Tuesday, December 16, 2014

Canada's Supreme Court Poised to Force Chevron To Stand Trial Over $9.5 Billion Judgment

Chevron Lawyer Clark Hunter Poses Dare to Justices: "Fairness" Should Have Nothing to do With It

Chevron's brazen plan to inflict a "lifetime of litigation" on the indigenous communities it poisoned in Ecuador's Amazon continues to grind its way through courts around the world. We are now in the third decade of litigation since the original lawsuit was filed in 1993 in New York.

The latest stop in Chevron’s global road show of evasion occurred last week in Canada's Supreme Court. On a snowy day in Ottawa, Chevron’s small army of Canadian lawyers put the dare to seven respected justices on the country's highest court. Chevron challenged them to try to stop the company's "lifetime of litigation" strategy designed to block the villagers from collecting their $9.5 billion judgment won in the courts of Chevron's choosing in Ecuador.

Chevron might have met its match in Canada. The country is known for having an outstanding judicial system that is more than capable of standing up to Chevron's game of musical courts that has stretched across countries and continents.

After almost three hours of argument, the seven justices seem to be seriously considering an order that would force Chevron into a trial that could determine whether it pays the entirety of the Ecuador judgment. Unlike in Ecuador -- where Chevron stripped its assets in anticipation of losing the lawsuit -- the company maintains substantial holdings in Canada via a wholly-owned subsidiary. These holdings could fully cover the company's obligations in Ecuador and result in a comprehensive clean-up of the ancestral lands of the indigenous groups.

The specific issue before the Supreme Court of Canada is whether the Ecuadorian villagers should be forced to overcome a new jurisdictional hurdle invented by Chevron that appears to have no precedent in the law. As far as we can tell, never have courts in either Canada or the U.S. (or in any other country) required the holder of a foreign judgment pursuing a scofflaw debtor like Chevron to prove jurisdiction for a second time after jurisdiction already was established where the underlying matter was heard. That's the new barrier Chevron is asking the justices to erect.

In fact, Chevron voluntarily accepted jurisdiction in Ecuador. It had eight years to defend itself in the country and it did so mightily. It often inundated the court with frivolous motions and threatened judges with jail if they failed to rule in the company's favor. It submitted dozens of evidentiary reports and hundreds of motions challenging court rulings. Chevron lost on the merits based on 105 expert evidentiary reports and 220,000 pages of trial evidence.

An intermediate Ecuadorian appellate court unanimously affirmed the judgment after a de novo review of the trial record. Ecuador's highest court, the National Court of Justice, unanimously affirmed the de novo decision. In all, eight different appellate judges in Ecuador rejected Chevron's complaints of an unfair trial and confirmed the validity of the overwhelming evidence against the oil company.

If Chevron's proposed jurisdictional rule is adopted, it could severely hamper if not quash the ability of the indigenous communities to enforce their judgment in Canada. As a general matter, Chevron appears to believe that judges should erect new barriers to justice whenever the existing ones don't seem to work well enough to immunize it from its rampant misconduct in Ecuador.

(For detailed background on that misconduct, see this extraordinary affidavit by Ecuadorian lawyer Juan Pablo Saenz. For more on Chevron's "lifetime of litigation" strategy as applied to Canada, see this press release and this background document.)

The trial took place in Ecuador only because Chevron wanted it there. In fact, Chevron filed 14 affidavits before a U.S. judge in the 1990s praising the fairness of Ecuador's courts as part of its plan to block the case from being heard by a jury in New York.

When the trial started in Ecuador and the scientific evidence against Chevron mounted, the company began to play dirty. It launched a vicious attack on Ecuador's judiciary. It also lobbied Presidents Bush and Obama to eliminate bilateral trade preferences for the country -- a move that would have cost Ecuador an estimated 300,000 jobs had it succeeded. Chevron also sued Ecuador's government in a secret investor arbitration seeking a taxpayer-funded bailout in Ecuador of its clean-up liability.

Chevron did not stop there. It openly used threats and intimidation. The company issued a press release in 2007 promising the villagers "a lifetime of collateral and appellate litigation" if they continued to pursue their claims. "We don't want to be in any court, period," Chevron lawyer Sylvia Garrigo told the CBS news show 60 Minutes in 2009.

Chevron has roughly $15 billion of assets in Canada in a wholly-owned subsidiary, Chevron Canada. The assets include two offshore oil fields, a refinery in British Columbia, and a large tar sands project in Alberta. The parent company is said to collect between $2 billion and $4 billion annually in dividends from its Canadian operations.

So while Chevron and its shareholders benefit greatly from profits produced by the company's subsidiary Chevron Canada, in Chevron's view Chevron Canada should receive full immunity from any of Chevron's liabilities. That's Chevron's notion of corporate impunity in action.

There are also six wholly-owned Chevron subsidiaries between Chevron the parent and Chevron Canada. It is clear that these entities exist only on paper. Their sole useful function appears to be to shield Chevron from liability. Yet they are touted by Chevron as yet another reason the enforcement action of the villagers should not go forward.

We might add that the size of the Ecuador judgment is modest compared to the magnitude of the damage Chevron caused when operating in Ecuador under the Texaco brand from 1964 to 1992. Chevron abandoned roughly 1,000 toxic waste pits gouged out of the jungle floor. It also admitted to the systematic discharge of 15 billion gallons of oil-laced water into streams and rivers that indigenous groups relied on for their drinking water, bathing, and fishing. Cancer rates in the region predictably have skyrocketed.

BP’s liability in the United States for the far smaller spill in the Gulf of Mexico now stands at $48 billion. That's about five times greater than Chevron's liability in Ecuador. Only four years after the Gulf spill, BP already has paid out an estimated $30 billion in damages. Almost five decades after Chevron began operating in Ecuador, the company has yet to pay even one dollar directly to the affected communities.

Chevron's theory that it owes no compensation provides insight into how large multinational corporations try to evade accountability for human rights abuses. But judges are under no obligation to accept Chevron's outdated theories of subsidiary immunity given the increasing evidence they run counter to international human rights law and evolving global standards of corporate accountability.

This was exactly the point made by several Canadian human rights groups -- including the Human Rights Program at the University of Toronto Facuty of Law -- that filed friend of the court briefs in Canada in support of the villagers. These insightful briefs explain how Chevron's approach will hurt the ability of human rights victims everywhere to receive legal redress. They can be read here and here.

It bears mention that roughly 80% of Chevron’s revenues worldwide come from its wholly owned subsidiaries located outside the United States. Chevron makes almost no revenue except through the operations of its subsidiaries. Chevron does not even own its global headquarters building in California. Virtually the only way to recover Chevron's assets is to sue its subsidiaries.

Think for a moment about the degree of impunity to which Chevron feels it is entitled.

Under Chevron’s scenario, the indigenous villagers cannot recover in Ecuador even though the company promised to accept jurisdiction there. That’s because Chevron has no assets in the country.

The villagers also cannot recover in Chevron’s home country of the U.S. That’s where Chevron convinced a controversial trial judge from New York (after a farcical proceeding last year that is under appeal) to bar the villagers from seeking to collect their judgment in all 50 U.S. states. 

As for the rest of the world, that’s off limits too under Chevron’s theory of subsidiary immunity. That’s because the company claims that its assets in wholly-owned subsidiaries are not owned by Chevron.

Chevron’s promise of a “lifetime of litigation” is treading dangerously close to a new form of impunity for an oil company that nobody disputes has caused massive environmental damage. That should deeply disturb anybody who cares about access to justice and corporate accountability.

Chevron’s able lawyers who appeared before the Supreme Court of Canada, Clark Hunter and Benjamin Zarnett, focused purely on the technical. Neither spoke a word about the devastating life conditions caused by the company’s dumping. (Some of the personal stories of the people affected have been captured vividly by photojournalist Lou Dematteis.)

Mr. Hunter went so far as to warn the justices of the “danger of paying too much attention to fairness” in their analysis. When asked if he was requesting that the court create a new jurisdictional barrier for the villagers that had never before existed in Canada, he evaded answering the question.

To Chevron, “fairness” never had any place in either its brutally messy operations in Ecuador or in its arguments in court. Hopefully, judges who hear these cases will reject Mr. Hunter's plea to ignore fairness. The affected villagers deserve to be able to seek to collect on what they have won after far too many years of Chevron-instigated delay. Fairness should be front and center in any legal analysis.

Absent extraordinary circumstances not present here, enforcement actions against a company that refuses to pay a valid court judgment must be heard on the merits. To deny the villagers an enforcement trial would make little sense in our increasingly globalized world. It would also be a manifest injustice to those vulnerable communities that have fought bravely for 22 years to obtain a resolution of their claims.