Financial Post 24/01/2017
You might expect a legal fight over US$9.5 billion to involve several, complex legal arguments and a lot of bizarre plot twists. But the most recent legal development in the case of Yaiguaje v. Chevron Corp. is, to my mind, notable for its simplicity.
In a written decision issued Friday, Judge Glenn Hainey of the Ontario Superior Court granted summary judgment dismissing the case against Chevron’s Canadian subsidiary, Chevron Canada. And he did so based on a bedrock principle of Canadian law called corporate separateness. The Chevron decision underscores how important this principle is — and not just for big corporations, but also small business people and entrepreneurs.
To recap, Yaiguaje v. Chevron is the case in which villagers won a multi-billion pollution judgment from an Ecuador trial court. Yet the 2011 decision is controversial. A U.S. federal judge has even labelled the Ecuador lawsuit an “egregious fraud.”
Since Chevron has no assets in Ecuador, the villagers have been roaming the globe, looking for a jurisdiction that will allow them to commence enforcement proceedings. In 2012, the plaintiffs brought the case to Ontario in hopes of seizing Chevron assets in Canada.
Judge Hainey’s ruling doesn’t end the matter entirely. Although he dismissed the case against the oil company’s Canadian subsidiary, the Ontario action against the U.S. parent company continues. Yet since Chevron Canada is the Canadian entity that holds the assets the plaintiffs hoped to seize in the enforcement action, if the Ontario ruling isn’t a road block, it’s at least a speed bump.
The plaintiffs plan to fight on. They’ve publicly said they believe the ruling against Chevron Canada will be “swiftly reversed” on appeal. They’re entitled to their optimism. But swiftly is a relative term, and if the outcome of every appeal was a foregone conclusion, there would be no need for appeals.
Under the principle of separateness, if a company owes money, it’s only that company that owes on the debt, and no one else. The implications are crucial for Canadian businesses. Creditors can’t collect on a corporation’s debt by going after the corporation’s shareholder owners. Creditors can’t chase after other companies located elsewhere in the parent company’s corporate family tree.
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