The United Kingdom’s Supreme Court (UKSC), on the 12th of February 2021, ruled that Nigerian farmers and fishermen could sue the Royal Dutch Shell Plc in English Courts over allegations of pollution where the company owns a subsidiary.
The appeal in concern before the UKSC related to a jurisdiction claim in tort, which involved a foreign company (defendant), where jurisdiction was sought to be found on an alleged common law duty of care owed by the UK domiciled holding/parent company. The appeal in question involved two sets of proceedings: namely, the Ogale proceedings and the Bille proceedings. The former proceedings were raised by approximately 40,000 individuals from the Nigerian farming and fishing community, and their King HRH Emere Godwin Bebe Okpabi. The later proceedings were raised by 2,335 individuals of the Bille Kingdom. Both communities were remotely located in the Rivers State, Nigeria. Both the communities allege that numerous oil spills from oil pipelines and associated infrastructure have caused “widespread environmental damage, including serious water and ground contamination”, which either has not been adequately cleaned up or remediated. This has led the natural water sources in the appellants’ communities to be unsafe for drinking, fishing, agricultural, washing, or recreational purposes.
The allegations were brought against a Nigerian registered company, namely, the Shell Petroleum Development Company of Nigeria Ltd (SPDC), the second respondent in the case, on grounds of negligence committed in the operation of pipelines and infrastructure under a joint venture. SPDC was a subsidiary to the UK based, Royal Dutch Shell Plc (RDS), a UK domiciled company, the parent company of the multinational Shell Group. RDS was the first respondent in the case. The appellants argued that RDS owed them a duty of care because it exercised significant control over material aspects of SPDC’s operations and/or assumed responsibility for SPDC’s operations, which allegedly failed to protect the appellants against the risk of foreseeable harm arising from SPDC’s operation.
The High Court and Court of Appeal Verdicts
In January 2017, the High Court ruled that although the Court had jurisdiction to try the claims against RDS, the claims did not have a real prospect of success and, as a consequence, the conditions for granting permission to serve the claim on SPDC as “necessary or proper party” to claim against RDS for the purposes of the jurisdictional gateway in paragraph 3.1(3) of the Practice Direction 6B was not made out. Accordingly, orders were made setting aside service of the claims form on SPDC and striking out the appellants’ statements of case insofar as they related to RDS.
In February 2018, the Court of Appeal dismissed the appellants’ appeal. While the court did find that the High Court judge had in fact erred in certain aspects of the evidence, the majority for the Court of Appeal reached the same conclusion that there was no arguable case against RDS to have owed a duty of care to the appellants. However, Sales LJ dissented, concluding that there was an arguable case RDS to have owed a duty of care to the appellants.
Subsequently, the Appellants’ appealed to the Supreme Court. The Supreme Court deferred the case till the Court ruled in the [Lungowe v Vendanta Resources Plc] (2019) UKSC 20 case, as it was very related to both procedural and substantive aspects of the case in question. Following that judgment, permission to appeal to the Supreme Court was granted. The appeal raised two principal issues: (i) whether the Court of Appeal materially erred in law; and (ii) if so, whether the majority was wrong to decide that there was no real issue to be tried.
The Supreme Court of the United Kingdom’s Decision
The Court in its 41-page judgment having considered all the evidence before it conclusively allowed the appeal. Lord Hamblen gave the leading judgment, with whom Lord Hodge, Lady Black and Lord Briggs agreed, noted several matters that led to his conclusion. Regarding the issue of proportionality, the Supreme Court reiterated the importance of it, in relation to jurisdiction claims, as examined in the Vendanta case as well as the [VTB Capital plc v Nutritek International Corporation] (2013) 2 AC 337 case. The focal point of proportionality was placed on the particulars of a claim, or witness statements, which set out the details of the claim, or whether based on the facts that were alleged to be true, the cause of action asserted had a real prospect of succeeding. The Court considered the myriad of witness statements and files of exhibits running to over 2000 pages as being “inappropriate”; and hence, considered the appeal to be disproportionate.
Nevertheless, regarding the principal issue of there being a material error of law by the Court of Appeal, the Supreme Court held that the Court of Appeal did in fact make an error in law, in that it had conducted a mini-trial which led it to the adoption of an inappropriate approach to the contested factual issues and to the documentary evidence. This, the Court held was against established precedent, and the Supreme Court’s decision in the Vendanta case. The Court of Appeal, according to Lord Hamblen, instead of focusing on the pleaded case and whether that disclosed an arguable case, went onto evaluating the weight of the evidence and exercised a judgment based on that evidence. This, the Supreme Court deemed was inappropriate, as this was not the task of the Court at the interlocutory stage. The Court held that factual assertions made in support of a claim should always be accepted unless, exceptionally, they are demonstrably untrue or unsupportable.
In addition to these, the Court of Appeal made other errors of law, which included: firstly, accepting the “general principle” that a holding company could never incur a duty of care in respect of the activities of a subsidiary by maintaining group-wide policies and guidelines. This was inconsistent with the findings of the Vendanta case, most notably, of the findings of Lord Briggs; secondly, the Court of Appeal was wrong to put too much emphasis over the issue of control a parent/holding company has or exercises over the management of relevant activity in its subsidiary company. This may or may not always be demonstrated by the parent company in relation to control over its subsidiary; finally, the Court of Appeal made an error by disregarding the set of guidelines provided in the Vendanta case to establish a duty of care of a parent company against its subsidiary. The Court of Appeal was wrong to conclude a duty of care under the common law negligence principle established in the case of [Caparo v Dickman] (1990) AC 605.
Regarding the real issue to be tried, in light of the oral and written submissions and evidence attached thereof, it had not been shown that the asserted facts in the particulars of claim should be rejected for being untrue or unsupportable. As such, the appellants’ pleaded case, along with the two RDS internal documents disclosed before the Court so far, establishes that there are real issues to be tried. In this regard, the Supreme Court held that Sales LJ’s approach and conclusion in the Court of Appeal was the correct one; most notably, that the Shell group’s vertical corporate structure. How the organization worked in practice and the extent of authority it delegated to its subsidiary were all matters to be determined in trial. Hence, the Court of Appeal was wrong to decide that there was no real issue to be tried.
In conclusion, the appeal was allowed. Additionally, if the Respondents intended to purse other challenges to a jurisdiction which were not resolved by the High Court judge, the matter is remitted to the High Court.
A copy of the judgment can be found here.
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