David beats Goliath? Not quite. Jurisdictional analyses in Chevron Corp v Yaiguaje

Introduction

The effects of globalization are deep and far reaching – not least with respect to the Canadian legal framework. As cross-border litigation involving multinational corporations becomes increasingly prevalent, courts are forced to grapple with the challenges of reconciling the domestic and international aspects of these disputes.

In Chevron Corp v Yaiguaje, 2015 SCC 42 [Chevron Corp], the Supreme Court of Canada (“SCC”) had the opportunity to clarify the approach to enforcing foreign judgments against corporate entities with Canadian affiliates. In addition to its interesting facts and complex judicial history, this decision is noteworthy for its potential implications on Canadian-related corporations acting abroad.

Factual and Judicial Background

This decision is but another chapter in a protracted and arduous dispute between Chevron, one of the largest multinational energy corporations, and a class of 47 Ecuadorian villagers, representing the approximately 30,000 indigenous residents of the Sucumbios province. The litigation deals with the extensive environmental degradation of Sucumbios at the hands of numerous global oil companies between 1972 and 1990, including Chevron. The dispute first began in 1993, and after a series of legal and jurisdictional twists-and-turns, culminated with a $9.4 billion dollar judgment ordered against Chevron by the Ecuadorian Provincial Court of Justice. The order was upheld by Ecuador’s Court of Cassation – the highest appellate court in the country. However, the plaintiffs were unable to obtain redress as Chevron had no assets in Ecuador. With Chevron refusing to acknowledge or pay the damage award, the plaintiffs turned to Canadian courts, seeking recognition and assistance in enforcement of the Ecuadorian judgment against both Chevron Corporation and its Canadian affiliate, Chevron Canada (together the “Chevron defendants”).

The case was first heard by the Ontario Superior Court of Justice, 2013 ONSC 2527, where Justice Brown was tasked with determining whether Ontario had jurisdiction to recognize and enforce the foreign judgment. He ultimately held that Ontario did have jurisdiction over both the Chevron defendants, with respect to the principle of comity (Chevron Corp, para 51) and the “real and substantial connection” that existed between that dispute and the forum in which it was heard. However, Justice Brown did use his discretionary powers to order a stay of proceedings (under s. 106 of the Courts of Justice Act, 1990 RSO, c C.43); since neither of the Chevron defendants had any assets in Ontario, he found there to be “no prospect of recovery” (Chevron Corp, para 88).

The Ontario Court of Appeal upheld the lower court’s finding on jurisdiction, 2014 ONCA 40 (with commentary available here), and expressly rejected the defendants’ assertion that there need be a real and substantial connection between the subject matter of the litigation and the jurisdiction being asked to recognize and enforce the judgment. However, Justice McPherson (writing for a unanimous Court of Appeal bench) overturned the stay, as such a remedy was entered entirely on the initiative of the motion judge and was not requested by the Chevron defendants. Indeed, the Court found that Justice Brown had “effectively imported a forum non conveniens motion into his reasoning on the stay, even though no such motion had been before him” (Chevron Corp, para 18). This robbed the plaintiffs of the opportunity to adequately respond.

The Supreme Court of Canada’s Decision

The two principal issues before the SCC were: (a) whether Canadian courts have jurisdiction over foreign debtors in actions to recognize and enforce foreign judgments; and (b) whether jurisdiction can be exerted with respect to Chevron Canada. Traditionally, jurisdiction only exists on a presence- or consent-basis. This decision instead addresses the question of assumed jurisdiction, which exists where there is a “real and substantial connection” between the dispute and the forum.

On the first point, the SCC rejected the proposition that a real and substantial connection must exist “between the defendant or the action and the enforcing court for jurisdiction to exist in recognition and enforcement proceedings” (Chevron Corp, para 28).   In arriving at this determination, Justice Gascon – writing for a unanimous bench – made reference to that same court’s previous decisions in both Morgaurd Investments v De Savoye, [1990] 3 SCR 1077 [Morguard], and Beals v Saldanha, [2003] 3 SCR 416 [Beals], both of which undermine the defendants’ assertion. It was also noted that the decision in Club Resorts Ltd v Van Breda, [2012] SCR 572 [Club Resorts] does not signal a departure from the approach taken in Morguard and in Beals. Furthermore, two factors: the principle of comity and broader policy considerations, led the Court to outright reject the defendants’ position, and instead hold that the real and substantial connection test need only apply between the foreign court and the subject of the dispute. Because recognition does not create any new substantive obligations, there is no concern of any potential territorial overreach, and the Ontario Superior Court of Justice was correct in its finding of jurisdiction over Chevron Corporation.

The SCC also affirmed Justice Brown’s finding of jurisdiction over Chevron Canada, under traditional presence-based jurisdiction. Because it was served by the defendant in Mississauga, where it was carrying on business, Justice Gascon correctly found that this was a clear case of service in juris, in accordance with Subrule 16.02(1)(c) of the Rules of Civil Procedure, 1990 RRO, Reg 194.

Jurisdictional Considerations in a Globalized World

The SCC’s renewed affirmation of a “general and liberal approach to the recognition and enforcement of foreign judgments” creates a strong precedent in favour of corporate social responsibility on a global scale (Chevron Corp, para 27). By affirming and expanding the jurisdictional tests and principles laid out in Morguard and Beals, the decision in Chevron Corp signals the ease with which a foreign judgment will be recognized domestically against a foreign corporate entity and its Canadian affiliate.

To better understand this holding, however, it is necessary to understand its jurisprudential backdrop. The SCC’s pronouncement in Club Resorts saw a clarification and expansion of the principles of jurisdiction, forum non conveniens, and comity in the context of actions in tort – making it easier for litigants to have cross-border disputes heard by Canadian courts. More significantly, the Ontario Superior Court of Justice considered similar questions in Choc v Hudbay, 2013 ONSC 1414 [Hudbay] – a class action involving alleged human rights violations at Hudbay’s Guatemalan mining operation. The defendants brought a motion to have the matter dismissed for disclosing no reasonable cause of action, for the expiry of the limitation period, and for a lack of jurisdiction. Justice Brown – who also presided over this motion – dismissed all of these arguments and allowed the matter to proceed.

Indeed, the weight of the jurisprudence indicates a move towards an increasingly open system, whereby jurisdiction no longer poses an unnecessary and anachronistic barrier to the recognition and enforcement of otherwise reasonable foreign judgments. Gone are the days of overly formalist considerations and tests; the broadening of the jurisdictional principles that underlay the Chevron Corp decision recognizes the internationalizing world within which we live and the requirement that legal institutions adapt accordingly. On this point, Justice Gascon noted that:

 In today’s globalized world and electronic age, to require that a judgment creditor wait until the foreign debtor is present or has assets in the province before a court can find that it has jurisdiction in recognition and enforcement proceedings would be to turn a blind eye to current economic reality (Chevron Corp, para 57). …

 …the existence of clear, liberal and simple rules for the recognition and enforcement of foreign judgments that facilitates the flow of wealth, skills and people across borders in a fair and orderly manner (Chevron Corp, para 68).

This is particularly significant for large, multinational corporations with activities both in Canada and abroad. First, it increases their potential exposure to liability for acts carried out abroad, by rendering the Canadian legal system more accessible (at least, in theory) to extraterritorial litigants. The plaintiffs need not establish a real and substantial connection between the dispute and the Canadian jurisdiction when seeking recognition and enforcement; all that needs to be established is a real and substantial connection between the dispute and the adjudicating forum.

Moreover, the broad and expansive interpretation of jurisdictional principles will minimize the viability of similar jurisdictional arguments going forward.   Removing this procedural barrier will have the effect of requiring institutional defendants (like Chevron) to address these legal issues in a substantive manner. Finally, the decisions in Hudbay and in Chevron Corp further signal the willingness of Canadian courts to implicate related entities in litigation involving allegations of tort committed abroad.

It is too early to fully assess the weight of this decision, though it will likely have important considerations for cross-border litigation – specifically those involving multinational corporations operating in Canada.

Looking Ahead

Although the SCC unanimously ruled in favour of the Ecuadorian litigants, this decision will almost surely not signal the end of this longstanding and ever-changing saga. This particular dispute involved purely procedural matters and the Chevron defendants now have the opportunity to raise substantive defences to the enforcement of their adverse order. This course of action is particularly likely, given the recent economic troubles facing the oil industry. Finally, even if Chevron unsuccessfully exhausts all such legal avenues, there remains the question of whether there are sufficient Canadian assets to satisfy the $9.4 billion dollar judgment – an important consideration in Justice Brown’s analysis.   As put by Justice Gascon:

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 (Chevron Corp, para 94).

Despite the fact that this decision has important implications in the evolving question of jurisdiction, it surely does not put to bed the dispute between the litigants in this case. Although David may have won this battle, the war wages on.