LEGAL NEWSLINE

TORONTO (Legal Newsline) -- A Canadian appeals court ruled this week that indigenous and farmer communities in Ecuador have the right to pursue enforcement of a $9.5 billion Ecuadorian court judgment against Chevron Corp.'s assets in Canada.

The Court of Appeal for Ontario granted an appeal brought by the Ecuadorian plaintiffs. The decision affords the plaintiffs no substantive relief, but allows the action to move forward.

In May, a judge of the Superior Court of Justice in Ontario stayed the lawsuit -- nearly a year after the Ecuadorian plaintiffs initially filed the suit in Canada.

Judge David M. Brown, in his 42-page decision, said the plaintiffs "have no hope of success in their assertion that the corporate veil of Chevron Canada should be pierced and ignored so that its assets become exigible to satisfy a judgment against its ultimate parent."

In a 29-page ruling Monday, Justice James MacPherson said the Ecuadorian plaintiffs "should have an opportunity to attempt to enforce the Ecuadorian judgment in a court where Chevron will have to respond on the merits."

"That the plaintiffs in this case may ultimately not succeed on the merits of their recognition and enforcement action, or that they may not succeed in successfully collecting from the judgment debtors against whom they bring this action, are not relevant factors for a court to consider in determining whether to grant a discretionary stay before defendants have even attorned to the jurisdiction of the Ontario court," MacPherson wrote for a three-judge panel of the appeals court.

The appeals court also ordered Chevron's two Canadian subsidiaries to pay $100,000 in costs to the Ecuadorians.

In a statement, Chevron said it is "evaluating its next steps," including a possible appeal to the Supreme Court of Canada.

"If the Ecuadorian plaintiffs truly believed in the validity of the Ecuadorian judgment, they should seek enforcement in the United States, where Chevron Corp. resides, rather than targeting assets of the company's subsidiaries that are not parties to the Ecuadorian litigation," the company said.

"They are aware that in the U.S., however, they would be confronted by the fact that eight federal courts have already found the Ecuador trial to be tainted by fraud."

The oil giant said it remains committed to fighting enforcement of the Ecuadorian judgment and it is "confident that any jurisdiction that respects the rule of law will find it illegitimate and unenforceable."

The appeals court's decision was lauded by the leaders of the Ecuadorian communities and their lawyers.

"This order will allow us the opportunity to hold Chevron accountable for fleeing the scene of its environmental crimes in Ecuador after a valid judgment was entered against it," Pablo Fajardo, the lead Ecuadorian lawyer for the villagers, said in a statement.

Anton Tabuns, a Canadian lawyer who represents the villagers, called the ruling a "significant step forward."

"We look forward to moving into the merits of recognizing the legitimate judgment from Ecuador in Canada," Tabuns said in a statement. "Chevron's two-decade history of forum shopping and obstructionism must end now."

Even if Chevron does appeal to Canada's high court, and it is accepted, it is unclear whether that appeal will stay the enforcement proceeding.

Under Canadian law, such proceedings are heard by a judge and not a jury.

Chevron just wrapped up a six-week trial in New York before Judge Lewis Kaplan. The company alleges the Ecuadorian plaintiffs and their lawyers obtained the Ecuador judgment by fraud.

The Ecuadorians, on the other hand, argue Chevron is using the fraud allegations to take away from its environmental crimes and growing liability in their home country.

A decision in that case is expected in early 2014.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.