Ontario judge gives Chevron lawyers a rough ride

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Chevron Corp. got off to a rough start in a Toronto courtroom Thursday as it tried to quash a move by the Amazon villagers attempting to collect on a $18.3-billion (U.S.) environmental judgment levelled against the company by an Ecuadorean court last year.

In one of a handful of similar legal actions around the world, lawyers for the Ecuadorean plaintiffs are trying to get Ontario to recognize the massive Ecuadorean ruling against Chevron, which came last year in a tangled fight over decades of oil pollution in the Amazon. This could allow the plaintiffs to claim assets held by the oil giant's Canadian subsidiaries, which they say are worth an estimated $12-billion.

But lawyers for Chevron, which dismisses the Ecuadorean ruling as "fraudulent," are in court this week in a bid to have the case in Ontario tossed out completely on jurisdictional grounds.

On Thursday, Mr. Justice David Brown of the Ontario Superior Court barely let Chevron lawyer Alan Mark start his arguments before demanding to know why this case was before his court at all, since it remained under appeal before Ecuador's Constitutional Court.

"You can't keep me in the dark like this," Judge Brown told Mr. Mark in a heated exchange.

Mr. Mark explained that the Constitutional Court only agreed to hear the case last week. Judge Brown later asked both sides to prepare positions on whether he should simply adjourn the case pending an appeal result.

Judge Brown also asked Chevron to explain why it wasn't premature for the company to be making its arguments about jurisdiction, given that an Ontario court has not yet even granted the plaintiffs' wish to have the Ecuadorean judgment recognized.

"Why has the cart been put before the horse?" Judge Brown demanded, adding that allowing Chevron to go ahead with its jurisdiction motion now could create a new line of defence that does not exist in "four centuries" of litigation.

The judge also referred to the litigation between the two sides in New York, where both allege the other was involved in fraud and where the plaintiffs have so far shied away from attempting to enforce the Ecuadorean judgment.

"You should all be in New York. I know that and you know that. But you're here. Welcome to Ontario," Judge Brown said. "This is a New York fight."

The judge was quick to slap down Mr. Mark any time he mentioned fraud, saying that this was a matter for Chevron's defence on the main battle over the Ecuadorean judgment. He said bringing up fraud now would be an "end run" on the rules of civil procedure.

Chevron's lawyers were eventually allowed to get into their arguments, which centre on the issue of whether the plaintiffs should be allowed to consider assets held by Chevron's Canadian subsidiaries as though they were owned directly by Chevron Corp.

Doing this, which is known as "piercing the corporate veil," requires the plaintiffs to show that Chevron Canada's corporate parent exercises total control over its subsidiaries, Chevron argued. The company's lawyers also say the plaintiffs must show that the corporate structure was set up through fraud or for an improper purpose – arguments the plaintiffs have not made. Chevron says it has a "decentralized" structure and that its subsidiaries are largely independent.

If the plaintiffs cannot show they have a reasonable argument, Chevron's lawyers argued, the court should rule that there is not enough of a connection between Ontario and Chevron Corp., which is based in San Ramon, Calif., to take on the case.

Fresh from his recent defeat acting for embattled Toronto Mayor Rob Ford, prominent Toronto litigator Alan Lenczner, who acts for the Ecuadorean plaintiffs, will go before Judge Brown on Friday morning.

The underlying litigation over what the plaintiffs call catastrophic oil pollution in the Amazon was first filed against Texaco in 1993 in New York, and then later moved to Ecuador at the defendants' behest. Chevron inherited the litigation when it acquired Texaco in 2001. Chevron argues that Texaco paid its share of oil cleanup costs when it pulled out of Ecuador in the 1990s.