A 21-year legal battle that has made its way through the courts of Ecuador and the United States will arrive next month at the Supreme Court of Canada.
From 1972 to 1990, Texaco, an American oil retail brand, conducted oil drilling operations throughout the Amazon region of Ecuador. The operations allegedly caused substantial environmental pollution to certain provinces within the region.
In 1993, 47 individuals, representing thousands of indigenous inhabitants of the Lago Agrio region of the Amazon (the “plaintiffs”), commenced a lawsuit against Texaco seeking damages for this pollution. The lawsuit was initiated in the United States District Court for the South District of New York (“SDNY”). Texaco agreed to have the case heard before the Ecuadorian courts on the basis that they could contest any potential judgment in the United States.
The Ecuadorian proceedings began in 2004, by which time Texaco had merged with another American oil company, Chevron Corporation (“Chevron”). After seven years of litigation, on February 14, 2011, an Ecuadorian trial court found Chevron liable for US$8.6 billion in damages, with an additional US$8.6 billion in punitive damages if Chevron did not apologize within 14 days (the “Trial Judgment”). Chevron did not apologize, and was therefore liable for US$17.2 billion in damages.
After subsequent appeals within Ecuador, the country’s highest appellate court reduced Chevron’s liability to US$9.51 billion. Chevron subsequently initiated legal proceedings in the United States to contest its liability.
Meanwhile, the plaintiffs sought to have the Trial Judgment enforced against Chevron Canada, a subsidiary of Chevron, in the Canadian province of Ontario. A preliminary issue arose as to whether an Ontarian court has the ability, or jurisdiction, to hear the case.
On May 1, 2013, an Ontario judge ruled that while an Ontario court could adjudicate the case, the case had no hope of success because Chevron possessed no assets in Canada. Accordingly, the judge stayed the proceedings, thereby bringing the case to its end in Canada.
On appeal, the Ontario Court of Appeal determined that the trial judge overstepped his boundaries by staying the proceedings. The court held that the proceedings could continue in Ontario, stating: “After all these years, the Ecuadorian plaintiffs deserve to have the recognition and enforcement of the Ecuadorian judgment heard on the merits in an appropriate jurisdiction. At this juncture, Ontario is that jurisdiction.”
The outcome of the proceedings before the Supreme Court of Canada will conclusively determine whether the plaintiffs may seek to enforce the Ecuadorian judgment in Ontario.
However, any future proceedings in Canada may be all for naught. On March 4, 2014, a judge of the SDNY ruled in a 497-page judgment that the Trial Judgment was a product of fraud and racketeering activity and therefore was unenforceable in the United States.
Amongst other findings, Justice Lewis A. Kaplan held that the plaintiffs wrote the Trial Judgment in its entirety and that the trial judge was paid US$500,000 to sign the judgment in the plaintiffs’ favour. Justice Kaplan concluded: “The decision in the Lago Agrio case was obtained by corrupt means. The [plaintiffs] may not be allowed to benefit from that in any way. The order entered today will prevent them from doing so.”
While the findings of the SDNY do not bind a Canadian court, they are likely to be taken into account if enforcement proceedings begin in Canada. The Supreme Court of Canada will hear the Chevron appeal on December 12, 2014.