Litigation

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Litigation

Litigation

MTBE

Chevron and many other companies in the petroleum industry have used methyl tertiary butyl ether (MTBE) as a gasoline additive. Chevron is a party to six pending lawsuits and claims, the majority of which involve numerous other petroleum marketers and refiners. Resolution of these lawsuits and claims may ultimately require the company to correct or ameliorate the alleged effects on the environment of prior release of MTBE by the company or other parties. Additional lawsuits and claims related to the use of MTBE, including personal-injury claims, may be filed in the future. The company’s ultimate exposure related to pending lawsuits and claims is not determinable. The company no longer uses MTBE in the manufacture of gasoline in the United States.

Ecuador

Texaco Petroleum Company (Texpet), a subsidiary of Texaco Inc., was a minority member of an oil production consortium in Ecuador from 1967 until 1992, with state-owned Petroecuador as the majority partner. Upon termination of the consortium, and following a third-party environmental audit, Ecuador and the consortium parties entered into a settlement agreement specifying Texpet’s environmental remediation obligations. After Texpet completed a three-year remediation program, Ecuador certified that the remediation was properly conducted and released Texpet and its related corporate entities from environmental liability.

In May 2003, plaintiffs alleging environmental harm from the consortium’s activities filed a civil lawsuit against Chevron in the Superior Court for the province of Nueva Loja in Lago Agrio, Ecuador. Chevron defended itself on multiple grounds, including that the lawsuit was barred by the settlement and releases from Ecuador and that the evidence confirmed Texpet’s remediation was properly conducted and any remaining environmental impacts were due to Petroecuador’s failure to remediate its own majority share of the concession area and to Petroecuador’s conduct as sole owner of expanded operations in the area since 1992. In February 2011, the Ecuadorian provincial court entered a judgment against Chevron for approximately $9.5 billion plus additional punitive damages. In January 2012, an appellate panel affirmed the judgment and

ordered that Chevron pay an additional 0.10% in attorneys’ fees. In November 2013, Ecuador’s National Court of Justice ratified the judgment but nullified the punitive damage assessment, resulting in a judgment of $9.5 billion. Ecuador’s highest Constitutional Court rejected Chevron’s final appeal in July 2018.

In February 2011, Chevron filed a civil lawsuit against the Lago Agrio plaintiffs and several of their lawyers and supporters in the U.S. District Court for the Southern District of New York, asserting violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act and state law. After a trial, the New York court ruled in favor of Chevron, finding that the Ecuadorian judgment had been procured through fraud, bribery, and corruption, and prohibiting the RICO defendants from seeking to enforce the Ecuadorian judgment in the United States or profiting from their illegal acts. The U.S. Court of Appeals for the Second Circuit unanimously affirmed, and the U.S. Supreme Court denied certiorari in June 2017, rendering final the New York judgment in favor of Chevron.

The Lago Agrio plaintiffs’ lawyers sought to have the Ecuadorian judgment recognized and enforced in Canada, Brazil, and Argentina. All of those recognition and enforcement actions have been finally resolved in Chevron’s favor. In Canada, following dismissal of Chevron Canada Limited from the action, the Ontario Superior Court ordered a final dismissal of the action against Chevron Corporation in July 2019 by consent of the parties. In Brazil and Argentina, after public prosecutors in each country recommended rejection of the plaintiffs’ action on grounds including that the Ecuadorian judgment was procured through fraud and corruption, Brazil’s Superior Court of Justice dismissed and the Supreme Court of Argentina affirmed dismissal by the lower court of the actions on jurisdictional grounds in rulings that became final in June 2018 and July 2020, respectively.

Chevron and Texpet filed an arbitration claim against Ecuador in September 2009 before an arbitral tribunal administered by the Permanent Court of Arbitration in The Hague, under the United States-Ecuador Bilateral Investment Treaty. In September 2013, the Tribunal issued a first partial award holding that, although the settlement and release agreements between Ecuador and Texpet did not preclude individual claims for personal harm, they did release Texpet and Chevron from public environmental claims. In August 2018, the Tribunal issued a second partial award holding that the Ecuadorian judgment was based on public claims that Ecuador had settled and released and that it was procured through fraud, bribery, and corruption. According to the Tribunal, the Ecuadorian judgment “violates international public policy” and “should not be recognized or enforced by the courts of other States.” The Tribunal ordered Ecuador to take immediate steps to remove the status of enforceability from the Ecuadorian judgment and to compensate Chevron for any injuries resulting from the judgment. The third and final phase of the arbitration, to determine the amount of compensation Ecuador owes to Chevron, is ongoing. The District Court of The Hague denied a request by Ecuador to set aside the Arbitration Tribunal’s first partial award, and the Appeals Court and Supreme Court of the Netherlands upheld that denial. On September 16, 2020, the District Court of The Hague denied Ecuador’s request to set aside the Tribunal’s second partial award, holding that the award was well reasoned and complied with applicable law and public policy, and properly sought to “remov[e] the consequences of a fraudulent judgment that was rendered by a corrupt judge.” The District Court further recorded that it now is “common ground” between Ecuador and Chevron that the Ecuadorian judgment is fraudulent.

Management’s Assessment The ultimate outcome of the foregoing matters, including any financial effect on Chevron, remains uncertain. Chevron continues to believe that the Ecuadorian judgment is illegitimate and unenforceable and that it does not provide any basis upon which an estimate of a reasonably possible loss or range of loss can be made.