The Supreme Court of Canada recently released its decision in Chevron Corp v. Yaiguaje. The
decision upheld a ruling granting the Ontario Courts jurisdiction
to enforce a judgment from Ecuador for environmental damages. The
Supreme Court confirmed a two-step approach to recognizing foreign
judgments. First, determine if the foreign court has a "real
and substantial connection to the litigants or subject
matter". Second, determine if the Canadian claim (seeking to
recognize judgment) was properly served on the debtor. The case is
of importance to Canadian companies operating internationally, and
in particular to resource companies who are the subject of
environmental litigation abroad, as it clarifies that Canadian
Courts have jurisdiction to enforce foreign judgments at home.
Texaco, which subsequently merged with Chevron US, has long been
active in the Lago Agrio region of Ecuador. Local residents
attributed significant environmental degradation to Chevron's
operations. In 2003, local residents filed claims against Chevron
US in the Ecuadorian courts. After numerous appeals, the Plaintiffs
obtained damage awards against Chevron US in the amount of $9.51
Chevron US refused to acknowledge the award or pay damages. In
May 2012, the Plaintiffs commenced an action in Ontario seeking to
enforce the Ecuadorian judgment against both Chevron US and Chevron
Canada. Chevron Canada, which has an office in Ontario, was not
party to the original action in Ecuador. Chevron Canada is 100%
owned by Chevron US, through a series of subsidiaries.
Chevron US and Chevron Canada filed to have the claim against
them denied on the ground that the Ontario Court lacked
jurisdiction as no "real and substantial connection"
existed between the parties and Ontario. Chevron Canada further
argued that the Ontario Court had no jurisdiction over it as it was
not party to the original action in Ecuador.
The Plaintiffs succeeded in the courts below, and Chevron US
appealed to the Supreme Court of Canada.
Supreme Court of Canada
The issues before the Supreme Court were:
In an action to enforce a judgment, must there be a real and
substantial connection between the defendant or the dispute and
Ontario for jurisdiction to be established?
Do the Ontario courts have jurisdiction over Chevron Canada, a
third party to the judgment?
The Supreme Court acknowledged Canadian Courts have adopted a
generous and liberal approach to enforcement of foreign judgments.
In this context, Chevron US's argument that the Ontario Courts
could not enforce the judgment, because no "real and
substantial" connection existed between the parties and
Ontario, was rejected.
The Court gave three reasons for this view. First, the case law
reveals no requirement for a "real and substantial
connection" between the defendant or the action and the
enforcing court. Second, the legal principle of "comity"
militates in favour of generous enforcement rules, not restrictive.
Third, practicality in an era of instant and international asset
transfers requires "clear, liberal and simple rules for the
recognition and enforcement of foreign judgments".
Regarding Chevron Canada's argument on jurisdiction, the
Supreme Court found the analysis began and ended with
"presence-based jurisdiction". Where a defendant is
present in the jurisdiction, there is no need to consider whether a
real and substantial connection exists.
The decision re-affirms and clarifies the existing jurisprudence
on the enforcement of foreign judgments by limiting the requirement
of a "real and substantial connection". However, caution
should be taken when reading this decision. While denying
Chevron's preliminary motions opposing the action, the Supreme
Court has not guaranteed the Plaintiff's success. It still
remains to be seen whether a Canadian Court will enforce the
Ecuadorian judgment; but their jurisdiction to do so is no longer
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