English Court of Appeal Rules on Claims Brought by Foreign Plaintiffs, Against Foreign Defendants, for Conduct Outside the U.K. - international litigation blog
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English Court of Appeal Rules on Claims Brought by Foreign Plaintiffs, Against Foreign Defendants, for Conduct Outside the U.K.

English Court of Appeal Rules on Claims Brought by Foreign Plaintiffs, Against Foreign Defendants, for Conduct Outside the U.K.


Two recent judgments of the English Court of Appeal (the Court of Appeal) have shed light on the approach of the U.K. courts towards civil actions taken against parent companies for wrongs allegedly committed by foreign subsidiaries abroad.

Both cases concerned the responsibility of parent companies for actions of their subsidiaries and the jurisdictional rules for taking claims in the U.K. arising from facts occurring in other countries. They provide interesting perspectives on the traditional doctrine of separate corporate personality and the principle of forum non conveniens  in common law. Both cases are consistent with one another, and the second case sheds more light on the factual links between a parent and subsidiary which may give rise to a duty of care vis-à-vis third parties who are affected by the actions of the subsidiary.

Okpabi and Others v. Royal Dutch Shell and Others

On 14 February 2018, the Court of Appeal upheld the decision of the High Court on the possibility for foreign plaintiffs to rely on a U.K.-based company’s duty of care vis-à-vis its foreign subsidiaries in order to assert the jurisdiction of U.K. courts over acts committed outside the U.K. by those subsidiaries.

In the case at hand, members of local Nigerian communities brought legal proceedings before U.K. courts seeking recovery for oil pollution allegedly caused by a Nigerian subsidiary of Royal Dutch Shell (Shell Petroleum Development Company – SPDC) in the Niger Delta. The appeal focused on the issue of jurisdiction.

As previously discussed, the Nigerian communities sought to bring an action in tort against both SPDC (a Nigerian company) and Royal Dutch Shell Plc (RDS) (the ultimate U.K.-based holding company of the Shell group), arguing that RDS exercised control over, and was therefore responsible for the conduct of its Nigerian subsidiary. More specifically, the plaintiffs argued that RDS owed them a duty of care and could therefore be seen as an “anchor defendant” (i.e. a defendant against whom an action is brought for the sole purpose of vesting a certain court with the jurisdiction to hear the claim).

Against the local Nigerian communities’ allegations, RDS and SPDC argued that the plaintiffs had no legitimate claims in law against RDS, as no duty of care could be established. As a consequence, RDS could not be used as an anchor defendant and the U.K. courts did not have jurisdiction to hear the case.

At first instance, the High Court rejected the claim, holding that there was “simply no connection whatsoever between this jurisdiction and the claims brought by the claimants“. The Court of Appeal upheld this judgment. Interestingly, the Court of Appeal noted that it would have “approached the issue in a different way and on the basis of different materials” to the High Court, but nonetheless dismissed the appeal.

First, the Court of Appeal agreed that the existence of a duty of care was to be assessed according to the three-part test set out in Caparo Industries v. Dickman: (i) the harm must be foreseeable; (ii) there should exist a relationship of proximity between the party owing the duty and the party to whom it is owed; (iii) and it should be “fair, just and reasonable” to impose the duty of care. In the case at hand, the foreseeability of harm suffered by the claimants was not significantly disputed.

Two central issues therefore arose on appeal. Firstly, whether the relationship between RDS and its Nigerian subsidiary SPDC resulted in RDS being proximate to the claimants, and secondly, whether it was “fair, just and reasonable” that a duty of care be therefore imputed to RDS.

With respect to the proximity requirement, the Court of Appeal held that the claimants had failed to demonstrate an arguable case that RDS controlled SPDC’s operations in the Niger Delta or that RDS was otherwise responsible for the latter’s practices or failures. The Court of Appeal disagreed with the High Court’s approach (which focused on the formal structure of the companies) and instead examined the documents relied upon by the claimants. It criticised the volume of documentary evidence and the manner in which short extracts were relied upon without reference to their “proper context“, and held that there was no arguable case made out on the basis of that evidence.

On whether it was “fair, just and reasonable” to impose a duty of care on RDS, the Court of Appeal again found that there was no arguable case. In particular, the Court of Appeal rejected the arguments that RDS had “an assumed responsibility for devising a material policy the adequacy of which [was] the subject of the claim” and that RDS “controlled or shared control of the operation which [were] the subject of the claim“.

In the absence of an arguable case, the majority of the Court of Appeal therefore dismissed the appeal.

It is interesting to note that the Court of Appeal made reference to its recent judgment in Lungowe v. Vedanta (below). Okpabi V. Royal Dutch Shell was the first case where it had the opportunity to explore more fully the implications of its earlier judgement. It is worth briefly looking at the earlier case to see where this approach began.

Lungowe and Others v. Vedanta Resources and Others

The judgment of the Court of Appeal in Lungowe v. Vedanta was delivered on 13 October 2017. This case concerned a claim taken by a number of Zambian citizens against the U.K.-based Vedanta Resources plc (Vedanta) and its Zambian subsidiary Konkola Copper Mines plc (Konkola). The claimants sought damages for harm caused to their property and persons due to discharges from a copper mine operated by Konkola, which is domiciled in Zambia. The claimants argued that the U.K. courts had jurisdiction as Konkola is owned by a U.K.-domiciled holding company. In 2015, the High Court agreed with the claimants and held that the Zambian citizens could bring their case in England despite the fact that the alleged tort and harm had occurred in Zambia. The Court of Appeal upheld that judgment.

The Court of Appeal confirmed that the doctrine of separate legal personality does not necessarily absolve a parent company of a duty of care owed to non-employees who are affected by the actions of its subsidiary.

The first limb of the Court of Appeal’s analysis centred on whether the claim had a real prospect of success. The Court of Appeal agreed with the High Court’s assessment that the claim did indeed have such a prospect, and drew attention to the fact that (i) Konkola was the operator of the mine from which there had been recorded discharges of toxic materials, (ii) Zambian law established strict liability (i.e. it did not require the defendant to have intended the wrong) for certain environmental harm, and (iii) the “underlying basis of the claimants’ claim” had not been challenged.

The second limb of the test concerned the existence of a real issue between the claimants and Vedanta, the English holding company. Crucially, the Court of Appeal upheld the High Court’s conclusion that there was an arguable case. As in Okpabi, the Court of Appeal applied the three-part test of foreseeability, proximity and reasonableness, as set out in Caparo Industries v. Dickman. It examined the case law and concluded that “a duty may be owed by a parent company to […] a party directly affected by the operations of [its] subsidiary, in certain circumstances“. Those circumstances include, in particular, where the parent company controls the operations which give rise to the claim.

In the case at hand, the claimants adduced evidence of Vedanta’s role in designing Konkola’s environmental and health-and-safety policies, the high degree of oversight exercised, and the financial support given to Konkola. The Court of Appeal held that the High Court was entitled to rule as it did, given what was pleaded before it. It was not necessary to engage in a substantive examination of the evidence at that stage: rather, it was enough to hold that the claim was arguable. Consequently, the Court of Appeal found that the Zambian citizens were entitled to bring their claim in the English courts against UK-based Vedanta and its foreign-based subsidiary.

This article was kindly drafted by Benedict Blunnie (intern at Van Bael & Bellis).

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