In Canada, Chevron Faced Tough Questions During Critical Court Hearing Over $12b Ecuador Pollution Judgment

Members of the FDA delegation from Ecuador join Canadian National Chief Perry Bellegarde in front of Ontario Court of Appeals in Toronto on day of court hearing in Ecuador pollution case.

Members of the FDA delegation from Ecuador join Canadian National Chief Perry Bellegarde in front of Ontario Court of Appeals in Toronto on day of court hearing in Ecuador pollution case.

TORONTO - Chevron faced a series of tough questions from a three-judge appellate panel this week in Ontario over its continued attempt to evade paying a $12 billion environmental liability owed to Indigenous peoples and farmer communities in Ecuador’s Amazon region following the dumping of billions of gallons of toxic oil waste onto ancestral lands.

Chevron packed one side of the courtroom for the two-day hearing with roughly 20 lawyers, but the company ran into strong headwinds from judges who must decide whether the Ecuadorians can gain access to a wholly-owned Chevron subsidiary (Chevron Canada) that holds enough assets to pay the entirety of the Ecuador judgment. Chevron has vowed never to pay the Ecuador judgment despite accepting jurisdiction in Ecuador; a company official once threatened the Indigenous peoples with a “lifetime of litigation” if they persisted in pursuing their claims.

Chevron now maintains that its Canadian subsidiary is a separate company even though 100% of Chevron Canada’s shares are owned by Chevron or other of its wholly-owned subsidiaries. See this summary of the overwhelming evidence against Chevron as found by Ecuador’s courts.

Highlights from the two–day hearing before the Ontario Court of Appeal include: 

  • The judges essentially shut down Chevron’s lead Canadian lawyer, Larry Lowenstein, when he tried to talk about the company’s discredited “racketeering” judgment against the Ecuadorians from a U.S. court.  “We presume the judgment in Ecuador to be valid,” said Justice Ian Nordheimer. “I’m not sure where this argument is taking you.” Lowenstein then quickly took a seat after only a few minutes despite having a large book of notes that he apparently planned to speak from over the entire afternoon. Chevron’s argument ended at 3 p.m. when the court had allotted the entire day for the company to make its case.
    (For more on Chevron’s discredited U.S. racketeering case, where it paid a witness at least $2 million for false testimony, see here and here. For how Chevron lawyer Lowenstein has tried to mislead Canada’s courts about the U.S. racketeering case, see here. For a criminal referral letter of Chevron to the U.S. Department of Justice, see here.)
  • Alan Lenczner, a lawyer for the Ecuadorians, orally disclosed stunning evidence that Chevron Canada was under the control of Chevron and was not independent, as the company maintains as part of its effort to immunize the subsidiary from collection. Among the facts offered by Lenczner: Chevron Canada has been used by Chevron to funnel $3.3 billion annually to the governments of Nigeria and Indonesia, with the profits from the operations in those countries flowing directly back to Chevron in the United States rather than to the Canadian subsidiary.
    “Other than day-to-day operations, Chevron Canada has no significant authority to engage in its core and fundamental business,” said Lenczner. “Every step has required (outside) approval.”
  • The judges also asked Chevron Canada lawyer Benjamin Zarnett whether Chevron had any interest in Chevron Canada given that the company owns 100% of the shares of its subsidiary. Zarnett’s response: “Corporations are separate legal entities even if they’re part of a group. It’s not an economic reality, but it’s a legal reality.” 
  • Lenczner, the lawyer for the Ecuadorians, was asked about the discredited racketeering judgment issued in 2014 by a lone U.S. trial judge who determined in a civil case that the Ecuador proceeding was fraudulent. Lenczner directed a full-throated attack on the U.S. trial judge’s decision, pointing out that Chevron (in the U.S. case) paid its star witness at least $2 million. The witness later admitted that he had lied under oath after being coached for 53 days by Chevron lawyers. The U.S. judge also relied on a limited evidentiary record that did not include the voluminous evidence of Chevron’s environmental contamination in Ecuador.
    “The U.S. case is irrelevant and has no probative value in Canada,” said Lenczner during his argument. “The U.S. case is actually a great illustration of how Chevron committed fraud to evade its liability to the people it harmed in Ecuador,” Patricio Salazar, the lead Ecuadorian lawyer on the case, said after hearing the argument.
  • Chevron also was dealt a blow when two of Canada’s leading Indigenous leaders attended the hearing in support of six Ecuadorian leaders who were present. The Canadian leaders included Perry Bellegarde, Canada’s current National Chief who leads the Assembly of First Nations, considered the world’s most powerful indigenous confederation; and Phil Fontaine, the thrice-elected National Chief of Canada. Fontaine visited the impacted area in Ecuador last year along with Canadian Grand Chief Ed John; both were harshly critical of Chevron’s misconduct.

While Chevron was hit with a number of setbacks during this week’s court hearing – company lawyers looked glum after Lowenstein suddenly was forced to stop his presentation – the long-running case seems to inadvertently have produced possible evidence of an apparent Chevron tax-avoidance scheme using its wholly-owned Canadian subsidiary as the vehicle, according to Salazar.

“It appears Chevron is paying virtually no tax in Canada by sending billions of dollars of profits generated in the country to foreign governments, and then writing it off as a business expense,” said Salazar, the Ecuadorian lawyer on the case. “Chevron appears to be using Chevron Canada to cheat Canadians out of tax dollars while it cheats Indigenous peoples and farmer communities in Ecuador out of their compensation for damaging their ancestral lands.” 

Attending the court hearing in Toronto in traditional dress were several Ecuadorian Indigenous and mestizo leaders, including Rafael Pandam, the President of the Amazonian Indigenous Parliament of Ecuador (which counts 325 parliamentarians); Hugo Camacho, a community leaders and founder of the Amazon Defense Coalition of Ecuador (FDA), the grass roots organization that brought the lawsuit and leads the judgment enforcement effort; Janeth Cuji, a Kichwa leader and former top official of Ecuador’s Amazon Indigenous Confederation; Jaime Vargas, the President of Ecuador’s national federation, known as CONAIE; and Domingo Peas, a leader of Ecuador’s Amazonian Indigenous federation, which represents 11 Ecuadorian nationalities.

The Ecuadorians have won three straight unanimous appellate court decisions in Canada, despite the fact Chevron has hired at least 60 law firms and used an estimated 2,000 legal personnel in what is widely considered the most expensive corporate legal defense in history. The Supreme Court of Canada ruled in favor of the Indigenous peoples on a jurisdictional queston in a unanimous 2015 decision.

Chevron is also under increasing pressure from the Canadian Broadcasting Corporation and environmental groups to lift a sweeping confidentiality order that it has imposed on the court docket in the Ecuador pollution case. Among other problems, the Chevron order prevents scrutiny of the sworn testimony of a Chevron Canada corporate official about the large payments from the subsidiary to foreign governments. “Lifting this confidentiality order could potentially blow the lid off of Chevron’s attempt to hide its efforts to evade taxes in Canada and avoid the scrutiny of anti-corruption authorities in the United States,” said Rex Weyler, the co-founder of Greenpeace. (Here is the CBC article about unsealing the documents.) 

Chevron also faces increasing opposition from Canada’s AFN and several prominent environmental groups in the United States and Canada led by Oakland-based Amazon Watch. AFN leader Wilton Littlechild blasted Chevron this week over its unpaid liability in a speech at the United Nations Permanent Forum On Indigenous Issues in New York, while Bellegarde also wrote a letter to Canada’s Attorney General, Jody Wilson-Raybould, urging consideration of new legislation providing for more “expeditious” enforcement of foreign judgments in Canada.

(See this short memo on the Canadian court action and a longer briefing memo. See this press release on the arrival of Ecuadorian Indigenous leaders in Canada. )