The $18 billion award given in Ecuador against Chevron for environmental damage won’t be enforced by seizing Chevron Canada, according to Justice David Brown. The epic legal battle to enforce this, allegedly fraudulent, judgment has now spread around the globe. Plaintiffs brought the original Ecuador lawsuit in 1993 against Texaco Inc for pollution and health damage left after four decades of oil extraction, not all of it by Texaco. Chevron, which has never operated in Ecuador, inherited the case when it acquired Texaco in 2001, despite a $40 million cleanup and settlement signed with the Ecuador government. Chevron has counterattacked with vehemence, including a New York lawsuit to have the award declared a fraud. The plaintiffs’ lawyers are now seeking leave to withdraw from the New York case, due to non-payment of their fees. Instead, the plaintiffs are trying to seize Chevron assets, wherever they may be found. Judge Brown summarized the Canadian status in Yaiguaje v. Chevron Corporation, 2013 ONSC 2527.
“[2] In 2011 the plaintiffs, residents of Ecuador, obtained a judgment in an Ecuador trial court which required the defendant, Chevron Corporation, to pay damages of approximately $18 billion. The trial judgment was upheld by an Ecuadorean intermediate court of appeal which, the parties agreed, turned the trial judgment into a final judgment for purposes of recognition and enforcement (the “Judgment”).
[3] In 2012 the plaintiffs commenced an action in this Court seeking recognition and enforcement of the Judgment. The plaintiffs sued not only the judgment debtor, Chevron Corp., but also one of its indirectly-held subsidiaries, the defendant, Chevron Canada Ltd. .. both defendants have brought motions to … stay this action …”
Parent company doesn’t own subsidiary’s assets
Justice Brown granted the stay, on the ground that Chevron Corp. has no assets in Canada. Its wholly owned but indirect subsidiary, Chevron Canada, does have assets here, but the assets of a subsidiary do not belong to the parent company. “[88] … By way of my “bottom-line”, I accept the following submission made by Chevron in its factum:
117. [B]ecause Chevron Corp. does not have assets here, and there is no reasonable prospect that it will do so in the future, there is no prospect for any recovery here. To allow the Plaintiffs’ academic exercise to take place in the Ontario judicial system would, therefore, be an utter and unnecessary waste of valuable judicial resources …
Let me explain why I have reached my conclusion….
[93] …under Canadian law, a shareholder in a corporation does not possess a legal or equitable interest in the assets of the company….Accordingly, the plaintiffs’ bald pleading that Chevron beneficially owns the assets of Chevron Canada is inconsistent with the basic principles of Canadian corporate law.
[95] …(iv) The fact that a parent corporation operates a number of world-wide companies as an integrated economic unit does not mean that separate legal entities will be ignored absent some compelling reason for lifting the corporate veil. Ontario courts have not adopted the “group enterprise theory” of corporate liability. I adopt, as an accurate statement of the law prevailing in Ontario on this point, the following statements by the United Kingdom Court of Appeal in Adams v. Cape Industries Pic.: There is no general principle that all companies in a group of companies are to be regarded as one. On the contrary, the fundamental principle is that “each company in a group of companies … is a separate legal entity possessed of separate legal rights and liabilities …” Our law … recognizes the creation of subsidiary companies, which though in one sense the creatures of their parent companies, will nevertheless under the general law fall to be treated as separate legal entities with all the rights and liabilities which would normally attach to separate legal entities.”