Chevron Sued in Canada over Ecuador Case

By Naomi Mapstone, Financial Times
31 May 2012

Plaintiffs who won an $18.2bn environmental damages case against oil majorChevron in Ecuador after 19 years of litigation have turned to Canada to enforce the ruling.

In the first of several actions expected to be launched worldwide, lawyer Alan Lenczner filed a suit in the Superior Court of Justice in Ontario on Wednesday seeking the seizure of shares and assets of Chevron Canada.

"There are substantial assets here," said Mr Lenczner. "More than three-quarters of Chevron's asset base is outside the US."

Canada was also "robust" in its recognition of foreign judgments, having enforced many originating in the US and South America, he added.

Chevron, the second-biggest US oil and gas group by market capitalisation, has refused to pay the damages award.

The company inherited the long-running case in 2001 when it bought Texaco, which started Ecuador's oil industry in partnership with state-owned Petroecuador. Petroecuador is now the sole operator in the area involved in the court case, which is near the town of Lago Agrio, named after Texaco's headquarters in Sour Lake Texas.

Chevron argues it fulfilled its clean-up responsibilities under a 1995 agreement with Ecuador.

The Ecuador court judgment is "a product of bribery, fraud and it is illegitimate," the company said on Wednesday. "The company does not believe that the Ecuador judgment is enforceable in any court that observes the rule of law. If the plaintiffs' lawyers believed in the integrity of their judgment, they would be seeking enforcement in the US where Chevron resides. Chevron will vigorously defend against any enforcement action."

The US Second Circuit Court of Appeals in September overturned a lower court order that barred the plaintiffs from attaching Chevron assets outside Ecuador. The company is pursuing a racketeering and fraud case against certain plaintiffs in the US and has asked The Hague's Permanent Court of Arbitration to rule on whether Ecuador breached a treaty with the US requiring it to guarantee a fair trial.

Karen Hinton, a spokeswoman for the plaintiffs in the US, says they "categorically deny" the fraud charges, calling them a ruse to block enforcement of the Ecuador court's ruling.

Under Canadian law, Chevron has 40 days to prepare a defence to the petition there.

Among Chevron Canada's assets are a 20 per cent stake in the 255,000 barrel per day Athabasca oil sands project, the Ells River concession with an estimated 7.5bn barrels of oil, the 50,000 bpd Burnaby refinery and the Hibernia offshore drilling project. The company also has significant retail interests, including a chain of 162 service stations and 134 convenience stores.

Mr Lenczner predicted that success before the Canadian court would force Chevron to pay without having its assets seized. "Once you have that judgment and the ability to seize the assets, they will pay. They would look terrible [otherwise]," he said.

Pablo Fajardo, the lead lawyer for the plaintiffs in Ecuador, said at least one or two other actions would be launched in July, but he did not say where.

Chevron has significant assets in Argentina, Venezuela and Brazil, where it has been targeted by regulators over an oil spill and faces a damages claim for $10.6bn.

"At last the indigenous people of the Amazon are very close to receiving justice," Mr Fajardo said. "We won legally in Ecuador and Chevron has refused to pay its debt to us ... As big as it is, it has to respond to justice."