Chevron Facing Major New Difficulties in Ecuador Pollution Case After Losing Before Canada Supreme Court
10 September 2015 - FOR IMMEDIATE RELEASE
Contact: Karen Hinton at +1.703.798.3109
Toronto, Canada – After losing a critical decision before Canada's Supreme Court, Chevron must now prepare for a possible worst-case scenario in the Ecuador pollution case that could force the company to pay the full amount of the $10 billion environmental judgment and see a disruption to its business operations in a strategically important oil-producing country, according to an analysis by the legal team that won the judgment.
The legal team's analysis – "Six Reasons Why Chevron's Ecuador Disaster Just Became a Company Nightmare In Canada" – can be read in full here. "Chevron's Ecuador environmental disaster has now spread to Canada in what is fast becoming a business and legal nightmare for company management," concludes the analysis.
Last week, all seven justices on Canada's top court rejected Chevron's last-ditch attempt to block Ecuadorian rainforest villagers from trying to seize company assets in Canada to pay for their judgment. Chevron had used two large Canadian law firms over the last three years in an attempt to block the matter from proceeding to the merits.
Chevron stripped its assets from Ecuador in 2007 in anticipation of losing the underlying trial in that country, even though it had insisted the litigation be held there. Chevron's asset sale in Ecuador forced the villagers to try to enforce their judgment in other jurisdictions, Canada among them. The action in Canada was filed in 2012 shortly after the Ecuador judgment was affirmed unanimously on appeal and became final.
Among the reasons that Chevron now faces major new difficulties in Canada with the Supreme Court decision, according to the analysis:
Chevron has a large pool of assets in Canada worth an estimated $15 billion, or more than enough to pay for the entirety of the Ecuador judgment. Canada is the fifth-largest energy producer in the world and generates about $3 billion annually in profits for Chevron. Chevron will not be able to dissipate its assets in Canada to evade paying any eventual judgment, as it did in Ecuador.
Canada allows for the liberal enforcement of foreign judgments – and indeed encourages the procedure under the doctrine of international comity, as the Supreme Court underscored in its recent opinion. "The need to acknowledge and show respect for the legal action of other states has consistently remained one of comity's core components, and militates in favor of recognition and enforcement," the decision said.
Visual and scientific evidence of Chevron's dumping of billions of gallons of toxic waste in Ecuador is likely to be seen in open court in North America for the first time, leading to a major potential embarrassment for CEO John Watson and company officials. Chevron has spent roughly $2 billion and close to two decades desperately trying to block a public airing of its pollution evidence in the United States. In Canada, the company will be forced to face the music for the harms it committed to the people of Ecuador, according to the analysis.
Chevron's discredited "fraud" defense – after being rejected by three layers of courts in Ecuador -- continues to disintegrate outside of court. The company's claim that the Ecuador judgment was the product of bribery has fallen apart completely in light of new forensic computer evidence commissioned by an international arbitration panel at the request of Chevron. The company's unethical payments of millions of dollars to its key witnesses will also be looked on with great disfavor in Canada, which (like most countries) bars such payments.
The cost of litigation in Canada has been dramatically reduced for the villagers, which neutralizes Chevron's resource advantage. Given that most of the issues that could arise in Canada already have been litigated repeatedly in Ecuador and elsewhere, the enforcement trial should take place quickly with almost no time-consuming depositions or evidence-gathering as normally happens in U.S. litigations.
Interest is running on the judgment in Canada. This means that Chevron's strategy of obstructionism is likely to severely penalize the company. Already, the amount of the Ecuador judgment has increased by an estimated $500 million during the three years that Chevron has tried to block the enforcement action in Canada from proceeding.
Chevron also will have to contend with explosive new whistleblower videos that depict company scientists trying to defraud Ecuador's courts by hiding contamination during field inspections of contaminated sites in Ecuador. The videos have received more than 2 million hits on the internet since they were posted earlier this year.
On the other hand, Chevron could try to tie up the villagers in trial and appellate litigation and then try to prevent any asset seizure by claiming its properties in Canada are held by wholly-owned subsidiaries not subject to the Ecuador court judgment, according to the analysis. The issue of whether the assets of a subsidiary can be seized will be litigated after the judgment is recognized, presumably in a second-stage proceeding.
The analysis, however, concluded that such a result – the villagers winning the enforcement action but being unable to seize Chevron's assets -- was highly unlikely for a variety of reasons related to Canadian law and Chevron's history of forum shopping across the globe to evade paying the judgment.
"The latest Canada ruling is a powerful example of how Chevron's vicious attacks against the very indigenous tribes it poisoned continue to backfire," concluded the analysis. "It seems the more money the company spends to fend off the Ecuadorians, the more it ends up chasing its own tail."
The next step in the proceeding is for Chevron to engage the merits of the case for the first time by submitting a written statement of defense. This is due in early October, said the analysis.