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Ontario Court of Appeal denies liability for Chevron subsidiary

[JURIST] The Ontario Court of Appeal [judicial website], the highest court in the province of Ontario, ruled Wednesday that US-based oil corporation Chevron Corp.'s Canadian subsidiary cannot be held liable [judgment, PDF] for a USD $9.5-billion award granted by an Ecuadorian court against the parent company.

This lawsuit arose out of the original actions against Texaco (which later became part of Chevron) by the Ecuadorian government related to the oil pollution from 1964-1990. In 2001 an Ecuadorian court held Texaco liable for $9.5 billion dollars. This decision was determined to be illegitimate [BBC report] and unenforceable by the US District Court for the Southern District of New York.

The legal arguments advanced by the appellants cannot succeed. They urge upon us an interpretation of the Act that finds no support in the wording of the legislation or its jurisprudence. If this court endorsed this interpretation it would result in significant changes to fundamental principles of our corporate law and the law of execution. It would also create new substantive rights arising from what is supposed to be a purely procedural statute.
The decision hinges on the principle that subsidiaries such as Chevron Canada cannot be held responsible for their parent companies actions. "We will continue to fight—not only because of the need to realize environmental justice in Ecuador, but because this decision allows wealthy corporations with creative lawyers to achieve absolute immunity by placing assets in shell companies," Patricio Salazar, the plaintiffs' lead Ecuadorian lawyer, said [Globe and Mail report].

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