A case study in multinational corporate accountability: Ecuador's indigenous peoples struggle for redress.

Author:Lyons, Maxi


Multinational corporations often wield more power than many of the world's nations, the immense wealth and political influence of multinationals make them powerhouses in the global economy. These domineering enterprises are often able to undertake profit-making endeavors, particularly involving the consumption or extraction of natural resources, in developing nations with little or no regulation and often without meeting social and cultural responsibilities to the local communities and environments adhered to in the United States (U.S.). The eastern half of the Ecuadorian Amazon, known as Oriente, is one of the richest bioregions on the planet, and a rich source of oil that has been exploited by multinational oil companies for thirty years. (1) Oil extraction in the Amazon has led to contamination of the waters and land, deforestation, and resulted in sickness in indigenous communities, threatening some communities with cultural extinction. (2) The jungle of Ecuador will be extinguished in its entirety within forty years at the present rate of deforestation however, the oil extracted and sold in the global marketplace is the foundation of Ecuador's economy and is therefore promoted by the Ecuadorian government as the key to development. (3) Despite initial opposition by the Ecuadorian government, indigenous peoples of Ecuador formed grassroots resistance movements--educating and galvanizing local communities against exploitation, which led to citizens of Ecuador and Peru filing two putative class actions against Texaco (now ChevronTexaco (4)) alleging the oil company polluted rain forests and rivers in those two countries, causing environmental damage and personal injuries. (5) The litigation surrounding the now consolidated cases has been touted as "the antiglobalization trial of the century." (6) Although environmental contamination and human rights violations are central to the legal case, the fundamental issue underlying this landmark case is corporate responsibility, in particular, the accountability of multinational corporations operating in developing and underdeveloped countries where regulation is often far more lax than standards a corporation operating in the U.S. would be held to.

This paper takes the position that multinational corporations have social and environmental responsibilities to the peoples and environs from which their enterprises profit that demand legal remedy when breached. As a case study in multinationals operating without accountability, this paper details the developments and implications of the case against ChevronTexaco throughout more than a decade of litigation and discusses generally the barriers to redress encountered by plaintiffs, such as the Ecuadorian and Peruvian plaintiffs, attempting to bring suit against multinationals operating in a global market. Section II discusses the background of ChevronTexaco's operations in Ecuador and the political and economic environment at the time of operations as well as the impacts of these operations to the natural and cultural environment in Ecuador and Peru and the potential liabilities incurred as a result. Section III analyzes the cases brought against ChevronTexaco for their allegedly sub-standard waste disposal techniques that resulted in environmental and cultural devastation. Section IV highlights the associated case now pending in Ecuador, which was brought following the U.S. federal court's dismissal of the U.S. suit. Section V looks to the future of Ecuador's oil development as an economic force following the ChevronTexaco debacle. Section VI outlines the new laws and regulations that will shape oil extraction in the future by empowering indigenous peoples to have both information and meaningful participation in the processes. Section VII considers generally the barriers encountered by plaintiffs attempting to gain access to redress for wrongs committed by multinationals in foreign jurisdictions, and Section VIII proposes solutions for improving means of redress as a mechanism for demanding multinational accountability in an international context. Section IX calls for universal standards to be established through collaborative efforts of the international community to demand multinational social, cultural and economic accountability in the environs within which they operate.


The matter of environmental contamination by Texaco, a U.S. domiciled multinational corporation, in Ecuador was facilitated by a combination of legal, political and economic factors. In the 1970's and 1980's, "environmental protection was virtually nonexistent in Ecuador" as "the first environmental impact assessments were only introduced in Latin America in the 1990's." (7) Economics was a key factor for both the Republic of Ecuador, who leased the land within the sensitive rainforest region to Texaco for exploitation as a source of wealth for the state, and Texaco who gained high profits with no government regulation or oversight. (8) Government corruption was also a factor in the despoiling of the Amazon as "most of the time Texaco was in Ecuador, the government was unrepresentative and corrupt. Local people, whose forest was leveled and whose water was polluted, were completely unaware of what oil exploration would do to them." (9) Thus, the issue that arises is what responsibilities do corporations seizing such prime profit-making opportunities have to the ecosystems, societies, and economies within which they operate. Corporate accountability, a topic much debated since the Enron scandal, should extend beyond accountability to board members and stockholders to "those most directly affected by their operations." (10) Thus, underlying the legal technicalities of the ChevronTexaco case is the more critical issue of multinational corporate accountability for the welfare of whole societies from whom they profit.

Texaco's Operations in Ecuador

In 1964, the Ecuadorian government invited Texaco to develop the country's first oil field in the Oriente and Texaco's Ecuadorian subsidiary, Texaco Petroleum Company (TexPet), commenced oil exploration. (11) In 1967, Texaco found oil near the Columbian border, an unspoiled jungle region of Ecuador that was, at the time, inhabited by indigenous tribes and missionaries. (12) Texaco began drilling in the Oriente as part of consortium in which Gulf Oil Corporation (Gulf) and Texaco owned equal shares with the Ecuadorian government-owned PetroEcuador acquiring a twenty-five percent share in 1974. (13) PetroEcuador became the majority stakeholder in 1976 when it acquired Gulf's interests. (14) By 1980, in addition to drilling hundreds of wells, the consortium had constructed the 312-mile trans-Ecuador pipeline traversing the Andes and built access roads throughout the jungle. (15) TexPet operated the oil pipeline and handled all drilling operations until PetroEcuador assumed responsibility for the pipeline in 1989 and for drilling operations in 1990. (16)

Techniques Employed by Texaco

Between 1971 and 1992 when Texaco ceased operations in Ecuador, Texaco had drilled 339 wells in over a million acre concession and extracted roughly 1.4 billion barrels of crude oil from the Amazon. (17) Texaco's operations generated more than 3.2 million gallons of waste each day and accidental spills from the pipeline released an estimated 16.8 million gallons of crude into the Amazon River--all discharged without prior treatment or followup monitoring. (18) The "drilling muds" produced during Texaco's oil extraction contain "water, oil, heavy metals and chemicals used in drilling." (19) U.S. government studies have shown that drilling muds such as those dumped in unlined pits near the wells in the Oriente, can contain "toxic levels of benzene, a known carcinogen, and lead, which can impede mental development in children." (20) Additionally, Texaco used dirt pits to separate the oil from water, which produced a waste called "produced water," a brine that was dumped into nearby streams. (21) According to studies of produced water in the U.S., it also contains "high levels of benzene and arsenic." (22) These wastes from Texaco's operations are blamed for the devastation of streams, rivers, and wetlands in the Amazon basin, impacting both Ecuador's and Peru's indigenous inhabitants. (23)

In response to a request from Ecuador's Minster of Energy and Mines for an environmental audit of the oil fields in 1994, Texaco asserted that during the company's years of operation they complied with all laws and regulations along with the company's "operating practices which often go beyond the environmental laws and regulations of countries around the globe." (24) In sharp contrast to

Texaco's practices, however, "large [U.S.] operators had mostly abandoned the use of unlined dirt pits to dispose of drilling muds" by the mid-1980s due to more stringent disposal regulations for oil waste prompted by growing health and environmental impact concerns. (25) Less than five percent of oil wastes in the U.S. were damped into dirt pits in 1985, according to a survey by industry trade group American Petroleum Institute. (26) Most drilling muds were shipped to special offsite disposal centers and while most U.S. states with petroleum activity banned the discharge of oil wastes into freshwater streams in the 1940s and 1950s, the U.S. federal government banned such damping nationwide in 1979 with only very limited exceptions. (27) Alternatively, oil companies in the U.S. and many other countries were reinjecting waste into the ground. (28)

According to the interviews and documents produced during discovery in the U.S. case, "Texaco dumped waste water directly into streams and the jungle instead of using disposal methods safer for the environment and public health that became common in the United States during the 1970s and 1980s. Oil company officials regarded those methods as too expensive to be cost-effective in...

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