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Court Says Chevron Can Be Pursued in Canada Over Ecuadorean Damage

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Screen Shot 2015-09-05 at 07.12.20By IAN AUSTEN and CLIFFORD KRAUSSA version of this article appears in print on September 5, 2015, on page B2 of the New York edition

The Supreme Court of Canada ruled on Friday that a group of Ecuadoreans can use an Ontario court in an attempt to collect billions of dollars from Chevron for environmental damage.

The ruling is the latest step in a 13-year legal battle over the contamination of a rain forest in Ecuador, where Texaco had oil operations. The lawsuit has pitted Ecuadorean villagers in the region of Lago Agrio against Chevron, which bought Texaco.

While a trial court in Ecuador initially awarded the villagers $17.2 billion, an appeals court reduced the damages to $9.5 billion. It was one of the largest judgments imposed by a court for environmental contamination.

But Chevron has not paid the group and has waged a vigorous legal battle against the Ecuadoreans, as well as against their American lawyers in the United States, where it argued that the original judgment had been obtained through fraud. The company has declined to accept responsibility for polluting the rain forest, drawing the condemnation of international human rights and environmental activists.

In Canada, the Ecuadoreans are fighting to seize the assets of Chevron’s subsidiary. Chevron countered that the Ecuadoreans should not be allowed to collect their debt in Canada because they have no direct link to the country. The Canadian court sided with the Ecuadoreans, saying the local courts were obliged to respect the decisions of foreign counterparts.

“Canadian courts, like many others, have adopted a generous and liberal approach to the recognition and enforcement of foreign judgments,” the Supreme Court ruled. “To recognize and enforce such a judgment, the only prerequisite is that the foreign court had a real and substantial connection with the litigants or with the subject matter of the dispute.”

Alan Lenczer, the lead Canadian lawyer for the Ecuadorean farmers, said the decision “clears the way” to a trial over the claim.

“You’ve got to be able to collect somewhere and that’s what the court is saying.” He added, however, that “we still have a road ahead of us.”

In a statement, Chevron dismissed the significance of the ruling. “Today’s decision has no bearing on the legitimacy or enforceability of the fraudulent Ecuadorean judgment,” the company said. “Instead, the Supreme Court of Canada has simply decided that the Ontario trial court has jurisdiction to entertain further proceedings in the action.”

The Ecuadorean farmers insist that Texaco, before it was bought by Chevron, spilled millions of gallons of toxic wastewater into waters of the Ecuadorean Amazon in the 1970s and 1980s and left unlined waste pits filled with toxic sludge. The contamination, they argued, ruined the lives and culture of several indigenous groups.

Chevron says Texaco cleaned up its mess. It has argued that most of the pollution was caused by the Ecuadorean national oil company that originally partnered with Texaco and eventually took over the fields.

Two years ago, the National Court of Justice, Ecuador’s highest court, reduced the fine to $9.5 billion, although it upheld the original decision despite Chevron’s cries of fraud. The Ecuadorean government has strongly supported the case against Chevron, waging its campaign on social media and encouraging protests of the company in Europe.

Last year, Chevron won a major victory when a federal judge in Manhattan ruled that a long legal effort to punish the company was marred by fraud and corruption. Still, the decision did not prohibit enforcement of the Ecuadorean judgment in courts in Canada, Brazil and Argentina, where lawyers representing indigenous Amazonian farmers have sued Chevron to seize assets.

While opening Canada’s courts to Ecuadoreans and their debt collection efforts, the Supreme Court noted that they might not be successful.

“That the plaintiffs in this case may ultimately not succeed on the merits of their recognition and enforcement action, or that they may not succeed in successfully collecting from the judgment debtors against whom they bring this action, are not relevant factors,” the court ruled. “A party may bring an action for all kinds of strategic reasons, recognizing that their chances of collection on the judgment are minimal. It is not the role of the court to weed out cases on this basis.”

Mr. Lenczer, the lawyer for the plaintiffs, said he expected Chevron to raise the same fraud and corruption allegations at a Canadian trial. But he hoped the company would have a change of heart.

“Nobody’s challenging that there was widespread contamination and pollution here, so the question is: Why not remediate it?”

Morgan Crinklaw, a spokesman for Chevron, said, “The government of Ecuador and Petroecuador, the state-owned oil company, are responsible for the current environmental and social conditions in Ecuador.”

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