Canada: Yaiguaje V Chevron Corporation: Supreme Court Releases Leading Decision On The Enforcement Of Foreign Judgments In Canada

Last Updated: September 16 2015
Article by Michael Schafler and Thomas Wilson

Summary

  1. Supreme Court of Canada favours a relaxed approach to the recognition and enforcement of foreign judgments in Canada.
  2. For a Canadian court to recognize and enforce a foreign judgment, a judgment debtor need only establish that the foreign court had a real and substantial connection with the litigants or the subject matter of the dispute. The "real and substantial connection" test does not apply with respect to the proposed Canadian jurisdiction of enforcement.
  3. The existence of assets in the proposed jurisdiction of enforcement is not a pre-requisite to bringing an action for the recognition and enforcement of a foreign judgment in Canada.
  4. Canadian courts may assume jurisdiction over Canadian subsidiaries of foreign judgment debtors, even if the Canadian subsidiary was not a named defendant in the initial action.
  5. Canadian courts may still elect not to assume jurisdiction on the basis that there is another clearly more appropriate forum for recognizing and enforcing the judgment (forum non conveniens).

Discussion

Introduction

On September 4, 2015, the Supreme Court of Canada released its highly anticipated decision in Yaiguaje v Chevron Corporation.1 In dismissing the appeal of Chevron Corporation ("Chevron") and Chevron Canada Limited ("Chevron Canada"), the Court favoured a relaxed approach to the recognition and enforcement of foreign judgments in Canada, unequivocally holding that a "real and substantial connection" between the proposed jurisdiction of enforcement and the matter which gave rise to the judgment debt, or the judgment debtor itself, is not required in order to establish the jurisdiction of the proposed enforcing court.

The decision, which both clarifies and curtails jurisdictional defences available to judgment debtors whose assets or operations extend across multiple fora, further facilitates the enforcement of foreign judgments in Canada. In the wake of Chevron, so long as the foreign court whose order gave rise to the judgment debt correctly assumed jurisdiction over the initial matter, Canadian courts will assume jurisdiction over defendants of related enforcement actions so long as they are correctly served pursuant to the applicable provincial or territorial rules of service.

Even though the Court has now closed the door on jurisdiction simpliciter defences in proceedings to enforce foreign judgments, alternative jurisdictional defences (including forum non conveniens) remain seemingly unchanged.

Background

For over two decades, some 30,000 indigenous Ecuadorian villagers have sought compensation from Texaco, and its corporate successors, for alleged environmental damages caused by oil extraction operations in the Lago Agrio region.2

In 2003, a representative group of the affected villagers (the "Plaintiffs"), obtained judgment3 in the courts of Ecuador against Chevron, which had merged with Texaco in 2001.4 The judgment, modified but affirmed by an Ecuadorian appellate court, was ultimately worth an astounding $9.51 billion.5

The Superior Court of Ontario

In 2012, the Plaintiffs brought an action in Ontario for recognition and enforcement of the Ecuadorian judgment against the Canadian assets of Chevron and Chevron Canada, its seventh-level indirect subsidiary.6 In response, both corporations brought motions to set aside service or to stay the action on the basis that the courts of Ontario lacked jurisdiction simpliciter.

After dismissing the moving parties' submissions with respect to jurisdictional simpliciter, the Superior Court, on its own motion, stayed the action pursuant to section 106 of the Courts of Justice Act because Chevron did not have assets or conduct business in Ontario.7 According to the Court, "any recognition of the Ecuadorian Judgement by this Court would have no practical effect whatsoever in light of the absence of exigible assets of the judgement debtor in this jurisdiction."8

After refusing the Plaintiffs' requests to pierce the corporate veil or to recognize Chevron and Chevron Canada as one and the same entity,9 Justice Brown recommended that the parties "take their fight elsewhere to some jurisdiction where any ultimate recognition of the Ecuadorian Judgment will have a practical effect."10

The Ontario Court of Appeal

The Plaintiffs appealed the Superior Court's stay of proceedings and the moving parties, Chevron Canada and Chevron, cross-appealed the ruling that Ontario courts had jurisdiction simpliciter to hear the enforcement action.11 The Court of Appeal ultimately set aside the stay but agreed that Ontario courts did, in fact, have jurisdiction over Chevron and Chevron Canada.

The Ontario Court of Appeal's decision confirmed that the test for recognizing and enforcing foreign judgments in Canada remained as articulated in Beals v Saldanha:12 a domestic court must be satisfied that there was a real and substantial connection between the initial claim and the foreign jurisdiction which rendered the judgment.13 Consequently, the Court held that Ontario had jurisdiction over Chevron given that the initial environmental damages claim had a real and substantial connection to Ecuador.

Where the Superior Court ruled that Chevron Canada should not be considered Chevron's alter ego for the purpose of enforcement, the Court of Appeal took a different approach. Recognizing that it had jurisdiction over Chevron Canada (which operated in Canada), and emphasizing what it described as an "economically significant relationship" between the two entities, including the fact that Chevron Canada was, albeit indirectly, a wholly owned subsidiary of Chevron, the Court of Appeal held that Ontario courts had jurisdiction to determine the merits of the enforcement action against Chevron Canada, even though it was not a party in the Ecuadorian lawsuit.14

Finally, particularly in light of the fact that no party had requested a stay and no law or evidence had been heard on the issue, the Court of Appeal rejected the motion Judge's view that this was an appropriate case for a court-imposed section 106 stay.15

The Supreme Court of Canada

In a unanimous decision, the Supreme Court of Canada dismissed Chevron and Chevron Canada's appeal. Recognizing the moveable nature of assets in modern commercial environments, the Court made a series of rulings that further facilitate the enforcement of foreign judgments in Canada. According to the Court, oftentimes "recognition and enforcement in another jurisdiction is the only means by which a foreign judgment creditor can obtain its due."16

The Court identified two issues in the appeal: (1) whether a real and substantial connection between the proposed Canadian jurisdiction of enforcement and the matter which gave rise to the judgment debt, or the judgment debtor itself, is required to establish jurisdiction over defendants of related enforcement actions, and (2) whether Ontario courts had jurisdiction over Chevron Canada, a third party to the Ecuadorian judgment.17 On both issues, the Court ruled in favour of the Plaintiffs: (1) a real and substantial connection was not necessary to establish jurisdiction over Chevron, who had been properly served pursuant to Ontario's Rules of Civil Procedure,18 and had been properly within the jurisdiction of the Ecuadorian courts, and (2) consistent with a traditional jurisdictional analysis, and recognizing that it operated a bricks-and-mortar business in Ontario, Ontario courts clearly had jurisdiction simpliciter over Chevron Canada.

The Court explained that, in enforcement actions, it had never required there to be a real and substantial connection of the type argued for by Chevron.19 The Court clarified that in previous decisions it "did not articulate or imply a need to inquire into the enforcing court's jurisdiction: the focus remained squarely on the foreign jurisdiction."20 Consistent with this approach, the Supreme Court concluded that "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."21 Instead, in actions limited to the recognition and enforcement of foreign judgments, jurisdiction is established upon effective service of the foreign judgment debtor.22

In support of its conclusion that a real and substantial connection test should not be extended to enforcement proceedings, two principles were cited: (1) in enforcement proceedings, "the only purpose of the action is to allow a pre-existing obligation to be fulfilled", and (2) the notion of comity and respect for the legal acts of other states militates in favour of relaxed rules regarding the recognition and enforcement of foreign judgments.23

The first supportive principle recognizes that enforcing courts fulfill a facilitative, rather than substantive role, with respect to adjudicated issues. As such, the enforcing court "does not exercise jurisdiction in the same way as it does in actions at first instance" and the tests for assuming jurisdiction, accordingly, need not be identical.24 Given that enforcement measures are limited to the confines of the enforcing jurisdiction, and understanding that obligations created by foreign judgments are universal, the Court held that the appellants' concerns regarding jurisdictional overreach were overstated.25

With respect to the second supportive principle, the Court noted that "facilitating comity and reciprocity, two of the backbones of private international law, calls for assistance, not barriers."26

Perhaps most controversially, the Supreme Court held that the existence of assets in the proposed jurisdiction for enforcement was not a pre-requisite to that court's jurisdiction.27 Thus, judgment creditors have been extended considerable freedom to choose where to enforce foreign judgments in Canada and are now able to assess their enforcement options based on, not only on where the judgment debtors' assets are currently situated but, where they might be in the future.28

Ultimately, Chevron, though of clear significance to multi-jurisdictional entities, is largely consistent with the gradual expansion of the recognition and enforcement of foreign judgments in Canada, commencing with the Supreme Court's 1990 decision, Morguard Investments Ltd. v De Savoye.29

Footnotes

1 2015 SCC 42

2 Ibid at para 4

3 The Court, at paragraph 7 of its decision, acknowledged that a US court, in 2014, held that the Plaintiffs' judgment was the result of fraud. That decision, and the underlying allegation of fraud, was not, however, before the Court.

4 Ibid at paras 4 and 6.

5 Ibid at para 6.

6 Yaiguaje v Chevron Corporation, 2013 ONSC 2527.

7 Ibid at para 89.

8 Ibid at para 110.

9 Ibid at paras 100 and 106.

10 Ibid at para 111.

11 Yaiguaje v Chevron Corporation, 2013 ONSC 758.

12 2003 SCC 72.

13 Yaiguaje v Chevron Corporation, 2013 ONCA 758 at para 30.

14 Ibid at para 38.

15 Ibid at para 53.

16 Chevron Corp. v Yaiguaje, 2015 SCC 42 at para 1.

17 Ibid at para 23.

18 Ibid at para 76.

19 Ibid at para 28.

20 Ibid at paras 29-33.

21 Ibid at para 3.

22 Ibid at para 36.

23 Ibid at para 42.

24 Ibid at para 44.

25 Ibid at paras 46 and 50.

26 Ibid at para 69.

27 Ibid at para 57.

28 Ibid at para 68.

29 [1990] 3 SCR 1077.

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