Friend of the blog and Chevron advocate Doug Cassel weighs in with his reaction to the Yaiguaje decision. Stay tuned for my own reaction this afternoon.
Last week’s jurisdictional decision by the Supreme Court of Canada in Chevron v. Yaiguaje is a first-inning victory for the Lago Agrio plaintiffs, in their quest for a foreign court to enforce their $9.6 billion Ecuadorian judgment against Chevron for harm allegedly caused by Texaco’s oil pollution decades ago.
But first innings alone do not win ball games. The plaintiffs have a long way to go in Canada, and the toughest issues remain before them. As the Court made clear, “A finding of jurisdiction does nothing more than afford the plaintiffs the opportunity to seek recognition and enforcement of the Ecuadorian judgment.”
The only issues before the Canadian Supreme Court were jurisdictional: Can the Ecuadorian plaintiffs’ suit to enforce their judgment be heard in Canada at all? This broke down into two issues: Could an Ontario court entertain the suit against Chevron (the US-based parent company), and could it entertain the suit against Chevron Canada (the company’s Canadian subsidiary)? On both issues, the rulings were limited to jurisdiction over suits to “recognize and enforce a foreign judgment.”
The Court saw no need for Canadian courts to have a “real and substantial connection” to Chevron or the Ecuadorian case in order to hear an enforcement action. In regard to Chevron Canada, the Court held that Canadian courts have jurisdiction over Canadian companies.
Neither ruling was a shocker. The lower courts had already found jurisdiction. The Court affirmed their jurisdictional rulings. While there was some precedent and factual support for Chevron’s effort to avoid Canadian jurisdiction, the weight of authority supported the plaintiffs’ effort to be heard.
The Court’s rulings were grounded in considerations of comity and reciprocity. Comity calls for respect for the courts of other nations. In a world of global commerce and movable assets, the Court explained, economic confidence and legal security counsel the courts of country A to open their doors to efforts to enforce judgments of the courts of country B, so long as the courts of country B had jurisdiction. All that is required is a “real and substantial connection” between the courts of country B (here Ecuador) and the judgment debtor (Chevron) or the claim (Chevron’s alleged liability).
Reciprocity also leads to respect for foreign judgments, albeit for a different reason. If Canadian courts close their doors to suits to enforce another country’s judgments, how can Canada expect its own judgments to be enforced in foreign courts?
I claim no special expertise in international enforcement of foreign judgments; my field is international human rights law. But both the rationale and result of the Canadian jurisdictional ruling make sense to me.
Moreover, the ruling seems facially neutral with regard to human rights. It would equally allow Canadian jurisdiction over suits by a large corporation to enforce a foreign judgment against, say, an allegedly corrupt human rights lawyer. Supporters of the Lago Agrio plaintiffs may understandably celebrate their jurisdictional win. But in other cases, it could come back to bite them.
That brings us to the second inning. As “emphasize[d]” by the Canadian Supreme Court, “when jurisdiction is found to exist, it does not necessarily follow that it will or should be exercised … Establishing jurisdiction merely means that the alleged debt merits the assistance and attention of the Ontario courts.”
On remand, the Court continued, it may be open to Chevron and Chevron Canada to present “any or all” of their arguments against recognizing the Ecuadorian judgment. Chevron could argue, for example, that “the proper use of Ontario judicial resources justifies a stay under the circumstances; that the Ontario courts should decline to exercise jurisdiction on the basis of forum non conveniens; [or] that any one of the available defences to recognition and enforcement (i.e. fraud, denial of natural justice, or public policy) should be accepted …”
That brings us to the issue—fraud in the Ecuadorian litigation—that brought me into this matter (I represented Chevron against the plaintiffs’ effort to enforce their fraudulent judgment before the Inter-American Commission on Human Rights, and I have been an independent external consultant to the company). As the Canadian Court noted, “In 2014, Judge Kaplan of the [US] District Court [in New York] held that the Ecuadorian judgment had resulted from fraud — That decision and the underlying allegations of fraud are not before this Court.”
On remand, Chevron may now raise the issue of fraud. If it does, the overwhelming evidence of wrongdoing in the Ecuador litigation may come before Canadian courts. As I have detailed in prior posts on this page, all three grounds cited by the Canadian Court—“fraud, denial of natural justice, or public policy”—should block enforcement of the Lago Agrio judgment. The chicanery by which that judgment was produced would be a stain on any country’s judicial system.
Ironically, then, the upshot of Canada’s effort to show comity toward Ecuadorian courts could have the opposite effect: Canada’s exercise of jurisdiction may well drag Ecuador’s courts through the mud of their own making.
But not necessarily. If Chevron’s only material asset in Canada is Chevron Canada, and if Canadian courts decline to pierce the corporate veil between the parent company and its subsidiary, then plaintiffs’ effort to collect on their Ecuadorian judgment could fail, without the Canadian courts having to delve into the seamy underside of the Lago Agrio judgment.
Here, too, the Canadian ruling gives the plaintiffs no comfort. The Court cautioned that its jurisdictional ruling “should not be understood to prejudice future arguments with respect to the distinct corporate personalities of Chevron and Chevron Canada.” The Court took “no position on whether Chevron Canada can properly be considered a judgment-debtor to the Ecuadorian judgment. Similarly, should the judgment be recognized and enforced against Chevron, it does not automatically follow that Chevron Canada’s shares or assets will be available to satisfy Chevron’s debt.”
We shall see. Meanwhile, we also await the ruling on appeal from Judge Kaplan’s judgment in the US, as well as the final award of the panel in the international arbitration brought by Chevron against Ecuador over the Lago Agrio judgment. Like the Canadian jurisdictional ruling, those decisions, too, could turn on other issues, without necessarily reaching the fraud issues.
The shame of it is that the Lago Agrio lawyers’ world travels in search of a friendly forum would not be necessary, if they had not delegitimized their judgment by the unethical and illegal tactics used by some members of their legal team. Chevron has plenty of assets in the US, where it is headquartered. The US plainly has jurisdiction over Chevron. An honest Ecuadorian judgment could have been enforced in the US. However, even before Judge Kaplan enjoined enforcement in the US, multiple US courts had already found that the Lago Agrio judgment reeks of fraud.
As observed by leading human rights lawyers in their amicus brief on the appeal from Judge Kaplan’s ruling, “corruption in the judicial process violates human rights, both directly—by denying due process of law and a fair trial—and indirectly—by undermining the position of courts as guarantors of legitimate human rights claims and defenses.” The lawyers’ misconduct in the Lago Agrio litigation in Ecuador is a textbook example of how not to help the downtrodden.