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Ecuadorian Plaintiffs Can Seek to Enforce $9 Billion Judgment in Ontario

10-Sep-15

By Michael Barbero

The Supreme Court of Canada recently released its decision in Chevron Corp v. Yaiguaje. The decision upheld a ruling granting the Ontario Courts jurisdiction to enforce a judgment from Ecuador for environmental damages. The Supreme Court confirmed a two-step approach to recognizing foreign judgments. First, determine if the foreign court has a "real and substantial connection to the litigants or subject matter". Second, determine if the Canadian claim (seeking to recognize judgment) was properly served on the debtor. The case is of importance to Canadian companies operating internationally, and in particular to resource companies who are the subject of environmental litigation abroad, as it clarifies that Canadian Courts have jurisdiction to enforce foreign judgments at home.

Background
Texaco, which subsequently merged with Chevron US, has long been active in the Lago Agrio region of Ecuador. Local residents attributed significant environmental degradation to Chevron's operations. In 2003, local residents filed claims against Chevron US in the Ecuadorian courts. After numerous appeals, the Plaintiffs obtained damage awards against Chevron US in the amount of $9.51 billion.

Chevron US refused to acknowledge the award or pay damages. In May 2012, the Plaintiffs commenced an action in Ontario seeking to enforce the Ecuadorian judgment against both Chevron US and Chevron Canada. Chevron Canada, which has an office in Ontario, was not party to the original action in Ecuador. Chevron Canada is 100% owned by Chevron US, through a series of subsidiaries.

Chevron US and Chevron Canada filed to have the claim against them denied on the ground that the Ontario Court lacked jurisdiction as no "real and substantial connection" existed between the parties and Ontario. Chevron Canada further argued that the Ontario Court had no jurisdiction over it as it was not party to the original action in Ecuador.

The Plaintiffs succeeded in the courts below, and Chevron US appealed to the Supreme Court of Canada.

Supreme Court of Canada
The issues before the Supreme Court were:

  1. In an action to enforce a judgment, must there be a real and substantial connection between the defendant or the dispute and Ontario for jurisdiction to be established?
  2. Do the Ontario courts have jurisdiction over Chevron Canada, a third party to the judgment?

The Supreme Court acknowledged Canadian Courts have adopted a generous and liberal approach to enforcement of foreign judgments. In this context, Chevron US's argument that the Ontario Courts could not enforce the judgment, because no "real and substantial" connection existed between the parties and Ontario, was rejected.

The Court gave three reasons for this view. First, the case law reveals no requirement for a "real and substantial connection" between the defendant or the action and the enforcing court. Second, the legal principle of "comity" militates in favour of generous enforcement rules, not restrictive. Third, practicality in an era of instant and international asset transfers requires "clear, liberal and simple rules for the recognition and enforcement of foreign judgments".

Regarding Chevron Canada's argument on jurisdiction, the Supreme Court found the analysis began and ended with "presence-based jurisdiction". Where a defendant is present in the jurisdiction, there is no need to consider whether a real and substantial connection exists.

Conclusions
The decision re-affirms and clarifies the existing jurisprudence on the enforcement of foreign judgments by limiting the requirement of a "real and substantial connection". However, caution should be taken when reading this decision. While denying Chevron's preliminary motions opposing the action, the Supreme Court has not guaranteed the Plaintiff's success. It still remains to be seen whether a Canadian Court will enforce the Ecuadorian judgment; but their jurisdiction to do so is no longer at question.

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