Noticia

Canada’s top court sets dangerous precedent in Chevron case

Financial Post - Lisa A. Rickard 29/09/2015

Canadians are renowned for their humility, practicality, and restraint. Unfortunately, those traits were not on display late last month when the Supreme Court of Canada permitted a group of Ecuadorian villagers to try to enforce in Ontario a fraudulent $9.5 billion judgment issued by an Ecuadorian court against Chevron Corporation despite the fact that Chevron is an American company with no assets in Ontario and the dispute has no relationship to Canada. The Supreme Court’s overreach is a misguided and dangerous precedent that should not be followed elsewhere.

In 2003, Chevron was sued in Ecuador for environmental damage allegedly caused by oil operations a decade earlier involving Texaco, which Chevron acquired in 2000. Despite the fact that the Ecuadorian government and Texaco settled any outstanding claims for environmental clean-up in 1994, an Ecuadorian judge ordered Chevron in 2011 to pay $18 billion in damages?the largest award ever by a foreign court against a U.S. company. An Ecuadorian court of appeals subsequently reduced the award to $9.5 billion.

Chevron has no assets in Ecuador, so the plaintiffs’ lawyers devised a plan to collect the judgment in countries with liberal enforcement laws, including Brazil, Argentina, and Canada, where Chevron indisputably does not operate and has no assets. In Canada, the plaintiffs seek to legitimize their judgment with the imprimatur of a respectable court and perhaps will attempt to seize assets of Chevron’s Canadian subsidiary. Notably, the plaintiffs did not seek to collect in the United States, where Chevron is incorporated and runs its business. When Chevron subsequently challenged the validity of the Ecuadorian judgment in New York, a U.S. judge held a month-long trial in 2014 and found “clear and convincing evidence” that plaintiffs’ legal team used bribery, fraud, and extortion to obtain the Ecuadorian judgment.

The Canadian Supreme Court, without addressing the dubious nature of the Ecuadorian judgment, allowed the enforcement action to proceed in Ontario despite the lack of any connection to Canada. The court held that whenever a creditor seeks to enforce a foreign country’s judgment in Canada, there is “no need to demonstrate a real and substantial connection between the dispute or the defendant and the enforcing forum” because the defendant already has been found liable abroad. As a result, the court held that the act of serving legal papers on Chevron in California was sufficient to allow the enforcement lawsuit against the company in Canada.

The Canadian Supreme Court’s decision cuts against the broader international trend of limiting the exercise of jurisdiction beyond a country’s borders. In 2005, the Canadian government complained that a U.S. court was improperly overseeing a lawsuit against a Canadian company, Talisman Energy, with respect to a human rights dispute that occurred in Sudan. In response to diplomatic friction caused by such suits, the U.S. Supreme Court has repeatedly affirmed that U.S. laws are presumed not to apply beyond U.S. borders.

The Canadian Supreme Court’s decision establishes a dangerous precedent in the growing practice of “tort tourism.” Plaintiffs’ lawyers are increasingly filing tort lawsuits abroad to secure large awards against multinational companies in weak or corrupt foreign courts. The lawyers then seek to collect those judgments around the world under liberal rules favoring recognition of foreign judgments. As a result of last week’s decision, Canadian courts are now open to such suits even when the defendant has no presence or assets in Canada.

The court stated that its outcome was compelled by the “economic reality” that debtors can quickly move assets between countries to avoid collection. Putting aside the fact that substantial business operations are not as fluid as the court assumed?infrastructure does not zip across international borders?the critical “economic reality” is that Chevron has almost all its assets in the United States, yet the Ecuadorian plaintiffs have gone to great lengths to avoid U.S. courts. Canadian courts should not be amenable to forum shopping where a suitable and logical forum is available to hear the claim.

The Canadian Supreme Court expressed no opinion on whether the Ecuadorian villagers would ultimately succeed in enforcing their judgment on its merits, especially given the evidence of fraud. Nonetheless, much of the harm already has been done. In the coming months, Chevron will be hauled into a foreign court that has no connection to the parties or the controversy. It is said that hard cases make bad law, and the extraordinary saga of Chevron’s case led the Canadian Supreme Court to adopt an unprecedented overreach of authority. Future courts should take care not to repeat this mistake.

Lisa A. Rickard is president of the U.S. Chamber Institute for Legal Reform

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