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29 September 2015
On September 4 2015 the Supreme Court released its highly anticipated decision in Yaiguaje v Chevron Corporation.(1) In dismissing the appeal of Chevron Corporation ('Chevron') and Chevron Canada Limited ('Chevron Canada'), the court favoured a relaxed approach to the recognition and enforcement of foreign judgments in Canada, unequivocally holding that a "real and substantial connection" between the proposed jurisdiction of enforcement and the matter which gave rise to the judgment debt, or the judgment debtor itself, is not required in order to establish the jurisdiction of the proposed enforcing court.
The decision, which both clarifies and curtails jurisdictional defences available to judgment debtors whose assets or operations extend across multiple forums, further facilitates the enforcement of foreign judgments in Canada. In the wake of Chevron, provided that the foreign court whose order gave rise to the judgment debt correctly assumed jurisdiction over the initial matter, Canadian courts will assume jurisdiction over defendants of related enforcement actions so long as they are correctly served pursuant to the applicable provincial or territorial rules of service.
Even though the court has now closed the door on jurisdiction simpliciter defences in proceedings to enforce foreign judgments, alternative jurisdictional defences (including forum non conveniens) remain seemingly unchanged.
For more than two decades around 30,000 indigenous Ecuadorian villagers have sought compensation from Texaco, and its corporate successors, for alleged environmental damages caused by oil extraction operations in the Lago Agrio region.(2)
In 2003 a representative group of the plaintiffs obtained judgment(3) in the Ecuador courts against Chevron, which had merged with Texaco in 2001.(4) The judgment, modified but affirmed by an Ecuadorian appellate court, was ultimately worth US$9.51 billion.(5)
In 2012 the plaintiffs brought an action in Ontario for recognition and enforcement of the Ecuadorian judgment against the Canadian assets of Chevron and Chevron Canada, its seventh-level indirect subsidiary.(6) In response, both corporations brought motions to set aside service or to stay the action on the basis that the Ontario courts lacked jurisdiction simpliciter.
After dismissing the moving parties' submissions with respect to jurisdictional simpliciter, the Ontario Superior Court, on its own motion, stayed the action pursuant to Section 106 of the Courts of Justice Act because Chevron did not have assets or conduct business in Ontario.(7) According to the court, "any recognition of the Ecuadorian Judgement by this Court would have no practical effect whatsoever in light of the absence of exigible assets of the judgement debtor in this jurisdiction".(8)
After refusing the plaintiffs' requests to pierce the corporate veil or to recognise Chevron and Chevron Canada as one and the same entity,(9) Justice Brown recommended that the parties "take their fight elsewhere to some jurisdiction where any ultimate recognition of the Ecuadorian Judgment will have a practical effect".(10)
The plaintiffs appealed the Ontario Superior Court's stay of proceedings and the moving parties, Chevron Canada and Chevron, cross-appealed the ruling that Ontario courts had jurisdiction simpliciter to hear the enforcement action.(11) The Ontario Court of Appeal ultimately set aside the stay but agreed that Ontario courts did, in fact, have jurisdiction over Chevron and Chevron Canada.
The Ontario Court of Appeal's decision confirmed that the test for recognising and enforcing foreign judgments in Canada remained as articulated in Beals v Saldanha:(12) a domestic court must be satisfied that there was a real and substantial connection between the initial claim and the foreign jurisdiction which rendered the judgment.(13) Consequently, the court held that Ontario had jurisdiction over Chevron given that the initial environmental damages claim had a real and substantial connection to Ecuador.
Where the Ontario Superior Court had ruled that Chevron Canada should not be considered Chevron's alter ego for the purpose of enforcement, the appeal court took a different approach. Recognising that it had jurisdiction over Chevron Canada (which operated in Canada) and emphasising what it described as an "economically significant relationship" between the two entities, including the fact that Chevron Canada was, albeit indirectly, a wholly owned subsidiary of Chevron, the appeal court held that Ontario courts had jurisdiction to determine the merits of the enforcement action against Chevron Canada, even though it was not a party in the Ecuadorian lawsuit.(14)
Finally, particularly in light of the fact that no party had requested a stay and no law or evidence had been heard on the issue, the appeal court rejected the motion judge's view that this was an appropriate case for a court-imposed Section 106 stay.(15)
In a unanimous decision, the Supreme Court dismissed Chevron's and Chevron Canada's appeal. Recognising the moveable nature of assets in modern commercial environments, the court made a series of rulings that further facilitate the enforcement of foreign judgments in Canada. According to the court, often "recognition and enforcement in another jurisdiction is the only means by which a foreign judgment creditor can obtain its due".(16)
The court identified two issues in the appeal:
On both issues the court ruled in favour of the plaintiffs:
The court explained that in enforcement actions, it had never required there to be a real and substantial connection of the type argued for by Chevron.(19) The court clarified that in previous decisions it "did not articulate or imply a need to inquire into the enforcing court's jurisdiction: the focus remained squarely on the foreign jurisdiction".(20) Consistent with this approach, the Supreme Court concluded that:
"in an action to recognize and enforce a foreign judgment where the foreign court validly assumed jurisdiction, there is no need to prove that a real and substantial connection exists between the enforcing forum and either the judgment debtor or the dispute."(21)
Instead, in actions limited to the recognition and enforcement of foreign judgments, jurisdiction is established upon effective service of the foreign judgment debtor.(22)
In support of its conclusion that a real and substantial connection test should not be extended to enforcement proceedings, two principles were cited:
The first supportive principle recognises that enforcing courts fulfil a facilitative, rather than substantive, role with respect to adjudicated issues. As such, the enforcing court "does not exercise jurisdiction in the same way as it does in actions at first instance", and accordingly the tests for assuming jurisdiction need not be identical.(24) Given that enforcement measures are limited to the confines of the enforcing jurisdiction, and understanding that obligations created by foreign judgments are universal, the court held that the appellants' concerns regarding jurisdictional overreach were overstated.(25)
With respect to the second supportive principle, the court noted that "facilitating comity and reciprocity, two of the backbones of private international law, calls for assistance, not barriers".(26)
Perhaps most controversially, the Supreme Court held that the existence of assets in the proposed jurisdiction for enforcement was not a prerequisite to that court's jurisdiction.(27) Thus, judgment creditors have been extended considerable freedom to choose where to enforce foreign judgments in Canada and are now able to assess their enforcement options based not only on where the judgment debtors' assets are currently situated, but also where they might be in the future.(28)
Ultimately Chevron, although of clear significance to multijurisdictional entities, is largely consistent with the gradual expansion of the recognition and enforcement of foreign judgments in Canada, commencing with the Supreme Court's 1990 decision in Morguard Investments Ltd v De Savoye.(29)
For further information on this topic please contact Michael D Schafler or Thomas Wilson at Dentons Canada LLP by telephone (+1 416 863 4511) or email (firstname.lastname@example.org or email@example.com).The Dentons website can be accessed at www.dentons.com.
(1) 2015 SCC 42, full decision available here.
(3) The court, at paragraph 7 of its decision, acknowledged that in 2014 a US court held that the plaintiffs' judgment was the result of fraud. However, that decision, and the underlying allegation of fraud, was not before the court.
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Michael D Schafler