In Canada, Chevron Faces New Risks From $12b Ecuador Pollution Judgment As Shareholders Step up Pressure

TORONTO - After losing three consecutive appellate court decisions in Canada, Chevron faces significant new risk ahead of a critical court hearing next month in Toronto where it hopes to avoid a high-risk trial on enforcement of the $12 billion Ecuador environmental judgment.

Chevron’s new challenges come at a time when several institutional shareholders in the United States are intensifying pressure on new CEO Timothy Wirth to settle the case before the company’s litigation position deteriorates further. One shareholder resolution accuses Chevron management of “material mishandling” the pollution liability, which grows by $300 million annually because of interest.

“Chevron’s April court hearing in Canada is critically important to the well-being of all indigenous and farmer communities in Ecuador who have been harmed by the company’s pollution, as well as to all victims of corporate human rights abuses throughout the world,” said Greenpeace co-founder and Canada resident Rex Weyler, who is supporting the legal team for the Front for the Defense of the Amazon (FDA), the grass roots coalition in Ecuador that is enforcing the judgment for the affected communities.

Chevron must scale significant hurdles in the months ahead due to the rapid progress of the villagers in enforcing their judgment in Canada. Chevron’s risks include:

**On April 17, Chevron’s 20-odd team of lawyers will appear before the Ontario Court of Appeal to try to defend a claim that the company’s wholly-owned subsidiary in Canada (Chevron Canada) should be immunized from asset collection to enforce the Ecuador judgment. Already, the same court has ruled against Chevron unanimously on two prior occasions and the Canada Supreme Court has ruled against Chevron once on a jurisdictional question. (See here for background.)

**If Chevron loses a third time before the Ontario court, a portion of its estimated $15 billion in Canadian assets will be subject to seizure to pay for the court-ordered clean-up in Ecuador. The company also will be forced into a trial where its main defense is likely to collapse because of new evidence that it paid a witness $2 million to falsify evidence before a U.S. court, as this document explains. (See this article on how Chevron’s payments were not only unethical, but criminal.)

**Pressure on Chevron is also mounting after the company was forced by a new transparency law in Canada to disclose that it has been funneling billions of dollars from its Canadian subsidiary to the governments of Nigeria and Indonesia. The information – much of it still secret because of a protective order imposed by the oil giant -- severely undercuts Chevron’s argument in the upcoming court hearing that its subsidiary only operates in Canada and therefore its assets should be protected.

The disclosure also suggests a possible tax avoidance scheme by Chevron using its Canadian subsidiary as the vehicle -- similar to a scheme the company recently carried out in Australia, which resulted in an enormous fine being imposed on the oil giant by tax authorities in that country, said Weyler. (See here.)

**Chevron shareholders are again pestering Chevron management over the Ecuador litigation. Zevin Asset Management is among those that have advanced resolutions for Chevron’s annual meeting in May that are critical of the company’s poor performance in the case. Last year, two resolutions related to the Ecuador matter each received substantial support from major shareholders. Earlier, shareholders with a combined $500 billion in assets urged the company to settle the case. (See here.)

**Chevron also must contend with opposition from Canada’s powerful national indigenous federation, the Assembly of First Nations (AFN). The thrice-elected and longest serving national chief of the AFN, Phil Fontaine, harshly criticized Chevron while on a recent trip to Ecuador. In December, the AFN (which represents 634 nationalities) signed an agreement with Ecuador’s national indigenous federation to work together to hold Chevron accountable for environmental damage it has caused in both countries.  

In addition, Greenpeace co-founder Weyler accused Chevron of committing “ecological crimes” in Ecuador after his own visit to the region.

Chevron’s main objective in Canada is to avoid a high-stakes trial where its defense of “fraud” – based largely on false testimony from the Ecuadorian witness paid by the company – is almost certain to collapse, said Steven R. Donziger, the U.S. legal advisor to the FDA, the grass roots coalition that is enforcing the judgment.

Chevron’s apparent witness bribery also earned the company a criminal referral letter from Donziger and his Ecuadorian clients to the U.S. Department of Justice. Chevron has not publicly commented on the letter and the underlying evidence pointing to its guilt, which was turned over to the DOJ last November.

In the meantime, Chevron has continued to deploy what prominent U.S. appellate lawyer Deepak Gupta characterized as an “intimidation model” to try to deter advocates from working on the case. The company used a little-known discovery statute in the United States to sue more than 100 environmental activists, journalists, and bloggers who have tried to help the affected indigenous and farmer communities in Ecuador.

Chevron also is seeking an order requiring reimbursement of millions of dollars in legal fees from Donziger and his Ecuadorian clients for the company's work on its now discredited U.S. litigation. After losing the pollution case in Ecuador, Chevron had retaliated by suing Donziger and the villagers in New York for $60 billion -- considered the largest potential liability in American history. Chevron dropped all the damages claims on the eve of trial to avoid a jury.

Chevron in recent weeks also has attacked prominent Canadian lawyers Alan Lenczner and Peter Grant after they agreed to represent the Ecuadorians, said Patricio Salazar, the lead Ecuadorian lawyer for the FDA. "Chevron's attacks on human rights defenders as a way to evade its Ecuador pollution liability must stop," he said.

Three layers of courts in Ecuador – the venue where Chevron insisted the trial be held – found the company had deliberately dumped billions of gallons of toxic oil waste, leading to an outbreak of cancer in the region and a catastrophic public health crisis. See here for a summary of the evidence against Chevron.

After winning the Ecuador judgment, Salazar said he was optimistic that Chevron would soon be forced to pay compensation to the indigenous and farmer communities it harmed.

”Running around the world like a scofflaw debtor while indigenous groups give chase is only creating more risk for Chevron and its shareholders and is no way for a public company to act,” said Salazar. “Governments are now becoming hesitant to partner with Chevron on oil and gas projects given its long track record of environmental destruction, tax avoidance, disrespect for indigenous communities, and insensitivity to the threat of global warming.”

Donziger also indicated that the Ecuadorian communities, led by FDA President Carmen Cartuche, feel a "deep level of gratitude" for the support provided to their cause by Canadian indigenous and environmental leaders.

"Carmen and others at the community level in the Amazon asked me to convey to all Canadians their appreciation for the amazing outpouring of support being received in the country," he said. 

For more information, please contact:

Karen Hinton
Phone: 703-798-3109