Chevron Corp. v. Yaiquaje a case to assist with international debt enforcement

Tim Law was called to the Ontario bar in 1991 and, after clerking to the judges of the Ontario Superior Court of Justice for one year, he joined a sole practitioner with whom he practiced for 2 years.  Tim then joined Heifetz, Crozier as counsel in 1994 and became a partner of Heifetz, Cozier, Law in 1997.  He is a proud member of the International Law Association and the International Forum of Travel & Tourism Advocates.  Since joining Heifetz, Crozier, Tim has carried out work for airlines, airline consolidators, tour operators, travel agencies, travel management companies, travel insurance companies and individuals in the travel industry; as well as for other commercial and individual clients.  The firm’s clients are located in various parts of the world, including Canada, the U.S., the Americas, the U.K. and Europe.  Tim’s work has been carried out in courts (in 6 of the 10 Canadian provinces) and before regulatory/administrative bodies and arbitration panels.

This case was recently back in the press because of an Ontario Court of Appeal decision addressing basic corporate law principles and debt collection in Ontario, but it was not that long ago that it made the news as a private international law debt collection case, arguably applicable in all common law provinces, when the Supreme Court of Canada decided 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. It makes little sense to compel such a connection when, owing to the nature of the action itself, it will frequently be lacking. Nor is it necessary, in order for the action to proceed, that the foreign debtor contemporaneously possess assets in the enforcing forum. Jurisdiction to recognize and enforce a foreign judgment within Ontario exists by virtue of the debtor being served on the basis of the outstanding debt resulting from the judgment. This is the case for Chevron.” para. 3 [2015] 3 S.C.R. 69.

Enter Canada as a jurisdiction friendly to the collection of debts owed by foreign nationals, many of whom, considering Canada a country friendly to foreign investment, hold both personal and real property here.

The case began when suit was brought against Chevron by Ecuadorian Plaintiffs due to environmental damage done by its predecessor corporation, Texaco. Originally commenced in New York, the claim there was stayed and the suit proceeded in Ecuador, where an US$18 billion award was initially granted, but ultimately reduced to US$9.51 billion. The Plaintiffs then sought to enforce the Ecuadorian judgment in Ontario against Chevron, located in the U.S., and without Canadian assets, as well as Chevron Canada. Chevron Canada was an indirectly owned subsidiary of Chevron but was not party to the original judgment.  The Plaintiffs claimed the shares in Chevron Canada were beneficially owned by Chevron and also sought a declaration that these were assets of Chevron which were available to satisfy the Ecuadorian judgment.  Chevron and Chevron Canada brought a motion to stay the claim on the basis that the Canadian court lacked jurisdiction and to set aside service.

Dealing with the Defendants’ motion, Justice Brown canvassed the very limited defences available to a claim such as that being brought by the Plaintiffs, all of which are based on the notion that the foreign judgment was obtained in some tainted fashion or contrary to Canadian notions of justice.  He then went on to note that test for assuming jurisdiction against a foreign defendant is based on whether there was a real and substantial connection to the forum in which the action, on its merits, had proceeded to determine liability and damages and not the Canadian jurisdiction in which enforcement was sought.  Having found that Ontario had jurisdiction over the proceeding, Brown J. went on to discuss a discretionary stay despite that relief not being sought by any party.  His Honour noted that Chevron Canada was a 7th generation indirectly owned subsidiary of Chevron (not originally part of the Ecuadorian proceeding) and that the Plaintiffs were attempting to pierce the corporate veil by claiming Chevron was the beneficial owner of the shares of Chevron Canada.  Finding that the evidence did not support piercing of the corporate veil, that there were no allegations of wrongdoing against Chevron Canada, that a principal-agent relationship between the two was not pleaded, and that therefore the relationship between the two was of a typical parent and subsidiary, he concluded Chevron Canada`s assets were not available to satisfy the judgment.  As a result, and of his own volition, Brown J. granted a discretionary stay of the claim.

In the ruling by the Ontario Court of Appeal (2013 ONCA 758), Justice MacPherson found that Justice Brown was correct in determining that the “real and substantial connection” test did not need to be met twice (first in the foreign jurisdiction where the judgment originated and again with respect to Ontario in the claim to enforce the judgment), and that there was no need for assets to exist in the jurisdiction in order for enforcement proceedings to be brought there.  He also decided that Justice Brown erred in staying the action on his own motion and lifted the stay.

The case then made its way, as all watching knew it would, to the Supreme Court of Canada.  As noted above, in the third paragraph of the decision, Justice Gascon (speaking for the entire court) made it clear that those with a foreign judgment in their favour, obtained in a foreign jurisdiction having jurisdiction over the claim, are able to use that judgment as a basis to obtain an Ontario judgment.  That local judgment can then be used to enforce the foreign debt against assets located in Canada.  This is the case regardless of whether the debtor has any assets in Canada at the time the case is heard or judgment granted.  The prerequisite for same being proper service of the Ontario proceeding on the party against which the judgment is sought.

As a creditor with knowledge that a debtor has, or may in the near future have, assets in Canada, there is no barrier – in the form of a link to Canada of the debt owing or the debtor – when it comes to commencing suit here in order to enforce a foreign judgment.  Other than the local legislation and case law applicable to debt enforcement, and patience, Canada is now as friendly a place to those trying to collect debts as it is to those choosing to own assets here.

 

Post a comment