Financial Post 25/01/2017
Activists protest against US multinational energy corporation Chevron at a square in Quito RODRIGO BUENDIA/Getty Images
Last week, the wind was almost entirely taken from the sails of an Ecuadorian legal pirate ship that turned up in Canadian waters several years ago, looking to loot energy giant Chevron Corp.’s Canadian subsidiary.
As in the great days of buccaneering, however, we have to remember that one man’s pirate is another man’s freedom fighter cum state representative, and this voyage was backed to the hilt by Ecuador’s socialist president, Rafael Correa (who reluctantly leaves office this year, having failed to rig his country’s constitution). It was also supported by radical environmentalists, trade unions, left-wing politicians, and a raft of Hollywood’s B-list.
The captain of the ship was a mercenary American lawyer named Steve Donziger, who imagined that he had hit the jackpot when an Ecuadorian court ordered California-based Chevron to pay US$18.5 billion (subsequently reduced to a mere US$9.5 billion, plus interest) for alleged crimes against the environment and humanity. These revolved around pollution caused by Texaco, which Chevron acquired in 2001, when Texaco was operating in Ecuador more than 25 years ago.
A rather fundamental legal problem for taking the case to civilized jurisdictions was that Donziger’s band of buccaneers had — among other crimes and misdemeanours — bribed the Ecuadorian judge and ghostwritten his decision.
In 2014, a U.S. federal court found that the judgment had been the product of fraud and racketeering, including extortion, money laundering, wire fraud, witness tampering and obstruction of justice, a list of which Johnny Depp’s Captain Jack Sparrow would have been proud. That damning decision was unanimously affirmed last year by the U.S. Court of Appeals for the Second Circuit, which found Donziger’s crew guilty of a “parade of corrupt actions.”
The first U.S. federal court decision had also prohibited the Ecuadorian judgment from being enforced in the U.S., but Donziger had already set sail for what he hoped would be more amenable judicial waters. Thus the Jolly Roger appeared off Toronto.
There Donziger found a reputable local firm, headed by Alan Lenczner, to represent him. Lenczner claimed to be moved by the fact that Chevron was so rich and the 30,000 allegedly “affected” natives were so poor. True, perhaps, but legally irrelevant, although one certainly has to admire Lenczner’s tenacity in keeping Donziger’s leaky ship afloat.
In 2013, an Ontario judge ruled that while there might be jurisdictional grounds for allowing attempted enforcement of the Ecuadorean decision, such an exercise would be a waste of Canada’s precious judicial time since Chevron Canada had nothing to do with Ecuador, and was protected by the “corporate veil” of limited liability. That judgment was overturned on appeal, leading to Chevron requesting a Supreme Court ruling. The Supremes decided the case could proceed, and it was sent back to Ontario, where the Ontario Superior Court of Justice confirmed last week that the case may indeed proceed, but that even if it were successful (snowballs in Hades come to mind), there would be nothing against which to enforce its claim. Indeed, wrote Justice Hainey, the notion that Chevron’s Ontario assets might be up for grabs would be “not only contrary to law, it would have a startling and stark consequences for Ontario’s businesses and their ability to attract investment.” Ditto presumably for all of Canada, where there are already more than enough aboriginal issues clogging up the legal system.
While one may well have sympathy for poor Amazonian natives, whose main problem is the “Ecuador First” policies of President Correa, the central legal issue is that this case is rotten to the core, and its rottenness will be a major factor should it drift on to trial. That’s because the Ontario court has permitted the details of massive corruption cited by the two U.S. courts as a defence by Chevron.
Nevertheless, the Ontario court allowed the case to proceed because it found Chevron’s less significant lines of defence impermissible. Chevron had pointed out that Texaco had in fact paid $40 million for remediation work when it left Ecuador, and that the government had released it from further liability. The Ontario court found that governments could change their minds. However, that legal “loss” by Chevron amounts to a sea louse on the back of a beached whale.
Apart from the corruption issue, far more pertinent, given last week’s decision, is exactly what the plaintiffs are fighting for, since Chevron’s Canadian assets aren’t available for plunder.
Other offshore legal expeditions have not been going well for Donziger and crew either. Public prosecutors in both Brazil and Argentina have recommended against recognition of the Ecuadorian judgment.
Still, you have to give Donziger and his crew points for chutzpah. His publicist, Karen Hinton, described last week’s crushing defeat as a “resounding victory.” Meanwhile, on his blog, Donziger confidently declared that the court’s main finding would be overturned on the basis of the appeal that Lenczner is crafting.
Donziger also predicted that Chevron would settle. Perhaps, but then we might recall that Chevron’s defence has famously declared that it would fight this case until hell freezes over, then continue the fight on the ice.
Toronto so far has had a very mild winter, but Donziger’s ship is stuck in very thick ice.Fuente Original