A New York federal court ruling this week sends a strong and positive message to Ecuador—that corrupt methods and practices that undermine the integrity of Ecuador’s judicial system will not be tolerated in the United States. They should not be tolerated in Ecuador, either.
Two years ago, a court in Ecuador levied a colossal fine of nearly $19 billion (later reduced to $9.5 billion) on Chevron over pollution in Lago Agrio, a small town in the Amazon Basin, allegedly caused in the 1970s and 1980s by Texaco (which was bought by Chevron in 2001).
But Chevron argued successfully that “the Lago Agrio plaintiffs’ team [won] the huge Ecuadorian judgment through bribery, extortion, fraud, witness tampering, obstruction of justice, and money laundering.”
For example, in his testimony at the trial in New York last year, the Ecuadorian judge who imposed that massive fine “seemed startlingly unfamiliar with the contents of the opinion he claims to have authored. He was unable to account for key data, reasoning, case citations, and terms he used in it.”
As Chevron noted in a press release, after reviewing all of the evidence, the U.S. District Court for the Southern District of New York found that “the $9.5 billion judgment against Chevron Corporation in Ecuador was the product of fraud and racketeering, finding [the ruling] unenforceable.”
Ecuador is no stranger to judicial corruption and weak rule of law. The country ranks in the bottom third of the Freedom from Corruption category in the 2014 Index of Economic Freedom, co-published by The Heritage Foundation and The Wall Street Journal. On top of petty corruption and bribery, the Ecuadorian government has also shown disregard for property rights, especially those of foreign firms.
This ruling is a triumph for the rule of law. It contrasts an efficient and judicious court system against a corrupt and fraudulent one. The rule of law and the fairness of the judicial process are vital to both large corporations and small towns. It is imperative that all judges, in Ecuador and the United States, maintain the integrity and impartiality of judicial proceedings. Whether the rule of law improves in Ecuador will be the true measure of whether this case has a positive impact in Ecuador.