Allowing corrupt foreign judgments into our courts: Another sign Canada’s bad for business
The headwinds against Canada’s oil and gas industry have been severe the past few years, and show no signs of abating. But a court case in Toronto this week showcases yet another formidable threat to the integrity of the Canadian business environment that could give foreign corporate interests another reason to hit the pause button on Canadian investment.
In 2011, a $19.5 billion Ecuadorian court judgment (later reduced to $9.5 billion) was secured against Chevron Corp. for alleged environmental damage supposedly done by Texaco, a company Chevron purchased in 2001. The judgment was issued despite all subsequent remediation and a written commitment by the Ecuadorian government to Chevron to legally remove any liability.
It later came to light that the Ecuadorian judgment was procured by deception. In 2014, the U.S. District Court (and later the U.S. Court of Appeals for the Second Circuit) held that the Ecuadorian judgment was secured by witness tampering, bribery, corruption and fraud, and is permanently unenforceable in the U.S. According to the findings of U.S. courts, the lead lawyer for the Ecuadorian plaintiffs, Steven Donziger, had arranged for the ghost-writing of “expert” reports, court orders, and the original Ecuadorian court judgment itself. The Wall Street Journal has called the Ecuadorian judgment the “legal fraud of the century.”
Since 2014, Donziger has been shopping the Ecuadorian judgment around the world, trying to find a country willing to collude with him to tie the fraudulent $9.5-billion judgment on a Chevron subsidiary. He has found a new way to advance the Ecuadorian judgment: in Canada.
Federal prosecutors in both Brazil and Argentina have issued formal opinions that the Ecuadoran judgment is unenforceable in those countries because it is the product of fraud and corruption. Brazil’s deputy prosecutor general even stated that the judgment was “issued irregularly, especially under deplorable acts of corruption.” But the Supreme Court of Canada ruled in 2015 that enforcement proceedings for the Ecuadorian judgment could proceed against Chevron Canada.
Chevron Canada has nothing to do with what occurred in Ecuador. Further, the legal doctrine of corporate separateness holds that Chevron Canada is a distinct and separate entity from Chevron Corp. In January 2017, an Ontario court agreed, and ruled that the Ecuador judgment cannot be enforced against Chevron Canada due to the doctrine of corporate separateness. That is the law in Canada, and Chevron Canada has a right to expect that it will be upheld by Canadian courts, yet it is being dragged through the Canadian judicial system unfairly because the Supreme Court of Canada permitted the Ecuadorian judgment to proceed in Canada.
The Ecuadorian plaintiffs have appealed the 2017 decision of the Ontario court that protected the corporate separateness of Chevron Canada. That appeal is being heard this week. The legal drama will play out as it will. But a foreign company observing the Chevron Canada proceedings and considering investing in Canada has one more cause for serious concern about the viability and integrity of the Canadian business environment and the advisability of investment.
Thanks to recent open anti-commerce hostility displayed by Canada’s provincial and federal governments to the oil and gas industry — the B.C. government’s disregard for the Constitution in its anti-pipeline campaign and our increasingly uncompetitive business tax regime, to name just two examples — Canada is bleeding foreign investment at a record pace. Companies like Kinder Morgan already can’t trust Canadian political leaders to respect the rule of law. Now they can’t trust Canada to protect them from corrupt foreign judgments.
Global trade works when international standards are observed and intellectual property rights are respected. Canada, however, must stop thinking that its national niceness requires it to recognize corrupt judgments being shopped here from other countries. Allowing corrupt foreign judgments to proceed to enforcement against Canadian companies is an insult to our Constitution and the rule of law, and a knife in the back of the foreign companies that invest in Canada.
Jay Cameron is a lawyer with the Justice Centre for Constitutional Freedoms
@JurisCameron jcameron@jccf.ca