English High Court Rules on Claims Brought by Foreign Plaintiffs, Against Foreign Defendant, for Conduct Outside the U.K.
On 26 January 2017, the English High Court (the Court) rendered a very interesting judgment 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.
At first sight, all the factual elements of the plaintiffs’ claims led to the assumption that the case should proceed before Nigerian courts, and that those claims did not touch upon the UK’s jurisdiction.
However, in order to trigger the jurisdiction of the U.K. courts, the Nigerian communities not only brought their action against SPDC (a Nigerian company) but also against Royal Dutch Shell Plc (RDS) (the ultimate UK-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.
The Court agreed and sided with RDS and SPDC.
In analysing whether RDS owed a duty of care in common law to the claimants for acts committed in Nigeria, the Court referred to a three-fold test set-out in Caparo Industries plc v. Dickman. According to this test, a duty of care exists if (i) the damage is foreseeable; (ii) there is proximity or neighbourhood between the party owing the duty and the party to whom it is owned; and (iii) the imposition of the duty is fair, just and reasonable.
In applying those criteria to the present case, the Court found that the second and third elements of the test were not satisfied.
With respect to the proximity requirement, the Court first emphasised that SPDC was not a direct subsidiary of RDS, but of another company in which the latter held shares. The Court also stressed that RDS did not have any connection or relevance to the operations conducted in Nigeria, and was merely a shareholding investment company.
Regarding the fairness, justice, and reasonableness criteria, the Court found that Nigeria already has a legal framework in place allowing for the recovery of environmental losses that occur as a result of oil operations. Finally, the Court stressed that RDS did not have the expert knowledge of the operations of SPDC, nor did RDS know that SPDC was relying upon it to protect the plaintiffs.
Accordingly, the Court concluded that no duty of care on the part of RDS to the plaintiffs could be established under English law. The Nigerian local communities therefore had no cause of action against RDS, who could therefore not act as an anchor defendant. Since the plaintiffs could not rely on RDS’s liability to assert the jurisdiction of U.K. courts against SPDC indirectly, the U.K. courts could not assert jurisdiction over any claims against the latter.
Interestingly, RDS and SPDC also asked the Court to apply the forum non conveniens doctrine (i.e. the doctrine according to which courts have a discretionary power to dismiss a case where another court, or forum, is much better suited to hear the case) and to dismiss the plaintiffs’ claims.
The Court, however, rejected the application of the forum non conveniens doctrine since recourse to this doctrine is prohibited by EU law (see leading case Owusu v. Jackson of the Court of Justice of European Union).