Court rejects bid to enforce Ecuador judgment on Chevron Canada

A Toronto court has rejected a bid by Ecuadorian villagers to enforce a judgment in their home country against Chevron Canada Ltd, ruling the subsidiary is not liable for parent Chevron Corp, the U.S. oil major said on Friday.

A Canadian lawyer for the villagers in the environment-damage lawsuit said the ruling is "not a modern-day view," and that an appeal will be filed.

Residents of Ecuador's Lago Agrio region have been trying to force Chevron to pay for water and soil contamination caused from 1964 to 1992 by Texaco, which Chevron acquired in 2001.

The villagers obtained a $9 billion judgment against Chevron in Ecuador in 2011. But the company has no assets in Ecuador, and the villagers have been suing it in the United States, Canada, Brazil and Argentina to enforce the decision.

While not disputing that pollution occurred, Chevron has alleged the villagers' lawyer, Steven Donziger, and his associates went too far, including arranging for the ghost-writing of a key environmental report and bribing the presiding judge in Ecuador.

A U.S. federal appeals court, which blocked enforcement of the judgment last year, agreed with the company.

On Friday, the Ontario Superior Court of Justice ruled Chevron Canada Ltd is a separate entity from Chevron Corp, and is thus not a debtor to the Ecuadorian judgment, according to a copy of the decision provided by the California-based Chevron.

But Justice Glenn Hainey also ruled partly in favor of the villagers.

Chevron had argued the Ecuadorian judgment is unenforceable in Canada because of what it says is the corrupt manner in which it was obtained. The villagers had asked for that argument to be struck out entirely.

Hainey ruled some parts of Chevron's argument should be struck, while some should be tested through trial.

Karen Hinton, U.S. spokeswoman for the Amazon Defense Coalition that represents the villagers, called the decision a "resounding victory," even if the Chevron Canada subsidiary, which is worth billions, is not up for grabs.

"The part of the decision that knocks out Chevron's subsidiary from the enforcement action still allows the villagers to proceed against Chevron itself," she said.

"The part of the decision to limit Chevron's liability is a temporary setback that will be corrected quickly on appeal."

(Editing by Alan Crosby and Lisa Shumaker)