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The Revenge of the State -- Los Afectados vs. Chevron

One of the greatest challenges facing developing nations (and the rest of us) arises from the difficulty of regulating foreign investment in light of the rights investors enjoy under international treaties that have been quietly negotiated over the past dozen years or so. A decision by an Ecuadorian Court, awarding more than $16 billion against Chevron on account of damage it caused to the environment and public health, points the way for nations that wish to re-establish some balance to their relationships with foreign investors.

The proliferation of investment treaties have allowed some of the world's largest companies to invoke international arbitration to recover tens, even hundreds of millions of dollars from nations that have simply sought to regulate their activities in the public interest -- for the purposes of protecting the environment, ensuring local benefits, or protecting human rights. The arbitrators empowered to decide such cases are unaccountable, extremely well paid, and self interested. Moreover, international investment arbitration entirely sidesteps and undermines domestic judicial systems -- it is both corrupt and corrupting.

One of the most problematic features of these regimes is that they accord foreign investors virtually unbridled rights, while imposing on them absolutely no responsibility. Confronting the reality of these regimes is a daunting challenge. It is easier to write a treaty, particularly in secret, than it is to rescind one.

Fortunately, a decision by a court in Ecuador holding Chevron accountable for the damages the company caused to the environment and people of that nation, shows that a revival of domestic judicial systems may be just the antidote needed to redress the entirely one-sided nature of international investment law.

In late May 2012, a number of indigenous peoples groups (Los Afectados) who were successful in obtaining the judgement against Chevron, after a hard fought battle of 8 years, filed a claim in the Ontario Superior Court of Justice seeking enforcement of the damage award made by the Ecuadorean Court because Chevron no longer had any significant assets in Ecuador. Canadian courts will in the normal course recognize and enforce judgements rendered by the Courts of other sovereign nations, and Chevron has significant assets in Canada.

If the Afectados succeed, and they should, they will finally achieve some measure of justice for the communities and ecosystems that have been seriously damaged by decades of indifferent and reckless resource extraction activities by a global energy conglomerate.

Perhaps even more importantly, they will have shown that recourse to domestic courts, when these are accountable and independent, may be precisely the strategy needed to confront the scourge of international investment treaties. 

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