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Ecuadoreans can sue Chevron in Canada, Supreme Court rules

A Chevron gas station sign is pictured at one of their retain gas stations in Cardiff, California October 9, 2013.

Reuters/Mike Blake

Ecuadorean villagers can sue Chevron and its Canadian subsidiary in an Ontario court to enforce a $9.5-billion (U.S.) judgment from Ecuador, the Supreme Court of Canada ruled Friday.

The ruling has major implications for Canadian multinational companies whose business activities raise environmental or human-rights concerns around the globe. The ruling weakens the so-called "corporate veil" that has shielded subsidiaries from responsibility for the actions of their corporate parents.

"In a world in which businesses, assets and people cross borders with ease, courts are increasingly called upon to recognize and enforce judgments from other jurisdictions," Justice Clément Gascon wrote in a 7-0 ruling. "Sometimes, successful recognition and enforcement in another forum is the only means by which a foreign judgment creditor can obtain its due."

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A Chevron company spokesman once said that it would fight this case to the bitter end: "We're going to fight this until hell freezes over. And then we'll fight it out on the ice."

That looks like what is about to happen.

An intervenor group that provides legal support abroad to communities affected by Canadian resource companies says these communities can be exposed to a range of abuses, such as "war crimes, torture and environmental degradation."

"The outcome of this appeal has the potential to have a profound impact on the ability of such communities to seek redress," the Justice and Corporate Accountability Project told the Supreme Court in a written brief.

The lawsuit was brought by 47 indigenous villagers over harm to their lands and way of life from pollution between 1972 and 1990, allegedly caused by Texaco (which later merged with Chevron Corp., a U.S. company). An Ecuador trial court awarded $18-billion (U.S.), later reduced to $9.5-billion on appeal.

Chevron holds no assets in Ecuador so the judgment could not be enforced in that country. Chevron contends that the trial judgment was obtained through fraud and bribery, and has filed a countersuit in the United States.

The villagers have sued in Argentina, Brazil and Canada to enforce the judgment. An Ontario trial judge called the suit an academic exercise because Chevron Corp. has no assets in Ontario, but the Ontario Court of Appeal said in a 3-0 ruling that the enforcement attempt should be allowed to proceed.

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