Chevron can't arbitrate Ecuador liability-US court

A U.S. court said on Tuesday Ecuador's government did not have to enter arbitration with Chevron Corp (CVX.N: Quote, Profile, Research, Stock Buzz) over an estimated liability of up to $16 billion stemming from oil waste pits in the Amazon rainforest. The 2nd U.S. Circuit Court of Appeals found Chevron's claim that Ecuador must submit to arbitration over who was responsible for any environmental damage to be "without merit," according to a summary order from the New York court. In an ongoing suit in Ecuador, locals charge that Chevron's Texaco unit damaged their health by dumping billions of gallons of oil-laden water from 1972 to 1992, before turning over operations to state-run Petroecuador. "This ruling is yet another blow to Chevron's strategy to avoid liability in Ecuador and signals that Chevron should take responsibility for the environmental and medical tragedy that resulted from the contamination," Pablo Fajardo, an attorney for the plaintiffs, said in a statement. Texaco, bought by the second-largest U.S. oil company in 2001, denies its operations affected the health of Amazon communities. The company argues it was released from liability because it paid $40 million for an environmental clean-up in the 1990s, and blames Petroecuador for much of the pollution. "The Court's decision denies Chevron the contractual remedy of arbitration and will require us to pursue other avenues to ensure that the government of Ecuador lives up to its legal and contractual obligations," Chevron spokesman Don Campbell said in a e-mailed statement. Ecuador argues the 1995 release for Chevron excluded third-party claims such as the current civil lawsuit, which plaintiffs' lawyers say is expected to be decided next year. An expert appointed by the Ecuador court assessed damages of between $7.2 billion and $16.3 billion, which Chevron called "exaggerated" and based on "erroneous" evidence. The three-judge panel's ruling on Tuesday for the appeals court upheld a federal court decision finding no legal basis for Chevron's claim that Ecuador had to arbitrate the dispute under a 1965 agreement between Texaco and Gulf Oil Co before a predecessor company to Petroecuador took over Gulf's interest. "The ruling does not address the issue of ultimate responsibility and Chevron remains firm on its position that the government of Ecuador and Petroecuador must comply with their contractual obligations, which they have consistently repudiated," Chevron's Campbell said in a statement. "Chevron has repeatedly raised other concerns about the ability to get a fair trial in Ecuador," he added. President Rafael Correa, a leftist who often scorns foreign oil companies and accuses them of cheating Ecuador of money, has said the company did irreversible damage to the jungle. San Ramon, California-based Chevron described an indictment by Ecuador last month of two attorneys associated with its operations in the country as politically motivated.