Chevron in Ecuador

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Canada's Top Court Rules in Favor of Ecuador Villagers in Chevron Case

The case will go back to an Ontario court where the two sides will argue over a $9.5 billion judgment against Chevron

By Nicole Hong and Kim Mackrael, The Wall Street Journal
4 September 2015

In a boost to Ecuadorean villagers' long-running bid to enforce a $9.5 billion judgment against Chevron Corp., the highest court in Canada ruled Friday that villagers can move forward with an effort to seize assets tied to the oil company.

The ruling doesn't mean that villagers can begin seizing Chevron's assets in Canada. Rather, the case will now get kicked back to a trial court in Ontario, where the two sides will battle over whether the judgment should be recognized and enforced.

"A finding of jurisdiction does nothing more than afford the plaintiffs the opportunity to seek recognition and enforcement" of the Ecuadorean judgment, wrote Justice Clément Gascon.

The ruling follows three years of fighting over whether Canada can serve as a venue for the broader battle. In a unanimous 7-0 ruling, the Canadian high court on Friday sided with the lawyers for the villagers, saying the province of Ontario has jurisdiction to recognize the $9.5 billion judgment, which was obtained by the villagers in an Ecuadorean court in 2011.

Chevron had argued that its assets in Canada belong not to the parent company that was involved in the original Ecuador judgment, but to a subsidiary called Chevron Canada Ltd.

The plaintiffs argued Chevron owns an estimated $15 billion in assets in Canada, including offshore oil fields, a tar sands investment and a refinery. Chevron has declined to disclose the value of its assets there.

Canada's high court rejected the arguments made by Chevron. According to Justice Gascon, Chevron Canada's "bricks-and-mortar business in Ontario and its significant relationship with Chevron" is enough to establish jurisdiction for the case.

The ruling in Canada is part of a broader legal battle between Ecuadorean farmers and Chevron that has stretched for more than two decades and been litigated across multiple continents. The original lawsuit was filed in 1993 against Texaco Inc., which was accused by Ecuadorean farmers of polluting the Amazon rain forest with its oil drilling. Chevron inherited the lawsuit when it acquired Texaco in 2001 and denied liability for the environmental damage.

An Ecuadorean court in 2011 awarded $19 billion to the plaintiffs, one of the largest environmental verdicts in history, which was ultimately reduced to $9.5 billion by Ecuador's highest court. Chevron has refused to pay the judgment and embarked on an aggressive legal effort to undermine it.

Since Chevron doesn't hold any assets in Ecuador, Steven Donziger, the primary lawyer spearheading the plaintiffs' efforts, and his team have tried to enforce the judgment by going after Chevron's assets around the world, including Canada, Brazil and Argentina.

"We are confident that once Canadian courts review the fundamental fairness and strength of the judgment, it will be respected and Chevron will be forced to turn over any and all assets necessary to pay the amount ordered by the Ecuadorean court," Mr. Donziger said in a statement Friday.

Mr. Donziger's efforts come amid questions about the validity of the original judgment from Ecuador. An appeals court is currently reviewing a ruling by a Manhattan federal judge who found last year that the $9.5 billion judgment was obtained fraudulently by Mr. Donziger through bribery, witness-tampering and other corrupt misconduct. The judge's decision barred Mr. Donziger and his team from profiting from the award.

"Today's decision has no bearing on the legitimacy or enforceability of the fraudulent Ecuadorean judgment," said Morgan Crinklaw, a spokesman for Chevron.

Mr. Donziger has denied any wrongdoing.

Chevron has also filed claims against Ecuador in an international tribunal under The Hague, accusing the country of violating its obligations under a U.S.-Ecuador investment treaty by denying Chevron a fair trial.