Royal Dutch Shell has been in hot water for a long time over its involvement in the Niger Delta. There were a number of lawsuits against it regarding different cases in the last three decades but just recently two important decisions regarding Shell were made– one in the Dutch court system and the other one in the UK Supreme court. The Dutch case orders the Nigerian subsidiary of Shell to pay damages to farmers for contaminated land and waterway. The court ruled that the Royal Dutch Shell – the parent company – had a duty of care toward the villagers to prevent further oil spills. This is the first time where a parent company has been held ‘responsible for what happens in a region in which it is not active itself’ but the court did not hold the parent company liable ‘for the damages done, only the liability to act on prevention’.
In the UK, the supreme court overturned a lower court decision and ruled that a case against Shell can be heard in UK courts. The court ruled that there is ‘an arguable case that UK-domiciled Shell, one of the world’s biggest energy companies, is responsible’ for the spills and that this case can be heard on its merits in lower courts.
These two cases (in addition to the earlier case against Vedanta which allowed nearly 2,000 Zambian villagers to sue the company in England for alleged pollution) have far reaching implications for corporates’ responsibilities in cases which involve their subsidiaries.
These cases are significant because they stand in contrast to previous court decisions like the Unilever Kenya Tea Plantation case. This was a case which was brought by victims of ethnic violence in the aftermath of the 2007 elections. The lawsuit ‘alleges that Unilever Tea Kenya failed to protect their tea workers from the foreseeable risk of ethnic violence’. The company argued that the English courts have no jurisdiction as Unilever’s Kenyan subsidiary was responsible for risk management of any crises and as such any case should be heard in Kenya and that the parent company cannot be held responsible for what its subsidiary does. The court accepted those claims. It is remarkable because the Unilever court case ended in 2019, a few months before the final decision on Vedanta and two years before Shell.
For me, there are two key issues that these decisions emphasise – it is harder for a parent company to claim that it is not responsible for what their subsidiaries or their operating partner in a joint venture do and that despite all the hurdles and the length of time – perhaps in the end, justice can be done.
For more in-depth analysis, here is an array of blogs and commentaries from experts in the field:
CityAM warning for businesses – https://www.cityam.com/businesses-should-be-wary-of-class-action-lawsuits-as-groundbreaking-shell-decision-has-global-reach/
The case timeline:
Essex Human Rights Centre webinar on Shell litigation (where the participants claim that if the Unilever case would be heard now after the Shell and Vedanta case, the ruling would be different: https://t.co/k8BdxOY0zb?amp=1
Leigh Day – the team which represented the victims: https://www.leighday.co.uk/latest-updates/blog/2021-blogs/supreme-court-okpabi-v-royal-dutch-shell-what-does-the-judgment-mean/
Okpabi v Shell and Lungowe v Vedanta Dispel Three Myths: https://corporate-responsibility.org/okpabi-v-shell-lungowe-v-vedanta-dispel-three-myths/
Robert McCorquodale blog: https://gavclaw.com/2021/02/17/okpabi-v-shell-the-supreme-court-reverses-the-court-of-appeal-and-the-high-court-on-jurisdictional-hurdles-in-parent-subsidiaries-cases-guest-blog-by-professor-robert-mccorquodale/
Broader review of due diligence and the case: http://opiniojuris.org/2021/02/16/uk-okpabi-et-al-v-shell-uk-supreme-court-reaffirms-parent-companies-may-owe-a-duty-of-care-towards-communities-impacted-by-their-subsidiaries-in-third-countries/