Further encouragement to overseas claimants looking to bring mass tort actions in the UK?
The case concerns approximately 40,000 claimant Nigerian citizens and two defendants, the Shell Petroleum Company of Nigeria Limited (SPDC) and Royal Dutch Shell Plc (RDS). The claimants allege oil leaks from pipelines and infrastructure operated by SPDC in Nigeria caused widespread damage, for which SPDC and RDS are responsible. SPDC is incorporated in Nigeria and is a subsidiary of UK-incorporated RDS. In addition to certain Nigerian law-based claims against SPDC, the claimants allege RDS owed them a common law duty of care because it exercised significant control over material aspects of SPDC’s operations and/or assumed responsibility for SPDC’s operations.
The Supreme Court decision resolved a jurisdiction appeal concerning whether the claimants had an arguable case that RDS owed them a common law duty of care to properly found jurisdiction against the foreign subsidiary SPDC as a necessary and proper party to the proceedings. A similar issue was addressed in the recent Supreme Court decision of Lungowe v Vedanta Resources plc  UKSC 20 and its guidance was followed and re-iterated in Okpabi.
In short, the Supreme Court found that the High Court and the Court of Appeal had focussed too heavily on the substantial volume of evidence presented to them. This led them both to conduct a “mini-trial”, instead of simply examining whether the claim had a prospect of success, and to wrongly discount the significance of further evidence that might substantiate the claim. The Supreme Court allowed the appeal, finding that it was at least arguable that RDS had assumed a duty of care, effectively clearing the way for the claim to proceed to a full trial.
Likely of interest to multinational corporations, the Court made the following observations, building on Vedanta, as to when a parent might incur a duty of care in relation to its subsidiary’s operations.
- Whether a parent assumes a duty of care in relation to its subsidiary’s operations depends on the extent to which it participates in the management of some or all of the subsidiary’s operations.
- A parent does not need to “control” a subsidiary to participate in its management. A subsidiary can maintain legal control over its activities, but nonetheless delegate management of them to “emissaries of its parent”.
- As noted in Vedanta, a parent may incur liability to third parties if it holds itself out as exercising supervision and control of its subsidiaries, even if it does not in fact do so.
- It is not correct that simply laying down group-wide policies or standards without actively enforcing them can never create a duty of care. As noted in Vedanta, group guidelines may contain systemic errors which, when routinely implemented by a subsidiary, cause harm to third parties.
- The fact that a parent has set up a network of subsidiaries, or that the parent heads an international group of some size, are not relevant to whether it can assume a duty of care.
- Where a group of companies establishes vertical reporting and business lines that operate across entities, this could be an indication of control or participation in management.
- A parent is also more likely to be exerting operational control where it imposes internal corporate policies and procedures on its subsidiaries.
For more information, please see Lois Horne and Lauren Roberts’ article, Vedanta v Lungowe & Others: liability of a UK parent company.