TORONTO _ Ecuadorian villagers do not need to put up almost $1 million before they can pursue a claim against oil behemoth Chevron, Ontario’s top court ruled Tuesday.
In its decision, the Court of Appeal said it would be unfair to force the villagers to put up the cash deposit to cover Chevron’s legal costs should they lose their challenge.
“An order for security for costs should only be made where the justness of the case demands it,” the Appeal Court said. “Courts must be vigilant to ensure an order that is designed to be protective in nature is not used as a litigation tactic to prevent a case from being heard on its merits.”
The villagers are asking the Canadian courts to make Chevron Canada pay a hard-fought US$9.5-billion award they won in Ecuador against U.S.-based Chevron Corp. in 2013 for environmental devastation and the health problems caused.
While the Supreme Court has said the group’s case can be heard here, an Ontario judge ruled Chevron Canada is a separate entity and can’t be held liable for the judgment against its parent. The Ecuadorians are appealing that ruling, but a judge had ordered them to first put up $943,000 to cover Chevron’s legal costs if they lose.
The villagers argued they couldn’t come up with that kind of money, and forcing them to do so would thwart their attempt to pursue their case against a well-resourced, determined company.
“Chevron Corporation has and, it may be anticipated, will employ all available means to resist enforcement of the Ecuadorian judgment,” the Appeal Court said. “This reality makes it difficult to accept that the motion for security for costs was anything more than a measure intended to bring an end to the litigation.”
The villagers first sued in 1993 after Texaco, later bought by Chevron, polluted about 1,500 square kilometres of rain forest, fouling streams, drinking water and garden plots. They ultimately won the US$9.5-billion judgment in Ecuador but the company insists the award was obtained fraudulently.
The Canadian action, begun in 2012, aims to have Chevron Canada pay the money on the basis that it has a “significant” relationship with its parent.
“There can be no doubt that the environmental devastation to the appellants’ lands has severely hampered their ability to earn a livelihood,” the court said. “If we accept the findings that underlie the Ecuadorian judgment _ findings that have not yet been undermined in our courts _ Texaco Inc. contributed to the appellants’ misfortune.”
The Appeal Court found it would be impractical to try to force the 47 representative plaintiffs to prove they don’t have the money to put up as security _ let alone require as much from the 30,000 or so villagers affected by the pollution.
Looking at this case “holistically,” the court decided upholding the costs order would run counter to the interests of justice. For one thing, the villagers would receive no direct benefit if they ultimately prevail in collecting on the award, which would go into a trust fund to cover health and environmental problems.
“This is public-interest litigation,” the court said.
The court also noted that Chevron, as one of the world’s largest oil companies with 1,500 subsidiaries around the world, makes billions of dollars a year and does not need to be protected from a potential costs award the villagers couldn’t pay.
The court also rejected Chevron’s claim the Canadian lawsuit has no chance of success. While the arguments are novel, that doesn’t mean they shouldn’t be heard, the court said.
“It is hardly just that potential advancements in or restatements of the law be thwarted for procedural or tactical reasons,” the three-panel court said.
The panel also ordered Chevron Corp. and Chevron Canada to pay $11,500 to cover the villagers’ costs in fighting the security-deposit order.
Kirk Baert, one of the villagers’ Canadian lawyers, said the decision was important both for their case and for the law generally.