Disputes Quick Read: No dropping anchor – parent company liability for environmental claims

The Supreme Court's recent decision in jurisdiction challenge Okpabi and ors (Appellants) v Royal Dutch Shell plc and another (Respondents) [2021] UKSC 3 has favoured the claimants, which follows its approach in Vedanta (Zambian mining case).

The Supreme Court has overturned the Court of Appeal and given the claimants the go-ahead to pursue their pollution claim against Royal Dutch Shell plc (RDS) in the English courts.

The claim concerns alleged pollution caused to Nigerian citizens and inhabitants of an area affected by oil pipeline and associated infrastructure leaks. The pipeline is operated by the Shell Petroleum Development Company of Nigeria Ltd (SPDC) (a subsidiary of RDS) as part of a joint venture with Nigerian companies.

The claim against the "anchor" English parent company means that the group action can proceed in England.

Unpacking the Supreme Court's decision

On the one hand, the decision is not surprising. It follows closely the Supreme Court's 2019 decision in Lungowe v (1) Vedanta Resources plc and (2) Konkola Copper Mines plc [2019] UKSC 20 (which three of the same Supreme Court justices heard), and indeed there was some judicial displeasure that the guidance in Vedanta had not avoided the need for a hearing altogether. But it is nevertheless a stark illustration of the risks of English parent companies being brought into global environmental claims based on the operations of their subsidiaries.

The Supreme Court decided that the Court of Appeal had committed a material error of law in conducting a mini-trial, apparently swayed by the disproportionate volume of evidence for the jurisdiction challenge. In looking at whether there was a good arguable case against RDS, the Court should have focused on the pleaded case. That case should be accepted unless it was demonstrably untrue or unsupportable.

The Supreme Court had not been shown that the asserted facts in the particulars of claim were demonstrably untrue or unsupportable. Adopting the Vedanta approach, there were real issues to be tried.

Vedanta also meant that parent company liability is to be determined on general principles of the law of tort concerning the imposition of a duty of care. In this context, that depended upon the extent to which the parent controlled, supervised, or advised the management of its subsidiary's alleged harmful operations (including through group-wide environmental and safety policies).

Key takeaways

This decision is likely to bolster those looking to pursue claims against English-based parent companies for the harmful actions of their subsidiaries. This is particularly the case in instances where substantial justice may not be available to the claimants in their home jurisdiction. 

The latter is an important factor, as we have seen in the recent High Court decision striking out the claimants' case in Municipio de Mariana v BHP Group plc and BHP Group Ltd [2020] EWHC 2930 (TCC) (relating to the collapse of the Fundão tailings dam in Brazil).

We expect to see similar arguments played out again, including in the context of climate change litigation.

Find out more

To discuss this decision in more detail, please reach out to a member of our Disputes & Investigation team.