The Supreme Court of Canada recently reviewed the law of
recognition and enforcement in Canada of foreign judgments in a
decision called Chevron Corp. v. Yaiguaje. The decision has
implications for large multi-national corporations with
subsidiaries in Canada, as the effect of the decision is to open
the door to ignoring the separate legal personality of the local
subsidiaries and putting at risk the assets of those subsidiaries
in order to satisfy a judgment obtained against a foreign parent
corporation in a foreign jurisdiction. The decision is therefore a
victory for foreign plaintiffs who are being thwarted in their
enforcement efforts by complex corporate structures that shield
assets from them under the legal fiction of separate corporate
The decision concerns creditors who obtain judgment in another
country, but who are unable to locate assets to satisfy the
judgment debt in that jurisdiction. If the debtor has assets in
Canada (or is suspected to), the creditor seeks Canadian judgment
on the same terms as the foreign judgment, so that Canadian assets
may be pursued. The only traditional defences available to such
actions are if the original judgment was obtained by fraud, or by
violation of the rules of natural justice or if the enforcement of
the judgment would be contrary to public policy1.
Global oil giant, Texaco (which merged with Chevron, a U.S.
corporation), was sued in Ecuador for causing serious environmental
damage as a result of its oil extraction operations. The Ecuadorian
court awarded judgment against Chevron for US $9.51 billion. Unable
to satisfy the judgment debt in Ecuador (where Chevron holds no
assets), and tied up in opposed litigation in United States, the
plaintiffs turned to Canada. The plaintiffs launched an action in
Ontario for recognition and enforcement of the judgment against
Chevron Canada, a seventh-level indirect subsidiary of Chevron U.S.
The Supreme Court was tasked with deciding the following issues
raised by Chevron: (1) whether there must be a "real and
substantial connection" between the defendant or the dispute
and Ontario; and (2) whether the Ontario court has jurisdiction
over Chevron Canada. The Court answered "no" to the first
question and "yes" to the second.
The court emphasized that Canada takes a generous and liberal
approach to recognition and enforcement proceedings, and stressed
the importance of "comity" - the recognition of the
legitimate judicial acts of other nations. The court confirmed that
there is no requirement for a connection between the substance of
the dispute and the new jurisdiction where enforcement is sought.
The enforcing court only needs proof that the judgment was issued
by a court of competent jurisdiction, is final, and proof of its
amount. There is no requirement for a debtor to have assets in
Canada at the time enforcement is sought. The court pointed out
that in the global and electronic age, such a requirement would
impede a creditor's right to access assets that may eventually
flow into Canada. Regarding whether the Ontario court has
jurisdiction over Chevron Canada, this too does not require a
"real or substantial connection" between Chevron Canada
and the Ecuadorian dispute. The court only requires traditional,
presence-based jurisdiction, which is established if the defendant
carries on business in Canada at the time of the action. Here, the
court noted the importance of Chevron's bricks and mortar
operation within Ontario, which was much more than just a
The Chevron decision is an unequivocal confirmation by
Canada's highest court that the judgments of foreign nations
with comparable legal systems are to be treated with considerable
The ruling that the Ontario court has jurisdiction over Chevron
Canada, a separate and distinct corporate entity from Chevron U.S.,
is an important development, as conventional wisdom, based on the
application of traditional legal doctrine that corporations have a
separate and distinct legal personality from their shareholders, is
at risk of being turned on its head. Although at this stage,
Chevron Canada can still raise the defence that it is an unrelated
and distinct corporate entity, and should therefore not be subject
to enforcement proceedings, the plaintiffs' efforts were not
thwarted at the jurisdictional stage. It therefore remains to be
seen whether the courts will revisit the wisdom of long-standing
corporate law doctrine and ignoring form over substance in the
interests of doing justice.
1 See Beals v Saldanha,  SCJ No 77 (SCC) at paras.
35 and 40
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