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Chevron (CVX) Emerges Victorious in Ecuador Pollution Case

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Chevron Corporation (CVX - Free Report) is breathing a sigh of relief, as an international tribunal ruled in favor of the integrated oil giant regarding a pollution-related case in Ecuador. The international arbitrator court in The Hague echoed the verdict of U.S. Supreme Court in 2017, which immunized Chevron from the payment of a landmark $9.5-billion fine in relation to the Ecuador pollution case.

The Long-Running Saga Comes to an End

Residents of Ecuador alleged that Texaco, a subsidiary of Chevron, let out wastewater into open pits across vast swaths of Lago Agrio region. A case pertaining to the same was filed in the United States. However, the same was dismissed, and Ecuadorian plaintiffs along with the American lawyer Steven Donziger had to refile the case in 2011 in Ecuador, wherein Chevron was ordered to cough up $9.5 billion as a penalty.

Chevron believed that the judgment in the Ecuador court was a result of fabricated evidence and fraudulence. The company alleged that Donziger and his associates fabricated the writing of a key environmental report.

U.S. District Judge Kaplan in Manhattan did not implement the judgment in 2014 on grounds of bribery. The New York-based 2nd U.S. Circuit Court of Appeals upheld Kaplan's decision last year, citing "a parade of corrupt actions" by Donziger and his associates.

Donziger claimed that a federal court exceeded its authority by letting Chevron use a U.S. racketeering law to block enforcement of Ecuador's $9.5-billion award. However, the U.S. top judges turned down the appeal, sustaining the prior U.S. court ruling. Former Ecuadorian judge Alberto Guerra, an important witness of Chevron, claimed that the Ecuadorian plaintiffs and Donziger had offered him bribes to announce the verdict in their favor.

Post the U.S. Supreme Court ruling against Ecuador, the lawyers for the plaintiff decided to appeal in international courts. Donziger and Ecuadorian plaintiffs’ hope of receiving $9.5-billion fine suffered a huge setback again, as the international tribunal was of the view that Ecuador violated its obligations under international treaties.

With the recent verdict, Chevron now stands to receive millions of dollars as economic compensation. The amount that Ecuador is required to pay to Chevron is likely to be settled in another 3 months.

Zacks Rank and Key Picks

Chevron currently carries a Zacks Rank #3 (Hold).

Investors interested in the energy sector can opt for some better-ranked stocks like McDermott International, Inc. (MDR - Free Report) , Subsea 7 S.A. (SUBCY - Free Report) and Helix Energy Solutions Group, Inc. (HLX - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX-based McDermott is an equipment provider for energy companies. The company’s top line for 2018 is likely to improve 145% year over year. In the last four reported quarters, it delivered an average positive earnings surprise of 101.7%.

Luxembourg-based Subsea is an oilfield service providing company. In the last four reported quarters, the company delivered an average positive earnings surprise of 318.6%.

Houston, TX-based Helix Energy’s bottom line surpassed the consensus mark in three of the last four quarters, with the average positive earnings surprise being 66.7%.

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