The Ecuadorian plaintiffs suing Chevron Corporation were eerily quiet after February 17. That’s when an intermediate appeals court in Ecuador appeared to give them the go-ahead to enforce the $18 billion oil pollution verdict rendered by an local trial court judge, despite vivid accusations of fraud by Chevron. But the legal team for the indigenous plaintiffs had not lost their nerve or their funding. Apparently hoping to generate pressure for a settlement, they pounced on the day of Chevron’s annual meeting.

On May 30, the plaintiffs filed their long-awaited first enforcement action—in Ontario. The business world’s most dramatic international dispute thus entered a fourth dimension, as proceedings continue in the courts of Ecuador and New York, and in Europe before a panel supervised by the Permanent Court of Arbitration in The Hague. The plaintiffs’ move to start collecting their award in another country was no surprise, but pundits like me had predicted that they would file in a place that might be more hostile to U.S. corporations, like Venezuela. Of the 30-odd nations with major Chevron assets, why did they choose to start collecting in Canada? And how will Chevron counter their moves on all of these chessboards?

As a general matter, Canadian courts enforce foreign judgments readily. This may be partly because they are usually enforcing judgments from the U.S., where adherence to the rule of law is rarely questioned. Courts have so far developed only three common law defenses to enforcement in Canada—fraud, natural justice (i.e., procedural fairness), and public policy (including the policy against bias and corruption).

Alan Lenczner of Lenczner Slaght Royce Smith Griffin,
Canadian counsel to the Ecuadorian plaintiffs, fielded questions from The Global Lawyer as part of a teleconference with several members of the press. Lenczner forcefully and correctly cited the leading Canadian enforcement case of Beals v. Saldanha for the proposition that the merits of a judgment can only be challenged for fraud when the fraud is newly discovered. By contrast, he emphasized, the frauds alleged by Chevron were thoroughly aired in Ecuador. “After reviewing 250,000 pages of transcripts,” Lenczner said,” I am persuaded that a Canadian court will enforce this judgment.”

In an interview with The Global Lawyer, Chevron general counsel R. Hewitt Pate responded that Chevron did not mainly face a fraud “on the court” (as in Beals), but a fraud “with the court.” How, he asked, could a fraud be cleansed by judges who were complicit? Indeed, Chevron’s Canadian lawyers—Norton Rose’s Clarke Hunter and Anne Kirker, and their now-independent colleague Jack Marshall—might argue that a judgment procured by “fraud with the court” should be unenforceable under any of the three defenses accepted in Canada.

The centerpiece of Chevron’s defense is that the plaintiffs colluded with the Ecuadorian court to short-circuit the collection of environmental samples and appoint an ostensibly independent damages expert who was in fact a puppet of the plaintiffs. (Whether the judgment ultimately relied on the tainted expert is in dispute.) In addition, Chevron cites forensic evidence that the judgment itself contained passages lifted from plaintiffs’ documents not in the court record. It cannot help the plaintiffs’ cause that the judge who wrote that opinion was later removed from the bench by Ecuador’s Judicial Council for his conduct of unrelated drug proceedings.

Chevron’s cause in Canada is helped by its global offensives. In the United States, federal district judge Lewis Kaplan has written a damning account of the case that might sway an enforcing court, even though his injunction against enforcement of the plaintiffs’ award didn’t stand on appeal. And while Ecuador has ignored arbitral orders to halt enforcement, a Canadian judge might conclude that the judgment offends public policy because it was issued in breach of international law.

Independent Canadian experts estimate that the effort to enforce the judgment will take a year at the first level, and three years through final appeal. That gives a chance for the Canadian action to be overtaken by events in the European arbitration or the U.S. litigation.

The arbitrators have severed for a fall 2012 trial the issue of whether Ecuador released Chevron under the settlement negotiated when the oil company’s predecessor left the country. All of Chevron’s other arguments (including a new claim for denial of justice) are left for the longer term.

In New York, Judge Kaplan recently winnowed Chevron’s claims for the potential fraud and racketeering trial that the company hopes will take place in mid-to-late 2013. Chevron’s RICO’s claims against the plaintiffs’ advisors survived an attack under Morrison v. National Australia Bank, although the judge queried whether some damages theories might ultimately fail. Similarly, Kaplan dismissed Chevron’s theory that the Ecuadorian plaintiffs and their advisers might be liable in fraud for Chevron’s attorneys’ fees—but cleared for trial the larger claim that they might be liable in fraud for damages flowing from the judgment itself. Unjust enrichment was merely dismissed as unripe.

In sum, Chevron is on track to put the plaintiffs on trial in both arbitration and U.S. court. Discovery looms and settlement does not. Chevron can always renew its failed U.S. motions—to enjoin enforcement, or to attach its foes’ assets—in narrower form.

Meanwhile in Ecuador, the $18 billion judgment is on appeal to the National Court of Justice. My hunch that Ecuador would blink has so far been mistaken, but the government could at any point moot everything, depending on the political and legal winds.

By choosing Canada as their fourth front, plaintiffs are cleverly signaling their belief that the Ecuadorian award is strong enough to pass scrutiny in a rule-of-law nation. Chevron has always said that no legitimate court would enforce it. And now we’ll get to see if they’re right.

But to hedge their bets, the plaintiffs plan this month to file at least one more enforcement action—somewhere in the world. While the plaintiffs express confidence that they can win in Toronto, The Global Lawyer can’t help but wonder whether the fifth dimension will look more like Caracas.