Eye on the Amazon

The Toxic Mess Under Chevron's Corporate Veil

Photo credit: Amazon Watch

A hearing in a critically important case for the future of environmental protection, corporate accountability, and human rights took place in Toronto, Canada last week. At issue was an argument essential to corporate accountability: can individuals harmed by a corporation "pierce the corporate veil" to force it to account for judgements from countries where the corporation holds no assets?

Chevron committed one of the most infamous environmental crimes in history decades ago in the Ecuadorian Amazon and, despite the overwhelming evidence against it and having been ordered to pay $9.5 billion for a clean up, it still refuses to do so and has withdrawn all its assets from Ecuador. That has forced the Ecuadorians to pursue the gross polluter to Canada.

Bearing witness to the proceedings in Canada were indigenous representatives from Ecuador and Canadian First Nations, environmental and human rights NGOs, and many journalists. Major news outlets in Canada have been covering the case, and some of its largest NGOs joined the call years ago for Chevron to clean up and even asked the Canadian government to freeze its assets until it does so. It's a war of attrition, but as one of the Achuar indigenous representatives put it in his interviews with the press, "Chevron may have millions of dollars to fight, but we have millions of people and we will not give up."

Twenty-five years after committing the crimes, Chevron still thinks it can get away with it. But despite wasting hundreds of millions of dollars on lawyers, PR firms, and an array of dirty tricks, the Ecuadorians refuse to give up. For that, the entire world owes them a huge debt. This case is simply too big to lose.

Before delving into the legal issues at hand in the recent hearings, it's vital to remember that this is not really about anything other than access to justice for indigenous peoples and other affected communities who have suffered terrible and deliberate crimes at the hands of a U.S. corporation. As Canadian lawyer, Peter Grant argued on behalf the affected peoples that the courts must understand that, "indigenous rights is the context here and your decision will have major implications for indigenous peoples. Canadian jurisprudence recognizes the relationship between indigenous peoples and the land they occupy."

Of course, the Ecuadorians won their historic case against Chevron in 2011 and it was affirmed unanimously by Ecuador's Supreme Court in 2013. That cannot be undone. All that remains is to collect on the debt – which is why we were all in Canada in this, the sixth year of the collection effort (even this hearing was supposed to have taken place last October, but Chevron successfully delayed it another six months). It has taken this long because Chevron not only benefits from being the third largest corporation in the U.S. with virtually unlimited funds for lawyers, it also takes advantage of a Kafka-esque legal structure that allows corporations to systematically evade responsibility for their actions. For example, in Canada, Chevron is hiding its assets behind a seventh-level subsidiary called Chevron-Canada. Every company up the line from Chevron-Canada to the ultimate parent Chevron Corporation is nothing more than a holding company that owns 100% of the shares of the company below it. It's a corporate shell game devised to insulate those at the top and, as one of the justices on the Ontario Appeals Court remarked to Chevron's lawyers, "it's a pretty good way to structure your company, huh?"

For two days, the Ontario Appeals Court heard arguments about why the Ecuadorians can (or cannot) seize Chevron-Canada's shares and assets to cover the debts of Chevron Corporation and finally clean up the mess that it left behind in Ecuador. At some points, the Chevron legal team (at least eight lawyers were officially recognized by the court, with many more lining the benches behind) executed some amazing feats of logical gymnastics to avoid admitting that Chevron-Canada is really an asset controlled by Chevron in the U.S. Mr. Benjamin Zarnett even went so far as to say, "Chevron Corp. has no rights or interests in Chevron Canada." Well, Amazon Watch will be at the Chevron shareholder meeting in May, and we look forward to hearing how Chevron management explains that comment to its many concerned shareholders.

Alan Lenczner, renowned litigator and lawyer for the Ecuadorians, responded by pointing out that all the directors of these companies are also directors of Chevron Corporation or other subsidiaries. In fact, Chevron Canada is restricted from making any large financial decisions (over $500,000) without approval from the parent company, Chevron Corporation. Indeed, Chevron has over 1,500 subsidiaries worldwide, and most of these subsidiaries are holding companies that do nothing and have no operations or sales. In essence, Chevron Corporation has set itself up to be nothing more than a management company with no operations of its own that operates only through its subsidiaries. You see what this all adds up to, right? The very nature of Chevron's corporate structure exists to insulate it from risks from the actual work it conducts – some of the most harmful environmental work in the history of the planet. Yeah, it's a convenient way to structure your company.

Amazon Watch wants to know more about how Chevron operates and structures itself in Canada and elsewhere, as does the free press in Canada. That's why we filed a motion along with Friends of the Earth-Canada and the Humanities Fund of the United Steelworkers of Canada to lift a blanket confidentiality order granted by the Canadian courts over all of Chevron's legal filings in this case. CBC News filed the same motion, arguing that Canada's open court system grant the public the right to know. It's of particular interest to the Canadian press ever since a new law forces Canadian companies to disclose all payments to foreign governments. It turns out that Chevron Canada pays less to Canada in taxes and fees than to other resource nations such as Nigeria and Indonesia. And, in 2016, Chevron-Canada paid only $134 million to Canada in taxes and fees, while paying $3.3 billion to Nigeria and Indonesia combined. What more can be learned about these operations from disclosing documents in this case?

Having seen firsthand the way Chevron conducts itself in the courtroom, it came as no surprise that the company asserted its right to cross-examine CBC News, the other NGOs, and, of course, Amazon Watch because we filed our transparency motion. Our interest in making these documents public is at the heart of the nature of our work for corporate accountability and protection of human rights and the environment, but despite the simple and narrow nature of our motion, Chevron wants to haul us into court for questioning. After all, when you have an army of lawyers, they need to be fed. More news about this will be coming in the next few weeks.

Returning once again to the proceedings of last week, Lenczner ultimately laid it out pretty straight to the judges: "to dismiss this appeal you'd have to determine that Chevron Corporation has no interest Chevron-Canada." Clearly it does. And while Canada operates under the principle of "polluter pays," what good is that principle if the polluter can simply change the name on its bank account and hide its money? Will the judges acknowledge these facts, or will they permit the status quo of corporate impunity and pass the buck up to the Supreme Court of Canada to decide? One thing is for certain: despite all of Chevron's best efforts, we will be there alongside the Ecuadorians to find out. As Lenczner said, quoting Ben Franklin to open the hearings in last week: "Justice will not be served until those who are unaffected are as outraged as those who are."

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