(Adds comments from analyst and lawyer)
By David Ljunggren
OTTAWA, Sept 4 (Reuters) - Canada's top court ruled on Friday that a group of Ecuadorean villagers could pursue a multi-billion pollution lawsuit against Chevron Corp in the Canadian province of Ontario.
Chevron is contesting a ruling by Ecuador's highest court that said the oil giant had to pay $9.5 billion to clean up contamination at a site it once owned. The villagers are now going after Chevron's assets in Canada, Brazil and Argentina.
"Canadian courts, like many others, have adopted a generous and liberal approach to the recognition and enforcement of foreign judgments," the Canadian Supreme Court said in its unanimous ruling.
The decision marked the third defeat for Chevron on the merits of the case in Canadian courts. The villagers can now continue with a 2012 lawsuit against Chevron's Canadian subsidiary in a lower Ontario court
In a ruling that affirms existing law, the court rejected Chevron's argument that there was no legal basis for the villagers to sue Chevron Canada, which was not part of the Ecuadorean judgment.
Chevron said in an emailed statement it would argue in the lower Ontario court that the lawsuit should be stopped early on the grounds the initial judgment "is the product of fraud and other misconduct, and is therefore illegitimate and unenforceable."
A U.S. judge concluded last year that the American lawyer who helped secure the settlement used corrupt means. That ruling has been appealed.
Fadel Gheit, an oil industry analyst at Oppenheimer & Co, said he gave the villagers "very little chance of succeeding in Canada," given the controversy over the original judgment and Chevron's relatively limited asset base in Canada.
The villagers have been litigating the case for over 20 years. They initially sued Texaco, which Chevron later acquired, over contamination in the jungle around Lago Agrio, Ecuador, between 1964 and 1992.
"It is clearer than ever that Chevron's long run from justice is coming to an end," Aaron Marr Page, a U.S. lawyer for the villagers, said in a statement.
Canada's Supreme Court said in its ruling that it was taking no position on the merits of the original case against Chevron.
Dianne Saxe, a Toronto environmental lawyer who has studied the case, said the Ontario court would have to decide whether the original judgment was valid and if Chevron Canada's assets could be seized to pay off the debt.
"Those are the two big things that are left open and those were always the main ones," she said.
The case is Daniel Carlos Lusitande Yaiguaje and others vs Chevron Corporation and Chevron Canada Ltd, file no 35682. (Additional reporting by Ernest Scheyder in Williston, N.D.; Editing by W Simon, Jeffrey Hodgson and Paul Simao)