In 1973, Chevron and Ecuador signed an agreement allowing Chevron to develop oil fields in Ecuador. Years later, litigation ensued and eventually Chevron commenced an arbitration action before a tribunal in the Hague. Ecuador objected to the arbitral tribunal’s jurisdiction. The tribunal rejected the jurisdictional challenge and ultimately awarded Chevron $96 million. After appeals in the Dutch courts, Chevron sought to confirm the award in a federal district court under the New York Convention. Ecuador challenged the court’s jurisdiction under the Foreign Sovereign Immunities Act (“FSIA”), lost and appealed.
The main issue before the Federal Circuit Court was whether the district court had subject-matter jurisdiction under the FSIA. Resolution of that issue turned, in great part, the arbitration provision contained in the U.S.-Ecuador Bilateral Investment Treaty (“BIT”) pursuant to which Chevron initiated the arbitration. The appellate court rejected Ecuador’s argument that Ecuador’s offer in the BIT to arbitrate certain types of disputes was not an agreement to arbitrate the Chevron dispute. The court found that BIT included a “standing offer to all potential U.S. investors to arbitrate investment disputes” and that Chevron properly accepted that offer. Thus, the court concluded, the FSIA allowed the district court to exercise jurisdiction over Ecuador to consider an action to confirm or enforce the arbitral award.
The appellate court noted that the FSIA required Chevron to make a prima facie showing that there was an agreement to arbitrate. Once Chevron met that burden, the burden shifted to Ecuador to demonstrate that the notice to arbitrate in the BIT did not constitute a valid arbitration agreement. Resolution of this question was critical, the appellate court noted, to the district court’s jurisdictional analysis: “The statute requires the District Court to satisfy itself that the party challenging immunity has presented prima facie evidence of an agreement between the parties and that the sovereign asserting immunity has failed to sufficiently rebut that evidence.” The district court had failed to make that determination, which might have been reversible error. However, the appellate court found that because the district court had separately determined that there was a valid agreement to arbitrate, there was no need to remand. Chevron Corp. v. Republic of Ecuador, No. 13-7103 (D.C. Cir. Aug. 4, 2015).
This post written by John A. Camp.
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