The Supreme Court of Canada has ruled in the case of Chevron Corp. v. Yaiguaje that Ontario’s courts have jurisdiction to determine whether a US$ 9.51 billion judgement by Ecuador’s courts against Chevron Corp. for environmental damages should be recognized and enforced in Ontario against Chevron Corp. and Chevron Canada.

Plaintiffs, representing approximately 30,000 indigenous Ecuadorian villagers, sought legal accountability and financial and environmental reparation for extensive environmental pollution and harms they allegedly suffered due to Texaco’s former operations in the region. Texaco has since merged with Chevron, a U.S. corporation.

The Appellate Division of the Provincial Court of Justice of Sucumbíos affirmed an Ecuadorian trial judge’s award of US$8.6 billion in environmental damages and US$8.6 billion in punitive damages against Chevron. Ecuador’s Court of Cassation upheld the judgment except on the issue of punitive damages. In the end, the total amount owed was reduced to US$9.51 billion.

Since the initial judgment, Chevron fought the plaintiffs in the U.S. courts and refused to acknowledge or pay the debt. As Chevron does not hold any Ecuadorian assets, the plaintiffs commenced an action for recognition and enforcement of the Ecuadorian judgment against Chevron and its seventh‑level indirect subsidiary, Chevron Canada, in the Ontario Superior Court of Justice.

On appeal, Ontario’s Court of Appeal held that, as the foreign court had a real and substantial connection with the subject matter of the dispute or with the defendant, an Ontario court has jurisdiction to determine whether the foreign judgment should be recognized and enforced in Ontario against Chevron.

With respect to Chevron Canada, in view of its bricks‑and‑mortar business in Ontario and its significant relationship with Chevron, the Court of Appeal found that an Ontario court has jurisdiction to adjudicate a recognition and enforcement action that also named it as a defendant.

The Supreme Court dismissed Chevron’s appeal:

Canadian courts, like many others, have adopted a generous and liberal approach to the recognition and enforcement of foreign judgments. To recognize and enforce such a judgment, the only prerequisite is that the foreign court had a real and substantial connection with the litigants or with the subject matter of the dispute, or that the traditional bases of jurisdiction were satisfied. There is no need to demonstrate a real and substantial connection between the dispute or the defendant and the enforcing forum.

In actions to recognize and enforce foreign judgments within the limits of the province, it is the act of service on the basis of a foreign judgment that grants an Ontario court jurisdiction over the defendant.

The need to acknowledge and show respect for the legal action of other states has consistently remained one of comity’s core components, and militates in favour of recognition and enforcement. Legitimate judicial acts should be respected and enforced, not sidetracked or ignored.

In this case, jurisdiction was established with respect to Chevron. It had attorned to the jurisdiction of the Ecuadorian courts, it was served ex juris at its head office, and the amended statement of claim alleged that it was a foreign debtor pursuant to a judgment of an Ecuadorian court.

The question of whether jurisdiction exists over Chevron Canada begins and ends with traditional, presence‑based jurisdiction. Where jurisdiction stems from the defendant’s presence in the jurisdiction, there is no need to consider whether a real and substantial connection exists.

To establish traditional, presence‑based jurisdiction over an out‑of‑province corporate defendant, it must be shown that the defendant was carrying on business in the forum at the time of the action. This is a question of fact. Here, the motion judge’s factual findings were not contested and were sufficient to establish presence‑based jurisdiction. Chevron Canada has a physical office in Ontario, where it was served. Its business activities at this office are sustained; it has representatives who provide services to customers in the province. Canadian courts have found that jurisdiction exists in such circumstances.

The court acknowledged that establishment of jurisdiction does not mean that the plaintiffs will necessarily succeed in having the Ecuadorian judgment recognized and enforced. A finding of jurisdiction does nothing more than afford the plaintiffs the opportunity to seek recognition and enforcement of the Ecuadorian judgment. Once past the jurisdictional stage, Chevron and Chevron Canada can use the available procedural tools to try to dispose of the plaintiffs’ allegations.

Further, the conclusion that the Ontario courts have jurisdiction in this case do not prejudice future arguments with respect to the distinct corporate personalities of Chevron and Chevron Canada or whether Chevron Canada’s shares or assets will be available to satisfy Chevron’s debt.

Click this link to read the full judgment Chevron Corp. v. Yaiguaje, 2015 SCC 42

Comment

This decision is another instance where Canada’s courts have taken a liberal approach towards claims by foreign indigenous plaintiffs against a Canadian parent or subsidiary of the local company. . In 2013 in Choc v. Hudbay Minerals Inc.  Ontario’s Superior Court of Justice refused to strike out a human rights claim by indigenous Guatamalans against staff employed by the defendant’s Guatemalan subsidiary. See our post at the following link: Human Rights Claims Against Canadian Corp For Acts Of Its Overseas Subsidiary May Proceed

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Manning Environmental Law is a Canadian law firm based in Toronto, Ontario. Our practice is focussed on environmental law, energy law and aboriginal law. 

Paul Manning is a certified specialist in environmental law. He has been named as one of Canada’s leading Environmental Lawyers by Who’s Who Legal: Canada and ranked by Lexpert as one of Canada’s Leading Energy Lawyers.