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Indigenous Ecuadorian villagers can try again to enforce a controversial $18 billion environmental damage award against Texaco (now merged with Chevron Corp., one of the world’s largest corporations) in Canada. This is part of a worldwide legal battle between the villagers, seeking to collect the money and have the pollution cleaned up, and Chevron, which argues that the Ecuador oil pollution judgment was corrupt and invalid, and that the pollution was caused by the state oil company.

In an earlier post, we described how the Canadian claim was blocked in the Ontario Superior Court at a very early stage. Justice Brown stayed the action on the grounds that Chevron Corp. (the defendant in the Ecuadorian case) 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.

The plaintiffs successfully appealed that decision on procedural grounds and will now have another chance to pursue Chevron assets in Canada.

Too early to stay the Ecuador oil pollution damage claim

The villagers appealed on the basis that  Justice Brown granted the stay on his own initiative, not at the defendants’ request (because they had not agreed that an Ontario court had jurisdiction) and that this was an error. The Court of Appeal agreed:

[53] … [T]he motion judge’s stay in a major case involving poor and vulnerable foreign residents, one of the world’s largest corporations, a long and difficult process in a foreign court, and a huge damages award, was entirely his own construct; no party sought it. Consequently, this issue was not argued before the trial judge, and no cases were put before him regarding the appropriateness of granting a discretionary stay.

The Court of Appeal essentially said that Justice Brown’s reasoning about the merits of the claim may be right, but that he was wrong to decide these issues so early in the case, without giving both sides a full opportunity to argue each of his points. The Court of Appeal therefore overturned the stay, and allowed the case to proceed in Ontario. Chevron will have to respond to the claim on its merits.

[70] … [T]he Ecuadorian plaintiffs do not deserve to have their entire case fail on the basis of an argument against their position that was not even made, and to which they did not have an opportunity to respond. In these circumstances, the Ecuadorian plaintiffs should have an opportunity to attempt to enforce the Ecuadorian judgment in a court where Chevron will have to respond on the merits. That the plaintiffs in this case may ultimately not succeed on the merits of their recognition and enforcement action, or that they may not succeed in successfully collecting from the judgment debtors against whom they bring this action, are not relevant factors for a court to consider in determining whether to grant a discretionary stay before the defendants have even attorned to the jurisdiction of the Ontario court. A party may bring an action for all kinds of strategic reasons, recognizing that their chances of collection on the judgment are minimal. It is not the role of the court to weed out cases on this basis and it is a risky practice for a judge to second-guess counsel on strategy in the name of judicial economy.

The case will be heard in Ontario

As Justice MacPherson concluded:

[74] Even before the Ecuadorian judgment was released, Chevron, speaking through a spokesman, stated that Chevron intended to contest the judgment if Chevron lost. He said: “We’re going to fight this until hell freezes over. And then we’ll fight it out on the ice.”

[75] Chevron’s wish is granted. After all these years, the Ecuadorian plaintiffs deserve to have the recognition and enforcement of the Ecuadorian judgment heard on the merits in an appropriate jurisdiction. At this juncture, Ontario is that jurisdiction.

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