Canada Supreme Court To Decide Friday Whether Chevron Assets Can Be Targeted by Ecuadorian Villagers

Ottawa, Canada – In a decision that could have important implications for human rights victims worldwide, Canada's Supreme Court on Friday will announce whether Ecuadorian villagers can proceed in Canadian courts to try to seize Chevron's assets to force the oil giant to comply with a $9.5 billion Ecuadorian environmental judgment.

If the court decides in favor of the villagers, the decision could pose a substantial risk to Chevron's large asset base in Canada. The oil giant owns offshore oil fields, a tar sands investment, and a refinery in the country that collectively are worth an estimated $15 billion and produce an estimated $2 billion to $3 billion annually in profits.

The decision also could pave the way for human rights victims to more easily obtain compensation from private companies that try to hide their assets in overseas subsidiaries as a way to evade paying civil judgments in environmental cases, according to experts and others following the two-decade litigation.

"Canada's Supreme Court will be making a critically important decision that hopefully will create some much-needed clarity around this long-running dispute," said Paul Paz y Miño, a campaigner for the U.S. environmental group Amazon Watch, which works closely with the Ecuadorian villagers.

"If the decision is in favor of the Ecuadorians, Chevron will face a real threat to a hugely important asset pool in one of the top energy producing countries of the world," he said. "In addition, the decision could make it easier for courts in other countries to let the villagers seize Chevron assets as Chevron is currently making the same technical arguments to block the case elsewhere that it is making in Canada.

"On the other hand, if Canada rules for Chevron, the villagers will still be left with viable legal options in other countries but they likely will take much longer to come to fruition, playing into Chevron's game of obstruction and delay," he added.

Ecuadorian indigenous leader Humberto Piaguaje, who heads the coalition of rainforest communities suing Chevron, underscored the significance of the decision.

"Thousands of suffering people in communities spread out over the Amazon are praying Canada's courts quickly move our request to trial so it can finally be determined whether Chevron will be forced to clean up the horrific contamination caused to our ancestral lands," he said. "The health of the rainforest and the lives of many people being exposed to Chevron's toxic chemicals depend on it."

The impending decision is the product of Chevron's appeal of a unanimous ruling by an Ontario appellate court in 2013 ordering that the villagers be allowed to pursue Chevron's assets in the form of a judgment collection action. The Ecuadorians are represented by prominent Canadian trial lawyer Alan Lenczner, who argued the case on their behalf before the country's Supreme Court.

The Ontario appeals court had rejected Chevron's technical argument that the Ecuadorians should be denied jurisdiction because the company's assets in Canada are held not by Chevron but by a wholly-owned subsidiary, Chevron Canada.

"For 20 years, Chevron has contested the legal proceedings of every court involved in the litigation – in the United States, Ecuador, and Canada," the three-judge panel of the Ontario appeals court wrote in its decision. "In these circumstances, the Ecuadorian plaintiffs should have an opportunity to attempt to enforce the Ecuadorian judgment in a court where Chevron will have to respond on the merits," it added.

If the Canada Supreme Court affirms that decision, the subsequent enforcement trial will largely concern whether Ecuadorian courts gave Chevron a fair hearing – an issue hotly disputed by the parties, as Chevron claims it was the victim of "fraud" in Ecuador. Chevron raised the allegations in the Ecuador proceeding, but two separate appellate courts and a trial judge rejected them after reviewing the evidence.

The villagers accuse Chevron of inventing the "fraud" narrative by paying corrupt witnesses to fabricate evidence, trying to bribe judges, and deliberately trying to sabotage the Ecuador proceeding as a way to hide its own fraudulent and criminal conduct in Ecuador. See here for background.

The Canadian trial proceeding could begin within one month of a decision in favor of the villagers, with the first step being the filing by Chevron of a defense in written form.

The Ecuadorian judgment against Chevron, which came down in 2011, is based on extensive scientific evidence that the oil company dumped billions of gallons of toxic waste into the rainforest when it operated in Ecuador under the Texaco brand from 1964 to 1992. It was issued on behalf of an estimated 30,000 indigenous and farmer villagers from roughly 80 rainforest communities in a 1,500-square mile area in the country's Oriente region. (For a summary of the evidence against Chevron, see here.)

Ecuador's Supreme Court affirmed the liability portion of the judgment unanimously in a 222-page decision in 2013, although it halved the damages to $9.5 billion by knocking out a punitive penalty.

Chevron not only has refused to pay that judgment, but it stripped its assets from Ecuador years ago in anticipation of losing the case. That forced the villagers to file enforcement actions targeting company assets in Canada, Brazil, and Argentina. The Canada action is the most advanced. (A background document explaining the details of the Canadian enforcement action against Chevron can be read here.)

"Knowing it can never win on the merits, Chevron for more than two decades has been trying to use technicalities to block the courthouse door to the very people it has poisoned in Ecuador," said Kevin Koenig, an official with Amazon Watch. "It is the same playbook the company used in the United States to block the original trial. Chevron tried to use it in Ecuador but ended up losing a historic decision on the merits.

"The question now is whether Canada will stop Chevron's abusive litigation tactics and move this matter forward so thousands of suffering people can have the chance to obtain a measure of justice," he said.

Background

Chevron accepted jurisdiction in Ecuador in 2001 as a condition of the trial being transferred out of U.S. federal court. Once the trial began, Chevron not only challenged jurisdiction anyway but its top lawyer vowed a "lifetime of litigation" if the villagers persisted in pursuing their claims.

Since the Ecuador judgment was issued, Chevron has filed more than 30 retaliatory legal actions in the U.S. and other jurisdictions against the named plaintiffs, their lawyers, their financial supporters, and allies in the environmental community. The company, which in internal emails referred to the effort as a "demonization" campaign, has admitted using at least 60 law firms and 2,000 legal personnel in the effort.

One trial judge in the U.S., Lewis A. Kaplan, found for Chevron last year after a truncated bench trial where he refused to consider any of the pollution evidence against the company and essentially tried to overturn Ecuador's Supreme Court by blocking the judgment. In contrast, approximately 25 trial and appellate judges in Ecuador and the U.S. have rejected Chevron's claims of fraud in one form or another in decisions over the last five years, both at the trial and appellate levels and in the context of discovery actions filed by the company.

Chevron's "fraud" allegations are based largely on the testimony of a fact witness to whom Chevron paid, contrary to ethical rules, approximately $2 million in cash and benefits and whose testimony has since been proven to be entirely false through in-depth computer forensic analyses. The central claims in Chevron's retaliation campaign are deeply problematic for numerous additional reasons and are likely to be reversed on appeal in the coming months.

Ultimately, it is likely that very little of Chevron's retaliatory litigation will be of great consequence if Canada's courts allow the villagers to go forward and the case is resolved there, said Julio Prieto, an Ecuadorian lawyer for the villagers.

"Chevron's worst nightmare is that the Canadian courts will let the matter proceed to the merits, despite the company's pressure campaign," he said.