One response to “Lago Agrio: Plaintiffs Victorious in Canadian Appeal”

1. Doug Cassel

   December 17, 2013

   Dear Ted,

   Thanks for alerting us to this important new preliminary ruling. In essence the Ontario Court of Appeal rules as follows:

   (1) Jurisdiction: The Court of Appeal upholds the trial judge’s ruling that the Ontario court has jurisdiction over the Lago Agrio plaintiffs’ effort to enforce their judgment against the assets of Chevron Canada.

   (2) Discretionary Stay: The Court of Appeal overrules the trial judge’s entry of a discretionary stay of plaintiffs’ proceedings. The Court of Appeal reasons that Chevron and Chevron Canada—both of whom appeared before the Ontario Court only to contest jurisdiction—did not and could not request a discretionary stay based on non-jurisdictional grounds. The trial judge was “premature” in granting an unsolicited stay based on his own view that the corporate veil between Chevron and Chevron Canada could not be pierced. He also erred in suggesting that plaintiffs should seek relief in Chevron’s home country (the U.S.) rather than in Canada. On both issues his error was compounded because plaintiffs had no opportunity to brief these issues at the jurisdictional stage.

   (3) Merits: The merits remain explicitly open. The Court of Appeal notes that, although issues of whether Chevron has assets in Canada, whether the corporate veil can be pierced, and whether New York is a better forum, “might ultimately derail” the plaintiffs’ case in Canada, “the derailment is premature in the context of [Chevron’s] not raising the discretionary stay issue, no argument on this question, and devastating consequences” for the plaintiffs. (Par. 63.) Later the Court of Appeal reiterates, “That the plaintiffs in this case may ultimately not succeed on the merits … , or that they may not succeed in successfully collecting from the judgment debtors … , are not relevant factors for a court to consider before the defendants have even attorned to the jurisdiction of the Ontario court.” (Par. 70.) (To “attorn” to jurisdiction means to accept jurisdiction.)

   Aside from these preliminary rulings on jurisdiction and a stay, while reserving the merits, the Court of Appeal in dicta shows sympathy for plaintiffs’ efforts to enforce their Ecuadorian judgment: “This case cries out for assistance, not unsolicited and premature barriers.” (Par. 72.) However, the Court’s sympathy may itself be premature: Canadian courts have not yet heard argument on the corporate veil and forum issues, which were prematurely addressed by the trial judge for purposes of a discretionary stay, but which will have to be fully briefed if the case is to proceed toward the merits. (I am not aware of what further appeals, if any, might be sought.)

   Nor have Canadian courts heard argument on what is by now overwhelming evidence of fraud in the Ecuadorian proceedings. The Court of Appeal opens the door to argument on the fraud issues, by repeatedly noting that Chevron accepted the jurisdiction of Ecuadorian courts, “subject to reserving its right to contest the validity of an Ecuadorian judgment in the circumstances permitted by New York’s Recognition of Foreign Country Money-Judgments Act.” (Par. 66.) That Act expressly provides that a foreign judgment need not be recognized, among other grounds, if “the judgment was obtained by fraud.” NY CVP Law section 5304 (b) (3).

   In short, while the plaintiffs have won a preliminary battle (at least at the Court of Appeal stage), they face daunting obstacles before they will have any real hope of collecting on their Ecuadorian judgment against the assets of Chevron Canada. Unfortunately, the principal effect of this preliminary ruling may be to give plaintiffs false hope, making settlement less likely in the next year or so, and delaying the day before a just resolution of Lago Agrio may be agreed to or adjudicated on a non-fraudulent basis.

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