Supreme Court Rules Ecuadorean Plaintiffs Allowed to Pursue Enforcement of Judgment Against Chevron
In Yaiguaje v. Chevron Corporation, the plaintiffs, representing about 30,000 Ecuadorean villagers, seek damages from the defendant for injuries resulting from environmental pollution. They originally filed their claim in New York federal court in 1993, believing Ecuadorian courts to be ill-equipped to conduct a fair trial in such a matter. The defendants, however, sought a forum non conveniens dismissal, arguing that the Ecuadorian court system was fair and just. This jurisdictional dispute stalled the case for almost a decade, until the Second Circuit Court of Appeals finally granted the defendants a forum non conveniens stay in 2002.
The plaintiffs filed suit in Ecuador the following year, and after another protracted legal battle obtained a judgment against the defendants, which has since been upheld by Ecuador’s Court of Cassation. The judgment from the Ecuadorian court is worth US$9.51 billion.
Subsequently, the defendant, who before the judgment had proclaimed the fairness and integrity of the Ecuadorian courts, declared that the judgment in Ecuador had been obtained by fraud, and that it would refuse to pay it. This has spawned a cascading series of subsidiary litigation battles around the world – the dispute has spread to a whole host of other tribunals including the Permanent Court of Arbitration in The Hague, as well as domestic courts in the United States, Brazil, and Canada. In Canada, the plaintiffs brought proceedings against Chevron and its Canadian subsidiary, Chevron Canada, seeking to enforce the Ecuadorian judgment in Ontario.
The question at the Supreme Court was whether the Ontario court had jurisdiction over the defendants in the Ontario proceedings. Chevron, the parent, argued that in order to hear enforcement proceedings in a Canadian court, the conventional test for jurisdiction – whether there exists a real and substantial connection linking the Canadian forum to the dispute – applies, and there was no such connection here because Chevron had no business operations or directly held assets in Canada. Chevron Canada, for its part, argued that the Ontario court had no jurisdiction over it with respect to the subject matter of the proceeding because it was not a party to the original judgment.
Gascon J., writing for a unanimous Court, rejected both arguments. With respect to Chevron, he held that no real and substantial connection is needed to establish jurisdiction in proceedings to enforce a judgment against the judgment debtor. He noted that, “In today’s globalized world and electronic age, to require that a judgment creditor wait until the foreign debtor is present or has assets in the province before a court can find that it has jurisdiction in recognition and enforcement proceedings would be to turn a blind eye to current economic reality.”
With respect to Chevron Canada, he held that its business operations in Ontario were sufficient to establish jurisdiction under traditional grounds of presence-based jurisdiction.
The enforcement proceedings against Chevron and Chevron Canada will now go ahead, with the defendants anticipated to argue that the Ecuadorian decision should not be enforced under the fraud exception to the recognition of foreign judgments, as described in cases like Beals v. Saldanha.
The scope of this decision is narrow and the factual circumstances unique. However, this decision supplies another piece in the puzzle of holding western multinational corporations accountable for involvement in human rights violations in developing countries. It confirms that the assets of a multinational enterprise anywhere in the world, whether held directly or indirectly, could be made available to satisfy a judgment against that multinational enterprise. On the heels of the decision in HudBay, it also signals to lower courts – as well as to multinational corporations in Canada – that Canadian courts may now be prepared to be receptive to such disputes.
James Yap graduated from Osgoode Hall in 2010. He currently works at Siskinds LLP.