September 29, 2015 Practice Points

The Chevron Ecuadorian Judgment: Jurisdiction over Recognition in Canada

By Paul V. Majkowski

In the latest development in the long-running controversy between Chevron and Ecuadorian plaintiffs seeking compensation for environmental damages, the Canadian Supreme Court has found that the Canadian courts may exercise jurisdiction over an action brought against Chevron and Chevron Canada for recognition and enforcement of the Ecuadorian judgment.

The court rejected Chevron’s arguments that jurisdiction required a “real and substantial connection” between Ontario and either the judgment debtor (Chevron) or the dispute resulting in the judgment:

In an action to recognize and enforce a foreign judgment where the foreign court validly assumed jurisdiction, there is no need to prove that a real and substantial connection exists between the enforcing forum and either the judgment debtor or the dispute. It makes little sense to compel such a connection when, owing to the nature of the action itself, it will frequently be lacking. Nor is it necessary, in order for the action to proceed, that the foreign debtor contemporaneously possess assets in the enforcing forum. Jurisdiction to recognize and enforce a foreign judgment within Ontario exists by virtue of the debtor being served on the basis of the outstanding debt resulting from the judgment. This is the case for Chevron. Jurisdiction also exists here with respect to Chevron Canada because it was validly served at a place of business it operates in the province. On the traditional jurisdictional grounds, this is sufficient to find jurisdiction.

The court restricted its holding to finding jurisdiction, explicitly noting that it was not deciding the issue of recognition, or matters of corporate separateness under Canadian law and whether Chevron Canada’s shares or assets might be the subject of enforcement if the judgment were to be recognized. As to potential recognition of the judgment in the Canadian court, note that Chevron’s RICO claims against the plaintiffs’ attorneys that the judgment was fraudulently obtained were sustained in the Southern District of New York (appeals in the matter were argued before the Second Circuit in April 2015). Fraud would be a challenge to recognition under Canadian law as well.

Despite the court’s express limitations on its ruling, some commentators observe that the decision reflects an erosion of corporate separateness and presents a vehicle for the redress of “a range of abuses, such as ‘war crimes, torture and environmental degradation.’” The Justice and Accountability Project, filing an amicus brief, stressed, “The outcome of this appeal has the potential to have a profound impact on the ability of such communities to seek redress.”

Setting aside the viability/non-viability of actually piercing the corporate veil, the liberal recognition jurisdiction acknowledged by the Canadian Supreme Court presents two potentially troubling facets to defending recognition of a foreign country judgment. First, rather than seeking recognition in the judgment debtor’s home forum, which would seemingly be the most natural process, there is a potential for multiple recognition actions in different venues (the original Ecuadorian strategy involved dozens of actions under the code name “Invictus”). Second, allowing jurisdiction over recognition—even where enforceable assets are not present in the jurisdiction—would seem to provide judgment creditors with an opportunity to bolster the credibility/sustainability of their judgment by inviting and withstanding recognition challenges in “friendly” forums to create preclusive/precedential effects for later recognition in asset-rich jurisdictions.

Paul V. Majkowski, Rivkin Radler LLP, Uniondale, NY

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