Expert Report of Dr. Enrique Barros B.

[CERT.GEOTEXT VER]

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

________________________________________________________________________

CHEVRON CORPORATION, PLAINTIFF

vs.

MARIA AGUINDA SALAZAR ET AL. DEFENDANTS

AND

STEVEN DONZIGER, ET AL. INTERVENORS

11-CV-3718 (LAK)

________________________________________________________________________

EXPERT REPORT OF DR. ENRIQUE BARROS B.

________________________________________________________________________

2 [CERT.GEOTEXT VER]

REPORT BY DR. ENRIQUE BARROS B.

INDEX I. INTRODUCTION...............................................................................................................................3 II. SUMMARY OF MY CONCLUSIONS………………………………………………..…………...3

III. RULES AND PRINCIPLES REGARDING RES JUDICATA………………………………..4 A. Function and history of res judicata…………………………………………….….....4 B. The effect of res judicata applies to both judicial judgments and settlement agreements………………………………………………..…………..………………………...5 C. Requirements of res judicata………………………………………………..………....6 IV. RES JUDICATA IS A SUCCESSFUL DEFENSE WITH REGARD TO THE LAGO AGRIO COMPLAINT………………………………………………..…………..……………………………...7 A. Identity of the causa petendi………………………………………………..………….7 B. Identity of object ………………………………………………..…………..………...8 C. Legal identity of the parties ………………………………………………..…………11 1. The concept of party refers to the holder of the interest being represented in the proceedings ……………………………………………….11 2. The erga omnes effect that derives from the diffuse nature of the right to an environment free of contamination……………………………………..15


I. INTRODUCTION

1. Chevron Corporation has asked me to provide an opinion, as an expert in civil and comparative law, on whether the decision in the ruling by the Lago Agrio Court on February 14, 2011—which was clarified and expanded on March 4, 2011—that upheld the claim filed by María Aguinda et al. against [the company] (the Lago Agrio complaint) violates the doctrine of res judicata. 2. I am independent from the Parties and their legal advisors, and I have no personal interest in the outcome of this case. The opinions expressed in this report are based on my professional knowledge acquired in over 30 years of legal experience working as an attorney in the civil law tradition in general, as a law professor, scholar, judge and arbitrator. My professional background and qualifications to prepare this opinion are listed in Annex A. Throughout my career I have acquired experience in the interpretation of special rules and laws relating to the Chilean Civil Code, [a code] that was later adopted on almost identical terms in Ecuador. In addition, I have extensive experience in civil law and comparative law in general. In fact, in my capacity as a law professor and in my academic research I have studied and regularly utilized the laws of other countries, because in civil law systems the use of comparative law dates from the mid-nineteenth century. In almost every article I have published, as well as in my Treatise on Tort Liability [Tratado de Responsabilidad Extracontractual], I have used comparative law to analyze legal institutions. I have no doubt that I am qualified to give my opinion on the issues that have been put to me. I have carefully explained the basis for my arguments in this report and I have cited portions of the legal texts and doctrinal sources that I find most significant and useful to the reader regarding the major topics discussed here, and to explain why and how I came to the conclusions of this report, and their foundations. I endorse and include as an integral part of this report others I made in September 2010, presented to the arbitration court in PCA case No. 2009-23, captioned “Chevron Corporation y Texaco Petroleum Company v. República del Ecuador,” attached as Annex B. The documents I have reviewed for this report are listed in Annex C. 3. Chevron has paid me at a rate of US$900 an hour for the preparation and drafting of this report. The report was written in Spanish and I understand that there is an English translation that will be filed in the proceeding.

II. SUMMARY OF MY CONCLUSIONS 4. Settlement agreements have the effect of res judicata, similar to court rulings in most Latin American legal systems, including in Ecuador and Chile. Res judicata is a principle widely respected in civil law systems. It is recognized as essential for security and certainty in legal disputes, which could otherwise be prolonged indefinitely.


5. In my opinion, the Lago Agrio Decision negating the res judicata effect of the settlement agreements entered into between 1994 and 1998 by TexPet, Petroecuador, the State of Ecuador, and local governments constitutes a serious violation of this legal doctrine, and the Court should have dismissed the lawsuit, ruling in favor of Chevron. 6. The Lago Agrio verdict is not supported by law, because (i) those settlement agreements had the effect of res judicata under Ecuadorian law (and, in general, under the Roman tradition of civil law) and (ii) the necessary requirements of res judicata regarding identity of causa petendi, identity of object and identity of parties were clearly met in this case.

III. LEGAL RULES AND PRINCIPLES REGARDING RES JUDICATA A. FUNCTION AND HISTORY OF RES JUDICATA 7. Res judicata is the principle by which final judgments become binding and immutable.1 In systems of civil law, res judicata also applies to settlements. The law defines a settlement as “a contract in which the parties terminate a pending lawsuit out of court, or prevent a potential lawsuit.”2 8. The most important function of res judicata is to guarantee the effectiveness and stability of legal decisions and settlement agreements. It is universally accepted that the foundation of res judicata lies “in the need to prevent litigations from being reproduced indefinitely, and to secure legal certainty and stability.”3 Even in the face of an erroneous judgment, “[l]ong experience and the laws of various peoples attest to the fact that uncertainty in the law has been regarded as the greater evil[.]”4

1 Carnelutti, Francesco. Sistema de Derecho Procesal Civil [Civil Procedure Law System]. Vol.1. Buenos Aires. Uteha.

1944. p. 332. 2 Civil C. art. 2348 (Ecuador) (Barros Previous Report Annex 45). Civil C. art. 2446 (Chile) . 3 Romero, Alejandro. La Cosa Juzgada en el Proceso Civil Chileno [Res judicata in Chilean Civil Procedure]. Editorial

Jurídica de Chile. Santiago. 2002. p. 70 (Barros Previous Report Annex 31). It has been stated that “[s]ocial peace thus requires certainty in legal relationships, even to the detriment of justice, and that imperative gives rise to the idea of giving the judgment, regardless of the conditions in which it was issued, the quality of being immutable or irrevocable. That is how two opposing extremes arise: the need for justice and the need for certainty. Therefore, the problem the legislator must solve is that of harmonizing these requirements, and for this purpose he has created a balanced equation: he provides for the need for justice by establishing procedural recourses and he provides for the need for certainty with res judicata….”(Pereira, Hugo. La cosa juzgada formal en el proceso civil. [Formal Res Judicata in Civil Proceedings]. Lexis Nexis. Santiago. 2nd Ed. 2004. pp. 19-20). It has also been held that “[t]hrough res judicata, the uncertainty of the Law is transformed into the certainty of the judgment.” (Maturana, Cristián. Relación entre litispendencia, la acumulación de autos y la cosa juzgada [Relationship between Litispendence, Consolidation of Case, and Res Judicata]. Thesis for obtaining the Degree in Legal and Social Sciences[from the University of Chile]. Universidad de Chile. Santiago. 1982. p. 304) (Barros Previous Report Annex 33). Similarly, an authority on civil law tradition has stated that “res judicata is the self-efficacy of the judgment that accepts or rejects the claim, and consists of this: due to the supreme requirement of order and security in social life, the situation of the parties, set by the court in relation to...the object of the dispute, cannot later be challenged...” (Chiovenda, Giuseppe. Instituciones de derecho procesal civil [Institutions of Civil Procedure]. Vol I. Madrid. Editorial Revista de Derecho Privado. 1954. p. 438-439) (Barros Previous Report Annex 34).

4 von Savigny, Friedrich. Traité de Droit Romain [Treatise on Roman Law]. Firmin Didot Brothers, Booksellers. Paris. 1849. § CCLXXX, p. 265-266 (Barros Previous Report Annex 35).


9. Res judicata has a dual purpose: enforcing the remedy established by a court or agreed upon in a settlement, and preventing the same matter from being argued in a subsequent trial on the same grounds and between the same parties. In the first sense, it ensures that the benefit obtained by the party invoking the judgment or the settlement will be maintained. In the second sense, it is a basic principle of civil procedural law that prevents a dispute that has already been settled through a judgment or a settlement that definitively resolves the case from being raised again. 10. Without the effect of res judicata, parties in dispute would never attain certainty with regard to their rights and obligations because disputes could be renewed again and again. Res judicata also prevents the risk of issuing judgments contrary to what has previously been resolved, which would cause confusion and uncertainty in legal relationships.5 11. The rules regarding res judicata originate in Roman civil law.6 The Roman rules were explained by the French jurist Robert Pothier in his Treatise on the Law of Obligations, published in 1761. This renowned work had a decisive influence on the drafting of the French Civil Code of 1804, and also on the vast majority of the civil codes in Latin America, including those of Chile (1855) and Ecuador (1858). 12. In the codification process in Chile and other Latin American countries that follow the French or Chilean codification, as is the case in Ecuador, the basic rules regarding res judicata from Roman law and later French law were incorporated into the Civil Codes (into the rules governing settlement agreements and their res judicata effects), and into the Codes of Civil Procedure (where [res judicata] is explained with regard to its conditions and scope). B. THE EFFECT OF RES JUDICATA APPLIES TO BOTH JUDICIAL JUDGMENTS AND SETTLEMENT AGREEMENTS 13. A dispute between parties can be resolved in two ways: (i) through a judicial ruling that decides the dispute or (ii) through an agreement that contains reciprocal concessions with regard to what is sought or could be sought in a trial.7 In civil law systems, agreements of this type are called “settlements.” This agreement, like any other, binds the parties that entered into it, since “any contract legally entered into is a law for the parties.”8

5 In doctrina it has been written that “it is usually stated that res judicata is an institution of natural reason or of natural

law, imposed by the very presence of the law and without which the law would be illusory; without it uncertainty would prevail in social relationships and chaos and disorder would be the norm in legal phenomena.” (Couture, Eduardo. Fundamentos de Derecho Procesal Civil [Fundamentals of Civil Procedure]. Depalma. Buenos Aires. 1964. p. 405).

6 Digesto de Justiniano [Digest of Justinian]. vol. III. Book 44, 2, 6 (Barros Previous Report Annex 40). 7 Alcalá, Niceto. Proceso, autocomposición y autodefensa [Trial, Settlement Out of Court, and Self-Representation].

UNAM. Mexico. 2000. p. 12-13 (Barros Previous Report Annex 44). 8 As provided by Article 1561 of Ecuador's Civil Code, identical to Article 1545 of Chile’s Civil Code (Barros Previous

Report Annexes 47 and 46).


14. In addition to the inherent effects of the settlement as a contract, the law provides that settlement produces the effect of res judicata characteristic of judicial decisions, without it needing to have judicial approval. Article 2362 of the Ecuadorian Civil Code, in terms materially identical to article 2460 of the Chilean Civil Code, states that: “Settlement produces the effect of res judicata at a court of last appeal[.]”9 Moreover, this provision is reiterated in various Civil Codes in Latin America, including those of Mexico, Argentina, Colombia, Peru, Costa Rica, Uruguay, Nicaragua, Honduras, Venezuela, Bolivia, and Paraguay, as well as that of Spain.10 15. Thus, the settlement agreement fulfills the same function as a court judgment, in that both resolve a controversy, and [the settlement agreement] does so with the same imperativeness and immutability [as the judgment].11 16. The res judicata effect of settlement agreements has an additional institutional purpose, which is to encourage settlements by promising to grant the parties stability and to end disputes forever. Res judicata encourages the parties to forestall or put an end to legal conflict through a settlement, with the explicit promise that the same problem will not be raised again 17. The res judicata effect supports the mandatory nature of the settlement, because it gives it an effect equivalent to a judicial decision. C. REQUIREMENTS OF RES JUDICATA 18. In order for the res judicata defense to apply with regard to a particular suit, three elements must be met: identity of causa petendi, identity of object sought, and identity of parties.

9 Civil C. art. 2362 (Ecuador) (Barros Previous Report Annex 49). 10 Civil C. art. 1816 (Spanish) (Barros Previous Report Annex 50): “The settlement has, between the parties, the

authority of res judicata[.]” Federal Civil Code art. 2953 (Mexico) (Barros Previous Report Annex 51): “Settlement has, with respect to the parties, the same power and authority as res judicata.” Civil C. art. 850 (Argentina) (Barros Previous Report Annex 52): “A settlement cancels any rights and obligations the parties may have waived, and has the authority of res judicata for them.” Civil C. art. 2483 (Colombia) (Barros Previous Report Annex 53): “Settlement produces the effect of res judicata in the final level, but a declaration of invalidity or revocation may be made under the articles above.” Civil C. art. 1302, last sub-section (Peru) (Barros Previous Report Annex 54): “... Settlement has the value of res judicata.” Civil C. art. 1385 (Costa Rica) (Barros Previous Report Annex 55): “Settlement has shall have the same effect and authority as res judicata in regard to the parties.” Civil C. art. 2161 (Uruguay) (Barros Previous Report Annex 56): “ A settlement, to the extent that it cancels rights and obligations the parties may have waived, has the authority of res judicata for them.” Civil C. art. 2193 (Nicaragua) (Barros Previous Report Annex 57): “Settlement has shall have the same effect and authority as res judicata in regard to the parties.” Civil C. art. 2014 (Honduras) (Barros Previous Report Annex 58): “Settlement produces the effect of res judicata, but a declaration of invalidity or revocation may be made under the articles above.” Civil C. art. 1718 (Venezuela) (Barros Previous Report Annex 59): “A settlement has the same force between the parties as res judicata.” Civil C. art. 949 (Bolivia) (Barros Previous Report Annex 60) “Settlements, assuming they are valid, have the effects of res judicata between the parties and their successors.” Civil C. art. 1501 (Paraguay) (Barros Previous Report Annex 61): “A settlement cancels any rights and obligations the parties may have waived and has the authority of res judicata for them and their successors.”

11 The concept of jurisdictional equivalent was developed by the Italian jurist Francesco Carnelutti, who understood these to be the best means to achieve jurisdiction's same ends, noting that “it is often the parties themselves who provide the resolution of the litigation.” (in Sistema de Derecho Procesal Civil [System of Civil Procedure]. Translated by N. Alcalá and S. Sentis. Uteha. Buenos Aires. 1944. p. 197).


• Identity of causa petendi means that the factual background and the legal grounds for the previous trial or settlement must coincide with those in the new suit, i.e., the reason for the suit is the same.

• Identity of object sought means that the legal benefit (not the material object) sought in the previous trial or settlement must coincide with that in the new suit, i.e., that which is sought is the same.

• Identity of parties means that the legal holders of the rights enforced in the previous trial or settlement agreement coincide with those in the new suit, i.e., the interested parties are the same.

19. Article 297 of the Ecuadorian Code of Civil Procedure states: “… a new suit may not take place if the two lawsuits would involve subjective identity, which consists in the intervention of the same parties, and objective identity, which entails demanding the same thing, amount, or fact on the basis of the same cause, reason, or right” (emphasis added).12

20. In order to determine whether res judicata applies, these three elements of the judgment or the settlement agreement must be compared with the three elements of the complaint. If the elements coincide, the res judicata defense must be accepted.

IV. RES JUDICATA IS A SUCCESSFUL DEFENSE WITH REGARD TO THE LAGO AGRIO COMPLAINT

21. Based upon a comparison of the causa petendi, the object, and the parties in the settlement agreements, and the elements of the Lago Agrio complaint, I conclude that the three identities are met and that res judicata exists. In my opinion, the environmental dispute initiated by the Lago Agrio complaint was resolved through these settlement agreements. The Lago Agrio judgment is counter to the law in not recognizing the res judicata defense.13

12 C. Civ. Pro. art. 297 (ex 301) (Ecuador) (Barros Previous Report Annex 71). While the wording of Ecuador’s Code

of Civil Procedure is not identical to the Code of Civil Procedure of Chile, the core elements that come from Roman law are exactly the same: cause, object and parties.

13 In the case of the Lago Agrio complaint, the settlement agreement, entered into by public deed on May 2, 1996 before Notary No. 15 of Quito Canton, was approved on September 19, 1996 by decision of the First Court on Civil Matters of Sucumbíos (in Nueva Loja ) (Case No 289-94). That decision states in its relevant part: “FIRST: Settlements are defined by Section 2372 of the Civil Code as agreements whereby the parties solve any pending dispute between them without resorting to a court of law or whereby they prevent future disputes. According to legal authors and case law, a settlement is a civil contract resembling a judgment as it puts an end to a lawsuit and has a res judicata effect for the parties to the proceeding. In this case, however, the parties agreed that they would ask the courts to render judgment confirming the settlement, despite the fact that the agreement is a judgment in itself. It should be noted that such request by the parties violates no legal provisions. In fact, given that it is a contract, the settlement is actually the law binding on the parties.” The judgment concludes: “[t]herefore, the parties are hereby required to comply with [said settlement agreement] and the case is hereby ARCHIVED, provided that the settlement shall have res judicata effect pursuant to Section 2386 of the Civil Code, except for the legal actions set forth therein.” When later a Lago Agrio mayor tried to set aside this judicial approval of the settlement agreement, his petition was rejected several times, and the matter ended on May 15, 1997 with the decision by the Supreme Court of Ecuador to reject an extraordinary appeal (proceeding No 132/97).


A. IDENTITY OF THE CAUSA PETENDI 22. The doctrina has explained that the causa petendi is “the material or legal fact serving as the basis for the claim asserted therein.”14 23. The settlement agreements and the Lago Agrio complaint have the same causa petendi inasmuch as they are based on the same facts, i.e., whatever repercussions the hydrocarbon exploration and production activities carried out by the Consortium between 1964 and 1992 in a specified geographic area of Ecuador might have had, and they have the same legal basis, which is the right to live in a healthy environment free of contamination. 24. As for the factual basis, both the settlement agreements and the complaint reference the alleged damage that may have resulted from the operations of the former Consortium. The settlements with the Government and the local authorities make specific reference to the “potential Environmental Impact arising out of the Consortium’s operations”15 and to the “ alleged environmental damages…as a result of the actions performed by TexPet”16 The Lago Agrio complaint is based on the alleged impacts derived from “the time of [TexPet’s] operation in Ecuador.”17 25. As for the legal basis for the remedy sought, the causa petendi is the same in the settlement agreements as in the Lago Agrio complaint: the right to live in a healthy environment free of contamination. This is the right that justifies the redress sought. The 1995 Contract expressly releases TexPet from any and all claims based on Article 19 (2) of the Political Constitution of the Republic of Ecuador (of 1978), 18 which guaranteed all people “the right to live in an environment free of contamination” and established that “[i]t is the duty [of] the state to ensure that this right is not infringed and to guarantee the preservation of nature (…).”19 The claim invokes the same “collective” constitutional right, as it was codified in Article 23 (6) of the 1998 Constitution, which guarantees all people “The right

14 Maturana, Cristián. Relación entre litispendencia, la acumulación de autos y la cosa juzgada [Relationship between

Litispendence, Consolidation of Case, and Res Judicata]. Universidad de Chile. Santiago. 1982, p. 374 (Barros Previous Report Annex 33).

15 Contract for Implementing of Environmental Remedial Work and Release from Obligations, Liability and Claims between the Republic of Ecuador, Petroecuador, and Texaco Petroleum Company, May 4, 1995 (1995 Contract), third-to-last Recital (Barros Previous Report Annex 4).

16 Municipal Settlement Agreement with Lago Agrio, May 2, 1996, clause 3.1 (Barros Previous Report Annex 12); Municipal Settlement Agreement with Joya de los Sachas, May 2, 1996, clause 3.1 (Barros Previous Report Annex 10); Municipal Settlement Agreement with the Canton of Francisco de Orellana (Coca), May 2, 1996, clause 3.1 (Barros Previous Report Annex 11); Municipal Settlement Agreement with Shushufindi, May 2, 1996, clause 3.1 (Barros Previous Report Annex 13).

17 Complaint filed before the President of the Superior Court of Nueva Loja, Lago Agrio, Ecuador, by Maria Aguinda and 48 others against Chevron, May 7, 2003 (Lago Agrio Compl.), ch. I No. 3 (Barros Previous Report Annex 16).

18 1995 Contract. clause 5.2 (Barros Previous Report Annex 4). 19 Political Constitution of Ecuador (1978) art. 19(2) (Barros Previous Report Annex 77). Promulgated via Codification

No. 25, published in Official Gazette 183 on May 5, 1993 (Barros Previous Report Annex 78).


to live in a healthy, ecologically balanced, and pollution-free environment.”20 Likewise, the complaints filed by the municipalities in 1994 cite several rules concerning the environmental regulations that aim to maintain a healthy environment. 26. Although the Lago Agrio Court never specifically references res judicata in the judgment, it seems to agree with this analysis, since it acknowledges that the plaintiffs “have demanded the protection of a collective right…, redress of environmental harm… that affects over 30,000 people”21 and recognizes that in the settlement agreements Texaco has been released from liability for impacts upon that right.22 B. IDENTITY OF THE OBJECT 27. The object sought, also called petitum in the legal doctrine, is “the immediate legal benefit that is claimed and which is sought to have right to.”23 28. “ [T]here is agreement in that objective similarity cannot be determined by a mere literal comparison of what was previously ruled and (…) the subject matter of the new claim,”24 because identity does not depend on the thing itself being requested nor on the particular terms used by the parties to refer to it. Case law has held that “[o]ne must look for identity in the legal claim sought and not in the material aspect, much less can one hold that this [aspect] is identical in substance and incidents.”25 29. In the case of a settlement, the object is “the disputed legal relationship,” that is, the dispute that is ended by way of an agreement between the parties.26 30. Res judicata is based on the principle of coherence between the previous ruling or settlement and the claim in the subsequent proceeding. The way to determine the identity of object in a specific case is to determine whether the judge must again decide a dispute that has

20 Political Constitution of Ecuador (1998) art. 23 No. 6 (Barros Previous Report Annex 79). 21 Lago Agrio Decision, p. 33. 22 Lago Agrio Decision, p. 91. 23 The courts thus ruled in: Supreme Court (Chile), Perez v., de Perez c/ v. Gajardo, Perez, December 11, 1937. RDJ,

vol. XXXV, sec.1, p. 238 (Barros Previous Report Annex 81) Court of Appeals of Santiago (Chile), Jimenez, Clodomiro v. Cancino, Luis, September 21, 1950. RDJ, vol. IIIL, Sec. 2, p. 57 (Barros Previous Report Annex 82) and Supreme Court, Mario G. Costa c/ Mosso S., . Juan Carlos et al., August 7, 1961. RDJ, vol. LVIII, Sec. 1, p. 263 (Barros Previous Report Annex 83), inter alia.

24 Romero, Alejandro, La Cosa Juzgada en el Proceso Civil Chileno [Res Judicata in Chilean Civil Procedure]. Editorial Jurídica de Chile. Santiago. 2002. p. 69 (Barros Previous Report Annex 31).

25 Supreme Court (Chile), Ferrocarriles de Antofagasta a Bolivia v. Impuestos Internos, August 7, 1961. RDJ, vol. LVIII, part 2, sec. 1, p. 264 (Barros Previous Report Annex 84).

26 Díez-Picazo, Luis and Gullón, Antonio. Sistema de derecho civil [Civil Law System]. Volume II. 8th edition. Tecnos. Madrid. 2000. p. 431 (Barros Previous Report Annex 85). Also Vodanovic, Antonio. Contrato de transacción [Settlement agreement]. 3rd edition. Ed. Jurídica Conosur Santiago. 1993. p. 81 (Barros Previous Report Annex 86), and Ortells Ramos, Manuel. Derecho Procesal Civil [Civil Procedure]. Ed. Aranzadi. Navarra. 2001. p. 491 (Barros Previous Report Annex 87).


been resolved, because with that there is a risk of declaring a right that has already been denied or denying a right that has already been established. 31. The object sought in the Lago Agrio complaint is covered by the object of the settlement agreements entered into with the State of Ecuador and the local authorities, given that the complaint intends to ultimately impose on TexPet liability for the environmental impact allegedly caused by the operations of the former Consortium and thus pursues once more an environmental dispute that was already resolved by the settlement agreements. 32. The 1995 Contract ended the dispute concerning TexPet’s alleged liabilities for environmental impact resulting from Consortium operations in which TexPet participated. That is clear from the name of the agreement, “Contract for Implementing of Environmental Remediation Work and Release from Obligations, Liability and Claims.” In [this agreement], it is specifically set forth that “TexPet, the Government and Petroecuador” have “determined” and agreed on “the scope of the Environmental Remediation Work to be undertaken by TexPet…”27 and, in return, the Government and Petroecuador agreed to “release, acquit and forever discharge TexPet (…) of all the Government’s and Petroecuador’s claims against the Releases for Environmental Impact arising from the Operations of the Consortium (…).”28 33. In this regard, it is established that the release from liability includes: “any and all claims, rights to claim (…) (past, present, future, known or unknown), that the government or Petroecuador have or could have (…) in any way related to the contamination, that have or ever may arise in the future, directly or indirectly arising out of Operations of the Consortium (…).”29 34. The settlement agreements with the municipalities also speak to it being the same dispute when they point out that the purpose of the complaints was “to obtain obtain payment of indemnization for alleged environmental damages (…) result of the actions performed by TexPet in said area.”30 Like the State, they irrevocably free TexPet from “any responsibility, claim, request, demand or complaint, be it past, present or future, for any and all reasons related to (…) the activity of the aforementioned companies [TexPet and Petroecuador] (…) especially concerning damage possibly caused to the environment (…).”31

27 1995 Agreement. op. cit. Penultimate recital (Barros Previous Report Annex 4). 28 Id. clause 5.1 (Barros Previous Report Annex 4). 29 Id. clause 5.2 (Barros Previous Report Annex 4). 30 Municipal Settlement Agreement with Lago Agrio. op. cit. clause 3.1 (Barros Previous Report Annex 12);.

Municipal Settlement Agreement with Joya de los Sachas. op. cit. clause 3.1 (Barros Previous Report Annex 10); Municipal Settlement Agreement with Coca. op. cit. clause 3.1 (Barros Previous Report Annex 11); Municipal Settlement Agreement with Shushufindi. op. cit. clause 3.1 (Barros Previous Report Annex 13).

31 Municipal Settlement Agreement with Lago Agrio. op. cit. clause 5 (Barros Previous Report Annex 12); Municipal Settlement Agreement with Joya de los Sachas. op. cit. clause 5 (Barros Previous Report Annex 10); Municipal Settlement Agreement with Coca. op. cit. clause 5 (Barros Previous Report Annex 11); Municipal Settlement Agreement with Shushufindi. op. cit. clause 5 (Barros Previous Report Annex 13).


35. Thus, according to the settlement agreements with the central government and the local governments, in order to resolve this controversy, TexPet agreed to carry out environmental remediation work and provide socioeconomic compensation to the community and in return received a complete release from all environmental liability associated with its activity in the Concession area.32 In this way, the object of the environmental dispute was completely resolved. 36. As for the temporal scope of the release of TexPet’s liability, the agreements specifically establish that they extend both to the actions that could be raised at that time, as well as to any future action deriving from the activity of the former Consortium.33

37. Chapter VI of the Lago Agrio complaint, called “Prayer for relief,” contains a precise and specific statement of the concrete requests submitted for the judge’s decision. The plaintiffs ask for the “eliminate[ion] or removal [of] the contaminating substances that still threaten the environment and the health of the inhabitants,”34 and the “remediation of the environmental damage caused.”35 38. In my opinion, the object sought in the Lago Agrio complaint is included in the object of the settlement agreements because the complaint seeks to submit for the judge’s decision an environmental dispute resulting from TexPet’s alleged liability for adversely affecting the right of the community to live in a healthy environment free of contamination, even though a final resolution was already reached in this dispute through those agreements. 39. The object of a settlement is the dispute that it resolves and not the particular items of redress agreed upon, and the object of a complaint is not the remedies requested, but rather the legal benefit that it represents, which is environmental remediation. The fact that signs of contamination may exist does not

32 In my opinion, the 1995 Contract indicates that the underlying logic has to do with the fact that TexPet, despite

having been the operator of the Consortium until 1990, had only a minority stake in oil production. TexPet was required to carry out remediation work on a portion of Consortium sites estimated to be in proportion to its relative stake, considering that the State of Ecuador through Petroecuador was the majority shareholder. This explains why Ecuador has released TexPet from any liability in exchange for remediation work on a percentage of the sites and not on all of them.

33 Municipal Settlement Agreement with Lago Agrio. op. cit. clause 5 (Barros Previous Report Annex 12); Municipal Settlement Agreement with Joya de los Sachas. op. cit. clause 5 (Barros Previous Report Annex 10); Municipal Settlement Agreement with Coca. op. cit. clause 5 (Barros Previous Report Annex 11); Municipal Settlement Agreement with Shushufindi. op. cit. clause 5 (Barros Previous Report Annex 13), 1995 Contract. clause 5.2 (Barros Previous Report Annex 4).

34 Lago Agrio Complaint, ¶ VI, Prayer for relief, Item 1 (Barros Previous Report Annex 16). Specifically, they ask for: (i) the removal and appropriate treatment and disposal of waste and contaminants still present in pits or wells excavated by Texaco, which have merely been plugged, covered or inadequately treated, (ii) the clean up of rivers, streams, lakes, wetlands and natural and artificial waterways and appropriate disposal of all waste, (iii) the removal of all above-ground well structures and machinery, closed, sealed or abandoned stations and substations, as well as ducts, pipes, channels and similar objects related to these wells, and (iv) in general, the clean up of land, fields, farm plots, streets, roads and buildings that still contain the residue of contaminants produced or generated as a result of operations carried out by Texaco, including the disposal pits for contaminated waste built as part of the poorly executed environmental cleanup work.

35Id. ¶ VI, Prayer for relief, Item 2 (Barros Previous Report Annex 16). Including: (i) the work necessary to restore the natural features and conditions of the soil and surrounding environment in the pits excavated by Texaco, (ii) the hiring of qualified individuals or institutions to implement a recovery plan for the native flora and fauna and the regeneration of aquatic life, and (iii) the hiring of qualified individuals or institutions to design and implement a plan to improve and monitor the health of the inhabitants of the affected settlements.


change the analysis as to identity of object. As we have seen, the dispute is the same (TexPet’s ultimate liability for environmental damage) as is the legal benefit sought (remediation of that same damaged environment). 40. Any difference in the specific remedies requested is not relevant to the analysis of triple identity. The amount and extent of remediation carried out by TexPet was agreed upon with the Government and was proportional to the interest TexPet had in the Consortium. The Lago Agrio complaint does not show a different object, but rather its dissatisfaction with the remedies obtained by the Government, which it calls “insufficient” or “inadequate.”36 The correct avenue for raising this objection, however, was a judicial review as to the validity of the agreements, which the plaintiffs did not do. 41. Without stating so specifically, the Lago Agrio judgment assumes it has been established that the same object is involved, as it acknowledges that the same dispute is being argued and the same legal benefit is being sought. By way of example, it acknowledges that “the State has released Texaco, and consequently Chevron, from all their responsibilities in relation to the environmental damage that is the subject of this complaint (…).”37 C. LEGAL IDENTITY OF THE PARTIES 1. The concept of party refers to the holder of the interest being represented in the proceedings. 42. Legal doctrine has understood a “party” to be the person who requests, in his own name (or in whose name it is requested), satisfaction or denial of a claim within the proceedings.38 The fundamental issue for determining that the parties are the same is not the physical identity of those appearing in the proceedings, but rather the legal capacity in which the parties are acting. 43. Legal identity refers to the individual whose interest is represented in the proceedings. For example, if a minor appears in proceedings represented by his mother, it is the minor who is the party in the proceedings, not the mother who is representing him. If the minor appears in another set of proceedings represented by his father, the parties will be the same because in this case, the minor is also the interested party; only his representative has changed. In both cases, the effects of the proceedings will be in regard to the minor whose interests have been represented in the proceedings.

36 Lago Agrio Complaint, ¶ I, Background, Item 11. (Barros Previous Report Annex 16). 37 Lago Agrio Decision, p. 91. 38 In a similar sense, Giuseppe Chiovenda argues that a party is “the person who requests in his own name (or in whose

name this is requested) for an intent of the law to be carried out, and the person from whom this is requested.”(in Instituciones de Derecho Procesal Civil [Institutions of Civil Procedure]. Volume II. Editorial Revista de Derecho Privado. Madrid. 1954. p. 284) (Barros Previous Report Annex 88).


44. With respect to representation, the Civil Code of Ecuador states that “Anything that a person performs on behalf of another, having been authorized by such person or by the law to represent him, is as effective vis-à-vis the person being represented as if he had entered into the contract himself.”39

45. In this sense, in order to check whether the same parties are involved, it is necessary to determine who the holder of the interest asserted in the proceedings is. In this case, it is a right that is diffuse in nature—as will be explained— whose effect and redress extends to the entire community. Thus, the holder of the interest protected by the settlements with the Government of Ecuador and the local authorities is the same as that asserted in the Lago Agrio complaint: it is the community whose right to live in a healthy environment free of contamination has allegedly been affected. In other words, the holder of the interest is the group of individuals who partake as a whole in the same right, and not the individual interest of any one person, as I have stated in my Treatise on Tort Liability, when I point out that, “The legal system assumes that in cases of environmental damage the community interest is at stake, and the law provides that such interest is represented by the public authorities it designates.”40 (i) Settlements with the State and local governments 46. By executing the settlement agreements, the State of Ecuador acted in defense of the population’s interest in a healthy environment that is free of contamination, an issue that in Ecuador as well as elsewhere has been held as a public interest. Thus the State has the authority to act in representation of the community of its inhabitants.41 47. The environmental remediation work demanded from TexPet was purusant to the State’s obligation established in Article 19 (2) of the Constitution in force at the time, which gave it the duty to ensure for all citizens the right to live in an environment free of contamination, as reflected in Clause 5.2 of the 1995 Contract.42 48. Article 19 (2) does not confer any right upon the State as a legal entity that has its own interests, but instead upon the people that the State itself represents. The Government of Ecuador had claims

39 Civil C. art. 1464 (Ecuador) (Barros Previous Report Annex 89), corresponding to Civil C. art. 1448 (Chile) (Barros

Previous Report Annex 90). 40 Barros, Enrique. Tratado de Responsabilidad Extracontractual [Treatise on Tort Liability]. Editorial Jurídica de

Chile. Santiago de Chile. 2006. p. 811 (Barros Previous Report Annex 91). 41 Chile recognizes representation of the community by public entities. Thus, in a decision dated October 15, 2008, the

Court in Defense of Free Competition ruled in favor of a res judicata defense by a brewer that had been sued by a competitor, based on the fact that the National Public Prosecutor on Economic Matters had entered into a settlement agreement with the brewery. The court ruled “...the National Public Prosecutor on Economic Matters represents the general interests of the community at large in the economy, so by filing suit against an economic agent, he represents, in said process, the interests of each and every party potentially harmed by the conduct alleged in his suit, ...” (Cervecera Artesanal Artiagoitía Hermanos Ltda. c/ Cervecera CCU Chile Ltda., October 15, 2008. ROL, C 169-8, ¶ 12).

42 1995 Contract. clause 5.2 (Barros Previous Report Annex 4).


against TexPet, but they were not founded in its own interest, but instead in the community’s interest.43 This is evident in the Contract, for example, when it establishes that the State of Ecuador should act “taking into account the inhabitants of the Oriente Region.”44 49. The State’s protection of the community’s interest is also clear in the socioeconomic compensation programs included in the Contract (for example, financing medical and educational centers in order to “deliver additional educational messages to community members” and to “help improve health conditions in [the] population”) and the requirement that TexPet negotiate with all of the municipalities involved in order to finance other socioeconomic projects selected by these municipalities.45 50. Like the State, the municipalities and provinces acted in representation of the interest of their citizens, that is, of the interests of the respective communities. The agreements state that “after consulting with the entities and organizations representing the community of its inhabitants,” the local authorities selected socioeconomic projects that were of “social interest” “in accordance with community interest proposals.”46 Further, they specifically acknowledged that they were acting to “contribute… to achieving the objectives of the State” as provided for in Article 19 of the Law on Municipal Provisions.47 All of this is evidence that the local governments brought claims and executed settlement agreements to protect the interests of and in representation the respective communities. (ii) The Lago Agrio complaint 51. The Lago Agrio complaint indicates that the action is filed in defense of the right to live in an environment free of contamination, “as members of the affected communities and in safeguard of their recognized collective rights.”48 It also mentions that the Constitution states that preservation of the environment, conservation of ecosystems and biodiversity are matters of public interest, and declares that “[a]ny person may thus seek remediation based on the breach or disregard of such rights.”49

43 Considering that the idea of Government defines a state function and not a personified entity distinct from the State,

it must be understood that the Government of Ecuador acts on behalf of the State of Ecuador, and its acts are therefore binding on the members of the country’s political community. Therefore, this report uses both terms interchangeably.

44 Memorandum of Understanding between the Republic of Ecuador, Petroecuador and Texaco Petroleum Co., Dec. 14, 1994 (Memorandum of Understanding), art. V (Barros Previous Report Annex 2).

45 Scope of Work of Environmental Remediation Between the State of Ecuador, Petroecuador, and TexPet. December 14, 1994, clause VII B - C (Barros Previous Report Annex 92).

46 Municipal Settlement Agreements. op. cit. clauses 2.4 and 3.2 (Barros Previous Report Annexes 10–13). Municipal Settlement Agreement with Sucumbíos, May 2, 1996, clauses 2.4, 3.2 (Barros Previous Report Annex 14). Settlement, Release from Obligations, Liability and Claims, entered into by the Consortium of municipalities of the province of Napo, April 26, 1996 (Mun. Release with Napo) (Barros Previous Report Annex 15).

47 Law on Municipal Provisions (Ecuador) art. 19 (Barros Previous Report Annex 105). 48 Lago Agrio Complaint, op. cit. ¶ VI (Barros Previous Report Annex 16). 49 Lago Agrio Complaint, ¶ V, Legal Basis, Item (3)(a) (Barros Previous Report Annex 16).


52. Based on the foregoing, I therefore conclude that the State of Ecuador and the local authorities were acting to protect the interest of and as legal representatives of the national and the local communities, respectively, and that the plaintiffs in the Lago Agrio suit are acting “as members of the communities” and “to safeguard the rights recognized for them collectively,” that is, to protect the same interest and in representation of the same affected community. As a result, all the requirements established in the doctrine have been met for the parties to be considered legally the same. 53. It is impossible for private individuals or groups of persons to sue Chevron again by asserting the public interest in restoring the environment because those persons were already represented by the State of Ecuador and the provinces and municipalities when the settlement agreements and releases from liability were signed. It makes no sense to speak of the government’s environmental claims versus the plaintiffs’ environmental claims; there is but one environment and under Ecuadorian law it belongs to the community. Once that community has had its right exercised and settled, as was the case here, res judicata prevents that right from being asserted again. 54. The object of the Lago Agrio action is not remedy for the damages that may have been suffered by individuals, either upon their property or person. In that case, the rights would belong to each individual separately, such that they cannot be affected by the settlements to which they subscribed in order to satisfy the community interest. However, the subject matter of the Lago Agrio complaint is not to seek remedy for personal injury, as is recognized by the Decision.50 (iii) Rebuttal of the arguments in the judgment a) There is no unlawful deprivation of fundamental rights 55. TexPet’s release from liability does not deprive the plaintiffs of their fundamental rights, as the judgment asserts.51 To the contrary, the central government and local authorities acted in their protection; this is the precise reason that justifies their involvement. 56. As to the right of the community to live in an environment that is healthy and free of contamination, in all the settlement agreements, the authorities acted to protect the inhabitants’ rights by requiring a series of restitution and compensation benefits, the fulfillment of which was certified by the proper authority. 57. The judgment asserts that to extend the effects of the releases to individuals is to deny them their right to file an action. The right to petition is only “a right to jurisdiction.”52 It guarantees the ability to file actions and for them to be heard by the courts, but does not ensure that the complaint will be

50 Lago Agrio Decision, p. 33. 51 Lago Agrio Decision, p. 30-31. 52 Couture, Eduardo. Introducción al estudio del proceso civil [Introduction to the Study of Civil Procedure]. 2nd

edition. Depalma. Buenos Aires. 1953. p. 19.


sustained. To sustain the defense of res judicata does not imply a violation of the fundamental right to file actions, but instead is simply a dismissal of the claim or right invoked in the proceedings. b) The State acted in representation of the people, in defense of a public interest. 58. The Judgment claims that the 1995 Contract was executed by authorities that represented the Government, which is not a party to the proceeding, and that there would be no legal basis to extend the representation to all citizens. 59. However, all administrative actions are assumed to be adopted in the interest and representation of the community when they involve the exercise of public authority. A determining factor is that the action is carried out in exercise of public authority, meaning that it assumes that the State has the authority to represent the interest of the community. An example is when [the State] pursues the defense of a public interest such as caring for the environment. 60. In my view, the settlements were executed in protection of the environment, in the exercise of a constitutional responsibility by the State. Considering the diffuse nature of the right, their general scope necessarily includes the protection of the interests of the community. Furthermore, in this case the State had the public authority to legally pursue environmental liabilities. 61. The Court’s claim that for representation to exist it must be a case of unilateral actions is also irrelevant. The representation of public interest is not limited to statements of the unilateral will of the State. State agreements can be reached in order to protect a general interest in representation of the community, as occurs with an international treaty or with a reparation agreement intended to satisfy a general interest. 62. The Court simultaneously claims that the releases do not extend to the plaintiffs because they were signed by the State, which is not a plaintiff in Lago Agrio. However, the judgment itself states that when it is a matter of diffuse rights, the effects of the decision that resolves the dispute are not limited to the signatories. In fact, in the face of doubts about the validity of the complaint due to irregularities with regard to the signatures of the plaintiffs, it states that“[t]he Court points out that the complaint was signed by a group of individuals, the plaintiffs, but they are not suing on their own behalf. Rather, they are suing on behalf of thousands who say they have been affected by the existence of environmental damage. And they filed the complaint to benefit all of these people. So even if one or more signatures were missing, a single person could have filed the action…”53 Thus, the Court assumes that the plaintiffs represent the entire affected community, and it is of no consequence if its members have manifested their will in the complaint, if they have actively participated in the proceedings, or if they have given authority to the plaintiffs to represent them in the case.

53 Lago Agrio Decision (clarification), p. 4.


63. Given the absence of collective actions on the matter as of the date that the settlements were executed, the State of Ecuador and the Municipalities had legal standing to seek the protection of the right of the community to the preservation of the environment, keeping in mind that the State also had a constitutional duty to do so.54 64. I can therefore conclude that, upon executing the settlements, the central government and local governments acted in representation of their communities, protecting the public’s interest in keeping the environment free of contamination. The governments were able to agree to the settlement precisely because they represented that interest. Thus, all communities represented by the governments are understood to be included in the agreement, just as if they had signed the agreements themselves.55 2. The erga omnes effect that derives from the diffuse nature of the right to an environment free of contamination 65. In my opinion, the effect of res judicata arises (i) because the parties are the same, as the analysis in the previous section showed, and also (ii) because rulings and settlements concerning matters of diffuse rights, such as the right to live in an environment free of contamination, produce erga omnes effects, that is, their effects extend to the entire community. 66. The right to live in an environment free of contamination is not held by the individual, but instead by the community. Precisely because this are interest is held by the group, the rights holders are not individual persons. 67. In contemporary civil law, these types of rights or interests are called “diffuse rights,” as compared to “individual” [rights], 56 and the right to live in a clean environment is one of its best examples.57

54 The State's power to represent the community in claiming compensation for damage and signing the settlement agreement is not altered by the extension of the standing to bring action established in the 1999 Environmental Management Act. This law confers for the first time the right of private parties to establish standing to sue for environmental damage in defense of environment, but does not allow them to sue again to remedy damages that were the object of a decision or settlement by virtue of the actions of a person entitled to pursue the preservation of the environment at the time.

55 If the allegedly affected communities are not satisfied with the remedies obtained by the government in the settlements, or consider these agreements to be ineffective for some reason, the way to assert their objections would have been to argue their validity in a separate trial. As long as the agreements have not been judicially invalidated, the settlement agreements are valid and binding upon the community.

56 In general, the authors distinguish two broad categories of rights in relation to ownership: diffuse rights and individual rights. In this report, the right to live in a healthy environment free from pollution is referred to as a diffuse right in the strict sense. That is, a right that belongs to an undetermined group of people who are not united by any legal bond. In my Treatise on Tort Liability, I refer to the concepts of collective and diffuse interests from a broad perspective, as “ those that indiscriminately harm an undetermined number of persons” (Barros, Enrique. op.cit. p. 242) (emphasis added) (Barros Previous Report Annex 91).

57 In this sense, González, Leonardo. “Lineamientos para un proceso colectivo eficaz.” [Guidelines for an Effective Collective Proceeding], in Collective Proceedings. op. cit. p. 315 (Barros Previous Report Annex 114); Aguirrezabal, Maite. “Algunas precisiones en torno a los intereses supraindividuales” (colectivos y difusos)” [Some clarifications in regard to supraindividual rights (collective and diffuse)], in Revista Chilena de Derecho. Volume XXXIII. Nº 1. Santiago. 2006. p.71 (Barros Previous Report Annex 112).


68. The doctrina has indicated that there are diffuse interests when one person’s situation cannot be improved without at the same time improving the situation of the group to which that person belongs. The right is diffuse when the interest of each party cannot be determined individually but rather jointly with the interest shared by the other members of a specified group.58

69. This type of right is indivisible, meaning that it cannot be divided into portions that can be assigned to each member of the community, so (i) if the right is violated in regard to one person, it is violated in regard to everyone, and (ii) a remedy cannot be limited to only some members of the affected community, so if an injury is remedied for one person, the benefit will accrue to everyone.59 70. It is recognized that a ruling or settlement resolving disputes concerning diffuse rights has erga omnes effects.60 That is, it produces effects “on everyone” or “towards everyone” and does not merely affect those who actively participated in the proceedings.61 71. The erga omnes effect prevents anyone from claiming that the ruling or the settlement agreement is not binding on him because he did not actively participate in the defense of the right. If each of the holders of the diffuse interest could pursue the same claim without being affected by the decision that resolved the issue when previously raised by another interested party, the dispute would remain open indefinitely until all the parties with standing to exercise the right had exercised the action, which would be a severe attack on legal certainty. In fact, denying the erga omnes effect with regard to environmental rulings would lead to the ridiculous situation in which the Lago Agrio judgment itself would only be binding upon the plaintiffs who appeared in the proceedings, with the consequence that any of the other 30,000 allegedly affected people—according to the judgment—who consider the environmental

58 Carnelutti, Francesco. op. cit. p.12 (Barros Previous Report Annex 30). 59 V. Rosales, Cecilia. “La modernización del estado en el reconocimiento y tutela efectiva de los intereses difusos”

[“ Modernization of the State in the Recognition and Effective Tutelage of Diffuse Interests”]. Revista Chilena de Derecho [Chilean Law Review] (special issue), 1998, op. cit. p. 255. As noted, in the conceptualization of diffuse interests or rights in the strict sense, the key elements are (a) the indeterminacy of the holders, (b) the lack of a specific legal relationship between individual holders and (c) and the indivisibility of the legally protected interest. Thus, diffuse rights differ from those that personally belong to many people, those that correspond individually to each person holding [the rights], although they are occasionally exercised in the same proceeding.

60 In Chile, in a legal report for a proceeding where these issues were addressed, Professor Alejandro Romero indicates: “in certain situations the consequences extend to third persons who were not parties in the respective case. This happens, for example, in actions filed by public agencies in charge of promoting public interests, in class actions, popular action lawsuits [acción popular], and the representation of diffuse and collective interests.” Court in Defense of Free Competition (Chile), Cervecera Artesanal Artiagoitía Hermanos Ltda. c/ Cervecera CCU Chile Ltda., November 29, 2008. Alejandro Romero Law Report. ROL, C169-8 (Barros Previous Report Annex 115).

61 In the civil law tradition, cases in which a ruling applies to third parties are not unheard of; this could occur in cases of lawsuits involving solidarity actions, security deposit, nullity, inheritance, termination of contracts and mortgages. Moreover, there are cases recognized with erga omnes effects as such; the determination of an heir as such (Chilean Civil Code, art. 1246); judgments on civil status (Chilean Civil Code, arts. 315 and 316); collective actions (art. 54, Law 19.946 on consumer protection); environmental cases (art. 54, Law 19.300 on Environmental Framework); free competition cases (arts. 1 and 30, Legal Decree 211), and; in Chile, a law declared unconstitutional by the Constitutional Court (Constitution art. 93(7), arts. 93–102, Constitutional Internal Regulation 17.997).


remediation to be insufficient or inadequate, could file a complaint regarding the same facts; and so on. In civil law tradition, the res judicata effect of judgments and settlements specifically prevents this outcome. 72. Under circumstances in which living in an environment that is free of contamination is a diffuse right, whose redress includes all interested parties, the settlements entered into between TexPet, the State of Ecuador and the local governments to end the dispute regarding the environmental impact that resulted from the operations of the former Consortium have an erga omnes effect, and produce the effect of res judicata with regard to the entire community. 73. In sum, in this case, the parties are legally the same under the doctrine according to which the parties are the holders of the involved interests. The effectiveness of a ruling or settlement based on its erga omnes effect should also be considered established because it involves a diffuse right, one held by all the members of the community as whole. I declare that my opinions and my conclusions are the result of my genuine belief, and I reserve the right to supplement this report.

[signature] _____________________ Dr. Enrique Barros B.

30th of June, 2011

Expert Report of Dr. Enrique Barros B.

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Transcript of Expert Report of Dr. Enrique Barros B.