Law Times

Law Times • February 6, 2017 Page 7 www.lawtimesnews.com Chevron, the final act: tort tourism no more BY JEFFREY LEM T he Ontario Superior Court of Justice has released its decision in Yaiguaje v. Chevron Cor- poration 2017 ONSC 135. This ends the long-running plight of 47 indig- enous Ecuadorian villagers who nearly changed the landscape of corporate law in this country. Greatly paraphrased, indigenous vil- lagers from the Lago Agrio region of Ec- uador alleged that Texaco (subsequently merged with Chevron) had caused sub- stantial pollution to the local rainforests in Ecuador and Peru between 1972 and 1990. They also alleged the company then failed to complete an adequate cleanup of the pollution, with catastrophic conse- quences to the local inhabitants' way of life. These plaintiffs succeeded in an Ec- uadorian trial court, winning a whopping US$18-billion award against Chevron. The award was upheld on appeal in Ec- uador (albeit reduced in quantum to a still far from trif ling US$9.5 billion). While some nominal Chevron assets were seized in Ecuador to satisfy the judgment, the plaintiffs really needed to reach beyond Ecuador to get any meaningful execution on the judgment. So the plaintiffs brought their made-in-Ecuador judgment to the United States to enforce against the assets of Chevron Corporation (the U.S. parent company) for the balance of the judgment. While successful in the Ecuadorian courts, the plaintiffs' litigation warpath came to a grinding halt in the American courts. In 2014, the U.S. District Court for the Southern District of New York crushed the Ecuadorian collection aspirations, finding not only that the Ecuadorian judgment was unenforceable in the Unit- ed States against Chevron Corporation but that the judgement itself was totally fraudulent and the product of racketeering activity. The plaintiffs, while stymied in the United States, brought similar enforcement proceedings in Brazil, Argentina and Canada. In September 2015, the Supreme Court of Canada, in a unanimous decision (and despite the finding of fraud and racketeer- ing in New York), denied Chevron's sum- mary motion to dismiss the Ecuadorian proceedings in Canada. In his opinion for a 7-0 bench, Justice Clément Gascon concluded, "In a world in which business- es, assets and people cross borders with ease, courts are increasingly called upon to recognize and enforce judgments from other jurisdictions... Sometimes, success- ful recognition and enforcement in an- other forum is the only means by which a foreign judgment creditor can obtain its due." The business community reeled with pessimism over the apparent fragil- ity of the Canadian corporate veil. Lisa A. Rickard, president of the U.S. Chamber Institute for Legal Reform, writing in the Financial Post right after the release of the Supreme Court decision in Chevron, coined the phrase "tort tourism." Rickard said, "Plaintiffs' lawyers are increasingly filing tort lawsuits abroad to secure large awards against multinational companies in weak or cor- rupt foreign courts. The lawyers then seek to collect those judgments around the world under liberal rules favoring recognition of foreign judgments. As a result of last week's de- cision, Canadian courts are now open to such suits even when the defendant has no presence or assets in Canada." In a colourful reply to the setback in the Supreme Court of Canada, a Chevron spokesman is reported to have stated, "[Chevron] will fight this case to the bitter end. We're go- ing to fight this until hell freezes over. And then we'll fight it out on the ice." And fight on Chevron did. The litigation returned to the On- tario Superior Court of Justice to hear the merits of the case for enforcement of the Ecuadorian judgment against the as- sets of Chevron's Canadian subsidiary (which was one of more than 1,500 Chev- ron subsidiaries worldwide, at least seven corporate levels removed from Chevron Corporation, never operated in or near Ecuador and otherwise had nothing to do with the Texaco misadventures, if any, in Lago Agrio). It is on the steps of the Ontario trial court where the Canadian part of this in- ternational litigation story seems to have finally come to an end. In a motion decision, Judge Glenn Hainey concludes that the Ecuadorian judgment against Chevron Corporation, even if valid, could not be enforced against the assets of Chevron's Canadian subsid- iary. "Chevron Canada is not an asset of Chevron [the U.S. parent]," said the ruling. "It is a separate legal person…The Ex- ecution Act does not give Chevron [the U.S. parent] any right or interest, equi- table or otherwise in the…assets of Chev- ron Canada….[a] plain reading of the Ex- ecution Act makes it clear that it does not create any substantive rights that override or supplant the long-established principle of corporate separateness…the assets of the corporation are owned exclusively by the corporation, not the shareholders of the corporation." Not only does the court recognize the corporate veil, it refuses to pierce it, given that the Chevron corporate structure was never designed or implemented to perpe- trate a fraud or other improper conduct. This robust adherence to the "long-es- tablished principle of corporate separate- ness" is the quintessential application of Salomon v. Salomon that we all learned about in Business Associations 101 in law school and comes as a welcome sigh of re- lief to many corporate law observers. While the decision may yet spawn an appellate history, for the time being, it brings to an end the considerable pessi- mism that had surrounded the sanctity of corporate identity in Canada following the Supreme Court of Canada's earlier de- cision in the case. All is now well in Cana- dian corporate law. LT uJeffrey Lem is the Director of Titles for the Province of Ontario. This article ref lects the personal view of the author alone. COMMENT Restorative justice in response to hate BY REBECCA BROMWICH M any Canadians expressed a deep sense of sorrow and outrage after a man shot worshippers in a mosque in Quebec City on Jan. 29. The shootings — soon after U.S. President Donald Trump signed an executive order banning nationals from seven countries from entering the United States for 90 days — touched a col- lective nerve in Canada. Thousands of people attended vigils across Canada, in response to the deaths, and so- cial media was alive with commentary about combat- ting Islamophobia. Lawyers have a unique role in times of crisis. In the United States, lawyers have been on the front lines of defence for civil liberties and democracy. Cana- dian lawyers must also be vigilant and vocal to ensure that the tides of social tension and moral panic do not sweep away our carefully constructed legal rights. We must vigorously defend the rights of minorities and also zealously guard the rights of people who are accused. One such concrete action could be effected by the passage of Bill C-305, which proposes amendments to s. 430 of the Criminal Code. Bill C-305, An Act to amend the Criminal Code (mischief ) received first reading in the House of Commons on Nov. 22, 2016. The legislative proposal, if passed, will extend the maximum 10-year prison penalty for mischief on religious buildings motivated by hate to apply to all public buildings, including places such as universities, community centres, seniors' residences, daycares and sports arenas. The bill also aims to add gender identity and sexual orientation to the criteria of what consti- tutes a hate crime when it comes to mischief. Currently, the provision includes only religion, race, colour and national or ethnic origin. Thus, the bill would make available prison terms of up to 10 years for property damage in a wide range of new circumstances. Bill C-305 has significant political backing across party lines. It also has grassroots support. Many com- munity members have promoted Bill C-305, including Ottawa's Centre for Israel and Jewish Affairs and the city's Youth Services Bureau. This strong support from Ottawa stems, in part, from a spate of hate graffiti in Ottawa in late 2016. This included incidents where a United church was defaced, along with a mosque, two synagogues and a Jewish prayer centre. A teenage boy is currently awaiting trial in relation to the incidents, and he cannot be identified under the Youth Criminal Justice Act. The acts led to a wide range of community responses, from hurt and devastation to expressions of solidarity for the victims, and a desire expressed on the part of some clergy for reconciliation and healing. I support Bill C-305's proposals to move away from protecting only religious institutions and toward full inclusion for LGBT persons. These changes would bet- ter ref lect the diversity of our communities than does existing law. They would make visible and more accu- rately measurable the realities these minorities face. However, while hate crimes should be defined to include gender identity and sexual orientation, and property protection should not be limited to places of worship, I have concerns about the extension of 10-year maximum sentences to new non-violent crimes that is contained in the bill. The proposal comes at a time when Canada's incar- ceration rate is already at an all-time high and when, in particular, as evidenced by a Statistics Canada Report on pre-trial remand released Jan. 10, we have a high rate of pre-trial detention of youths and a growing majority of youth in custody being held in remand relative to the numbers in sentenced custody. As currently drafted, Bill C-305 would likely lead to the incarceration of more Canadians for longer for non-violent crimes. It would also likely lead to the pre-trial detention of more youths accused of mischief. Clearly, we are in a time of increasing nativism and the emboldening of hate-motivated crime. This did not begin with Donald Trump. Incidents of police-reported hate crime against Muslims in particular have, according to Statistics Canada, in- creased over the last few years, especially in Quebec. Years before Trump's election, much Canadian politi- cal rhetoric on the right capitalized on Islamophobia and xenophobia to talk about "Canadian values" in op- position of the wearing of the niqab. We need to take hate-motivated crime seriously. However, I worry that Bill C-305 will amplify Canada's existing problem with over-incarceration and particu- larly of excessive use of pretrial detention for youths. The problems of our moment in national and interna- tional politics are complex and painfully embedded in our society. We must differentiate between violent of- fending and property crime. However tempting it may be to hope so, tensions in our communities around race and religion will not be easily resolved by rash recourse to lengthy prison terms for people who commit non-violent property crime. Scapegoating youths who deface buildings distracts from the root causes of hate-motivated crime. Thus, while passing Bill C-305 will bring about con- crete benefits by closing gaps in the recognition of and protection against hate-motivated property damage, its sentencing provisions should be revised. Rather than more prisoners serving longer prison terms, Canada needs creative, restorative remedies that get to the root causes of hate-motivated offending behaviour. In send- ing a clear message that hate-motivated violence and hate speech will not be condoned in Canada, we must be careful not to abandon our commitment to proportion- ate responses to offending, especially by youth. LT uDr. Rebecca Bromwich is an Ontario lawyer and le- gal academic and serves as the director of the Graduate Diploma in Conf lict Resolution Program at Carleton University, in the Department of Law and Legal Studies. u SPEAKER'S CORNER The Dirt Je rey W. Lem Je rey W. Lem

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