On April 3, 2014 the Supreme Court of Canada granted leave to appeal from the Ontario Court of Appeal decision in Yaiguaje v. Chevron Corporation, 2013 ONCA 758 (CanLII). The Court of Appeal of Ontario (Canada) held that Canadian courts had the jurisdiction to hear claims by Ecuadorian nationals wanting to enforce their US$9.51 billion judgment against Chevron and its Canadian subsidiary.

Chevron was attempting to have the matter stayed before it was dealt with substantively by challenging an Ontario court’s jurisdiction to hear case at all. The Court analysed what is called the “real and substantial connection” requirement that must be met for an Ontario Court to consider the recognition and enforcement of a foreign judgment. On December 17, 2013 the Court ruled that:

  • Ontario Courts have jurisdiction to consider the recognition and enforcement of foreign judgments even if no real and substantial connection exists between Ontario and the foreign judgment; and
  • The fact that a plaintiff may ultimately fail on the merits, or in the enforcement, of a recognition and enforcement action, are not relevant factors for a court to consider in determining whether to grant a discretionary stay of a recognition and enforcement action.

Background

In the fall of 2013, the Court of Cassation (Ecuador) affirmed an earlier Ecuadorian judgment against Chevron for remediation and costs totalling US$9.51 billion, for alleged pollution of the Lago Agrio region of Ecuador between 1972 and 1990. The plaintiffs have, however, been unable to collect these damages in Ecuador due to the fact that Chevron no longer holds any assets in that country. In an attempt to collect, the Ecuadorians have subsequently instituted legal proceedings in Ontario, pursuant to which they are seeking enforcement and execution of the Ecuadorian judgment in Canada, against Chevron and its subsidiary Chevron Canada Limited (Chevron Canada).

In a judgment dated May 1, 2013, the Superior Court of Justice held that the Ontario Courts had jurisdiction, but nevertheless dismissed the action based on the fact that Chevron had no assets in Canada and based on the fact that the plaintiffs had no hope of successfully piercing the corporate veil of Chevron Canada, making its assets exigible to satisfy the foreign judgment against Chevron.

The plaintiffs then appealed the component of the motion judge’s Order dismissing the action, and Chevron and Chevron Canada cross-appealed the component of the motion judge’s Order confirming the jurisdiction of the Ontario Courts.

Court of Appeal for Ontario’s Findings

In addressing the plaintiffs’ appeal, the Court of Appeal for Ontario held that the fact that a plaintiff may ultimately fail on the merits, or in the enforcement, of a recognition and enforcement action, are not relevant factors for a court to consider in determining whether to grant a discretionary stay. The Court accordingly allowed the appeal and set aside the stay of the action, without commenting directly on the plaintiff’s chances of success against Chevron or dealing with the corporate veil defence of Chevron Canada.

With regard to Chevron US and Chevron Canada’s cross-appeal, the Court of Appeal for Ontario held that where an Ontario Court is being asked to enforce a foreign judgment “there is no need to undertake an analysis of whether there is a real and substantial connection between Ontario and the subject matter of the judgment”. The appropriate inquiry is rather to establish whether a real and substantial connection existed between the foreign jurisdiction and the subject matter of the foreign judgment; once that is established, the analysis shifts to a consideration of whether the foreign judgment is enforceable in Ontario as a matter of domestic law. The Court accordingly dismissed Chevron US and Chevron Canada’s cross-appeal, and found that the Ontario Courts have jurisdiction to consider the recognition and enforcement of the Ecuadorian judgment.

If and when the Ontario Courts eventually consider whether the foreign judgment is enforceable in Ontario as a matter of domestic law, the plaintiffs will have to contend with the fact that eight federal courts in the United States have already found the Ecuador trial to be tainted by fraud[1].

Conclusion

This case underscores the potential exposure of multinationals to recognition and enforcement of foreign awards in jurisdictions where they or their subsidiaries hold assets. The SCC will give some clarity to the issue of whether Canadian courts have jurisdiction to hear such claims at all. Whether the Court provides any guidance on whether a Canadian subsidiary can be made to satisfy judgments against its parent, will depend on how the issues are presented to them and their approach to the case – it may be that this will remain a question that will have to be answered if this case proceeds.