Yaiguaje v Chevron Corporation: Enforcing and Recognizing Foreign Judgments in Canada

In Yaiguaje v Chevron Corporation, 2013 ONCA 758 [Yaiguaje], a decision released on December 17, 2013, the Ontario Court of Appeal considered the power of Ontario courts to hear actions seeking to enforce and recognize foreign judgments in Ontario. In this context, the court also discussed the appropriateness of staying a proceeding pursuant to section 106 of the Courts of Justice Act, RSO 1990, c C 43 [Courts of Justice Act].

Factual Background

Between 1972 and 1990, approximately 30,000 residents of Sucumbíos, a province of Ecuador, had their lands, waterways, livelihoods, and ways of life harmed by environmental pollution. The plaintiffs in this case – 47 indigenous Ecuadorian villagers – brought a claim on behalf of these 30,000 residents against Chevron Corporation (“Chevron”), which was incorporated in the United States. The plaintiffs alleged that Texaco, which subsequently merged with Chevron, extensively polluted the Lago Agrio region of Ecuador.

Judicial History

The plaintiffs filed suit in the United States in 1993; this action was dismissed on the condition that Texaco would make a commitment to submit to the jurisdiction of Ecuadorian courts, which it did. In Ecuador, there is now a final judgment against Chevron for $9.51 billion; the plaintiffs sought to have this order recognized and enforced in Canada against Chevron and Chevron Canada, a wholly-owned subsidiary of Chevron, which had no involvement in the initial judgment in Ecuador.

In response, Chevron and Chevron Canada have rejected the idea of submitting to the jurisdiction of the Canadian court and have sought to have the Amended Statement of Claim against them set aside and to receive a declaration that the Ontario Superior Court has no jurisdiction to hear the action, as well as an order dismissing, or permanently staying, the action.

The Ontario Superior Court determined that the court has jurisdiction to hear the action. However, the court found that because

Chevron Corp. does not have assets here, and there is no reasonable prospect that it will do so in the future, there is no prospect for any recovery here. To allow the Plaintiffs’ academic exercise to take place in the Ontario judicial system would, therefore, be an utter and unnecessary waste of valuable judicial resources (2013 ONSC 2527, para 88).

Having found this, the Ontario Superior Court stayed the action against Chevron. The court also determined that the absence of Chevron assets in Ontario could not be cured by piercing Chevron Canada’s corporate veil in such a way that would allow its assets to be demanded to be used to satisfy a judgment against its parent. In short, then, both Chevron and Chevron Canada were successful in having the action stayed against them.

Did the Motion Judge Err by Concluding that an Ontario Court Has Jurisdiction to Determine whether the Judgment of the Ecuadorian Court Should Be Recognized and Enforced in Ontario?

This question was raised as a cross-appeal by the respondents in this action. Chevron and Chevron Canada contended that it was necessary for the motions judge to inquire into whether there was a real and substantial connection between the subject matter of the litigation and the court being asked to recognize and enforce the judgment. The Court of Appeal disagreed with this requirement, and in doing so the court stated that the appropriate test for enforcing foreign judgments was articulated by the Supreme Court of Canada in Beals v Saldanha, [2003] 3 SCR 416.

The Court of Appeal outlined the correct test at para 30:

[I]n recognition and enforcement actions relating to foreign (e.g. Ecuadorian) judgments in Canadian jurisdictions (e.g. Ontario), the exclusive focus of the real and substantial connection test is on the foreign jurisdiction.  There is no parallel or even secondary inquiry into the relationship between the legal dispute in the foreign country and the domestic Canadian court being asked to recognize and enforce the foreign judgment.

In short, then, it is only necessary to determine whether there is a real and substantial connection between the subject matter of the litigation and the foreign court that rendered the judgment. While jurisdictional ties to Ontario must be considered on an action of first instance, this is not the case when a court is dealing with an enforcement action.

While this reasoning allowed the court to find that an Ontario court has jurisdiction to determine whether the Ecuadorian judgment against Chevron can be recognized and enforced in Ontario, Chevron Canada was not a party to the original Ecuadorian action and was, as such, not found liable via that judgment. In assuming jurisdiction over Chevron Canada – this was important because Chevron does not directly own any assets in Canada whereas Chevron Canada does – the court stated at para 38:

In light of the economically significant relationship between Chevron and Chevron Canada, and given that Chevron Canada maintains a non-transitory place of business in Ontario, an Ontario court has jurisdiction to adjudicate a recognition and enforcement action against Chevron Canada’s indirect corporate parent that also names Chevron Canada as a defendant and seeks the seizure of the shares and assets of Chevron Canada to satisfy a judgment against the corporate parent.

Did the Motion Judge Err by Staying the Action?

The Court of Appeal found that the motion judge erred by granting the stay in this case. He had stayed the action pursuant to section 106 of the Courts of Justice Act, which states that “[a] court, on its own initiative or on motion by any person, whether or not a party, may stay any proceeding in the court on such terms as are considered just.”

Neither Chevron nor Chevron Canada filed a statement of defence to the Ontario action. Section 106 was cited by each party in their notices of motion; however, this was done only in the context of it potentially supporting the grant of a stay based on lack of jurisdiction. The Ontario Court of Appeal summarized this issue at para 53:

[T]he motion judge’s stay in a major case involving poor and vulnerable foreign residents, one of the world’s largest corporations, a long and difficult process in a foreign court, and a huge damages award, was entirely his own construct; no party sought it. Consequently, this issue was not argued before the trial judge, and no cases were put before him regarding the appropriateness of granting a discretionary stay.

While Chevron asserted that it is an extraordinary circumstance that it was precluded from requesting a discretionary stay on any basis other than jurisdiction, the court disagreed: both Chevron and Chevron Canada chose to refuse to attorn to the jurisdiction of the Ontario court and use that as a basis to restrict the plaintiffs’ action in Ontario. Thus, it would be expected – and not at all extraordinary – that both companies would be limited to making only jurisdictional (as opposed to substantive) arguments in their motions.

The court found that for 20 years Chevron has contested the legal proceedings of every court involved in this litigation, whether in the United States, Ecuador, or Canada. Thus, the court acknowledged the need to “allow the Ecuadorian plaintiffs the opportunity to attempt to enforce the Ecuadorian judgment in a court where Chevron will have to respond on the merits” (Yaiguaje, para 70). In short, this “case cries out for assistance, not unsolicited and premature barriers” (para 72). Therefore, the appeal by the plaintiffs was allowed.

Potential Impact

In short, the Ontario Court of Appeal’s decision in Yaiguaje clarifies the fact that Ontario courts will assume jurisdiction over foreign decisions, so long as there is a real and substantial connection between the legal dispute and the foreign country where the decision was rendered. In enforcement actions, then, it is clear that there is no need to find a similar connection between the legal dispute and the court being asked to recognize and enforce the judgment. As a result, defense strategies by Canadian subsidiaries of multi-national corporations may evolve in the context of enforcement decisions, with more focus being placed on defending a case on its merits (in a substantive manner) rather than on bringing jurisdictional challenges.