The Supreme Court has given judgment in a high-profile appeal which raises important issues regarding the proper approach to jurisdictional challenges and the potential liability of parent companies in respect of damage caused by their subsidiaries.
This appeal concerned claims brought by approximately 40,000 individuals in Nigeria, who allege that they have suffered damage as a result of oils spills from infrastructure operated by the second defendant, The Shell Petroleum Development Company of Nigeria Ltd (“SPDC”). SPDC is a Nigerian company. It is a subsidiary of the first defendant, Royal Dutch Shell Plc (“RDS”), which is domiciled in England. The claimants allege that both RDS and SPDC are liable in negligence, RDS’s alleged negligence being based on an alleged failure to exercise reasonable care in monitoring and controlling SPDC.
The claimants served the proceedings on RDS within the jurisdiction, relying on RDS’s English domicile. The claimants obtained permission ex parte to serve SPDC out of the jurisdiction, but permission was subsequently set aside by Fraser J, following a 3-day hearing. Fraser J concluded (i) that it was not reasonably arguable that RDS owed the claimants a duty of care; and (ii) that in the absence of a reasonably arguable claim against a defendant domiciled within the jurisdiction, the conditions for granting permission to serve the claim on SPDC outside the jurisdiction were not satisfied. The Court of Appeal dismissed an appeal by the claimants, following another 3-day hearing.
The Supreme Court unanimously allowed the claimants’ appeal. The Court said that, when dealing with jurisdictional issues which turn on whether there is a triable claim against a defendant, the analytical focus should be on the Particulars of Claim and whether, on the basis of the facts alleged, the cause of action asserted has a real prospect of success – it is not generally appropriate to seek to resolve disputed questions of fact, save where an allegation is demonstrably untrue or unsupportable. The Supreme Court held that both Fraser J and the Court of Appeal had failed to follow this approach, and that each had been drawn into conducting a “mini-trial”.
On the claimants’ pleaded case, RDS exercised a high degree of control, direction and oversight in respect of SPDC’s pollution and environmental compliance, and the operation of its oil infrastructure. On that basis, the Supreme Court held that it was reasonably arguable that RDS owed the claimants a duty of care. In reaching this conclusion, the Court emphasised that (as it had held in Lungowe v Vedanta Resources Plc  AC 1045) there is no special test for when a parent company will owe a duty of care in respect of the activities of a subsidiary, and that the circumstances in which such a duty may arise include (e.g.) where the parent takes over the management of a relevant activity and/or takes active steps to implement group-wide policies. The Court also noted that proof of the nature and extent of RDS’s involvement in SPDC’s activities would depend in large measure on the disclosure of documents held by the defendants, and underlined the dangers of seeking to determine summarily the issues which arise in parent/subsidiary cases.
The effect of the judgment is that the claimants’ claims against both RDS and SPDC can proceed in England, subject to certain other jurisdictional challenges which remain outstanding. The judgment has significant wider implications, in view of the large number of English-domiciled companies which operate through overseas subsidiaries around the world.
The judgment is available here.
Tim Otty QC and George Molyneaux acted pro bono (instructed by Kingsley Napley LLP) for the International Commission of Jurists and the Corporate Responsibility (CORE) Coalition Ltd, which intervened in the appeal. Tim and George acted for the same interveners in Vedanta.
Ben Jaffey QC acted pro bono (instructed by Hausfeld & Co LLP) for Corner House Research, which also intervened.