Friday, September 11, 2015

Sara Seck on "Chevron at the Supreme Court of Canada: The Saga Continues"

Sara Seck is an Associate Professor at the University of Western Ontario. Professor Seck's research interests include corporate social responsibility, international environmental, human rights, and sustainable development law, climate change, and indigenous law. She is particularly interested in international and transnational legal theory, notably the relationship between Third World Approaches to International Law (TWAIL) and international legal process theories that are informed by constructivist understandings of international relations. Professor Seck has contributed several important essays to this blog site (see here, here, and here).

Professor Seck has recently been considering ramifications of Chevron Corp v Yaiguaje 2015 SCC 42, and the related issues of national jurisdiction, autonomy of legal personality for corporations, and the coordination of judgments relating to disputes that seep beyond national borders.

Professor Seck's essay, "Chevron at the Supreme Court of Canada: The Saga Continues," follows.

Chevron at the Supreme Court of Canada: The Saga Continues
Sara L Seck, Associate Professor, Western Law

On September 4, 2015, the Supreme Court of Canada released its decision in Chevron Corp v Yaiguaje 2015 SCC 42. The unanimous judgment, written by Justice Gascon, has been seen as a victory for the plaintiffs (respondents, representing 30,000 indigenous Ecuadorean villagers), as the litigation over the recognition and enforcement action was not dismissed from Canadian courts due to a lack of jurisdiction. Instead, litigation will likely continue in Ontario courts for many years to come over whether or not the Ecuadorean judgment against Chevron for oil pollution in the Lago Agrio region can be recognized and enforced in Ontario.

There are numerous contentious issues in this recognition and enforcement litigation, which is aimed as securing a remedy for environmental pollution in the notorious Chevron/Ecuador dispute that has festered in courts and international arbitral bodies all over the world for decades (not least of which, eventually, are the allegations that the judgment was fraudulently obtained). Among key issues for the Canadian litigation are those that relate to the relationship between Chevron Corporation (incorporated in Delaware, US) and Chevron Canada (incorporated in the Canadian province of Alberta, with a presence in Ontario). The Ecuadorean judgment is against Chevron (US), yet, it (arguably, see below) has no presence or assets in Canada. On the other hand, Chevron Canada clearly has a presence and assets in Canada, but was not part of the Ecuadorean proceeding and so (arguably) no outstanding judgment against Chevron Canada exists to be recognized and enforced.

Whether or not issues of separate legal personality and corporate law are so routine as to make it obvious that this is not an appropriate enforcement action for Canadian courts is a matter of intense dispute. Indeed, while the motions judge who heard the original arguments by Chevron rejected the claim that Canadian courts did not have jurisdiction to hear the recognition and enforcement action, the motions judge nevertheless of his own accord decided to use discretion to issue a stay on the basis that “there was nothing in Ontario to fight over” (SCC para 15; see further SCC paras 12-18). Later on, in the summer of 2014, as the appeal from the Ontario Court of Appeal to the Supreme Court of Canada was to be heard, lawyers in the Business Law section of the Canadian Bar Association decided to submit a brief on “foundational issues of corporate law,” characterizing this intervention as a “neutral” one designed to “clarify corporate law principles” of “direct and significant interest” to the 4500 CBA members who are in-house counsel. Yet members of the CBA’s Aboriginal Law section opposed the intervention, some even threatening to resign, due in part to a disagreement over the neutral characterization of corporate law principles that are seen by many as designed to shield assets from corporate accountability. The CBA eventually decided not to intervene in the case. (See Yamri Taddese, “Bar divided over CBA withdrawal: Some lawyers happy, others disappointed at reversal on Chevron” (October 20, 2014) Law Times; Yamri Taddesse, “Members leave CBA over Chevron case” (Monday 6 October 2014) Law Times.)

The key questions before the SCC in its recent decision were whether “in an action to recognize and enforce a foreign judgment” there “must be a real and substantial connection between the defendant or the dispute and Ontario for jurisdiction to be established”; and, whether “Ontario courts have jurisdiction over Chevron Canada, a third party to the judgment for which recognition and enforcement is sought.” (SCC para 23) The court unanimously concluded that no such real and substantial connection was required to hear the recognition and enforcement action against Chevron (US), noting in part that concerns with judicial overreach simply do not arise (SCC para 50, paras 75-76). With regard to Chevron Canada, which was served in juris at its business operations in Ontario, “traditional, presence-based” jurisdiction was sufficient to satisfy the jurisdictional requirement. (SCC para 94)

However, with regard to the first issue and Chevron (US), the court went on to say (para 77):
“In closing on this first issue, I wish to emphasize that when jurisdiction is found to exist, it does not necessarily follow that it will or should be exercised … . Establishing jurisdiction merely means that the alleged debt merits the assistance and attention of the Ontario courts. Once the parties move past the jurisdictional phase, it may still be open to the defendant to argue any or all of the following, whether by way of preliminary motions or at trial: that the proper use of Ontario judicial resources justifies a stay under the circumstances; that the Ontario courts should decline to exercise jurisdiction on the basis of forum non conveniens; that any one of the available defences to recognition and enforcement (i.e. fraud, denial of natural justice, or public policy) should be accepted in the circumstances; or that a motion under either Rule 20 (summary judgment) or Rule 21 (determination of an issue before trial) of the Rules should be granted. The availability of these potential arguments, however, does not oust the jurisdiction of the Ontario courts over the plaintiffs’ action for recognition and enforcement.”
Moreover with regard to Chevron Canada, the court continued (SCC para 94):
“As indicated for Chevron, the establishment of jurisdiction does not mean that the plaintiffs will necessarily succeed in having the Ecuadorian judgment recognized and enforced against Chevron Canada. A finding of jurisdiction does nothing more than afford the plaintiffs the opportunity to seek recognition and enforcement of the Ecuadorian judgment. Once past the jurisdictional stage, Chevron Canada, like Chevron, can use the available procedural tools to try to dispose of the plaintiffs’ allegations. This possibility is foreign to and remote from the questions that must be resolved on this appeal.”
And with regard to both (SCC para 95):
“Further, my conclusion that the Ontario courts have jurisdiction in this case should not be understood to prejudice future arguments with respect to the distinct corporate personalities of Chevron and Chevron Canada. I take no position on whether Chevron Canada can properly be considered a judgment-debtor to the Ecuadorian judgment. Similarly, should the judgment be recognized and enforced against Chevron, it does not automatically follow that Chevron Canada’s shares or assets will be available to satisfy Chevron’s debt. For instance, shares in a subsidiary belong to the shareholder, not to the subsidiary itself. Only those shares whose ownership is ultimately attributable to the judgment debtor could be the valid target of a recognition and enforcement action. It is not at the early stage of assessing jurisdiction that courts should determine whether the shares or assets of Chevron Canada are available to satisfy Chevron’s debt. As such, contrary to the appellants’ submissions, this is not a case in which the Court is called upon to alter the fundamental principle of corporate separateness as reiterated in BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 S.C.R. 560, at least not at this juncture. In that regard, the deference allegedly owed to the motion judge’s findings concerning the separate corporate personalities of the appellants and the absence of a valid foundation for the Ontario courts’ exercise of jurisdiction is misplaced. These findings were reached in the context of the s. 106 stay. As I stated above, the Court of Appeal reversed that stay, and this issue is not on appeal before us.”
Clearly, then, numerous key issues remain to be fought out in future court battles. This is not unexpected, but sadly points to the challenges of access to meaningful justice through transnational – indeed, any – civil litigation. As I noted in a 2013 article in the Windsor YearBook of Access to Justice entitled “Transnational Juridicial and Non-Judicial Remedies for Human Rights Harms: Challenges of and for Law” in which I describe the emergence of non-judicial grievance and remedy mechanisms such as those proposed under the UN Guiding Principles for Business and Human Rights, one conclusion is clear: “if lawyers continue to advise corporate clients to engage in never-ending procedural maneuvers that sidestep the substance of the claims being brought forward, then the possibility of transnational justice and corporate accountability is in fact an illusion, a magic trick.” (at 194)

Commentary by various Canadian private international law scholars posted to a conflicts list-serv in recent days has expressed concern that the SCC decision is not correctly decided, as, for constitutional reasons, there must be a real and substantial connection for a court to have jurisdiction over any action, whether or not the action is with regard to a new claim or for the recognition and enforcement of an existing foreign judgment (I credit my colleague Stephen Pitel for this observation, with whom the court disagreed on this point, Stephen Pitel, No Independent Jurisdiction Requirement for Proceeding to Enforce a Foreign Judgment in Canada, Conflicts of, Sept. 11, 2015). Nevertheless, whatever may be said of the SCC analysis, a motivating factor for the decision was the need to establish a clear, simple, and predictable rule so as to “avert needless and wasteful jurisdictional inquiries that merely thwart the proceedings from their eventual resumption.” (SCC para 69) This is important. One thing that no one seems to contest is that the oil pollution in Lago Agrio needs to be cleaned up. The question remains as to whether it is possible for transnational civil litigation to in fact provide meaningful remedy to a real problem such as this, rather than “merely” providing lawyers (and legal academics!) with the opportunity to engage in fascinating exercises of legal analysis that rarely if ever deliver on their promise of access to justice.

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