Second Circuit Vacates Preliminary Injunction Entered In Favor Of Chevron Against Ecuador Judgment, Staying Portion Of District Court Case

We have written on District Judge Kaplan's decision earlier this year — a 127-page decision preliminary enjoining enforcement, anywhere in the world, of an Ecuadorian judgment totaling $8.646 billion obtained by Lago Agrio plaintiffs (indigenous peoples in the Amazonian rain forest) against Chevron Corp., which bought the assets directly or indirectly from Texaco, Inc. in 2001 and was treated as the successor in interest. Chevron Corp. v. Donziger, et al., 11 Civ. 0691 (S.D.N.Y. Feb. 2011). The judgment arose out of environmental damage that the Ecuadorian court found had been done by Texaco. The case has been a cause célèbre, full of international practice novelties and learnings.

In entering the preliminary injunction, the District Court ruled: "In determining whether a foreign legal system "provide[s] impartial tribunals [and] procedures compatible with due process of law," a court considers not only the structure and design of the judicial system at issue, but also "its practice during the period in question". The District Court also found that the Ecuadorian judicial system "does not provide impartial tribunals and due process". For this proposition the Court relied on sources internal and external to the litigation. The District Court did not quantify the other countries of the world as to which the same sources would conclude the same thing. And in rejecting the argument that international comity would be undermined by a U.S. court's interference with Ecuadorian judicial process, the District Court relied on China Trade & Development Corp. v. M.V. Choong Yong, 837 F.2d 33 (2d Cir 1987), which adumbrated the standard for the use of one of the most powerful tools in international practice (see the discussion of enjoining parties from pursuing litigation in non-U.S. jurisdictions in our e-book, International Practice: Topics and Trends). The District Court found the China Trade factors satisfied but assumed for these purposes that the U.S. court would be rendering a substantive decision on the enforceability of the Ecuadorian judgment itself, not the underlying facts and claims.

Echoing a reluctance to condemn a non-U.S. judicial regime, the Court of Appeals for the Third Circuit went in a different rhetorical...