Canada: Supreme Court Of Canada Addresses Recognition, Enforcement Of Foreign Judgments In Chevron Case

In a much anticipated ruling, the Supreme Court of Canada (SCC) has released its decision in Chevron Corp. v. Yaiguaje, addressing recognition and enforcement of foreign judgments. The SCC unanimously held that for a Canadian court to have jurisdiction over an action to recognize and enforce a foreign judgment, the only prerequisites are: that the foreign court had jurisdiction, on the basis of a real and substantial connection to the defendant or with the subject matter of the dispute or on a traditional basis such as presence or consent of the defendant; and that the enforcement claim is properly served. There is no need for a "real and substantial connection" between the subject matter of the foreign dispute and the province in which recognition and enforcement is sought (in this case Ontario).

Given the facts of the case, the SCC did not decide the corporate veil issues posed by the lower court decision but instead left those issues to be determined at a later stage.

BACKGROUND

The appeal related to an action commenced in 2013 in the Ontario Superior Court of Justice by 47 Ecuadorian residents seeking recognition and enforcement of a US$9.51-billion judgment rendered against Chevron Corporation (Chevron Corp) by an Ecuadorian court. In addition to naming Chevron Corp (a United States domiciled corporation) as a defendant, the plaintiffs also named Chevron Canada Limited (Chevron Canada), a seventh-level indirect subsidiary of Chevron Corp.

Chevron Corp and Chevron Canada brought a preliminary motion to set aside service and dismiss the claim or, in the alternative, permanently stay the action on the grounds that the Ontario courts did not have jurisdiction simpliciter. The motion judge held that the Ontario court did have jurisdiction. However, on his own initiative, the judge stayed the enforcement action. With respect to Chevron Corp, the judge found that the company owned no assets and conducted no business in Ontario. As for Chevron Canada, while it operated a place of business in Ontario, the judge held that there was no legal basis for piercing Chevron Canada's corporate veil. Consequently, in the motion judge's view, there was no prospect for any recovery in Ontario and to allow the action to proceed would be "an utter and unnecessary waste of valuable judicial resources."

On appeal, the Court of Appeal for Ontario upheld the motion judge's decision that the Ontario courts had jurisdiction over the enforcement action, but overturned the lower court's stay. With respect to Chevron Corp, the Court of Appeal held that jurisdiction was established on the basis that the Ecuadorian court had a "real and substantial connection" with the defendant or the subject matter of the dispute. With respect to Chevron Canada, jurisdiction was established on the basis of its business presence in Ontario and its "economically significant relationship" with Chevron Corp. The appeal decision raised concerns that a concept of enterprise liability may have been introduced into the law of recognition and enforcement in Ontario: see our December 2013 Blakes Bulletin: My Parent's Keeper? Enforcement Action Allowed to Proceed Against Parent, Subsidiary Corporations.

SCC DECISION

The SCC dismissed the appeals of Chevron Corp and Chevron Canada. The SCC held that in an action for recognition and enforcement of a foreign judgment, jurisdiction stems from service of the claim being effected on the basis of a foreign judgment rendered in the plaintiff's favour and against the named defendant. The SCC noted that where the foreign court had jurisdiction (on the basis of a real and substantial connection with the litigants or with the subject matter of the dispute, or on one of the traditional bases of jurisdiction, such as consent or presence), there is no need to demonstrate a real and substantial connection between the dispute and the enforcing forum. In the SCC's view, to conclude otherwise would undermine the important values of order and fairness that underlie all conflicts rules. The SCC held that this approach is consistent with previous decisions that have stated that the doctrine of comity "must be permitted to evolve concomitantly with international business relations, cross-border transactions, as well as mobility." On the basis of the foregoing approach, the SCC concluded that the Ontario courts have jurisdiction over Chevron Corp in the action.

As for Chevron Canada, the SCC held that the Ontario courts had jurisdiction over it on the basis of traditional presence-based jurisdiction (because Chevron Canada was carrying on business in Ontario at the time the action was commenced). Given this finding, the SCC was not required to consider the fundamental principle of corporate separateness and the applicable test for piercing the corporate veil.

The SCC went on to make it clear that its determination that the Ontario courts have jurisdiction over both Chevron Corp and Chevron Canada does not mean that the plaintiffs will necessarily succeed in having the Ecuadorian judgment recognized and enforced. The SCC noted that a finding of jurisdiction still permits defendants to argue that the courts should decline to exercise jurisdiction on the basis of forum non conveniens, to argue that the proper use of judicial resources justifies a stay, or to raise any one of the available defences to recognition and enforcement (e.g. fraud, denial of natural justice, or public policy).

With respect to the arguments concerning whether Chevron Canada's assets are potentially exigible to satisfy Chevron Corp's obligations under the Ecuadorian judgment, the SCC stated that its ruling regarding jurisdiction should not prejudice future arguments with respect to the distinct corporate personalities of Chevron Corp and Chevron Canada. Such issues are to be addressed following any jurisdictional determination.

IMPLICATIONS

In terms of recognition and enforcement proceedings, this decision will likely shift the battleground away from jurisdictional challenges to other preliminary motions such as for a stay, to strike, or for summary judgment. 

Given that the corporate veil issues raised in this case remain to be decided on another day, this case remains one to be watched.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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