Column : Dumping waste, courting trouble

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: If the European Commission’s record fine of $1.44 billion on Intel Corporation for anti-competitive behaviour shook the IT industry, an even mightier storm is brewing in Ecuador against the US oil giant, Chevron. A five-year-long lawsuit worth $27 billion by indigenous people against Texaco (a subsidiary of Chevron since 2001) for contaminating the Amazon’s waterways is expected to be awarded “any day” in favour of the plaintiffs by a court in Nueva Loja.

Such a verdict would be a stunning blow to the second largest American oil company, which is already reeling from the plunge in global oil prices. The damages in Ecuador could wipe off more than a full year of Chevron’s profits and sink its share value. The management of Chevron is now facing pressure from its own shareholders—US pension fund investors—for failing to fully disclose its potential financial liability in the case. One shareholding entity is demanding that Chevron report specific procedures it adopts to conform to host country laws on the environment and human health.

The allegations against Texaco are grave—dumping and spilling billions of gallons of toxic waste and oil from 1964 to 1992 in the Amazonian rainforest that caused a public health catastrophe and eliminated many Ecuadorian aboriginal communities. The government of Rafael Correa, which draws electoral support of the indigenous people, is fully behind the plaintiffs and has been accused of using its political power to push the court to punish Chevron.

The embattled oil major’s lawyers have lobbied the US government to strip Ecuador of trade preferences in retaliation for its failure to force the closure of the judicial proceedings. Thus far, there is little sign that Chevron would be bailed out of trouble by the Obama administration or US Congress through arm-twisting foreign policy towards Ecuador. The law, however derided as unfair by Chevron, is set to take its course and slap the largest civil damages ever in judicial history.