By Daniel Gilbert, Wall Street Journal
30 May 2012
Lawyers representing residents of an Amazon rain forest filed a lawsuit in Canada to seize assets there belonging to Chevron Corp. as part of their effort to collect an $18.2 billion judgment they won in Ecuador in a pollution case.
The claim, filed Wednesday in Ontario's Superior Court of Justice, signals a new phase in an epic legal battle that has stretched across two decades and is being waged on several continents. The plaintiffs say they will try to seize Chevron's assets in countries where it operates to force it to pay the judgment, a prospect the company said last year could cause it "irreparable harm."
The plaintiffs say their land was contaminated by oil operations dating back to the 1970s involving Texaco Inc., which Chevron bought in 2001. Last year, a court in Ecuador found Chevron liable and levied an $18.2 billion judgment.
Chevron says the decision was the product of fraud involving expert witnesses, and has appealed it in Ecuador. The company also argues that Texaco did its share to clean up any contamination and was released from liability by the Ecuador government in 1998. The plaintiffs dispute all of these contentions.
Chevron said Wednesday that it would fight any effort to enforce the judgment. "The Ecuador judgment is a product of bribery, fraud, and it is illegitimate," company spokesman Kent Robertson said in a statement. "The company does not believe that the Ecuador judgment is enforceable in any court that observes the rule of law."
Karen Hinton, a spokeswoman for the Ecuadorian plaintiffs, said: "Chevron for years has fabricated charges of fraud against the rainforest communities to distract attention from its own guilt."
The company, which has a market capitalization of $193 billion, has no assets in Ecuador. But in Canada, Chevron subsidiaries drill on land and offshore, refine oil and sell gasoline, and own a 20% stake in a multibillion-dollar project to wring heavy crude from the oil sands in Alberta. The company produced the equivalent of 70,000 barrels of oil a day in 2011, almost 3% of its global production.
The plaintiffs chose Canada as a venue because of Chevron's assets there, and because its judiciary is "robust in enforcing the judgments of foreign courts," said Alan Lenczner, a lawyer with the Toronto firm Lenczner Slaght Royce Smith Griffin LLP, which represents the Ecuadorean plaintiffs. "I'm hopeful, at some point, that Chevron is going to say, 'Enough, let's resolve this,'" he said.
Chevron says, however, that it won't settle with plaintiffs' lawyers it accuses of wrongdoing. "We believe the only path to a constructive resolution of this matter requires the participation of the government of Ecuador," Mr. Robertson said. "Unfortunately, the Republic has rebuffed all attempts at a constructive dialogue."
To seize Chevron's assets in Canada, the plaintiffs must first persuade a judge to recognize the Ecuadorean judgment. Then the court would have to appoint a receiver to seize the assets of Chevron's subsidiaries.
But a Canadian court would probably wait to consider an action to enforce a foreign judgment until all appeals in that country have ended, said Stephen Pitel, a law professor at the University of Western Ontario. Chevron would face high hurdles to a fraud defense, he said, noting that Canadian courts "tend to take a somewhat narrower view of what might constitute fraud than some courts would."
The legal battle, and its potential liability, have become an increasing focus for shareholders, some of whom have called on the company to settle the case.
Meanwhile, Chevron is suing the plaintiffs and their lawyers for racketeering in U.S. Federal District court in N.Y., arguing that their Ecuador lawsuit amounts to a shakedown scheme. The plaintiffs deny the charges and have leveled their own accusations of fraud against Chevron.
Last year, a U.S. judge granted a preliminary injunction barring the plaintiffs from attempting to collect the Ecuadorean court's award, citing evidence of fraud. But an appellate court later vacated that order.
Chevron is also seeking to block enforcement of the judgment under a treaty between the U.S. and Ecuador. A three-judge panel, administered by the Permanent Court of Arbitration in The Hague, said in February that it would rule on Chevron's complaint, and ordered Ecuador to take "all measures necessary" to prevent the plaintiffs from attempting to collect the judgment while it reviews the arguments.
Ecuador criticized the tribunal's decision; the plaintiffs suing Chevron say it has no bearing on their case.