We have all been consumed by the flurry of news around the first weeks of Trump’s presidency, so many might have missed three recent important decisions in the transnational fight for corporate accountability in Canada and the U.K.
In Ontario, Canada, the Superior Court of Justice found that Chevron Canada’s assets cannot be used to pay the outstanding $9.51 billion that its parent, Chevron Corporation, owes to affected communities in Ecuador for environmental pollution.
In the U.K. the High Court of Justice dismissed two cases against Royal Dutch Shell (RDS) and its subsidiary Shell Petroleum Development Company of Nigeria Ltd. (SPDC) brought by a collective 42,500 Nigerian residents seeking damages for environmental pollution.
And, in British Columbia the Court of Appeal decided that individuals injured during a protest outside Tahoe Resource’s Escobal silver mine in Guatemala, can proceed in a legal case against them in Canada.
Collectively, these decisions are part victory and progress for the fight for justice and accountability; but aspects of the decisions are concerning and, if not overturned, may obstruct efforts for justice and accountability.
Chevron enforcement action
For over 23 years, the approximately 30,000 indigenous Ecuadorians plaintiffs in the notorious Chevron case have sought compensation for environmental pollution, and resulting health impacts. In 1993, the plaintiffs initially sued Texaco – which later merged with Chevron – in U.S. court. But after the company successfully argued that the case should be heard in Ecuador, the case was dismissed and the plaintiffs re-filed in Ecuador. They won a groundbreaking $9.51 billion judgment against Chevron in Ecuador; but Chevron no longer has assets in Ecuador to enforce the judgment, so it did not pay up. The aftermath of this decision is messy: there have been numerous proceedings, initiated by Chevron, challenging the decision. But the plaintiffs also turned to the Canadian courts to order enforcement.
The case already went all the way up to the Supreme Court, which ruled that Canadian courts have jurisdiction over Chevron Canada and Chevron Corporation and sent the case back to the trial court. But this was not the end of the fight—Chevron Canada then sought to remove itself from the action, arguing there was no case against it. It argued that it was not a party in the Ecuadorian proceedings and that its assets and shares cannot be used to pay a debt owed by Chevron Corporation.
Unfortunately, the Ontario Superior Court of Justice agreed and dismissed the case against Chevron Canada, finding that Chevron Canada is a separate legal entity from Chevron Corporation. The court refused to disregard this separation regardless of whether it was the “just” thing to do.
So, while the case is proceeding against Chevron Corporation, something that the plaintiffs are celebrating, this judgment is concerning. Even if they succeed against Chevron Corporation, the plaintiffs may have a hard time getting their promised $9.51 billion without Chevron Canada’s assets.
From a bigger picture perspective, the finding that Chevron Canada’s assets are off limits means that the creation of subsidiary corporations is a one-way benefit: a parent company can rely on their profits and success, without any concern that those same assets will be used to pay a debt. It creates additional challenges in holding parent companies liable for their involvement in violations committed at their subsidiary’s operations.
U.K. Shell Decision
Nigerian communities have also been suing another oil giant, Shell, for decades in U.K. courts. The latest actions involve communities seeking accountability for the environmental harm caused by oil spills. However, while the court found that the U.K. has jurisdiction over the case, it dismissed the case. Basically, the court found that Royal Dutch Shell (RDS), the parent company of the Shell Group and SPDC (Shell’s local Nigerian subsidiary), is not liable.
Good news first: the court confirmed that, in the European Union, companies can be sued in their home country. This is significant: like Chevron, many multinational corporations sued in their home countries try to get cases arising in foreign countries dismissed, arguing that they should be sued in the other country. In most cases, unlike Chevron, the lawsuit is not refiled in the country where the harm occurred. As a result, justice is denied.
But, despite this finding, the Court went on to find that RDS cannot be held accountable for the environmental pollution that occurred at their subsidiary’s operations. Why? Because the court did not feel that RDS had sufficient control over SPDC’s environmental policies. The underlying basis for this decision is that RDS and SPDC are two separate legal entities, another example of the impact of the doctrine of separate corporate personhood. Without RDS as a defendant, the case cannot proceed in the U.K. against SPDC, because it is not a U.K. company.
This aspect of the decision is worrisome because it further insulates multinational corporations from being held accountable for their involvement in human rights violations. Like the Chevron decision, it sends the message that corporations can use subsidiaries to successfully avoid liability.
Seven Guatemalan men are seeking compensation from Tahoe Resources, a Canadian mining company, for abuses by the company’s security forces during a peaceful protest at the company’s silver mine. The lawsuit was filed in June 2014 in British Columbia, where Tahoe is incorporated. In November 2015 the Supreme Court of British Columbia dismissed the action finding that the case should be tried in Guatemala – just like the original Chevron case.
In the recent decision, however, the Court of Appeal for British Columbia reversed that decision and allowed the case to proceed in British Columbia. This is the first Canadian appellate court to allow a case against a multinational corporation for human rights abuses outside of Canada. I hope it will set an important precedent about where corporations should be held accountable. The court relied on three primary factors: the ability to gather evidence in Guatemala would be limited; it is uncertain if the case can be filed in Guatemala because of different time limitations; and the risk that the seven men won’t obtain justice in Guatemala.
A number of notable findings in the decision show that the court recognized that victims of human rights abuses related to the operations of multinational corporations can seek justice in the corporation’s home state. The court found that it is important to view these claims in the broader context of the conflict in which they arose, considering the political context, and cannot simply view the case as a personal injury matter.
The court also confirmed that we shouldn’t focus on whether another country’s court is capable of providing justice, but whether there is real risk that the this other country’s court system will not provide justice. The Court concluded that “there is some measurable risk that the appellants will encounter difficulty in receiving a fair trial against a powerful international company whose mining interests in Guatemala align with the political interests of the Guatemalan state. This factor points away from Guatemala as the more appropriate forum.”
Three steps forward, two steps back
Collectively, the three decisions illustrate the barriers that individuals harmed by corporate activity face in pursuing justice. While each of them has some promising legal rulings that advance the trend of holding corporations accountable in their home countries, the Chevron and Shell rulings also present significant obstacles to justice. The cases show that corporations continue to find ways to avoid responsibility through their subsidiaries, which will continue to be a challenge both in establishing liability and enforcing a judgment.
We congratulate the Tahoe Resources plaintiffs on their victory, and we’re hopeful that the appeals in the Chevron and Shell actions will be successful, and help forge the way to breaking down the barriers for parent company liability.