suggests that there is a contradiction between what was stated by Drs. Eguiguren and Albán, and my First Declaration on this matter. 76 There is no such contradiction; in fact, Dr. Coronel neglects to transcribe a substantial part of the experts’ statement in his report, joining two independent statements to create a statement different from the one expressed in the report in question. 53. At paragraphs 103 to 107 of their Statement, Dr. Eguiguren and Dr. Albán explain the legal nature and background of (i) the popular action prescribed in Article 2236 of the Civil Code, on the one hand, and (ii) the action provided in Article 43 of the EMA, on the other, as follows: Note that in addition to the popular action of Article 2236 the Civil Code, a civil action for monetary damages in case of harm arising from tortious acts is always available pursuant to Article 2214 of the Civil Code. See supra n.77, Exhibit 36. The civil action prescribed in Article 43 of the 1999 Law also draws from this longstanding action to provide for “actions for monetary damages.” Note further that a claim for damages pursuant to Article 2214 can be brought in addition, and without detriment to the action provided for in Article 2236 if the person or group of persons bringing the claim have already suffered injury or harm and the threat of future injury persists. The same result can be achieved, albeit more expeditiously, through Article 43 of the 1999 Law. 77 54. This explanation is consistent with that expressed in my First Declaration. The language quoted by Dr. Coronel to suggest otherwise is taken out of context from the paragraph where Dr. Eguiguren and Dr. Albán summarize their conclusions. 78 There is thus no 75

RLA-512, Calva v. Petroproducción. My opinion on the procedural nature of Article 43 of the EMA coincides with that expressed by the Supreme Court. 76

Report of César Coronel Jones (June 3, 2013) ¶ 99.

RE-9, Andrade Expert Rpt. (Feb. 18, 2013), Annex 1, Declaration on Foreign Law from Genaro Eguiguren and Ernesto Albán (Dec. 20, 2006) ¶ 106 n.79. 78

The complete text of the respective paragraph reads (emphasis added): In brief, the popular action granted by Article 2236 of the Civil Code provides for judicial recourse to seek compulsory remediation of environmental harm - completely independent of and apart from the civil action prescribed in Article 43 of the 1999 Law. The popular action in the Civil Code is intended to protect individuals from contingent harm to their person and/or assets by allowing a collective action to seek the removal of whatever poses a threat of contingent damage (i. e., existing environmental harm that threatens the lives or property of undetermined or determined persons). The civil action in Article 43 draws from each citizen's constitutional right to a safe and clean environment to justify a procedure that, should the facts be proven, compels the remediation of environmental harm. The popular action would proceed as an “ordinary action,” while the latter would be heard through summary oral proceedings.

contradiction whatsoever between what Dr. Eguiguren and Dr. Albán explain and what I have stated previously. In sum, the three of us have explained that (i) when the cause of action prescribed in Article 2236 of the Civil Code stems from harm to the environment that threatens to cause contingent (ulterior) harm, the applicable proceeding is the oral summary proceeding, as provided in Article 43 of the EMA, and (ii) in any other case not involving environmental harm, the popular action shall be heard through ordinary proceedings, in accordance with the general rule. 79 Setting the bond to stay enforcement of a judgment 55. Dr. Coronel states that “given that the main obligation established in the Judgment [of the Lago Agrio case] consists of paying an amount of money, the reasonable thing to do would have been for the bond to be established in the amount of the interest for the term that the Court had deemed that it would take to issue a decision on the cassation appeal.” 80 Dr. Coronel considers that such time could range between 14 months and 9.4 years, approximately, and then concludes that the possible amount of the bond in this case would therefore range between US$ 1.9 billion and US$ 14.6 billion. 81 56. Dr. Coronel does not offer any legal foundation to support his statement; on the contrary, he correctly points out that the law provides no parameters to set the amount of the bond and that the subject has been barely addressed by commentators. 82 Thus, the only support he resorts to is an excerpt from an article he himself wrote more than 20 years ago and which does not reflect the current state of the issue in Ecuadorian legal practice. 83 57. An analysis of the decisions of the Ecuadorian courts that rule on this matter reveals two recurring patterns of behavior. First, the courts currently apply various calculation methodologies on the basis of the subject matter and the prejudice that delay might cause to the non-moving party. Second, and even more important, the value of the bond set by the courts in recent decisions tends to be a small fraction of the amount in dispute (even equivalent to one percent or less of the value of the judgment on cassation appeal). 84 The thesis proposed by Dr. Coronel thus not only lacks legal support, but also is contrary to legal practice in Ecuador.

Id. Dr. Coronel omitted the boldface text in his citation. 79

RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶¶ 22-26.

Report of César Coronel Jones (June 3, 2013) ¶ 112.

Id. ¶ 113.

Id. ¶ 111.

The article written and citied by the expert Coronel and published in 1994, could not be based on the practical application of the rule, since the Law of Cassation was enacted only one year earlier (May 18, 1993), which is the reason why the author only offers an abstract analysis of the issue, without any support from legal practice.

See, e.g., RLA-450, PROPHAR S.A. v. Merck Sharp and Dohme (Interamerican) Corp., First Civil, Mercantile, Tenant, and Miscellaneous Subjects Division of the Provincial Court of Pichincha, Case No. 421 of 2008 (in a judgment for $150 million, the bond set by the Court in a ruling dated October 24, 2011, was for $23,500); RLA- 451, Miguel García Costa v. PacifiCard S.A., Second Civil, Mercantile, Tenant, and Miscellaneous Subjects Division of the Provincial Court of Pichincha, Case No. 825 of 2010 (in a ruling dated October 17, 2012,

58. The reality is that, to learn about the amount of the bond, one must first timely request a stay of enforcement of the judgment on appeal and move the court to set the amount of the requisite bond. Chevron chose not to. Even then, once the amount of the bond is set, the amount of the bond ordered by the judge can be challenged before the same judge by way of reconsideration and amendment of the decision. 85 Cancellation of judicial inspections 59. Dr. Wright contends that “the parties originally agreed to carry out 123 judicial inspections by means of a contract that was approved by the court.” He further asserts that, upon receiving plaintiffs’ motion to cancel inspections they had previously requested, and which request the court had granted, “the judge illegally revoked the decision which had ordered them.” 86 The thesis proposed by Dr. Wright suffers from multiple substantive errors. 60. First, the expert has confused (i) the procedural term for each party to request judicial inspections and (ii) the purported agreement of the parties to which he refers. The judicial inspections in the case were requested by each party within the evidentiary period, 87 and could not be the result of an agreement between the litigant parties. The document called “Terms of Reference” was executed approximately one year after the closure of the evidentiary period. As evinced by its own terms, the object and purpose of such document is “to agree upon certain basic parameters to serve as a framework for the judicial inspections, allowing them to be performed in an organized manner and to use scientific procedures to obtain reliable and credible expert reports about the facts being investigated in the inspections.” 88 for a judgment of $100,000, the Division set a bond of $1,000, which represents 1%). See also RLA-633, Correa v. Banco de Pichincha (in a judgment for US$ 5 million in the lower court, and US$ 300,000 at the appellate level, the Court set a bond for US$ 4,000); R-1298, Chart showing 70 cases in which a bond was posted by the First and Second Chamber of the Provincial Court of Pichincha. This chart shows that in the case with the largest amount in dispute is US$ 660,000.00, corresponding to case number 080-08, the court set a bond in the amount of US$ 3,000.00 which represents 0.45% of the total amount in dispute. Among these 70 cases, 12 show a bond equivalent to 1% of the total amount in dispute, or less; 14 show a bond equivalent to or lower than 5%; and only 2 show a bond equivalent to 10% or more of the total amount in dispute. In case No. 850-10, involving President Correa, a bond of US$ 1,000.00 was posted, which represents only 1% of the total amount. 85

RLA-198, Ecuadorian Code of Civil Procedure, art. 289 (“Interlocutory and procedural orders can be clarified, amplified, amended or revoked by the judge who issued them if any of the parties so moves within the time limit established in Article 281”). 86

Report of Jorge Wright-Ycaza (June 3, 2013) at 3.

C-494B, Plaintiffs’ Motion for Evidence (Oct. 29, 2003), requesting the execution of judicial inspections. The evidentiary period on oral summary proceedings is a brief, six-day period during which each party must identify all the evidence that it intends to produce and have the court order during the remainder of the proceedings. Pursuant to Article 836 and in observance of Articles 117 and 119 of the 2005 CPC, the judge must open the evidentiary period for a term of 6 days at the conciliation hearing. RLA-198, Ecuadorian Code of Civil Procedure, art. 836 (“[I]f facts have been alleged that must be proven the judge, in the same conciliation hearing, shall open the cause to evidence for a term of six days.”). Only the evidence requested by the parties during the evidentiary period can be considered as duly requested evidence. According to Article 117 of the 2005 CPC: “Only properly produced evidence, i.e., evidence requested, presented and examined according to legal requirements, is admissible in court.” In turn, Article 119 of the same Code determines that “The judge, within the respective term, shall order that all evidence submitted or requested within the same term, be examined prior notice to the opposing party.”

C-177, Terms of Reference at 1.

61. The document itself refers, as background, to the inspections previously requested by the parties. 89 Thus it does not concern an agreement to request judicial inspections, as incorrectly stated by Claimants’ expert, but rather a guide document for the orderly and efficient execution of the judicial inspections previously requested by each party and ordered by the Court. 90 Dr. Wright’s contention that these inspections were the product of a contract (the Terms of Reference) is baseless. 62. Second, Dr. Wright confuses the nature of the court orders concerning judicial inspections, and makes statements of law that have no basis in applicable rules of procedure in Ecuador. As I explained in my previous report, 91 both the court order that mandates the performance of court inspections requested as evidence by the plaintiffs, and that which orders the incorporation of the Terms of Reference into the record (and instructs the parties to implement it) are procedural orders (decretos), which are judicial decisions to move the case along. 92 Contrary to what Dr. Wright states, in our legal system there is no provision according to which procedural orders (decretos) become “res judicata.” Only judgments and rulings (autos) become final and “res judicata.” 93 63. Thus there is no legal basis to support Chevron’s expert’s contention that “when a judge orders evidence, or any other proceeding, if at least one of the litigants does not request the revocation of the decision within three business days as of the date of notice, the decision becomes ejecutoriada (res judicata), and neither the judge nor the parties are excused from complying with it, nor can it be revoked.” 94 Various legal precepts are garbled in this statement. 95 89

The document expressly acknowledged that “the parties have requested judicial inspections at approximately 122 wells and production installations in the former concession granted by the Ecuadorian Government to what was called the PETROECUADOR-TEXACO Consortium. In each case, the purpose of the inspections has been specified by the petitioners in their respective motions for evidence.” C-177, Terms of Reference at 1. 90

As I explained in my First Declaration, the Terms of Reference were not, and could not be binding on the Court. It is not possible for the litigant parties to modify the legal framework governing the taking of evidence in civil proceedings; those rules are of a public nature and thus mandatory. See RLA-613, Banco de Crédito v. Mario Guevara, Supreme Court, First Civil and Mercantile Chamber, Legal Gazette Volume XCVIII, Series XVI, No. 13, at 3477, Quito (Nov. 17, 1998). A contract of the nature described by Dr. Wright would be absolutely null and void.

RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶ 32. See also RLA-198, Ecuadorian Code of Civil Procedure, arts. 271, 296, 298. 92

RLA-198, Ecuadorian Code of Civil Procedure, art. 271 (“Decree is the ruling that the judge issues to manage the case, or which orders any procedure.”). 93

Id. arts. 296, 298.

Report of Jorge Wright-Ycaza (June 3, 2013) at 3.

Under the thesis defended by Dr. Wright, it would not be possible, for example, for Chevron to have been able to request that an expert translator not be appointed (when such an appointment had been previously requested and ordered), but the document that Chevron sought to introduce in evidence was already translated. See RE-9, Andrade Expert Rpt. (Feb. 18, 2013), Annex 11, Lago Agrio Record at 9056 (Motion dated August 31, 2004, through which Chevron requested that the appointment of the translator for the testimony of Dr. Green and that the practice of the corresponding formality not be carried out).

64. The production of evidence is a procedural right that can be waived by the party who carries the burden of proving his or her claims. As I explained in my First Declaration, it is a litigant party’s prerogative to waive the right to obtain or compel the production of evidence previously requested during the evidentiary period. 96 This is possible as long as such waiver is made before the evidence is actually produced. 97 The waiver can be exercised only by the party that has requested the evidence, under the terms of Article 66 of the Constitution and Article 11 of the Civil Code. 98 There is no provision whatsoever in Ecuadorian law that prohibits the party who requested the evidence from renouncing his prior request. 99 65. In this case, the plaintiffs were free to dispose of their requested for evidence, since it is only they who bear the burden of proving the facts alleged in the complaint, or the consequences of its failure to do so.100 If Chevron had considered the production of this evidence (judicial inspections) necessary to support its own case, it should have requested that same evidence during the evidentiary period. 101 Because it did not, Chevron had no right to demand the performance of said inspections or to oppose the waiver of the plaintiffs to this

RE-9, Andrade Expert Rpt. (Feb. 18, 2013) ¶ 34. The principles of unity and joint ownership of the evidence prevent the waiver of evidence only when the evidence has already been produced but not when there has been only a request [for the production of such evidence]. See R-1296, Hernando Devis Echandía, General Theory of Judicial Evidence, Volume I, Third Ed., Alberti 835, Buenos Aires, 1974 at 118. C-1975, National Court Decision at 84 (“the evidence that may never be waived is the one already produced, recorded or performed in the proceedings. It is only when evidence has been requested, ordered and actually obtained and it has probative value that it becomes part of the body of evidence, i.e. a piece of evidence”).

The alternative would allow for the withdrawal of evidence by the party who requested the production of such evidence where the evidence happens to be adverse to it. Once the evidence is submitted, it becomes part of the record.

RLA-164, 2008 Ecuadorean Constitution, art. 66(29); see also RLA-163, Civil Code of Ecuador, art. 11.

On this matter, Devis Echandía, teaches when referring to the Fundamental Principles of procedure: The parties can, in general, waive procedural rights, and such a waiver is deemed to exist, in many cases, by the mere fact of not using them in due time, even if this is due to forgetfulness or negligence and in general they will suffer adverse consequences (if they do not comply with the acts that the various procedural burdens have imposed upon them)

R-1297, Hernando Devis Echandía, General Notions of Civil Procedure at 54. In addition to confirming the principle that procedural rights are disposable, the abovementioned quotation refers to the concept of implied waiver of procedural rights that occurs when they were not promptly exercised. Such is the case, for example, of a party that fails to request the production of certain evidence during the trial term. 100

RLA-198, Ecuadorian Code of Civil Procedure, art. 114 (“Each party is required to prove the facts alleged, except those that are presumed under the law. Any of the litigants may submit evidence against the facts alleged by the opposing party.”). 101

The evidentiary period in summary oral proceedings (such as the Lago Agrio Litigation) is six days long, and follows the conciliation hearing. RLA-198, Ecuadorian Code of Civil Procedure, art. 836 (“If there are no bases for liquidation, or when involves the other disputes subject to the proceeding established in this Section, if no agreement between the parties has been reached, and if the parties claimed facts that must be justified, the judge, in the same conciliation hearing, shall open the cause to evidence for a term of six days.”).

evidence. Naturally, the valid waiver of a procedural right by one of the parties in the case does not lead to the nullification of the proceedings. 102 66. Finally, Dr. Wright’s contention that the judicial inspection constitutes mandatory evidence is baseless. 103 As I have explained before, our procedural Law does not recognize the principle of weighted evidence and, furthermore, contains the principle of evaluating the evidence according to the rules of sound judgment. Each party is completely free to prove its case as it deems appropriate. 104 67. To justify his thesis, Dr. Wright cites to Article 840 of the Code of Civil 105 Procedure. However, the cited provision in no way dictates that judicial inspections are mandatory in this kind of proceeding. Article 840 refers instead to the principle of concentration, according to which the judge must take the greatest possible number of procedural steps in a single evidentiary proceeding. In such context, this provision requires that during the performance of an inspection, the judge also receive the witness statements that may be relevant to such inspection. This provision does not impose mandatory judicial inspections or any other form of evidence. Assessment of the evidence of procedural fraud presented by Chevron 68. In his sixth report, Dr. Coronel asserts that when a party presents allegations of procedural fraud, (i) any judge is required to consider them and, (ii) should they be proven true, declare the proceedings null and void, including ex officio, in order to protect the constitutional rights of the parties. 106 Based on these assertions, Dr. Coronel then argues that the National Court erred in declining to examine and rule on the new evidence (evidence not presented to the trial court), as well as in confirming a similar decision by the Provincial Court regarding the same evidence. 107 Dr. Coronel maintains that National Court precedents make it clear that: (i) the Court is empowered as well as obliged to ensure that no constitutional provisions have been violated and that the required substantial formalities common to all proceedings have been observed; and (ii) if the Court finds grounds for nullifying the proceedings, it must do so ex

102

Procedural nullification is subject to the principles of tipicidad (facts fitting the statutory definition of the violation), significance, and validation. The waiver of the right to produce evidence by the party that requested it and who bears the burden of is not specified as grounds for nullification of a proceeding. See RLA-198, Ecuadorian Code of Civil Procedure, arts. 346, 1014. 103

Report of Jorge Wright-Ycaza (June 3, 2013) at 4.

104

Article 114 of the 2005 CPC provides that “Each party is required to prove the facts alleged, except those that are presumed under the law. Any of the litigants may submit evidence against the facts alleged by the opposing party.” See RLA-198, Ecuadorian Code of Civil Procedure, art. 114. See also id. 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. ”). 105

Report of Jorge Wright-Ycaza (June 3, 2013) at 4.

106

Report of César Coronel Jones (May 7, 2014) ¶¶ 12-14.

107

Id. ¶ 18.

officio. 108 Dr. Coronel’s argument is fallacious insofar as it (i) omits reference to rules that apply to the matter under analysis, and (ii) relies on other inapposite rules of procedure. 69. First, Dr. Coronel fails to make reference to rules that govern the competence of Ecuadorian judges regarding evidence at the appellate and cassation appeal levels, respectively. 109 70. The applicable rules of civil procedure at the appellate level in respect of oral summary proceedings provide that the provincial courts must rule on the basis of the existing record (por los méritos del proceso). 110 Accordingly, they can only consider and weigh evidence duly introduced in the trial record, and lack the competence to examine evidence extrinsic to the proceedings. As I explained in my First Declaration, there is no evidentiary stage during the appellate review of a judgment rendered in oral summary proceedings. Consequently, the courts are barred from accepting or ordering the production of new evidence. 111 The new documents submitted by Chevron in its appeal cannot be accepted as duly produced evidence. 112 71. The National Court, in its capacity as Cassation Court, is subject to the same restriction. In fact, the rules that govern cassation appeals expressly rule out any possibility of presenting new evidence at this level. 113 72. In view of the foregoing provisions, it is clear that Dr. Coronel’s argument has no basis under Ecuadorian Law. It is incorrect to assert that both the Provincial Court and the National Court had not only the power but also an obligation to examine the documentary evidence submitted by Chevron in support of its fraud allegations. 114 As expressly provided in 108

Id. ¶¶ 22-25.

109

The expert Velázquez makes a similar error in asserting that “[w]hen a judge is aware of fraudulent acts during the conduct of a proceeding, regardless of its status, he has the legal obligation to consider the evidence.” See Velázquez Expert Rpt. (June 3, 2013) at 4. 110

RLA-198, Ecuadorian Code of Civil Procedure, art. 838 (“Superior court shall rule on the merits of the case and, judgment pronounced shall admit the motions allowed under the applicable law.”). 111

RE-9, Andrade Expert Rpt. (Feb. 18, 2013) at 4 & ¶ 77.

112

RLA-164, 2008 Ecuadorean Constitution, art. 76.4. See also RLA-198, Ecuadorian Code of Civil Procedure, art. 117 (“Only properly produced evidence, i.e., evidence requested, presented and examined according to legal requirements, is admissible in court”); RLA-1296, Hernando Devis Echandía, General Theory of Judicial Evidence, Vol. I, Ed. Temis S.A., Bogotá, 2002 at 358-359 (“Evidence untimely submitted, even if it is documental, cannot be considered by a judge, otherwise the judge would be violating the principle that he must adjudge ‘justa allegata et probata’ according to the concept of Lessona, because what it is proven it is understood with the formalities and requirements established by law.”). 113

RLA-558, Law on Cassation, art. 15 (“PROCESSING. – During the processing of the cassation recourse, [the parties] may not request nor order the practice of any evidence, and no incidental process shall be accepted whatsoever.”). The Supreme Court has relied on this provision when holding that new evidence is “not relevant, within the recourse that is subject to decision of this Chamber; since, in accordance with art. 13 of the Cassation Law, “During the processing of a cassation recourse, no evidence can be requested nor the practice of any evidence, and no incident whatsoever shall be accepted.” which is exactly what the defendant attempts.” RLA-559, Supreme Court, Cassation Case File No. 244, R.O. 169 (April 14, 1999). 114

The Appellate Court, both in its initial decision and in its clarification, considered the fraud allegations and explained that it found no evidence to support a declaration of procedural nullity. However, it upheld the rights of

the applicable rules of procedure in Ecuador, both courts lack the competence to consider and weigh such evidence and both would have incurred in a violation of due process had it done so. 115 73. Second, Dr. Coronel’s reference to Code of Civil Procedure provisions regarding the nullification of civil proceedings is inapposite. The grounds that enable a judge to declare proceedings null and void are limited by law and do not include the type of fraud allegations raised by Claimants in these proceedings. Civil proceedings in Ecuador may be nullified on the following grounds: (i)

When substantive formalities have been omitted from proceedings, 116 to the extent that (1) such omission may influence the Court’s decision, and (2) any of the parties has argued for nullity at the appropriate time. 117 The substantive formalities in judicial proceedings are the following: a. b. c. d. e.

Jurisdiction of the judge hearing the case; Competence of the judge or court in respect of the legal action in question; Legal capacity; Service of process on the defendant or defendant’s legal representative; Concession of an evidentiary period when facts have been alleged that must be proven and the law provides such a period; f. Notice of the statement of evidence and judgment to the parties; and g. Formation of a court with the number of judges provided by law. 118 (ii)

When the appropriate procedure for the matter in dispute has been violated and such breach has influenced or may influence the decision on the case. 119

the parties to file a formal complaint with the criminal prosecution authorities in Ecuador. C-991, Lago Agrio Appellate Decision at 10; R-299, Clarification Decision on Appeal by the Provincial Court of Sucumbíos at 3-4. 115

The Constitutional Court has made statements to such effect. See, e.g., RLA-560, Extraordinary Action for Protection 28, R.O. Suppl. 209 (March 21, 2014), art. 76. See also RLA-164, 2008 Ecuadorean Constitution, art. 76. (“In any proceedings in which rights and obligations of whatever kind are being determined, the right to due process will be warranted, including the following basic guarantees:. . . 4. Evidence obtained or used in violation of the law shall not have any validity and shall be devoid of probative effect.”). 116

RLA-198, Ecuadorian Code of Civil Procedure, art. 344 (“Notwithstanding the provisions of Article 1014, the process is void, in whole or in part, when it has missed any one of the substantive formalities provided for in this Code.”) (Emphasis added). See also Report of Coronel Jones (May 7, 2014) ¶ 14. 117

RLA-198, Ecuadorian Code of Civil Procedure, art. 352 (“In order to declare nullity for the omission of any other substantial formality, the following two circumstances must concur: 1. That the omission may exert influence in the decision of the case, and, 2. That nullity was alleged in the respective instance, by one of the parties.”). Declaring the proceedings null and void due to a failure to serve the complaint on the defendant or its legal representative requires that (i) the absence of such service of process has prevented the defendant from filing a defense or enforcing its rights; and (ii) the defendant has complained of such omission at the time of intervening in the proceedings. Id. art. 351. 118

Id. art. 346.

119

Id. art. 1014 (“The violation of the procedure corresponding to the nature of the matter or the cause being judged, nullifies the proceeding. The courts shall declare the nullity, ex officio or upon the parties’ request, provided that the violation had influenced or may have exerted influence in the decision of the case, observing, in

74. Not every omission or departure from procedure can result in nullification of the proceedings. The grounds for nullity are limited by law, and therefore judges may declare proceedings null and void only in the event that one of the circumstances specifically provided by law has come to pass (principle of specificity). 120 None of these grounds for nullity includes allegations of fraud regarding the drafting of an expert report during the proceedings, or allegations at the appellate stage regarding the purported ghostwriting of the judgment. The contrary contention is baseless. 121 75. The National Court in the Lago Agrio Litigation confirmed this upon review of Chevron’s allegations of nullity and explained that: Procedural nullities are limited and strictly and restrictively interpreted, and outside of the material formalities, common to all cases and instances, expressly determined in Art. 355 (346) of the Code of Civil Procedure, whose omission in any of them, when it influences or might influence the decision in the case, leads to nullity of the proceeding, there are no other ones that invalidate it, as has been held by the case law of the Supreme Court of Justice from the judgment published in Judicial Gazette Series X No. 15, pg. 4139. 122 76. The jurisprudence offered by Dr. Coronel similarly confirms that courts may declare procedural nullification only upon the existence of any of the grounds for nullity provided by law and previously described herein. 123 An analysis of each of the aforementioned

addition, the general provisions, particularly Arts. 355, 356 and 357.”); id. art. 344 (“Notwithstanding the provisions of Article 1014, the process is void, in whole or in part, when it has missed any one of the substantive formalities provided for in this Code.”) (Emphasis added). See also Report of César Coronel Jones (May 7, 2014) ¶ 14. 120

This principle is known as the “principle of specificity.” See Vera Vera v. Godoy Benitez, Supreme Court, First Civil and Commercial Chamber (Dec. 4, 2000) at 1 (“According to the principle of specificity that our legal framework enshrines regarding procedural nullity, the grounds for nullity are stated specifically in the law; thus, no procedural nullity exists if the law does not note this expressly. In an oral summary proceedings the following are grounds for procedural nullity: the omission of substantive formalities common to all proceedings and instances enumerated in article 355 of the Code of Civil Procedure and the violation of the respective process in light of the nature of the matter or the case that is being judged under article 1067 of the Code of Civil Procedure.”). See also Banco Filabanco v. Matute Rodriguez, Supreme Court, First Civil and Commercial Chamber, R.O. 418 (Sept. 24, 2001) at 1-3.

121

As I explain elsewhere in this report, an action of collusion is available under Ecuadorian Law as a means of seeking the invalidation of a proceeding by submitting evidence that shows, for example, that the judgment rendered in such proceeding was fraudulently procured through a collusive agreement between the judge and one of the parties thereto.

122

C-1975, National Court Decision at 52 (emphasis added). For its part, the Appellate Court also specifically ruled on the allegation of “nullity of the proceedings due to procedural fraud and violation of due process guarantees,” finding no basis for declaring the proceedings null and void and explaining that the defendant vigorously exercised its right of defense and that the proceedings were public and transparent. See C-991, Lago Agrio Appellate Decision at 10 (emphasis added).

123

Report of César Coronel Jones (May 7, 2014) ¶¶ 22-25.

cases shows that nullity is alleged and/or declared based on the grounds specifically set forth in Ecuadorian procedural law. 124 The State is not liable for the conduct of an expert witness 77. Under Ecuadorian Law, the State is liable for acts committed by public officials and employees while performing the duties of their office that may result in violations of thirdparty rights. 125 Expert witnesses appointed by the court are not considered court officers or public servants. 126 Court-appointed expert witnesses are private individuals tasked with providing information to the court on disputed issues that require knowledge of a certain science, art, or trade. 127 Consequently, any irregular or fraudulent act committed by a court-appointed 124

For example, in Aucacama v. Bastidas, the Supreme Court of Justice declared the proceedings null and void because “the fourth substantive formality listed in Article 346 of the Code of Civil Procedure was omitted in respect of the defendant, and such omission can and must lead to an ex-officio declaration of nullity pursuant to article 349 of the aforementioned code.” See Coronel Annex 324. In addition, in Tejada v. Pita et al., the Supreme Court declared the proceedings null and void ex officio for breach of the appropriate procedure for the matter or case being adjudicated (article 1014 of the Code of Civil Procedure), because the trial court judge failed to allow one of the parties the time required by law to answer the counterclaim. See id. at 325. 125

RLA-164, Constitution of Ecuador (2008), art. 11(9) (“The enjoyment of rights shall be governed by the following principles: 9. The State, their delegates, agents and any person acting in the exercise of public authority shall be obliged to compensate for any violation of an individual’s rights resulting from the lack of or deficiency in the provision of public services or for the acts or omissions of its officers and public employees in the performance of their duties.”). 126

RLA-303, Organic Law of the Judiciary, art. 38 (“CONSTITUTION OF THE JUDICIAL FUNCTION – The following comprise the Judicial Branch and are referred to, in general, as officers of the Judiciary: 1. Judges; associate judges and other officers of the Judicial Branch that provide their services at the National Court of Justice, provincial courts, tribunals and trial level courts; 2. Temporary judges, while they are in charge of the unit; 3. Members and other officers of the Judicial Branch that provide their services at the Judicial Council; 4. The State Prosecutor General, the Public Defender General and other officers of the Judicial Branch who provide their services at the Office of the State Prosecutor General and the Public Defender’s Office; 5. Public notaries and other officers of the Judicial Branch who provide their services in the auxiliary bodies of the Judicial Branch; and, 6. Those who are appointed provisional judicial officers to provide their services at the bodies of the Judicial Branch.”). See also RLA-635, Organic Law of the Public Service, art. 4 (“Public servants.- All persons that work, in any form or under any title, provide services or exercise a position, function or authority within the public sector shall be public servants.”); id. art. 3 (“Scope.-The provisions of this law are binding, in matters of human resources and compensation, in all the public administration, that covers: 1. The bodies and dependencies of the Executive, Legislative, Judicial, and Indigenous Justice, Electoral, Transparency and Social Control, Office of the State Attorney General and the Constitutional Court; 2. The entities that integrate the decentralized autonomous regime and special regimes; 3. The bodies and entities created by the Constitution or the law for the exercise of the state powers, for the provision of public services or to develop economic activities assumed by the state; and, 4. The legal persons created by normative act of the autonomous decentralized bodes and special regimes to provide public services.”); RLA-164, Constitution of Ecuador (2008), art. 225 (“The public sector is comprised of the following: 1. The bodies and agencies of the Executive, Legislative, Judicial, Electoral and Transparency and Social Control Branches of Government. 2. The institutions that comprise the decentralized autonomous system of government. 3. The bodies and institutions created by the Constitution or by law to exercise the powers of the State, to provide public services or to carry out economic activities entrusted to the State. 4. The legal entities created by regulatory acts issued by the decentralized autonomous governments for the provision of public services.”). 127

See RLA-198, Ecuadorian Code of Civil Procedure, art. 250 (“Expert or experts shall be appointed to the issues in dispute that demand some knowledge of science, art or craft.”). The requirement for accreditation of experts before the Judicial Council (which enables them to be appointed in the litigations) does not change the fact that they are not judicial servants or court employees.

expert witness does not give rise to liability of the State, and only involves the personal liability, whether criminal, civil, or disciplinary, of the expert witness. 128 Chevron’s allegation of collusion through Ecuador’s purported “promotion” of the Judgment 78. Counsel to the Republic asked me to analyze paragraph 225 of Chevron’s Trak 2 Reply Memorial, and to examine Chevron’s allegations against applicable Ecuadorian Law. Chevron alleges therein that Ecuador engages in collusion by purportedly “promoting” enforcement of the Judgment by way of a number of procedural and out-of-court acts addressed below. However, none of these acts on which Chevron could support a finding of collusion. 129 •

128

“Certificate of enforceability.” Under Ecuadorian Law, a judgment becomes enforceable as a matter of law, inter alia, upon its affirmance on appeal. 130 No certificate is required for a judgment to become enforceable. The August 3, 2012 Order was not a “certificate of enforceability”; it instead was as a “writ of execution” (mandamiento de ejecución), 131 issued in accordance with CPC Article 438 132 to instruct the defendant to See, e.g., RLA-367, Criminal Code of 1971, art. 354.

129

Ecuadorian Law defines “collusion” as “fraudulent acts between two or more people intended to cause harm to third parties.” See RLA-493, Collusion Prosecution Act, First Whereas Clause. “Fraud,” according to the Dictionary of the Real Academia de la Lengua, is: 1. Action contrary to truth and righteousness, which hurts the person against whom it is committed. 2. Act aimed at circumventing a statute against the State or third parties. 3. Jur. Crime committed by the person in charge of monitoring the execution of public contracts, or some private ones, conspiring with the representation of conflicting interests. It follows that conduct that is prescribed and also mandated by law can never be considered a fraudulent act. Since this is the usual procedure for enforcement of any judgment in Ecuador, it cannot be deemed as an act conceived to harm third parties. 130

RLA-198, Ecuadorian Code of Civil Procedure, art. 296(5) (“A judgment becomes enforceable: 5. Upon adjudication of a matter by the last instance.”). In accordance with Article 2, first paragraph of the Cassation Law “The cassation recourse applies against judgments and orders that end judicial proceedings, [which have been] issued by superior courts [currently provincial courts], by tax district tribunals and contentious administrative district tribunals” (C-316, Law on Cassation, art. 2); and id. art. 11 provides that “the appellant filing a cassation recourse may request that the enforcement of the appealed judgment or order be stayed, by posting a bond in an amount sufficient.” Chevron chose not to avail itself of the measures available to it in Ecuador to avoid the enforcement of the judgment pending the cassation appeal. Under Ecuadorian procedural law, the conduct of the appellant who having the right chooses not to exercise it in a timely manner, is considered as a waiver of such right under the principle of estoppel. See R-1292, E. COUTURE. Fundamentals of Civil Procedure, 3d ed., Depalma, Buenos Aires, 1997 at 194-200 (“Preclusion is generally defined as the loss, extinguishment, or consummation of a procedural power. It generally results from three different situations: a) when order or opportunity have not been abided by, as prescribed by law to perform an act; b) when an activity has been performed that is incompatible with the exercise of another; c) when this power has been exercised once, validly (properly said consummation).”).

131

See R-455, “Writ of Execution,” Lago Agrio Record at 220,662 (Aug. 3, 2012).

132

RLA-198, Ecuadorian Code of Civil Procedure, art. 438 (“Once the judgment has become enforceable, the judge, when dealing with a complaint for payment of principal and interest, shall determine the amount of interest due and shall order the debtor to identify, within twenty-four hours, assets equivalent to the principal, interest and costs if he has been sentenced to pay costs. If deemed necessary, the judge may appoint an expert to conduct the

either pay or relinquish assets equivalent to the obligation established in the final decision. The judge has no discretionary power to stay this phase of enforcement of a judgment, and can only do so in exceptional circumstances such as the placement of a bond in accordance with the Cassation Law. 133 Failure by the judge to issue a “writ of execution” upon request of a party can result in any of the following: (i) recusal of the judge; 134 (ii) the judge may be subject to disciplinary sanctions; 135 and/or (iii) the State can be held liable for unjustified delay in the administration of justice, without prejudice to the State’s right to file a reimbursement claim against the judge. 136 •

“Power of Attorney and Apostille.” A power of attorney is an out-of-court legal act between private parties, 137 where neither the public administration nor the public interest is involved. Notarization of the act by a Notary Public is a formality mandated by law, which purpose is the certify the fact of the performance of an act and the date when it was executed. 138 Likewise, the apostille provided by the Ministry of Foreign Affairs is a procedure common to all signatories of the Apostille Convention. 139 It is intended to dispense with

quantification of interest. This expert may not be recused and his appointment shall not be notified to the parties, nor must he take office, and it is enough that, in the report, he expresses the matters issued under oath.”). 133

C-316, Cassation Law, art. 11(“BOND - Except as provided in the foregoing Article, the appellant filing an extraordinary appeal may request that the enforcement of the appealed judgment or order be stayed by executing a bond in an amount sufficient to cover the estimated damage that the opposing party may suffer as a result of the delayed enforcement of such order or judgment. The bond amount shall be determined by the competent judge or court within three days at the time a decision is rendered whereby the extraordinary appeal to a court of cassation is admitted, or an appeal thereto upon dismissal is granted. If the bond is posted within three days following notice of such decision, the enforcement of the relevant judgment or order shall be stayed. Otherwise, they shall be enforced, provided, however, that this shall not preclude the further prosecution of the extraordinary appeal. The Supreme Court of Justice shall set forth the criteria to be followed by the courts in determining the bond amount, taking into account the matters at issue and the damage that a delay could cause.”). 134

C-260, Code of Civil Procedure, art. 856 (“ A judge of an upper or lower court may be recused by any of the parties, and must refrain from hearing a case, if:: …10. He does not hear the case within three times the time period provided for by law.”); id. 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 set of one hundred pages.”).

135

RLA-303, Organic Law of the Judiciary, art. 108 (“SERIOUS INFRACTIONS.- Officers of the Judiciary may be sanctioned with suspension for the following infractions: 1. Outraging verbally or in writing, provided that the terms used constitute serious injury offense, according to the Criminal Code, or for aggression to their superiors or inferiors, colleagues or users of the service.”). 136

RLA-164, Constitution of Ecuador (2008), art. 11(9).

137

RLA-163, Civil Code of Ecuador, art. 2020 (“Agency is a contract in which a person trusts the management of one or more businesses to another, who takes charge of them on the expense and risk of the first.”). 138

RLA-198, Ecuadorian Code of Civil Procedure, art. 166 (“The public instrument certifies, even against third parties, as to the fact of having been granted and its date; but not as to the truth of the declarations that interested parties have made therein. In this part, it does not certify except against declarants. The obligations and disclaimers contained in it consist of evidence regarding the grantors and the person who is recipients of the transfer of said obligations and disclaimers, under a universal or singular title. The promise to execute a contract shall be granted by public deed, if, for its validity, that formality is necessary, pursuant to the provisions of the Civil Code.”).

139

See RLA-856, The Hague Apostille Convention, art. 1.

the legalization of foreign public documents. The apostille merely certifies (i) the signature; (ii) the capacity in which the grantor has acted in executing the underlying document; and (iii) when appropriate, the identity of the seal affixed to such document.140 Failure to issue an apostille by public official charged with the duty to do so may expose him to administrative, civil and/or criminal liability. 141

140

•

“Seizure Order.” Chevron confuses the “writ of execution” with an “order of seizure.” The Court was required by law to issue the “order of seizure” pursuant to CPC Art. 439, 142 which provides that, in the event the Defendant failed to comply with the “writ of execution,” the creditor can identify assets belonging to the debtor for purposes of seizure, valuation and auction. 143 Contrary to Chevron’s contentions, the Lago Agrio Record shows that Chevron was in fact served with notice of the order of seizure. 144

•

“Letters Rogatory.” Competent organs of all States signatory to the Inter-American Convention on Letters Rogatory are entitled to issue letters rogatory for the performance of procedural acts. 145 These letters do not amount to an endorsement by the government of the enforcement of the judgment. Upon request of a party, the judge must order and issue letters rogatory in accordance with applicable domestic and international law. 146

•

“Ombudsman amicus curiae.” Under the Constitution and its Organic Law, the Ombudsman’s Office is completely independent from the executive and judicial branches of the State. Among its duties, the Ombudsman must promote due process. The amicus

Id. art. 2.

141

RLA-164, Constitution of Ecuador (2008), art. 233 (“Article 233.- No servant or public servant shall be exempt from liability for acts performed in the exercise of his functions, or omissions, and shall be held to administrative, civil and criminal liability for the management and administration of funds, property or public funds.”). 142

RLA-198, Ecuadorian Code of Civil Procedure, art. 439 (“If the debtor fails to identify the assets for confiscation and said failure were malicious, if the assets are located abroad or if they are sufficient to cover the debt, at the request of the creditor, the judge shall proceed to seize the assets identified by the creditor, with preference over money, assets subject to pledge or mortgage, or those subject to sequestration or retention. If the debtor fails to identify real estate assets, the creditors identification of real estate assets shall not be accepted unless accompanied by the corresponding certificate of the registrar of the property and the property valuation.”). 143

See R-1293, Lago Agrio Record at 220,699 – 220,758, Plaintiffs’ Request for Enforcement and Seizure of Assets (Sept. 26, 2012).

144

See R-1294, Lago Agrio Record at 221,491- 221,494, Seizure Order (Oct. 15, 2012).

145

RLA-614, Inter-American Convention on Letters Rogatory, art. 2 (“This Convention shall apply to letters rogatory, issued in conjunction with proceedings in civil and commercial matters held before the appropriate judicial or other adjudicatory authority of one of the States Parties to this Convention, that have as their purpose: a. The performance of procedural acts of a merely formal nature, such as service of process, summonses or subpoenas abroad; b. The taking of evidence and the obtaining of information abroad, unless a reservation is made in this respect.”). 146

Id. arts 4, 10.

curiae brief falls within these functions and is a common practice of that office’s statutory competences. 147 Cassation appeals are extraordinary, inherently technical and formalistic 79. Counsel for the Republic has asked me to explain the main characteristics of a cassation appeal. 80. A cassation appeal is an extraordinary, technical, and highly formalistic 148 recourse. This has been confirmed repeatedly by Ecuadorian jurisprudence. 149 Due to its technical and formalistic nature, the cassation appeal must comply strictly with the formalities mandated by law for its admissibility, 150 and must be predicated only on the grounds set forth in

147

RLA-164, Constitution of Ecuador (2008), art. 215. (“The Office of the Human Rights Ombudsman shall have as its duties the protection and guardianship of the rights of the inhabitants of Ecuador and the defense of the rights of Ecuadorian nationals living abroad. It shall have the following attributions, in addition to those provided for by law: 1. To support, by virtue of its office or at the request of a party, the actions of protection, habeas corpus, access to public information, habeas data, noncompliance, citizen action and complaints for poor quality or improper provision of public or private services. 2. To issue measures of mandatory and immediate compliance for the protection of rights and to request trial and punishment from the competent authority for their violations. 3. To investigate and rule, in the framework of its attributions, on the deeds or omissions of natural persons or legal entities that provide public services. 4. To exercise and promote surveillance of due process of law and to immediately prevent and stop all forms of cruel, inhumane and degrading treatment.”). 148

See RLA-615, IMBASEGURIDAD CIA. LTDA v. Empresa Eléctrica Regional Norte EMELNORTE S.A., Supreme Court Cassation Decision, Division for Civil and Commercial Matters, Judicial Gazette 11, Series 17, Feb. 12, 2003 (“IMBASEGURIDAD CIA. LTDA v. EMELNORTE S.A.”) at 2 (“We must remember the fundamental principles of cassation, firstly, those that are related to this case: a) Cassation is an extraordinary recourse, as it attacks the res judicata effect of a judgment issued by an appellate court. It is essentially a formalistic recourse that, in order to succeed, requires strict compliance with the applicable legal provisions. … It is not a recourse against the proceedings but against an enforceable judgment and its effects.”)

149

See RLA-616, Case File 380, O.R. Suppl. 17, Feb. 21, 2008, No. 380-2006 (“The Supreme Court of Justice has repeatedly held that the cassation appeal is extraordinary, highly technical and formalistic, and that for its review, the law requires the appellant to satisfy certain mandatory formal requirements, which have not been fulfilled in the case under review.”). See also RLA-617, José Angel Rafael Hernández v. Director General del IESS, Supreme Court, Cassation Decision, Administrative Division, O.R. 181 (Oct. 27, 1997) at 2; RLA-618, David Eduardo Arteaga Ponce v. Empresa Eléctrica Regional Manabí S.A., Supreme Court, Cassation Appeal Case File, Division for Labor and Social Matters, Judicial Gazette 5 (Apr. 1, 1996) at 1; RLA-619, ANDINATEL S.A. v. José Antonio Jara Zamora, Supreme Court, Cassation Decision, Division for Labor and Social Matters, Judicial Gazette 4 (Sept. 12, 2000) at 1; RLA-620, Case File 67, O.R. 459 (Nov. 11, 2004); RLA-621, Case File 106, O.R. 404 (Nov. 24, 2006); RLA-622, Judicial Gazette Year CI, Series XVII No. 4 at 1075 (Sept. 12, 2000); RLA-623, Judicial Gazette. Year XCV, Series XVI No. 4, p. 1044 (Sept. 5, 1995); RLA-624, Judicial Gazette. Year CXIII, Series XVIII, No. 11 at. 4134 (Apr. 5, 2012); RLA-625, Case File 159, O.R. Suppl. 117 (Feb. 11, 2011); RLA-626, Case File 371, O.R. Suppl. 52 (Oct. 22, 2009) No. 371-2007. 150

RLA-558, Law on Cassation, art. 6 (“FORMAL REQUIREMENTS.- The petition for cassation shall necessarily include the following: 1. Indication of the appealed judgment or decision, identifying the proceedings in which it was rendered and the parties thereto; 2. The legal provisions allegedly infringed or the procedural formalities omitted; 3. Determination of the grounds underlying the appeal; and 4. The rationale supporting the appeal.”). See also RLA-627, Amable Agustín Loor Viteri v. Rafaella Marta Bernitt Zevallos, Supreme Court Cassation Decision, Third Division for Civil and Commercial Matters, Judicial Gazette 12, Series 17 (May 17, 2003) (“Loor Viteri v. Bernitt Zevallos”) at 6. Citing legal doctrine, the Court stated:

Article 3 of the Cassation Law. 151 If such requirements are not complied with, the National Court must dismiss the appeal. 152 81. Ecuadorian jurisprudence has held repeatedly that substantiation of a cassation appeal is one of the most important requirements for admissibility of the appeal, which demands that the appellant clearly establish the alleged legal errors in the judgment. 153 In this regard, the Supreme Court (now National Court) explained that: The reasoning and support is the most demanding procedural burden imposed on the appellant as an essential requirement to formally file the recourse, due to the its breadth, complexity and transcendence. It demands development and reasoning pursuant to a clear and complete legal logic . . . . it must be carried out in a clear and precise fashion, without lapsing into vague accusations, linking the content of the allegedly infringed provisions with the facts and circumstances of the violation. In Since the petition for cassation is such an important factor in the cassation decision, and furthermore considering that a cassation appeal does not constitute a third instance in the proceedings, the petition must be structured in accordance with formal requirements and all underlying technical principles. Only thus can it be admitted and lead the Court to examine its substance. In truth, in preparing the petition for cassation is where the vast majority of attorneys visibly and prominently fail by confusing this highly special recourse with a simple appeal and ignoring its underlying technical principles. Moreover, appellant attorneys, obsessed by, and under the influence of, their client and their case, frequently see infringements or violations of laws where none exists, believing that their own reasons and arguments are the only ones that can and must inform the Supreme Court’s decision. Following these mistaken and erroneous paths, they file their challenge contradicting the intent of the law governing a recourse which is by nature thoroughly formalistic. 151

C-316, Law on Cassation, art. 3 (“GROUNDS.- A petition for cassation can only be based on the following grounds: 1. Improper application, lack of application, or erroneous interpretation of legal rules, including binding precedents, in the judgment or order, that were determining factors in the holding; 2. Improper application, lack of application, or erroneous interpretation of procedural rules, when they have irreparably invalidated the process or caused lack of a proper defense, provided that they influenced the decision in the case and the respective invalidity was been legally confirmed; 3. Improper application, lack of application, or erroneous interpretation of the legal provisions applicable to the examination of evidence, provided that they led to erroneous application or nonapplication of rules of law in the judgment or order; 4. Resolution, in the judgment or order, of that which was not a subject of the litigation or failure to resolve in it all the issues in the lawsuit, and 5. When the judgment or order does not meet the requirements set forth by Law, or contradictory or incompatible decisions are adopted in the holding.”). See also C-1975, National Court Decision at 49 (citing doctrine and explaining that “the parties cannot make use of this [cassation appeal] merely because of their interests, but rather must have a legally determined cause of action, that is to say, grounds for the cassation appeal”); Report of César Coronel Jones (May 7, 2014) ¶ 11. 152

RLA-558, Law on Cassation, art. 7. See also RLA-617, José Angel Rafael Hernández v. Director General del IESS, Supreme Court, Cassation Case File, Administrative Division, O.R. 181 (Oct. 27, 1997) at 2 (“The cassation appeal is technical, extraordinary and eminently formalistic; accordingly, the legal requirements as to both form and substance must be rigorously fulfilled. Failure to do so mars it and the court is legally mandated to deny it.”). (Emphasis added). 153

R-1295, Santiago Andrade, Civil Cassation in Ecuador, Andrade & Asociados Fondo Ed., Quito, 2005 at

152.

other words, the infringement must be shown not simply by indicating that the judgment violated a certain legal provision but by demonstrating how, when, and in what sense the infringement occurred. 154 82. The competence to hear and adjudicate cassation appeals is vested in the National Court, 155 whose mission in that respect is framed by the following objectives of Ecuador’s legal order: (i) to control the legality of judicial decisions rendered by judges and lower tribunals; and (ii) to achieve uniformity in the application of the law by judges and lower tribunals, thereby guaranteeing legal security and the right to equality under the law. 156 It is because of the cassation appeal’s nature as a mechanism to control the legality of judgments and adherence to substantive law, that matters of fact relevant to the underlying controversy are excluded from its scope of review. 157 83. The former Supreme Court and the National Court have stated repeatedly that “assessment or weighing of the evidence is the exclusive prerrogative of judges and lower tribunals.” 158 Accordingly, it is not possible for a cassation tribunal to review the facts as established by the courts below. In this respect, Article 16 of the Law of Cassation mandates that, if the Court grants cassation, it shall issue a new judgment “on the basis of the facts established in the [underlying] judgment or order.” 159

154

RLA-615, IMBASEGURIDAD CIA. LTDA v. EMELNORTE S.A. at 1; see id. at 1, 3. See also RLA-624, Judicial Gazette, Year CXIII, Series XVIII, No. 11, p. 4134 (Apr. 5, 2012) at 7 (“The cassation appeal is extremely formalistic and rigorous. To be admitted, it must indicate not only the legal provision infringed in the judgment but how such infringement was decisive in determining the use of law or jurisprudence in the judgment. . . . The appeal filed by the plaintiff company is dismissed in view of its total failure to reflect the strict and formalistic nature required of an Extraordinary Cassation Appeal.”); RLA-625, Case File 159, O.R. Suppl. 117 (Feb. 11, 2011). 155

RLA-164, Constitution of Ecuador (2008), art. 184 (“The National Court of Justice’s duties, in addition to those provided for by law, shall be the following: 1. To hear appeals for cassation, review and others provided for by law.”). 156

R-1295, Santiago Andrade, Civil Cassation in Ecuador, Andrade & Asociados Fondo Ed., Quito, 2005 at 18 (explaining that with the enactment of the Law on Cassation on May 18, 1993, the third-instance appeal was repealed and the Supreme Court, now the National Court, no longer had as its main purpose the resolution of conflicts between private parties as an appellate court, becoming a body to defend the objective law, which ensures its proper and consistent application by the lower courts).

157

With regard to the Cassation Court’s inability to review questions of fact (as is the case in Ecuador), the Court has established that “for the Cassation Court to be able to obtain uniformity in the interpretation of case law, it must only examine the questions of law that may generate diversity in the jurisprudence, and the evaluation of all the factual matters are, in principle, excluded from its jurisdiction.” R-1295, Santiago Andrade, Civil Cassation in Ecuador, Andrade & Asociados Fondo Ed., Quito, 2005 at 150 (quoting H. Murcia Ballén, Civil Cassation Appeal at 406) (emphasis added). 158

RLA-628, Ordoñez Ordoñez v. Granja Villacís, Official Gazette No. 159 (Mar. 30, 1999) at 3.

159

RLA-558, Law on Cassation, art. 16 (“JUDGMENT. – If the Supreme Court of Justice finds the cassation appeal admissible, it shall quash the judgment or decision in question and render the corresponding decision [superseding the appealed judgment], based on the merits of the facts, as established in such judgment or order.”) (emphasis added). See also RLA-628, Ordoñez Ordoñez v. Granja Villacís, Official Gazette No. 159 (Mar. 30, 1999) (Triple Reiteration Judgment) (cited in the National Court Decision at note 174 (“[W]eighing or assessing the evidence is a power granted exclusively to trial judges and courts … The Cassation Court does not have powers to carry out a new weighing of the evidence, but only to verify whether in the weighing of the evidence the standards

84. Commentators agree that the Cassation Law excludes from its scope of review possible errors in the assessment of the factual circumstances of a dispute. 160 Accordingly, there is no room in a cassation appeal for a discussion of factual issues or for a request and production of evidence. 161 Finally, judgments issued by courts of first instance are not subject to the cassation appeal as a matter of law. 162 De novo review at the appellate level 85. Ecuadorian Law provides that first-instance judgments can be challenged by way 163 of appeal. The scope of the review allowed at the appellate level may extend to a comprehensive analysis of the record and include both matters of fact and law, always subject to the parties’ allegations. 164 This aspect of the first-instance appeal distinguishes it from the cassation appeal, which scope of review is limited to issues of law. 165 86. The competence of the Provincial Court hearing an appeal is defined by the extent of the review requested by the appellant (petitum), 166 who may choose to appeal the entirety or only part of the first-instance judgment. 167 When the appeal extends to all aspects of the of law concerning that weighing have been violated or not, and whether such violation has indirectly led to the violation of substantive standards in the judgment.”)). 160

See R-1295, Santiago Andrade, Civil Cassation in Ecuador, Andrade & Asociados Fondo Editorial, Quito, 2005 at 150 (quoting H. Murcia Ballén, Civil Cassation Appeal at 406). 161

Id. art. 2. See also RLA-634, Agencia de Viajes Etnotour Cía. Ltda. v. Carlos Gálvez Cortez, Supreme Court, Cassation Decision, Civil and Mercantile Chamber, Judicial Gazette 9, Series 17 (July 31, 2001) at 3 (“[T]his accusation is inadmissible since the charges are directed against the trial court judgment and article 2 subsection one, as amended, of the Law on Cassation clearly states that this extraordinary recourse is admissible when filed in respect of judgments and orders that put an end to judicial proceedings and are rendered by superior courts and district courts for tax and administrative litigation matters.”). 163

RLA-198, Ecuadorian Code of Civil Procedure, art. 323 (“Appeal is a claim that one of the litigant parties or other interested party makes to the superior judge or tribunal, seeking the vacatur or amendment of a decree, order, or judgment from the lower court.”). 164

Id. art. 334 (“The judge hearing the appeal may confirm, vacate or amend the decision subject to appeal on the basis of the record, even when the trial judge may have failed to decide one or more of the issues in controversy. In that case, the appellate judge shall rule on those issues[.]”). 165

R-1295, Santiago Andrade Civil Cassation in Ecuador, Andrade & Asociados Fondo Editorial, Quito, 2005 at 18 (explaining that the Supreme Court, now National Court, as the cassation court, is charged with defending and regulating the judicial interpretation of substantive law). 166

RLA-303, Organic Law of the Judiciary, art. 19 (“PRINCIPLES OF DISPOSITION, IMMEDIACY AND CONCENTRATION- Every judicial proceeding is conducted by motion of a party with standing to do so. The judges shall rule on the subject of the controversy, as defined by the litigant parties, and on the basis of the evidence requested, ordered and produced in accordance with applicable law.”). 167

C-260, Code of Civil Procedure, art. 328 (“Interested parties may choose to appeal only part of the judgment, order or decree, and accept the remainder.”).

judgment that are adverse to the appellant — such is the case of Chevron’s appeal 168 — it is understood that the Provincial Court must conduct an integral review of all factual and legal aspects of the judgment, on the basis of the existing record, that are adverse to the appellant. The Collusive Prosecution Action in Ecuadorian Law 87. Counsel to the Republic requested that I offer an opinion on the National Court’s decision in the Lago Agrio case concerning (i) Chevron’s allegations of fraud at the appellate level and the cassation appeal, (ii) the lack of competence for both the appellate court and the National Court to examine the purported evidence of fraud, and (iii) the availability of a specific action to air Chevron’s allegations under Ecuador’s Collusive Prosecution Act (“CPA”). 169 I have also been asked to opine in respect of the Claimants’ and their expert, Dr. Coronel’s, contentions on the subject. 170 88. For the reasons articulated in this section, I consider that the National Court’s decision on this subject was correct in all respects. Indeed, the collusive action in Ecuadorian Law was introduced specifically to protect those who have seen one of their rights adversely affeccted as a result of a collusive agreement between two or more. 171 The CPA confers upon a person that has been affected by a collusive act or proceeding, 172 an action to obtain, inter alia, the anullment of the act or proceeding tainted by collusion, full reparation of the harm suffered as a result of the collusion, and as far as possible, the restoration of things to the status quo ante. 173 168

C-1178, Chevron’s appellate brief in the Lago Agrio Litigation (Mar. 9, 2011). Chevron even clarified that “the fact that specific allegations are made in no way limits the scope of this appellate petition, which should be considered in its entirety and not be limited to the prayer-for-relief section.” 169

C-1975, National Court Decision at 94-95.

170

Claimants’ Track 2 Supp. Memorial ¶¶ 120-122; see also Report of César Coronel Jones (May 7, 2014) ¶¶ 8-9, 27 et seq.

171

RLA-493, Collusive Prosecution Act, art. 1 (“Any person who has suffered harm, in any way, by a collusive procedure or act, e.g., if he/she has been deprived of the ownership, possession or occupancy of a piece of real property, or of any right in rem of use, usufruct, occupancy, easement or antichresis over such piece of real property or other rights that are legally due to such person.”) (Emphasis added.) 172

The National Court explained that, according to the Escriche Dictionary of Law and Jurisprudence, collusion is defined as “the fraudulent and secret agreement made between two or more parties for some business to the ‘detriment of a third party,’” adding further that the author mentions that “it is clear that any act or contract performed or made with collusion must be declared null and void, thereby compensating the party for any damage sustained as a result thereof.” See C-1975, National Court Decision at 94 n.87. 173

RLA-493, Collusive Prosecution Act, art. 6 (“The judge shall issue the decision within a period of fifteen days. If the grounds for the claim are confirmed, measures to void the collusive proceeding will be issued, invalidating the act or acts, and contract or contracts affected by it, as the case may be, and redressing the harm caused, by restoring to the affected party the possession or holding of the property in question, or the enjoyment of the respective right, and, as a general matter, restoring the things to the state prior to the collusion. If the lawsuit was brought also against judges and attorneys, and there is proof that they participated maliciously, the judge shall forward copies of the court file to the Judiciary Council to initiate proceedings for removal from office or suspension of the professional practice, as the case may be, without detriment to sentencing them to joint payment of compensation for damages. Once the judgment becomes final and enforceable, the damages amount shall be liquidated by the trial court, in a separate record. Once the amount has been determined, it shall be collected by attachment order.”) (Emphasis added.)

89. The collusive action affords the party affected by the collusive act or proceeding an opportunity to be heard and to proffer all the evidence that it deems appropriate to substantiate his or her allegations of fraud or collusion. 174 In fact, when the alleged fraud or collusion taints a judicial act or proceeding, the victim can commence proceedings under the CPA while the allegedly tainted proceedings are ongoing, and the judge hearing the CPA action shall order copies of the record in the underlying case. 175 90. Claimants in this arbitration assert, incorrectly, that the collusive action is available only in respect of fraudulent agreements affecting real property rights. 176 In support, Claimants cite Dr. Coronel’s testimony that, when the CPA was enacted in 1945, its fundamental stated purpose was “to combat the malicious practice of filing collusive or fraudulent cases to strip others of their possession or tenancy of property or of the right of use, habitation, etc. regarding real estate.” 177 Both Claimants and their expert fail, however, to mention that the CPA was subsequently amended, precisely to expand its scope to every fraudulent act between two or more persons intended to affect any right, including guarantees of due process. 178 91. In fact, since 1977, the CPA has stated clearly that the collusive action is available in all cases of harm caused “in any way” to real property rights or to “other rights legally pertaining to” the victim. 179 In this respect, the National Court has stated: According to Art. 1 of the Law to Judge Collusion, we conclude that the harm can arise from any procedure or fraudulent act of the parties colluding, whether they deprive of dominion, possession or holding of a real estate, or from a real right to use, usufruct, inhabit, easement or antichresis constituted over a real property, or other rights that are lawfully his or hers. 3) For someone to be affected by a collusive act or proceeding, he or she must have a certain legitimately acquired right that can be harmed and the person filing a collusive suit must prove title over the right that he or she claims was violated; the burden of proof or the onus probandi corresponds to the plaintiff. 180 174

Id. art. 5 (“Once the conciliation hearing has taken place and if the proceedings continue, the judge shall grant a ten day period for evidence. The judge shall request the record of the proceedings where the collusion allegedly played a role, as well as that of the associated proceedings, if any, and shall order, ex officio or at the request of the interested party, any evidence that deemed necessary for clarification of facts. If the requested proceedings are ongoing, a copy shall be requested.”). 175

Id. Similarly, if evidence is adduced showing that the judge or the parties representatives incurred in collusion during the course of judicial proceedings, the party affected may file a criminal complaint against those responsible for the collusion, seeking imprisonment for a period of one month to a year. Id. art. 7. 176

Claimants’ Track 2 Supp. Memorial ¶ 122; see also Report of César Coronel Jones (May 7, 2014) ¶ 28.

177

Report of César Coronel Jones (May 7, 2014) ¶ 28.

178

The CPA was amended in 1953, 1977 and 2009.

179

See supra n.171.

180

Coronel Exhibit 332, Delgado et al. v. Velásquez et al., National Court of Justice, Second Criminal Chamber (May 17, 2007) O.R. Suppl. No. 67 (Nov. 8, 2013). See also, R-1281, Chart of CPA case law, Case No.

92. The jurisprudence of Ecuadorian courts confirms that the CPA action is not limited to cases involving real property rights. 181 Dr. Coronel also confirms this in his report, and acknowledges that not all cases under the CPA refer to real property. 182 93. The collusive action prescribed by the CPA has become an available and effective remedy to address allegations of fraud or collusion concerning judicial acts or proceedings. 183 Several decades of jurisprudence on the subject confirm this. 184 94. Claimants also argue that a CPA action is not available to Chevron because its allegations of fraud were raised before the Provincial Court and the National Court, and are currently pending before the Constitutional Court through Chevron’s extraordinary action of protection (EAP). As a result, the ultima ratio condition purportedly precludes the filing of a CPA action. 185 Such contention has no basis in Ecuador’s legal order. 95. First, as I have explained earlier, neither the Provincial Court nor the National Court had competence to examine and rule upon Chevron’s allegations and purported evidence of fraud. It is therefore incorrect to assert that a CPA action would not be available while Chevron’s appeal and cassation appeal are pending resolution. To the contrary, as I explained above, Chevron could have pursued a CPA action as of the time it became aware of the purported evidence of fraud. The ultima ratio argument is unsupportable in this context. 21, Judicial Gazette, ELEMENTS OF THE COLLUSIVE ACTION (May 31, 2004) (“In order for a collusive prosecution action to proceed, it is indispensable to prove the existence of the essential elements of the action, as follows: a) illegal agreement between two or more persons; b) simulation to make an act, contract or proceeding appear lawful, legal, legitimate; and c) intent to cause harm to a third party, depriving such third party of the ownership, possession or tenancy of real property, or of any right to use, usufruct, habitation, easement or lien in respect of real property, or of other legal rights that may belong to the third party”). 181

The case cited by Dr. Coronel confirms that the CPA is not limited to real property rights. See Coronel Annex 332, Delgado y otra v. Velasquez et al., National Court of Justice, Second Criminal Chamber (May 17, 2007) O.R. Suppl. No. 67 (Nov. 8, 2013); see also RLA-610, Santana-Villacis, Judgment 23-XI-8, 3rd Chamber, Case 364; RLA-608, Banco Territorial de Guayaquil v. Manuel Cornejo et al., First Chamber of the Superior Court of Guayaquil, Judicial Gazette, Year XLVII, Series X, No. 4; RLA-609, Holmes Medardo Maldonado Veintimilla v. Ximena del Pilar Rodríguez Arguello, José Sancho Gallegos, Supreme Court, Second Criminal Chamber (Feb. 4, 2002), O.R. 581 (May 22, 2002). 182

Report of César Coronel Jones (May 7, 2014) ¶ 28.

183

Dr. Santiago Andrade, Chevron’s counsel at the Cassation Appeal, rendered judgments while a Supreme Court Justice stating that the CPA action is an effective mechanism to combat legal proceedings tainted by fraud. See R-1281, Chart of CPA case law, Case No. 7, Juan Alberto Aisalla Sánchez and Roberto Jacinto Chávez Muyulema v. Segundo Francisco Cují Lliguilema, Supreme Court, First Civil and Commercial Chamber (July 24, 2002) O.R. 664 (Sept. 17, 2002) (“Our legislation . . . when regulating the collusive prosecution action, provides that the collusive agreement may encompass proceedings initiated fraudulently, clear fraudulent negotiations, using the words of Couture, and if the claim is admitted, measures will be rendered in order to leave the collusive judicial proceeding without effect, ‘returning conditions to the state in which they were found prior to the collusion,’ as per Article 7 of the relevant law.”). 184

See R-1281, Chart of CPA case law, citing to cases where courts have taken measures to vacate/nullify collusive proceedings, ordering full reparation of damages, and generally, restoring things to the status quo ante.

185

Claimants’ Track 2 Supp. Memorial ¶¶ 120-22; see also Report of César Coronel Jones (May 7, 2014) ¶ 29.

96. Second, Claimants’ suggestion that the Constitutional Court can hear and decide upon Chevron’s allegations of fraud is also wrong. The EAP is a constitutional guarantee through which the Constitutional Court can review the legality of final decisions of Ecuadorian courts where a constitutional right is alleged to have been breached. 186 If the Constitutional Court finds that a court has infringed upon a constitutional right, it can invalidate all proceedings from the point where the constitutional right at issue was violated, including the judgment, and remand the case to the lower court so the proceedings can resume from the point of the violation and through a new decision. 187 The Constitutional Court can also order full compensation to the moving party. 188 97. In particular, the EAP expressly disallows the submission of any evidence extrinsic to the existing record. The Consitutional Court has listed the following requirements for the admissibility of an EAP: 189 (i) (ii) (iii) (iv)

A violation of a constitutional right, whether by action or ommission; That such violation be effected in the dispositive part of the judgment; That such violation be clear, direct and manifest; 190 No evidence may thus be adduced to determine the nature and extent of the alleged violation of a constitutional right; 191 and

186

RLA-164, Constitution of Ecuador (2008), art. 94 (“An extraordinary action of protection is available against judgments or final orders by which Constitutional rights were violated by action or omission. This action shall be brought before the Constitutional Court. This remedy shall proceed when all ordinary and extraordinary remedies have been exhausted within the legal term, unless the failure of filing these remedies was not attributable to the negligence of the person whose constitutional right has been violated.”). See also id. art. 437; RLA-561, Constitutional Court of Ecuador, Resolution No. 11, O.R. 637 (July 20, 2009) Exp. 0038-08-EP. 187

RLA-630, Constitutional Court Decision No. 003-09-SEP-CC, File 0064-08-EP (June 1, 2009) (“[B]y means of this exceptional action it is permitted to submit to review by the Constitutional court, as the highest constitutional body in the country, judgments, decrees and resolutions that have become final or enforceable; . . . . having as an immediate effect, if such a violation of rights is found, the redress of the violated right and therefore, leaving the final or enforceable judgment of the challenged authority without any effect.”). 188

RLA-562, Constitutional Court Decision No. 041-11-SEP-CC, O.R. No. 601 (Dic. 21,2011); RLA-561, Constitutional Court Decision No. 11, O.R. 637 (July 20, 2009) File. 0038-08-EP, at 15-17; RLA-563, Constitutional Court Decision No. 010-11-SEP-CC, Exp. No. 0373-10-EP (in all cases the Court, after examining the record, found that a constitutional right was violated and as a result, accepted the EAP, declared that the underlying judgments were devoid of any legal effect, remanded the proceedings to the corresponding courts and ordered full compensation in favor of the Plaintiffs). 189

See RLA-629, Constitutional Court Decision 007-09-SEP-CC (May 19, 2009); RLA-630, Constitutional Court Decision 003-09-SEP-CC (May 14, 2009). 190

RLA-561, Constitutional Court Decision No. 11, O.R. 637 (July 20, 2009) File. 0038-08-EP at 16 (explaining that in order for the EAP to be successful, it is necessary that the “the violation against a constitutional right . . . can be reduced in a clear and direct, express, ostensible and evident manner . . . [and] must be a direct consequence of said judgment or writ issued by a body of the judicial function. This violation must be inferred in an express and direct manner from the dispositive part of the judgment, since this is what really binds and causes real effects.”). 191

Id. at 15-17 (“excludes the possibility to produce evidence in order to determine the contents and scope of the alleged violation of a constitutional right”).

(v)

That no other legal mechanism exist to vindicate the constitutional right at issue.

98. Thus, if the alleged violation of a constitutional right is not self-evident from the underlying proceedings, the Constitutional Court cannot allow for the production of new evidence and must reject the EAP, at least in respect of those particular allegations. 192 99. In light of the above, the EAP provided for in our Constitution and regulated by the Organic Law of Jurisdictional Guarantees and Constitutional Control, is not one of the ordinary actions which availability must be considered against the possible filing of a CPA action (ultima ratio mechanism). Whether an EAP is available does not preclude a party’s ability to pursue a CPA action because the different objects and scope of each action, and because the latter allows for the submission of evidence to show the existence of collusion. Third-party actions by legitimate owner to exclude assets from enforcement proceedings (“Tercería de Dominio Excluyente”) 100. Counsel to the Republic has asked me to address the issue of whether Chevron’s subsidiaries could have challenged the Lago Agrio Court’s order of attachment over certain of their assets. Indeed, those subsidiaries could have asserted a third-party motion known as “tercería excluyente de dominio.” 193 These third-party actions provide a mechanism for any person whose assets may be subject to enforcement of an obligation of another party, to have those assets excluded from the enforcement proceedings against that third party. *

192

See RLA-562, Constitutional Court Decision No. 041-11-SEP-CC, O.R. No. 601 (21 Dec. 2011), and RLA561, Constitutional Court Decision No. 11, O.R. 637 (July 20, 2009) File. 0038-08-EP at 15-17 (in both cases the Court admitted the EAP because it was able to confirm, from a plain review of the file record, that the rights to due process and to legal defense were violated as a result of the lack of service of notice of the complaint, and thus, declared that the underlying judgments were devoid of any legal effect); see also RLA-563, Constitutional Court Decision No. 010-11-SEP-CC, File. No. 0373-10-EP (after a review of the underlying case record, the Court found that the right to be judged by the competent authorities was infringed, and invalidated the underlying decision). 193

RLA-198, Ecuadorian Code of Civil Procedure, art. 491 (“It is known as third-party complaint [tercería] both the opposition filed by a third-party, as well as the proceedings in which the third-party claim is heard. The opposition may involve one party or all of them.”); id. art. 502(1) (“The third-party claim seeking to exclude [the rights of the procedural parties] must be filed along with a supporting title justifying ownership [of the disputed item] or by filing a protest under oath pledging to submit the title within the evidentiary term. If none of these conditions is fulfilled, or if a third-party claim seeks a malicious purpose, the court, on its own motion, shall dismiss the claim, and this decision shall not be subject to appeal.”).