Ecuadorean Indigenous groups said Texaco - which merged with Chevron in 2001 - dumped more than 18 billion gallons (68 billion litres) of toxic materials into unlined pits and rivers between 1972 and 1992, destroying large areas of rainforest and leading to increased risks of cancer among the local population.

The eighteen year-old case was initially filed in New York in 1993, but was re-filed n Ecuador in 2003 after a US appeals court ruled that the case should be heard in Ecuador. Both sides are contemplating appeals.

"This is an important step but we're going to appeal this sentence because we think that the damages awarded are not enough considering the environmental damage caused by Chevron here in Ecuador," said lawyer Pablo Fajardo, who brought the case on behalf of 30,000 Ecuadoreans.

"We plan to appeal ... this illegitimate verdict and see to it that the perpetrators of this fraud are brought to justice," said James Craig, a Chevron spokesman. Chevron has long contended that plaintiffs unduly influenced the court-appointed expert in the case.

Environmentalists applauded the decision hoping the case will set a precedent, forcing companies operating in developing countries to comply with the same anti-pollution standards as in the industrialized world.

John van Schaik, an oil analyst at Medley Global Advisors in New York, said, "...the fact that the Lago Agrio court ruled in favour of the plaintiffs sends a signal to oil companies that, more than ever, they need to be good corporate citizens."