A two-decades-long, multibillion-dollar legal battle against one of the world's largest companies over oil pollution in the Amazon is coming to Canada.
Rain forest villagers won an $18.3-billion (U.S.) judgment in an Ecuadorean court against Chevron Corp. last year – a judgment that the company calls "illegitimate" and refuses to pay. Now lawyers for the villagers are asking the Ontario Superior Court to force Chevron to pay up, pointing to the company's assets across Canada, including in Alberta's oil sands.
Their claim, filed Wednesday, is the first court action anywhere in the world to try to collect on the controversial judgment against Chevron. The company was ordered to pay the costs of cleaning up oil pollution that accumulated over two decades of drilling, as well as punitive damages. The latest action comes as Chevron continues to appeal the Ecuadorean ruling and wages a court battle in the U.S., accusing some of the plaintiffs' lawyers and supporters of fraud.
The plaintiffs' Ontario claim asks the court to designate shares of Chevron subsidiaries Chevron Canada Ltd. and Chevron Finance Canada Ltd. as eligible to cover the costs of the judgment, instead of cash. And it asks the court to appoint a receiver over Chevron's Canadian assets.
"Their [global]assets are $300-billion, so paying $18-billion is not the end of the world," Alan Lenczner, the prominent Toronto litigator hired by the Ecuadorean plaintiffs, told reporters. "It's not going to cripple them."
Kent Robertson, a Chevron spokesman, said in an e-mail that the company does not believe the judgment is enforceable and charged that it was obtained by "bribery" and "fraud." He said the company will "vigorously defend against any enforcement action," and that if the plaintiffs tried to enforce the ruling in the U.S., they would be up against previous U.S. federal court decisions that criticized the Ecuadorean trial.
It's the latest twist in a high-profile international legal soap opera that dates back to 1993, when lawyers for residents of Sucumbios province in northeast Ecuador filed a case against Texaco Corp. in New York.
Chevron inherited the battle when it merged with Texaco in 2001. Texaco, in a consortium that included Ecuador's state-owned oil company, had drilled wells all over a jungle region near the Colombian border for more than 20 years starting in 1967.
The plaintiffs' legal team, led by Ecuadorean lawyer Pablo Fajardo, alleged that the company left behind billons of tons of toxic oil waste in open pits and contaminated water supplies, which led to health problems and birth defects for the local indigenous population.
Chevron denies the charges, calling them "baseless." Company lawyers originally argued that the case should be heard in Ecuador instead of the U.S., but Chevron now argues that Ecuador's courts are corrupt and cannot be trusted.
It insists that Texaco was released from cleanup costs when it paid $40-million for remediation of oil pits in the Amazon in the 1990s, and calls the ruling against it last year "illegitimate."
In addition, Chevron alleges, in a lawsuit in New York, that lawyers and consultants for the plaintiffs, including Mr. Fajardo and U.S. lawyer Steven Donziger, along with groups supporting the villagers, launched a "fraudulent" campaign against the company. They have denied the allegations.
Asked why the plaintiffs chose Canada to launch the first repayment action against Chevron, Mr. Lenczner said much of the company's assets are outside the U.S. (Chevron had previously won an injunction in the U.S. against enforcing the judgment, but that has since been lifted.)
Legal observers said Canada's courts generally defer to foreign courts' judgments. But they and the plaintiffs expect Chevron to put up a massive fight. The company could try to argue that the Ecuador judgment was obtained by fraud, for instance, or that the company was denied "natural justice" in that country's courts.
Stephen Pitel, an associate professor at the University of Western Ontario's law school, said that if the plaintiffs tried to enforce the judgment in the U.S., the action would likely be tied into Chevron's U.S. lawsuit alleging fraud. Filing in Canada avoids this problem for the plaintiffs.
But he also said a Canadian court might be persuaded to await that outcome, and any final outcome in an Ecuadorean appeal, before enforcing any judgment.
Prof. Pitel said Chevron's arguments that Ecuador's courts are corrupt will have to meet a high bar: "Canadian courts are quite reluctant to condemn foreign courts."