The Latest Development In Yaiguaje V. Chevron Corporation – The Court Of Appeal For Ontario Refuses To Pierce The Corporate Veil

Introduction

Yaiguaje v Chevron Corporation1 , released on May 23, 2018, is the most recent decision of the Court of Appeal for Ontario (the “Court”) in that proceeding, which has already been the subject of a number of procedural decisions (including appellate decisions) addressing, for example, jurisdiction and security for costs.2 The latest decision of the Court addresses questions concerning the interpretation of the Execution Act3 and when a court may pierce the corporate veil. The questions were raised in the context of the appellants' attempts to enforce an Ecuadorian judgment against Chevron Corporation in Ontario (the “Ecuadorian Judgment”).

The appellants argued that the Execution Act permits execution by them on Chevron Canada's shares and assets to satisfy the Ecuadorian Judgment (Chevron Canada being a seventh-level subsidiary of Chevron Corporation, against whom the Ecuadorian Judgment was made). In the alternative, they argued that the Court should pierce the corporate veil in order to render Chevron Canada's shares and assets exigible to satisfy the Ecuadorian Judgment. The majority of the Court rejected both arguments. First, the majority found that the Execution Act is a purely procedural statute that did not create new substantive rights against Chevron Canada. Secondly, the majority found that the facts of this case did not meet the requirements of the existing two-part test for piercing the corporate veil, and rejected the appellants' submission that the Court should expand the circumstances in which the court should pierce the corporate veil.

In a concurring decision, Justice Nordheimer would have developed the two-part test for piercing the corporate veil to allow equity to be a relevant factor in whether the corporate veil should be pierced. However, His Honour found that even on a test based in equity, the corporate veil should not be pierced in this case, given concerns about the underlying Ecuadorian Judgment following findings by United States courts that there was evidence of fraud used to obtain the judgment.

Background

Between 1964 and 1992, a company that would later become part of Chevron Corporation explored and extracted oil in Ecuador. The appellants are indigenous villagers who obtained a 9.5 billion USD judgment against Chevron Corporation in Ecuador in connection with alleged environment harm (the Ecuadorian Judgment). The appellants commenced an action in the United States, where Chevron Corporation...