Group claim against UK parent company and its foreign subsidiary should be allowed to proceed

12/02/21

On 12 February 2021 the Supreme Court confirmed that the courts of England and Wales have jurisdiction to hear a group claim against a parent company and its foreign subsidiary for actions by the subsidiary which allegedly caused serious environmental damage and human rights impacts. In doing so, it also clarified the relevant rules in relation to summary judgment in such cases.

The Claimants were over 40,000 Nigerian farmers who commenced a claim for negligence against Royal Dutch Shell (RDS) and its Nigerian subsidiary, the Shell Petroleum Development Company of Nigeria Ltd (SPDC) in relation to oil pollution in Nigeria. The Claimants say that RDS owed them a common law duty of care because RDS exercised significant control over material aspects of SPDC’s operations and/or assumed responsibility for SPDC’s operations. They rely – in support of their case – on the fact that RDS promulgated and imposed mandatory health, safety and environmental policies, standards and manuals on its subsidiaries, which allegedly failed to protect the claimants against the risk of foreseeable harm arising from SPDC’s operations.

The trial judge held that the Court had no jurisdiction to hear the claim because it did not disclose a real issue to be tried. The Court of Appeal, by a 2-1 majority, upheld this decision. The Supreme Court unanimously overturned that decision of the Court of Appeal.

The Supreme Court was concerned that the trial judge and the Court of Appeal had both dismissed the claim for lack of jurisdiction, or even as an abuse of process, while entering into a close analysis of the factual evidence. The Court held that this was inappropriate where the key jurisdictional issue before the courts was whether there is a triable issue as against a defendant. Instead, the Court held that [22] “the analytical focus should be on the particulars of claim and whether, on the basis that the facts there alleged are true, the cause of action asserted has a real prospect of success”. The Court noted that the claimants had only a few of the documents dealing with the relationship between RDS and SPDC, as most of the operational documents were in the hands of the companies. Accordingly, the courts should be wary of concluding that the claimants did not have a triable claim, when most relevant documents were still in the hands of the defendant companies.

The Court reaffirmed the application of its decision in Vedanta v Lungowe that a UK parent company may owe a duty of care to those affected by the actions of a foreign subsidiary. It warned, though, that there should not be too much focus on the notion of “control” by a parent company of a subsidiary, as [147] “control of a company and de facto management of part of its activities are two different things”.  It is the latter test that must be satisfied.

The judgment is here.