Canadian Court Thwarts Enforcement of Fraudulent Judgment

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May 30, 2018

A long-running litigation campaign to force Chevron USA to pay a $9.5 billion Ecuadorian judgment, which a New York court found in 2014 to be a product of fraud and bribery, hit another roadblock last week in Canada. 

An Ottawa appellate court held that the Ecuadorian plaintiffs and their lawyers could not go after the assets of Chevron’s Canadian subsidiaries to satisfy the judgment.  The court explained that Chevron USA and Chevron Canada are different corporate entities, and that a U.S. company’s foreign subsidiary is not liable for the alleged debts of the parent corporation. The court found no evidence that Chevron had structured its assets to avoid collection.

The court’s opinion also criticized the plaintiffs’ apparent strategy of circumventing the U.S. legal system, despite the fact that Chevron USA has sufficient assets to satisfy the judgment in the United States.  The plaintiffs’ motivation, the court noted, was to avoid the U.S. courts’ findings of fraud:

[T]he appellants’ submissions fail to acknowledge that the real fact driving their appearance in the Canadian courts is that they have not enforced their judgment in the United States. . . .

Whatever the reason for not enforcing the Ecuadorian judgment in the United States, it is clear that the difficulties the appellants are encountering in collecting the judgment are not related to Chevron Corporation’s structuring of its subsidiaries. What we are really being invited to do is to assist the appellants in doing an end-run around the United States court order by breaking with well-established jurisprudence and creating an exception to the principle of corporate separateness that is both ill-defined and will be unnecessary for similarly situated judgment creditors.

With this decision, four countries have now rejected attempts to enforce the questionable judgment: Canada, Brazil, Argentina, and the United States. 

The Canadian court order can be accessed here.  For more information on foreign judgment enforcement in the United States, please visit our information page.