ARBITRATION






Here are relevant articles on the subject of ARBITRATION.


2013 International Law Update, Volume 19, Number 4 (October – November - December) ARBITRATION 
In ongoing dispute over severe environmental pollution in Ecuador allegedly caused by U.S. company, Fifth Circuit holds that judicial estoppel is appropriate and discovery should be made available under Section 1782 for use in arbitration; Chevron, opposing the Section 1782 discovery, had previously argued that the arbitration is in fact an “international tribunal” and benefitted from the results, but in this case argued the opposite, that the arbitration is not such a “foreign or international tribunal” The following case is part of the ongoing saga about the environmental contamination of oil fields in Ecuador. The dispute has continued for almost 20 years and involved dozens of courts. Before a court in Lago Agrio, Ecuador, issued a multi-billion dollar judgment against Chevron, Chevron filed for arbitration under the UNCITRAL rules pursuant to the U.S.–Ecuador Bilateral Investment Treaty (BIT). In the following matter, The Republic of Ecuador seeks discovery under 28 U.S.C. Section 1782 from John Connor and his company GSI Environmental to use it in the foreign arbitration proceeding against Chevron. Chevron intervened in the U.S. District Court proceeding to protect its interests. The District Court found that the pending arbitration is a bilateral investment dispute and not a “foreign or international tribunal” as required by Section 1782. Ecuador appeals.   The U.S. Court of Appeals for the Fifth Circuit reverses and remands for a determination of the scope of discovery. The Court notes that in the past, Chevron has benefitted by arguing against Ecuador and others that the arbitration is a “foreign or international tribunal.” Chevron’s previous positions are inconsistent with its current argument, and judicial estoppel should apply to make the discovery available to Ecuador.   “Judicial estoppel is an equitable doctrine designed to protect the integrity of judicial proceedings by preventing litigants from asserting contradictory positions for tactical gain. The precise rationale for and consequences of the doctrine vary. 18B CHARLES ALAN WRIGHT, ARTHUR R. MILLER & EDWARD H. COOPER, FEDERAL PRACTICE AND PROCEDURE § 4477 (2d ed. 2002 & Supp. 2012) … Recognizing this, the Supreme Court examined the doctrine extensively in New Hampshire v. Maine, 532 U.S. 742, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001), but in the end refused to establish an ‘inflexible formula.’ Relying instead on several factors that often indicate the propriety of the sanction, the Court held that a party may be estopped from asserting a position in a judicial proceeding where it has previously persuaded a court to adopt a clearly contrary position to the disadvantage of an opponent. See also Reed v. City of Arlington, 650 F.3d 571 (5th Cir.2011) (en banc). Reed also notes, ‘Because judicial estoppel is an equitable doctrine, courts may apply it flexibly to achieve substantial justice.’ Id. at 576.”     “The predicate for the exercise of judicial estoppel against Chevron is easily described. To promote international dispute resolution and comity, § 1782 authorizes federal district courts to issue discovery orders ancillary to proceedings in ‘foreign or international tribunals.’ In numerous district courts, and on appeal in other circuits, Chevron asserted that the BIT arbitration is an international proceeding. Chevron explicitly distinguished this court’s [decision in Republic of Kazakhstan v. Biedermann Int’l, 168 F.3d 880 (5th Cir.1999)]… as involving a purely ‘private’ international arbitration between the Republic of Kazakhstan and an investor company. Chevron denies neither that it made these assertions, nor that its current position on the arbitration’s status is precisely contrary, nor that it successfully obtained § 1782 discovery orders over Ecuador’s opposition. Why shouldn’t sauce for Chevron’s goose be sauce for the Ecuador gander as well?” [708 F.3d at 654] (footnotes omitted)   The Court then addresses and rejects Chevron’s argument that the BIT arbitration raises an issue of jurisdiction to which judicial estoppel does not apply.   “The only remaining doubt about the availability of judicial estoppel is that Chevron’s inconsistent argument may have been ‘irrelevant’ to the discovery orders in prior cases. Because the parties’ disputes have involved both Ecuadorian court litigation (unquestionably, a ‘foreign tribunal’) and the BIT arbitration (arguably, an ‘international tribunal’), Chevron’s § 1782 discovery requests were often premised on twin grounds. We have found no authority suggesting that ‘harmless error,’ or some variety thereof, is not among the equitable considerations underlying judicial estoppel, but we do not reach the question here. A review of many of the courts’ orders shows that they rested on the twin § 1782 grounds for authorizing discovery, in part because Ecuador never challenged that the BIT arbitration is an ‘international tribunal.’ A recent Third Circuit decision, in particular, notes repeatedly that although certain of Ecuador’s objections to discovery might be meritorious if related to the Lago Agrio litigation alone, ‘Chevron seeks the § 1782 discovery for use in both the Lago Agrio litigation and the BIT arbitration.’ In re Application of Chevron Corp., 633 F.3d 153, 161, 163 (3d Cir. 2011). Chevron profited from being able to assert mutually reinforcing grounds under § 1782 to support its discovery requests; the courts were persuaded that whether ‘for use’ in the Ecuadorian court proceedings or the arbitral tribunal, Chevron’s requests satisfied § 1782. The status of the BIT arbitration was not irrelevant to Chevron’s success.”   “The result of rejecting these objections is clear. Chevron has deliberately taken inconsistent positions on the availability of § 1782 discovery for use in ‘international tribunals.’ Chevron successfully obtained such discovery by persuading courts to reject Ecuadorian (and related parties’) objections and by contending, opposite to its current position, that the BIT arbitration is an ‘international tribunal.’ Finally, if Chevron is permitted to shield itself under Biedermann against Ecuador’s current discovery request, it will have gained an unfair advantage over its adversary. Chevron should be judicially estopped from asserting its legally contrary position here. Consequently, we need not and do not opine on whether the BIT arbitration is in an ‘international tribunal.’ On remand, the district court should proceed in its discretion to evaluate Ecuador’s request for discovery pursuant to § 1782.” [708 F.3d at 657-658]   Citation: Republic of Ecuador v. Connor, 708 F.3d 651 (5th Cir. 2013).

Copyright 2014 Mike Meier, Attorney at Law