The Court of Appeal for Ontario has just released its judgment in Yaiguaje v. Chevron Corporation, 2013 ONCA 758; (“Yaiguaje“) a significant conflict of laws decision which will have major repercussions beyond cross-border and international litigation.
For a backgrounder, see Alejandro Manevich’s guest post: Lago Agrio comes to Ontario: Chevron and the $19B judgment and also my guest posts: The Motions to Dismiss inYaiguaje, and Comments on the Lago Agrio Plaintiffs Enforcement Action in Canada over at Ted Folkman’s Letters Blogatory.
Briefly, plaintiffs residents of rural provinces in Ecuador (“Lago Agrio Plaintiffs”) sought recognition and enforcement of a US$18 billion Ecuadorian judgment against Chevron Corporation (“Chevron”) and its Canadian subsidiary Chevron Canada Limited (“Chevron Canada”) (subsequently reduced by the Ecuador Court of Cassation, affirming the judgment of the intermediate appeal court for damages for remediation and costs totalling US$9.51 billion against Chevron, but allowing Chevron’s appeal with respect to punitive damages).
In a judgment dated May 1, 2013, Brown J. of the Superior Court of Justice held that the Ontario court had jurisdiction to hear the action, but stayed the action on the basis that “Chevron does not possess any assets in this jurisdiction at this time” and “the plaintiffs have no hope of success in their assertion that the corporate veil of Chevron Canada should be pierced and ignored so that its assets become exigible to satisfy the Judgment against its ultimate parent” (paras. 109-110).
The Ecuadorian plaintiffs appealed the stay, while Chevron and Chevron Canada cross-appealed the finding that Ontario court had jurisdiction simpliciter to consider the recognition and enforcement of the Ecuadorian court’s judgment.
Writing for the unanimous panel (Gillese and Hourigan JJ.A. concurring) MacPherson, J.A. agreed with Brown J. that Ontario had personal and subject-matter jurisdiction to determine whether the Ecuadorian judgment should be recognized and enforced in Ontario:
 I agree with the motion judge’s analysis on this issue.
 The leading cases dealing with the recognition and enforcement of foreign judgments are Morguard and Beals. Morguard dealt with the enforcement of an Alberta judgment in British Columbia, Beals with the enforcement of a Florida judgment in Ontario. Obviously, Beals is directly on point in this appeal.
 In my view, Beals is crystal clear about how the real and substantial connection test is to be applied. Major J. stated, at paras. 18, 23, 28, 32 and 37:
In Morguard, supra, the “real and substantial connection” test for the recognition and enforcement of interprovincial judgments was adopted. Morguard did not decide whether that test applied to foreign judgments.
Morguard established that the courts of one province or territory should recognize and enforce the judgments of another province or territory, if that court had properly exercised jurisdiction in the action, namely that it had a real and substantial connection with either the subject matter of the action or the defendant. A substantial connection with the subject matter of the action will satisfy the real and substantial connection test even in the absence of such a connection with the defendant to the action.
International comity and the prevalence of international cross-border transactions and movement call for a modernization of private international law. The principles set out in Morguard, supra, and further discussed in Hunt v. T&N plc,  4 S.C.R. 289, can and should be extended beyond the recognition of interprovincial judgments, even though their application may give rise to different considerations internationally. Subject to the legislatures adopting a different approach by statute, the “real and substantial connection” test should apply to the law with respect to the enforcement and recognition of foreign judgments.
The “real and substantial connection” test requires that a significant connection exist between the cause of action and the foreign court. Furthermore, a defendant can reasonably be brought within the embrace of a foreign jurisdiction’s law where he or she has participated in something of significance or was actively involved in that foreign jurisdiction. A fleeting or relatively unimportant connection will not be enough to give a foreign court jurisdiction. The connection to the foreign jurisdiction must be a substantial one.
There are conditions to be met before a domestic court will enforce a judgment from a foreign jurisdiction. The enforcing court, in this case Ontario, must determine whether the foreign court had a real and substantial connection to the action or the parties, at least to the level established in Morguard, supra. A real and substantial connection is the overriding factor in the determination of jurisdiction. The presence of more of the traditional indicia of jurisdiction (attornment, agreement to submit, residence and presence in the foreign jurisdiction) will serve to bolster the real and substantial connection to the action or parties. Although such a connection is an important factor, parties to an action continue to be free to select or accept the jurisdiction in which their dispute is to be resolved by attorning or agreeing to the jurisdiction of a foreign court.
 The import of these passages, especially the emphasized portions, is clear: in recognition and enforcement actions relating to foreign (e.g. Ecuadorian) judgments in Canadian jurisdictions (e.g. Ontario), the exclusive focus of the real and substantial connection test is on the foreign jurisdiction. There is no parallel or even secondary inquiry into the relationship between the legal dispute in the foreign country and the domestic Canadian court being asked to recognize and enforce the foreign judgment. See also: Pro Swing, at para. 11; BNP Paribas (Canada) v. Mécs (2002), 60 O.R. (3d) 205 (S.C.J.) (“BNP Paribas (Canada)”), at para. 13; and Janet Walker, Halsbury’s Laws of Canada, Conflict of Laws, 2011 Reissue (Toronto: Ont.: LexisNexis Canada, 2011), HCF-69.
MacPherson J.A. also rejected Chevron’s argument that the Supreme Court of Canada’s decision in Van Breda changed the Canadian landscape for the recognition and enforcement of foreign judgments, noting “ Van Breda is not a recognition and enforcement case; it is a jurisdiction simpliciter case. “
With respect to Chevron Canada, the Court of Appeal notes that while they were not a party to the underlying Ecuadorian judgment:
 The motion judge did not rely on rule 17.02(m) in his jurisdictional analysis with respect to Chevron Canada; rather, he grounded his jurisdictional determination in Chevron Canada’s physical, non-transitory, carrying on of business in Ontario:
Chevron Canada operates a business establishment in Mississauga, Ontario. It is not a mere “virtual” business. It runs a bricks and mortar office from which it carries out a non-transitory business with human means and its Ontario staff provides services to and solicits sales from its customers in this province. In the words of Rule 16.02(1)(c), Chevron Canada was served at a “place of business” in this province. This court therefore possesses jurisdiction over Chevron Canada.
 In my view, the trial judge was correct to note Chevron Canada’s bricks-and-mortar business in Ontario. I would additionally note Chevron Canada’s significant relationship with Chevron. Chevron Canada is a wholly-owned subsidiary of Chevron, albeit one owned via intermediate wholly-owned subsidiaries. Chevron guarantees the debt of its indirect subsidiaries which in turn furnish capital to Chevron Canada, and has directly guaranteed certain performance obligations of Chevron Canada. Furthermore, Chevron’s income is wholly derived from dividends from indirect subsidiaries that carry out its actual business functions, which include Chevron Canada. In light of the economically significant relationship between Chevron and Chevron Canada, and given that Chevron Canada maintains a non-transitory place of business in Ontario, an Ontario court has jurisdiction to adjudicate a recognition and enforcement action against Chevron Canada’s indirect corporate parent that also names Chevron Canada as a defendant and seeks the seizure of the shares and assets of Chevron Canada to satisfy a judgment against the corporate parent.
 Chevron Canada is entitled to dispute that its assets (or that Chevron Canada in its entirety) are exigible for the judgment debts of Chevron. However, this argument is not availing at this juncture where only jurisdiction is in issue. The usual concerns regarding the piercing of the corporate veil – unanticipated personal liability by a shareholder, or unanticipated liability of a shareholder being imputed to a corporation – are not present at the stage of this preliminary jurisdictional determination. They may be appropriately addressed after the jurisdictional stage, when Chevron Canada has an opportunity to file a statement of defence.
 For these reasons, I would dismiss the cross-appeals of both Chevron and Chevron Canada.
With respect to the motion judge’s stay of the action pursuant to s.106 of the Courts of Justice Act, R.S.O. 1990, c. C. 43 (“CJA”), MacPherson J.A. found that the motion judge committed several reversible errors; namely:
1. Chevron and Chevron Canada both cited s. 106 of the CJA in their notices of motion, but only “in the context of it potentially supporting the grant of a stay on the basis of lack of jurisdiction.” (at para. 45). Granting a discretionary stay, sua sponte, would work an injustice to the plaintiffs (at paras. 53-55);
2. It was not an “extraordinary circumstance” for Chevron to have been precluded from requesting a discretionary stay on any basis other than jurisdiction:
“ Chevron and Chevron Canada made a decision with their eyes wide open – they could refuse to attorn to the jurisdiction of the Ontario court and use that, and that alone, as a basis to resist the Ecuador plaintiffs’ action in Ontario, or they could accept the jurisdiction of the Ontario court and defend the action using the full panoply of Ontario substantive and procedural law available to them. Both chose the former option, as they were entitled to do. However, having made this choice, the expected, not “extraordinary”, circumstance that followed was that both companies were limited to making only a jurisdictional objection in their motions.”
3. Having taken on a s.106 CJA analysis on his own initiative, the motion “embark[ed] on a disguised, unrequested, and premature Rule 20 and/or Rule 21 motion. The granting of a stay without affording the plaintiffs an opportunity to make legal arguments and develop an evidentiary record would constitute an injustice (at para. 57);
4. In lieu of a forum non conveniens motion, the motion judge improperly imported such a motion into his reasoning on the stay (at para. 60);
5. There was a “disconnect between the rationale underlying the motion judge’s reasons on the jurisdiction issue and the tenor and content of his reasons on the discretionary stay issue.” (at para. 61). The reference to a myriad of discretionary factors effectively would undermine the Ontario court’s jurisdiction:
In my view, although these factors might ultimately derail the appellants’ recognition and enforcement action in Ontario, the derailment is premature in the context of the respondents not raising the discretionary stay issue, no argument on this question, and devastating consequences for the appellants. (at para. 63).
6. The Court of Appeal did not share the motion judge’s concern that a “bitter, protracted and expensive recognition fight” would consume “significant time and judicial resources” of the Ontario court”. Relating the litigation history in Ecuador, and more recently, in the United States, MacPherson J.A. concludes:
 The picture from the above history is an obvious one. For 20 years, Chevron has contested the legal proceedings of every court involved in this litigation – in the United States, Ecuador and Canada. Chevron even sought, and briefly obtained, a global injunction against enforcement of the Ecuadorian judgment.
 In these circumstances, I cannot agree with the motion judge that the Ecuadorian plaintiffs’ recognition and enforcement action in Ontario is an “academic exercise” and would be “an utter and unnecessary waste of valuable judicial resources.” In these circumstances, the Ecuadorian plaintiffs do not deserve to have their entire case fail on the basis of an argument against their position that was not even made, and to which they did not have an opportunity to respond. In these circumstances, the Ecuadorian plaintiffs should have an opportunity to attempt to enforce the Ecuadorian judgment in a court where Chevron will have to respond on the merits. That the plaintiffs in this case may ultimately not succeed on the merits of their recognition and enforcement action, or that they may not succeed in successfully collecting from the judgment debtors against whom they bring this action, are not relevant factors for a court to consider in determining whether to grant a discretionary stay before the defendants have even attorned to the jurisdiction of the Ontario court. A party may bring an action for all kinds of strategic reasons, recognizing that their chances of collection on the judgment are minimal. It is not the role of the court to weed out cases on this basis and it is a risky practice for a judge to second-guess counsel on strategy in the name of judicial economy.
 In the end, I agree with what Pepall J. said in BNP Paribas (Canada), at para. 12:
As set out in Morguard v. De Savoye Investments Ltd.  3 S.C.R. 1077, the purpose of comity is to secure the ends of justice and contemplates the recognition of judgments in multiple jurisdictions. The court should grant its assistance in enforcing an outstanding judgment, not raise barriers.
 This case cries out for assistance, not unsolicited and premature barriers. Chevron and Chevron Canada can decide not to attorn to the jurisdiction of the Ontario courts, and let the recognition and enforcement process take its course. Or they can attorn to the jurisdiction of the Ontario courts and mount relevant challenges to recognition and enforcement, for example, through a Rule 20 motion, a Rule 21 motion, or a forum non conveniens motion brought on a proper record.
Finally, it is clear that the Court of Appeal was unimpressed with Chevron’s ‘scorched earth’ tactics, quoting Chevron’s spokesman:
 Even before the Ecuadorian judgment was released, Chevron, speaking through a spokesman, stated that Chevron intended to contest the judgment if Chevron lost. He said: “We’re going to fight this until hell freezes over. And then we’ll fight it out on the ice.”
 Chevron’s wish is granted. After all these years, the Ecuadorian plaintiffs deserve to have the recognition and enforcement of the Ecuadorian judgment heard on the merits in an appropriate jurisdiction. At this juncture, Ontario is that jurisdiction.
The Yaiguaje decision will have a significant impact beyond the recognition or enforcement of foreign judgments., The Court of Appeal has sent a strong signal to multinational corporations that it may assert jurisdiction over foreign parent companies and their Canadian subsidiaries, which arrange their corporate affairs in a manner to avoid judgment creditors and will not hesitate to pierce the corporate veil, if and when necessary.
MacPherson J.A.’s reasons are an exegesis on the Court of Appeal’s equitable jurisdiction—there are numerous references to “injustice” throughout. While MacPherson J.A. does not reference the Club Resorts Ltd. v. Van Breda residual jurisdictional factor of “forum of necessity” (admittedly, distinguishing Van Breda as a jurisidiction, not a foreign judgment enforcement case), it is implicit that the doors to Ontario courtrooms are not closed to foreign judgment creditors.
- Canadian judge dismisses lawsuit against Chevron (thestate.com)
- Chevron beats back Ecuadorans’ Ontario legal challenge (thestar.com)
- Two Important Ontario Attornment Decisions (thetrialwarrior.com)