Supreme Court reaffirms low threshold for jurisdiction in recognition and enforcement cases

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1 Supreme Court reaffirms low threshold for jurisdiction in recognition and enforcement cases Ted Brook Litigation Conflict of Laws Foreign Judgments Jurisdiction Enforcement and Recognition Service Ex Juris Supreme Court of Canada Chevron v. Yaiguaje The Scenario Imagine you re a plaintiff, and after months, or even years, of gruelling litigation in a foreign country be it the United States, the United Kingdom or the United Republic of Tanzania a foreign court has finally granted judgment in your favour. You ve won. Your rights have been vindicated. At long last, you can rest that is, until you discover that the Defendant has removed its assets from the jurisdiction. What do you do? You think that the Defendant may have assets in Ontario, but what good is your foreign judgment here? As the Supreme Court of Canada recently reminded us in Chevron v. Yaiguaje, 1 pretty darn good that s what. Since the landmark 1990 decision in Morguard v. De Savoye, 2 Canadian courts have taken a generous approach to the recognition and enforcement of lawfully-obtained foreign judgments. Fuelled by a concern for comity (respect for the laws other nations) and by a appreciation for the fact in our globalized world, assets can cross borders with ease, Canadian law sets a low threshold for the recognition and enforcement of foreign judgments. Chevron (2015) Chevron (2015) involved the attempt by 47 plaintiffs, representing 30,000 indigenous SCC 42 [Chevron (2015)]. 2 [1990] 3 SCR 1077 [Morguard (1990)]. Ecuadorian villagers, to enforce a foreign judgment by an Ecuadorian trial judge against Chevron regarding extensive environmental pollution. The award obtained by the villagers was a staggering US$8.6 billion, even after being reduced on appeal by Ecuador s Court of Cassation. 3 While Chevron (2015) was unique the award was massive and aspects of the case read like a John Grisham novel 4 the Supreme Court s decision has a wide breadth and contains lessons for any business, small or large, commencing or defending recognition and enforcement proceedings in Canada. Procedural History The villagers commenced an action for recognition and enforcement of the Ecuadorian judgment against Chevron and Chevron Canada in the Ontario Superior Court of Justice. 5 Chevron was served at its head office in San Ramon, California; and Chevron Canada was served first at an extra- 3 Chevron (2015) at para. 6. The original award was for US$17.2 billion. 4 Steven Donziger, the villagers lawyer, was found to have engaged in bribery, fraud and racketeering in relation to the Ecuadorian litigation: Ecuador s environment damages case against Chevron receives another blow in U.S. Globe and Mail, May 11, Yaiguaje v. Chevron Corporation, 2013 ONSC 2527 [Chevron (2013)].

2 provincially registered office in British Columbia, and then at its Mississauga Office. 6 Chevron and Chevron Canada each brought a motion seeking an order setting aside service ex juris and an order declaring that the court had no jurisdiction to hear the action. The motion judge rejected Chevron s position that the real and substantial connection test for establishing jurisdiction articulated by the Supreme Court in Club Resorts v. Van Breda applied to whether an enforcing court has jurisdiction to recognize and enforce a foreign judgment. 7 The motion judge also found that jurisdiction existed over Chevron Canada, despite not being the judgment debtor, because the plaintiffs had served the corporation at a bricks and mortar office which constituted a place of business within the meaning of s (1)(c) of the Ontario Rules of Civil Procedure. Nevertheless, the motion judge ordered a stay of proceedings pursuant to s. 106 of the Courts of Justice Act because, among other considerations, Chevron did not own, had never owned, and had no intention of owning assets in Canada. According to the motions judge, the evidence disclosed that there is nothing in Ontario to fight over. 8 The villagers appealed the stay, and Chevron and Chevron Canada cross-appealed the conclusion that the Ontario courts have jurisdiction. The Court of Appeal overturned the stay, rejecting the view that it was appropriate for the motion judge to impose this rare relief, no less on his own initiative without the request of either party. 9 On the jurisdictional issue, however, the Court of Appeal agreed with the motion judge, holding that Club Resorts v. Van Breda did not apply to actions for recognition and enforcement. Further, the Court of Appeal found that the Supreme Court s decision in Beals v. Saldanha was crystal clear about the role of the real and substantial connection test in actions for recognition and enforcement. The sole question is whether the court in the foreign jurisdiction had a real and substantial connection with the subject matter of the dispute or the defendant. 10 With regard to Chevron Canada, the Court of Appeal held that the motion judge had been correct to note Chevron Canada s bricks-andmortar business in Ontario. 11 The Court of Appeal also found that Chevron Canada s significant relationship with Chevron was relevant to whether jurisdiction could be properly asserted. Chevron and Chevron Canada appealed. The Issues There were two issues before the Supreme Court in Chevron (2015): 1. whether, in an action to recognize and enforce a foreign judgment, there must be a real and substantial connection between the defendant or the dispute and Ontario for jurisdiction to be established; 2. whether the motions judge and Court of Appeal were correct to assert jurisdiction over Chevron Canada, a third party to the judgment for which recognition and enforcement was sought. 6 Chevron (2013) at para Ibid at para Yaiguaje v. Chevron Corporation, 2013 ONCA 758 [Chevron (C.A.)] at para Ibid at paras Ibid at para Ibid at para. 38.

3 Jurisdiction over Chevron Before the Supreme Court, Chevron argued that an Ontario enforcing court must follow a two-step process. First, it must determine its own jurisdiction by applying the real and substantial connection test from Van Breda. Second, and only if jurisdiction is found, the enforcing court should ask whether the foreign court appropriately assumed jurisdiction over the dispute. In support of its position, Chevron relied heavily on a single passage from the Supreme Court s decision in Pro Swing v. Elta Golf which read: Under the traditional rule [that only monetary judgments were enforceable], once the jurisdiction of the enforcing court is established, the petitioner must show that he or she meets the conditions for having the judgment recognized and enforced. 12 Writing for a unanimous court, Gascon J. rejected Chevron s position completely, holding that it was sound neither in law nor in policy and noting that Canadian courts have adopted a generous and liberal approach to the recognition and enforcement of foreign judgments. 13 Justice Gascon agreed with the Court of Appeal and reaffirmed that the only prerequisite to recognize and enforce a foreign judgment is that the foreign court 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 SCC 52 at para Chevron (2015) at para. 27. have a real and substantial connection with the litigants or the subject matter of the dispute. 14 According to Gascon J., there are five reasons for this conclusion: (1) contrary to the position of Chevron, the Supreme Court has never imposed such a requirement; (2) the conflict of law principles underlying actions for recognition and enforcement are distinct from those governing actions at first instance; (3) the ex periences of jurisdictions, convincing academic commentary, and the fact that comparable statutory provisions exist in provincial legislation reinforces this approach; and finally (4) practical considerations militate against Chevron s approach. 15 Jurisdiction over Chevron Canada Chevron Canada argued before the Supreme Court that Ontario courts have no jurisdiction to hear an action to recognize and enforce a foreign judgment against a non-party to the judgment not domiciled in Ontario. According to Chevron Canada, the Ontario Court of Appeal erred by holding (1) that carrying on business in the province is a sufficient ground for the assertion of jurisdiction when the subject matter of the action is unrelated to the business; and (2) that the close economic relationship between Chevron and Chevron Canada was relevant to the assertion of jurisdiction in the absence of facts that could justify piercing the corporate veil. Justice Gascon was equally dismissive of Chevron Canada s jurisdictional challenge. In his view, Van Breda specifically preserved the traditional grounds of presence and consent. In this case, Chevron Canada s office in Mississauga, where it was served in juris, satisfies presence-based jurisdiction. According to Gascon J., although Van Breda simplified, justified and explained many 14 Ibid at para Ibid at para. 27.

4 critical aspects of Canadian conflicts of laws, [Van Breda] did not purport to displace the traditional jurisdictional grounds... Van Breda did not, as Chevron Canada argued, raise the threshold for presence-based jurisdiction to that of assumed jurisdiction. After all, LeBel J. explicitly stated in Van Breda that in addition to the connecting factors for assumed jurisdiction, jurisdiction may also be based on traditional grounds, like the defendant s presence in the jurisdiction or consent to submit to the court s jurisdiction, if they are established. 16 Justice Gascon took no position on the corporate relationship between Chevron and Chevron Canada, however, and refused to comment on whether Chevron Canada s assets could be available to satisfy Chevron s debts: It is not at the early state of assessing jurisdiction that courts should determine whether the shares or assets of Chevron Canada are available to satisfy Chevron s debt. As such, contrary to the appellant s submissions, this is not a case in which the Court is called upon to alter the fundamental principle of corporate separateness 17 Chevron (2015) the Big Picture Although the villagers were successful in establishing that Ontario courts have jurisdiction to hear their action for recognition and enforcement, it is important to remember that this is but one step in the enforcement process. The Supreme Court in Chevron (2015) was only concerned with the assumption of jurisdiction and not with the merits of the villagers recognition and enforcement action. Thus, Gascon J. s decision does not prevent Chevron or Chevron Canada from raising any one of the available defences to recognition and enforcement, such as fraud, denial of natural justice, or public policy. In an action to recognize and enforce a foreign judgment where the foreign court validly assumed jurisdiction, there is no need to prove that a real and substantial connection exists between the enforcing forum and either the judgment debtor or the dispute. Nevertheless, Gascon J. s decision in Chevron (2015) is a valuable reminder of the reasons why the threshold for assuming jurisdiction in recognition and enforcement actions ought to be a low bar for plaintiffs. Specifically, Chevron (2015) reminds us that Canadian courts take comity seriously. The respect for the laws and legal systems of other nations militates in favour of recognition and enforcement. 18 As Gascon J. writes, Legitimate judicial acts should be respected and enforced, not sidetracked or ignored. 19 Takeaways for Plaintiffs There are two main takeaways from Chevron (2015) for plaintiffs who have obtained judgment abroad; either in another province, south of the border or elsewhere in the world: 1. The threshold to convince a court to hear a recognition and enforcement be it in Ontario or another province is a low one. 2. To establish that an Ontario court has jurisdiction to hear the action, a plaintiff must simply demonstrate 16 Ibid at para Ibid at para See discussion in Morguard (1990) at pp Chevron (2015) at para. 53.

5 that (a) a final judgment was obtained and (b) the issuing court had a real and substantial connection to the dispute or the litigants. Of course, a low threshold does not mean that the recognition and enforcement of foreign judgments is straightforward or without obstacles. Plaintiffs seeking to enforce foreign judgments should always seek advice from qualified legal counsel. Takeaways for Defendants Chevron (2015) also contains a number of takeaways for defendants to actions for recognition and enforcement: 1. After Chevron (2015), it will be difficult to challenge the jurisdiction of an Ontario court to hear a recognition and enforcement action. To succeed a defendant should challenge the finality of the foreign judgment or the connection between the foreign court and the litigants and the subject matter of the dispute. 2. Defendants may have more success raising defences to recognition and enforcement, such as fraud, natural justice, or public policy; 3. If served in accordance with the Rules of Civil Procedure, defendants carrying on business in Ontario will likely be subject to the jurisdiction of the court hearing a recognition and enforcement action despite having nothing to do with the foreign action. Although the Supreme Court found that the Ontario court had jurisdiction over Chevron Canada, the Supreme Court did not address any of the substantive issues regarding the liability of Chevron Canada as a non-party to the original judgment. In other words, Chevron Canada will have another kick (or two) at the can before the Villagers succeed in enforcing their judgment. About Chitiz Pathak LLP Chitiz Pathak LLP is a boutique business law firm located in Toronto, Ontario, Canada, offering leading legal expertise and advice in litigation, corporate law and securities, and intellectual property and trademarks This article is intended to provide educational legal information and does not constitute legal advice or opinion. You should not act or rely on any information contained in this article without first seeking the advice of lawyer.