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Ecuadoreans Can’t Tap Chevron Canada For $19B Judgment

Date: May 2, 2013

An Ontario judge on Wednesday halted efforts by a group of indigenous Ecuadoreans to pursue a $19 billion pollution judgment against Chevron Corp. through assets seizures there, saying the oil giant’s Canadian subsidiary is sufficiently independent and not party to the Ecuadorean dispute.

While Justice David Brown of the Ontario Superior Court of Justice in Toronto rejected Chevron’s arguments that his court lacks jurisdiction to hear the suit, he nonetheless stayed the case on the grounds that insufficient connection exists between Chevron and subsidiary Chevron Canada to warrant proceeding.

Justice Brown said the Ecuadoreans had not argued that Chevron Canada’s activities are in any way fraudulent or intended to conceal liability against its parent company, and that continued legal proceedings in Canada would be fruitless and wasteful because Chevron Corp. has no assets in the country to seize.

“The evidence disclosed that there is nothing in Ontario to fight over,” Justice Brown said. “In my view, the parties should take their fight elsewhere to some jurisdiction where any ultimate recognition of the Ecuadorean judgment will have a practical effect.”

The dispute is one of several international asset seizure lawsuits Ecuadoreans have filed in an effort to force Chevron to pay the $19 billion judgment an Ecuador court ordered against it in a long-running suit over pollution to the Amazon rain forest allegedly caused by Texaco Inc., which merged with Chevron in 2001.

Representatives for the Ecuadoreans released a statement Wednesday saying they will appeal the order.

“It cannot be right that a multinational company that operates entirely through subsidiaries is immune from the enforcement of a judgment in Canada, particularly where the subsidiary is 100% owned and provides some of the billions of dollars that Chevron pays out in dividends each year,” plaintiffs attorney Alan Lenczner said. “Chevron Corp itself earns no money. All its earnings and profits come from subsidiaries including, importantly, Chevron Canada.”

Justice Brown said in Wednesday’s order that he would consider lifting the stay should the plaintiffs present new evidence suggesting Chevron possesses or will possess assets in his jurisdiction.

Chevron spokesman Justin Higgs told Law360 on Wednesday that the company was pleased with the decision and characterized the ruling as a significant setback for the Ecuadoreans’ worldwide enforcement strategy.

“The plaintiffs should be seeking enforcement in the United States, where Chevron Corporation resides,” Higgs said. “In the U.S., however, they would be confronted by the fact that eight federal courts have already found the Ecuador trial tainted by fraud.”

Chevron has rejected the massive Ecuadorean judgment as the product of fraud, and mounted a New York Racketeer Influenced and Corrupt Organizations Act suit accusing the Ecuadoreans and their attorney, Steven Donziger, of securing the unprecedented award through extortion. Donziger and the Ecuadoreans have denied those allegations and shot back with fraud counterclaims of their own.

Despite its loss of the jurisdictional argument, Wednesday’s stay is a significant victory for Chevron, which has long maintained that it does not and will never have any real assets or presence in the country, and that foreign courts have no right to freeze the assets of subsidiaries when a judgment is entered only against the parent company.

In November, the Ecuadoreans’ Argentine counsel in Enrique Bruchou noted that the plaintiffs had specifically selected Canada as the venue for their first attempts to enforce the award outside Ecuador in an attempt to counteract Chevron’s allegations that they were trying to move the litigation to corrupt jurisdictions, citing unspecified world rankings listing Canada as one of the most judicially transparent nations in the world.

The Ecuadoreans have had better luck with their attempts to secure asset seizures elsewhere, having successfully obtained an attachment of the assets of two Chevron subsidiaries in Argentina. That freeze was obtained via a 1979 treaty between a number of Latin American countries specifically designed to facilitate such attachments and was upheld in January by an Argentine appeals court.

The plaintiffs are represented by Alan J. Lenczner and Paul-Erik Veel of Lenczner Slaght Royce Smith Griffin LLP and Pablo Fajardo.

Chevron Corp. is represented by Norton Rose. Chevron Canada is represented by Goodmans LLP.

The case is Daniel Carlos Lusitande Yaiguaje et al. v. Chevron Corp. et al., case number 12-cv-454778, in the Ontario Superior Court of Justice.

By Gavin Broady-Law360, May 1, 2013