Friday, 1 June 2012

Chevron Foreign Judgment Case is a Fraud/Denial of Natural Justice Defence Case Writ Large Enormous

     Chevron's defences to enforcement  in Canada of the US$18.3 billion Equadorian judgment are relatively few, and are dwindling.     

      Unlike in some enforcement cases, the trial court's jurisdiction over the defendant will not likely be an issue here.  The plaintiffs originally sued Texaco in 1993 in Federal Court in New York in connection with environmental damage in Equador in the 1970's and 1980's by Texaco (which was purchased by Chevron in 2001).  Texaco resisted on jurisdictional grounds, insisting that the proper forum was Equador and that the courts there would provide a fair trial, and promising to attorn to that jurisdiction.  The jurisdictional battle was hard fought and raged until 2001.  The trial in Equador would be before a judge alone, not a jury, and some believed the Equadorian judiciary was notoriously corrupt.  These facts plus the fact that oil represented a third of the Equadorian government's revenue led some to believe the Equadorian court would side with Texaco. Ultimately, the oil company prevailed and the case was moved to Equador in 2001. The Equadorian court gave judgment against Chevron last year, making this a massive case of buyer's remorse. 

      Chevron denounced the judgment as "illegitimate and unenforceable",  and declared that “We’re going to fight this until Hell freezes over—and then we’ll fight it out on the ice.”    Chevron has employed unprecedented tactics in resisting enforcement.  Shortly before the Equadorian court issued its judgment, Chevron moved pre-emptively to obtain an order from the Federal Court in New York restraining the plaintiffs from enforcing any Equadorian judgment.  (However, this brash move conceivably contributed to the ultimate outcome in Equador.)   Last fall, Chevron persuaded the court to restrain the plaintiffs from enforcing the judgment anywhere in the world. This order was soon set aside on appeal, but I understand an order restraining enforcement in the United States remains in effect.  Because Chevron attempted but failed to get a restraining order with extra-territorial effect, Chevron's prospects for having the order enforced in Canada (if it chooses to pursue this) are diminished.    

      Chevron takes an aggressive stance not only because it has vast financial resources, but also because of indications of serious problems in the trial proceeding,  including some admissions of same allegedly made during the trial by one of the plaintiffs' counsel. He said, “They’re all corrupt,” referring to Ecuadoran judges. “It’s their birthright to be corrupt.”   On another occasion, he allegedly said "The only language that I think this judge is going to understand is one of pressure, intimidation and humiliation".  (The judge in question might not be the same judge who issued the judgment, as a number of judges came and went over the course of the decade-long proceedings.)  Apparently there is also evidence that an environmental assessment report bearing the name of certain expert was not in fact his work, that the report of a court-appointed neutral expert was partially drafted by the plaintiff, and that meetings with judges took place sometimes without representatives of both sides present. 

       However, as the Supreme Court of Canada said in Beals v Saldanha, "the merits of a foreign judgment can be challenged for fraud only where the allegations are new and not the subject of prior adjudication".   Almost certainly Chevron raised these allegations in the proceedings in Equador. 

      If so, Chevron may have to pin its hopes on the denial of natural justice defence.   Chevron was not denied its right to notice of the trial and to participate in it, so Chevron's defence may be limited to bias, specifically bias on the part of the judge who issued the judgment.

      I hope to provide updates and more commentary as the enforcement proceedings progress.

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