Chevron vs Ecuador: Who Will Prevail in the International Arbitration Case?

Who will prevail in the case between Chevron and Ecuador?

A. Chevron will lose because the doctrine of sovereign immunity applies.
B. Chevron will lose because national courts never have jurisdiction over a foreign nation's domestic actions.
C. Chevron will prevail because Ecuador consented to the arbitration clause in the contract.
D. Chevron will likely prevail because in an international commercial contract the CISG has a default arbitration provision.

Answer:

Chevron will likely prevail because Ecuador consented to the arbitration clause in the contract, and the tribunal found in favor of Chevron.

Chevron and Ecuador signed an agreement that includes an arbitration clause. This means that both parties agreed to resolve any disputes through arbitration rather than in national courts. The agreement allowed Chevron to develop Ecuadorian oil fields in exchange for providing below-market-price oil to the Ecuadorian government. However, one year before the agreement expired, Ecuador expelled Chevron from the country.

In response, Chevron initiated an international arbitration before a three-member tribunal at The Hague. The tribunal reviewed the case and found in favor of Chevron, ruling that Ecuador violated the agreement by expelling Chevron. Despite Ecuador's argument that they never agreed to arbitration with Chevron and asserted their sovereign immunity, Chevron can argue that Ecuador consented to the arbitration clause in the contract. By signing the agreement, Ecuador agreed to resolve any disputes through arbitration.

Therefore, the tribunal's ruling in favor of Chevron is likely to stand, and Chevron will prevail in the case. This demonstrates the importance of clarity in contracts and the enforceability of arbitration agreements in international commercial disputes.