You're it! Tag jurisdiction over corporations in Canada.

• Author: Monestier, Tanya J.

ABSTRACT

In September 2015, the Supreme Court of Canada released its decision in Chevron v. Yaiguaje, a case that legal commentators had been keeping an eye on for years. The Chevron case has spanned several decades as well as several continents, and the enforcement action in Ontario was the latest in a series of procedural moves aimed at enforcing a nearly $10 billion Ecuadorian judgment against the oil giant. In Chevron, the plaintiffs sought to have the judgment enforced in Ontario against both Chevron (the judgment debtor) and Chevron Canada (a seventh-level indirect subsidiary of the judgment debtor). The Chevron case did not decide the merits of the dispute, but rather addressed two discrete jurisdictional questions: (1) Was a real and substantial connection between Chevron and Ontario required in order to enforce a money judgment against Chevron? And, (2) What was the appropriate basis of jurisdiction over Chevron Canada?

With respect to the first issue, the Court held that jurisdiction was properly assumed over Chevron, the judgment debtor, because service of process had been properly effected on Chevron pursuant to the Ontario Rules of Civil Procedure. No additional showing of a real and substantial connection between Chevron and Ontario was required. With respect to Chevron Canada, the Court held that jurisdiction was appropriate in Ontario because Chevron Canada was carrying on business in Ontario and it was served with process in juris. It is this latter holding that has the most potential to disrupt the existing case law.

What the Supreme Court of Canada did in Chevron was essentially endorse tag jurisdiction over a corporation. If a corporation is carrying on business--a fairly low standard judging from the Chevron case itself--and the corporation is served in juris, then a provincial court will have general jurisdiction over the corporation. General jurisdiction, a largely American term, refers to the power of a court to adjudicate any and all disputes involving a defendant, even those with no connection to the underlying forum. Although the Court justified its holding on presence-based jurisdiction over Chevron Canada on the basis of well-established precedent, this Article takes the position that this precedent is actually not that well-established.

For instance, in the leading case cited by the Supreme Court of Canada, Incorporated Broadcasters, the Ontario Court of Appeal actually appeared not to understand what is required to assert presence-based jurisdiction over a corporation. Additionally, this Article argues that there are various (likely unintended) conceptual problems created by the Supreme Court of Canada's decision in Chevron: the adoption of too low a standard for carrying on business, which results in the assertion of universal jurisdiction over corporate defendants; the partial subsuming of the real and substantial connection test; and the conceptual misalignment between presence-based jurisdiction and assumed jurisdiction. This latest development in Canada ironically comes at a time when U.S. courts are dramatically reining in general jurisdiction. This Article suggests that the United States' experience with this issue--and its reasons for severely limiting general jurisdiction--should inform Canadian jurisprudence on the topic.

Table of Contents I. Introduction II. The Chevron Decision III. Deconstructing Chevron A. Incorporated Broadcasters Ltd. v. Canwest Global Communications Corp B. Prince v. ACE Aviation Holdings Inc. C. Abdula v. Canadian Solar Inc. D. Wilson v. Hull E. Charron v. Banque provinciale du Canada F. Summary IV. Conceptual Problems with Presence-Based Jurisdiction over Corporations A. Chevron's Low Standard for Carrying On Business Means that Canadian Courts Have Universal Jurisdiction over Many Corporations 1. Chevron Has Created a Very Low Standard for Carrying On Business 2. Chevron Results in Universal Jurisdiction over Corporations B. Chevron Obviates the Need for Resorting to the Real and Substantial Connection Test in Many Cases C. Presence-Based Jurisdiction in Chevron Is Conceptually Misaligned with Van Breda 1. Domicile/Residence as a Basis for Jurisdiction 2. Carrying On Business Under the Van Breda Framework V. The U.S. Approach to Presence-Based Jurisdiction and Corporations VI. Conclusion I. Introduction

In September 2015, the Supreme Court of Canada released the much-anticipated decision in Chevron v. Yaiguaje. (1) The case was subject to extensive national and international media coverage. (2) The Court in Chevron held that plaintiffs could proceed in their effort to enforce an Ecuadorian judgment for approximately $9.5 billion (U.S.) against oil giant Chevron Corporation, as well as one of its indirect subsidiaries, Chevron Canada. (3) The Chevron case is infamous in international litigation circles for its unique procedural posture and the vast sums of money involved. In the aftermath of the Chevron decision, newspaper reports and academic articles focused on the implications of the decision for the enforcement of judgments (particularly against an indirect subsidiary of the defendant) and for the law of corporate personality. (4)

The aspect of Chevron that no one has really focused on is what Chevron said about presence-based jurisdiction over corporations. The Supreme Court of Canada concluded that Ontario had jurisdiction simpliciter over Chevron Canada because Chevron Canada was properly served at a place where it carried on business in Ontario. (5) The Court viewed this as a classic application of presence-based jurisdiction. It reiterated that presence-based jurisdiction was a "traditional" basis of jurisdiction, and that resorting to the real and substantial connection test was not necessary where a plaintiff relies on presence-based jurisdiction. (6)

What the Supreme Court of Canada has done in Chevron is to endorse "tag jurisdiction" for corporations. (7) If a corporation can be "tagged" with process in a province where it is carrying on business, then the corporation "is it," meaning that the corporation will be subject to jurisdiction in that province for any and all claims, including those with no connection to the forum. This is a startling proposition. Consider the facts of Chevron itself: Chevron Canada's head office was in Alberta and its registered office was in British Columbia. Its connection to Ontario was minimal. Thirteen of its seven hundred Canadian employees worked in Ontario, selling lubricant and chemical products. Three of these thirteen employees worked out of a physical office in Ontario. (8) Stated differently, 0.004 percent of Chevron Canada's workforce was present at the physical bricks-and-mortar location in Ontario, where Chevron Canada was served with process. And yet, this was sufficient for an Ontario court to assert jurisdiction over Chevron Canada with respect to a cause of action that had absolutely nothing to do with its activities in Ontario.

While presence-based jurisdiction over natural persons is well-established, there is little support in the case law for the proposition that service of process on a corporation that is carrying on business in the forum confers general jurisdiction over the corporation. The Court's endorsement of presence-based (or tag) jurisdiction over corporations will certainly make it much easier for plaintiffs to ground jurisdiction over corporate defendants. But it is unclear whether the Court realized just how dramatic the implications of presence-based jurisdiction over corporations will be. This Article will discuss those implications and the (perhaps unintended) consequences of the Chevron holding with respect to presence-based jurisdiction.

This Article proceeds as follows: Part II discusses the Chevron decision, with particular focus on the Supreme Court of Canada's pronouncement that presence-based jurisdiction was appropriately asserted over Chevron Canada because it had been served with process at its physical offices in Ontario. Part III deconstructs the Chevron decision and argues that presence-based jurisdiction is not supported by Canadian case law (or at least not the case law cited by the Court itself). Part IV focuses on the various conceptual problems created by Chevron: the adoption of too low a standard for carrying on business which results in the endorsement of universal jurisdiction over corporate defendants, the partial subsuming of the real and substantial connection test, and the Chevron test's conceptual misalignment with Van Breda. Part V contrasts the developments in Canada with those in the United States and argues that, just as U.S. courts are dramatically reining in general jurisdiction (by eliminating "doing business" jurisdiction), Canadian courts are dramatically expanding general jurisdiction. Part V also examines the policy reasons behind the shift in the American case law and argues that they are equally applicable to Canada. Part VI offers some concluding remarks.

2. THE CHEVRON DECISION

   In Chevron, the plaintiffs sought to recognize and enforce in Ontario a $9.5 billion (U.S.) judgment against both Chevron and Chevron Canada. (9) The enforcement proceedings in Ontario were part of a decades-long battle between oil giant Chevron and a class of Ecuadorian plaintiffs who advanced a variety of claims related to Chevron's oil extraction activities in Ecuador dating back to the 1960s. (10) The case was originally brought in federal court in New York. After years of litigation, the New York court dismissed the case on the basis of forum non conveniens. (11) The Ecuadorian plaintiffs refiled their suit in Ecuador, ultimately winning a judgment of nearly $17.2 billion. This figure was reduced to $9.51 billion on appeal. (12)

   The plaintiffs attempted to enforce the Ecuadorian judgment in U.S. courts to no avail. (13) The plaintiffs also sought to have the judgment recognized and enforced in Ontario. To that end, the plaintiffs...