What happens in Ecuador… no longer stays in Ecuador. The Supreme Court of Canada eliminates a jurisdictional barrier to cross-border enforcement action
Posted in Commercial

On September 4, 2015, the Supreme Court of Canada issued its decision in Chevron Corp v Yaiguaje, 2015 SCC 42. In a unanimous decision, the Court dismissed Chevron’s appeal, holding that Canadian courts have jurisdiction to enforce a foreign judgment whether or not the original dispute or the parties to it had any connection to Canada.  The decision will have far-reaching implications for multi-nationals with subsidiaries in Canada.  In effect, the Supreme Court of Canada has ruled that Canadian courts have jurisdiction to enforce valid judgments of foreign courts, whether or not the underlying dispute or the defendant relates to Canada.

In the case, the plaintiffs (a group of indigenous Ecuadorian villagers) sought enforcement of a $9.51 billion judgment made against Chevron Corp. by the Ecuadorian courts. The judgment sum consisted of environmental and punitive damages relating to oil extraction activities. The action was brought in Ontario against Chevron Corp. and its indirect Canadian subsidiary, Chevron Canada Limited (which has significant assets in Canada but which was not a party to the Ecuadorian judgment).

Chevron Corp. brought a motion to set aside service and stay the action for lack of jurisdiction, arguing that, following the Supreme Court of Canada’s decision in Club Resorts Ltd v Van Breda, 2012 SCC 17, a ‘real and substantial connection’ between the court in which enforcement is sought (in this case the Ontario court) and the parties or the subject matter of the original dispute is required to establish jurisdiction. The Supreme Court of Canada rejected this argument and confirmed that its decision in Van Breda applies only to first instance cases and not to actions for enforcement.

The decision made it clear that the sole requirement for the Canadian court’s jurisdiction in enforcement actions is that the original foreign court had valid jurisdiction. The jurisdiction of the Ontario court over Chevron Corp. derives from the existence of the foreign judgment, not from any connection between Ontario and the dispute. The judgment emphasized the generous and liberal approach traditionally taken by Canadian courts to the recognizance and enforcement of foreign judgments.

One aspect which remains unsettled is the effect of the Court Jurisdiction and Proceedings Transfer Act (CJPTA), which is in force in a number of provinces, notably British Columbia, Nova Scotia and Saskatchewan. The CJPTA explicitly states that a foreign judgment will create a rebuttable presumption of jurisdiction for the enforcing court. The Supreme Court of Canada recognised that the CJPTA, or a similar act, might change the position. As Ontario had not enacted any such legislation, the Court did not need to rule on the point. Therefore, there remains a possibility of enforcement action in provinces in which a version of the CJPTA is in force for a judgment debtor to mount a jurisdictional challenge.

The decision has undoubtedly increased litigation risk for mining, commodities and other multi-national companies operating through affiliated companies in foreign jurisdictions. Such companies will need to be prepared for the risk of being held liable in Canada for the actions of their subsidiaries or parent companies in other jurisdictions. Any assets in Canada may potentially be the target of enforcement actions and the companies may face increased public scrutiny in Canada as a result of such actions.

The ruling dealt only with jurisdiction, and the corporate structure separating the two Chevron entities should ultimately prevent enforcement. Other defences, such as forum non conveniens, may still apply. However, the Supreme Court of Canada’s decision clearly eliminates jurisdiction arguments with regard to enforcement of valid foreign judgments.

The decision is in keeping with a continuing trend in Canada towards multi-nationals facing actions from foreign plaintiffs in their home jurisdiction, which I blogged about in December last year. Two cases which have not yet proceeded to trial (Adolfo Garcia v. Tahoe Resources Inc. and Araya v. Nevsun Resources Ltd.) concern claims brought against a parent company for the activities of its foreign subsidiary. Both cases will be important and will be closely watched by commodities companies operating in multiple jurisdictions.


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