Tuesday, September 8, 2015

Supreme Court Permits Enforcement Proceedings Against Chevron

In closing another chapter in what has been a very long story, the Supreme Court of Canada ruled unanimously that forty-seven Ecuadorian villagers can proceed with their Ontario lawsuit against Chevron Corporation (“Chevron”) and Chevron Canada Limited (“Chevron Canada”) to recognize and enforce a U.S. $9.51 million judgment that they obtained against Chevron in the courts of Ecuador.


This writer has written about this case before. After the plaintiffs commenced an action in the Ontario Superior Court, Chevron moved to permanently stay the action on the basis that the Ontario Court had no jurisdiction to hear the matter. The motion judge ruled in the villagers’ favour with respect to the issue of jurisdiction. However, the judge exercised the court’s power to stay the proceedings on its own motion on the basis that pursuing a recognition and enforcement proceeding against Chevron in Ontario, where Chevron claimed it had no assets, would be futile and a waste of time and resources.


The Ontario Court of Appeal reversed that decision, holding that the Ontario courts need not erect additional obstacles  to the villagers' 27 year fight against Chevron and its predecessor Texaco Oil.  The action had been brought in Ecuador as a result of extensive environmental pollution that had disrupted the lives and jeopardized the futures of approximately 30,000 Ecuadorian indigenous villagers.  The plaintiffs' attempts to obtain compensation had been met with obstacles and roadblocks by Chevron the entire way.


The Supreme Court of Canada agreed. Justice Gascon, writing for the unanimous court, held that in order to recognize and enforce a foreign judgment, the only prerequisite is that the foreign court have a real and substantial connection with the litigants or with the subject matter of the dispute or that the traditional bases of jurisdiction were satisfied.


Canadian courts have never required that there be a real and substantial connection between the defendant or the action and the enforcing court for jurisdiction to exist in recognition and enforcement proceedings. The Supreme Court held that an unambiguous statement  that a real and substantial connection was not necessary would have the benefit of providing a fixed, clear and predictable rule, and would help to avoid needless and wasteful jurisdictional inquiries.


The Court held that there were two considerations of principle that support the view that a real and substantial connection test should not be extended to an enforcing court. Firstly, in an action for recognition and enforcement, the only purpose of the action is to allow a pre-existing obligation to be fulfilled. As the enforcing court is not creating a new substantive obligation, there can be no concern that the parties are situated elsewhere or that the facts underlying the dispute are properly addressed in another court. Each jurisdiction has an equal interest in the obligation resulting from the foreign judgement and no concern about territorial overreach could emerge.


The Court held that it must be remembered that the notion of comity has consistently been found to underlie Canadian recognition and enforcement law. The need to acknowledge and show respect for the legal action of other states has remained one of comity’s core components and militates in favour of recognition and enforcement. No unfairness results to judgment debtors from having to defend against recognition and enforcement proceedings – through their own behaviour and illegal non-compliance, they have made themselves a subject of outstanding obligations, so they may be called upon to answer for their debts in various jurisdictions.


The court held that requiring any defendant to be present or to have assets in the enforcing jurisdiction would only undermine order and fairness. 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.


Secondly, the court held that finding that there is no requirement of a real and substantial connection between the defendant or the action and the enforcing court is also supported by the choices made by the Ontario legislature, all other common-law provinces and territories, Quebec, other international common-law jurisdictions and most Canadian conflict of laws scholars.


In this case, the motion judge had correctly found jurisdiction with respect to both Chevron and Chevron Canada. The establishment of jurisdiction did not mean that the plaintiffs would necessarily succeed in having the Ecuadorian judgment recognized and enforced. It did nothing more than afford the Plaintiffs the opportunity to seek recognition and enforcement in Ontario. Chevron and Chevron Canada could use the available procedural tools to defend against the plaintiffs’ allegations.

The case will continue and will continue to be hard fought.




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