Judge halts Chevron-Ecuador enforcement action in Canada

Wed May 1, 2013 7:46pm EDT

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May 1 (Reuters) - A Toronto judge halted on Wednesday an effort to enforce a $19 billion Ecuadorean judgment against U.S. oil company Chevron Corp in Canada, finding that his Ontario provincial court was the wrong place for the case.

The action is the latest skirmish in a two-decade conflict between Chevron and residents of Ecuador's Lago Agrio region over claims that Texaco, which Chevron acquired in 2001, contaminated the area from 1964 to 1992.

Citing Chevron's promise to fight the plaintiffs until "hell freezes over, and then fight it out on the ice," Justice David Brown of the Ontario court foresaw a "bitter, protracted" battle that would be costly and time consuming.

"While Ontario enjoys a bountiful supply of ice for part of each year, Ontario is not the place for that fight," Brown wrote in his ruling on Wednesday. "Ontario courts should be reluctant to dedicate their resources to disputes where, in dollars and cents terms, there is nothing to fight over."

Alan Lenczner, principal lawyer in Toronto for the Ecuadorean plaintiffs, said they would definitely appeal, arguing that a multinational company could not be immune from enforcement in a country where it earns so much.

"Chevron Corp itself earns no money," he said in a statement. "All its earnings and profits come from subsidiaries including, importantly, Chevron Canada."

Chevron Canada's assets are worth more than $12 billion, the plaintiffs had said, and alongside separate actions in Argentina and Brazil, they had sought to persuade the Ontario court to collect the damages awarded to them by the South American court.

Chevron, the second-largest U.S. oil company, has steadfastly refused to pay, saying the February 2011 ruling by the court in Lago Agrio was influenced by fraud and bribery. A related fraud case goes to trial in New York in October.

The Supreme Court of Canada has ruled that the country's courts can recognize and enforce foreign judgments in cases where there is a "reasonable and substantial connection" between the cause of the action and the foreign court.

Chevron called Brown's ruling a "significant setback" to the Ecuadoreans' strategy of seeking enforcement against subsidiaries that were not parties to the Ecuador case.

"The plaintiffs should be seeking enforcement in the United States - where Chevron Corporation resides. In the U.S., however, they would be confronted by the fact that eight federal courts have already found the Ecuador trial tainted by fraud," Chevron said in a statement.

Last month, a consulting firm whose work helped lead to the $19 billion award against Chevron disavowed some environmental claims used to obtain the judgment.

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