Jessica Karmasek Sep. 4, 2015, 1:59pm


ONTARIO, Canada (Legal Newsline) - Canada’s highest court ruled Friday that a group of Ecuadorian villagers can proceed with a multi-billion dollar lawsuit against Chevron Corp. and its Canadian subsidiary in an Ontario court.

The court, in its decision, rejected the oil giant’s argument that there was no legal basis for the villagers to sue Chevron Canada.

“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,” Justice Clément Gascon wrote in the 7-0 ruling.

“The motion judge’s analysis was correct, and the Ontario Court of Appeal had no need to go beyond these considerations to find jurisdiction.”

The Appellate Division of the Provincial Court of Justice of Sucumbíos affirmed an Ecuadorian trial judge’s award of $8.6 billion in environmental damages and $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 $9.51 billion.

Since the initial judgment, Chevron has fought the plaintiffs in U.S. courts and has 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 in the Ontario Superior Court of Justice.

It served Chevron at its head office in California and Chevron Canada, a seventh-level indirect subsidiary of Chevron.

Inter alia, the plaintiffs sought the Canadian equivalent of the award resulting from the judgment of the Appellate Division of the Provincial Court of Justice of Sucumbíos.

Chevron and Chevron Canada each sought orders setting aside service ex juris of the amended statement of claim, declaring that the court had no jurisdiction to hear the action, and dismissing or permanently staying the action.

The motion judge ruled in the plaintiffs’ favor with respect to jurisdiction. However, he exercised the court’s power to stay the proceeding on its own initiative.

The Court of Appeal held this was not an appropriate case in which to impose a discretionary stay.

On the jurisdictional issue, it 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, 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.

“Canadian courts, like many others, have adopted a generous and liberal approach to the recognition and enforcement of foreign judgments,” Gascon wrote in the Supreme Court’s ruling. “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. To conclude otherwise would undermine the important values of order and fairness that underlie all conflicts rules, and would be inconsistent with this Court’s statement that the doctrine of comity must be permitted to evolve concomitantly with international business relations, cross-border transactions, and mobility.”

Humberto Piaguaje, executive coordinator of the Union of Persons Affected by Texaco/Chevron, the local organization representing the communities suing Chevron, said the court’s decision is “the beginning of the end” of Chevron’s “abusive and obstructionist” litigation strategy.

“Chevron will now be forced to take the Ecuadorian judgment like any other, something it has desperately tried to avoid since our enforcement action was filed in Canada three years ago,” Piaguaje said.

“We are confident that once Canadian courts review the fundamental fairness and strength of the judgment, it will be respected and Chevron will be forced to turn over any and all assets necessary to pay the amount ordered by the Ecuadorian court. When that happens, a measure of relief can finally come to thousands of innocent people who have suffered decades of environmental abuse at the hands of the company.”

Chevron told Reuters in a statement that it plans to argue in the lower court that the lawsuit should be quashed early on because the initial judgment is the product of fraud.

Last year, Judge Lewis Kaplan of the U.S. District Court for the Southern District of New York ruled that the $9.5 billion judgment against Chevron in Ecuador was the product of fraud and racketeering activity, finding it unenforceable in the United States and holding Steven Donziger, the lead lawyer behind the lawsuit, liable for RICO violations.

That ruling is being appealed.

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

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