Investors call on Chevron to settle $18bn Ecuador case

Signatories sought for letter challenging oil major

A group of investors led by the $140.6bn (€99bn) New York State Common Retirement Fund and asset manager Trillium is calling on Chevron to settle its almost two-decade old lawsuit in Ecuador.
The investors are urging Chevron to consider “whether to settle with the plaintiffs rather than pursue endless rounds of appeals in an attempt to delay the inevitable”.
The New York fund, the third largest in the US, and Trillium are seeking investor signatories to a letter to be sent to the oil giant calling on it to take a “fresh look at its options”.
The issue surrounds an $18bn judgement against the company handed down by an Ecuadorian court in February this year. The lawsuit was filed in 2003 by 30,000 Ecuadorian aboriginal people over the company’s alleged pollution of the Amazonian rainforest through oil drilling and waste products.
Chevron has appealed against the decision – but the investors say it is unlikely that a preliminary injunction obtained by Chevron could be applied outside the US. They also say that Chevron’s image has been seriously tarnished by its “limited pollution remediation efforts”.
The investors are also calling on Chevron to inform shareholders about the risks arising from the Ecuadorian ruling and to reassess whether interminable litigation is the best strategy for the company and its shareholders.
Chevron, in its most recent filing to the Securities and Exchange Commission on May 5, said the lawsuit “lacks legal or factual merit” and that the February judgement against it “is the product of fraud,and contrary to the legitimate scientific evidence”. And it says it is unable to make an estimate of its possible loss in the case.

The shareholder initiative coincides with a new report saying Chevron’s counter-litigation and public relations campaign against the plaintiffs could backfire and be a long-term barrier to it obtaining “the legal right and social license” to explore and operate.
The study – An Analysis of the Financial and Operational Risks to Chevron Corporation from Aguinda v. ChevronTexaco – was prepared by Simon Billenness of Strategy for Corporate Responsibility and Social Investment and Sanford Lewis, Strategic Counsel on Corporate Accountability. It was commissioned by Amazon Watch and Rainforest Action Network.

The authors say Chevron is downplaying the risk associated with the Ecuador litigation in its public filings and statements to shareholders – and that it has made “one-sided” public statements about legal particulars. They conclude: “These choices may lead investors to question the accuracy of the company’s public assessments of the financial and operational risk it faces.”

The company’s new corporate social responsibility report says it contributed $197m in social investments in 2010 and that it has “developed plans and provided resources” to implement its Human Rights Policy.
Chevron is already facing a raft of shareholder resolutions on environmental, social and governance (ESG) issues at its annual shareholder meeting in California on May 25.