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Ecuador vs. Chevron, By Way of Canada

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In the latest twist to a 22-year-old legal saga, Canada’s Supreme Court ruled on September 4th that Ecuadorian villagers can seek to enforce an Ecuadorian legal judgment in Canada for $9.5 billion against Chevron Corporation for polluting the Amazon rainforest.

The plaintiffs were successful in arguing that since Chevron owns at least $15 billion worth of assets in Canada – including Newfoundland offshore oil fields, major investment in the Alberta tar sands, an oil refinery in B.C., natural gas holdings, and other assets – they can pursue the case in Ontario courts. In the unanimous 7-0 ruling, the Canadian Supreme Court sided with the villagers’ lawyers, agreeing that the province of Ontario has jurisdiction to recognize the $9.5 billion judgment obtained in 2011 by the villagers in an Ecuadorean court. [1]

Chevron Corp. had appealed to the Supreme Court in the hopes of overturning a lower-court decision that said the villagers could pursue their case in Ontario courts.

In the Supreme Court case, California-based multinational Chevron Corp. argued that its Canadian assets don’t belong to the parent company, but to a subsidiary called Chevron Canada Ltd. But the high court rejected the company’s arguments. Justice Clement Gascon ruled that Chevron Canada’s “bricks-and-mortar business in Ontario and its significant relationship with Chevron” is enough to establish jurisdiction for the case. [2]

The ruling does not mean that the Ecuadorian villagers can now seize Chevron’s Canadian assets. It only means that the case can go forward at a subsequent trial court in Ontario. As Justice Gascon wrote, “A finding of jurisdiction does nothing more than afford the plaintiffs the opportunity to seek recognition and enforcement.”

Nonetheless, the villagers and their lawyers believe the decision by the Supreme Court of Canada “has set an important milestone” [3] in a case that has been called “the trial of the century.”

Massive Contamination

Between 1964 and 1990, U.S. oil giant Texaco (now Chevron) contaminated Ecuador’s Amazon rainforest by dumping 80,000 tons of oil and toxic residues, thereby ruining rivers and drinking water in a 19,305-square-mile area and contributing to high cancer rates and birth defects among the local population. The villagers’ original lawsuit was filed in 1993. Chevron inherited the lawsuit when it merged with Texaco in 2001.

According to writer/activist Mitch Anderson, “Over the course of more than two decades of operations, Chevron abandoned more than 900 unlined waste pits gouged out of the jungle floor that leach toxins into soils and streams; contaminated the air by burning the waste pits; dumped oil along roads; and spilled millions of gallons of pure crude from ruptured pipelines. Internal company documents demonstrate that Chevron officials ordered field workers to destroy records of oil spills. The company refused to develop an environmental response plan or pipeline maintenance program, and Chevron never conducted a single health evaluation or environmental impact study despite the obvious harm it was causing.” [4]

By 2013, Huffington Post reported that “over 1,400 have died and thousands more [Ecuadorians] have suffered illnesses” resulting from the severe contamination in the region. [5]

Writing for the Canadian website rabble.ca, Raluca Bejan and Santiago Escobar called the situation “the Amazonian Chernobyl,” and stated: “In 2011, an Ecuadorian court ruled for Chevron having to pay $9.5 billion dollars for the destruction it has caused. Surprise, surprise, Chevron already liquidated all of its owned assets in Ecuador. Indigenous people were left with no other choice but to pursue Chevron’s resources globally. After all, Chevron is Chevron everywhere, trading under the same symbol on New York and Toronto Stock Exchanges. Initial attempts were made in the U.S. but the door was quickly shut down, soon after Judge [Lewis]

Kaplan’s intervention proclaimed the Ecuadorian judgment as corruptly decreed. The next stop was successively Canada.” [6]

On March 4, 2014, Chevron had succeeded in getting the U.S. federal judge to declare the Ecuador case an “egregious fraud,” ruling that the Ecuadorian judgment against Chevron is unenforceable in the U.S. [7] That case is now under appeal.

The Ecuadorian villagers have also filed similar lawsuits against Chevron in Argentina and Brazil. In 2012, Canadian Press reported that the villagers planned to file lawsuits in “30 countries on four continents where Chevron has assets” in order to collect the damages owed. [8]

Bejan and Escobar stress that “This is a transnational justice case. If a global world allows Chevron to operate globally, to pick and choose its countries of interest, to pack up and leave when convenient, social responsibility should also be demanded across national borders….”

Chevron denies liability for the contamination, saying the pollution was cleaned up after Texaco pulled out of Ecuador in 1992. The company also asserts that the Ecuadorian government released the company from further responsibility, and Chevron calls the case “the legal fraud of the century.”

But the villagers’ lead Canadian lawyer, Alan Lenczner told the press, “It cannot be right that a multinational company that operates entirely through subsidiaries is immune from the enforcement of a judgment in Canada, particularly where the subsidiary is 100 per cent owned and provides some of the billions of dollars that Chevron pays out in dividends each year and even more billions in share buy backs.” [9] Chevron Corp. reported 2014 profits of $19.2 billion, with annual revenues of $203.7 billion.

The “Corporate Veil”

In the Supreme Court case, Lenczner, a top litigator with Lenczner Slaght Royce Smith Griffin LLP in Toronto, was up against Benjamin Zarnett of Goodmans LLP and Clarke Hunter of Norton Rose Fulbright Canada. According to the Financial Post, Zarnett and Hunter “argued that enforcing the Ecuadorian judgment in Ontario would be impossible because Chevron’s corporate structure is too complicated. Chevron is structured sort of like a Russian nesting doll: The Canadian subsidiary is owned by another Chevron-subsidiary, which is owned by another subsidiary, and so on. There are no fewer than seven corporate layers separating the Canadian unit from Chevron Corp.” [10]

But the Canadian Supreme Court rejected this argument – in a judgment that could have profound repercussions.

As the Toronto Globe & Mail reported, “The ruling has major implications for Canadian multinational companies whose business activities raise environmental or human-rights concerns around the globe. The ruling weakens the so-called ‘corporate veil’ that has shielded subsidiaries from responsibility for the actions of their corporate parents.” [11]

Justice Cascon wrote in the 7-0 ruling, “In a world in which businesses, assets and people cross borders with ease, courts are increasingly called upon to recognize and enforce judgments from other jurisdictions. Sometimes, successful recognition and enforcement in another forum is the only means by which a foreign judgment creditor can obtain its due.” [12]

Chevron spokesman Morgan Crinklaw told the Wall Street Journal that the decision by the Supreme Court of Canada “has no bearing on the legitimacy or enforceability of the fraudulent Ecuadorean judgment.” Chevron’s top lawyer once vowed that the company would fight the Ecuadorian case “until Hell freezes over, and then we’ll fight it out on the ice.”

But the villagers are equally adamant. Pablo Fajardo, an Ecuadorian attorney working on the case, told a news conference in Quito following the Canadian legal decision, “We are going to pursue Chevron’s assets in Canada and in the pertinent courts, until the last cent of the award is paid.”

Whatever happens next, the Supreme Court ruling has set an important historical precedent, with potentially far-reaching implications.

Footnotes/Links.

[1] Nicole Hong and Kim Mackrael, Canada’s Top Court Rules in Favor of Ecuador Villagers in Chevron Case, The Wall Street Journal (Sept. 4, 2015).

[2] Ibid.

[3] Claudia Garcia, A slippery decision: Chevron oil pollution in Ecuador, dw.com (Sept. 7, 2015).

[4] Mitch Anderson, Chevron Found Guilty in Amazon Pollution Case, sfgate.com (Feb. 16, 2011).

[5] Karen Hinton, Chevron in Ecuador: U.S. Oil Company Spies on Latin American Country to Escape Multi-Billion Court Judgment, Huffington Post (March 14, 2013).

[6] Raluca Bejan and Santiago Escobar, Supreme Court decision on Ecuador-Chevron case to set global precedent on corporate responsibility, rabble.ca (Sept. 3, 2015).

[7] Insiders Continue to Abandon Fraud Scheme Against Chevron, The Amazon Post (Sept. 14, 2015).

[8] Canadian Press, Ecuador plaintiffs launch attempts in Canada to collect from Chevron, The Tyee (May 31, 2012).

[9] Drew Hawwelback, Meet Alan Lenczner: The man fighting for Ecuadorian villagers in their Canadian case against Chevron, Financial Post (Sept. 4, 2015).

[10] Ibid.

[11] Sean Fine, “Ecuadoreans can sue Chevron in Canada, Supreme Court rules,” The Globe & Mail (Sept. 4, 2015).

[12] Ibid.

Joyce Nelson is an award-winning Canadian freelance writer/researcher working on her sixth book.

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