Lago Agrio: Ontario Court of Appeal Vacates Order on Costs

Yesterday the Ontario Court of Appeal vacated an earlier order of a single justice requiring the Lago Agrio plaintiffs to give security for the costs of the appeal. This will allow the LAPs to proceed with their appeal without paying nearly $1 million to cover their costs in case they lose—and without having to disclose whether they have any third-party litigation financing supporting their efforts.

The gist of the court’s decision is that while it’s true that the plaintiffs didn’t show that they were impecunious, the question of security for costs is always one addressed to the judge’s discretion, and the overriding consideration is whether such an order is just. Here, the court held, because the litigation is essentially public interest litigation, and because Chevron doesn’t need the money and apparently sought security as a way to bring the litigation to a close, the order was not just. I think this is a defensible decision, though one that could have come out either way, especially given the deference due to the single justice’s decision.

Two points of interest in the new decision: First, the court held, correctly I think, that the LAPs’ claim is not frivolous. This is of course a low bar, but it must come as some relief to the LAPs, after the first judge held they were unlikely to succeed. I would rather be told I’m likely to lose than that I’m guaranteed to lose! Second, the court noted but was unmoved by the LAPs’ failure to disclose whether they have third-party funding. If I were on the bench, that would have been a key consideration for me in deciding on the justice of the order. What makes the order potentially unjust is the plaintiffs’ apparent poverty, since we ought to prefer litigation be decided on the merits without regard to the plaintiffs’ financial means. But if there is a pot of litigation funding out there, the question of justice is a lot murkier. It seems right that security should not be invariably required just because there is third-party funding, but on the other hand the existence of funding seems like a key fact.

3 responses to “Lago Agrio: Ontario Court of Appeal Vacates Order on Costs”

  1. Peter Lynn

    Having just read the Canadian decision, it appears to me that there are justices within the Canadian legal system who see some merit in the LAPs case. This is the most positive document I have seen in some time. They acknowledge that Texaco have been found to contribute towards the ‘environmental devastation’ that has wrecked peoples lives, and point out that these findings have yet to be undermined in their courts. They also do not dismiss veil piercing out of hand, but state that law evolves through novel arguments, such as those presented. Finally they recognise that Chevron has consistently ’employed all available means to resist enforcement’, and this appears to be an important factor in leading them to view the order as a tactic to end litigation.

    However, whilst encouraging, the possibility of successful enforcement still looks remote at this stage. For this reason, third party funding must be difficult to attract – who would put up a bond of almost £1million when it is almost certainly going to be lost?

  2. Peter, thanks for the comment. I agree that this is a positive sign for the LAPs, though it’s a sign of how badly things have been going for them that a decision that their case is not frivolous seems like a ray of sunshine.

    Like any other investment, third-party funding has risks and rewards. There may be some investors who can bear the risk in return for a speculative big win. I don’t know whether there’s any funding here, but I suspect there is, otherwise the LAPs would’ve said there was none. But that’s just speculation.

  3. […] month. The proceedings in Canada were rejected by the first instance court in January 2017 but are still on appeal. The LAPs, perhaps sensing a defeat, abandoned their efforts in Brazil in September 2017, though […]

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