With its options dwindling and the mistakes of its legal team mounting, Chevron has suffered another courtroom setback in its eleventh-hour attempt to block indigenous rainforest communities from enforcing their $18 billion judgment against the oil giant’s assets around the world.

A three-judge appellate panel in Ecuador on Friday ruled  that a Chevron request for a special bond waiver had no basis in Ecuadorian law, thereby paving the way for the commencement of enforcement actions. Chevron has stripped its assets from Ecuador, forcing the rainforest communities to consider standard judgment collection lawsuits against the oil giant in other countries.

“We intend to do everything in our power to ensure Chevron’s management team meets the company’s legal obligations and pays the full amount of the judgment,” said Pablo Fajardo, the lead lawyer for the 30,000 Ecuadorians who initiated the lawsuit against the oil giant in U.S. federal court in 1993.

“Chevron broke the rainforest of Ecuador,” said Fajardo. “Now it must fix it.”

Once the judgment against Chevron was affirmed by the same Ecuador appellate panel in early January, the oil giant was obligated to request the bond pending an extraordinary final appeal to the nation’s highest court. Payment of such a bond was the only way under Ecuadorian law to temporarily suspend enforcement of the judgment, but Chevron’s legal team blundered by never asking for it, said Fajardo.

Instead of requesting the bond — which easily could have been paid given Chevron’s annual revenues of$240 billion – Chevron requested an unprecedented waiver of the bond requirement.  After Chevron sought the waiver, the rainforest communities charged the oil giant was seeking “special treatment” not available to any other litigant in Ecuador.

The court, in a four-page decision, said seeking a bond “is the only established legal mechanism to give litigants in Ecuador the opportunity to suspend execution of a judgment.”  In reference to Chevron, it added:  “The losing party decided not to exercise this right.”

Separately, the court rejected an “order” issued Thursday from a private investment arbitration thatEcuador’s government freeze the 18-year litigation until it can rule on a separate set of Chevron claims that it the court system in Ecuador treated it unfairly. See here. The private investment panel has been harshly criticized by jurists for violating international law, and the rainforest communities have said its actions have no bearing on their claims given they are not a party to the proceedings. See here and here.

In a detailed analysis of the international law obligations of Ecuador’s government, the appellate panel said the Inter-American Convention of Human Rights and Ecuador’s Constitution trumped any authority from the investment panel, which was convened by Chevron under the U.S.-Ecuador Bilateral Investment Treaty.

The rainforest communities recently filed a petition with a noted human rights court to block any order from the secret arbitral panel, whose members — all private lawyers — stand to reap millions of dollars of fees for simply granting jurisdiction over the case.

“No part of this Convention can be interpreted to permit any person (such as Chevron or the Arbitral Panel) to interfere with the enjoyment and exercise of rights and liberties recognized in the Convention, nor can it override other rights and guarantees that are inherent in the rights of all men,” the panel wrote in its decision.

The panel also ruled that international law to protect investors can never override international treaties that protect fundamental human rights of individuals, including the right to life and the right to seek legal redress, both of which are being exercised by the rainforest communities.

“A simple arbitral award … cannot obligate judges to do violence to the human rights of the citizens of the country where it sits,” said the panel.

A representative of the rainforest communities was pleased with the decision, which she said protects the independence of Ecuador’s courts and ensures that a private investor treaty cannot trump the fundamental human rights of ordinary citizens.  The trial was held in Ecuador only after Chevron moved it there from U.S. federal court, promising to abide by any adverse judgment.

“The Ecuador appellate panel spoke in a way that is consistent with both Ecuador’s laws and the country’s international treaty obligations,” said Karen Hinton, the U.S. spokesperson for the rainforest communities.  “It shows that Ecuador’s independent courts will not succumb to Chevron’s political pressure nor its request for special treatment.”

“After 18 years of dealing with Chevron’s bad faith and abusive litigation tactics, the rainforest communities have a final and enforceable judgment,” she added.

The Ecuador appellate court did grant Chevron’s request for an extraordinary appeal to the National Court of Justice, a process that likely will take one to two years to conclude.

The appellate ruling comes at a time when Chevron officials are furiously trying to cut a side deal withEcuador’s government to illegally quash the environmental case, said Fajardo.  The company apparently offered $1 billion to the government to end-run the legal process, an act that could expose Chevron to criminal liability under various anti-bribery statutes in the United States and other countries, he added.

The Ecuador trial court in February 2011 found overwhelming scientific evidence that Chevron deliberately dumped billions of gallons of toxic waste into Amazon waterways when it operated in Ecuador under the Texaco brand from 1964 to 1992.  The dumping decimated indigenous groups and caused an outbreak of cancer that could lead to thousands of deaths in the coming years, according to evidence before the court. See here and here.

A video that tells the story of the environmental disaster and of Chevron’s fraudulent cover-up can be seen here.

The amount of damages set by the Ecuador court is modest compared to the potential liability of BP in the much smaller Deepwater Horizon disaster in the Gulf of Mexico, said Hinton.  BP already has committed $20 billion in compensation for the Gulf spill, an amount that does not include an estimated$60 to $80 billion in additional liability from civil lawsuits now pending in U.S. federal courts.

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A distinguished international law jurist from Latin America has issued a letter to United Nations Secretary General Ban Ki-moon, asking for a review of Chevron’s “egregious misuse” of an investor treaty to evade its $18 billion liability in Ecuador for creating one of the world’s worst oil-related disasters in the Amazon rainforest, according to a letter released to thousands of arbitration specialists around the globe.

Jose Daniel Amado, a leading law scholar in Peru and a specialist in international arbitration, told the Secretary General that Chevron’s latest attempt to deny the legal claims of the rainforest communities to be decided by an arbitration panel that meets in secret “stands in direct violation of international law” and would “quash” the fundamental human rights of the 30,000 citizens who initially brought suit against Chevron in the United States in 1993.

Chevron shifted that lawsuit to Ecuador in 2002 after praising the country’s judicial system and promising to abide by any judgment there, subject only to narrow enforcement defenses that did not include international arbitration. ”Chevron has constructed what appears to be a calculated plan to manipulate a commercial investment dispute system to evade the outcome of a private litigation,” wrote Amado, who has served as a consultant to the Ecuadorian plaintiffs.

Amado asked the Secretary General to conduct a review of the matter “to ensure that the BIT arbitration system is not used by Chevron to undo international law protections guaranteeing access to justice.”

In January, after a nine-year legal proceeding, a three-judge panel of the Ecuador appellate court confirmed an $18 billion award against Chevron for the deliberate dumping of billions of gallons of toxic waste into Amazon waterways that local inhabitants relied on for drinking water.  The Ecuador trial court found evidence that Chevron’s contamination decimated indigenous groups and caused an outbreak of cancer and other oil-related diseases.

The trial in Ecuador produced 220,000 pages of evidence and more than 64,000 chemical sampling results from independent laboratories which proved that dozens of Chevron oil production facilities suffer from extensive levels of life-threatening heavy metals and toxins, according to the findings of the Ecuador court.

On January 4, the day after the Ecuador appellate court decision, Chevron petitioned a private arbitration panel convened under the U.S.-Ecuador Bilateral Investment Treaty (“BIT”) to order Ecuador’s executive branch to interfere in its independent judiciary and block the ability of the Ecuadorian citizens to enforce their judgment in countries around the world.  Chevron had stripped its assets from Ecuador to avoid paying the judgment.

Lawyers for the Ecuadorians say the arbitration panel does not have such authority, and that in any event Ecuador’s government is obligated to ignore its orders given its own binding legal obligations under the Ecuador Constitution and various international treaties protecting the human rights of its citizens.

The arbitration panel prohibits the Ecuadorians from appearing before it and takes no steps to inform them (or the public) of the status of its proceedings or when or where it is meeting.  Nor does it release its decisions in a system that clearly lacks due process of law, said Aaron Page, who represents the Ecuadorians and who has represented governments in the arbitral proceedings.

Some commentators have like ecuadorians end the secret arbitration panel to a “kangaroo court” rife with conflicts of interest and imbued with a pro-business culture.

The arbitrators are private sector lawyers who generally rule in favor of investors and against sovereign governments — a fact which in recent years has led several countries to withdraw or threaten to withdraw in recent years from the arbitral system, said Page. ”Chevron’s radical request for relief in this case potentially undermines the credibility of the entire investor arbitral regime,” Page said.

In the letter to Ban Ki-moon, Amado noted that a recent “interim” order by the arbitration panel asking Ecuador’s government to freeze the environmental case “makes a travesty of the bilateral commercial treaty system” and represents an “illegal expansion of arbitral powers with wide-ranging implications for well-settled principles of international law, including fundamental human rights and state sovereignty.”

“Such a result is simply untenable under international law — BIT arbitral panels cannot be called on by investors to set aside countries’ constitutional systems and sovereignty, which are essential components of modern democracies,” he added.

Concern over Chevron’s latest stratagem, Amado pointed out, is shared by a U.S. federal appellate court which ruled last year that the longstanding legal claims of the Ecuadorians “cannot be settled” through the BIT arbitration given that they are not a party to those proceedings.

“The international legal community was shocked by this [interim] Order, which Chevron interpreted to force the Ecuadorian executive branch affirmatively to interfere in a judicial process and limit Ecuador’s sovereignty vis-a-vis a case that has been in the courts for 18 years,” he said.

The Amado letter was emailed to 7,000 arbitrators around the world by the Peruvian Arbitration Institute, which said it considered the letter to “of high interest” to the international arbitration community.

Amado is a graduate of Harvard Law School and the founding partner of Miranda & Amado, one of Peru’s leading law firms.  He has published numerous articles on international law topics, has lectured in various countries, and has represented both private investors and governments before BIT arbitration panels.

Amado is also a member of the American Chamber of Commerce in Peru and is President of the Energy Legal Committee of Peru’s National Mining, Oil and Energy Society.

The three arbitrators hearing the Chevron claims — all private lawyers who represent investors before other arbitration panels in the same treaty system — stand to personally reap millions of dollars in fees if they grant jurisdiction over the case, which in itself is a hotly contested issue given that Chevron left Ecuador five years before the U.S.-Ecuador BIT took effect in 1997, Page said.

R. Doak Bishop, an American from the firm King & Spalding who is Chevron’s lead lawyer in the Ecuador matter, has served as an arbitrator in numerous cases convened under the BIT process while he simultaneously represents private clients in the same system.  Ecuador’s American lawyers are only putting up a nominal defense, essentially leaving the Ecuador plaintiffs without representation before the panel, said Karen Hinton, the U.S. spokesperson for the plaintiffs.

In any event, it is clear that any “award” from the panel will lack legitimacy in countries that observe the rule of law and will not be an obstacle to enforcement of the Ecuador judgment, said Amado.

“This is a far-fetched strategy by Chevron that has little chance of working,” said Amado.  “But it is our duty as international lawyers to prevent it from causing collateral damage to the international legal order that protects the human rights of all peoples worldwide.”

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U.S. courts are showing increasing hostility toward Chevron and its CEO John Watson over the company’s $18 billion Ecuador liability as the oil giant’s plan to quash the landmark case continues to falter in the hands of American law firm Gibson Dunn & Crutcher, said representatives of the Amazon indigenous groups who offered an analysis of the 18-year case to its shareholders and industry analysts.

Leaders of the indigenous groups in Ecuador – who last year won the largest environmental court case in history — are presenting their analysis because Watson misled company shareholders about the case in an earnings call last Friday.  Watson failed to disclose his own conflict of interest in that he was a key Chevron executive who drove the purchase of Texaco in 2001 without properly vetting the company for its massive Ecuador liability, said Karen Hinton, the U.S. spokesperson for the Ecuadorians.

In the earnings call, Watson charged that the Ecuador case is part of an elaborate “fraud” to extort money from Chevron — a false statement that directly contradicts court findings based on scientific evidence, including evidence provided by Chevron itself, said Hinton.

“Watson uses rhetoric as a device to hide his failed leadership on the Ecuador case,” said Hinton.  “His comments about the Ecuador liability on the earnings call were misleading and should be treated with extreme skepticism by shareholders.”

For a more accurate analysis of the risks facing the Ecuador case than that Chevron is making in its quarterly calls or in its disclosures to the SEC, Hinton said shareholders should reference a report on the Ecuador case by Simon Billeness and Sanford Lewis that was published in May of last year prior to the company’s annual meeting. Both point out risks that Chevron has not completely disclosed, including the likelihood of standard collection actions against Chevron assets in various countries that are critical to the company’s operations.

Watson’s comments on the earnings call omitted key information that has emerged recently, as follows:

After eight-year trial, the Ecuador court in February 2011 found the company liable and imposed damages of $18 billion. The court found Chevron itself proved the company discharged billions of gallons of toxic waste into the environment, decimating indigenous groups and poisoning rivers and streams that local inhabitants rely on for drinking water.

On January 3, an Ecuador appellate court affirmed the trial court judgment and blasted Chevron for its “abuse of the judicial process” in Ecuador by filing frivolous motions and threatening a judge with jail time.  The court also upheld a punitive damages sanction against the company.

The U.S. Court of Appeals in New York last week rejected a Chevron attempt to seek a worldwide injunction blocking the Ecuadorians from enforcing their judgment, essentially nullifying the centerpiece of the U.S. component of the oil giant’s legal strategy.

Chevron’s lead outside law firm, Gibson Dunn & Crutcher, has created even greater risk for Chevron shareholders by bungling key aspects of the litigation.

Since the firm took over the matter in 2009, Chevron lost the underlying case;  lost at the appellate level; lost a motion to attach  assets of the Ecuadorians in the U.S.; seen its plan to block enforcement overturned by the U.S. federal appellate court; and been exposed to potential criminal liability for trying to bribe Ecuador’s government.

Documents recently obtained via U.S. discovery actions shows that Chevron engaged in extensive acts of corruption and fraud in Ecuador.  Chevron doctored soil samples to mislead the Ecuador court and used a secret lab to hide evidence of toxic contamination; paid $2.2 million in hush money to a man who threatened to expose the company’s corruption in the Ecuador trial; tried to entrap an Ecuadorian judge with secret video recordings, and used U.S.-based experts to lie to the Ecuador court about the company’s deceptive field sampling.

U.S. and Ecuadorian courts have sanctioned Chevron for the use of unethical litigation practices done at the behest of Gibson Dunn and its lead partner, Randy Mastro.  Several U.S. and Ecuadorian judges sanctioned Chevron for harassing witnesses, filing a frivolous lawsuit, and abusing the judicial process.

Recognizing it could not win the lawsuit on the merits, Chevron recently tried to bribe Ecuador’s government with a “donation” to an environmental project in exchange for the “settlement” of the legal case without the involvement of the plaintiffs, according to sources within Ecuador’s government. Chevron never denied the reports of the attempted bribe, which might violate criminal laws in both Ecuador and the U.S.

Chevron also suffered a major setback in a U.S. federal appellate court in Philadelphia when Mastro was harshly criticized for seeking the case file of an American lawyer who represented the Ecuadorians.  The panel unanimously overturned a trial court order secured by Mastro.

Chevron faces potential criminal and civil liability for orchestrating a video scandal to entrap the Ecuador trial judge in a trumped-up bribery scandal.  Several lawyers working for Chevron, including Robert Middlestadt of Jones Day, have been deposed or face potential depositions in the matter.

One of Gibson Dunn’s investigators on the Ecuador matter, San Anson, was caught trying to pay an American journalist to spy on the plaintiffs.

The Gibson Dunn strategy also includes fomenting open conflict between Chevron and Ecuador’s government, a tact considered grossly impolitic for an oil major.  Chevron is already facing likely criminal charges in Brazil – a country with enormous reserves coveted by the company — for lying about its recent spill off the coast of Rio province.

Mastro, the mastermind of Chevron’s increasingly shaky legal strategy, was laughed at as he was unable to answer basic questions posed by the New York appellate panel that issued its order last week.  One judge even asked whether Chevron’s legal expenditures on the case was a good use of shareholder money.

Hinton said shareholders needed full information to be able to understand the risks facing the company.

“With these numerous setbacks over the last several months, it is even more apparent that John Watson and Gibson Dunn have brought Chevron’s shareholders to the edge of the proverbial cliff,” said Hinton.

“No matter what Watson does, Chevron simply cannot change the fact its horrific contamination in Ecuador is visible to the naked eye and has been confirmed by journalists and courts the world over,” she added.  “The evidence is so overwhelming that no amount of trickery can save the day for Chevron at this point.

“It is also becoming increasingly obvious that Gibson Dunn has sold Chevron’s management a bill of goods for which it has charged hundreds of millions of dollars over the last two years,” added Hinton.  “If this management team doesn’t monitor the situation more carefully, some additional and very unpleasant consequences for the company’s shareholders could be in store.”

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After being found liable in Ecuador for creating one of the world’s worst oil disasters, Chevron filed a notice of appeal to Ecuador’s highest court where it seeks special treatment not afforded any other litigant under the nation’s laws — the waiver of a bond required to suspend enforcement of a judgment during the pendency of any appeal.

It would be illegal under Ecuadorian law for the appellate court to grant Chevron’s unusual and unprecedented request to waive the bond requirement, said Pablo Fajardo, the lead attorney for the indigenous and farmer communities who brought suit against the oil giant for the dumping of billions of gallons of toxic waste into the waterways used by several indigenous groups and farmer communities.

“Chevron has every right under the law to seek an extraordinary appeal to the highest court as long as it can cite a proper legal basis,” said Fajardo.  “But Chevron is yet again seeking a special exemption under Ecuadorian law when it claims the bond requirement should not apply to it, while it applies to every other litigant in the country.”

“Chevron behaves in Ecuador as if it is above the law while thousands of people continue to suffer the devastating effects of the company’s toxic contamination,” said Fajardo.  ”This abuse of the judicial process must end.”

For execution of a court judgment in Ecuador to be suspended pending appeal to the highest court — called the National Court of Justice — the losing party must post a bond that is usually calculated at roughly 8% of the amount of damages awarded (roughly $1.5 billion in this case). Chevron is seeking to have enforcement suspended even without posting a bond even though the indigenous and farmer communities continue to suffer grave health effects engendered by the company’s delaying tactics, said Fajardo.

Karen Hinton, the U.S. spokesperson for the Ecuadorians, said in a statement that “for almost two decades, Chevron has stood in the way of a comprehensive cleanup of billions of gallons of crude oil and toxic waste water it deliberately dumped into the pristine rainforest of Ecuador.”

“Thousands of people have died or suffered from illnesses as Chevron and its army of lawyers have waged a campaign to distract attention from the overwhelming scientific evidence against the company,” said Hinton. “Chevron has always believed that Ecuador’s many laws prohibiting environmental contamination should not apply to its misconduct.”

The bond requirement, typical in countries around the world including the U.S., is intended to protect the winning side from unnecessary delays during appellate review.  Ecuador’s first-level appellate court already affirmed the trial court judgment that the company is required to pay $18 billion for a clean-up, a relatively modest amount compared to BP’s estimated $60 billion liability for the smaller Deepwater Horizon spill in the Gulf of Mexico.

Fajardo also said that an arbitral order cited by Chevron as justification for its request for a bond waiver is not binding on the rainforest communities as they are not a party to that proceeding, which is held in secret pursuant to a U.S.-Ecuador investment treaty.

In any event, the arbitral panel never ordered — and under the law cannot order — that Ecuador’s courts take steps that would “clearly violate” Ecuador’s Constitution and international treaties binding the government to protect the fundamental human rights of its citizens, including the right to life and the right to seek legal redress in national courts, said Fajardo.  Further, the arbitral panel has never even held an evidentiary hearing on Chevron’s claims that a remediation contract with Ecuador’s government released it from liability.

“We believe Chevron clearly is misinterpreting the scope of authority of the arbitration,” he added. ”We want to reiterate that Chevron has every right to appeal to Ecuador’s National Court of Justice, but it has no right to special treatment during the pendency of the appeal,” Fajardo added.

The trial court decision, issued in February 2011, found that Chevron systematically dumped billions of gallons of toxic waste into the Amazon, poisoning waterways that local inhabitants use for drinking water and causing increased cancer rates. Damages were set at $18 billion.  In 2002, the case was shifted from U.S. federal court to Ecuador at Chevron’s request.

The trial court in Ecuador also repeatedly sanctioned Chevron’s legal team for filing frivolous motions intended to delay the proceedings, and for threatening a judge with jail if he did not rule in favor of the company.  These actions led to a punitive damages award that accounts for roughly half of the total judgment.

Chevron has roughly two more weeks under Ecuadorian law to determine if it will publicly apologize for its misconduct, which would allow it to eliminate the punitive damages component of the award.

As support for the contention that Chevron believes it does have to adhere to the law in Ecuador, Hinton cited a comment in a 60 Minutes interview where Chevron attorney Silvia Garrigo – pressed as to why the company said it would never pay any adverse judgment in Ecuador – said: “We don’t believe we should be in any court, much less the courts of Ecuador.”

The 188-page trial court judgment is undergirded by a wide body of scientific and testimonial evidence submitted during eight years of proceedings that prove Chevron designed a system of oil extraction that deliberately discharged toxic oil waste into the environment to keep production costs to a minimum. Chevron also has been heavily criticized for trying to defraud the Ecuador court and sabotage the proceedings.

In briefs submitted to U.S. and Ecuadorian courts, the rainforest communities submitted evidence that Chevron technicians staked out “clean” spots at contaminated well sites to test prior to court-supervised judicial inspections; sent dirty soil samples to a secret lab to prevent their disclosure to the court; and doctored a “judicial playbook” document so two academic experts in the U.S. would endorse the company’s misleading sampling protocol, among other charges.

A separate ruling by a New York federal appellate court marks Chevron’s third consecutive legal setback in its effort to block enforcement of the Ecuador judgment.

In September, a federal appellate panel blocked Chevron’s attempt to seek an unprecedented worldwide injunction blocking enforcement. In January, a federal district court judge denied Chevron’s illegal attempt to freeze the assets of the plaintiffs. And on January 3, Ecuador’s first-level appellate court confirmed the validity of the trial court judgment.

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In a stark departure from its normal litigation practices, Chevron has refused to request that the Ecuador appellate court that recently affirmed the $18 billion judgment against the oil major reconsider or clarify its decision.

Chevron let a deadline pass that allowed either party to contest or clarify the decision, which was issued on January 3. The appellate court on Friday January 13 reaffirmed its original decision in response to ten separate clarification requests submitted by lawyers for the rainforest communities.

Normally in Ecuador, the losing party in an appeal seeks clarification of an appellate court decision unless it decides it is withdrawing from the litigation or simply accepting the result. Asking for clarification in Ecuador is roughly similar to filing a motion for reconsideration in the United States.

It is unclear why Chevron did not contest or seek clarification of the appellate court decision, but its failure to do so could be seen as a disadvantage as the case moves forward both in Ecuador and potentially in other jurisdictions where the rainforest communities might seek enforcement, said Pablo Fajardo, the lawyer for the Ecuadorian communities who brought the lawsuit.

Chevron, which requested that the trial take place in Ecuador, stripped its assets from the country and has announced it will not pay the judgment. ”By not contesting the appellate court decision, Chevron is essentially conceding that it has no problem with the court’s reasoning or logic,” said Fajardo.

“Chevron also is effectively abandoning its argument that it exhausted all legal remedies in the courts of Ecuador before it tries to block any possible enforcement actions,” he added.

Chevron normally “litigates to the hilt” in Ecuador while simultaneously attacking Ecuador’s courts as unfair, a charge vigorously rejected by the plaintiffs based on expert testimony, said Karen Hinton, the U.S. spokesperson for the Ecuadorians.

“Failing to take advantage of every right afforded it by procedural law is a real departure from Chevron’s normal litigation practice in courts around the world,” said Hinton. “It might reflect a new strategy, or it might reflect simple confusion as the company’s legal options narrow.”

The trial court decision, issued in February 2011, found that Chevron deliberately dumped billions of gallons of toxic waste into the Amazon, poisoning waterways that local inhabitants use for drinking water and causing a spike in cancer rates. See here and here. Damages were set at roughly $18 billion.

Chevron operated in Ecuador from 1964 to 1992 under the Texaco brand.

The trial court in Ecuador also repeatedly sanctioned Chevron’s legal team for filing frivolous motions and threatening a judge if he did not rule in favor of the company, leading to a punitive award that constitutes roughly half of the total damages.

In response to the request by the plaintiffs for clarification, the three-judge appellate panel in Ecuador issued a second opinion on January 13 that rejected several Chevron arguments but also made clear that the company could stop enforcement of the judgment if it posts a bond during the pendency of any appeal to the nation’s highest court.

That court, called the National Court of Justice, is similar to the Supreme Court in the U.S. and is located in the capital of Quito.

Chevron must decide by Friday, Jan 20, if it will file a notice of appeal to the higher court, which has the discretion to accept or reject it much like the Supreme Court in the U.S., said Hinton.

The request for the appeal must be made to the intermediate appellate court that affirmed the trial court decision, which then has the discretion to set a bond before sending the case to the National Court of Justice for consideration. Chevron must request the bond as a way to suspend enforcement of the judgment pending further appeal, said Hinton.

A bond is customarily set by the intermediate appellate court at approximately 8% of the amount of the judgment, or in this case approximately $1.6 billion. Chevron reported annual revenues in 2011 of close to $240 billion, with profits expected to be roughly $30 billion based on its latest quarterly earnings report.

The Ecuador appellate court also made the following points in its second ruling on Jan. 13:

**Chevron has 15 business days (tolled from Monday of this week) to eliminate a punitive damages component of the award by issuing a public apology, considered a key component of accountability under international human rights law. Such an apology could effectively cut the $18 billion award in half.

**The appellate court provided detailed guidance as to the nature and scope of the apology that Chevron would need to make. Among other things, the court said Chevron must admit that it used unacceptable waste disposal practices in Ecuador that caused harm to the rainforest and its inhabitants. It also must publish its apology in newspapers in Ecuador and the U.S.

**The appellate court reiterated that its judgment represents the “final and definitive step” under the Ecuadorian legal system to settle the dispute of the parties. An appeal to National Court of Justice is considered “extraordinary” under Ecuador law and will not block a potential enforcement action unless a bond is posted.

The bond in Ecuador is designed to compensate the winning party for any further delays in collecting its judgment — similar to a running interest rate, which is often used by courts in other countries during the pendency of any appeal. If Chevron were to prevail at the National Court of Justice, the bond monies would be returned to the company.

**The appellate panel also said it “rejects… definitively and as unfounded, [Chevron's] affirmation … that the judgment has been based on information foreign to the record, or with secret assistance.”

**The appellate also found that the trial court ruling was “firmly rooted” in the voluminous 220,000-page evidentiary record, which included thousands of chemical sampling results from both Chevron and the plaintiffs that proved extensive contamination at hundreds of former Chevron oil production sites.

In its original judgment affirming the trial court decision, members of the panel were clearly outraged at Chevron’s abuse of the judicial process in Ecuador. The court found that many of Chevron’s legal filings were “abusive” and “clearly designed to obstruct the administration of justice.”

Inhabitants from dozens of rainforest communities filed the class action case in 1993 in U.S. federal court. Chevron had the trial shifted to Ecuador after heaping praise on that country’s judicial system.

Once the evidence in the subsequent trial started to point to Chevron’s guilt, the company shifted gears and tried repeatedly to attack the courts it had previously praised. In the meantime, several courts have sanctioned Chevron’s lead outside firm in the U.S., Gibson Dunn & Crutcher, for engaging in ethical violations on behalf of Chevron’s campaign to evade the Ecuador judgment.

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While indigenous groups in Ecuador’s Amazon face possible death and grave illness from Chevron’s “Rainforest Chernobyl” disaster, several prominent U.S. law firms and their well-known partners are billing the oil giant hundreds of millions of dollars to forestall a clean-up that could save thousands of lives, according to court documents.

Chevron’s lead outside law firm in the U.S., Gibson Dunn & Crutcher, has 60 lawyers working extensively on the case, a recent court filing revealed. The filing also showed that Chevron has paid almost 500 attorneys and paralegals from 39 different law firms since the celebrated case was filed in U.S. federal court in 1993.

The litigation was shifted to Ecuador at Chevron’s request in 2002, with a subsequent eight-year trial resulting in an $18 billion judgment against the oil giant for causing what experts believe could be the world’s worst oil-related contamination.

The Ecuador litigation represents the first time that indigenous groups have successfully sued a large oil company for harm caused to their health and ancestral lands, said Karen Hinton, the U.S. spokesperson for the Ecuadorians.  Evidence from independent health evaluations concluded that more than 9,000 rainforest dwellers face the risk of contracting cancer absent a rapid cleanup of the damage.

In all, Gibson Dunn was billing Chevron an estimated $250 million per year in 2010 and 2011 as the company launched lawsuits against the plaintiffs in 16 different federal courts, helped to litigate an international arbitration action against Ecuador’s government, filed a fraud case against the Ecuadorians and their lawyers in U.S. federal court, and supervised Chevron’s battery of local lawyers in Ecuador as they faced multiple setbacks that culminated in the adverse judgment against Chevron, said Hinton.

“Chevron’s environmental destruction in Ecuador is the best thing that ever happened to the bottom line of Gibson Dunn,” said Hinton, who noted the firm reported a 20% increase in per-partner profits in 2010 during a downturn in the economy as dozens of its lawyers worked full-bore on the Ecuador matter.

“Clearly, Gibson Dunn and several other firms are profiting from rainforest destruction,” Hinton added. “These lawyers have proven that fighting to deny the human rights of indigenous groups can be a very profitable business model.”

Gibson Dunn clearly has sold Chevron on its willingness to engage in questionable tactics and push the ethical envelope, said Hinton.  The firm boasts that it engages in “recuse operations” for clients in trouble and that if the law is in the way it is willing to maneuver around it to achieve client objectives. Several judges have sanctioned Gibson Dunn lawyers for trying to intimidate witnesses and for filing frivolous lawsuits on behalf of Chevron, and one well-known partner has been accused of trying to mislead the Congress about the case.

A federal judge in Oregon fined Chevron after a team of Gibson Dunn lawyers had harassed the executive director of a respected environmental organization that had filed a brief in support of the Ecuadorians.

Gibson Dunn also uses cookie cutter lawsuits, Hinton said, where defenders of human rights victims and their supporters are always accused of “fraud” for trying to hold wrongdoers like Chevron accountable for their misconduct.

“The basic Gibson Dunn template is to attack victims to distract from the evidence,” said Hinton.  “When that doesn’t work, the firm resorts to outright intimidation to silence any lawyer or advocate who stands up to the firm.”

Gibson Dunn’s approach also has created numerous problems for Chevron in Ecuador, the fifth-largest oil producing nation in South America.  Chevron’s legal team in Ecuador is said to be furious with the Gibson Dunn lawyers for losing the case because of their arrogant treatment of Ecuadorian judges, said Hinton.

Chevron lawyers in Ecuador working closely on the case with Gibson Dunn’s “rescue” team have been sanctioned repeatedly for filing frivolous motions (once filing a motion eighteen times in 30 minutes), threatening the presiding judge with jail time if he didn’t rule in Chevron’s favor, and paying a Chevron contractor to secretly videotape a judge to try to entrap him in a trumped-up bribe scandal.

The Ecuador court imposed a large punitive damages award on Chevron in large part for its abuse of the judicial process in Ecuador, according to the judgment.

In the meantime, the case has become a financial bonanza for several other large law firms who represent Chevron. The list of 39 law firms disclosed by the company in a U.S. court action also includes the prominent criminal defense firm of Arguedas, Cassman & Headley; Jones Day; King & Spalding; Akin, Gump, Strauss; Hauer & Feld; Holland & Knight; Jones Day; Steptoe & Johnson; and Williams & Connolly.

The all-star cast of attorneys who have worked on some aspect of the case for Chevron include Theodore Olson of Gibson Dunn, a former Solicitor General of the United States; Brendan Sullivan of Williams & Connolly, who reportedly represented a Chevron executive who faced potential criminal liability in Ecuador; Greg Craig of Skadden Arps, President Clinton’s impeachment lawyer who Chevron reportedly hired to explore settlement;

Mickey Kantor of Mayer Brown, the former U.S. Trade Representative under Clinton who spearheaded a Chevron effort to cut trade preferences for Ecuador; David Boies , whose firm helps the oil giant fight discovery actions in the U.S. designed to expose its corruption in Ecuador; and Alan Vinegrad , a former U.S. Attorney who represented a Chevron lawyer indicted on criminal charges of fraud for lying to Ecuador’s government about the results of a sham remediation.

Chevron also has used six public relations firms to push talking points denying the company caused any environmental damage in Ecuador, even though the judgment is undergirded by extensive scientific evidence and the allegations have been confirmed by numerous independent news accounts.

After an eight-year trial, the Ecuador trial court in 2011 found the oil giant systematically discharged billions of gallons of toxic waste into the rainforest, decimating indigenous groups and causing an array of oil-related health problems. An Ecuador appellate court affirmed the judgment in early January, potentially opening up Chevron to standard collection actions against its assets in jurisdictions around the world unless its posts a bond in Ecuador.

Chevron stripped its assets from Ecuador and has vowed never to pay for a cleanup, even though reports indicate it contacted the plaintiffs recently in an attempt to explore settlement possibilities. Ultimately, one must wonder how much Chevron shareholders are getting in return for these expensive legal services, she said.

In the last three years, since Gibson Dunn’s “rescue” operation was launched, Chevron was hit with the $18 billion judgment, the largest ever for an environmental case; the judgment was confirmed by a three-judge panel; multiple courts sanctioned the company for its unethical litigation tactics; and a U.S. appellate court in New York prevented Chevron from seeking a worldwide injunction to block enforcement of the judgment.

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Members of the appellate panel in Ecuador that affirmed the $18 billion judgment against Chevron for contaminating the Amazon rainforest were clearly outraged at the oil giant’s abuse of the judicial process even as it denied a request by the rainforest communities to increase the amount of damages, a reading of an unofficial translation of the decision reveals.

The judges also found ample scientific basis to uphold the damages award — including devastating evidence provided the court by Chevron’s own team of technical experts that proved levels of pollution hundreds of times higher than permitted by law. But citing a lack of evidence, the panel also rejected efforts by the indigenous communities to seek additional damages for the loss of their ancestral lands and for the spreading of oil on the dirt roads of the region.

Chevron has a right to appeal to Ecuador’s National Court of Justice (NCJ) in Quito, but might first be required to post a bond, said Pablo Fajardo, the lead lawyer for the plaintiffs. The right to appeal to the NCJ — the nation’s highest judicial authority — will not kick in until the appellate panel has a chance to respond to requests by the parties for clarification, which must be submitted by the end of this week.

The case was heard in Ecuador at the request of Chevron, which fought for almost a decade to shift the venue away from the U.S. federal court where it was originally filed in 1993.

“This decision confirms what we have been saying for years,” said Pablo Fajardo, the lead Ecuadorian lawyer. ”Chevron is guilty of extraordinary greed and criminal misconduct that has created a humanitarian crisis in Ecuador that puts thousands of people at risk.

“Whether people live or die depends largely on whether Chevron meets its responsibility to remediate a problem it created,” Fajardo added. ”Chevron broke the rainforest. It now must fix it.”

In a 16-page single-spaced decision, the three Ecuador judges noted that Chevron had “staged incidents that encumbered the process of the trial” and that it dumped 20,000 pages of largely redundant evidence on the appellate court to delay consideration of the case. The plaintiffs have long accused Chevron of trying to undermine the trial by filing frivolous motions and trying to intimidate judges.

Among the key findings by the panel, which reviewed the voluminous trial record of 220,000 pages for 11 months:

In response to Chevron’s complaints that it was “denied justice” in Ecuador, the appellate court noted on the second page of its decision that the only filings from the oil giant that were denied were those that were “abusive” and “clearly designed to obstruct the administration of justice.” For example, Chevron once filed 18 similar motions in the trial court in a 30-minute period, and tried to have the judge removed when he did not rule on them fast enough.

The court found that Chevron’s requests for proof that it needed to defend itself — including the tedious task of conducting 36 judicial inspections of the company’s former well sites — were “processed without exception.” It found that “hundreds of thousands of documents submitted by Chevron bloated the trial record with everything it considered relevant.”

Referencing Article 283 of Ecuador’s civil code, and citing a long list of examples of Chevron’s malfeasance during the trial, the appellate panel upheld a decision that Chevron should pay the costs of the plaintiffs due to the “flagrant bad faith it exhibited in the case.”

The panel wrote:  “Chevron was condemned to pay trial costs for manifest bad faith… so much so that now suffice it to say that the procedural conduct of the defendant, few times seen in the annals of the administration of justice in Ecuador, were abusive to the point that… the Court will not even dedicate any more writings to this portion of the decision.”

The panel also criticized Chevron for continuing to challenge the jurisdiction of Ecuador’s courts, even though the oil giant voluntarily agreed to litigate the case in Ecuador to induce a U.S. federal judge to shift the venue to the South American country.

“From the [initial hearing] up to the present appeal, it can be said that … Chevron has failed to recognize the authority, jurisdiction, and competence of Ecuadorian courts,” the panel wrote on page 15 of its decision.

The court also noted on page 11 of its decision that laboratory results confirmed that pollution existed at former Chevron well sites hundreds of times higher than permissible norms in Ecuador, which themselves are considered relatively lax by international standards.

The panel also noted many of the scientific results that proved the case against Chevron were submitted to the court by Chevron’s own technical experts.

Pierre-Jean Durieu / Shutterstock.com

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Chevron has lost yet another legal round over its increasingly furious effort to evade paying an $18 billion judgment in Ecuador for causing environmental damage in the Amazon rainforest, according to a decision released by a U.S. federal judge.

Just days after an appellate panel in Ecuador, U.S. federal judge, Lewis A. Kaplan, denied the company’s motion to attach the assets of the Ecuadorian plaintiffs.

The decision also comes just weeks after Chevron was exposed for trying to bribe Ecuador’s government to quash the case by making a “donation” to an environmental project, and reports surfaced that the company tried to corrupt the court process in Ecuador by using a secret lab.

Kaplan also denied a request by Chevron for a restraining order preventing the Ecuadorians and their lawyers from selling any portion of the claims, so they could finance the litigation. The Ecuadorians had argued that Chevron’s motion was nothing more than an attempt to dry up support for their 18-year case, thereby denying them legal counsel and the ability to enforce the Ecuador judgment.

“This decision is another rebuke for Chevron, and it comes on the heels of a devastating defeat in the appellate court of Ecuador,” said Karen Hinton, the U.S. spokesperson for the 30,000 Ecuadorians who have accused the oil giant of dumping billions of gallons of toxic waste into their ancestral lands.

Chevron had argued to Kaplan that the Ecuador judgment was based on “fraud” and, therefore, was not entitled to be enforced, even in countries outside the U.S.  Chevron stripped its assets from Ecuador and has said it will not comply with the judgment.

Lawyers for the rainforest communities had argued that Chevron’s motion had no legal basis and that the judgment in Ecuador is based on a wide body of scientific evidence. The company caused one of the worst environmental disasters in history, decimating five indigenous groups and causing an outbreak of cancer.

The communities also argued that Chevron had the ability to block any enforcement actions by the Ecuadorians by simply posting a bond while it appeals to Ecuador’s highest court. Chevron reported profits of roughly $30 billion in 2011 and total assets of more than $204 billion.

“The relief Chevron seeks is improper and unprecedented,” argued Craig Smyser, a U.S. lawyer for the Ecuadorians, in a letter to Judge Kaplan. Smyser noted that the remedy sought by Chevron had never been granted in U.S. history under similar facts.

“Chevron’s latest histrionics and hysteria justify neither a temporary restraining order, nor an order of attachment,” Smyser said in his letter, which was submitted before Kaplan issued his decision.

Chevron faces another problem — its lead outside law firm in the Ecuador matter, Gibson Dunn & Crutcher, has come under increasing attack for orchestrating a string of legal setbacks that imperil the interests of company shareholders, according to a recent blog in the Huffington Post.

The blog noted that since Gibson Dunn entered the matter two years ago, Chevron has been hit with an $18 billion judgment at the trial court in Ecuador, lost the appellate decision in Ecuador, and was reversed by a U.S. federal appeals court last September in its unprecedented effort to seek a worldwide injunction to block enforcement of the Ecuador judgment.

Gibson Dunn also faces mounting ethical questions about its sharp-edged litigation practices in the Ecuador matter, which recently led a federal court to sanction and fine Chevron after finding that a Gibson Dunn lawyer harassed a witness in the Ecuador matter.

In Ecuador, the trial court imposed a punitive damages award to the plaintiffs after finding Chevron’s lawyers tried to delay and undermine the proceedings by threatening a judge with jail time if he did not rule in the company’s favor.

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