Lago Agrio Update: The Tribunal’s Site Visit and Motions for Summary Judgment

I do not have an update for you on the BIT Tribunal’s visits to several sites in the Oriente, which I briefly covered on October 19. The reason I don’t have an update is the same reason, more or less, I copped out on the Louis Berger Group report. On the one hand, it seems that the site visits allowed the Tribunal to see that oil was present at sites that only TexPet had operated. On the other hand, Chevron has legal defenses to claims about those sites, primarily that they were not sites that Texaco had to remediate under the remediation plan. On the one hand, the plaintiffs say their measurements show levels of toxic substances in excess of applicable standards. On the other hand, Chevron’s experts have technical objections to the results that I am in no position to judge, at least without consulting with third parties and doing a bunch of work. In short, as with the Louis Berger report, I find it difficult to come to firm conclusions about the import of the site visits.

I do, however, have an update on the Canadian proceedings.

The plaintiffs have now filed their reply to Chevron’s statement of defense. I am not a Canadian lawyer, but as I understand it, this closes the pleadings. The plaintiffs’ press release claims that the new document is a request to the Canadian court “to accelerate an action to seize assets from Chevron to satisfy their $9.5 billion environmental judgment.” This isn’t quite right, since the document is just a pleading and doesn’t contain any request for expedition. However, the plaintiffs have also moved for summary judgment on Chevron’s defenses. I haven’t seen the papers yet, but a source with knowledge of the plaintiffs’ case tells me that Chevron also will be filing a motion for summary judgment, directed at the claims against Chevron’s Canadian subsidiary.

The key point in the plaintiffs’ motion—or a key point, anyway—is that Canadian law does not allow intrinsic fraud as a defense to recognition of a foreign judgment, but only extrinsic fraud. That is, according to the plaintiffs, it’s not enough for Chevron to prove that fraud occurred in the Ecuadoran proceeding itself—Chevron has to prove that there was a fraud extrinsic to the proceeding that deprived it of a fair hearing. Readers may remember an exchange I had with Doug Cassel on this issue a long time ago. I wrote:

I have argued that it doesn’t make much sense to have case-specific exceptions to the ordinary rules of recognition and enforcement of the foreign judgment. If the foreign judiciary is adequate, than it can detect and correct any case-specific fraud or corruption on its own. If the foreign judiciary is inadequate, than its judgment is not entitled to mandatory recognition and enforcement anyway.

As that quote suggests, I basically think the plaintiffs are right about this issue. If the Ecuadoran courts were systematically adequate, then it shouldn’t matter whether there was fraud in the proceedings, as the Ecuadoran courts were, by hypothesis, capable of remedying the fraud themselves. I don’t think this is an accurate statement of US law—we will see whether it is an accurate statement of Ontario law. (The point may be moot if the Canadian court decides that there was extrinsic fraud in Ecuador, but as I have commented before, I think the case for intrinsic fraud here is much stronger than the case for extrinsic fraud).

Another point of interest: Chevron is, of course, arguing that Judge Kaplan’s judgment should have preclusive effect in Canada. But the plaintiffs are arguing preclusion, too: they want to give preclusive effect to the Ecuadoran appellate judgment, and they claim that that judgment was not infected by whatever fraud occurred in the first-instance proceedings. It will be interesting to see how the Canadian court squares these two claims, and I don’t claim to have a good idea about the answer.

I suspect Chevron’s motion will focus in large part on the corporate law issues, which to my mind are highly significant. I can imagine a court rejecting a veil-piercing or reverse veil-piercing claim, though again, this raises issues of Canadian law on which I don’t have much to say.

I will continue to keep you posted about the Canadian proceedings.

About Ted Folkman

Ted Folkman is a shareholder with Murphy & King, a Boston law firm, where he has a complex business litigation practice. He is the author of International Judicial Assistance (MCLE 2012), a nuts-and-bolts guide to international judicial assistance issues, and of the chapter on service of process in the ABA's forthcoming treatise on International Aspects of US Litigation, and he is the publisher of Letters Blogatory, the Web's first blog devoted to international judicial assistance, which the ABA recognized as one of the best 100 legal blogs in 2012, 2014, and 2015.

2 thoughts on “Lago Agrio Update: The Tribunal’s Site Visit and Motions for Summary Judgment

  1. Ted, I have to sound a note of caution here.

    First, the terms “extrinsic fraud” and “intrinsic fraud” have not been part of Canadian law for some time. I am surprised – to put it mildly – to see them in the plaintiff’s reply and summary judgment motion.

    The Supreme Court’s 2003 decision in Beals v Saldanha was pretty clear on this point:

    The historic description of and the distinction between intrinsic and extrinsic fraud are of no apparent value and, because of their ability to both complicate and confuse, should be discontinued. It is simpler to say that fraud going to jurisdiction can always be raised before a domestic court to challenge the judgment. On the other hand, the merits of a foreign judgment can be challenged for fraud only where the allegations are new and not the subject of prior adjudication. Where material facts not previously discoverable arise that potentially challenge the evidence that was before the foreign court, the domestic court can decline recognition of the judgment. (at para. 51, emphasis added)

    Reading the pleading generously, one could of course say that the concepts of jurisdictional fraud and fraud not previously discoverable are nonetheless part of Canadian law, irrespective of the terminology. But this is sloppy drafting.

    Second, on the topic of drafting, in my view the reply also rather blatantly disregards the Ontario rules of pleading by pleading evidence, not to mention its verbosity. Those rules are too often honoured in the breach, but from time to time one does see courts striking pleadings for that reason. There was an instructive example earlier this year, coincidentally also involving the firm acting for the plaintiffs in this case, Lenczner Slaght.

    It’s too early to assess the motion, as we have only a notice of motion. But so far, to me this seems like just a lot of sound and fury, so to speak.

    Alex

    1. Thanks, Alex, and that’s fair enough. I wasn’t trying to say what Canadian law is, but only what the plaintiffs say it is. When I give my own view, it’s really a theoretical or doctrinal view that may or may not reflect the law. It doesn’t reflect the law generally in the US, as I’ve said.

      I’m looking forward to our panel discussion in Washington!

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