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11-CV-3718 (LAK) CHEVRON CORPORATION, PLAINTIFF,
MARíA AGUINDA SALAZAR et al., DEFENDANTS AND STEVEN DONZIGER et al., INTERVENORS ________________________________________________________________________
EXPERT REPORT OF ÁNGEL R. OQUENDO ________________________________________________________________________
TABLE OF CONTENTS Page I. II. BACKGROUND AND QUALIFICATIONS..........................................................1 SCOPE OF OPINION ............................................................................................2
III. SUMMARY OF CONCLUSIONS .........................................................................3 IV. DISCUSSION ........................................................................................................4 A. RES JUDICATA AND THE LAGO AGRIO DIFFUSE-RIGHTS SUIT .............4 1. NOMENCLATURE: “INDIVIDUAL” VS. “DIFFUSE” RIGHTS.............4 2. GENERAL PRINCIPLES OF RES JUDICATA...........................................7 3. IDENTITY OF PARTIES AND DIFFUSE-RIGHTS ACTIONS ................9 4. IDENTITY OF PARTIES BETWEEN THE TWO CONTROVERSIES AT STAKE ............................................................................................... 12 a) The First Set of Claimants: Ecuadorian Governmental Authorities ......12 b) The Second Set of Claimants: The Lago Agrio Plaintiffs..................... 17 B. CIVIL-LAW ANALYSIS OF THE LAGO AGRIO DECISION ...................... 18 1. INTRODUCTION ..................................................................................... 18 2. RES JUDICATA......................................................................................... 20 3. RETROACTIVITY....................................................................................26 4. PUNITIVE DAMAGES.............................................................................32 V. SIGNATURE .......................................................................................................38
REPORT: IMPLICATIONS OF THE SETTLEMENTS BETWEEN TEXACO PETROLEUM CORPORATION AND ECUADORIAN GOVERNMENTAL AUTHORITIES FOR THE PRESENT LITIGATION— IDENTITY OF PARTIES; ANALYSIS OF THE LAGO AGRIO DECISION FROM A CIVIL LAW PERSPECTIVE
I, Ángel R. Oquendo, declare that the following is true and correct. I. Background and Qualifications
1. A law professor and scholar, I have taught Latin American Law for over 15 years. Exhibits A and B, which are attached to this report, describe my background and my qualifications for forming the opinions that are set forth in this expert report. Exhibit B also includes a list of my publications from the last ten years. I have not testified as an expert at trial or by deposition in the previous four years. In 2009, I submitted a written declaration, on the basis of my Latin-American-Law expertise, for two asylum-petition proceedings before the Immigration Court in Hartford, Connecticut: (1) Matter of M-P; (2) Matter of G-M (Htfd. Imm. Ct.) (2009). 2. A list of the documents that I considered to render the opinions that are set forth in this report is attached as Exhibit C. In addition, I hereby incorporate, as Exhibit D, my prior expert report, which I submitted to an arbitration tribunal and signed on September 2, 2010. I prepared such report for Chevron Corp. v. The Republic of Ecuador, PCA Case No. 2009-23 (hereinafter “BIT-Report”), which is the arbitration proceeding that Chevron and Texaco commenced against the Republic of Ecuador.
3. I currently reside in Rio de Janeiro, Brazil. My professional address is University of Connecticut School of Law, 65 Elizabeth Street, Hartford, CT 06105-2290, USA. I declare that I am independent from the Parties, their legal advisors, and the District Court. 4. I am qualified to offer the opinions stated in this report, which are based on my professional knowledge. For almost two decades, I have been a law professor and scholar, and have taught civil procedure and complex litigation in the United States, Europe, and Latin America. Moreover, I have published numerous articles in these fields, focusing on issues of international and comparative law. 5. In the course of my career, I have studied and analyzed thousands of Latin American and civil-law decisions, dealing mostly with commercial, procedural, civil, and constitutional law and often with collective-rights claims. In addition, I have become very familiar with the constitutions and civil codes of Latin America and Europe and have studied their application extensively. In writing this expert report, I have relied on this background and have formed my conclusions based on my own knowledge and understanding of Latin American and Civil Law. 6. This report was originally prepared in English. 7. I am being paid for my work at the rate of $720 per hour. My compensation does not depend on the outcome of this litigation. II. Scope of Opinion 8. I have been asked to opine, from a comparative perspective, on whether there is, for purposes of res judicata, an identity of parties, on the claimant side, between the Ecuadorian governmental settlements entered into with Texaco Petroleum, Inc.
(TexPet) in the 1990s and the Lago Agrio lawsuit pending, on appeal, in Ecuador today. 9. I have also been invited to review and analyze, from a civil-law perspective, the legal reasoning in the Lago Agrio decision issued by the trial court. In carrying out this task, I have focused on the discussion of issues such as preclusion, retroactivity, punitive damages, causation, and piercing the corporate veil. III. Summary of Conclusions 10. For the reasons elucidated below, I conclude that an identity of parties exists. The governmental authorities were, on the one hand, and the Lago Agrio plaintiffs are, on the other hand, seeking to enforce “diffuse” rights, which are indivisible entitlements that pertain to the society as a whole. When two controversies center on such rights, they satisfy the identity-of-parties requirement if the claimants represent the same real party in interest. The governmental authorities originally acted in representation of the same broader community that the Lago Agrio plaintiffs now want to represent, as well as the same socioeconomic and environmental interests. 11. Similarly, I arrive at the conclusion that the Lago Agrio decision diverges significantly from the typical Latin American or continental European opinion in its overall disjointedness, in its arbitrary appropriation of certain common-law concepts, in the weakness of much of its reasoning, and in its general unresponsiveness. With respect to res judicata and retroactivity, the decision focuses on uncontested and irrelevant points. It ultimately fails to come to terms with the defendant’s arguments, viz., on the one hand, (1) that the Ecuadorian authorities already represented the same real party in interest, settled identical claims, and thus barred other representatives
from re-litigating the matter and, on the other hand, (2) that the plaintiffs are basing the complaint, in violation of the Civil Code and of basic fairness, on the substantive portions of a law that Ecuador’s legislature enacted many years after the alleged harm took place. Moreover, the decision awards punitive damages without any legal basis, inasmuch as the Ecuadorian legal system, along with its counterparts in the civil-law tradition, does not support this kind of remedy. IV. Discussion A. Res Judicata and the Lago Agrio Diffuse-Rights Suit 1. Nomenclature: “Individual” vs. “Diffuse” Rights 12. In order to approach its subject matter with precision, this Report will distinguish “individual” rights from “diffuse” rights. The latter, rather than the former, lie at the heart of TexPet’s disputes both with Ecuadorian governmental authorities and with the Lago Agrio plaintiffs. 13. Single individual rights constitute the most basic element in this categorical scheme. They represent claims that one person asserts against someone else. For instance, P may, under ordinary circumstance, rightfully demand compensation when D negligently causes personal injury to P. 14. Two or more individual claims may sometimes be combined into a single action where there is sufficient legal or factual commonality to warrant the combination. The underlying rights do not thereby lose their individualized character. For example, if D causes injury to P1 and P2 through negligence, P1 and P2 may combine their claims and vindicate them together. As the number of individual right-holders increases, the denomination “aggregated individual rights” becomes appropriate.
Nonetheless, the underlying rights remain individual and normally allow apportionment. For instance, when a large group of shareholders sues the corporate board of directors for negligence, each shareholder usually has a claim that is commensurate with the number of shares that he or she owns. 15. These individual rights, which allow division, stand in contrast to “diffuse rights,” which are indivisible and belong to society as a whole or to a large community. The category of diffuse rights includes generalized entitlements that have been recognized nationally or internationally, such as the right to a healthy environment, the right to cultural self-determination, or the right to economic development. 16. To build off an example from one of my articles,1 suppose that a privately run prison neglects security regulations and thus compromises the safety of the surrounding community. Individual neighbors who, as a result, see their home values drop might aggregate their individual claims against the prison and seek compensation for the quantified diminution in the value of their homes. In addition to such an aggregation of individual claims, the surrounding community might assert a diffuse right to a safe residential neighborhood and request an injunction requiring the prison to abide by the security regulations. 17. In the latter case, the diffuse right at issue transcends those of the individual neighbors. It cannot be realistically apportioned (or divided) among individual members of the surrounding community. It may be violated even if none of the homes lose any value. An injunction issued against the prison, in order to protect this diffuse right, benefits the entire community, but no individual member of the
Ángel R. Oquendo, Upping the Ante: Collective Litigation in Latin America, 47 COLUM. J. TRANSNAT’L L. 248, 280 (2009).
community in particular. That is, beyond the economic loss that has been endured by the individual homeowners, the entire surrounding community has suffered a separate loss due to the overall diminution in the quality of life. In this scenario, the individual rights would relate to, but also clearly differ from their diffuse counterparts. 18. Because aggregated individual rights are divisible, they may be enforced either individually, by the interested individuals themselves, or collectively, through a representative. Diffuse rights, in contrast, must be enforced collectively and through a representative. The individual members of the broader community cannot enforce their “part” of a diffuse right, because such a right allows no partition. A representative must enforce the right in the name of the entire community, which is the real party in interest. 19. Traditionally, the government had the prerogative to vindicate diffuse rights. It still plays an overwhelmingly predominant part in this effort, which remains a core governmental function. Nonetheless, numerous jurisdictions in the Western Hemisphere have started allowing individuals and organizations to take on, under certain circumstances, a similar representative role. Many countries have chosen to define, explicitly, the res judicata consequences of an action filed by one representative vis-à-vis suits that other representatives might subsequently lodge. They have invariably established that a final decision on the merits, upon the initiative of one representative, precludes other potential representatives from filing a new suit. 20. This Report will rely on this nomenclature in answering the first question posed; namely, whether there is an identity of parties, for purposes of res judicata, between
the original controversy, which involved the Ecuadorian governmental authorities and TexPet, and the present controversy, which involves the Lago Agrio plaintiffs and Chevron. It will conclude that both controversies involve, on the claimant’s side, the same real party in interest, i.e., the broader community living in the territory in which the oil-exploration and -production venture took place and the communal social and health interests. The real party in interest is the party that matters for purposes of res judicata in diffuse-rights cases, such as the two controversies at stake. 21. The fact that the nominal parties that initiated the first and the second controversy— i.e., the governmental entities and the Lago Agrio plaintiffs, respectively—differ is irrelevant. Both sets of parties were acting as representatives for the same real party in interest, viz., the broader community, and sought to vindicate the same diffuse socio-economic and environmental rights. The first set of parties, viz., the governmental entities, bound the second set of parties, viz., the Lago Agrio plaintiffs, as well as any other potential representative who might otherwise have had standing to sue. 2. General Principles of Res Judicata 22. Ecuadorian law, as well as that of many other civil law systems, gives res judicata effect to both out-of-court settlements and judgments. Under Article 2362 of the Ecuadorian Civil Code, “settlement produces the effect of res judicata at a court of last appeal.”2 A settlement, accordingly, has consequences that are identical to those
Civil Code [Civ. C.] art. 2362 (2005) (Ecuador). See also Civ. C. art. 2052 (1804) (Fr.) (109th ed. 2010) (“Transactions between the parties have res judicata authority in the last instance without possibility of appeal. They may not be attacked because of a mistake of law, or because of lesion (laesio enormis).”); Civ. C. art. 2460 (1857) (15th ed.) (Chile) (“Settlement produces the effect of res judicata in the final level”); Civ. C. art. 850 (1871) (Arg.) (“A settlement cancels any rights and obligations the parties may have waived and has the authority of res judicata for them.”); Civ. C. art. 2483 (1887) (20th ed. 2008) (Colom.) (“Settlement produces the effect of res judicata in the final level.”); Fed. Civ. C. art. 2953 (1928)
of a final adjudication on the merits. Judges have the obligation to dismiss any subsequently filed suit on the same issue, by the same parties. 23. Ecuadorian law also echoes other civil law jurisdictions in defining res judicata. Article 297 of the Code of Civil Procedure proclaims the validity, in addition to specifying the requirements, of the doctrine. A final judgment irrevocably binds the parties who participated in the trial, as well as their legal successors. Consequently, a new suit may not take place if it involves subjective identity, which consists in the intervention of the same parties, and objective identity, which entails demanding the same thing, amount, or fact on the basis of the same cause, reason, or right.3 24. This formulation demands, for preclusion, what civil-law lawyers traditionally denominate “the three identities,” i.e., (1) of the parties, (2) of the thing, and (3) of the
(Mex.) (“In regard to the parties, settlement shall have the same effect and authority as res judicata.”); Civ. C. art. 1302 (1984) (Peru) (“Settlement has the value of res judicata..”); Code Civil Procedure [C. Civ. Pro.] art. 255 (1990) (Venez.) (“Settlement between the parties shall have the same effect as res judicata.”). Throughout this Report, the author has provided all translations of documents from Spanish, Portuguese, French, and German. 3 C. Civ. Pro. art. 297 (2005) (Ecuador). See Danilo Caicedo Tapia, La cosa juzgada, 64 LEX ECUADOR 6 (July, 2008) (“We can define this institution as the impossibility to discuss in a judicial procedure a matter that was previously already resolved in another former process. For this general statement to be valid, the following enunciated elements are necessary: Subjective identity - Intervention of the same legal parties. Objective identity - The object of the judgment is the same thing, quantity or fact supported in the same cause, reason or rights.”). See also Civ. C. art. 1351 (1804) (Fr.) (109th ed. 2010) (“The force of res judicata authority applies only to that which was the subject matter of the judgment. The thing demanded must be the same, the demand must be grounded on the same cause, and the demand must be between the same parties and be made by and against them in the same capacity.”); C. Civ. Pro. art. 177 (1893) (15th ed. 2001) (Chile) (“The litigant who has obtained the ruling and all others who benefit from it under the law may invoke the exception of res judicata, provided that there exists, between the new and the previously resolved complaint, (1) legal identity of parties, (2) identity of the thing pursued, and (3) identity of the cause supporting the pursuit.”). Cf. C. Civ. Pro. art. 301, §§1-2 (1973) (Braz.) (“Lis pendens or res judicata occurs upon the re-filing of a previously adjudicated action. An action is identical to another when it involves the same parties, the same cause, and the same request.”); C. Civ. Pro. art. 332 (1970) (Colom.) (“A final decision issued in an opposed proceeding shall have the force of res judicata provided that the new proceedings concern the same purpose and are based on the same case as the previous one and that the parties in the two sets of proceedings are the same.”); Civ. C. art. 1.395 (1982) (Venez.) (“Res judicata does not apply except in regard to the matter that was the subject of the ruling. It is necessary that the item sought be the same; that the new claim be based on the same cause of action; that it be between the same parties, and that these parties come to the proceedings with the same capacities as in the prior proceedings.”).
cause. 4 This part of the Discussion will treat the settlements between the governmental authorities and TexPet as having the same effect as a final judicial decision on the merits and will focus on the first (subjective) requirement for res judicata in the Ecuadorian Civil Code: the identity of parties. It will not directly analyze the second and third (objective) prerequisites, which the Lago Agrio decision did not address or call into question. Nonetheless, the identity-of-parties requirement in diffuse actions is intimately related to the other two prerequisites. In particular, a determination that the nominal plaintiffs represent the same real party in interest— viz., the same larger collectivity and the same set of interests, implies that they are staking the same claim, so long as they are suing the same defendant for the same alleged violations. 3. Identity of Parties and Diffuse-Rights Actions 25. Two diffuse-rights actions are taken to involve the same party, for purposes of res judicata, when their respective nominal plaintiffs represent the same real party in interest—i.e., the same larger collectivity and the same set of interests. A claimant seeking to vindicate diffuse rights may, therefore, bar a subsequent claimant purporting to represent the same real party in interest. Specifically, the state may, upon enforcing diffuse rights, preclude individuals from subsequently suing for the same rights on behalf of the same community. 26. As my previous Report explains in detail, Latin American jurisdictions that allow diffuse-rights litigation embrace these principles, e.g., Argentina, Brazil, Colombia,
EDUARDO J. COUTURE, FUNDAMENTOS DEL DERECHO PROCESAL CIVIL 411 (1964) (“This norm, traditionally denominated that of the three identities, has always enjoyed, and continues to enjoy, considerable prestige in judicial precedents.”).
Peru, and Uruguay. 5 The fact that all of these legal systems bar potential posterior plaintiffs from enforcing the same diffuse rights is not surprising. The very notion of representative litigation requires such an approach. If representatives were not able to bind the entire community—including any of its members with similar standing to vindicate its diffuse rights, they would not really be representing it in a full sense. 27. Allowing reiterated vindication of the same diffuse rights would, furthermore, encroach precisely upon the fundamental aims of efficiency and fairness that the doctrine of res judicata seeks to advance. It would, on the one hand, inefficiently force the tribunal to repeat essentially the same trial, potentially many times over. On the other hand, the contemplated approach would operate unfairly with respect to the defendant, who would have to respond to repeated attempts to enforce the same diffuse rights and might end up having to compensate the community, once and again, for the same alleged violation. 28. For these reasons, the law throughout the Americas uniformly and expressly establishes that the resolution of a diffuse-rights action has erga omnes effects. This wide uniformity across the whole hemisphere should not come as a surprise. A legal system that held otherwise would undermine the very notion of representative litigation, would lead to uncertainty and inefficiency, and would bring about fundamental unfairness vis-à-vis the defendant. It would thus be taking an approach similar to that of allowing various representatives of a single person or legal entity to enforce the same entitlements over and over again against a particular party. 29. In a case on point that bears directly on the present controversy, the First Civil Court of Sucumbios rejects the attempt by the new mayor of Lago Agrio to re-litigate the
See BIT-Report (Exhibit D).
claims that his predecessor had already settled with TexPet. The tribunal cites the settlement and dismisses his suit. For its part, Ecuador’s Supreme Court rejected his appeal. 6 30. As particularized in my prior Report, different procedural mechanisms exist for the vindication of diffuse rights in Latin America: in Portuguese-speaking Brazil, as well as in Spanish American countries, such as Argentina, Colombia, Peru, and Uruguay. Legal systems in the region usually empower individuals or private organizations to vindicate such rights through popular actions and diffuse-interests suits. Some of the available procedures, such as the collective writ of protection (amparo colectivo) in Spanish America, and the public civil action in Brazil, serve to enforce diffuse rights, in addition to aggregated individual rights. 31. Of course, the state may also vindicate diffuse rights. It typically does so through administrative actions, but may now rely on other, new or renewed, procedures. In Brazil, the state may bring public civil actions. In Spanish America, it may file diffuse-interests suits or popular actions. 32. In all of these procedures, the identity-of-parties requirement is satisfied, for purposes of res judicata, so long as the primary and the posterior suits involve the same real party in interest. In general, an action by one representative precludes similar subsequent suits, even if filed by a different representative. Specifically, state action on behalf of the broader community bars another representative from raising, afterward, the same diffuse claim.
Dismissal Jdt. (1st Civ. Ct. Sucumbios) (Feb. 27, 1997); Dismissal of App. (1st Chamb.) (Sup. Ct.) (Ecuador) (May 15, 1997). See also 3 Interlocutory Jdts. (1st Civ. Ct. Sucumbios) (Oct. 23, 1996) (Oct. 10, 1996) (Oct. 1, 1996).
4. Identity of Parties Between the Two Controversies at Stake 33. The representatives in the two controversies at stake here differ. In the first dispute, the national, provincial, and municipal governments led the charge. 7 This second time around, the Lago Agrio plaintiffs have taken the initiative. 8 Since both controversies involve the same diffuse rights, however, they meet the identity-ofparties requirement, for purposes of res judicata, so long as the nominal plaintiffs represent the same real party in interest. a) The First Set of Claimants: Ecuadorian Governmental Authorities 34. The Ecuadorian national, provincial, and municipal authorities sought reparation for alleged damages resulting from the petroleum venture, in which TexPet participated as an operator and minority owner. They set out to vindicate the diffuse rights, to a healthy environment, of their respective constituencies. These governmental entities were thus acting in their “representative”9 capacity and exercising their constitutional authority to protect the population’s environmental well-being. 10 The 1978 Constitution, which was in force at the time, imposes on the “state” the “duty… to
See, e.g., Contract for Implementing of Environmental Remedial Work and Release from Obligations, Liability and Claims between the Republic of Ecuador and Texaco Petroleum Company (May 4, 1995) (hereinafter “1995 Settl.”). 8 Lawsuit for Alleged Damages filed before the President of the Superior Court of “Nueva Loja,” in Lago Agrio, Province of Sucumbios; on May 7, 2003, by 48 Inhabitants of the Orellana and the Sucumbios Province, Superior Court of Nueva Loja, Complaint, May 7, 2003 (hereinafter “Lago Agrio Compl.”), ¶VI; in English Translation ¶VI. This Report will refer, in the first instance, to the original document in Spanish, will provide its own translation (if necessary), and will cite the available full translation. 9 1978 Const. (hereinafter “1978 Const.”), art. 1. See also 2008 Const. (hereinafter “2008 Const.”), art. 95; 1998 Const. (hereinafter “1978 Const.”), art. 1. 10 1978 Const., art. 19(2); 1998 Const., art. 86 (The “preservation of the environment” and the “prevention of environmental contamination” are part of the “public interest.”); see also id., art. 88; 2008 Const., art. 14 (“The people’s right to live in a healthy and ecologically balanced environment that guarantees sustainability and good living - sumak kawsay - is recognized. Environmental preservation, conservation of the ecosystems, the biodiversity and the integrity of the country’s genetic heritage, prevention of environmental damage and recovery of degraded natural areas are declared to be of public interest.”); art. 72.
guarantee the preservation of nature” and “to ensure” the inviolability of “the right to live in an environment free of contamination.”11 35. In the 1994 Memorandum of Understanding, the Republic of Ecuador secured from TexPet a commitment to “carry out socio-economic Projects for Socio-economic Compensation, designed to resolve [environmental] problems… caused by the oil operations.”12 Such compensatory effort would accrue to the benefit of the larger population. The document in question underscores that the projects at issue had to unfold “taking into consideration the inhabitants of the Oriente Region.”13 36. The anticipated and subsequently executed “Scope of the Environmental Remedial Work” (“1995 Scope of Work”) specifies the actions that TexPet had to undertake in order to redress the alleged harm to society, on the one hand, and to the environment, on the other hand. 14 It requires, in relation to the latter, a vast remediation effort, “in collaboration with the population,” as well as the payment of $1 million to a redress fund.15 Regarding the former, the text imposes on TexPet the duty to contribute to the “community infrastructure” by funding various sanitary and environmental “programs.”16 It additionally obligates TexPet “to continue… negotiations” with the municipalities of Lago Agrio (Nueva Loja), Shushufindi, La Joya de los Sachas, and Francisco de Orellana (Coca).17
1978 Const., art. 19(2). Memorandum of Understanding Between the Government of Ecuador, Petroecuador and Texaco Petroleum Company (Dec. 14, 1994) (hereinafter “1994 Mem. Understand.”), p.3; in English Translation at 3. 13 Id.; in English Translation at 3. 14 Scope of the Environmental Remedial Work (Mar. 23, 1995) (hereinafter “1995 Scope of Work”), pp. 1-6; in English Translation at 1-3. 15 Id. at 4; in English Translation at 3. 16 Id. at 5; in English Translation at 3-4. 17 Id. at 6; in English Translation at 4.
37. The document aims, overall, at addressing any and all diffuse claims against TexPet in a comprehensive and exhaustive manner. It broadly details the socio-ecological demands of the Republic of Ecuador, narrowly preserves those of the municipal administrations, and leaves out those of anyone else. 38. The 1995 Settlement Agreement between TexPet and the Republic of Ecuador incorporates the 1995 Scope of Work text as its Appendix A and takes a similar approach.18 The 1998 Final Act, in turn, purports to confirm that TexPet fully discharged, to the satisfaction of the national authorities and their monitors, its obligations under the 1995 Settlement Agreement.19 The Ecuadorian state thus settled all of its claims related to the “environmental impact stemming from the Consortium’s operation,” including those based on “civil or equitable law,” “on contracts or on malicious conduct,” on constitutional entitlements or penalties, on statutes or regulations, on “nuisance,” on “negligence,” on “strict liability,” or “on any theory of compensation.”20 39. All in all, the national government did not merely pursue its own particular commercial, contractual, financial, fiscal, pecuniary, or proprietary interests. Instead, it acted, as it frequently, prototypically, and principally does, in defense of the general well-being of its people. In fact, the 1978 Constitution declares: “The state’s primordial function consists in strengthening national unity, in guaranteeing
1995 Settl. at 5; in English Translation at 6. Final Certification between the Republic of Ecuador, Petroecuador, PetroProduccion and TexPet at 1-2, 7-8 (Sept. 30, 1998); in English Translation at 1-2, 6. 20 1995 Settl. at 8-9 (§5.2); in English Translation at 10.
fundamental rights, and in promoting the economic, social, and cultural progress of the population.”21 40. Specifically, the Ecuadorian central authorities sought to enforce its citizenry’s diffuse environmental right against any violations that TexPet might have committed. With the settlement, the Republic of Ecuador bound itself and anyone else purporting to vindicate the same rights. It shared an identity, for purposes of res judicata, with all other nominal parties who might have had standing to represent the broader community’s indivisible interests against the alleged infringements. 41. In addition, the authorities of the Sucumbios province entered into a settlement agreement in 1996.22 They had conferred “with entities and organizations representing the community of its inhabitants” in order to select an acceptable reparation project to resolve the dispute.23 The provincial government insisted, finally, that the petroleum company settle, with court approval, the actions that the municipalities of Nueva Loja (Lago Agrio) and Shushufindi had filed on similar grounds.24 It, evidently, followed the lead of the Republic of Ecuador in its quest for comprehensiveness and exhaustiveness in the resolution of the underlying controversy. 42. The municipalities concerned actually filed suit against TexPet in 1994 and ultimately reached a court-approved settlement in 1996. The municipal government of La Joya
1978 Const., art. 2. See also 2008 Const., art. 3; 1998 Const., art. 3. Contract of Settlement and Release between Texaco Petroleum Company and the Provincial Prefect Office of Sucumbíos (May 2, 1996) (hereinafter “Sucumbíos Settl.”), p. 4; in English Translation at 3. The Napo Province, for its part, endorsed, also in 1996, a short release that identified the dispute as relating, generally, to “the oil concession,” and, especially, to “the impact or damages possibly caused to the environment.” Instrument of Settlement and Release from Obligations, Responsibilities, and Claims between the Municipalities Consortium of Napo and Texaco Petroleum Company at 1 (Apr. 26, 1996); in English Translation at 1. 23 Sucumbíos Settl. at 3-4; in English Translation at 3. 24 Id. at 5-6; in English Translation at 4.
de los Sachas, for example, consulted “with the entities and organizations representing the community of its inhabitants” in order to choose an appropriate reparation project.25 It ultimately requested, “in accordance with [the] community interest,” that TexPet finance various “social interest works.” 26 In the end, the
municipality acceded to liberate the enterprise of any further liability for damage “possibly caused to the environment.”27 43. The three remaining municipalities, Lago Agrio (Nueva Loja), Shushufindi, and Francisco de Orellana (Coca) presented almost identically worded complaints. The first two of them underscored that they were defending resources that constituted “patrimony of [their] communities.”28 All of them eventually settled their suits along the same lines as La Joya de los Sachas, i.e., focusing on the diffuse rights of their constituents. Significantly, the First Civil Court of Sucumbios dismissed a suit, which was lodged by the new mayor of Lago Agrio and which resembled that of the Lago Agrio plaintiffs, against TexPet for the same alleged violations. The tribunal invoked the settlement and dismissed the action, while Ecuador’s Supreme Court rejected the appeal.29
Release with Municipality of La Joya de los Sachas at 4 (May 2, 1996); in English Translation at 3. Id. at 5; in English Translation at 3-4. 27 Id. at 6-7; in English Translation at 4-5. 28 See Lago Agrio Mun. v. TexPet, Compl. ¶2 (July 25, 1994); in English Translation ¶2. See also Shushufindi Mun. v. TexPet, Compl. ¶2 (July 20, 1994); in English Translation ¶2. The former translation renders the Spanish phrase “el patrimonio de nuestras comunidades” literally into “the patrimony of our communities.” The latter translates the same language, somewhat differently: “on which our communities depend.” 29 Dismissal Jdt. (1st Civ. Ct. Sucumbios) (Feb. 27, 1997); Dismissal of App. (1st Chamb.) (Sup. Ct.) (Ecuador) (May 15, 1997). See also 3 Interlocutory Jdts. (1st Civ. Ct. Sucumbios) (Oct. 23, 1996) (Oct. 10, 1996) (Oct. 1, 1996).
b) The Second Set of Claimants: The Lago Agrio Plaintiffs 44. The Lago Agrio plaintiffs are seeking the enforcement of diffuse, rather than individual, rights. Because they are suing in representation of the same broader community and of the same societal and environmental interests as those that the governmental authorities represented in the settlement negotiations in the 1990s, their suit involves the same claimant, within the meaning of res judicata, as that engaged in the previous and ultimately settled dispute. 45. The complainants are litigating “as members of the affected communities and in safeguard of their recognized collective rights.”30 They neither mention any violation to their individual rights nor aver that TexPet’s actions injured them specifically in their person, property, or particular possibilities. In their prayer for relief, 31 the plaintiffs invoke the 1999 Law of Environmental Management, which authorizes “indemnification in favor of the directly affected collectivity,” as well as reparation of the “harm caused.”32 The statute affirms that environmental rights are “collective” and “shared by the community” and defines “diffuse rights” as “homogeneous and indivisible interests held by indeterminate groups of individuals tied by common circumstances.”33 46. The complaint calls for the vindication of indivisible, diffuse rights by means of damages and reparatory measures.34 It actually acknowledges the previous controversy and release.35 The complainants thus implicitly recognize that they are
Lago Agrio Compl. ¶VI; in English Translation ¶VI. Id. ¶VI; in English Translation ¶VI. 32 Environ. Mgt. Act (Ecuador) (1999), Art. 43. 33 Id., Glossary of Definitions. 34 Lago Agrio Compl. ¶VI(1, 2); in English Translation ¶VI(1, 2). 35 Id. ¶I (9-10); in English Translation ¶I (9-10).
acting in representation of the same community at large that the governmental authorities already represented beforehand and of the same socio-economic and environmental interests that the government previously defended. 47. The face of the complaint, accordingly, shows that the plaintiffs are pursuing not the enforcement of their individual rights, but rather that of their diffuse rights. In light of this fact, the suit satisfies the identity-of-parties requirement, with respect to the earlier controversy, since the plaintiffs represent the same collectivity. The complaint itself also demonstrates that the plaintiffs are speaking for the same socio-economic and environmental interests as did the governmental authorities in their prior settlements. B. Civil-Law Analysis of the Lago Agrio Decision 1. Introduction 48. The Lago Agrio decision makes for extremely hard reading. It diverges significantly from typical Latin American or continental European opinions in its overall disjointedness and in its argumentative fragility. Beyond (1) jumping back and forth between topics and (2) dwelling upon relatively unimportant matters, the decision, more fundamentally, (3) fails to consider, head-on, some of the main issues and (4) arrives at certain determinations without any legal basis. This Section will focus on two instances of the third of these problems and on one instance of the last one. Accordingly, it will examine the decision’s discussion, on the one hand, of res judicata (Sub-Section 2) and retroactivity (Sub-Section 3) and, on the other hand, of punitive damages (Sub-Section 4).
49. Of course, civil-law systems differ significantly from their common-law counterparts. Nonetheless, the former converge with the latter in many respects too.36 In particular, they also require the judiciary to respond to the controversies before it with reasons and arguments. The provisions and the very structure of the various legal codes call for rational construction. 37 50. The Ecuadorian Code of Civil Procedure expressly requires clear, grounded, and reasoned judgments,38 while urging judges to avoid “obscurity” and vagueness. 39 It thus comports with its counterparts in the region.40 In fact, an almost logicaldeductive model of judicial deliberation prevails in Latin America and continental Europe. As a result, opinions typically consist of an ordered sequence with, first, an antecedents section of premises, second, a body of considerations in the form of “whereas” paragraphs, and, third, a resolutions part including the final dispositive holdings. 41 51. Despite formally following this sequential order, the Lago Agrio decision fails to do justice to the underlying goal of settling controversies in a coherent, rational manner. For example, it discusses causation through a multiplicity of theories without reflecting much either upon the relationship between them or upon possible conflicts
See, generally, ÁNGEL R. OQUENDO, LATIN AMERICAN LAW (2011) (hereinafter “OQUENDO (2011)”), pp. 4-6, 54-55. 37 Id. at 36, 417. 38 Cd. Civ. Pro. arts. 274, 275, 276 (2005) (Ecuador). 39 Id., art. 275. 40 See OQUENDO (2011) at 731-732 (reproducing parts of Ángel R. Oquendo, The Comparative and the Critical Perspective in International Agreements, 15 U.C.L.A. PAC. BASIN L.J. 205 (1997)) (quoting Fed. Dist. Cd. Civ. Pro. art. 81 (1934) (Mexico)). See also id. at 774 (reproducing parts of José Carlos Barbosa Moreira, Brazilian Civil Procedure: An Overview, A PANORAMA OF BRAZILIAN LAW 183-205 (Jacob Dollinger & Keith Rosenn, Eds.) (1992)). 41 See id. at 137. See also id. at 709 (reproducing parts of Eduardo J. Couture, The Nature of Judicial Process, 25 TULANE L. REV. 1 (1951)), 732 n.151 (reproducing parts of Ángel R. Oquendo, The Comparative and the Critical Perspective in International Agreements, 15 U.C.L.A. Pac. Basin L.J. 205 (1997) (quoting JAMES E. HERGET & JORGE CAMIL, AN INTRODUCTION TO THE MEXICAN LEGAL SYSTEM 76 (1978)).
and without fully establishing a causal connection between the alleged harm and TexPet.42 Similarly, the decision does not come across as responsive and reasonable with respect to the questions at stake in this part of the Report. 2. Res Judicata 52. The Lago Agrio decision does not face up to the defendant’s claim that the settlement between Ecuadorian authorities and TexPet precludes subsequent litigation on the same matter. Rather than engaging any of the previously analyzed questions, it essentially makes two statements that no one would deny, i.e., that the government has had no formal part in the litigation before it and that none of the complainants was a signatory of the prior releases. 43 The decision does not consider the decisive issue of whether both the government and the plaintiffs were acting as representatives of the same real party in interest, viz., the broader community, which allegedly suffered a collective injury as a consequence of the oil venture. 53. Basically, the Lago Agrio decision refuses to acknowledge that, in negotiating and executing the settlement, state officials were representing anyone beyond themselves, the public entities for which they worked, and the government as a whole. 44 It denies that they were standing in for the “people,” “all Ecuadorians,” or “all citizens” in any real sense.45 This position neglects the previously referenced constitutional recognition of the government’s “representative” nature and of the general well-being of the population as the “primordial” governmental “function.”46 It implausibly
See, generally, Lago Agrio Opinion, Superior Court of Nueva Loja, February 14, 2011 (hereinafter, “Lago Agrio Opinion”), pp. 86-90 (7th Consideration, §7.3), 154-174 (10th Consideration). 43 Id. at 30-32 (3rd Consideration, §3.6), 34-35 (3rd Consideration, §3.7); See also id. at 176 (12th Consideration). 44 Id. at 31 (3rd Consideration, §3.6). 45 Id. at 30-31 (3rd Consideration, §3.6). 46 1978 Const., arts. 1, 2. See also 2008 Const., arts. 3, 95; 1998 Const., arts. 1, 3.
implies that the state, rather than exercising these characteristic, common, and crucial powers, assumed a relatively particular contractual role. Evidently, the authorities did more of the former than the latter when they alleged a broad harm to the environment and to people’s health and when they secured wide-ranging compensation for the claimed injury. 54. Furthermore, the Lago Agrio decision misses the point when it declares that the authorities may not abolish, through an “administrative contract,” the constitutionally and internationally “fundamental” right to petition or to litigate.47 In all likelihood, it does not really mean to aver that anybody is proposing that such across-the-board abolition may legitimately occur. Perhaps the decision intends to assert, more narrowly, that a governmental agreement with a potential defendant may not eradicate the right of individuals to sue in a particular case. If so, it begs the question of whether the government, in representation of the diffuse rights of the citizenry, may settle the claim and, as a result, deprive subsequent aspiring representatives of their day in court. Indeed, the previous part of this Discussion answered this query in the affirmative. 48 55. The decision cautions, somewhat cryptically, that if the authorities had the power to bar subsequent suits, they could do so without having to subject themselves to any checks or challenges.49 In this statement, the conclusion does not follow from the antecedent condition. Despite having the capacity of preclusion at stake, the government must respond to any timely objection that citizens may wish to formulate in the exercise of their constitutional and international right to petition, of their right,
Lago Agrio Opinion at 30 (3rd Consideration, §3.6). See also id. at 176 (12th Consideration). See, supra, §IV(A). 49 Lago Agrio Opinion at 30 (3rd Consideration, §3.6).
under administrative law, to contest agency actions, or of their right to file for a writ of protection against state violations of their entitlements under the Constitution. 56. Echoing its counterparts throughout the region, its successors in Ecuador, and the American Declaration of the Rights and Duties of Man,50 the Ecuadorian 1978 Constitution, which was in force when the authorities settled their claims against TexPet, expressly guarantees the “right to address grievances and petitions to the authorities,” as well as “to receive attention and adequate responses.” 51 It empowers citizens, further, “to supervise (fiscalizar) the acts of the organs of the state.”52 Significantly, the national, provincial, and municipal authorities exerted themselves to guarantee these entitlements throughout the process of negotiation. They constantly collaborated, conferred, and consulted with citizens and with civic groups.53 57. In Ecuador, as in other civil-law jurisdictions, interested individuals may, specifically, contest administrative acts related to the formation of a contract between the government and a private party.54 They may do so, first, internally, within the agency
See, e.g., Const., art. 8 (1917) (Mex.). See also, American Declaration of the Rights and Duties of Man (O.A.S.) (1948), Art. 24 (“Every person has the right to submit respectful petitions to any competent authority, for reasons of either general or private interest, and the right to obtain a prompt decision thereon.”). 51 1978 Const., art. 19(10). See also 2008 Const., art. 66(23); 1998 Const., art. 23(15). Ecuadorian commentators understand the very concept of “public of administration” to encompass “government action” aimed at the “opportune resolution [of] any claims or petitions that may arise or be raised.” Herman Jaramillo Ordóñez, La administración pública, REVISTA JUDICIAL (derecho.ecuador.com) (2008) (quoting Aníbal Guzmán Lara). Cf. L. 50, Off. Reg. 349 (Ley de Modernización del Estado) (1993), Art. 28 (“Right to Petition”). 52 1978 Const., art. 32. See also 2008 Const., arts. 61(5), 204; 1998 Const. (Ecuador), art. 26. See, generally, Delfina Torres, Rec. 229, Off. Reg. 43 (1st Civ. & Comm. Chamb.) (Sup. Ct.) (Ecuador) (2002), pp. 4-5 (5th Consideration). 53 See discussion supra, §IV(A)(4)(a). 54 See, e.g., Statute on the Legal and Adm. Regime of the Executive Branch (Estatuto del Régime Jurídico Administrativo de la Función Ejecutiva) (Ecuador) (2002), Art. 76 (“The acts… whose production, prescription, or execution served to prepare the administration’s decision to enter the administrative contract shall be considered separate, though unitary, parts of the administrative procedure that led to such decision. As a consequence, the rules of administrative procedure shall regulate how to arrive at and how to challenge the administration’s decision.”). See, generally, 2008 Const., art. 173; 1998 Const., art. 196; 1978 Const., art. 97 (“Any administrative act of the national, provincial, [or] municipal administration…
itself, and, thereafter, externally, before an administrative court.55 Individuals may also judicially challenge the agreement as a whole.56 58. Finally, Ecuadorians, like other Latin Americans, may additionally request, in court, a writ of protection against governmental action that encroaches upon their constitutional entitlements.57 They may, accordingly, rely on this special, summary procedure, which addresses the specific controversy at hand and does not set a
may be challenged before the competent organs of the judicial system.”); Adm. Cts. Act (Ley de la Jurisdicción Contenciosa-Administrativa) (Ecuador) (1968), Art. 1 (1968) (“Individuals and legal entities may file suit in administrative court to challenge any final regulation, act, or resolution of the Public Administration… that may violate their rights or interests.”). Cf. Decree 1, Cd. Adm. Pro. (Código Contencioso Administrativo) (Colom.) (1984) (As Amended, 1989, 1998), Art. 87 (“The acts carried out prior to the formation of [an administrative] contract… are subject to challenge through nullification actions or through actions of nullification and restoration of legality….”); Jdt. C-1048/01 (Const. Ct.) (Colom.) (2001); Environmental Protection Association of Lunellois, No. 293836 (Lebon Compilation) (State Council) (Fr.) (Dec. 17, 2008) (A “third party to an administrative contract may file an abuse-ofdiscretion action against the contract’s regulatory clauses, provided that he demonstrates that he has an interest at stake. He may also pursue such a suit against the public official’s refusal to rescind, as an act that is severable from the contract itself.”). 55 See, e.g., Statute on the Legal and Adm. Regime of the Executive Branch (Ecuador) (2002), Art. 77 (“The different legal actions [manifestaciones] that intervened in the formation and execution of an administrative contract may be challenged in an administrative or in a judicial forum.”). Cf. Cd. Adm. Pro. (Verwaltungsgerichtsordnung (VwGO)(Germany) (1960), §70 (“Any formal objection should be raised… before the state official, who carried out the administrative act….”), §42 (“The invalidation of an administrative act may be requested through a complaint, viz., an invalidation complaint…, when… the plaintiff’s rights” are at stake.), §43 (“The ascertainment of… whether an administrative act is null may be requested through a complaint, provided that the plaintiff has a legitimate interest….”). 56 Statute on the Legal and Adm. Regime of the Executive Branch (Ecuador) (2002), Art. 77 (“In general…, administrative district courts shall have exclusive jurisdiction judicially to consider and decide all questions related to administrative contracts.”). Cf. Decree 1, Cd. Adm. Pro. (Código Contencioso Administrativo) (Colom.) (1984) (As Amended, 1989, 1998), Art. 87 (“The Public Ministry and any third party who can demonstrate a direct interest may request a [judicial] declaration of [the administrative contract’s] absolute nullity.”); Jdt. C-1048/01 (Const. Ct.) (Colom.) (2001); Société Tropic Travaux Signalisation, No. 291545 (Lebon Compilation) (State Council) (Fr.) (July 16, 2007) (An interested third party “may file… a regular judicial action to contest the validity of [an] administrative contract or of some of its severable clauses. If necessary, he may also raise a claim for indemnification.”); Adm. Pro. Act (Verwaltungsverfahrensgesetz (VwVfG)) (Germany) (1977), §59 (“A public contract is null, when” it violates “the provisions of the Civil Code,” or “when an administrative act with similar content would be null” or “illegal”), Cd. Adm. Pro. (Verwaltungsverfahrensordnung (VwGO)(Germany) (1960), §43 (“The ascertainment of whether a legal obligation actually exists, [as a result of, e.g., a settlement agreement or any other public contract,] may be requested through a complaint, provided that the plaintiff has a legitimate interest….”). 57 See 1978 Const., art. 146(2) (“queja”). See also 2008 Const., art. 88 (“acción de protección”); 1998 Const., art. 95 (“amparo”). For a discussion of the writ of protection in Latin America see OQUENDO (2011) at 277-349.
precedent for other cases, in order to secure fast and effective redress. 58 The plaintiffs may, in particular, enforce their rights to due process, to a healthy environment, and to a government that adequately carries out its social and environmental duties. 59. In sum, Ecuador’s citizens dispose of sufficient means to oppose the government when it settles a dispute with a private party and before it, thereby, precludes any other subsequent representative of the society at large. First and foremost, they may exercise their petition and supervision rights against any objectionable aspect of the authorities’ engagement on behalf the settlement. Second, Ecuadorians may contest the relevant agency’s effort through internal procedures and, eventually, before an administrative court. Third, they may seek a writ of protection against any governmental action that infringes upon their constitutional entitlements. 60. One must consider these possibilities against Ecuador’s civil-law background. Latin American and continental European legal systems do not recognize the common-law doctrine of sovereign immunity. 59 Ecuadorian citizens, therefore, need no special permission from the state in order to initiate action against it. They may sue the government so long as they can point to illegal or illegitimate governmental action and to an ensuing loss on their part. From this perspective, the decision’s assertion that individuals had no recourse against the authorities’ endeavors to settle the diffuse claims against TexPet sounds even less persuasive. 61. In one of its most obscure passages, the decision maintains that the releases did not amount to “acts of government” because they did not stem from the unilateral will of
Id. Id. at 657-658 (reproducing Picado González v. State, Res. 584/Rec. 97-000736-0163-CA (1st Chamb.) (Sup. Ct.) (C.R.) (2005)), 661. Cf. United States v. Sherwood, 312 U.S. 584, 586 (1941) (“The United States, as sovereign, is immune from suit save as it consents to be sued.”).
the state, but rather required the consent of a private actor—namely, TexPet.60 It does not explain the significance of this affirmation and perhaps only wants to chastise the defendant for misnaming or misclassifying the instruments at stake. In this context, the decision refers to an Ecuadorian Supreme Court resolution that, upon defining governmental acts as involving a non-delegable, constitutional power and as having a general scope or effect, exempts them from challenge through a writ of protection. 61 The statement that the releases do not fit the definition actually suggests that, contrary to what the Lago Agrio decision is arguing, any citizen could have contested their validity through such mechanism. In any case, the releases have the described res judicata effect irrespective of whether or not they qualify as acts of government. 62. Repeatedly, the Lago Agrio decision notes that the releases did not expressly state that they would serve to forestall posterior third-party litigation.62 Such omission, however, bears no relevance to the controversy at hand. The plaintiffs are not suing as third parties. They are, instead, acting as representatives of the same real party in interest that benefited from the authorities’ earlier endeavors to vindicate its claims, i.e., the society at large. 63. In any case, the failure textually to disallow such subsequent collective suits carries no legal weight. Throughout Latin America, the settlement of diffuse-rights claims precludes, by force of law, potential future representatives. 63 The relevant agreement or judgment need not spell out this consequence.
Lago Agrio Opinion at 31 (3rd Consideration, §3.6). Lago Agrio Opinion at 30-31 (3rd Consideration, §3.6) (quoting Writ of Protection Res. (Sup. Ct.) (Ecuador) (2001)). 62 Id. at 32-33, 34-35. 63 See supra, §IV(A)(3).
64. Moreover, one could not reasonably expect the negotiating parties to have written this preclusive effect into the releases because, at the time, individuals and organization did not have the right to file actions on behalf of the environment and the community. The Ecuadorian legislature enacted the Environmental Management Act, on which the plaintiffs based their complaint, after the execution of the 1998 Final Act. 65. Of course, the decision acknowledges the validity of the releases.64 In addition, it repeatedly recognizes that the plaintiffs are litigating on behalf of the collectivity, rather than themselves,65 and even acknowledges that “the record” demonstrates “that the State [of Ecuador] released Texaco and, consequently, Chevron, regarding the environmental harm that is the object of this complaint.”66 Nonetheless, the decision concludes thereupon simply that the Ecuadorian authorities may not participate in any of the remediation work;67 not, as it should, that the principle of res judicata disallows the suit at bar. 66. The Lago Agrio decision does not merely err by taking an approach at odds with that defended in the first part of this Discussion. Rather, it sidesteps the core issues, while mostly delving into uncontested, irrelevant, and confusing matters. 3. Retroactivity 67. Retroactivity constitutes another key issue in the Lago Agrio dispute. The decision never comes to terms with the defendant’s contention that the complaint illegitimately seeks the retroactive application of a substantive legal norm. The decision only lists
Lago Agrio Opinion at 32 (3rd Consideration, §3.6). See also id. at 176 (12th Consideration) (declaring that the extent of compliance with the contracts is not at issue). 65 Id. at 33 (3rd Consideration, §3.6), 147 (9th Consideration), 174 (10th Consideration), 184 (13th Consideration). See also Lago Agrio Clarification Opinion, Superior Court of Nueva Loja, March 4, 2011 (hereinafter “Lago Agrio Clarification Opinion”), pp. 4, 23, 24. 66 Lago Agrio Opinion at 91 (8th Consideration). See also id. at 176 (12th Consideration). 67 Id. at 90-91 (8th Consideration).
or quotes some of the relevant laws, without entertaining any of the crucial questions. Moreover, it fails to appreciate the extent to which the most plausible (though ultimately unpersuasive) argument at its disposal to reject Chevron’s claim on this point ultimately undermines its conclusion that the Ecuadorian authorities’ prior representation of the community bears no relevance to the controversy before it. 68. The Ecuadorian Civil Code, like many others in Latin American and in the civil-law universe, denies laws any retroactive effect whatsoever. 68 As just noted, the plaintiffs relied on the 1999 Environmental Management Act in order to challenge conduct that undisputedly took place much earlier. In its pleadings, the defendant took exception on this point.69 The decision, however, fails to confront the gist of the argument. 69. The decision comments on the matter relatively briefly. He devotes only one (1) of his decision’s 187 pages to it.70 Furthermore, his statements in this short section do not address the basic problem. 70. The decision points to Rule 20 of the Civil Code’s Article 7.71 This provision declares, in essence, that procedural laws may become valid immediately. 72 The decision also refers to Article 163(2), which contains almost identical language, of the Organic Judicial Code.73
See Civ. Cd. art. 7 (2005) (Ecuador), art. 7; Civ. Cd. art. (1970) (Ecuador). See generally, OQUENDO (2011) at 491. Sometimes, Latin American constitutions, like their U.S. counterpart, embody the same restriction. See, e.g., id. at 746 (quoting and commenting on Const. (Mex) (1917), Art. 14). 69 See Lawsuit for Alleged Damages filed before the President of the Superior Court of “Nueva Loja,” in Lago Agrio, Province of Sucumbíos; on May 7, 2003, by 48 Inhabitants of the Orellana and the Sucumbíos Province, Superior Court of Nueva Loja, Chevron Answer to Lago Agrio Complaint at I.10, p. 10; I.14, p. 12; II.C.I, pp. 80-87 (2003). 70 Lago Agrio Opinion at 27-28 (3rd Consideration, §3.3). 71 Id. at 27 (3rd Consideration, §3.3). 72 See Civ. Cd. art. 7(20a) (2005) ;Civ. Cd. art. 7(20a) (1970) (Ecuador). 73 Lago Agrio Opinion at 27-28 (3rd Consideration, §3.3) (citing Org. Jd. Cd., Art. 163(2) (2009)).
71. The decision thereupon states that the Environmental Management Act constitutes procedure, rather than substance.74 It cites two brief excerpts from the statute—one from Article 42 and the other one from Article 43—that establish, respectively, which judge has jurisdiction over environmental suits and what procedure applies to these actions.75 In this discussion, the decision ignores other parts of these provisions and of the statute that have an unambiguously substantive content, such as those that create a new private-party initiated, collective cause of action to remedy injuries to the environment.76 72. As a result, the decision does not consider whether, as a whole, the cited Articles or the 1999 law’s other provisions regulate substance as well as procedure. Nor does it reflect, more broadly, upon what distinguishes procedural from substantive regulation or upon the sense in which the former rather than the latter might be at stake in the controversy before it. These questions, which lie at the heart of the dispute, remain conspicuously unanswered. 73. Most legal systems, including those of the civil-law tradition, struggle with the distinction at hand. Establishing that a statute exclusively regulates procedure requires careful deliberation, except in obvious cases. And the Lago Agrio case is clearly not obvious in this respect. 74. Obviously, if the judiciary had the authority to label, at will, any statute as purely procedural, it could end up hollowing out the ban on ex post facto laws. It must, therefore, rationally and restrictively construe the exemption for statutes that exclusively regard procedure. At the very least, the Lago Agrio decision should have
Id. at 28 (3rd Consideration, §3.3). Id. at 27-28 (3rd Consideration, §3.3) 76 Environ. Mgt. Act (Ecuador) (1999), Art. 43 (¶1).
examined the statute at stake in its entirety before classifying it as purely procedural and applying it retroactively. 75. The decision under analysis does mention the Civil-Code Articles that institute a right to sue in tort.77 It does not, however, explicitly relate them to the question of retroactivity or explain how they relate to the provisions that, as part of the Environmental Management Act, authorize collective litigation. The decision possibly means to imply that the cited Articles contain the substantive law upon which the complaint rests. 76. At the time in which the challenged conduct took place, the Ecuadorian legal system, indeed, entitled individuals to seek compensation, under the Civil Code, when someone negligently or culpably injured them. 78 It also empowered the authorities to enforce environmental guaranties. 79 The 1999 Act, for its part, subsequently allowed citizens and organizations to demand reparation for any harm to the environment and to the community’s health. 80 77. The decision does not contemplate, however, whether the creation of a diffuse right to seek damages for environmental injuries amounts, per se, to a substantive alteration of the law. It does not take the position that the introduction of these trans-individual entitlements amounts exclusively to an alteration of legal procedure. Nor does it conclude that this legislative modification bears upon the substance of the law too. The decision simply neglects to confront, let alone decide, this critical matter.
Lago Agrio Opinion at 28 (3rd Consideration, §3.3) (citing Civ. Cd. arts. 2214, 2229 (2005) (Ecuador)). Civ. Cd. arts. 2214, 2229 (2005) (Ecuador) (2005); Civ. Cd. arts. 2241, 2256 (1970) (Ecuador) (1970). 79 1978 Const., arts. 19 & 50. 80 Environ. Mgt. Act (Ecuador) (1999), Art. 43 (¶1).
78. The diffuse entitlements under the 1999 enactment, in fact, differ radically from their individual counterparts under the Civil Code. The former pertain, indivisibly, to the community and are independent of any rights that the membership may have. The latter belong to a particular individual and involve matters that concern him or her, rather than the collectivity. 81 79. For example, the community may have claims to a sound environment that transcend those of any of the members and that would remain valid even if nobody lived in the region in question. 82 It may, accordingly, demand redress for the contamination of a remote, uninhabited, and inaccessible territory. A citizen who represents the collectivity under these circumstances is asserting an entirely different kind of right than when she pursues compensation for the pollution of a piece of land that she owns. 80. As a consequence, the decision would have been hard pressed to categorize, with plausibility, the transition from a regime of private entitlements to one of diffuse entitlements as purely procedural. Alternatively, it could have taken the questionable position that the 1999 Act’s provisions merely concerned procedure because they simply empowered a new class of litigants to vindicate a long-established, formerly state-enforced right. Such move would have, however, run counter to the contention that the previous releases had no bearing upon the Lago Agrio lawsuit. Specifically, the decision would have had to acknowledge the substantive convergence between
See supra, §IV(A)(1). See, generally, Oleoducto Crudos Pesados (OCP), No. 219-2008-S-CSJNU (Super. Ct. Nueva Loja) (Ecuador) (2008), pp. 2-3 (10th Consideration), aff’d in OCP, No. 999-2009-SR (Nat. Ct.) (Ecuador) (2011). 82 See discussion supra, §IV(A)(1) & BIT-Report, §V.
the rights vindicated by the government in its settlement with TexPet and those asserted by the Lago Agrio plaintiffs. 81. The decision would have, accordingly, found itself in a Catch-22 situation. It would have had to renounce its position either on retroactivity—by conceding that the Environmental Management Act enabled the claimants to vindicate a substantively unprecedented kind of entitlement—or on res judicata—by admitting that the plaintiffs claims overlapped, in substance, with those of the Ecuadorian authorities in the previous controversy with TexPet. The decision avoids this dilemma altogether simply by ignoring the crucial underlying issues. 82. All in all, the Lago Agrio decision would have most persuasively read the 1999 statute, for purposes of the prohibition on ex post facto civil laws, as transcending mere procedure. Earlier, Ecuador’s legal system enabled people only to sue for their own personal injuries in environmental cases, while the state held the prerogative of enforcing diffuse rights on behalf of the entire population. For its part, the Environmental Management Act opens the door, for the first time, to private parties seeking to vindicate the same entitlements in the name of the society at large and thus substantively alters the state of the law. 83. The alteration in the substance of the law results from the fact that the statute at stake grants standing to non-governmental litigants, who face different incentives, requirements, and restrictions than the authorities do. In comparison to the latter, the former may, inter alia, find more of a motivation to proceed in the prospect of monetary compensation, have to disclose less about the suit under freedom-ofinformation principles, and confront fewer (if any) due-process limitations when
interacting with their opponent in court. The 1999 statute, hence, institutes a new (representative) cause of action for private parties and effectively reduces the affirmative defenses available. It thus augments precisely the kind of burden that the ban on retroactivity aims to spare potential defendants. 84. Once again, the Lago Agrio decision does simply reach the wrong conclusion. In addition, it skips by all of the relevant issues. For this reason, the decision strikes the reader, right away, as extremely remarkable and inadequate. 4. Punitive Damages 85. The Lago Agrio decision awards punitive damages with no basis in the law. Ecuador’s legal system, like its counterparts in the civil-law tradition, does not provide for this kind of remedy. The decision misleadingly relies on the writings of Argentine scholar Ramón Daniel Pizarro, who actually recognizes the unavailability of punitive damages in Latin America and continental Europe, who proposes the cautious adoption of the concept by the Argentine legislature, and who insists on the necessity of clear statutory language prior to any action in this area. In addition, the decision mistakenly seeks to justify its determination as an application of a principle of “universal law” under the Civil Code’s Article 18(7a),83 which presupposes two conditions neither of which the case in hand meets: (1) absence of an applicable law and (2) presence of a universally valid norm. 86. In general, the decision’s remarks on this topic sound out of place. They would, specifically, sit more easily in the common-law universe than in its civil-law counterpart. Coincidentally, the Lago Agrio decision’s examination of the issue of “piercing the corporate veil” frequently comes across as equally dislocated. It
Civ. Cd. art. 18(7a) (2005) (Ecuador); Civ. Cd. art. 18(7a) (1970).
similarly weaves in U.S. notions and formulations in a rather indiscriminate and inapt manner.84 In fact, one can hardly imagine another Latin American court or even a continental European tribunal deliberating along similar lines. While the judiciary in these regions often incorporates foreign notions, it normally domesticates them in the process, i.e., speaks about them in more familiar or local terms. 87. Of course, the unusualness of the Lago Agrio decision manifests itself most unequivocally in the very choice to embrace, without much explanation, the legally extraneous doctrine of punitive damages.85 Indeed, “[c]ivil law courts ordinarily may not grant punitive damages.”86 They may not, in other words, award such a remedy under the civil code. 88. In order to disregard such ban, a Latin American or continental European tribunal has to set aside profoundly ingrained principles. First, it must act against the fundamental civil-law notion that the sovereign, codified law strictly binds the judiciary. 87 89. In fact, the concept in question retarded considerably the transition from pecuniary to so-called moral or psychological damages. For a very long time, civil-law judges granted compensation for material and economic injuries, but not for pain and suffering. 88 They felt that the latter kind of redress, as opposed to the former, lacked support in the Civil Code and would enable them to exercise unbound discretion. In many jurisdictions, this attitude changed only upon almost unanimous scholarly condemnation and upon an amendment to the Code, the Constitution, or both.89
Lago Agrio Opinion at 6-26 (3rd Consideration). See also Lago Agrio Clarification Opinion at 9, 19-21. Lago Agrio Opinion at 184-186 (14th Consideration). See also Lago Agrio Clarification Opinion at 2-3, 4-5, 16-17. 86 OQUENDO (2011) at 627. 87 Id. at 36, 417. 88 Id. at 626-627. 89 See, generally, id. at 614-666.
90. In order to award punitive damages in Latin America or in continental Europe, a court also has to disregard the equally deep-seated notion that a civil-law remedy may not operate as punishment. Coincidentally, this second concept has hindered the development of any significant support, either among scholars or among lawmakers, for the adoption of this kind of reparation. 91. Outside the Civil Code, Latin American and continental European jurisdictions do not sanction punitive damages either. Exceptionally, they empower judges to order relief that transcends compensation and that appears to have a punitive component. The legal systems that take this approach do so, occasionally, in areas like consumerprotection.90 In the relevant cases, they usually authorize the tribunal to make the award under limited circumstance and under specific guidelines. The court may not generally pass on the reprehensibility of the defendant’s conduct and assess a commensurate penalty, as with punitive damages. 92. Some civil-law tribunals have even gone so far as to declare punitive damages inconsistent with public policy and to decline to execute foreign judgments including these remedies.91 The 2005 Vienna Convention on Choice-of-Court Agreements explicitly authorizes such refusal. “Recognition or enforcement of a judgment may be refused,” according to the treaty, “if, and to the extent that, the judgment awards damages, including exemplary or punitive damages, that do not compensate a party
See, e.g., L. 24.240 (Consumer Defense) (Arg.), Art. 52bis (“The judge may impose, at the request and in favor of the consumer, a civil fine, which will vary depending on the gravity of… the case, on providers who fail to meet their legal or contractual duties toward consumers…. The civil fine may not exceed” five (5) million pesos.) (1993). 91 See, e.g., BGHZ 118, 312 (343 f.) (Sup. Ct.) (Germany) (1992); Summarized in Peter Hay, The Recognition and Enforcement of American Money-Judgments in Germany: The 1992 Decision of the German Supreme Court, 40 AM. J. COMP. L. 729, 730-31 (1992).
for actual loss or harm suffered.”92 Similarly, the European Union Regulation 864/2007, on the Law Applicable to Non-Contractual Obligations, allows member states to decline to apply statutes from other European-Union countries on the basis of “considerations of public interest,” specifically when the law in question calls on the judiciary to “award… non-compensatory exemplary or punitive damages of an excessive nature.”93 93. The Lago Agrio decision therefore makes a most surprising move when it orders Chevron to pay punitive damages.94 Thereupon, it takes two additional steps into the realm of the unexpected. First, the decision expresses intent to penalize the defendant not only for its allegedly reprehensible behavior in committing the claimed tort, but also for the supposedly outrageous way in which it conducted itself at trial. 95 Second, the decision offers to withdraw the penalty in exchange for a public apology.96 It thereby doubly expands the controversial discretional latitude and punitive powers that it has assumed by claiming the authority to award this type of relief. 94. The decision goes further out on a limb when it awards punitive damages despite the absence of a request to that effect in the complaint.97 It thus acts against the dispositive principle, which grants the parties the prerogative to sue and to define the suit’s scope in their pleadings and which civil-law systems universally recognize.98
Vienna Convention on Choice-of-Court Agreements (2005), Art. 11(1). European Union Regulation 864/2007 (On the Law Applicable to Non-Contractual Obligations) (“Rome II), Consideration 32. 94 Lago Agrio Opinion at 184-186 (14th Consideration). 95 Id. at 184-185 (14th Consideration). 96 Id. at 185-186 (14th Consideration). 97 Id. at 185 (14th Consideration). 98 See OQUENDO (2011) at 61-62; see also id. at 697, 698, 773. See, e.g., 2008 Const., art. 168(6); 1998 Const., art. 194.
This kind of infringement takes on large proportions when a court prescribes a measure that does not find clear—or any, as in this case—support in the law. 95. For purposes of justifying its order, the decision invokes the writings of Argentine scholar Ramón Daniel Pizarro.99 Nonetheless, this author actually declares that “punitive damages have not attained much recognition in the continental European system or in Latin America.”100 He specifically notes that “the punishment of intentional torts” or “of gross negligence” faces “serious difficulties,” mostly due to “the lack of norms for the imposition of civil sanctions in such cases.”101 96. Aiming to transcend a mere “description of the system,” 102 Pizarro advocates the “future” 103 adoption, in Argentina, of this institution, as a “useful instrument,”104 under “exceptional and restricted” 105 circumstances. Of course, he addresses his proposal to lawmakers and insists that it requires express legislation prior to application. He underscores “the absolute necessity of providing for such penalties by law.”106 “Punishment,” he explains, “must be expressly established in the law in
Pizarro, Chapter XIII (“Punitive Damages”) DERECHO DE DAÑOS (“Tort Law”) 287-337 (1996). Id. at 295. Elsewhere, Pizarro states that, “among us [in Argentina], as well as in most countries in continental Europe and Latin America, [punitive damages] have not attained much recognition.” Id. at 287. He notes, in particular, that civil-law literature has attributed “little importance… to the punitive dimension of tort law.” Id. at 289 (emphasis in original). 101 Id. at 290 (emphasis in original). See also id. at 291 (“The problems relating to the punishment of certain torts” stem from “a glaring lack of adequate normative principles”) & 297 (“In Latin America…, punitive damages find few antecedents.”). 102 Id. at 288. 103 Id. at 287. See also id. at 291 & 336. Pizarro asserts that “punitive damages in the common law constitute one of the possible parameters for consideration in the formulation of future legislation.” Id. at 291. Nonetheless, he acknowledges that comparative efforts in the civil-law tradition usually restrict themselves “to continental European law and to the Latin American system” and rarely focus on “the common law and its institutions.” Id. at 288. 104 Id. at 287. 105 Id. at 336. 106 Id. at 336 (emphasis in original).
order to forestall an encroachment upon basic notions of legal certainty, which the Constitution consecrates.”107 97. The Lago Agrio decision also refers to the Civil Code’s Article 18, which establishes in its section 7a that, in the absence of a legal norm applicable to the controversy at bar or to analogous cases, a judge may turn to “the principles of universal law.” 108 Evidently, this provision does not entitle judges to apply any imaginable rule to settle the disputes before them. Instead, it creates a narrow exception, which should not undermine the judiciary’s overriding obligation to adjudicate, strictly, according to what the Code spells out and expressly commands. 98. Consequently, a tribunal must first show that no legal norm exists for the present or a similar case. According to the Lago Agrio decision, however, the Civil Code itself applies to the controversy at hand. 109 Indeed, it covers all kinds of tort claims, including those pertaining to injuries alleged to have occurred due to “serious culpability, serious negligence, extreme culpability,” or even due to “malice (dolo), which consists in the positive intention to visit harm upon someone else or upon his or her property.”110 The Code does not authorize punitive damages in any of these scenarios. Therefore, the decision clearly disposed of positive law to address questions of liability and relief in the dispute before it. 99. Even in the absence of a relevant legal norm, a judge seeking to rely on the Civil Code’s Article 18(7a) must, secondly, point to a pertinent principle of universal law. As just noted, Latin American and Continental European systems universally reject
Id. at 290. Civ. Cd. art. 18(7a) (2005) (Ecuador); Civ. Cd. art. 18(7a) (1970) (Ecuador) (1970). 109 Lago Agrio Opinion at 74-75 (7th Consideration). 110 Civ. Cd. art. 29 (2005) (Ecuador); Civ. Cd. art. 29 (1970) (Ecuador) (1970).
the notion that the judiciary may punish defendants in controversies under the Civil Code. In fact, the remedy in question rests on a concept that presently appears to find clear support only in the United States and in some other common-law jurisdictions. 111 Therefore, no principle exists, with the necessary degree of universality, to sustain an award of punitive damages. If anything, the general practice throughout the world points in the opposite direction, viz., in that of a proscription against this kind of relief. V. 100. Signature I hereby affirm that my opinions are based on true facts, and that my conclusions
are the product of my own views. I reserve the right to supplement, amend, change or modify my opinions to this report.
Ángel R. Oquendo Signed at Rio de Janeiro, Brazil, on July 1, 2011
The U.S. Supreme has endorsed the constitutional validity of punitive damages, while imposing strict due-process limitations. See, e.g., Exxon Shipping Co. v. Baker, 554 U.S. 471 (2008); Philip Morris USA v. Williams, 549 U. S. 346 (2007); State Farm Mut. Automobile Ins. Co. v. Campbell, 538 U. S. 408 (2003); BMW of North America, Inc. v. Gore, 517 U. S. 559 (1996). Cf. Honda Canada Inc. v. Keays, 2008 SCC 39,  2 SCR 362 (Sup. Ct.) (Canada) (“Punitive damages are restricted to advertent wrongful acts that are so malicious and outrageous that they are deserving of punishment on their own….. Courts should only resort to punitive damages in exceptional cases….); Rookes v. Barnard, 1964 A.C. 1129, 1225-28 (H.L.) (England) (1964) (L. Devlin) (An award of “punitive or exemplary damages” may lie (1) when “oppressive, arbitrary or unconstitutional action by the servants of the government” has taken place; (2) when “the defendant’s conduct has been calculated by him to make a profit for himself which may well exceed the compensation payable to the plaintiff”; or (3) when “exemplary damages are expressly [authorized] by statute.”).