Epic Chevron Oil Pollution Case Goes Before Canadian Supreme Court

Flames burning gas in the Lago Agrio oil field in Ecuador Photographer: Moises Saman/The New York Times

Lawyers have fought for 21 years in courts in a half-dozen countries over who’s responsible for oil contamination in the rain forest in Ecuador. On Thursday the Supreme Court of Canada will hold oral arguments on whether that nation should get involved in the fracas.

Ecuadorean villagers are trying to enforce a multibillion-dollar judgment they won in their home country in 2011. Chevron, the target of that judgment, vows it’ll never pay a dime on a verdict the company disdains as a total sham. Chevron contends the main plaintiffs’ attorney, Steven Donziger of New York, is an extortionist and that, in any event, it isn’t responsible for the pollution in question.

Some background: The case began in New York in 1993, when Donziger and other attorneys filed suit against Texaco on behalf of thousands of poor farmers and indigenous tribe members in northeastern Ecuador. After nine long years of procedural wrangling, Texaco persuaded the U.S. courts to dismiss the case. Chevron, which acquired Texaco in 2001, assumed the Ecuador liability problem had gone away. Chevron assumed incorrectly.

Donziger refiled the suit in a provincial court in Ecuador in 2003, and eight years later he and an Ecuadorean team of lawyers and activists won a stunning $19 billion verdict. The Ecuadorean Supreme Court upheld Chevron’s liability, although it halved the damages to about $9.5 billion.

Two Amazonian frogs completely coated in oil were rescued from an open pit left by Texaco/Chevron near the town of Shushufindi, Sucumbios, Ecuador, in 2008
Photographer: Clare Kendall/Eyevine via Redux

Chevron refused to pay. It insisted that in the 1990s, Texaco had done a partial cleanup and received a complete legal release from the government of Ecuador. Moreover, Chevron said that any remaining contamination was actually the responsibility of Petroecuador, the national oil company. Finally, Chevron sued Donziger and his clients back in New York, accusing the lawyer of masterminding a phony judgment based on fabricated evidence, coercion, and bribery. A federal judge in Manhattan agreed with the American oil company and in March 2014 found Donziger liable under the Racketeer Influenced and Corrupt Organizations (RICO) Act. Corporate advocates predict that the table-turning RICO gambit will become a new strategy for companies confronted with large court judgments of dubious provenance.

Chevron has no assets in Ecuador. Its subsidiaries do have billions of dollars in assets in Canada. So Donziger’s team has filed suit in Canada seeking to enforce the Ecuadorean verdict there and sell off Chevron’s pipelines, drilling equipment, and so forth. Before a Canadian trial judge addresses the validity of the Ecuadorean proceedings—and Chevron is sure to contest those, citing the New York RICO verdict—Canada’s Supreme Court has to rule on an exceedingly technical question of corporate law.

That question: Can Chevron Corp., the parent company and the defendant in Ecuador, be taken to court in Canada when, as a formal matter, Chevron operates via a subsidiary called Chevron Canada Limited? Yes, it sounds more like a law school exam question than a search for justice, but welcome to the wonderful world of jurisdictional litigation.

In an e-mail, Karen Hinton, Donziger’s spokeswoman, accused Chevron of exploiting a “jurisdictional hurdle that likely would close [Canada's] courts to indigenous communities seeking to enforce their $9.5 billion environmental judgment against the company.” Chevron spokesman Morgan Crinklaw countered in a dueling e-mail that “Chevron Corp. and Chevron Canada Limited look forward to demonstrating to the Supreme Court of Canada that the trial court in Ontario has no jurisdiction to hear the action brought by the Ecuadorean plaintiffs.”

If Donziger’s side prevails, the Canadian branch of the case goes back to a trial judge in Ontario, at which point Chevron will wheel out the New York RICO verdict branding Donziger a racketeer. (He has denied wrongdoing and is appealing the RICO verdict in the U.S.) If Chevron prevails on the Canadian jurisdictional issue, Donziger will proceed with separate enforcement actions pending in Argentina and Brazil.

If all of this sounds like it may never end, well, that’s certainly one plausible prediction. More than two decades of legal warfare hasn’t resulted in a single barrel of waste oil getting removed from the rain forest or a medical clinic getting built. There are alternatives to the perpetual litigation machine (I’ve written about one here), but the courtroom lawyers don’t seem focused on resolution, at least not in this lifetime.

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