SEC Reverses Guidance Encouraging Disclosure of Overseas Environmental Litigation

Should companies omit disclosures of overseas environmental litigation?

The lengthy and sprawling litigation over Chevron’s alleged environmental misdeeds in Ecuador is worthy of a Netflix or Prime Video limited series. At the base of the fight was a legal dispute arising in Ecuador related to environmental damage allegedly caused by its Chevron’s subsidiary, Texaco, during oil operations in the Amazon rainforest. While Chevron never directly operated in Ecuador, it acquired Texaco in 2001, inheriting the legal issues. Ecuadorian courts have ruled against Chevron in multiple cases, including a $9.5 billion judgment for environmental remediation, which Chevron has consistently contested.

The Chevron saga sprang to mind today when I saw that the SEC has withdrawn long standing guidance advising (but not requiring) companies to include a description of environmental litigation in foreign courts in the annual reports on Form 10-K.