US Judge Dismisses Amazon Texaco Lawsuit

After eight years in litigation, Texaco prevailed in getting a US District Court judge to dismiss a lawsuit brought by South American Indians in Ecuador and Peru against the US oil company for polluting their water and land in and downstream from the oil-producing Oriente region.

Instead of trying the case in Manhattan court, the suit should be tried in an Ecuadorean court, Judge Jed Rakoff said in a ruling issued May 30.

The decision came as another oil-environment issue looms over Ecuador's proposed 450,000-barrel-per-day heavy crude oil pipeline (OCP). Both local and international environmental groups are opposed to the proposed route for the pipeline. The consortium selected to build it, however, is staunchly defending the project as planned – to the extent of threatening to pull out of the project (OD May30,p7).

Texaco immediately hailed the US court's ruling, saying it confirmed the company's view that the appropriate place to adjudicate the matter is in Ecuador.

Lawyers for the Indians said they would appeal the decision and file a suit in Ecuador. "This is not going away," one plaintiff's lawyer said.

The Texaco suit was dismissed by Rakoff once before, in 1996, but a federal appeals court reversed his dismissal in 1997 because Texaco had refused to submit to the authority of Ecuador's courts, a stance since reversed. Then, in January 2000, Rakoff said he was leaning toward dismissing the suit. He delayed his ruling, however, pending a review to determine whether an Ecuadorean court could be impartial after a brief military coup in which President Jamil Mahuad was replaced by Vice President Gustavo Noboa (OD Feb1,2000,p6).

In a decision issued Wednesday, Rakoff said that the failure of the military coup "reaffirmed Ecuador's insistence on democratic, civilian control of its institutions." In addition, all the evidence and witnesses in the lawsuit are in Ecuador, another reason for trying the case there, although federal law does allow citizens of other countries to bring claims of international law violations into US courts, he said.

If the case proceeds in Ecuador, Texaco will have one advantage in that Ecuador does not permit class action suits, as the 99 Indians had hoped to pursue in the US.

The litigation stems from suits filed in 1993 and 1994 by residents of the Oriente oil-producing region and Peruvians who live downstream. The Indians alleged that a Texaco subsidiary dumped toxic waste and leaked petroleum into their environment, and that damages could exceed $1 billion for cancer and other diseases caused by the pollution. Texaco, which had been a minority partner with state Petroecuador, stopped exploring in Ecuador in 1990.

As for the OCP pipeline, the construction of which will more than double Ecuador's oil production and exports, environmental groups appeared to have persuaded the Noboa administration to look more critically at the proposed northern route, which would run through the biodiversity-rich Mindo forest area. The government's decision is expected by June 11.

OCP Ltd. – the consortium comprising Alberta Energy, ENI, Kerr-McGee, Occidental Petroleum, Repsol-YPF, Perez Companc, and Argentina's Techint – maintains that the northern route is safer for the environment than the southern route promoted by environmentalists. OCP is due to respond by Saturday to some 72 change requests made by the Environment Ministry.

If OCP does not receive permission to lay the line along the preferred route "[W]e would be returning to the issue of whether or not to build the pipeline," OCP President Hernan Lara has said. It has taken 10 years to get to the point where only the environmental impact statement and its approval stand between plan and actual construction.

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